|
|
|
|
||
|
(State or other jurisdiction
of incorporation)
|
(Commission File Number)
|
(I.R.S. Employer
Identification No.) |
|
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
|
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
|
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
|
Title of each class
|
Ticker symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
The
|
||
|
|
|
The
|
||
|
|
|
The
|
|
Section 1
|
Registrant’s Business and Operations
|
|
Item 1.01
|
Entry into a Material Definitive Agreement.
|
|
Section 2
|
Financial Information
|
|
Item 2.03
|
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
|
|
Section 9
|
Financial Statements and Exhibits
|
|
Item 9.01
|
Financial Statements and Exhibits.
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
99.1
|
|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
Date: November 14, 2022
|
HORIZON TECHNOLOGY FINANCE CORPORATION
|
||
|
By:
|
/s/ Robert D. Pomeroy, Jr.
|
||
|
Robert D. Pomeroy, Jr.
|
|||
|
Chief Executive Officer
|
|||
EXHIBIT 10.1
$100,000,000
HORIZON FUNDING TRUST 2022-1
|
7.56% Asset Backed Notes |
NOTE PURCHASE AGREEMENT
October 26, 2022
KeyBanc Capital Markets Inc.
1301 Avenue of the Americas, 35th Floor
New York, New York 10019
Ladies and Gentlemen:
Section 1. Introductory. Horizon Funding Trust 2022-1, a Delaware statutory trust (the "Issuer"), proposes, subject to the terms and conditions stated herein, to issue and sell to KeyBanc Capital Markets Inc., as initial purchaser (the "Initial Purchaser"), its Asset Backed Notes (the "Notes"), in the Initial Note Principal Balance set forth in Exhibit A to this note purchase agreement (this "Agreement"). The Notes are to be issued under the Indenture, to be dated as of the hereafter defined Closing Date (the "Indenture"), between the Issuer and U.S. Bank Trust Company, National Association ("U.S. Bank"), as trustee (the "Trustee"). The Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, is herein referred to as the "Securities Act". Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Indenture or in the Sale and Servicing Agreement, to be dated as of the Closing Date, by and among the Issuer, Horizon Funding 2022-1 LLC, as trust depositor (the "Depositor"), Horizon Technology Finance Corporation, as seller and as servicer ("Horizon", and together with the Issuer and the Depositor, individually a "Horizon Entity" and collectively the "Horizon Entities"), U.S. Bank, as Trustee, and U.S. Bank National Association, as backup servicer, custodian and securities intermediary.
The offer and sale of the Notes to the Initial Purchaser will be made without registration under the Securities Act in reliance on certain exemptions from the registration requirements thereof. Subject to the terms and conditions of this Agreement, the Initial Purchaser shall offer and sell the Notes (or beneficial interests therein): (i) to non-U.S. persons in transactions occurring outside the United States in reliance on Regulation S under the Securities Act ("Regulation S") that in each case are "qualified purchasers" as defined in Section 2(A)(51) of the Investment Company Act of 1940 (each such person, a "Qualified Purchaser") and (ii) in the United States to Persons who are "qualified institutional buyers," as defined in Rule 144A ("QIBs" and each, a "QIB") in reliance on Rule 144A under the Securities Act ("Rule 144A") that in each case are Qualified Purchasers.
A preliminary confidential private placement memorandum and a confidential private placement memorandum relating to the Notes, to be offered by the Initial Purchaser, have been prepared by the Issuer. The preliminary confidential private placement memorandum, dated October 24, 2022 (the "Preliminary PPM"), the investor presentation dated October 2022 attached as Exhibit B to this Agreement (the "Road Show"), any and all asset level data, including any Intex cdi file, provided by a Horizon Entity, or by any of their respective affiliates on behalf of a Horizon Entity, to the Initial Purchaser for distribution to one or more prospective investors, whether in electronic form or otherwise (collectively, the "Collateral Data Information"), any information prepared by or on behalf of the Issuer and delivered to prospective holders of the Notes (other than the Preliminary PPM and the Road Show) attached as Exhibit C to this Agreement (the "Pricing Information" and, together with the Road Show, Form 15G, the Collateral Data Information and the Preliminary PPM, the "Time of Sale Information"), and the final confidential private placement memorandum, dated October 26, 2022, that includes the offering prices and other final terms of the Notes (the "PPM"), each, as amended or supplemented by additional information in accordance herewith, are collectively referred to as the "Offering Document". The Offering Document at a particular time means the Offering Document in the form actually amended or supplemented and issued at such time (as opposed to the Offering Document prior to such amendment or supplement). The "Time of Sale" means 10:00 A.M. EST on October 26, 2022.
Section 2. Representations and Warranties of the Issuer, the Depositor and Horizon. Each Horizon Entity, with respect to itself, represents and warrants to the Initial Purchaser, as of the Closing Date or such other date as may be specified below as follows:
(a) The Preliminary PPM, as of the date thereof, did not, and the Time of Sale Information, as of the Time of Sale did not and as of the Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The PPM, as of the date thereof, did not, and as of the Closing Date will not (and any amendment or supplement thereto, as of the date thereof and as of the Closing Date, will not) contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, none of the Horizon Entities makes any representations or warranties as to statements or omissions therein based upon the Initial Purchaser Information, it being understood and agreed that the "Initial Purchaser Information" is only such information that is described as such in Section 7(b) hereof. If, subsequent to the initial Time of Sale, the Issuer and the Initial Purchaser determine that the original Time of Sale Information included an untrue statement of material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and the Initial Purchaser advises the Issuer that investors in the Notes have elected to terminate their initial "contracts of sale" (within the meaning of Rule 159 under the Securities Act, the "Contracts of Sale") and enter into new Contracts of Sale, then the "Time of Sale" will refer to the time of entry into the first new Contract of Sale and the "Time of Sale Information" will refer to the information available to purchasers at the time of entry (prior to the Closing Date) into the first new Contract of Sale, including any information that corrects such material misstatements or omissions (such new information, the "Corrective Information") and Exhibit C to this Agreement will be deemed to be amended to include such
2
Corrective Information in the Time of Sale Information. Notwithstanding the foregoing, for the purposes of Section 7 hereof, in the event that an investor elects not to terminate its initial Contract of Sale and enter into a new Contract of Sale, "Time of Sale" will refer to the time of entry into such initial Contract of Sale and "Time of Sale Information" with respect to Notes to be purchased by such investor will refer to information available to such purchaser at the time of entry into such initial Contract of Sale.
(b) The Issuer is a statutory trust duly formed, validly existing and in good standing under the laws of the State of Delaware, with power and authority (trust and other) to own its properties and conduct its business as presently conducted and as described in the Offering Document and to execute, deliver and perform its obligations under each of the Transaction Documents to which it is or will be a party and to authorize, issue and sell the Notes as contemplated by this Agreement; and the Issuer is duly qualified to do business as a foreign entity in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification if failure to qualify would have a Material Adverse Effect. As used herein, "Material Adverse Effect" shall mean, as to any entity, a material adverse effect on the condition (financial or other), business, properties, assets, or results of operations of such entity and its subsidiaries (taken as a whole) or a material adverse effect on the ability of such entity to perform its obligations under the Transaction Documents to which it is a party.
(c) The Depositor is a limited liability company formed, validly existing and in good standing under the laws of the State of Delaware, with limited liability company power and authority to own its properties and conduct its business as presently conducted and as described in the Offering Document and to execute, deliver and perform its obligations under each of the Transaction Documents to which it is or will be a party; and the Depositor is duly qualified to do business as a foreign entity in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification if failure to qualify would have a Material Adverse Effect.
(d) Horizon is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as presently conducted and as described in the Offering Document and to execute, deliver and perform its obligations under each of the Transaction Documents and each other agreement or instrument contemplated thereby to which it is or will be a party; and Horizon is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect.
(e) On the Closing Date, the Notes will have been duly authorized; and when the Notes are delivered and paid for pursuant to this Agreement, and authenticated and issued pursuant to the Indenture, such Notes will have been duly executed, authenticated, issued and delivered and will conform in all material respects to the description thereof contained in the Offering Document; and will constitute valid and legally binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating
3
to or affecting creditors' rights and to general equity principles; and will be entitled to the benefits of the Indenture.
(f) Assuming (i) that the Initial Purchaser's representations and warranties in Section 4 hereof are true, and (ii) compliance by the Initial Purchaser with the covenants set forth herein, no consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by the Transaction Documents and in connection with the issuance and sale of the Notes by the Issuer.
(g) The execution, delivery and performance of each of the Transaction Documents and the issuance and sale of the Notes and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under or conflict with, (i) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Horizon Entities or any of their respective material properties, (ii) any material agreement or instrument to which any Horizon Entity is a party or by which a Horizon Entity is bound or to which any of the material properties of a Horizon Entity is subject, or (iii) the organizational documents of the Horizon Entities, and the Issuer has full power and authority to authorize, issue and sell the Notes as contemplated by this Agreement.
(h) This Agreement has been, and as of the Closing Date each other Transaction Document to which the Issuer is a party will have been, duly authorized, executed and delivered by the Issuer and, when executed and delivered by the Issuer, assuming due authorization, execution and delivery thereof by the other parties hereto and thereto, will constitute a valid and legally binding obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. This Agreement has been, and as of the Closing Date each other Transaction Document to which the Depositor is a party will have been, duly authorized, executed and delivered by the Depositor and, when executed and delivered by the Depositor, assuming due authorization, execution and delivery thereof by the other parties hereto and thereto, will constitute a valid and legally binding obligation of the Depositor enforceable against the Depositor in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. This Agreement has been, and as of the Closing Date each other Transaction Document to which Horizon is a party will have each been, duly authorized, executed and delivered by Horizon and, when executed and delivered by Horizon, assuming due authorization, execution and delivery thereof by the other parties hereto and thereto, will constitute a valid and legally binding obligation of Horizon enforceable against Horizon in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.
(i) As of the Closing Date, the Issuer shall have good and marketable title to the Loans and the other property comprising the Trust Estate, in each case, free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by it, other than liens and encumbrances pursuant to or
4
permitted by the Transaction Documents. On each Additional Loan Cutoff Date, the Issuer shall have good and marketable title to the Additional Loans and the other property comprising the Trust Estate, in each case, free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by it, other than liens and encumbrances pursuant to or permitted by the Transaction Documents.
(j) Each of the Horizon Entities possesses all material certificates, authorities, licenses, approvals or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, except for any such certificates, authorities, licenses, approvals or permits the failure of which to obtain or make would not, individually or in the aggregate, produce a Material Adverse Effect on such Horizon Entity. Except as described in or contemplated by the Offering Document, none of the Horizon Entities has received any notice of proceedings relating to the revocation or modification of any such certificate, authority, license, approval or permit that, if determined adversely to the Horizon Entities, would individually or in the aggregate produce a Material Adverse Effect on the Horizon Entities.
(k) Except as disclosed in the Offering Document, there are no pending actions, suits, investigations or proceedings against or affecting any Horizon Entity or any of their respective Affiliates or any of their respective properties that, if determined adversely to such Horizon Entity or any of their respective Affiliates, as applicable, would individually or in the aggregate have a Material Adverse Effect on such Horizon Entity or would materially and adversely affect the validity or enforceability of the Notes, or the federal income tax characterization of the Notes or classification of the Issuer, or which are otherwise material in the context of the sale of the Notes; and, to the Issuer's knowledge, no such actions, suits, investigations or proceedings are threatened or contemplated.
(l) The Issuer is not and, after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Offering Document, will not be subject to registration as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and in making this determination the Issuer will be relying primarily on exemptions from the definition of "investment company" under the Investment Company Act set forth in Section 3(c)(7) and Rule 3a-7 thereof, although there may be additional exclusions or exemptions available to the Issuer. The Issuer is being structured so as not to constitute a "covered fund" for purposes of Section 619 of the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010, based on its current interpretations.
(m) The Notes are eligible for resale pursuant to Rule 144A. No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Notes are listed on any national securities exchange registered under Section 6 of the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act"), or quoted in a U.S. automated interdealer quotation system.
(n) Assuming (i) that the Initial Purchaser's representations and warranties in Section 4 hereof are true and (ii) compliance by the Initial Purchaser with the covenants set forth herein, the offer and sale of the Notes to the Initial Purchaser in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(a)(2) thereof, the offer, resale and delivery of the Notes by the Initial Purchaser in the
5
manner contemplated by this Agreement will meet the requirements of Rule 144A(d)(3) of the Securities Act, as applicable, and no registration of the Notes under the Securities Act and no qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), is required for the offer, sale and delivery of the Notes in the manner contemplated by this Agreement.
(o) None of the Horizon Entities or any of their respective affiliates, as such term is defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D"), has (directly or indirectly) solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of in the United States or to any United States citizen or resident any security that is or would (assuming compliance by the Initial Purchaser with their obligations under Section 4 of this Agreement) be integrated with the sale of the Notes in a manner that would require the Notes to be registered under the Securities Act.
(p) None of the Horizon Entities has entered or will enter into any contractual arrangement with respect to the distribution of the Notes except for this Agreement.
(q) Upon the execution and delivery of the Transaction Documents, the Issuer will have the power and authority to pledge the Trust Estate to the Indenture Trustee on behalf of the Noteholders free and clear of all liens other than liens under the Transaction Documents.
(r) On the Closing Date, each of the representations and warranties of the Issuer set forth in each of the Transaction Documents to which it is a party will be true and correct in all material respects. On the Closing Date, each of the representations and warranties of the Depositor set forth in each of the Transaction Documents to which it is a party will be true and correct in all material respects. On the Closing Date, each of the representations and warranties of Horizon set forth in each of the Transaction Documents to which it is a party will be true and correct in all material respects.
(s) Any taxes, fees and other governmental charges in connection with the execution and delivery of the Transaction Documents or the execution, delivery and sale of the Notes have been or will be paid on or prior to the Closing Date.
(t) Since the respective dates as of which information is given in the Offering Document (x) there has not occurred any change in the business, properties, assets, financial condition, results of operations or regulatory situation of the Horizon Entities, that would or would reasonably be expected to result in a Material Adverse Effect, (y) none of the Horizon Entities has entered into any transaction or agreement (whether or not in the ordinary course of business) material to such Horizon Entity, that, in either case, would reasonably be expected to have a Material Adverse Effect on such Horizon Entity, otherwise than as set forth or contemplated in the Offering Document and (z) none of the Horizon Entities have defaulted under any material agreement or instrument to which it is a party or by which it is bound which would individually or in the aggregate have, or would reasonably be expected to result in, a Material Adverse Effect, in each case other than as set forth in or contemplated by the Offering Document.
6
(u) Immediately after the consummation of the transactions to occur on the Closing Date, (i) the fair value of the assets of Horizon, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of Horizon will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each of the Horizon Entities will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) Horizon will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date.
(v) This Agreement and the other Transaction Documents and the Notes conform in all material respects to the descriptions thereof contained in the Offering Document.
(w) None of the Horizon Entities or any of their respective affiliates (as defined in Rule 501(b) of Regulation D, nor any Person authorized to act on its or their behalf (other than through the Initial Purchaser, as to which no representation is made), has engaged or will engage in connection with the offering of the Notes in any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act.
(x) None of the Horizon Entities or any of their respective affiliates or any Person acting on its or their behalf (other than the Initial Purchaser, as to which no representation is made) has engaged or will engage, with respect to Notes sold outside of the United States to persons that are U.S. Persons (within the meaning of Regulation S) in any "directed selling efforts" within the meaning of Rule 902 of Regulation S and each of the Horizon Entities and any Person acting on its or their behalf (other than the Initial Purchaser, as to which no representation is made) has complied and will implement the "offering restrictions" within the meaning of Regulation S.
(y) None of the Horizon Entities nor any of their respective officers, directors or controlling Persons has taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or that might reasonably be expected to constitute, the stabilization or manipulation of the price of the Notes, as the case may be, to facilitate the sale or resale of the Notes (or beneficial interests therein), except that no such representation is made with respect to any actions taken directly or indirectly by the Initial Purchaser.
(z) Neither Horizon nor the Issuer has engaged in any activity or conduct which would violate any applicable anti-bribery, anti-corruption or anti-money laundering laws, regulations or rules in any applicable jurisdiction and Horizon has instituted and maintains policies and procedures designed to prevent any such violation. Neither Horizon nor the Issuer is a Person that is: (i) the subject of any economic or trade sanctions or restrictive measures enacted, administered, imposed or enforced by the U.S. government (including, without limitation, U.S. Department of the Treasury, the Office of Foreign Assets Control, the U.S. Department of State and including, without limitation, the designation as a "specially designated national" or "blocked person"), the United Nations Security Council, Her Majesty's Treasury, the
7
Swiss Secretariat for Economic Affairs, the Monetary Authority of Singapore, the Hong Kong Monetary Authority, the European Union or other relevant sanctions authority (collectively, "Sanctions"; any such Person, a "Sanctioned Person") or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions broadly prohibiting dealings with such government, country, or territory (a "Sanctioned Country"), including Cuba, Iran, Burma, North Korea, Sudan, Syria and the region of Crimea and/or any other country or region that is the subject of any economic and/or trade sanctions. Neither Horizon nor the Issuer will, in violation of applicable Sanctions, directly or indirectly use the proceeds of the Notes issued hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (i) to fund or facilitate any activities of or business with any person or entity that, at the time of such funding or facilitation, is the subject or target of Sanctions or that is owned or controlled by any person or entity that is the subject or target of Sanctions, (ii) in or involving a Sanctioned Country or any country or territory which at the time of such funding is the subject of comprehensive country-wide or territory-wide Sanctions, other than Cuba or Iran, or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions. Neither Horizon, the Issuer nor any of their affiliates or subsidiaries have knowingly engaged in and are not now knowingly engaged in any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country in violation of applicable Sanctions. The Issuer and Horizon each represent and covenant that, regardless of Sanctions, it will not, directly or indirectly, use the proceeds of the transaction, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, to fund any activities of or business in or involving Cuba or Iran.
(aa) Each of the Issuer and Horizon represents that it is in compliance, and will continue to be in compliance, with all applicable anti-money laundering laws and regulations, including the Bank Secrecy Act, as amended by the USA PATRIOT Act, and the regulations thereunder, and FINRA Conduct Rule 3011. Each of the Issuer and Horizon represents that it is subject to an anti-money laundering program of its parent that is designed to comply with applicable U.S. laws, regulations, and guidance, including rules of self-regulatory organizations, relating to the prevention of money laundering, terrorist financing, and related financial crimes.
(bb) No Horizon Entity nor any of its subsidiaries nor any director, officer, or employee of such Horizon Entity or any of its subsidiaries nor, to the knowledge of the Issuer or Horizon, any agent, or other person on behalf of such Horizon Entity or any of its subsidiaries has (i) used any funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made or taken an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government or regulatory official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom, or
8
any other applicable anti-bribery or anticorruption laws; or (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any unlawful rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit. Each Horizon Entity and its subsidiaries have instituted, maintained and enforced, and will continue to maintain and enforce policies and procedures reasonably designed to promote and ensure compliance with all applicable anti-bribery and anti-corruption laws.
(cc) None of Horizon, the Issuer or their respective affiliates has engaged or will engage any third-party to undertake "due diligence services" (as defined in Rule 17g-10(d)(1) of the Exchange Act, "Third-Party Due Diligence Services") and none of Horizon, the Issuer or their respective affiliates has obtained or will obtain a "third-party due diligence report" (as defined in Rule 15Ga-2(d) of the Exchange Act, a "Third-Party Due Diligence Report") with respect to the assets held by the Issuer or the transactions contemplated by this Agreement, except as specifically set forth on Exhibit D hereto. A Horizon Entity has provided any Third-Party Due Diligence Report to the Initial Purchaser prior to the furnishing or filing of such report, or any portion thereof, on the Securities and Exchange Commission’s EDGAR website or its 17g-5 website, as applicable. Third-Party Due Diligence Reports are deemed to have been obtained by the Issuer or Horizon pursuant to Rules 15Ga-2(a) and 17g-10 under the Exchange Act, and all legal obligations with respect to Third-Party Due Diligence Reports have been and will be timely complied with. No portion of any Form 15G contains any names, addresses, other personal identifiers or zip codes with respect to any individuals, or any other personally identifiable or other information that would be associated with an individual, including without limitation any “nonpublic personal information” within the meaning of Title V of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999.
(dd) Horizon is the "sponsor" (in such capacity, the "Sponsor") as defined in the Credit Risk Retention Rules (defined below), and as the Sponsor expects to comply as of the Closing Date, in all material respects with Regulation RR, 17 C.F.R. §246.1, et seq. (the "Credit Risk Retention Rules"), either directly or (to the extent permitted by the Credit Risk Retention Rules) through a "Wholly-Owned Affiliate" or a "Majority-Owned Affiliate" (as defined in the Credit Risk Retention Rules). The Sponsor, or one or more of its Wholly-Owned Affiliates or its Majority-Owned Affiliates, expects to satisfy on the Closing Date the Credit Risk Retention Rules through the retention of an "eligible horizontal residual interest", which includes the residual interest of the Issuer.
(ee) The Sponsor has determined the expected range of fair values of the ABS Interests based on its own valuation methodology, inputs and assumptions.
(ff) No election has been, or will be, made or filed pursuant to which the Issuer is or will be classified as an association for U.S. federal income tax purposes under Treasury Regulation Section 301.7701-3(a).
(gg) Other than as contemplated by this Agreement or as disclosed in the Time of Sale Information and the PPM, there is no broker, finder or other party that is entitled to receive from the Horizon Entities, or any affiliate thereof, any brokerage or finder's fee or other fee or commission as a result of any of the transactions contemplated by this Agreement.
9
(hh) As of the date hereof and as of the Closing Date, the information included in any Beneficial Ownership Certification provided by any Horizon Entity or any affiliate thereof to which the Beneficial Ownership Regulation is applicable with respect to the transactions undertaken pursuant to the Transaction Documents, is true and correct in all respects. A "Beneficial Ownership Certification" means a certification required by 31 C.F.R. § 1010.230 (the "Beneficial Ownership Regulation").
Section 3. Purchase, Sale and Delivery of Notes.
(a) On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions set forth herein, the Issuer agrees to sell to the Initial Purchaser and the Initial Purchaser agrees to purchase from the Issuer, the Notes at the respective purchase prices and the Initial Note Principal Balance set forth in Exhibit A to this Agreement.
(b) The Issuer will deliver, against payment of the purchase price, the Notes to be offered and sold by the Initial Purchaser in reliance on Regulation S (the "Regulation S Notes") in the form of one or more temporary global notes in registered form without interest coupons (the "Regulation S Global Notes") which will be deposited with the Indenture Trustee, in its capacity as custodian, for The Depository Trust Company ("DTC") for the respective accounts of the DTC participants for Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear"), and Clearstream Banking, société anonyme ("Clearstream") and registered in the name of Cede & Co., as nominee for DTC. The Issuer will deliver, against payment of the purchase price of the Notes to be purchased by the Initial Purchaser hereunder and to be offered and sold by the Initial Purchaser in reliance on Rule 144A under the Securities Act (the "144A Notes") in the form of one or more permanent global securities in definitive form without interest coupons (the "Rule 144A Global Notes") deposited with the Indenture Trustee, in its capacity as custodian, for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global Notes and the Rule 144A Global Notes shall be assigned separate CUSIP, ISIN and Common Code numbers. The Notes shall include the applicable legends regarding restrictions on transfer set forth under "TRANSFER RESTRICTIONS" in the PPM, as applicable. Until the termination of the "40-day distribution compliance period" (as defined in Regulation S) with respect to the offering of the Notes sold pursuant to Regulation S, interests in the Regulation S Global Notes may only be held by the DTC participants for Euroclear and Clearstream. Interests in any permanent global notes will be held only in book-entry form through Euroclear, Clearstream or DTC, as the case may be, except in the limited circumstances permitted by the Indenture.
(c) Payment for the Notes shall be made by the Initial Purchaser in federal (same day) funds by wire transfer to an account at a bank designated by the Issuer on November 9, 2022 (or, on such other date or at such other time as the Initial Purchaser and the Issuer shall agree, the "Closing Date") against delivery to the Indenture Trustee, in its capacity as custodian for DTC, of (i) the Regulation S Global Notes representing all of the Regulation S Notes for the respective accounts of the DTC participants for Euroclear and Clearstream and (ii) the Rule 144A Global Notes representing all of the 144A Notes. Copies of the Regulation S Global Notes and the Rule 144A Global Notes will be made available for inspection (which may be done by electronic mail) at least 24 hours prior to the Closing Date.
10
(d) Each of the Horizon Entities and the Initial Purchaser hereby acknowledges and agrees that, for all tax purposes, it is entering into this Agreement with the intention that the Notes not held by the Issuer or an affiliate thereof will be characterized as indebtedness and shall treat the Notes as indebtedness, unless otherwise required by applicable law.
Section 4. Representations and Covenants of the Initial Purchaser; Resales.
(a) The Initial Purchaser represents and warrants that it is both a QIB and an "accredited investor" within the meaning of Regulation D under the Securities Act.
(b) The Initial Purchaser represents and agrees that it is a QIB and a Qualified Purchaser and that it will not offer, sell or deliver any Notes within the United States or to, or for the account of benefit of, U.S. persons except in accordance with the requirements described under the "PLAN OF DISTRIBUTION—Investment Considerations; Transfer Restrictions" section in the PPM and that it will send to each other dealer to which it sells Notes, as applicable, during the 40-day period prescribed by Regulation S commencing on the later of (i) the date upon which Notes are first offered to persons other than the Initial Purchaser and any other distributor (as such term is defined in Regulation S) of the Notes and (ii) the Closing Date, a confirmation or other notice setting forth the restrictions on offers and sales of Notes in non-offshore transactions or to, or for the account or benefit of, U.S. persons.
(c) The Initial Purchaser agrees that it and each of its Affiliates will not offer or sell the Notes in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. The Initial Purchaser agrees, with respect to resales made in reliance on Rule 144A of any of the Notes, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Notes has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A.
(d) The Initial Purchaser represents and agrees that (i) it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by the PPM in relation thereto to any retail investor in the United Kingdom ("UK"). For the purposes of this provision:
(i) the expression "retail investor" means a person who is one (or more) of the following:
(a) a retail client as defined in point (8) of Article 2 of Regulation (EU) 2017/565 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended ("EUWA"); or
(b) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 as amended ("FSMA") and any rules or regulations made under the FSMA to implement Directive (EU)
11
2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of UK domestic law by virtue of the EUWA; or
(c) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended, the "EU Prospectus Regulation") as it forms part of UK domestic law by virtue of the EUWA; and
(ii) the expression "offer" includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes.
(e) The Initial Purchaser represents and agrees that (i) it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by the PPM in relation thereto to any retail investor in the European Economic Area ("EEA"). For the purposes of this provision:
(i) the expression "retail investor" means a person who is one (or more) of the following:
(a) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or
(b) a customer within the meaning of Directive (EU) 2016/97 on insurance distributions (as amended) where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or
(c) not a qualified investor as defined in the EU Prospectus Regulation; and
(ii) the expression "offer" includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes.
(f) The Initial Purchaser is not acquiring the Notes for or on behalf of or with the assets of any Benefit Plan Investor or any "governmental plan" within the meaning of Section 3(32) of ERISA that is subject to any Similar Law.
(g) The Initial Purchaser represents that it has not engaged any third party to undertake any Third-Party Due Diligence Services or obtained any Third-Party Due Diligence Report with respect to the assets held by the Issuer or the transactions contemplated by this Agreement.
Section 5. Certain Covenants of the Issuer, the Depositor and Horizon. The Issuer, the Depositor and Horizon each agree with the Initial Purchaser that:
12
(a) During the period from the date hereof until the earlier of (i) 180 days from the date hereof; or (ii) such date as of which all of the Notes shall have been sold by the Initial Purchaser (such period, the "Offering Period"), before amending or supplementing the Offering Document, the Issuer will advise the Initial Purchaser promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation without the Initial Purchaser's consent. If, at any time, following delivery of any document comprising the Offering Document and prior to the completion of the resale of the Notes by the Initial Purchaser, (i) any event occurs as a result of which such document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer promptly will notify the Initial Purchaser of such event, or (ii) if, in the reasonable opinion of the Initial Purchaser, a change to the Offering Document is necessary to comply with law or regulations, then in either case the Issuer promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission or which will cause the Offering Document to comply with such laws or regulations, as applicable. Neither the consent of the Initial Purchaser to, nor the Initial Purchaser's delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6 hereof.
(b) If requested by the Initial Purchaser, the Issuer will furnish to the Initial Purchaser copies of each document comprising a part of the Offering Document as soon as available and in such quantities as the Initial Purchaser reasonably requests. Horizon will also cause to be furnished to the Initial Purchaser, on the Closing Date, the letters specified in Section 6(a) hereof. At any time the Notes are Outstanding, the Issuer will promptly furnish or cause to be furnished to the Initial Purchaser and, upon request of holders and prospective purchasers of the Notes, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Notes pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Notes. The Issuer or Horizon will pay the expenses of printing and distributing to the Initial Purchaser all such documents.
(c) During the period of two years after the Closing Date, the Issuer will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Notes that have been reacquired by any of them.
(d) The Issuer will not conduct its business in a manner that will require it to be registered under the Investment Company Act.
(e) The Issuer will pay or cause to be paid all expenses incidental to the performance of its obligations under the Transaction Documents including (i) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Notes, the preparation of the Transaction Documents and the printing of the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Notes; (ii) any expenses (including reasonable fees and disbursements of counsel) incurred in connection with qualification of the Notes for sale under the laws of such jurisdictions in the United States as the Initial Purchaser designates and the printing of memoranda relating thereto; (iii) any fees charged by the Rating Agency for the rating of the
13
Notes, and (iv) for any reasonable fees and disbursements of Kramer Levin Naftalis & Frankel LLP, counsel to the Initial Purchaser.
(f) The Issuer shall promptly advise the Initial Purchaser of any downgrade of (or any "negative watch" or any similar warning placed on) a rating accorded to the Notes by the Rating Agency promptly after it is advised by the Rating Agency (or otherwise becomes aware) of any such downgrading (or warning).
(g) In connection with the offering, until the Initial Purchaser shall have notified the Issuer of the completion of the resale of the Notes, neither the Issuer nor any of its Affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its Affiliates has a beneficial interest any Notes or attempt to induce any person to purchase any Notes; and neither it nor any of its Affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Notes.
(h) Each of Horizon and the Issuer will comply with the representations, certifications and covenants made by it in the engagement letters with the Rating Agency, including any representation, certification or covenant provided by it to the Rating Agency in connection with Rule 17g-5, and will make accessible to any non-hired "nationally recognized statistical rating organization" all information provided by it to the Rating Agency in connection with the issuance and monitoring of the credit ratings on the Notes in accordance with Rule 17g-5.
(i) Each Horizon Entity agrees that it will promptly following any request therefor, provide information and documentation reasonably requested by the Initial Purchaser for purposes of compliance with applicable "know your customer" and anti-money laundering rules and regulations, including, without limitation, the USA PATRIOT Act, and the regulations thereunder, and the Beneficial Ownership Regulation.
(j) Horizon, in its capacity as Sponsor, agrees that it will comply with all of the legal requirements (including transfer, hedging and financing restrictions) imposed by the Credit Risk Retention Rules on the sponsor of a securitization transaction consisting of the issuance of the Notes.
Section 6. Conditions of the Initial Purchaser's Obligations. The obligations of the Initial Purchaser to purchase and pay for the Notes on the Closing Date will be subject to the accuracy of the representations and warranties on the part of the Issuer and Horizon herein, the accuracy of the statements of officers of the Issuer made pursuant to the provisions hereof, the performance by each of Horizon and the Issuer of its obligations hereunder and the following additional conditions precedent:
(a) The Initial Purchaser shall have received a letter or letters of RSM US LLP in form and substance satisfactory to the Initial Purchaser, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters, with respect to certain financial or statistical information set forth in the Offering Document.
14
(b) Subsequent to the execution and delivery of this Agreement, the Initial Purchaser may terminate this Agreement by notice given by the Initial Purchaser to the Issuer, if after the execution and delivery of this Agreement and prior to the Closing Date: (i) a change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls (including, but not limited to, any such adverse development as a result of the COVID-19 pandemic) as would, in the reasonable judgment of the Initial Purchaser, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Notes, whether in the primary market or in respect of dealings in the secondary market, (ii) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or there shall have been any setting of minimum prices for trading on any such exchange, (iii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any general moratorium on commercial banking activities shall have been declared by Federal or New York State authorities, (v) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis or natural disaster or a declaration by the United States of a national emergency or war or any other major act of terrorism involving the United States, or any other substantial national or international calamity, emergency or crisis (including, but not limited to, any such adverse development as a result of the COVID-19 pandemic), the effect of which is material and adverse, and which singly or together with any other event specified in this subsection (b), makes it, in the judgment of the Initial Purchaser, impracticable or inadvisable to proceed with the offer, sale or delivery of the Notes on the terms and in the manner contemplated in the Time of Sale Information or the PPM, or (vi) any change, or any development (including, but not limited to, any such adverse development as a result of the COVID-19 pandemic) that could reasonably be expected to cause a change, affecting the business or properties of the Issuer or Horizon occurs that, in the judgment of the Initial Purchaser, is material and adverse, and which singly or together with any other event specified in this subsection (b), makes it, in the judgment of the Initial Purchaser, impracticable or inadvisable to proceed with the offer, sale or delivery of the Notes on the terms and in the manner contemplated in the Time of Sale Information or the PPM. Upon such notice being given, subject to Section 9 hereof, the parties to this Agreement shall be released and discharged from their respective obligations under this Agreement.
(c) The Notes shall have been duly authorized, executed, authenticated, delivered and issued, and each of the Transaction Documents shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect, and all conditions precedent contained in the Transaction Documents shall have been satisfied or waived.
(d) On or before the Closing Date, all actions required to be taken in order to perfect: (i) the Issuer's ownership and security interest in the Initial Loans and related assets and (ii) the Indenture Trustee's first priority, perfected security interest in the Trust Estate shall have been taken. The Initial Purchaser shall have received evidence reasonably satisfactory to the Initial Purchaser that UCC financing statements in the State of Delaware with respect to (1) the sale of the Initial Loans and related assets from Horizon to the Issuer and (2) the pledge of the Trust Estate from the Issuer to the Indenture Trustee are being filed (or will be sent for filing within three Business Days of the Closing Date).
15
(e) The Initial Purchaser shall have received legal opinions of Dechert LLP, counsel to the Horizon Entities, (i) with respect to certain corporate, enforceability, federal tax, security interest, securities law and investment company matters, in form and substance satisfactory to the Initial Purchaser, (ii) with respect to certain “true sale” issues in form and substance satisfactory to the Initial Purchaser and (iii) with respect to certain “non-consolidation” issues in form and substance satisfactory to the Initial Purchaser. Dechert LLP shall also provide a customary “negative assurances” letter, dated as of the Closing Date, addressed to the Initial Purchaser and in form and substance reasonably satisfactory to its counsel, containing customary exceptions and limitations, to the effect that such counsel has no reason to believe that the Preliminary PPM, at the Time of Sale, or the PPM, as of the date thereof and as of the Closing Date, included any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (in each case, other than the financial statements and other information of a statistical, accounting or financial nature included in the Preliminary PPM and PPM).
(f) (i) The Initial Purchaser shall have received a letter from Dechert LLP that it has no reason to believe that the Preliminary PPM, together with the Pricing Information, as of the Time of Sale, and the PPM as of the date thereof and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein not misleading, it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Offering Document.
(ii) The Initial Purchaser shall have received a letter from Kramer Levin Naftalis & Frankel LLP that it has no reason to believe that the Preliminary PPM, together with the Pricing Information, as of the Time of Sale, and the PPM as of the date thereof and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein not misleading, it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Offering Document.
(g) The Initial Purchaser shall have received from each party to the Transaction Documents such information, certificates, opinions and documents as the Initial Purchaser may reasonably have requested and all proceedings in connection with the transactions contemplated by this Agreement and all documents incident hereto shall be in all material respects reasonably satisfactory in form and substance to the Initial Purchaser.
(h) (i) The Notes shall have received a rating of at least "A" from the Rating Agency, and (ii) such rating shall not have been rescinded, and no public announcement shall have been made by (x) the Rating Agency that the rating of such Notes has been placed under review or (y) by a non-hired rating agency that it has issued an unsolicited lower rating on such Notes.
(i) At least two business days prior to the date hereof, each Horizon Entity and any affiliate thereof to which the Beneficial Ownership Regulation is applicable with respect to the transactions undertaken pursuant to the Transaction Documents, to the extent that any such entity qualifies as a "legal entity customer" under the Beneficial Ownership Regulation shall (i) deliver, or ensure that it has delivered, to the Initial Purchaser if it so requests, a Beneficial
16
Ownership Certification in relation to itself, or (ii) deliver to the Initial Purchaser an updated Beneficial Ownership Certification if any previously delivered Beneficial Ownership Certification ceases to be true and correct in all respects.
(j) On or before the Closing Date, the Initial Purchaser shall have received in immediately available funds, the fees specified in that certain fee letter dated the date hereof, by and among the Issuer, Horizon and the Initial Purchaser.
The Initial Purchaser may in its sole discretion waive compliance with any conditions to the obligations of the Initial Purchaser hereunder.
Section 7. Indemnification and Contribution.
(a) Each of the Horizon Entities jointly and severally agrees (i) to indemnify and hold harmless the Initial Purchaser, its partners, directors, employees and officers and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an "Initial Purchaser Indemnified Party"), against any losses, claims, damages or liabilities, to which any Initial Purchaser Indemnified Party may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) ("Loss") arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Form ABS-15G furnished on EDGAR with respect to the transaction contemplated by this Agreement, whether prepared by or furnished by Horizon or the Issuer ("Form 15G"), any document comprising a part of the Offering Document, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (ii) will reimburse the Initial Purchaser for any legal or other expenses reasonably incurred by an Initial Purchaser Indemnified Party in connection with investigating or defending any such Loss or bringing any claim to enforce the indemnification obligations of a Horizon Entity, as such expenses are incurred; provided, however, that none of the Horizon Entities will be liable in any such case to the extent that any such Loss or reimbursement request arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Horizon Entities by the Initial Purchaser specifically for use therein, it being understood and agreed that such information consists only of the information described as such in subsection (b) below; and provided, further, that none of the Horizon Entities will be liable in any such case to the extent that such misstatement or omission from any document comprising a part of the Offering Document was corrected by the Horizon Entities reasonably prior to the initial time of sale and the Initial Purchaser did not deliver, prior to the initial time of sale, a copy of such document comprising a part of the Offering Document, as then revised, amended or supplemented, if any of the Horizon Entities furnished copies thereof reasonably prior to the initial time of sale to the Initial Purchaser in accordance with the terms of this Agreement.
(b) The Initial Purchaser will indemnify and hold harmless the Horizon Entities, their respective directors and officers, and each person, if any, who controls such
17
Horizon Entity within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any Losses to which a Horizon Entity may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any document comprising a part of the Offering Document or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Horizon Entities by the Initial Purchaser specifically for use therein, and the Initial Purchaser will reimburse any legal or other expenses reasonably incurred by a Horizon Entity in connection with investigating or defending any such Loss or bringing any claim to enforce the indemnification obligations of the Initial Purchaser as such expenses are incurred, it being understood and agreed that the only such information furnished by the Initial Purchaser consists of the first sentence of the second paragraph and the first sentence of the eighth paragraph under the caption "PLAN OF DISTRIBUTION" in the Preliminary PPM and the PPM (the "Initial Purchaser Information").
(c) Promptly after receipt by an indemnified party under subsection (a) or (b) of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above, except to the extent that the indemnifying party has been materially prejudiced by such failure. The indemnifying party shall have the right to assume the defense thereof with counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (A) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel and payment of reasonable legal fees and expenses thereto, (B) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party) or (C) the indemnifying party fails to timely retain counsel as provided in the preceding sentence. The indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (in addition to any local or specialized counsel) for all such indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Initial Purchaser in the case of parties indemnified pursuant to subsection (a) of this Section and by the Issuer in the case of parties indemnified pursuant to subsection (b) of this Section. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent or if there be a final
18
judgment for the plaintiff, the indemnifying party agrees to promptly indemnify the indemnified party from and against any loss or liability by reason of such settlement or final judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could be a party and indemnity could have been sought hereunder by such indemnified party unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer, the Depositor and Horizon on the one hand and the Initial Purchaser on the other from the offering of the Notes or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuer, the Depositor and Horizon on the one hand and the Initial Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Issuer, the Depositor and Horizon on the one hand and the Initial Purchaser on the other shall be deemed to be in the same proportion as the total proceeds from the Note offering (after deducting the Initial Purchaser's fee or underwriting discount, but before deducting expenses) received directly by the Issuer bear to the total fees, discounts and commissions received by the Initial Purchaser in respect thereof. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer, the Depositor and/or Horizon on the one hand or the Initial Purchaser on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), the Initial Purchaser shall not be required to contribute any amount in excess of the difference between the total price at which the Notes were resold by it and the total price of the Notes acquired by it.
(e) The obligations of the Horizon Entities under this Section 7 shall be in addition to any liability which a Horizon Entity may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Initial Purchaser under this Section shall be in addition to any liability which the Initial Purchaser may otherwise
19
have and shall extend, upon the same terms and conditions, to each person, if any, who controls a Horizon Entity within the meaning of the Securities Act or the Exchange Act.
Section 8. Default of Initial Purchaser. If the Initial Purchaser defaults in its obligations to purchase the Notes and the aggregate principal amount of the Notes with respect to which such default occurs exceeds 10% of the total principal amount of the Notes and arrangements satisfactory to the Issuer and Horizon for the purchase of such Notes by any other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of the Issuer or Horizon, except as provided in Section 9 hereof. Nothing herein will relieve the Initial Purchaser from liability for any default hereunder.
Section 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Horizon Entities or their respective officers and of the Initial Purchaser and its officers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, a Horizon Entity or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Notes. If this Agreement is terminated pursuant to Section 8 hereof or if for any reason the purchase of the Notes by the Initial Purchaser is not consummated, the Issuer shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5(f) hereof and the respective obligations of the Horizon Entities and the Initial Purchaser pursuant to Section 7 hereof shall remain in effect. If the purchase of the Notes by the Initial Purchaser is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 hereof, the Horizon Entities will reimburse the Initial Purchaser for all out-of-pocket expenses (including reasonable fees and disbursements of legal counsel) reasonably incurred by them in connection with the offering of the Notes. Section 17 shall survive the termination of this Agreement.
Section 10. Severability Clause. Any part, provision, representation, or warranty of this Agreement which is prohibited or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.
Section 11. Notices. All communications hereunder will be in writing and, (A) if sent to the Initial Purchaser, will be mailed, delivered or faxed and confirmed to the Initial Purchaser, at KeyBanc Capital Markets Inc., 1301 Avenue of the Americas, 35th Floor, New York, New York 10019, Attention: Alan Staggers, email: alan.staggers@key.com, or (B) if sent to the Issuer, will be mailed, delivered or faxed and confirmed to it at c/o Wilmington Trust, National Association, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration, Facsimile No.: (302) 636‑4140, or (C) if sent to the Depositor, will be mailed, delivered or faxed and confirmed to it at Horizon Funding 2022-1 LLC, c/o Horizon Technology Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032 Attention: Legal Department, Re: Horizon Funding Trust 2022-1, Telephone: (860) 676-8654, Facsimile No.: 860-676-8655; with a copy to Horizon Funding 2022-1 LLC, c/o Horizon Technology Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032 Attention: Legal Department, Re: Horizon Funding Trust 2022-1, Telephone: (860) 676-8654, Facsimile No.: 860-676-8655, or (D) if sent to Horizon, will be
20
mailed, delivered or faxed and confirmed to it at Horizon Technology Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032, Attention: Legal Department, Re: Horizon Funding Trust 2022-1, telephone: (860) 676-8654, Facsimile No.: 860-676-8655; with a copy to Horizon Technology Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032, Attention: Legal Department, Re: Horizon Funding Trust 2022-1, Telephone: (860) 676-8654, Facsimile No.: 860-676-8655.
Section 12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 7 hereof, and no other person will have any right or obligation hereunder.
Section 13. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK.
Section 14. Submission to Jurisdiction, etc.
(a) The parties hereto hereby irrevocably and unconditionally submit to the jurisdiction of: (i) the United States District Court for the Southern District of New York or of any New York State court (in either case sitting in the Borough of Manhattan in The City of New York) and (ii) the courts of its own corporate domicile, in each case with all applicable courts of appeal therefrom, with respect to actions brought against it as a defendant for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby or thereby; provided that nothing herein shall be deemed to limit the ability of any party to this Agreement to bring suit against any other party to this Agreement in any other permissible jurisdiction. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court, any claim that any such proceeding brought in such a court has been brought in an inconvenient forum and any objection based on place of residence or domicile.
(b) To the extent that any party hereto has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution or execution, on the ground of sovereignty or otherwise) with respect to itself or its property, it hereby irrevocably waives, to the fullest extent permitted by applicable law, such immunity in respect of its obligations under this Agreement.
Section 15. WAIVERS OF JURY TRIAL.
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM RELATING THERETO. EACH PARTY ACKNOWLEDGES THAT THE OTHER PARTIES HERETO ARE ENTERING INTO THIS AGREEMENT IN
21
RELIANCE UPON SUCH WAIVER.
Section 16. Counterparts, Etc. This Agreement supersedes all prior or contemporaneous agreements and understandings relating to the subject matter hereof between the Initial Purchaser and the Horizon Entities. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a writing signed by the party against whom enforcement of such change, waiver, discharge or termination is sought. This Agreement may be signed in any number of counterparts each of which shall be deemed an original, which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile transmission or other electronic transmission (i.e. a "pdf" or "tif") shall be effective as of delivery of a manually executed counterpart hereof.
Section 17. No Petition. During the term of this Agreement and for one year and one day after all debt securities issued by the Issuer have been paid, none of the parties hereto or any affiliate thereof will file any involuntary petition or otherwise institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceeding under any federal or state bankruptcy or similar law against the Issuer.
Section 18. Owner Trustee. It is expressly understood and agreed by the parties hereto that (a) this Agreement, when executed by the Issuer, is executed and delivered by Wilmington Trust, National Association ("WTNA"), not individually or personally but solely in its capacity as Owner Trustee on behalf of the Issuer, in the exercise of the powers and authority conferred and vested in it under the Trust Agreement, (b) each of the representations, warranties, covenants, undertakings and agreements herein made on the part of the Issuer is made and intended to bind only the Issuer and does not constitute personal representations, undertakings and agreements by WTNA in its individual capacity or as Owner Trustee, (c) nothing herein contained shall be construed as creating any liability on WTNA, individually or personally or as Owner Trustee, to perform any covenant either expressed or implied contained herein of the Issuer, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WTNA has made no (and is under no obligation to make any) investigation or determination as to the satisfaction, accuracy or completeness of any representations and warranties made by the Issuer in this Agreement and (e) under no circumstances shall WTNA be personally liable for the payment of any indebtedness or expenses of the Owner Trustee or the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Agreement, the Indenture, the Notes or any other Transaction Documents. It is expressly understood and agreed that the rights, duties and obligations of Issuer hereunder will be exercised and performed by Horizon in its capacity as the Administrator on behalf of the Issuer pursuant to its authority under the Trust Agreement and the Administration Agreement and under no circumstances shall the Owner Trustee have any duty or obligation to monitor, exercise or perform the rights, duties or obligations of the Issuer or the Administrator hereunder.
Section 19. No Advisory or Fiduciary Responsibility. Each of the Horizon Entities acknowledges and agrees that: (a) the purchase and sale of the Notes pursuant to this Agreement, including the determination of the offering price of the Notes and any related discounts and commissions, is an arm's-length commercial transaction among the Horizon Entities and the Initial Purchaser and each of the Horizon Entities is capable of evaluating and
22
understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (b) in connection with the purchase and sale of the Notes, the Initial Purchaser is and has been acting solely as a principal and is not the agent or fiduciary of any of the Horizon Entities, or their respective affiliates, stockholders, creditors or employees or any other party; (c) the Initial Purchaser has not assumed nor will assume an advisory or fiduciary responsibility in favor of any of the Horizon Entities with respect to any of the transactions contemplated hereby; (d) the Initial Purchaser and its respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of either of the Horizon Entities and that the Initial Purchaser has no obligation to disclose any of such interests by virtue of any fiduciary or advisory relationship; (e) the Horizon Entities shall each consult with its own advisors concerning the purchase and sale of the Notes and shall be responsible for making their own independent investigation and appraisal of the transaction contemplated hereby, and the Initial Purchaser shall not have any responsibility or liability to a Horizon Entity with respect thereto; (f) the Initial Purchaser and its respective affiliates are not providing and have not provided legal, regulatory, tax, insurance or accounting advice in any jurisdiction; and (g) each of the Horizon Entities waives, to the fullest extent permitted by law, any claims it may have against the Initial Purchaser for breach of fiduciary duty or alleged breach of fiduciary duty.
Section 20. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that the Initial Purchaser (if it is a Covered Entity) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from the Initial Purchaser (if it is a Covered Entity) of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any interest and obligation in or under this Agreement, were governed by the laws of the United States or a state of the United States.
(b) In the event that the Initial Purchaser (if it is a Covered Entity) or a BHC Act Affiliate of the Initial Purchaser (if the Initial Purchaser is a Covered Entity) becomes subject to a proceeding under a U.S. Special Resolution Regime, any Default Rights under this Agreement that may be exercised against the Initial Purchaser (if it is a Covered Entity) are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
For the purposes of this Section 17, the following terms shall have the meaning ascribed to them below:
"BHC Act Affiliate" has the meaning assigned to the term "affiliate" in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).
"Covered Entity" means any of the following:
(i) a "covered entity" as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
23
(ii) a "covered bank" as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii) a "covered FSI" as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
"Default Right" has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
"U.S. Special Resolution Regime" means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
[signature page follows]
24
If the foregoing is in accordance with your understanding of our agreement, please sign and return to the undersigned a counterpart hereof, whereupon this Note Purchase Agreement shall represent a binding agreement among the Horizon Entities and the Initial Purchaser.
Very truly yours,
Horizon Funding Trust 2022-1
By: Wilmington Trust, National Association, not in its individual capacity but solely as Owner Trustee on behalf of the Issuer
By: /s/
Name:
Title:
Horizon Funding 2022-1 LLC
By: /s/
Name:
Title:
Horizon Technology Finance Corporation
By: /s/
Name:
Title:
The foregoing Note Purchase Agreement is
hereby confirmed and accepted as
of the date first above written.
KeyBanc Capital Markets Inc.
By: /s/
Name:
Title:
EXHIBIT A
|
Initial Note Balance |
Purchase Price |
|
$100,000,000 |
99.97772% |
EXHIBIT B
Road Show
[see attached]
Exhibit C
The Initial Purchaser has indicated to the Issuer that it conveyed the pricing information below to each of its initial transferees of the Notes:
Initial Note Principal Balance: $100,000,000
Issue Price: 99.97772%
Closing Date: November 9, 2022
EXHIBIT D
Agreed-upon procedures report, dated October 14, 2022, obtained by Horizon, with respect to certain agreed-upon procedures performed by RSM US LLP.
|
EXHIBIT 10.2
INDENTURE |
|
by and among |
|
HORIZON FUNDING TRUST 2022-1, |
|
as the Issuer, |
|
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as the Trustee, |
|
and |
|
U.S. BANK NATIONAL ASSOCIATION, |
|
as the Securities Intermediary |
|
Dated as of November 9, 2022 |
Horizon Funding Trust 2022-1
Notes
TABLE OF CONTENTS
| Page | ||
| ARTICLE I | DEFINITIONS | 2 |
| Section 1.01 | Definitions. | 2 |
| Section 1.02 | Rules of Construction. | 9 |
| ARTICLE II | THE NOTES | 10 |
| Section 2.01 | Form. | 10 |
| Section 2.02 | Execution, Authentication and Delivery. | 10 |
| Section 2.03 | Opinion of Counsel. | 11 |
| ARTICLE III | COVENANTS | 11 |
| Section 3.01 | Transaction Accounts. | 22 |
| Section 3.02 | Maintenance of Office or Agency. | 11 |
| Section 3.03 | Money for Payments To Be Held in Trust; Paying Agent. | 11 |
| Section 3.04 | Existence; Separate Legal Existence. | 13 |
| Section 3.05 | Payment of Principal and Interest. | 14 |
| Section 3.06 | Protection of Indenture Collateral. | 14 |
| Section 3.07 | Opinions as to Indenture Collateral. | 17 |
| Section 3.08 | Furnishing of Rule 144A Information. | 17 |
| Section3.09 | Performance of Obligations; Sale and Servicing Agreement. | 18 |
| Section 3.10 | Negative Covenants. | 18 |
| Section 3.11 | Annual Statement as to Compliance. | 19 |
| Section 3.12 | [Reserved]. | 20 |
| Section 3.13 | Representations and Warranties Concerning the Loans. | 20 |
| Section 3.14 | Custodian Review of Loan Files. | 20 |
| Section 3.15 | Sale and Servicing Agreement. | 20 |
| Section 3.16 | Amendments to Sale and Servicing Agreement. | 20 |
| Section 3.17 | Servicer as Agent and Bailee of Trustee. | 20 |
| Section 3.18 | Investment Company Act of 1940. | 21 |
| Section 3.19 | Issuer May Consolidate, etc., Only on Certain Terms. | 21 |
| Section 3.20 | Successor or Transferee. | 22 |
| Section 3.21 | No Other Business. | 23 |
| Section 3.22 | No Borrowing; Use of Proceeds. | 23 |
| Section 3.23 | Guarantees, Loans, Advances and Other Liabilities. | 23 |
| Section 3.24 | Capital Expenditures. | 23 |
| Section 3.25 | Representations and Warranties of the Issuer. | 23 |
| Section 3.26 | Restricted Payments. | 23 |
| Section 3.27 | Notice of Events of Default, Amendments and Waivers. | 26 |
| Section 3.28 | Further Instruments and Acts. | 26 |
| Section 3.29 | Statements to Noteholders. | 27 |
| Section 3.30 | Grant of Substitute Loans and Additional Loans. | 27 |
| ARTICLE IV | THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE | 27 |
| Section 4.01 | The Notes. | 27 |
| Section 4.02 | Registration of Transfer and Exchange of Notes. | 28 |
| Section 4.03 | Mutilated, Destroyed, Lost or Stolen Notes. | 37 |
| Section 4.04 | Payment of Principal and Interest; Defaulted Interest. | 38 |
| Section 4.05 | Tax Treatment. | 39 |
| Section 4.06 | Satisfaction and Discharge of Indenture. | 40 |
| Section 4.07 | Application of Trust Money. | 41 |
| Section 4.08 | Repayment of Moneys Held by Paying Agent. | 41 |
| ARTICLE V | REMEDIES | 42 |
| Section 5.01 | Events of Default. | 42 |
| Section 5.02 | Acceleration of Maturity; Rescission and Annulment. | 43 |
| Section 5.03 | Collection of Indebtedness and Suits for Enforcement by Trustee. | 44 |
| Section 5.04 | Remedies; Priorities. | 46 |
| Section 5.05 | [Reserved]. | 47 |
| Section 5.06 | Limitation of Suits. | 47 |
| Section 5.07 |
Unconditional Rights of Noteholders To Receive Principal and Interest. |
48 |
| Section 5.08 | Restoration of Rights and Remedies. | 48 |
| Section 5.09 | Rights and Remedies Cumulative. | 48 |
| Section 5.10 | Delay or Omission Not a Waiver. | 48 |
| Section 5.11 | Control by Noteholders. | 49 |
| Section 5.12 | Waiver of Past Defaults. | 49 |
| Section 5.13 | Undertaking for Costs. | 49 |
| Section 5.14 | Waiver of Stay or Extension Laws. | 50 |
| Section 5.15 | Sale of Indenture Collateral. | 50 |
| Section 5.16 | Action on Notes. | 51 |
| Section 5.17 | Performance and Enforcement of Certain Obligations. | 52 |
| ARTICLE VI | THE TRUSTEE | 52 |
| Section 6.01 | Duties of Trustee. | 52 |
| Section 6.02 | Rights of Trustee. | 53 |
| Section 6.03 | Individual Rights of Trustee. | 55 |
| Section 6.04 | Trustee’s Disclaimer. | 55 |
| Section 6.05 | Notice of Event of Default | 55 |
| Section 6.06 | Reports by Trustee to Holders. | 55 |
| Section 6.07 | Compensation and Indemnity. | 56 |
| Section 6.08 | Replacement of Trustee. | 57 |
| Section 6.09 | Successor Trustee by Merger. | 58 |
| Section 6.10 | Appointment of Co-Trustee or Separate Trustee. | 59 |
| Section 6.11 | Eligibility; Disqualification. | 60 |
| Section 6.12 | Representations, Warranties and Covenants of the Trustee. | 60 |
| Section 6.13 | Directions to Trustee. | 61 |
| Section 6.14 | Conflicts. | 62 |
| ARTICLE VII | NOTEHOLDERS’ LISTS AND REPORTS | 62 |
| Section 7.01 | Issuer To Furnish Trustee Names and Addresses of Noteholders. | 62 |
| Section 7.02 | Preservation of Information; Communications to Noteholders. | 62 |
| Section 7.03 | Fiscal Year. | 62 |
| ARTICLE VIII | TRANSACTION ACCOUNTS, DISBURSEMENTS AND RELEASES | 62 |
| Section 8.01 | Collection of Money. | 62 |
| Section 8.02 | Transaction Accounts. | 63 |
| Section 8.03 | Officer’s Certificate. | 64 |
| Section 8.04 | Termination Upon Distribution to Noteholders. | 64 |
| Section 8.05 | Release of Indenture Collateral. | 64 |
| ARTICLE IX | SUPPLEMENTAL INDENTURES | 66 |
| Section 9.01 | Supplemental Indentures Without Consent of Noteholders. | 66 |
| Section 9.02 | Supplemental Indentures With Consent of Noteholders. | 68 |
| Section 9.03 | Execution of Supplemental Indentures. | 70 |
| Section 9.04 | Effect of Supplemental Indenture. | 70 |
| Section 9.05 | Reference in Notes to Supplemental Indentures. | 70 |
| Section 9.06 | Consent of the Servicer and Owner Trustee. | 70 |
| ARTICLE X | OPTIONAL REDEMPTION | 71 |
| Section 10.01 | Optional Redemption. | 71 |
| Section 10.02 | Form of Redemption Notice by Trustee. | 72 |
| ARTICLE XI | MISCELLANEOUS | 72 |
| Section 11.01 | Confidentiality. | 72 |
| Section 11.02 | Form of Documents Delivered to Trustee. | 73 |
| Section 11.03 | Acts of Noteholders. | 74 |
| Section 11.04 | Notices, etc., to Trustee and Others. | 74 |
| Section 11.05 | Notices to Noteholders; Waiver. | 76 |
| Section 11.06 | Alternate Payment and Notice Provisions. | 76 |
| Section 11.07 | Effect of Headings. | 77 |
| Section 11.08 | Successors and Assigns. | 77 |
| Section 11.09 | Severability. | 77 |
| Section 11.10 | Benefits of Indenture. | 77 |
| Section 11.11 | Legal Holidays. | 77 |
| Section 11.12 | GOVERNING LAW; JURY WAIVER | 77 |
| Section 11.13 | Counterparts. | 78 |
| Section 11.14 | Issuer Obligation. | 78 |
| Section 11.15 | No Petition; Limited Recourse. | 78 |
| Section 11.16 | Inspection; Confidentiality. | 79 |
| Section 11.17 | Limitation of Liability. | 80 |
| Section 11.18 | Disclaimer. | 80 |
| EXHIBITS | ||
| Exhibit A | — | Form of Note |
| Exhibit B | — | List of Loans |
| Exhibit C | — | Form of Wiring Instructions |
| Exhibit D-1 | — | Form of Transferee Letter Non-Rule 144A |
| Exhibit D-2 | — | Form of Rule 144A Certification |
| Exhibit E | — | Form of Transfer Certificate for Rule 144A Global Note to Regulation S Global Note during Distribution Compliance Period |
| Exhibit F | — | Form of Transfer Certificate for Rule 144A Global Note to Regulation S Global Note after Distribution Compliance Period |
| Exhibit G | — | Form of Transfer Certificate for Regulation S Global Note to Rule 144A Global Note during Distribution Compliance Period |
| Exhibit H | — | Form of Transfer Certificate for Regulation S Global Note during Distribution Compliance Period |
INDENTURE
THIS INDENTURE, dated as of November 9, 2022 (as amended, modified, restated, supplemented or waived from time to time, this “Indenture”), is by and among HORIZON FUNDING TRUST 2022-1, a Delaware statutory trust, as the issuer (together with its successors and assigns, the “Issuer”), U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association (“U.S. Bank Trust Co.”) not in its individual capacity, but solely in its capacity as the trustee (together with its successors and assigns, in such capacity, the “Trustee”) and U.S. BANK NATIONAL ASSOCIATION, a national banking association (“U.S. Bank N.A.” and, together with U.S. Bank Trust Co., “U.S. Bank”), as the securities intermediary (together with its successors and assigns, in such capacity, the “Securities Intermediary”).
Each party hereto agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer’s Notes.
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee, on behalf of and for the benefit of the Holders of the Notes, without recourse, subject to the terms of this Indenture and the other Transaction Documents and subject to any Permitted Liens with respect thereto, a continuing security interest in and Lien on all of the Issuer’s right, title and interest, whether now owned or hereafter acquired in and to (A)(i) the Loans and all Related Property included or to be included from time to time in the Loan Assets; (ii) Collections on the Loans received after the related Cutoff Date; (iii) the security interests in Related Property securing the Loans; (iv) the Loan Files and any other loan contract files relating to the Loans; (v) an assignment of all rights and remedies with respect to the Loans (including any warrants issued or that may be issued in favor of the Issuer with respect to such Loans) and any Proceeds from liquidating the Loan Assets; (vi) an assignment of the Trust Depositor’s rights against Obligors under agreements between the Seller and the Obligors under the Loans; (vii) the Collection Account, the Reserve Account, the Investment Account, the Lockbox Account and the Distribution Account, all amounts deposited therein or credited thereto, the Permitted Investments purchased with funds therefrom or deposited therein and all income from the investment of the funds therein; (viii) other rights under the Transaction Documents; (B) all proceeds from the items described above; (C) all accounts, cash and currency, chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, oil, gas and other minerals, supporting obligations, accessions, and other property consisting of, arising out of, or related to the above and (D) all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing; provided that all right, title and interest of the Issuer in and to each Excluded Amount, the Certificate Account and any and all proceeds of any Excluded Amount or the Certificate Account (collectively, the “Excluded Property”) shall be excluded from the foregoing Grant by the Issuer (collectively, the “Indenture Collateral”).
The foregoing Grant is made in trust to secure (x) the payment of principal of and interest on, and any other amounts owing in respect of, the Notes and all other sums owing by the Issuer hereunder or under any other Transaction Document, and (y) to secure compliance with the covenants and agreement in this Indenture and the other Transaction Documents.
The Trustee, on behalf of the Noteholders (1) acknowledges such Grant, and (2) accepts the trusts under this Indenture in accordance with this Indenture and agrees to perform its duties required in this Indenture to the best of its ability to the end that the interests of the Noteholders may be adequately and effectively protected.
ARTICLE I
DEFINITIONS
| Section 1.01 | Definitions. |
Certain defined terms used throughout this Indenture are defined above or in this Section 1.01. In addition, except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Sale and Servicing Agreement (as defined below), which are incorporated by reference herein.
“Applicable Procedures” has the meaning provided in Section 4.02(l)(i).
“Authorized Newspaper” means a newspaper of general circulation in the Borough of Manhattan, The City of New York, printed in the English language and customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays.
“Beneficial Owner” means, with respect to a Global Note, the Person who is the beneficial owner of such Note, as reflected on the books of DTC or on the books of a Person maintaining an account with such Depository (directly or as an indirect participant, in accordance with the rules of such Depository), as the case may be.
“Certificate Registrar” means initially, the Trustee, and thereafter, any successor appointed pursuant to the Trust Agreement.
“Clearstream” means Clearstream Banking, a société anonyme, a limited liability company organized under the laws of Luxembourg.
“Confidential Information” means any and all information concerning any Disclosing Party disclosed by, or at the request or on behalf of, any Disclosing Party to any Receiving Party or its representatives pursuant to this Indenture, excluding, however, any information that at the time of disclosure: (a) was generally available to the public, other than as a result of a disclosure by any Receiving Party or its representatives in violation of this Indenture; (b) was available to any Receiving Party on a non-confidential basis from a source other than the Disclosing Party or its representatives; (c) was already known to the Receiving Party and not subject to restrictions on use or disclosure; or (d) was independently developed by or on behalf of the Receiving Party (other than at the request of or for the benefit of the Disclosing Party) by individuals who did not directly or indirectly receive Confidential Information.
2
“Corporate Trust Office” means in the case of the Trustee: with respect to Note transfers and presentment of Notes for final payment, at U.S. Bank Trust Company, National Association, 111 East Fillmore Avenue, EP-MN-WS2N, St. Paul, Minnesota 55107, Attention: Bondholder Services - Horizon 2022-1, and for all other purposes, to the Trustee at U.S. Bank Trust Company, National Association, Global Corporate Trust Services, 190 S. LaSalle Street, 7th Floor, Chicago, IL 60603, Attention: Horizon Funding Trust 2022-1, Tel: 312-332-7453, Fax: 312-332-7996, Email: melissa.rosal@usbank.com and jose.galarza@usbank.com or at such other address as the Trustee may designate from time to time by notice to the Issuer, or the principal corporate trust officer of any successor Trustee at the address designated by such successor by notice to the Issuer.
“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.
“Direct Participant” means any broker-dealer, bank or other financial institution for whom the nominee of DTC holds an interest in any Note.
“Disclosing Party” means each of the Issuer, the Trust Depositor, the Servicer and the Seller and “Disclosing Parties” means collectively all such parties.
“Distribution Compliance Period” means the 40 day period prescribed by Regulation S commencing on the later of (a) the date upon which Notes are first offered to Persons other than the Initial Purchaser and any other distributor (as such term is defined in Regulation S) of the Notes and (b) the Closing Date.
“DTC” or the “Depository” means The Depository Trust Company, and its successors.
“DTC Custodian” means the Trustee as a custodian for DTC.
“DTC Participant” means a Person for whom, from time to time, DTC effects book-entry transfers and pledges of securities deposited with DTC.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor legislation thereto and the regulations promulgated and the rulings issued thereunder.
“Euroclear” means the Euroclear System, operated by Morgan Guaranty Trust Company of New York, Brussels office.
“Excluded Property” has the meaning provided in the Granting Clause.
“Event of Default” has the meaning provided in Section 5.01.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version) and any current or future regulations or official interpretations thereof.
“Global Note” means any Note registered in the name of DTC or its nominee, beneficial interests in which are reflected on the books of DTC or on the books of a Person maintaining any account with such Depository (directly or as an indirect participant in accordance with the rules of
3
such Depository). The definition of “Global Note” shall include the Rule 144A Global Notes and the Regulation S Global Notes.
“Grant” means to mortgage, pledge, sell, bargain, warrant, alienate, remise, release, convey, assign, transfer, create, and grant a Lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of Indenture Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of such collateral or other agreement or instrument and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.
“Indenture Collateral” has the meaning provided in the Granting Clause.
“Indirect Participant” means any financial institution for whom any Direct Participant holds an interest in any Note.
“Initial Purchaser” means KeyBanc Capital Markets Inc.
“Issuer Documents” has the meaning provided in Section 3.25(a).
“Issuer Order” means a written order or request signed in the name of the Issuer by any one of its Responsible Officers or by the Servicer or the Administrator on behalf of the Issuer and delivered to the Trustee. An Issuer Order or request provided in an email by a Responsible Officer of the Issuer or the Administrator on behalf of the Issuer shall constitute an Issuer Order in each case except to the extent the Trustee requests otherwise.
“Legal Final Payment Date” means, with respect to the Notes, November 15, 2030.
“Letter of Representations” means the Letter of Representations, dated as of November 1, 2022 by the Issuer.
“Minimum Denomination” of any Note shall mean, (x) in respect of Notes purchased by the Initial Purchaser and subsequently retransferred to the first transferee thereof (provided that such initial transferee provides to the Initial Purchaser and the Issuer a written certification that such transferee is both a Qualified Purchaser and a Qualified Institutional Buyer), a minimum denomination of $250,000 initial principal amount and integral multiples of $1,000 in excess thereof and (y) with respect to all subsequent transfers of Notes, a minimum denomination of $250,000 initial principal amount and integral multiples of $1,000 in excess thereof; provided that one Note may be in a smaller multiple in excess of the minimum denomination.
“Non-Permitted Holder” has the meaning provided in Section 4.02(s)(ii).
“Note Register” has the meaning provided in Section 4.02(a).
“Note Registrar” has the meaning provided in Section 4.02(a).
4
“Outstanding” means, as of any date of determination, all Notes theretofore executed, authenticated and delivered under this Indenture except: (i) Notes in exchange for or in lieu of which other Notes have been executed, authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Trustee is presented that any such Notes are held by a holder in due course; (ii) Notes to be redeemed in connection with an Optional Redemption and in respect of which money in the necessary amount to pay the Redemption Price, has been theretofore deposited with the Trustee in trust for the Noteholders; and (iii) Notes otherwise cancelled by the Note Registrar in accordance with the express terms of this Indenture; provided that, in determining whether the Holders of the requisite amount of any Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under the Sale and Servicing Agreement, (1) Notes beneficially owned by the Issuer shall be disregarded and deemed not to be Outstanding and (2) Notes beneficially owned by the Servicer, Seller, any Affiliate of the Seller or the Servicer or any account managed on a discretionary basis by the Servicer or an Affiliate of the Servicer shall be disregarded and deemed not to be Outstanding with respect to any assignment by the Servicer or termination of the Servicer under the Sale and Servicing Agreement or this Indenture (including the exercise of any rights to remove the Servicer or approve or object to a Successor Servicer); except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Trustee knows to be beneficially owned in the manner indicated above shall be so disregarded; provided that the Trustee shall be entitled to rely on a certificate of the Servicer attesting to the ownership of Notes by the Seller, the Servicer, any of their respective Affiliates or any account managed on a discretionary basis by the Servicer or an Affiliate of the Servicer, if any.
“Owner” means each Holder of a Note.
“Owner Trustee” means Wilmington Trust, National Association, not in its individual capacity but solely as owner trustee under the Trust Agreement, and any successor Owner Trustee thereunder.
“Participant” means a Person that has an account with DTC.
“Physical Note” means any Note in certificated form registered in the name of a holder other than DTC or its nominee.
“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.
“Qualified Institutional Buyer” has the meaning provided in Rule 144A under the Securities Act.
“Qualified Purchaser” has the meaning provided in Section 2(a)(51) under the 1940 Act.
“Receiving Party” means each Holder of a Note, the Trustee and the Owner Trustee.
“Regulation S” means Regulation S under the Securities Act.
5
“Regulation S Global Notes” means the Notes sold in offshore transactions in reliance on Regulation S and represented by one or more Global Notes deposited with the Trustee as custodian for DTC.
“Rule 144A Certification” means a letter substantially in the form attached to this Indenture as Exhibit D-2.
“Rule 144A Global Notes” means the Notes initially sold to Qualified Institutional Buyers who are Qualified Purchasers represented by one or more Global Notes in fully registered form without interest coupons, deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee of DTC.
“Sale” has the meaning provided in Section 5.15.
“Sale and Contribution Agreement” means the Sale and Contribution Agreement, dated as of the date hereof, by and between Horizon Technology Finance Corporation, as Seller, and Horizon Funding 2022-1 LLC, as the Trust Depositor.
“Sale and Servicing Agreement” means the Sale and Servicing Agreement, dated as of date hereof, by and among Horizon Funding Trust 2022-1, as the Issuer, Horizon Funding 2022-1 LLC, as the Trust Depositor, Horizon Technology Finance Corporation, as the Seller and as the Servicer, U.S. Bank Trust Company, National Association, as the Trustee and U.S. Bank National Association, as the Backup Servicer, Custodian and Securities Intermediary.
“Securities Legend” means a legend that reads as follows: “THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE APPLICABLE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN SECTION 4.02 OF THE INDENTURE. BY ITS ACCEPTANCE OF THIS NOTE, THE HOLDER OF THIS NOTE IS DEEMED TO, OR WITH RESPECT TO INVESTORS IN PHYSICAL NOTES SHALL, REPRESENT TO THE ISSUER AND THE TRUSTEE THAT IT IS (I) IF LOCATED IN THE UNITED STATES, A “QUALIFIED INSTITUTIONAL BUYER,” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT IS A “QUALIFIED PURCHASER” AS DEFINED IN SECTION 2(A)(51) OF THE INVESTMENT COMPANY ACT OF 1940 (EACH SUCH PERSON, A “QUALIFIED PURCHASER”); OR (II) A NON-U.S. PERSON ACQUIRING INTEREST IN THIS NOTE OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S OF THE SECURITIES ACT (“REGULATION S”) THAT IS A QUALIFIED PURCHASER.
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS NOTE SHALL BE MADE UNLESS SUCH SALE, PLEDGE OR OTHER TRANSFER IS (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON THE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS A “QUALIFIED INSTITUTIONAL BUYER,” AS DEFINED IN RULE 144A WHO IS A QUALIFIED PURCHASER AND THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A “QUALIFIED INSTITUTIONAL BUYER” WHO IS A QUALIFIED PURCHASER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
6
BEING MADE IN RELIANCE ON RULE 144A OR (C) TO A NON-U.S. PERSON ACQUIRING AN INTEREST IN THIS NOTE IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT THAT IS A QUALIFIED PURCHASER. THE TRUSTEE MAY REQUIRE AN OPINION OF COUNSEL TO BE DELIVERED TO IT IN CONNECTION WITH ANY SALE, PLEDGE OR OTHER TRANSFER OF THIS NOTE PURSUANT TO CLAUSES (A) OR (C) ABOVE. ALL OPINIONS OF COUNSEL REQUIRED IN CONNECTION WITH ANY TRANSFER SHALL BE IN A FORM REASONABLY ACCEPTABLE TO THE TRUSTEE. IN CONNECTION WITH A TRANSFER UNDER CLAUSE (C) ABOVE, THE TRUSTEE SHALL REQUIRE THAT THE PROSPECTIVE TRANSFEREE CERTIFY TO THE TRUSTEE AND THE SELLER, IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN FORM AND SUBSTANCE DESCRIBED IN THE INDENTURE. ANY ATTEMPTED TRANSFER IN CONTRAVENTION OF THE IMMEDIATELY PRECEDING RESTRICTION WILL BE VOID AB INITIO AND THE PURPORTED TRANSFEROR WILL CONTINUE TO BE TREATED AS THE OWNER OF THE NOTES FOR ALL PURPOSES.”
In addition, the Notes will include the following:
“EACH INVESTOR, WHETHER AS A PURCHASER OR A TRANSFEREE, IN THIS NOTE OR ANY INTEREST HEREIN (AND THE PERSON CAUSING THE PURCHASER OR TRANSFEREE TO ACQUIRE THIS NOTE OR INTEREST HEREIN) WILL BE DEEMED TO, OR WITH RESPECT TO INVESTORS IN PHYSICAL NOTES, WHETHER AS A PURCHASER OR TRANSFEREE, SHALL, HAVE REPRESENTED AND WARRANTED THAT EITHER (I) IT IS NOT, AND IS NOT DIRECTLY OR INDIRECTLY ACQUIRING THIS NOTE FOR, ON BEHALF OF OR WITH ANY ASSETS OF, AN EMPLOYEE BENEFIT PLAN OR OTHER ARRANGEMENT SUBJECT TO PART 4, SUBTITLE B, TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS OF ANY SUCH PLANS OR A PLAN OR OTHER ARRANGEMENT SUBJECT TO ANY PROVISIONS UNDER ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIVELY OR SUBSTANTIALLY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (“SIMILAR LAW”) OR (II) ITS ACQUISITION, HOLDING AND DISPOSITION OF SUCH NOTE OR ANY INTEREST THEREIN WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, OR A NON-EXEMPT VIOLATION OF SIMILAR LAW.
THE ISSUER HAS THE RIGHT, UNDER THE INDENTURE, TO COMPEL ANY BENEFICIAL OWNER OF AN INTEREST IN THIS NOTE THAT IS NOT BOTH (A) A QUALIFIED PURCHASER OR A CORPORATION, PARTNERSHIP, LIMITED LIABILITY COMPANY OR OTHER ENTITY (OTHER THAN A TRUST) EACH SHAREHOLDER, PARTNER, MEMBER OR OTHER EQUITY OWNER OF WHICH IS A QUALIFIED PURCHASER AND (B)(1) A QUALIFIED INSTITUTIONAL BUYER OR (2) A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S UNDER
7
THE SECURITIES ACT, TO SELL ITS INTEREST IN THIS NOTE, OR MAY SELL SUCH INTEREST ON BEHALF OF SUCH OWNER.
EACH HOLDER OF THIS NOTE (AND ANY INTEREST HEREIN) WILL BE DEEMED TO HAVE REPRESENTED AND AGREED TO TREAT SUCH NOTE AS INDEBTEDNESS FOR ALL TAX PURPOSES, EXCEPT AS OTHERWISE REQUIRED BY LAW.
THE FAILURE TO PROVIDE THE ISSUER AND THE TRUSTEE (AND ANY OF THEIR AGENTS) WITH THE PROPERLY COMPLETED AND SIGNED TAX CERTIFICATIONS (GENERALLY, IN THE CASE OF U.S. FEDERAL INCOME TAX, AN INTERNAL REVENUE SERVICE FORM W-9 (OR APPLICABLE SUCCESSOR FORM) IN THE CASE OF A PERSON THAT IS A “UNITED STATES PERSON” WITHIN THE MEANING OF SECTION 7701(a)(30) OF THE CODE OR THE APPROPRIATE INTERNAL REVENUE SERVICE FORM W-8 (OR APPLICABLE SUCCESSOR FORM) IN THE CASE OF A PERSON THAT IS NOT A “UNITED STATES PERSON” WITHIN THE MEANING OF SECTION 7701(a)(30) OF THE CODE) MAY RESULT IN WITHHOLDING FROM PAYMENTS IN RESPECT OF SUCH NOTE, INCLUDING U.S. FEDERAL WITHHOLDING OR BACK-UP WITHHOLDING.
EACH HOLDER OF THIS NOTE (AND ANY INTEREST HEREIN) THAT IS NOT A UNITED STATES PERSON WILL MAKE, OR BY ACQUIRING THIS NOTE OR AN INTEREST THEREIN WILL BE DEEMED TO MAKE, A REPRESENTATION TO THE EFFECT THAT (A) IT IS NOT (I) A BANK (OR AN ENTITY AFFILIATED WITH A BANK) EXTENDING CREDIT PURSUANT TO A LOAN AGREEMENT ENTERED INTO IN THE ORDINARY COURSE OF ITS TRADE OR BUSINESS (WITHIN THE MEANING OF SECTION 881(c)(3)(A) OF THE CODE), (II) A CONTROLLED FOREIGN CORPORATION RELATED TO THE ISSUER, AND (III) A HOLDER (DIRECTLY OR BY ATTRIBUTION) OF AT LEAST 10 PERCENT OF AN INTEREST (INCLUDING A CAPITAL OR PROFITS INTEREST) IN THE ISSUER, OR (B) IT HAS PROVIDED AN IRS FORM W-8BEN (OR APPLICABLE SUCCESSOR FORM) OR AN IRS FORM W-8BEN-E (OR APPLICABLE SUCCESSOR FORM), AS APPLICABLE, REPRESENTING THAT IT IS A PERSON THAT IS ELIGIBLE FOR BENEFITS UNDER AN INCOME TAX TREATY WITH THE UNITED STATES THAT ELIMINATES U.S. FEDERAL INCOME TAXATION OF U.S. SOURCE INTEREST NOT ATTRIBUTABLE TO A PERMANENT ESTABLISHMENT IN THE UNITED STATES, OR (C) IT HAS PROVIDED AN IRS FORM W-8ECI (OR APPLICABLE SUCCESSOR FORM) REPRESENTING THAT ALL PAYMENTS RECEIVED OR TO BE RECEIVED BY IT ON THE NOTES ARE EFFECTIVELY CONNECTED WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE UNITED STATES.”
In addition, each Regulation S Global Note will include the following:
“THIS REGULATION S GLOBAL NOTE IS A GLOBAL NOTE WHICH IS EXCHANGEABLE FOR INTERESTS IN OTHER GLOBAL NOTES AND DEFINITIVE NOTES SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN AND IN THE INDENTURE (AS DEFINED HEREIN). EACH HOLDER OF THIS REGULATION S GLOBAL NOTE (OR A BENEFICIAL OWNERSHIP INTEREST THEREIN) MUST PROVIDE A WRITTEN CERTIFICATION TO THE ISSUER THAT SUCH HOLDER (OR BENEFICIAL
8
OWNER) IS A QUALIFIED PURCHASER AND MAY NOT TRANSFER ITS INTEREST IN SUCH NOTE UNLESS IT REASONABLY BELIEVES THAT THE TRANSFEREE IS ALSO A QUALIFIED PURCHASER.”
“Series” means 2022-1.
“Similar Law” has the meaning provided in Section 4.02(t).
“Super-Majority Noteholders” means prior to the payment in full of the Notes, the Noteholders evidencing more than 66 2/3% of the Aggregate Outstanding Principal Balance.
“Transferee Letter” means the letter set forth in Exhibit D-1 to this Indenture.
“Trust Certificate” means a certificate evidencing ownership of the beneficial interest of a Certificateholder in the Issuer, substantially in the form of Exhibit A attached to the Trust Agreement.
“Trust Company” means Wilmington Trust, National Association (and any successor thereto or assign thereof), in its individual capacity, and any other Person who shall act as Owner Trustee under the Trust Agreement, in its individual capacity.
“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended from time to time, as in effect on any relevant date.
“Trustee” has the meaning provided in the Preamble.
“USA PATRIOT Act” means the United States Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, signed into law on and effective as of October 26, 2001, which, among other things, requires that financial institutions, a term that includes banks, broker-dealers and investment companies, establish and maintain compliance programs to guard against money laundering activities.
| Section 1.02 | Rules of Construction. |
Unless the context otherwise requires:
(i) a term has the meaning given to it;
(ii) an accounting term not otherwise defined has the meaning given to it in accordance with generally accepted accounting principles;
(iii)“ or” is not exclusive;
(iv)“ including” means including without limitation;
(v) words in the singular include the plural and words in the plural include the singular;
(vi) any pronouns shall be deemed to cover all genders;
9
(vii) any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified, waived or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns; and
(viii) terms used herein that are defined in the New York Uniform Commercial Code and not otherwise defined herein shall have the meaning set forth in the New York Uniform Commercial Code, unless the context requires otherwise.
ARTICLE II
THE NOTES
| Section 2.01 | Form. |
The Notes, together with the Trustee’s certificate of authentication, shall be in substantially the forms set forth as Exhibit A to this Indenture with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the appropriate Responsible Officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the Responsible Officers executing such Notes, as evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibit A are part of the terms of this Indenture.
| Section 2.02 | Execution, Authentication and Delivery. |
The Notes shall be executed on behalf of the Issuer by any of its Responsible Officers. The signature of any such Responsible Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who were at any time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes.
The Trustee shall upon receipt of an Issuer Order authenticate and deliver the Notes for original issue in an aggregate amount equal to the Initial Note Principal Balance.
Each Note shall be dated the date of its authentication. The Notes shall be issued in fully registered form in minimum initial denominations equal to the applicable Minimum Denomination and in integral multiples of $1,000 in excess thereof; provided that one Note may be issued in a smaller multiple in excess of the minimum denomination.
10
No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.
| Section 2.03 | Opinions of Counsel. |
On the Closing Date, the Trustee shall have received: (i) an Opinion of Counsel, with respect to securities law matters; (ii) an Opinion of Counsel, with respect to the U.S. federal income tax treatment of the Issuer and the Notes; (iii) an Opinion of Counsel to the Issuer, with respect to the due authorization, valid execution and delivery of this Indenture and with respect to its binding effect on the Issuer; (iv) an Opinion of Counsel with respect to certain “true sale” and “non-consolidation” issues relating to Seller and Trust Depositor; and (v) an Opinion of Counsel with respect to certain trust and limited liability matters and with respect to certain “perfection and priority” issues.
ARTICLE III
COVENANTS
| Section 3.01 | Transaction Accounts. |
The Securities Intermediary shall establish and maintain as required therein or herein, as applicable, the Collection Account, the Reserve Account, the Investment Account and the Distribution Account specified in Sections 7.01, 7.02, 7.03 and 7.04 of the Sale and Servicing Agreement. On the Closing Date the Issuer will deposit, or cause to be deposited, an initial deposit of $1,183,250.00 from proceeds of the issuance and sale of the Notes into the Reserve Account. The Issuer on behalf of the Trustee shall establish as required therein or herein, as applicable, the Lockbox Account specified in Section 7.01 of the Sale and Servicing Agreement. Subject to the Priority of Payments, the Trustee shall make all payments of principal of and interest on the Notes, subject to Section 3.03 and as provided in Section 3.05, from moneys on deposit in the Distribution Account in accordance with the instructions of the Servicer pursuant to Section 7.06 of the Sale and Servicing Agreement.
| Section 3.02 | Maintenance of Office or Agency. |
The Issuer will maintain with the Trustee an office or agency where, subject to satisfaction of conditions set forth herein, Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Trustee to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Trustee with the address thereof (if such office or agency is no longer maintained with the Trustee), such surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Issuer hereby appoints the Trustee as its agent to receive all such surrenders, notices and demands.
| Section 3.03 | Money for Payments To Be Held in Trust; Paying Agent. |
11
The Issuer hereby appoints U.S. Bank Trust Company, National Association to act as agent (in such capacity, the “Paying Agent”) for the payment of principal and interest on the Notes and all other amounts payable pursuant to the Sale and Servicing Agreement (including without limitation the Priority of Payments) and this Indenture. As provided in Section 3.01 hereof, all payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Distribution Account shall be made on behalf of the Issuer by the Paying Agent, and no amounts so withdrawn from the Distribution Account for payments of Notes shall be paid over to the Issuer except as provided in this Section 3.03 and in Section 3.05 hereof.
The Issuer may at any time and from time to time vary or terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that no Paying Agent shall be appointed in a jurisdiction that subjects payments on the Notes to withholding tax; provided that unless such agent has short-term debt rated “P-1” by Moody’s or an equivalent rating by DBRS Morningstar (if rated by DBRS Morningstar) it may not hold funds pursuant to this Indenture overnight. The Issuer shall give prompt written notice to the Trustee, the Rating Agency and the Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency.
By no later than 12:00 noon (New York, New York time) on the Business Day prior to each Payment Date, and by no later than 12:00 noon (New York, New York time) on any Optional Redemption Date, as applicable, the Paying Agent (provided that sufficient funds therefor are available) shall deposit or cause to be deposited into the Distribution Account from amounts on deposit in the Collection Account an aggregate sum sufficient to pay the amounts then becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Trustee is the Paying Agent) shall promptly notify the Issuer in writing of its action or failure so to act.
The Issuer will cause each party other than the Trustee that it appoints as Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee (and if the Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;
(ii) at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent;
(iii) immediately resign as Paying Agent and forthwith pay to the Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and
(iv) to the extent such Paying Agent is located in, or makes payments within, the United States, comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding
12
taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Subject to Applicable Laws with respect to escheat of funds, any money held by the Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer upon delivery of an Issuer Order, the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Paying Agent with respect to such trust money shall thereupon cease; provided that the Paying Agent, before being required to make any such repayment, shall at the expense and direction of the Issuer cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Trustee shall also adopt and employ, at the expense and direction of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Trustee or of any other party acting as Paying Agent, at the last address of record for each such Holder).
| Section 3.04 |
Existence; Separate Legal Existence. |
(a) The Issuer will keep in full effect its existence, rights and franchises as a statutory trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other state or of the United States, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the other Transaction Documents, the Indenture Collateral and each other instrument or agreement included in the Indenture Collateral.
(b) The Issuer shall:
(i) Maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions and in accordance with the terms of this Indenture. The funds of the Issuer will not be diverted to any other Person or for other than authorized uses of the Issuer.
(ii) Ensure that it is at all times in compliance with the Trust Agreement.
13
(iii) Ensure that, to the extent that it jointly contracts with any of its beneficial owners or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that the Issuer contracts or does business with vendors or service providers when the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods and services are provided, and each such entity shall bear its fair share of such costs. All material transactions between the Issuer and any of its Affiliates shall be only at fair market value on an arm’s length basis and, as applicable thereto, in accordance with the Sale and Servicing Agreement.
(iv) Conduct its affairs strictly in accordance with its organizational documents and observe all necessary, appropriate and customary statutory trust formalities, including, but not limited to, holding all regular and special board of trustees meetings, if any, as required under the terms of the Trust Agreement appropriate to authorize all statutory trust action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts.
(v) Conduct its affairs in its own name, duly correct any known misunderstandings regarding its separate identity and shall not take any action or conduct its affairs in a manner that is likely to result in its separate existence being ignored or its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding.
| Section 3.05 | Payment of Principal and Interest. |
The Issuer will duly and punctually pay the principal of and interest on the Notes, in accordance with the terms of such Notes, this Indenture and the Sale and Servicing Agreement (including the Priority of Payments therein). The Issuer will cause to be distributed all amounts on deposit in the Distribution Account on a Payment Date, or such other date selected by the Trustee pursuant to Section 5.04(b) hereof, deposited therein pursuant to the Sale and Servicing Agreement for the benefit of the Notes, to the applicable Noteholders. Amounts properly withheld under the Code or any applicable state law by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture.
| Section 3.06 | Protection of Indenture Collateral. |
(a) The Issuer shall cause each item of Indenture Collateral to be Delivered in accordance with this Section 3.06(a), and the Trustee shall hold each item of Indenture Collateral as Delivered, separate and apart from all other property held by the Trustee. To the extent that any such Indenture Collateral constitutes a deposit account that is maintained with U.S. Bank, U.S. Bank hereby makes the agreements required under the UCC in order for such deposit account to be Delivered. Notwithstanding any other provision of this Indenture, the Trustee shall not hold any
14
part of the Indenture Collateral through an agent or nominee except as expressly permitted by this Section 3.06(a).
For purposes of this Section 3.06, “Deliver” or “Delivery” means the taking of the following steps by the Issuer:
(i) with respect to such Indenture Collateral as constitutes an instrument, causing the Trustee to take possession in the State of New York, Minnesota, Illinois or Wisconsin of such instrument, indorsed to the Trustee or in blank by an effective indorsement;
(ii) with respect to such Indenture Collateral as constitutes tangible chattel paper, goods, a negotiable document, or money, causing the Trustee to take possession in the State of New York, Minnesota, Illinois or Wisconsin of such tangible chattel paper, goods, negotiable document, or money;
(iii) with respect to such Indenture Collateral as constitutes a certificated security in bearer form, causing the Trustee to acquire possession in the State of New York, Minnesota, Illinois or Wisconsin of the related security certificate;
(iv) with respect to such Indenture Collateral as constitutes a certificated security in registered form, causing the Trustee to acquire possession in the State of New York, Minnesota, Illinois or Wisconsin of the related security certificate, indorsed to the Trustee or in blank by an effective indorsement, or registered in the name of the Trustee, upon original issue or registration of transfer by the issuer of such certificated security;
(v) with respect to such Indenture Collateral as constitutes an uncertificated security, causing the issuer of such uncertificated security to register the Trustee as the registered owner of such uncertificated security;
(vi) with respect to such of the Indenture Collateral as constitutes a security entitlement, causing the Securities Intermediary to indicate by book entry that the financial asset relating to such security entitlement has been credited to the appropriate Transaction Account;
(vii) with respect to such of the Indenture Collateral as constitutes an account or a general intangible, causing to be filed with the Delaware Secretary of State a properly completed UCC financing statement that names the Issuer as debtor and the Trustee as secured party and that covers such account or general intangible;
(viii) with respect to such Indenture Collateral as constitutes a deposit account, causing such deposit account to be maintained in the name of the Issuer, for the benefit of the Trustee, and causing the bank with which such deposit account is maintained to agree in writing with the Trustee and the Issuer that (A) such bank will comply with instructions originated by the Trustee or its designee directing disposition of the funds in such deposit account without further consent of any other person or entity, (B) such bank will not agree with any person or entity other than the Trustee to comply with instructions originated by
15
any person or entity other than the Trustee, (C) such deposit account and the property credited thereto will not be subject to any Lien, security interest, encumbrance, or right of set-off in favor of such bank or anyone claiming through it (other than the Trustee), and (D) the State of New York will be the bank’s jurisdiction of such bank for purposes of Article 9 of the UCC; or
(ix) in the case of each of paragraphs (i) through (viii) above, such additional or alternative procedures as may hereafter become appropriate to grant a first priority perfected security interest in such items of Indenture Collateral (subject to Permitted Liens) to the Trustee, consistent with applicable law or regulations.
In each case of Delivery contemplated herein, the Trustee or Custodian as bailee for the Trustee, as applicable, shall make appropriate notations on its records indicating that each such item of Indenture Collateral is held by the Trustee pursuant to and as provided herein. Effective upon Delivery of any item of Indenture Collateral, the Custodian as bailee for the Trustee shall be deemed to have acknowledged that it holds such item of the Indenture Collateral as Trustee hereunder for the benefit of the Noteholders. Any additional or alternative procedures for accomplishing “Delivery” for purposes of paragraph (ix) of this Section 3.06(a) shall be permitted only upon delivery to the Trustee or the Custodian, as applicable, of an Opinion of Counsel to the effect that such procedures are appropriate to grant a first priority perfected security interest in the applicable type of collateral to the Trustee or the Custodian, as applicable.
(b) The Issuer intends the security interest Granted pursuant to this Indenture in favor of the Trustee on behalf of the Noteholders to be prior to all other Liens in respect of the Indenture Collateral other than Permitted Liens, and the Issuer shall take or shall cause the Servicer to take all actions necessary to obtain and maintain at all times, for the benefit of the Trustee on behalf of the Noteholders, a first Lien on and a first priority, perfected security interest in the Indenture Collateral, subject to any Permitted Liens with respect thereto. In connection therewith, pursuant to Section 2.09 of the Sale and Servicing Agreement, the Issuer shall cause to be delivered into the possession of the Trustee (or to the Custodian on behalf of the Trustee) as pledgee hereunder, indorsed in blank, any “instruments” (within the meaning of the UCC), not constituting part of chattel paper, evidencing any Loan which is part of the Indenture Collateral and all other portions of the Loan Files. The Trustee acknowledges and agrees that (i) it holds the Loan Assets delivered to it (or to the Custodian) under the Sale and Contribution Agreement for the benefit of the Trust Depositor, (ii) it holds the Loan Assets delivered to it (or to the Custodian) under the Sale and Servicing Agreement for the benefit of the Issuer, and (iii) it holds the Indenture Collateral delivered to it (or to the Custodian) pursuant to this Indenture for the benefit of the Noteholders. The Trustee agrees to maintain continuous possession of such delivered instruments and the Loan Files (directly or via the Custodian on its behalf) as pledgee hereunder until this Indenture shall have terminated in accordance with its terms or until, pursuant to the terms hereof or of the Sale and Servicing Agreement, the Trustee is otherwise authorized to release such instrument from the Indenture Collateral. Notwithstanding anything to the contrary in this Section 3.06(b) or the other provisions of the Indenture, the parties hereto acknowledge that the Custodian is holding the Loan Files as bailee on behalf of the Trustee. The Trustee makes no representations as to and shall not be responsible for or required to verify or hold the Loan Files. The Issuer authorizes and shall cause to be filed a financing statement that names the Issuer as debtor and the Trustee as secured party to ensure the perfection of the interest of the Trustee in the Indenture Collateral (including describing the Indenture Collateral as “all assets of the Debtor whether now existing or
16
hereafter acquired”). The Issuer will or will cause the Servicer from time to time to prepare (or shall cause to be prepared), execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and will take such other action necessary or advisable to:
(i) maintain or preserve the Lien and security interest (and the priority thereof) of this Indenture or carry out more effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;
(iii) enforce any of the Loans transferred to the Issuer as and to the extent commercially reasonable and in accordance with the Sale and Servicing Agreement; or
(iv) preserve and defend title to the Indenture Collateral and the rights of the Trustee and the Noteholders in such Indenture Collateral against the claims of all persons and parties.
The Issuer hereby designates the Trustee its agent and attorney-in-fact to execute any financing statement, continuation statement or other instrument required to be executed pursuant to this Section 3.06, provided however, that the Trustee shall not be obligated to execute or authorize such instruments except at the written direction of the Issuer.
| Section 3.07 | Opinions as to Indenture Collateral. |
(a) On or before the Closing Date, the Issuer shall furnish to the Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the delivery of the Underlying Notes and any other requisite documents, and with respect to the execution and filing of any financing statements and continuation statements, as is necessary to perfect and make effective the Lien and security interest of this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such Lien and security interest effective.
(b) On or before June 30 in each calendar year, beginning in 2023, the Servicer on behalf of the Issuer will furnish to the Trustee and the Rating Agency an Opinion of Counsel at the expense of the Issuer either stating that, in the opinion of such counsel, such action has been taken with respect to any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the perfection of the Lien and security interest created by this Indenture and reciting the details of such action or stating that in the opinion of such counsel no such action is necessary to maintain the perfection of such Lien and security interest. Such Opinion of Counsel shall also describe any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the Lien and security interest of this Indenture until June 30 in the following calendar year.
| Section 3.08 | Furnishing of Rule 144A Information. |
17
The Issuer will furnish, upon the written request of any Noteholder or of any owner of a beneficial interest therein, such information as is specified in paragraph (d)(4) of Rule 144A under the Securities Act (i) to such Noteholder or beneficial owner, (ii) to a prospective purchaser of such Note or interest therein who is a Qualified Institutional Buyer and a Qualified Purchaser designated by such Noteholder or beneficial owner, or (iii) to the Trustee for delivery to such Noteholder, beneficial owner or prospective purchaser, in order to permit compliance by such Noteholder or beneficial owner with Rule 144A in connection with the resale of such Note or beneficial interest therein by such Noteholder or beneficial owner in reliance on Rule 144A unless, at the time of such request, the Issuer is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act.
| Section 3.09 | Performance of Obligations; Sale and Servicing Agreement. |
(a) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the other Transaction Documents and in the instruments and agreements included in the Indenture Collateral.
(b) The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, the other Transaction Documents and the instruments and agreements included in the Indenture Collateral, and any performance of such duties by a Person identified to the Trustee in an Officer’s Certificate of the Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture, the other Transaction Documents and the instruments and agreements included in the Indenture Collateral.
(c) The Issuer will not take any action or permit any action to be taken by others which would release any Person from any of such Person’s covenants or obligations under any of the documents relating to the Loans Assets or under any instrument included in the Indenture Collateral, or which would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any of the documents relating to the Loan Assets or any such instrument, except such actions as the Servicer is expressly permitted to take in the Transaction Documents.
(d) If a Responsible Officer of the Issuer shall have knowledge of the occurrence of a Servicer Default, the Issuer shall promptly notify in writing the Trustee, the Backup Servicer and the Rating Agency thereof, and shall specify in such notice the action, if any, the Issuer is taking in respect of such Servicer Default. If such Servicer Default arises from the failure of the Servicer to perform any of its duties or obligations under the Sale and Servicing Agreement with respect to the Indenture Collateral, the Issuer may, and shall pursuant to direction of the Majority Noteholders, remedy such failure. So long as any such Servicer Default shall be continuing, the Trustee may, and shall pursuant to direction of the Majority Noteholders, exercise its remedies set forth in Section 8.02 of the Sale and Servicing Agreement. Unless granted or permitted by the Holders of the Notes to the extent provided in Article VIII of the Sale and Servicing Agreement, the Issuer may not waive any such Servicer Default or terminate the rights and powers of the Servicer under the Sale and Servicing Agreement.
| Section 3.10 | Negative Covenants. |
18
So long as any Notes are Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or any other Transaction Document, sell, transfer, exchange or otherwise dispose of any portion the Indenture Collateral, unless directed to do so by the Trustee;
(ii) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code or applicable state law), or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon the Issuer;
(iii) permit the validity or effectiveness of this Indenture to be impaired, or permit the Lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, permit any Lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the Lien of this Indenture or any other Transaction Document) to be created on or extend to or otherwise arise upon or burden the Indenture Collateral or any part thereof or any interest therein or the proceeds thereof (except for Permitted Liens) or permit the Lien of this Indenture not to constitute a valid first priority security interest in the Indenture Collateral (subject to Permitted Liens);
(iv) except as contemplated in the Transaction Documents, dissolve or liquidate in whole or in part;
(v) engage in any activities other than financing, acquiring, owning, pledging and managing the Loan Assets as contemplated by the Transaction Documents and activities incidental to those activities; or
(vi) incur, assume or guarantee any indebtedness other than indebtedness evidenced by the Notes or indebtedness otherwise permitted by the Transaction Documents.
| Section 3.11 | Annual Statement as to Compliance. |
The Issuer will deliver to the Trustee and the Rating Agency, within 90 days after the end of each calendar year (commencing with the calendar year ending December 31, 2022), an Officer’s Certificate stating, as to the Person signing such Officer’s Certificate, that:
(i) a review of the activities of the Issuer during such year and of its performance under this Indenture has been made under such Person’s supervision or direction; and
(ii) to the best of such Person’s knowledge, based on such review, the Issuer has complied with all conditions and covenants under this Indenture throughout such year, or, if there has been such a default in its compliance with any such condition or covenant, specifying each such default known to such Person and the nature and status thereof.
19
| Section 3.12 | [Reserved]. |
| Section 3.13 | Representations and Warranties Concerning the Loans. |
The Issuer has pledged to the Trustee for the benefit of the Noteholders all of its rights under the Sale and Contribution Agreement and the Sale and Servicing Agreement (except for the Excluded Property) and the Trustee has the benefit of the representations and warranties made by the Seller and the Trust Depositor in such documents concerning the Loans transferred into the Loan Assets and the right to enforce any remedy against the Seller and the Trust Depositor provided in the Sale and Contribution Agreement and the Sale and Servicing Agreement, to the same extent as though such representations and warranties were made directly to the Trustee.
| Section 3.14 | Custodian Review of Loan Files. |
The Custodian, on behalf of the Trustee, for the benefit of the Noteholders shall review the Loan Files as provided in Section 2.11 of the Sale and Servicing Agreement.
| Section 3.15 | Sale and Servicing Agreement. |
In order to facilitate the servicing of the Loan Assets, the Issuer has authorized the Servicer, in the name and on behalf of the Trustee and the Issuer, and the Trustee accepts such appointment, to perform its respective duties and obligations under the Sale and Servicing Agreement and the rights of the Trustee pursuant to the third sentence of Section 8.01 hereof. The Trustee agrees to perform its express obligations under the Sale and Servicing Agreement in accordance with the terms thereof.
| Section 3.16 | Amendments to Sale and Servicing Agreement. |
The Trustee may enter into any amendment or supplement to the Sale and Servicing Agreement only in accordance with Section 13.01 of the Sale and Servicing Agreement. The Trustee may, in its reasonable discretion, decline to enter into or consent to any such supplement or amendment if its own rights, duties or immunities shall be adversely affected in any material respect.
| Section 3.17 | Servicer as Agent and Bailee of Trustee. |
(a) Solely for purposes of perfection under Section 9-313 of the UCC or other similar Applicable Law, rule or regulation of the state in which such property is held by the Servicer, the Trustee hereby acknowledges that the Servicer is acting as agent and bailee of the Trustee in holding any documents released to the Servicer pursuant to the Sale and Servicing Agreement as well as any other items constituting a part of the Indenture Collateral which from time to time come into the possession of the Servicer. It is intended that, by the Servicer’s execution and delivery of the Sale and Servicing Agreement, the Trustee, as a secured party, will be deemed to have possession of such documents, such moneys and such other items for purposes of Section 9-313 of the UCC of the state in which such property is held by the Servicer.
(b) Solely for purposes of perfection under Section 9-313 of the UCC or other similar Applicable Law, rule or regulation of the state in which such property is held by the Trustee, if the
20
transfer of the Loans and the other assets in the Indenture Collateral by the Trust Depositor to the Issuer is deemed to be a loan, the Custodian hereby acknowledges it is acting as agent and bailee of the Issuer in holding items constituting a part of the Indenture Collateral which from time to time come into the possession of the Trustee.
| Section 3.18 | Investment Company Act of 1940. |
The Issuer shall not and the Trustee shall not knowingly take any action that would cause the Issuer or the pool of Indenture Collateral to be required to register as an “investment company” under the 1940 Act (or any successor or amendatory statute).
| Section 3.19 | Issuer May Consolidate, etc., Only on Certain Terms. |
(a) The Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all Notes, and the performance or observance of every agreement and covenant of this Indenture, the Notes, the Trust Certificate and each other Transaction Document on the part of the Issuer to be performed or observed, all as provided herein and therein;
(ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing;
(iii) each Holder of a Note has consented in writing to such transaction (and written notice thereof has been provided to the Rating Agency);
(iv) the Issuer shall have received an opinion from Dechert LLP or an opinion of tax counsel of nationally recognized standing in the United States experienced in such matters (and shall have delivered copies thereof to the Trustee on which the Trustee may conclusively rely) to the effect that such transaction will not (1) cause the Issuer to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (2) cause the Notes to be deemed to have been sold or exchanged under Section 1001 of the Code or (3) cause any Notes that were characterized as indebtedness at the time of issuance to be characterized as other than indebtedness;
(v) any action that is necessary to maintain the Lien and security interest created by this Indenture and the perfection and priority thereof shall have been taken; and
(vi) the Issuer shall have delivered to the Trustee an Officer’s Certificate and Opinion of Counsel (which may conclusively rely on the Officer’s Certificate with respect to clauses (ii) and (iii) above and as to the taking of any action required by such Opinion of Counsel as it relates to clause (v) above) each stating that such consolidation or merger complies with this Section 3.19 and that all conditions precedent herein provided for relating to such transaction have been complied with.
21
(b) Except as otherwise permitted hereunder or under the Transaction Documents, the Issuer shall not convey or transfer all or substantially all of its properties or assets, including those included in the Indenture Collateral, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties and assets of the Issuer the conveyance or transfer of which is hereby restricted shall be a United States citizen or a Person organized and existing under the laws of the United States or any state thereof or the District of Columbia, expressly assumes, by an indenture supplemental hereto, executed and delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all Notes, and the performance of each other Transaction Document, and the performance or observance of every agreement and covenant of this Indenture, the Notes, the Trust Certificate and each other Transaction Document on the part of the Issuer to be performed or observed, all as provided herein, expressly agrees by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of the Holders of the Notes as provided in the Transaction Documents, and unless otherwise provided in such supplemental indenture, expressly agrees to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes arising from such transfer;
(ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing;
(iii) each Holder of a Note has consented in writing to such transaction (and written notice thereof has been provided to Rating Agency);
(iv) the Issuer shall have received written an opinion from Dechert LLP or an opinion of tax counsel of nationally recognized standing in the United States experienced in such matters (and shall have delivered copies thereof to the Trustee on which the Trustee may conclusively rely) to the effect that such transaction will not (1) cause the Issuer to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (2) cause the Notes to be deemed to have been sold or exchanged under Section 1001 of the Code or (3) cause any Notes that were characterized as indebtedness at the time of issuance to be characterized as other than indebtedness;
(v) any action that is necessary to maintain the Lien and security interest created by this Indenture and the perfection and priority thereof shall have been taken; and
(vi) the Issuer shall have delivered to the Trustee an Officer’s Certificate and Opinion of Counsel (which may conclusively rely on a certificate of the transferee as to the transferee’s citizenship, if applicable, and on the Officer’s Certificate with respect to clauses (ii) and (iii) above and to the taking of any action required by such Opinion of Counsel as it relates to clause (v) above) each stating that such conveyance or transfer, and such supplemental indenture, comply with this Section 3.19 and that all conditions precedent herein provided for relating to such transaction have been complied with.
| Section 3.20 | Successor or Transferee. |
22
(a) Upon any consolidation or merger of the Issuer in accordance with Section 3.19(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all of the assets and properties of the Issuer pursuant to Section 3.19(b), the Issuer will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Trustee stating that the Issuer is to be so released.
| Section 3.21 | No Other Business. |
The Issuer shall not engage in any business other than financing, purchasing, owning, selling, managing and enforcing the Loans and Related Property, including through any subsidiaries permitted pursuant to Section 5.10 of the Sale and Servicing Agreement, in the manner contemplated by this Indenture and the other Transaction Documents and all activities incidental thereto, issuing the Notes and the Trust Certificate and as otherwise expressly permitted in the Trust Agreement or the other Transaction Documents.
| Section 3.22 | No Borrowing; Use of Proceeds. |
The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Notes and any other indebtedness permitted by the Transaction Documents. In consideration of the Trust Depositor’s transfer of the Initial Loans to the Issuer, the Issuer will transfer the net cash proceeds from the sale of the Notes to the Trust Depositor, together with the Trust Certificate. The Trust Depositor will use a portion of the net proceeds to acquire the Initial Loans from the Seller on the Closing Date.
| Section 3.23 | Guarantees, Loans, Advances and Other Liabilities. |
Except as contemplated by this Indenture or the other Transaction Documents, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person, other than any subsidiary established by the Issuer pursuant to Section 5.10 of the Sale and Servicing Agreement.
| Section 3.24 | Capital Expenditures. |
The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).
| Section 3.25 | Representations and Warranties of the Issuer. |
23
The Issuer represents and warrants as of the date hereof and as of each Transfer Date, as follows:
(a) Power and Authority. It has full power, authority and legal right to execute, deliver and perform its obligations as Issuer under this Indenture and the Notes (the foregoing documents, the “Issuer Documents”) and under each of the other Transaction Documents to which the Issuer is a party.
(b) Due Authorization and Binding Obligation. The execution and delivery of the Issuer Documents and the other Transaction Documents to which the Issuer is a party, and the consummation of the transactions provided for therein have been duly authorized by all necessary action on its part. Each of the Issuer Documents and the other Transaction Documents to which the Issuer is a party constitutes the legal, valid and binding obligation of the Issuer and is enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies.
(c) No Conflict. The execution and delivery of the Issuer Documents and the other Transaction Documents to which the Issuer is a party, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof will not conflict with, result in any material breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Issuer is a party or by which it or any of its property is bound.
(d) No Violation. The execution and delivery of the Issuer Documents and the other Transaction Documents to which the Issuer is a party, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof will not conflict with or violate, in any material respect, any Applicable Law.
(e) All Consents Required. All approvals, authorizations, consents, orders or other actions of any Person or any Governmental Authority required in connection with the execution and delivery of the Issuer Documents and the other Transaction Documents to which the Issuer is a party, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof have been obtained.
(f) No Proceedings. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Issuer, threatened, against the Issuer or any of its respective properties or with respect to the Issuer Documents or any other Transaction Document to which the Issuer is a party that, if adversely determined, would have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Issuer or the transactions contemplated by the Issuer Documents or any of the other Transaction Documents to which the Issuer is a party.
(g) Organization and Good Standing. The Issuer is a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite power to own its assets and to transact the business in which it is currently engaged, and had at all relevant times, and now has, all necessary power, authority and legal right under its organizational documents and under Applicable Law to acquire, own and pledge the Indenture Collateral.
24
(h) 1940 Act. The Issuer is not an “investment company” within the meaning of the 1940 Act. The Issuer will rely on an exclusion or exemption from the definition of “investment company” under the 1940 Act contained in Section 3(c)7 thereof and Rule 3a-7 thereof, and will qualify for the “loan securitization” exemption set forth in the implementing regulations of the Volcker Rule. The Issuer is not a “covered fund” for purposes of the regulations adopted to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (such statutory provision together with such implementing regulations, the “Volcker Rule”).
(i) Location. The Issuer is located (within the meaning of Article 9 of the UCC) in the State of Delaware. The Issuer agrees that it will not change its location (within the meaning of Article 9 of the UCC) without at least 30 days prior written notice to the Seller, the Servicer, the Trustee and the Rating Agency and without taking all actions that are necessary to maintain the perfection of the Lien of this Indenture, and, at the request of the Majority Noteholders, delivering an Opinion of Counsel to such effect to the Trustee.
(j) Security Interest in Collateral.
(i) This Indenture creates a valid, continuing and enforceable security interest (as defined in the applicable UCC) in the Indenture Collateral in favor of the Trustee, which security interest is prior to all other Liens (except for Permitted Liens), and is enforceable as such against creditors of and purchasers from the Issuer;
(ii) the Indenture Collateral constitutes “general intangibles,” “instruments,” “accounts,” “investment property,” or “chattel paper,” within the meaning of the applicable UCC;
(iii) the Issuer owns and has good and marketable title to the Indenture Collateral free and clear of any Lien (other than Permitted Liens), claim or encumbrance of any Person;
(iv) the Issuer has received all consents and approvals required by the terms of the Indenture Collateral to the pledge of the Indenture Collateral hereunder to the Trustee;
(v) the Issuer has caused the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the security interest in the Indenture Collateral granted to the Trustee under this Indenture;
(vi) other than the security interest granted by the Issuer pursuant to this Indenture and any Permitted Liens, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Indenture Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Indenture Collateral other than any financing statement (A) relating to the security interest granted by the Issuer under this Indenture, or (B) that has been terminated or for which a release or partial release has been filed. The Issuer is not aware of the filing of any judgment or tax Lien filings against the Issuer;
25
(vii) each Underlying Note or Underlying Notes that constitute or evidence the Loan Assets has been or will be delivered to the Custodian in accordance with Section 2.09 of the Sale and Servicing Agreement;
(viii) the Issuer has received a written acknowledgment from the Custodian that the Custodian is holding, in accordance with Section 2.09 of the Sale and Servicing Agreement, the Underlying Notes that constitute or evidence any Loan Assets solely on behalf of and for the benefit of the Securityholders; and
(ix) none of the Underlying Notes that constitute or evidence the Indenture Collateral has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Issuer and the Trustee.
The representations and warranties in Section 3.25(j) shall survive the termination of this Indenture.
| Section 3.26 | Restricted Payments. |
The Issuer shall not, directly or indirectly, (i) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose; provided that the Issuer may make, or cause to be made, (w) distributions to the Owner Trustee, the Trust Depositor and the Certificateholder as contemplated by, and to the extent funds are available for such purpose under, the Trust Agreement and the Sale and Servicing Agreement, (x) payments to the Servicer and/or Trust Depositor pursuant to the terms of the Sale and Servicing Agreement or the other Transaction Documents and (y) payments to the Trustee and other Persons entitled thereto pursuant to terms of the Sale and Servicing Agreement. The Issuer shall not, directly or indirectly, make payments to or distributions from the Distribution Account except in accordance with this Indenture and the other Transaction Documents. Any distributions permitted pursuant to this Indenture, the Sale and Servicing Agreement and the Transaction Documents shall be deemed to be free and clear of the Lien of this Indenture.
| Section 3.27 | Notice of Events of Default, Amendments and Waivers. |
Promptly upon a Responsible Officer of the Issuer becoming aware thereof, the Issuer shall give the Trustee and the Rating Agency prompt written notice of each Event of Default hereunder, of each Servicer Default under the Sale and Servicing Agreement, of any material default or material breach of any other Transaction Document, and of any amendment or waiver of any Transaction Document.
| Section 3.28 | Further Instruments and Acts. |
Upon request of the Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively
26
the purpose of this Indenture (provided nothing herein shall be deemed to impose an obligation on the Trustee to so request).
| Section 3.29 | Statements to Noteholders. |
The Trustee shall make available on its secure internet website to each Noteholder and the Rating Agency, the Monthly Reports and Quarterly Reports prepared by the Servicer pursuant to Article IX of the Sale and Servicing Agreement. Upon request, the Trustee shall make available to the Noteholders, the parties to the Transaction Documents and the Rating Agency, via the Trustee’s internet website, a copy of the Transaction Documents, each Monthly Report, Quarterly Report and, with the consent or at the written direction of the Trust Depositor, such other information regarding the Notes and/or the Loans as the Trustee may have in its possession or as may be provided to the Trustee by the Servicer or the Trust Depositor, but only with the use of its secure internet website; provided the Trustee shall have no obligation to provide such information described in this Section 3.29 until it has received the requisite information from the Trust Depositor or the Servicer and provided, further, upon written direction from the Issuer, the Trustee may provide access to such internet website to any other party that the Issuer may designate in such direction. The Trustee will make no representation or warranties as to the accuracy or completeness of such documents and will assume no responsibility therefor.
The Trustee’s secure internet website shall be initially located at http://pivot.usbank.com or at such other address as shall be specified by the Trustee from time to time in writing to the Noteholders, the parties to the Transaction Documents and the Issuer (who shall promptly forward the same to the Rating Agency). In connection with providing access to the Trustee’s internet website, the Trustee shall (other than with respect to the parties to the Transaction Documents and the Rating Agency) require registration and the acceptance of a disclaimer. The Trustee shall be permitted to change the method by which the Monthly Reports and Quarterly Reports are distributed in order to make such distributions more convenient and/or more accessible to the Holders. The Trustee shall not be liable for the dissemination of information in accordance with this Indenture.
| Section 3.30 | Grant of Substitute Loans and Additional Loans. |
In consideration of the delivery or acquisition of Loans transferred on each Substitute Loan Cutoff Date or each Additional Loan Cutoff Date, as applicable, pursuant to and in accordance with the terms of Section 2.04, Section 2.06 or Section 2.07, as applicable, of the Sale and Servicing Agreement, the Issuer grants to the Trustee a security interest in all of its right, title and interest in the Loans transferred on such Substitute Loan Cutoff Date or such Additional Loan Cutoff Date, as applicable, and simultaneously with the transfer of the Substitute Loans and Additional Loans, as applicable, the Issuer will cause the related Loan File to be delivered to the Trustee or the Custodian on its behalf.
ARTICLE IV
THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE
| Section 4.01 | The Notes. |
27
The Notes shall be registered initially in the name of Cede & Co., as nominee of DTC. Beneficial Owners will hold interests in such Notes through the book-entry facilities of DTC in minimum denominations equal to the applicable Minimum Denomination for such Notes.
The Notes shall, on original issue, be executed on behalf of the Issuer by the Owner Trustee, not in its individual capacity but solely as Owner Trustee, and authenticated and delivered by the Trustee upon receipt of an Issuer Order.
| Section 4.02 | Registration of Transfer and Exchange of Notes. |
(a) The Trustee shall cause to be kept a Note Register (the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers and exchanges of Notes as herein provided. The Trustee shall be “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Note Register shall contain the name, remittance instructions, as well as the Series and the number in the Series.
(b) Each Note shall be issued in minimum denominations of not less than the Minimum Denomination, so that on the Closing Date the sum of the denominations of all outstanding Notes shall equal the applicable Initial Note Principal Balance. On the Closing Date and pursuant to an Issuer Order, the Trustee will execute and authenticate (i) one or more Global Notes and/or (ii) Physical Notes all in an aggregate principal amount that shall equal the Initial Note Principal Balance.
(c) The Global Notes (i) shall be delivered by the Issuer to DTC or, pursuant to DTC’s instructions, shall be delivered by the Issuer on behalf of DTC to and deposited with the DTC Custodian, and in each case shall be registered in the name of Cede & Co. and (ii) with respect to the Rule 144A Global Notes, shall bear a legend substantially to the following effect:
“Unless this Note is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the Note Registrar or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.”
The Global Notes may be deposited with such other depository as the Issuer may from time to time designate, and shall bear such legend as may be appropriate; provided that such successor depository maintains a book-entry system that qualifies to be treated as “registered form” under Section 163(f)(3) of the Code.
The Issuer is hereby authorized to execute and deliver a Letter of Representations with DTC relating to the Notes.
28
(d) With respect to Notes registered in the Note Register in the name of Cede & Co., as nominee of DTC, the Issuer, the Servicer, the Owner Trustee (as such and in its individual capacity) and the Trustee shall have no responsibility or obligation to Direct or Indirect Participants or Beneficial Owners for which DTC holds Notes from time to time as a Depository. Without limiting the immediately preceding sentence, the Issuer, the Servicer, the Owner Trustee (as such and in its individual capacity), and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any Direct or Indirect Participant with respect to the ownership interest in the Notes, (ii) the delivery to any Direct or Indirect Participant or any other Person, other than a registered Holder, of a Note, (iii) the payment to any Direct or Indirect Participant or any other Person, other than a registered Holder of a Note as shown in the Note Register, of any amount with respect to any distribution of principal or interest on the Notes or (iv) the making of book-entry transfers among Participants of DTC with respect to Notes registered in the Note Register in the name of the nominee of DTC. No Person other than a registered Holder of a Note as shown in the Note Register shall receive a physical Note evidencing such Note.
(e) Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions hereof with respect to the payment of distributions by the mailing of checks or drafts to the registered Holders of Notes appearing as registered Owners in the Note Register on a Record Date, the name “Cede & Co.” in this Indenture shall refer to such new nominee of DTC.
(f) In the event that (i) DTC or the Servicer advises the Trustee in writing that DTC is no longer willing or able to discharge properly its responsibilities as nominee and depository with respect to the Global Notes and the Servicer is unable to locate a qualified successor; (ii) the Administrator, at its option, elects to terminate the book-entry system through DTC; (iii) DTC is no longer registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, and in either case the Administrator or the Trustee, as applicable, is unable to appoint a qualified successor; or (iv) after the occurrence of an Event of Default under the Indenture, the beneficial owners of the Notes representing not less than 51% of the outstanding principal amount of the applicable Notes advise the Trustee and DTC that the continuation of a book-entry system through DTC, or a successor to DTC, is no longer in the best interests of the beneficial owners of the Notes, the Global Notes shall no longer be restricted to being registered in the Note Register in the name of Cede & Co. (or a successor nominee) as nominee of DTC. At that time, the Servicer may determine that the Global Notes shall be registered in the name of and deposited with a successor depository operating a global book-entry system, as may be acceptable to the Servicer, or such depository’s agent or designee but, if the Servicer does not select such alternative global book-entry system, then upon surrender to the Note Registrar of the Global Notes by DTC, accompanied by the registration instructions from DTC for registration, the Trustee shall at the Servicer’s expense authenticate Physical Notes. Neither the Servicer nor the Trustee shall be liable for any delay in DTC’s delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Physical Notes, the Trustee, the Note Registrar, the Servicer, the Paying Agent, the Securities Intermediary and the Issuer shall recognize the Holders of the Physical Notes as Noteholders hereunder.
29
(g) Notwithstanding any other provision of this Indenture to the contrary, so long as any Global Notes are registered in the name of Cede & Co., as nominee of DTC, all distributions of principal and interest on such Global Notes and all notices with respect to such Global Notes shall be made and given, respectively, in the manner provided in the Letter of Representations.
(h) Subject to the preceding paragraphs, upon surrender for registration of transfer of any Note at the office of the Note Registrar and, upon satisfaction of the conditions set forth below, the Issuer shall execute, in the name of the designated transferee or transferees, a new Note and of the same aggregate Percentage Interest and dated the date of authentication by the Trustee. The Note Registrar shall maintain a record of any such transfer and deliver it to the Issuer, Servicer, the Owner Trustee or Trustee upon request.
(i) At the option of the Noteholders, Notes may be exchanged for other Notes in authorized denominations, upon surrender of the Notes to be exchanged at the Corporate Trust Office. Whenever any Notes are so surrendered for exchange, the Issuer shall execute the Notes which the Noteholder making the exchange is entitled to receive. Every Note presented or surrendered for transfer or exchange shall be accompanied by wiring instructions, if applicable, in the form of Exhibit C hereto. The preceding provisions of this section notwithstanding, the Issuer shall not be required to make and the Note Registrar shall not register transfers or exchanges of Notes called for redemption.
(j) No service charge shall be made for any transfer or exchange of Notes, but prior to transfer the Note Registrar may require payment by the transferor of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Notes.
All Notes surrendered for payment, transfer and exchange or redemption shall be marked canceled by the Note Registrar and retained and destroyed in accordance with its policies and procedures.
(k) By acceptance of a Physical Note, whether upon original issuance or subsequent transfer, each Holder of such a Note acknowledges the restrictions on the transfer of such Note set forth in the Securities Legend and agrees that it will transfer such Note only as provided herein. In addition to the provisions of Sections 4.02(m) and (n) hereof, the following restrictions shall apply with respect to the transfer and registration of transfer of a Physical Note to a transferee that takes delivery in the form of a Physical Note:
(i) The Note Registrar shall register the transfer of a Physical Note if the requested transfer is being made to a transferee who has provided the Note Registrar with a Rule 144A Certification or to a transferee who is an Affiliate of the Seller in a transfer which otherwise complies with Section 4.02(s) hereof; or
(ii) The Note Registrar shall register the transfer of any Physical Note if (x) the transferor has advised the Note Registrar in writing that the Note is being transferred to a Person that is both a Qualified Institutional Buyer and a Qualified Purchaser; (y) prior to the transfer the transferee furnishes to the Note Registrar a Transferee Letter; and (z) such transfer otherwise complies with Section 4.02(s) hereof.
30
(l) Subject to Section 4.02(n), so long as a Global Note remains outstanding and is held by or on behalf of DTC, transfers of beneficial interests in the Global Note, or transfers by Holders of Physical Notes to transferees that take delivery in the form of beneficial interests in the Global Note, may be made only in accordance with this Section 4.02(l) and in accordance with the rules of DTC.
(i) Rule 144A Global Note to Regulation S Global Note During the Distribution Compliance Period. If, during the Distribution Compliance Period, a Beneficial Owner of an interest in a Rule 144A Global Note wishes at any time to transfer its beneficial interest in such Rule 144A Global Note to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Note, such Beneficial Owner may, in addition to complying with all applicable rules and procedures of DTC and Clearstream or Euroclear applicable to transfers by their respective participants (the “Applicable Procedures”), transfer or cause the transfer of such beneficial interest for an equivalent beneficial interest in the Regulation S Global Note only upon compliance with the provisions of this Section 4.02(l)(i). Upon receipt by the Note Registrar at its Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from a Depository Participant directing the Note Registrar to credit or cause to be credited to another specified Depository Participant’s account a beneficial interest in the Regulation S Global Note in an amount equal to the Note balance of the beneficial interest in the Rule 144A Global Note to be transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the DTC Participant (and the Euroclear or Clearstream account, as the case may be) to be credited with, and the account of the DTC Participant to be debited for, such beneficial interest, and (3) a certificate in the form of Exhibit E hereto given by the Beneficial Owner that is transferring such interest, the Note Registrar shall instruct DTC to reduce the denomination of the Rule 144A Global Note by the Note balance of the beneficial interest in the Rule 144A Global Note to be so transferred and, concurrently with such reduction, to increase the denomination of the Regulation S Global Note by the Note balance of the beneficial interest in the Rule 144A Global Note to be so transferred, and to credit or cause to be credited to the account of the Person specified in such instructions (who shall be a Depository Participant acting for or on behalf of Euroclear or Clearstream, or both, as the case may be) a beneficial interest in the Regulation S Global Note having a Note balance equal to the amount by which the denomination of the Rule 144A Global Note was reduced upon such transfer.
(ii) Rule 144A Global Note to Regulation S Global Note After the Distribution Compliance Period. If, after the Distribution Compliance Period, a Beneficial Owner of an interest in a Rule 144A Global Note wishes at any time to transfer its beneficial interest in such Rule 144A Global Note to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Note, such Holder may, in addition to complying with all Applicable Procedures, transfer or cause the transfer of such beneficial interest for an equivalent beneficial interest in a Regulation S Global Note only upon compliance with the provisions of this Section 4.02(l)(ii). Upon receipt by the Note Registrar at its Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from a Depository Participant directing the Note Registrar to credit or cause to be credited to another specified Depository Participant’s account a
31
beneficial interest in the Regulation S Global Note in an amount equal to the Note balance of the beneficial interest in the Rule 144A Global Note to be transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the DTC Participant (and, in the case of a transfer pursuant to and in accordance with Regulation S, the Euroclear or Clearstream account, as the case may be) to be credited with, and the account of the DTC Participant to be debited for, such beneficial interest, and (3) a certificate in the form of Exhibit F hereto given by the Beneficial Owner that is transferring such interest, the Note Registrar shall instruct DTC to reduce the denomination of the Rule 144A Global Note by the Note balance of the beneficial interest in the Rule 144A Global Note to be so transferred and, concurrently with such reduction, to increase the denomination of the Regulation S Global Note by the Note balance of the beneficial interest in the Rule 144A Global Note to be so transferred, and to credit or cause to be credited to the account of the Person specified in such instructions (who shall be a Depository Participant acting for or on behalf of Euroclear or Clearstream, or both, as the case may be) a beneficial interest in the Regulation S Global Note having a Note balance equal to the amount by which the denomination of the Rule 144A Global Note was reduced upon such transfer.
(iii) Regulation S Global Note to Rule 144A Global Note. If the Beneficial Owner of an interest in a Regulation S Global Note wishes at any time to transfer its beneficial interest in such Regulation S Global Note to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Rule 144A Global Note, such Holder may, in addition to complying with all Applicable Procedures, transfer or cause the transfer of such beneficial interest for an equivalent beneficial interest in the Rule 144A Global Note only upon compliance with the provisions of this Section 4.02(l)(iii). Upon receipt by the Note Registrar at its Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from a Depository Participant directing the Note Registrar to credit or cause to be credited to another specified Depository Participant’s account a beneficial interest in the Rule 144A Global Note in an amount equal to the Note balance of the beneficial interest in the Regulation S Global Note to be transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the DTC Participant to be credited with, and the account of the DTC Participant (or, if such account is held for Euroclear or Clearstream, the Euroclear or Clearstream account, as the case may be) to be debited for such beneficial interest, and (3) with respect to a transfer of a beneficial interest in the Regulation S Global Note for a beneficial interest in the related Rule 144A Global Note (i) during the Distribution Compliance Period, a certificate in the form of Exhibit G hereto given by the Beneficial Owner, or (ii) after the Distribution Compliance Period, a Rule 144A Certification from the transferee of such interest to the effect that such transferee is a Qualified Institutional Buyer and a Qualified Purchaser, the Note Registrar shall instruct DTC to reduce the denomination of the Regulation S Global Note by the Note balance of the beneficial interest in the Regulation S Global Note to be transferred and, concurrently with such reduction, to increase the denomination of the Rule 144A Global Note by the Note balance of the beneficial interest in the Regulation S Global Note to be so transferred, and to credit or cause to be credited to the account of the Person specified in such instructions (who shall be a Depository Participant acting for or on behalf of Euroclear or Clearstream, or both, as the case may be) a beneficial interest in the Rule 144A Global Note having a Note balance
32
equal to the amount by which the denomination of the Regulation S Global Note was reduced upon such transfer.
(iv) Transfers Within Regulation S Global Notes During Distribution Compliance Period. If, during the Distribution Compliance Period, the Beneficial Owner of an interest in a Regulation S Global Note wishes at any time to transfer its beneficial interest in such Regulation S Global Note to a Person who wishes to take delivery thereof in the form of a Regulation S Global Note, such Beneficial Owner may transfer or cause the transfer of such beneficial interest for an equivalent beneficial interest in such Regulation S Global Note only upon compliance with the provisions of this Section 4.02(l)(iv) and all Applicable Procedures. Upon receipt by the Note Registrar at its Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from a Depository Participant directing the Note Registrar to credit or cause to be credited to another specified Depository Participant’s account a beneficial interest in such Regulation S Global Note in an amount equal to the Note balance of the beneficial interest to be transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the DTC Participant to be credited with (or, if such account is held for Euroclear or Clearstream, the Euroclear or Clearstream account, as the case may be), and the account of the DTC Participant (or, if such account is held for Euroclear or Clearstream, the Euroclear or Clearstream account, as the case may be) to be debited for, such beneficial interest and (3) a certificate in the form of Exhibit H hereto given by the transferor, the Note Registrar shall instruct DTC to credit or cause to be credited to the account of the Person specified in such instructions (who shall be a Depository Participant acting for or on behalf of Euroclear or Clearstream, or both, as the case may be) a beneficial interest in the Regulation S Global Note having a Note balance equal to the amount specified in such instructions by which the account to be debited was reduced upon such transfer. The Note Registrar shall not be required to monitor compliance by Beneficial Owners with the provisions of this Section 4.02(l)(iv).
(m) Transfers of Interests in Global Notes to Physical Notes. Any and all transfers from a Global Note to a transferee wishing to take delivery in the form of a Physical Note will require the transferee to take delivery subject to the restrictions on the transfer of such Physical Note described on the face of such Note, and such transferee agrees that it will transfer such Physical Note only as provided therein and herein. No such transfer shall be made and the Note Registrar shall not register any such transfer unless such transfer is made in accordance with this Section 4.02(m) or is made to an Affiliate of the Seller in a transfer which otherwise complies with Section 4.02(s).
(i) Transfers of a beneficial interest in a Global Note to a Person who is both a Qualified Institutional Buyer and a Qualified Purchaser will require delivery of such Note to the transferee in the form of a Physical Note and the Note Registrar shall register such transfer only if prior to the transfer such transferee furnishes to the Note Registrar (1) a Transferee Letter to the effect that the transfer is being made to a Qualified Institutional Buyer and a Qualified Purchaser in accordance with an applicable exemption under the Securities Act, and (2) an Opinion of Counsel acceptable to the Trustee that such transfer is in compliance with the Securities Act.
33
(ii) Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Physical Note, as provided herein, the Note Registrar shall endorse on the schedule affixed to the related Global Note Registrar (or on a continuation of such schedule affixed to such Global Note Registrar and made a part thereof) an appropriate notation evidencing the date of such exchange or transfer and a decrease in the denomination of such Global Note equal to the Note balance of such Physical Note issued in exchange therefor or upon transfer thereof. Unless determined otherwise by the Servicer and the Issuer in accordance with Applicable Law, a Physical Note issued upon transfer of or exchange for a beneficial interest in the Global Note shall bear the Securities Legend.
(n) Transfers of Physical Notes to the Global Notes. If a Holder of a Physical Note wishes at any time to transfer such Note to a Person who wishes to take delivery thereof in the form of a beneficial interest in the related Regulation S Global Note or the related Rule 144A Global Note, such transfer may be effected only in accordance with the Applicable Procedures and this Section 4.02(n). Upon receipt by the Note Registrar at the Corporate Trust Office of (1) the Physical Note to be transferred with an instrument of assignment and transfer, (2) written instructions given in accordance with the Applicable Procedures from the Holder of such Physical Note directing the Note Registrar to credit or cause to be credited to the applicable Participant’s account a beneficial interest in such Regulation S Global Note or such Rule 144A Global Note, as the case may be, in an amount equal to the Note balance of the Physical Note to be so transferred, (3) a written order given in accordance with the Applicable Procedures containing information regarding the account of the DTC Participant (and, in the case of any transfer pursuant to Regulation S, the Euroclear or Clearstream account, as the case may be) to be credited with such beneficial interest, and (4) (x) a certificate in the form of Exhibit F or Exhibit H, as applicable, hereto, given by the Holder of such Physical Note, if delivery is to be taken in the form of a beneficial interest in the Regulation S Global Note or (y) a Rule 144A Certification from the transferee to the effect that such transferee is a Qualified Institutional Buyer who is a Qualified Purchaser, if delivery is to be taken in the form of a beneficial interest in the Rule 144A Global Note, the Note Registrar shall cancel such Physical Note, execute and deliver a new Physical Note for that portion, if any, of the Note balance of the Physical Note not so transferred, registered in the name of the Holder, and the Note Registrar shall instruct DTC to increase the denomination of the Regulation S Global Note or the Rule 144A Global Note, as the case may be, by the Note balance of the Physical Note to be so transferred, and to credit or cause to be credited to the account of the Person specified in such instructions (who, in the case of any increase in the Regulation S Global Note during the Distribution Compliance Period, shall be a Depository Participant acting for or on behalf of Euroclear or Clearstream, or both, as the case may be) a corresponding Note balance of the Rule 144A Global Note or the Regulation S Global Note, as the case may be.
(o) An exchange of a beneficial interest in a Global Note for a Physical Note or Notes, an exchange of a Physical Note or Notes for a beneficial interest in a Global Note and an exchange of a Physical Note or Notes for another Physical Note or Notes (in each case, whether or not such exchange is made in anticipation of subsequent transfer, and in the case of the Global Notes, so long as the Global Notes remain outstanding and are held by or on behalf of DTC), may be made only in accordance with this Section 4.02 and in accordance with the rules of DTC and Applicable Procedures (to the extent applicable).
34
(p) Upon acceptance for exchange or transfer of a Physical Note for a beneficial interest in a Global Note as provided herein, the Note Registrar shall cancel such Physical Note and shall (or shall request DTC to) endorse on the schedule affixed to such Global Note (or on a continuation of such schedule affixed to such Global Note and made a part thereof) an appropriate notation evidencing the date of such exchange or transfer and an increase in the denomination of such Global Note equal to the Note balance of such Physical Note exchanged or transferred therefor.
(ii) Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Physical Note as provided herein, the Note Registrar shall (or shall request DTC to) endorse on the schedule affixed to such Global Note (or on a continuation of such schedule affixed to such Global Note and made a part thereof) an appropriate notation evidencing the date of such exchange or transfer and a decrease in the denomination of such Global Note equal to the Note balance of such Physical Note issued in exchange therefor or upon transfer thereof.
(q) Unless determined otherwise by the Servicer and the Issuer in accordance with Applicable Law, the Securities Legend shall be placed on any Physical Note issued in exchange for or upon transfer of another Physical Note or of a beneficial interest in a Global Note.
(r) Subject to the restrictions on transfer and exchange set forth in this Section 4.02, the Holder of any Physical Note may transfer or exchange the same in whole or in part (in a Note balance amount or amounts not less than the applicable Minimum Denomination) by surrendering such Note at the Corporate Trust Office, or at the office of any transfer agent, together with an executed instrument of assignment and transfer reasonably satisfactory in form and substance to the Note Registrar in the case of transfer and a written request for exchange in the case of exchange. The Holder of a beneficial interest in a Global Note may, subject to the rules and procedures of DTC, cause DTC (or its nominee) to notify the Note Registrar in writing of a request for transfer or exchange of such beneficial interest for a Physical Note or Notes. Following a proper request for transfer or exchange, the Note Registrar shall, within five Business Days of such request made at such Corporate Trust Office, cause the Trustee to authenticate and the Note Registrar to deliver at such Corporate Trust Office, to the transferee (in the case of transfer) or Holder (in the case of exchange) or send by first-class mail or by overnight delivery service at the risk of the transferee (in the case of transfer) or Holder (in the case of exchange) to such address as the transferee or Holder, as applicable, may request, a Physical Note or Notes, as the case may require, for a like aggregate Percentage Interest and in such Note balance amount or amounts and authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Physical Note shall not be valid unless made at the Corporate Trust Office by the registered Holder in person, or by a duly authorized attorney-in-fact.
(s) (i)No transfer of any Note shall be made unless such transfer is exempt from the registration requirements of the Securities Act and any applicable state securities laws or is made in accordance with the Securities Act and such laws. No transfer of any Note shall be made if such transfer would require the Issuer to register as an “investment company” under the 1940 Act. In the event of any such transfer, unless such transfer is made in reliance upon Rule 144A under the Securities Act or Regulation S under the Securities Act or is a transfer of a Physical Note to an Affiliate of the Seller, (i) the Trustee may require a written Opinion of Counsel acceptable to and in form and substance reasonably satisfactory to the Trustee that such transfer may be made
35
pursuant to an exemption, describing the applicable exemption and the basis therefor, from said Act and laws or is being made pursuant to said Act and laws, which Opinion of Counsel shall not be an expense of the Trustee, the Issuer, or the Servicer and (ii) the Trustee shall require the transferee to execute a Transferee Letter certifying to the Issuer and the Trustee the facts surrounding such transfer, which Transferee Letter or certification shall not be an expense of the Trustee, the Issuer or the Servicer. The Holder of a Note desiring to effect such transfer shall, and by accepting a Note and the benefits of this Indenture does hereby agree to, indemnify the Trustee, the Issuer, the Servicer and the Initial Purchaser against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. None of the Issuer, the Trustee, the Servicer, the Trust Depositor or the Initial Purchaser is obligated to register or qualify any Note under the Securities Act or any state or international securities laws.
(ii) If, at any time, (x) any Holder of any Note is not (1) both a Qualified Purchaser and a Qualified Institutional Buyer or (2) a non-U.S. Person that acquired such Note outside of the United States in compliance with Regulation S or that is not a Qualified Purchaser (or a corporation, partnership, limited liability company or other entity (other than a trust), each shareholder, partner, member or other equity owner of which is a Qualified Purchaser), and in each case, that does not have an exemption available under the Securities Act and the 1940 Act shall become the holder or beneficial owner of an interest in any Note, (y) any person that is not a Qualified Purchaser (or a corporation, partnership, limited liability company or other entity (other than a trust), each shareholder, partner, member or other equity owner of which is a Qualified Purchaser) and also a Qualified Institutional Buyer or (z) any holder of Notes shall fail to comply with the reporting obligations of such Noteholder (any such person, a “Non-Permitted Holder”), the Issuer (or the Trustee on behalf of the Issuer) shall, promptly after discovery that such person is a Non-Permitted Holder by the Issuer, or, if a Responsible Officer of the Trustee obtains actual knowledge, the Trustee (and notice by the Trustee to the Issuer, if a Responsible Officer of the Trustee has actual knowledge), send notice to such Non-Permitted Holder demanding that such Non-Permitted Holder transfer its interest to a Person that is not a Non-Permitted Holder within thirty (30) days of the date of such notice. If such Non-Permitted Holder fails to transfer such Notes, the Issuer (or its designee) shall have the right, without further notice to the Non-Permitted Holder, to sell such Notes or interests in such Notes to a purchaser selected by the Issuer (or its designee) that is not a Non-Permitted Holder on such terms and by such means as the Issuer may choose in its sole discretion. The Holder of each Note, the Non-Permitted Holder and each other Person in the chain of title from the Holder to the Non-Permitted Holder, by its acceptance of an interest in the Notes, agrees to cooperate with the Issuer, any of the Issuer’s designees, and the Trustee to effect such transfers. The proceeds of such sale, net of any commissions, expenses and taxes due in connection with such sale, shall be remitted to the Non-Permitted Holder. The terms and conditions of any sale under this subsection shall be determined in the sole discretion of the Issuer, and none of the Issuer, its designees or the Trustee shall be liable to any Person having an interest in the Notes sold as a result of any such sale or the exercise of such discretion.
(t) No Note, or any interest therein, may be acquired directly or indirectly by, for, on behalf of or with any assets of an employee benefit plan as defined in Section 3(3) of ERISA that is subject to Part 4, Subtitle B, Title I of ERISA, any plan described in and subject to Section 4975 of the Code or governmental, non-U.S. or church plan or arrangement subject to any federal, state, local or non-U.S. law or regulation substantively similar or of similar effect to the foregoing provisions of ERISA or the Code (“Similar Law”) unless it represents or is deemed to represent
36
that its acquisition, holding and disposition of the Note will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or, in the case of a plan or other arrangement subject to Similar Law, will not constitute or result in a non-exempt violation of Similar Law. In the case of a Physical Note, such representation shall be made in a certification from the transferee to the Trustee; in the case of a Note other than a Physical Note, the transferee shall be deemed to have made such representation.
(u) The Trustee, Note Registrar and Certificate Registrar shall not be responsible for ascertaining whether any transfer complies with, or otherwise monitoring or determining compliance with, the requirements or terms of the Securities Act, applicable state or international securities laws, ERISA, the Code or the 1940 Act; except that if a transfer certificate or opinion is specifically required by the terms of this Section (or by the terms of the Trust Agreement, as applicable) to be provided to the Trustee, Note Registrar or Certificate Registrar by a prospective transferee or transferor, the Trustee, Note Registrar or Certificate Registrar, as applicable, shall be under a duty to receive and examine the same to determine whether it conforms substantially on its face to the applicable requirements of this Section (or the Trust Agreement, as applicable).
(v) Any Note may be cancelled by the Note Registrar without any notice to or approval of any Noteholder in accordance with Section 4.03 or once such Note has been properly surrendered for (i) final payment, (ii) transfer and exchange or (iii) redemption. Any Note acquired by the Issuer or otherwise surrendered for cancellation or marked as abandoned by Holder thereof will be cancelled by the Note Registrar only upon receipt of written consent thereto from both the Servicer and the Majority Noteholders.
(w) Each Noteholder and each beneficial owner of a Note shall be deemed to acknowledge that (i) none of the Issuer, the Servicer, the Trustee, the Owner Trustee, the Custodian, or any of their respective affiliates is acting as a fiduciary or financial or investment adviser for such beneficial owner; and (ii) such beneficial owner has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent it has deemed necessary and has made its own investment decisions (including decisions regarding the suitability of any transaction pursuant to the Indenture) based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the Issuer, the Servicer, the Trustee, the Owner Trustee, the Custodian or any of their respective affiliates.
(x) Each Noteholder and each beneficial owner of a Note shall be deemed to acknowledge that (i) such beneficial owner was not formed for the purpose of investing in the Global Notes; and (ii) such beneficial owner understands that the Issuer may receive a list of participants holding interests in the Global Notes from one or more book-entry depositories.
| Section 4.03 | Mutilated, Destroyed, Lost or Stolen Notes. |
If (i) any mutilated Note is surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Trustee such security or indemnity as may be required by it to hold the Issuer and the Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Trustee that such Note has been acquired by a protected purchaser, the Issuer shall execute, and upon its request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note; provided that if any such destroyed, lost or stolen Note, but not
37
a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a protected purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a protected purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 4.03, the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and reasonable expenses of the Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
| Section 4.04 | Payment of Principal and Interest; Defaulted Interest. |
(a) The Notes shall accrue interest during each Interest Period on the basis of a 360 day year consisting of twelve 30-day months (or in the case of the first Payment Date, an accrual period of thirty (30) days). Any installment of interest or principal, if any, payable on any Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name such Note is registered on the Record Date, by check mailed first-class, postage prepaid, to such Person’s address as it appears on the Note Register on such Record Date, except that (i) with respect to Notes registered on the Record Date in the name of the nominee of DTC (initially, such nominee to be Cede & Co.), such payment will be made by wire transfer in immediately available funds to the account designated by such Person and except for the final installment of principal payable with respect to such Note on a Payment Date or on the Legal Final Payment Date and (ii) the Redemption Price for any Note called for redemption pursuant to Article X hereof shall be payable as provided in Section 4.04(b) or Article X hereof, as applicable. The funds represented by any such checks returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable on each Payment Date to the extent of funds available therefor in accordance with the Priority of Payments as provided in the Sale and Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default
38
shall have occurred and be continuing, if the Trustee with the consent or at the direction of the Majority Noteholders has declared the Notes to be immediately due and payable in the manner provided in Section 5.02. All principal payments among the Notes shall be made in the order and priorities set forth herein and in the Sale and Servicing Agreement and all principal payments on the Notes shall be made pro rata to the Noteholders. The Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid; provided that the Issuer or Servicer shall have provided the Trustee with timely notice of such expectation. Such notice shall be mailed or transmitted by electronic mail prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with a redemption shall be given to Noteholders as provided in Article X.
| Section 4.05 | Tax Treatment. |
(a) The Issuer has entered into this Indenture, and the Notes will be issued, with the intention that, for all tax purposes, (i) the Notes will be treated as indebtedness secured by the Indenture Collateral and (ii) the Issuer shall not be treated as an association, taxable mortgage pool or publicly traded partnership taxable as a corporation. The Issuer, by entering into this Indenture, and each Noteholder, by the acceptance of any such Note (and each beneficial owner of a Note, by its acceptance of an interest in the applicable Note), agree to treat such Notes for federal, state and local income and franchise tax purposes as indebtedness. Each Holder of any such Note agrees that it will cause any beneficial owner of such Note acquiring an interest in a Note through it to comply with this Indenture as to treatment of indebtedness under applicable tax law, as described in this Section 4.05. The parties hereto agree that they shall not cause or permit the making, as applicable, of any election under Treasury Regulation Section 301.7701-3 whereby the Issuer or any portion thereof would be treated as a corporation for federal income tax purposes and, except as required by the terms of this Indenture or Applicable Law, shall not file tax returns for the Issuer, but shall treat the Issuer as a disregarded entity for federal income tax purposes (unless, pursuant to Section 4.05(b)(ii), the Issuer is treated as a partnership). The provisions of this Indenture shall be construed in furtherance of the foregoing intended tax treatment.
(b) It is the intent of the Trust Depositor, the Servicer and the Certificateholder that, for federal income tax purposes, (i) in the event that the Trust Certificate is owned by a single beneficial owner for federal income tax purposes, the Issuer will be disregarded as an entity separate from such beneficial owner, and the Certificateholder (and the beneficial owner of the Trust Certificate), by acceptance of the Trust Certificate (or a beneficial interest therein), agrees to take no action inconsistent with such treatment and (ii) in the event that the Trust Certificate is owned by more than one beneficial owner for federal income tax purposes, the Issuer will be treated as a partnership, the partners of which are the beneficial owners of the Trust Certificate, and each Certificateholder (and beneficial owner of the Trust Certificate), by acceptance of a Trust Certificate (or beneficial interest therein), agrees to treat the Trust Certificate as equity and to take no action inconsistent with the treatment described herein.
(c) All payments made by the Issuer under the Notes will be made without any deduction or withholding for or on account of any tax unless such deduction or withholding is required by Applicable Law then in effect. If the Issuer is so required to deduct or withhold it will
39
provide notice to the Trustee of such requirement promptly after a Responsible Officer becomes aware thereof and the Issuer will not be obligated to pay to the holder of any such Note any additional amounts in respect of such withholding or deduction.
(d) Each Holder and each beneficial owner of a Note, by acceptance of such Note or its interest in such Note, shall be deemed to understand and acknowledge that failure to provide the Issuer, the Trustee or any other party acting as Paying Agent with the applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or successor applicable form) in the case of a person that is a “United States person” within the meaning of Section 7701(a)(30) of the Code or an appropriate Internal Revenue Service Form W-8 (or successor applicable form) in the case of a person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code) or any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. withholding tax (including, but not limited to, any withholding tax imposed under FATCA), duly completed together with such supplementary documentation as may be prescribed by Applicable Law to permit the Issuer to determine the withholding or deduction required to be made, may result in amounts being withheld from payments in respect of such Note.
| Section 4.06 | Satisfaction and Discharge of Indenture. |
(a) The following shall survive the satisfaction and discharge of this Indenture: (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes pursuant to Section 4.03 hereof, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.10, 3.19, 3.21, 3.22, 4.05, 6.07, 11.15 hereof and the second sentence of 11.16 hereof, (v) the rights, obligations and immunities of the Trustee hereunder (including the rights of the Trustee under Section 6.07 hereof and the obligations of the Trustee under Section 4.07 hereof) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them. This Indenture shall cease to be of further effect with respect to the Notes (and the Trustee, on written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes) when:
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 4.03 hereof and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.03) have been delivered to the Trustee for cancellation (two Business Days prior to the final Payment Date) pursuant to Section 4.02(v) hereof; or
(2) all Notes not theretofore delivered to the Trustee for cancellation:
(i) have become due and payable; or
40
(ii) mature within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer;
and the Issuer, in the case of (2)(i) or (ii) above, has irrevocably deposited or caused to be irrevocably deposited with the Trustee cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation when due to the Legal Final Payment Date therefor, Redemption Date (if Notes shall have been called for redemption pursuant to Article X hereof), as the case may be; and
(B) the Issuer has delivered to the Trustee an Officer’s Certificate and an opinion of counsel, which may be internal counsel to the Issuer or the Servicer and if requested by the Trustee, a certificate from a firm of acceptable public accountants, meeting the applicable requirements of Section 11.02 hereof and, subject to Section 11.02 hereof, stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Notes have been complied with;
(C) unless each Holder of each Note has consented to such deposit and satisfaction and discharge of this Indenture, the Issuer has delivered to the Trustee an opinion of U.S. tax counsel of nationally recognized standing in the United States experienced in such matters to the effect that the Holders of the Notes would recognize no gain or loss for U.S. federal income tax purposes solely as a result of such deposit and satisfaction and discharge of this Indenture; and
(D) the Issuer has made payment of all other sums due under this Indenture, the Trust Agreement and the Sale and Servicing Agreement.
(b) By acceptance of any Note, the Holder thereof agrees to surrender such Note to the Trustee promptly upon such Noteholder’s receipt of the final payment thereon or as otherwise provided in the Transaction Documents.
| Section 4.07 | Application of Trust Money. |
All moneys deposited with the Trustee pursuant to Section 4.06 hereof shall be held and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Trustee may determine, to the Holders of Notes for the payment or redemption for which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Sale and Servicing Agreement or required by law.
| Section 4.08 | Repayment of Moneys Held by Paying Agent. |
In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Trustee to be
41
held and applied according to Section 3.05 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
| Section 5.01 | Events of Default. |
Any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall constitute an “Event of Default”:
(i) failure to pay all accrued interest on the Notes on any Payment Date and such failure continues unremedied for two (2) or more Business Days;
(ii) failure to pay the Outstanding Principal Balance of the Notes by the Legal Final Payment Date;
(iii) the Issuer or the Servicer shall fail to make any other required payment on any Payment Date and such failure continues for a period of two (2) or more Business Days;
(iv) the Aggregate Outstanding Principal Balance exceeds the Borrowing Base for a period of three (3) consecutive calendar months (after giving effect to all distributions on such Payment Dates);
(v) other than as expressly set forth in this definition of “Event of Default”, a default in the observance or performance of any material covenant or agreement of the Issuer, the Trust Depositor or the Seller made in this Indenture or any other Transaction Document, and such default has a material adverse effect on the Noteholders, which default continues unremedied for a period of 30 days after the first to occur of (A) actual knowledge thereof by a Responsible Officer of the Issuer, the Trust Depositor or the Seller or (B) there shall have been given, by registered or certified mail, to the Issuer, the Trust Depositor or the Seller by the Trustee, a written notice specifying such default and requiring it to be remedied and stating that such notice is a notice of default hereunder;
(vi) any representation, warranty, certification or written statement of the Issuer made in the Transaction Documents or in any certificate or written statement delivered under this Indenture or in connection herewith shall prove to have been incorrect in any respect as of the time when made and the circumstance or condition in respect of which such representation or warranty was incorrect, and such incorrectness has a material adverse effect on the Noteholders and which default continues unremedied for a period of 30 days after the first to occur of (A) actual knowledge thereof by a Responsible Officer of the Issuer, or (B) the delivery to the Issuer by the Trustee, by registered or certified mail, a written notice specifying such incorrect representation or warranty and requiring it to be remedied and stating that such notice is a notice of default hereunder;
42
(vii) the Trustee fails to have a first priority security interest in the Issuer Property;
(viii) there occurs the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Trust Depositor, the Issuer or any substantial part of the Indenture Collateral in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Trust Depositor, the Issuer or for any substantial part of the Indenture Collateral, or ordering the winding-up or liquidation of the Trust Depositor’s or the Issuer’s affairs, and such decree or order shall remain unstayed and in effect for a period of 30 consecutive days;
(ix) there occurs the commencement by the Trust Depositor or the Issuer of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Trust Depositor or the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Trust Depositor or the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Trust Depositor or the Issuer or for any substantial part of the Indenture Collateral, or the making by the Trust Depositor or the Issuer of any general assignment for the benefit of creditors, or the failure by the Trust Depositor or the Issuer generally to pay its debts as such debts become due, or the taking of any action by the Trust Depositor or the Issuer in furtherance of any of the foregoing; or
(x) the Trustee, on behalf of the Noteholders, shall fail to have a valid and perfected first priority security interest in the Indenture Collateral except as otherwise expressly permitted to be released in accordance with the applicable Transaction Document, and such failure to have a perfected first priority security interest shall have a material adverse effect on the Noteholders.
| Section 5.02 | Acceleration of Maturity; Rescission and Annulment. |
If an Event of Default should occur and be continuing (other than an Event of Default specified in Sections 5.01(viii) or (ix) hereof), then and in every such case the Trustee may, and shall at the direction of the Super-Majority Noteholders, declare the Notes to be immediately due and payable by a notice in writing to the Issuer (who shall promptly forward the same to the Rating Agency) and the Owner Trustee (and to the Trustee if given by Noteholders), and upon any such declaration the unpaid principal amount of the Notes, together with accrued and unpaid interest thereon, through the date of acceleration, shall become immediately due and payable. If an Event of Default specified in Sections 5.01(viii) or (ix) hereof occurs, the unpaid principal amount of the Notes, together with accrued and unpaid interest thereon, through the date of acceleration, shall automatically, and without any notice to the Issuer, become immediately due and payable.
At any time after such declaration or automatic occurrence of acceleration of maturity and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article V provided, the Super-Majority Noteholders, by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences if the Issuer has paid or deposited with the Trustee a sum sufficient to pay:
43
(A) all payments of principal and interest on the Notes, and all other amounts that would then be due hereunder, upon the Notes if the Event of Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, indemnities, disbursements and advances of the Trustee, the Owner Trustee and their respective agents and counsel; and
(C) all Events of Default, other than the nonpayment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12 hereof.
No such rescission or annulment shall affect any subsequent default or impair any right consequent thereto.
If the Notes are accelerated following an Event of Default specified in Sections 5.01(viii) or (ix) hereof, then on each Payment Date on or after such Event of Default, payments will be made by the Trustee from all funds available to it in the same order of priority as that provided for in Section 7.06(c) of the Sale and Servicing Agreement.
| Section 5.03 | Collection of Indebtedness and Suits for Enforcement by Trustee. |
(a) The Issuer covenants that if (i) default is made in the payment of any interest on any Note, or (ii) default is made in the payment of the principal of or any installment of the principal of any Note, when the same becomes due and payable, and in each case such default continues for a period of two (2) Business Days, the Issuer will, upon demand of the Trustee, pay to it, for the benefit of the Noteholders, the whole amount then due and payable on the Notes for principal and interest, with interest upon the overdue principal, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, with the consent of the Majority Noteholders and subject to the provisions of Section 11.15 hereof may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon the Notes and collect in the manner provided by law out of the Indenture Collateral, wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Trustee subject to the provisions of Section 5.04 and Section 11.15 hereof may, as more particularly provided in Section 5.04 hereof, in its discretion, proceed to protect and enforce its rights and the rights of the Noteholders by such appropriate Proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or
44
to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any Person having or claiming an ownership interest in the Indenture Collateral, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other Person, or in case of any other comparable judicial Proceedings relative to the Issuer, or to the creditors or property of the Issuer, the Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.03, shall be entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of principal and interest, as applicable, owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by Applicable Law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Trustee on their behalf;
(iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee or the Noteholders allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and
(v) to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matter;
and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.
45
(e) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such Proceedings.
| Section 5.04 | Remedies; Priorities. |
(a) If an Event of Default has occurred and is continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, subject to the provisions of Section 11.15 hereof, the Trustee may do one or more of the following (subject to the provisions of this Section 5.04 and Section 5.15):
(i) institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Indenture Collateral;
(iii) exercise any remedies as a secured party under the relevant UCC and take any other appropriate action under Applicable Law to protect and enforce the rights and remedies of the Trustee and the Holders of the Notes; and
(iv) sell the Indenture Collateral or any portion thereof or rights or interest therein at one or more public or private sales called and conducted in any matter permitted by law;
provided, however, that the Trustee may not sell or otherwise liquidate the Indenture Collateral following and during the continuance of an Event of Default unless (A) the Notes have been declared or otherwise become immediately due and payable in accordance with Section 5.02 and such declaration or acceleration and its consequences have not been rescinded and annulled and (B) either (1) the proceeds of such Sale or liquidation are sufficient to discharge in full all amounts then due and unpaid upon the Notes for principal and interest (including any interest payable
46
pursuant to Section 7.06(a)(6) or 7.06(c)(4)) of the Sale and Servicing Agreement and all amounts due to the Trustee, Owner Trustee, Custodian, Backup Servicer, Successor Servicer, and Lockbox Bank, (2) the Trustee determines that the Indenture Collateral would not be sufficient on an ongoing basis to make all payments on the Notes as those payments would have become due had the Notes not been declared due and payable and the Super-Majority Noteholders (excluding Notes held by the Trust Depositor, the Seller, the Servicer or any of their respective affiliates) consent to such Sale or (3) 100% of the holders of the outstanding Notes (excluding Notes held by the Trust Depositor, the Seller, the Servicer or any of their respective affiliates) consent to such Sale. In determining whether the proceeds of such Sale or liquidation distributable to the Noteholders and the other parties entitled thereto are sufficient to discharge in full the amounts referenced in clause (B)(1) above, the Trustee may, but need not, obtain, at the Issuer’s expense, and rely upon an opinion of an independent accountant or an investment banking firm of national reputation as to feasibility of such proposed action and as to the sufficiency of the expected sales proceeds of the Indenture Collateral for such purpose.
(b) If the Trustee collects any money pursuant to this Article V, it shall distribute such money in accordance with Section 7.06(c) of the Sale and Servicing Agreement. The Trustee may fix a record date and distribution date (which may be a date other than a Payment Date) for any payment to Noteholders pursuant to this Section 5.04. At least five days before such record date, the Issuer shall mail to each Noteholder and the Trustee a notice that states the record date, the distribution date and the amount to be paid.
| Section 5.05 | [Reserved]. |
| Section 5.06 | Limitation of Suits. |
No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless and subject to the provisions of Section 11.15 hereof:
(i) such Holder has previously given written notice to the Trustee of a continuing Event of Default;
(ii) prior to the payment in full of Notes, the Noteholders evidencing not less than 25% of the Aggregate Outstanding Principal Balance have made written request to the Trustee to institute such Proceeding in respect of such Event of Default in its capacity as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and
(v) prior to the payment in full of the Notes, no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Holders of a majority of the Outstanding Principal Balance of the Notes.
47
It is understood and intended that no one or more of the Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Aggregate Outstanding Principal Balance then entitled to make such request, the Trustee shall take the action requested by the Holders of the Notes representing the greatest percentage of the Aggregate Outstanding Note Balance to determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture.
| Section 5.07 | Unconditional Rights of Noteholders to Receive Principal and Interest. |
Notwithstanding any other provisions in this Indenture, but subject to Section 11.15(a) hereof, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest, if any, on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture and such right shall not be impaired without the consent of such Holder.
| Section 5.08 | Restoration of Rights and Remedies. |
If the Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Trustee or to such Noteholder, then and in every such case the Issuer, the Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Noteholders shall continue as though no such Proceeding had been instituted.
| Section 5.09 | Rights and Remedies Cumulative. |
No right or remedy herein conferred upon or reserved to the Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
| Section 5.10 | Delay or Omission Not a Waiver. |
No delay or omission of the Trustee or any Holder of any Note in the exercise of any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Noteholders may be
48
exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Noteholders, as the case may be.
| Section 5.11 | Control by Noteholders. |
The Majority Noteholders shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee with respect to the Notes or exercising any trust or power conferred on the Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or with this Indenture;
(ii) the Super-Majority Noteholders or 100% of the Noteholders (as applicable) may provide any direction to the Trustee to sell or liquidate the Indenture Collateral pursuant to the express terms of Section 5.04; and
(iii) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section 5.11, subject to Section 6.01, the Trustee need not take any action that it determines might involve it in liability.
| Section 5.12 | Waiver of Past Defaults. |
Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.02 hereof, the Majority Noteholders may waive any past Event of Default and its consequences except an Event of Default with respect to payment of principal or interest, as applicable, on any of the Notes or in respect of a covenant or provision hereof which cannot be modified or amended without the waiver or consent of each of the Holders of the Outstanding Notes affected thereby. In the case of any such waiver, the Issuer, the Trustee and the Noteholders shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereto.
| Section 5.13 | Undertaking for Costs. |
All parties to this Indenture agree, and each Holder of any Note by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to (i) any suit instituted by the Trustee, (ii) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the
49
aggregate more than 25% of the Aggregate Outstanding Principal Balance or (iii) any suit instituted by any Noteholder for the enforcement of the payment of principal or interest, as applicable, on any Note on or after the respective due dates expressed in such Note and in this Indenture.
| Section 5.14 | Waiver of Stay or Extension Laws. |
The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
| Section 5.15 | Sale of Indenture Collateral. |
(a) The power to effect any sale or other disposition (a “Sale”) of any portion of the Indenture Collateral pursuant to Section 5.04 hereof is expressly subject to the provisions of Section 5.11 hereof and this Section 5.15. The power to effect any such Sale shall not be exhausted by any one or more Sales as to any portion of the Indenture Collateral remaining unsold, but shall continue unimpaired until the entire Indenture Collateral shall have been sold or all amounts payable on the Notes and under this Indenture shall have been paid. The Trustee hereby expressly waives its right to any amount fixed by law as compensation for any Sale.
(b) The Trustee shall not in any private Sale sell the Indenture Collateral, or any portion thereof, unless the Majority Noteholders consent to or such Noteholders as required by Section 5.11 hereof direct the Trustee to make such Sale and:
(i) the proceeds of such Sale or liquidation are sufficient to discharge in full all amounts then due and unpaid upon the Notes for principal and interest, as applicable, to pay all amounts then due and payable to the Trustee, the Custodian, the Backup Servicer and the Lockbox Bank and to reimburse the Servicer for any outstanding unreimbursed Servicing Advances and Scheduled Payment Advances; or
(ii) the Trustee determines, at the direction of Noteholders representing at least 25% of the Aggregate Outstanding Principal Balance, that the conditions for liquidation of the Indenture Collateral set forth in Section 5.04 hereof are satisfied (in making any such determination, the Trustee may rely upon an opinion of an Independent investment banking firm obtained and delivered as provided in Section 5.04 hereof).
(c) In connection with a Sale of all or any portion of the Indenture Collateral:
(i) other than in the case of a Sale of any Loan as contemplated by the Sale and Servicing Agreement, any Holder or Holders of Notes (other than the Trust Depositor) may bid for and purchase the property offered for Sale, and upon compliance with the terms of Sale may hold, retain and possess and dispose of such property, without further accountability, and may, in paying the purchase money therefor, deliver any Notes or claims
50
for interest thereon in lieu of cash up to the amount which shall, upon distribution of the net proceeds of such Sale, be payable thereon, and such Notes, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the Holders thereof after being appropriately stamped to show such partial payment;
(ii) other than in the case of a Sale of any Loan as contemplated by the Sale and Servicing Agreement, the Trustee may bid for and acquire the property offered for Sale in connection with any Sale thereof, and, subject to any requirements of, and to the extent permitted by, Requirements of Law in connection therewith, may purchase all or any portion of the Indenture Collateral in a private sale, and, in lieu of paying cash therefor, may make settlement for the purchase price by crediting the gross Sale price against the sum of (A) the amount which would be distributable to the Holders of the Notes as a result of such Sale in accordance with Section 5.04(b) hereof on the Payment Date next succeeding the date of such Sale and (B) the expenses of the Sale and of any Proceedings in connection therewith which are reimbursable to it, without being required to produce the Notes in order to complete any such Sale or in order for the net Sale price to be credited against such Notes, and any property so acquired by the Trustee shall be held and dealt with by it in accordance with the provisions of this Indenture;
(iii) the Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Indenture Collateral in connection with a Sale thereof;
(iv) the Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer and convey its interest in any portion of the Indenture Collateral in connection with a Sale thereof, and to take all action necessary to effect such Sale;
(v) the Trustee shall use commercially reasonable efforts to maximize the proceeds of any such Sale of the Indenture Collateral;
(vi) no purchaser or transferee at such a Sale shall be bound to ascertain the Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys; and
(vii) all proceeds received by the Trustee in connection with the liquidation or sale of the Indenture Collateral shall be deposited into the Collection Account no later than two (2) Business Days following receipt thereof.
| Section 5.16 | Action on Notes. |
The Trustee’s right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the Lien of this Indenture nor any rights or remedies of the Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Indenture Collateral or upon any of the assets of the Issuer. Any money or property collected by the Trustee shall be applied in accordance with Section 5.04(b) hereof.
51
| Section 5.17 | Performance and Enforcement of Certain Obligations. |
(a) Promptly following a request from the Trustee to do so, the Issuer shall take all such lawful action as the Trustee at the direction of the Majority Noteholders may request to compel or secure the performance and observance by the Seller, the Trust Depositor and the Servicer, as applicable, of each of their obligations to the Issuer under or in connection with the Transaction Documents, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Transaction Documents to the extent and in the manner directed by the Trustee, including the transmission of notices of default to the Seller, the Trust Depositor or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Seller, the Trust Depositor or the Servicer of each of their obligations under the Transaction Documents.
(b) If a Servicer Default has occurred and is continuing, the Trustee, at the direction of the Majority Noteholders, shall exercise all rights, remedies, powers, privileges and claims of the Issuer against the Servicer under or in connection with the Sale and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Servicer, of its obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale and Servicing Agreement, and any right of the Issuer to take such action shall not be suspended.
ARTICLE VI
THE TRUSTEE
| Section 6.01 | Duties of Trustee. |
(a) If an Event of Default has occurred and is continuing, of which a Responsible Officer of the Trustee has actual knowledge, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs with respect to the Indenture Collateral.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; however, the Trustee shall examine the certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct or bad faith, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this Section 6.01;
52
(ii) the Trustee shall not be liable for any error of judgment made in good faith by the Trustee unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c), (g) and (i) of this Section 6.01.
(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.
(f) Money held by the Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Sale and Servicing Agreement.
(g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture, to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or to honor the request or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholder or Noteholders shall have offered to the Trustee security or indemnity against the costs, expenses, and liabilities reasonably satisfactory to the Trustee that might be incurred by it in compliance with the request or direction. Anything in this Indenture to the contrary notwithstanding, in no event shall the Trustee be liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits).
(h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.01.
(i) The Trustee shall not be deemed to have notice of any Event of Default or Servicer Default, breach of representation or warranty, or other event unless a Responsible Officer of the Trustee has actual knowledge thereof or has received written notice of thereof in accordance with this Indenture.
| Section 6.02 | Rights of Trustee. |
(a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officer’s Certificate.
(c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Trustee shall not be responsible for any misconduct or negligence on the part of, or for the
53
supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided that the Trustee’s conduct does not constitute willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, accountants or other experts, and the advice of counsel or an Opinion of Counsel with respect to legal matters or the advice of such accountants or other experts relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with such advice of counsel or such Opinion of Counsel or the advice of such accountants or other experts.
(f) The Trustee shall not be bound to (i) make any investigation into the performance of the Issuer or the Servicer under this Indenture or any other Transaction Document or into the matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other document or (ii) institute, conduct or defend litigation or investigate any matter unless requested to do so in writing by the Noteholders evidencing not less than 25% of the Aggregate Outstanding Principal Balance.
(g) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.
(h) In the event that the Trustee or its Affiliate is acting in the capacity of Securities Intermediary, Paying Agent, Note Registrar or Certificate Registrar hereunder or under the other Transaction Documents, the rights, protections, immunities and indemnities afforded the Trustee pursuant to this Article VI shall also be afforded to U.S. Bank or U.S. Bank Trust Co. in such capacities.
(i) Whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s Certificate or (ii) be required to determine the value of any Indenture Collateral or funds hereunder or the cash flows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants (which may or may not be the Independent Accountants appointed by the Issuer pursuant to Section 9.05 of the Sale and Servicing Agreement), investment bankers or other persons qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services.
(j) Nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify or independently determine the accuracy of any report, certificate or information received from the Issuer or Servicer (unless and except to the extent otherwise expressly set forth herein).
54
(k) Any permissive right of the Trustee to take or refrain from taking actions enumerated in this Indenture shall not be construed as a duty.
(l) The Trustee shall be without liability for any damage or loss resulting from or caused by events or circumstances beyond it’s reasonable control including nationalization, expropriation, currency restrictions, the interruption, disruption or suspension of the normal procedures and practices of any securities market, power, mechanical, communications or other technological failures or interruptions, computer viruses or the like, fires, floods, earthquakes or other natural disasters, pandemics or epidemics, civil and military disturbance, acts of war or terrorism, riots, revolution, acts of God, work stoppages, strikes, national disasters of any kind, or other similar events or acts; errors by the Issuer or Servicer (including any Responsible Officer) in its instructions to the Trustee; or changes in Applicable Law, regulation or orders.
(m) The Trustee shall not be required to take any action it is directed to take under this Indenture if the Trustee reasonably determines in good faith that the action so directed would subject U.S. Bank Trust Co. in its individual capacity to personal liability, is contrary to law or is inconsistent with the terms of this Indenture or any other Transaction Document.
(n) The Trustee shall not be liable for failure to perform its duties hereunder if such failure is a direct or proximate result of another party’s failure to perform its obligations hereunder unless such other party’s failure is caused by the Trustee’s willful misconduct, bad faith or negligence.
| Section 6.03 | Individual Rights of Trustee. |
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee. Any Note Registrar, co-registrar, Paying Agent or co-paying agent may do the same with like rights. However, the Trustee must comply with Section 6.11 hereof.
| Section 6.04 | Trustee’s Disclaimer. |
The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Sale and Servicing Agreement, the Trust Agreement, the Notes or any other Transaction Document, the validity or sufficiency of any security interest intended to be created or the characterization of the Notes for tax purposes, it shall not be accountable for the Issuer’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee’s certificate of authentication.
| Section 6.05 | Notice of Event of Default. |
The Trustee shall mail to each Noteholder, the Servicer (who shall promptly forward the same to the Rating Agency, for so long as any of the Notes are Outstanding) and the Owner Trustee notice of an Event of Default within thirty (30) days after the Trustee has actual knowledge thereof in accordance with Section 6.01 hereof.
| Section 6.06 | Reports by Trustee to Holders. |
55
The Trustee shall deliver to each Noteholder such information in its possession as may be required to enable such holder to prepare its federal and state income tax returns. In addition, upon the Issuer’s or a Noteholder’s written request, the Trustee shall promptly furnish information reasonably requested by the Issuer or such Noteholder that is reasonably available to the Trustee to enable the Issuer or such Noteholder to perform its federal and state income tax reporting obligations.
The Trustee shall not be responsible for any tax reporting, disclosure, record keeping or list maintenance requirements of the Issuer under Sections 6011(a), 6111(d) or 6112 of the Code, including, but not limited to, the preparation of IRS Form 8886 pursuant to Treasury Regulations Section 1.6011-4(d) or any successor provision and any required list maintenance under Treasury Regulations Section 301.6112-1 or any successor provision.
| Section 6.07 | Compensation and Indemnity. |
The Issuer shall pay to the Trustee on each Payment Date reasonable compensation for its services under this Indenture and the other Transaction Documents in accordance with the Priority of Payments and pursuant to the separate fee agreement between the Trustee and the Issuer. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee’s agents, counsel, accountants and experts. The Issuer shall indemnify, defend and hold harmless the Trustee and its officers, directors, employees and agents for and against any and all loss, liability or expense (including the fees and expenses of attorneys, agents, accountants, and experts) incurred by it in connection with the administration of this Indenture and the performance of its duties hereunder and under the other Transaction Documents, including the reasonable costs and expenses of defending themselves against any claim, loss, damage or liability in connection with the exercise or performance of any of their powers or duties under this Indenture or under any other Transaction Documents and any reasonable and documented legal fees or other expenses incurred by the Trustee in connection with the enforcement of the Issuer’s contractual and indemnification obligations herein. The Trustee shall notify the Issuer and the Trust Depositor promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer and the Trust Depositor shall not relieve the Issuer of its obligations hereunder or under the Trust Agreement. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct, negligence or bad faith, except that the Trustee shall not be liable (i) for any error of judgment made by it in good faith unless it is proved that the Trustee was negligent in ascertaining the pertinent facts, (ii) for any action it takes or omits to take in good faith in accordance with directions received by it from the Holders of the Notes in accordance with the terms hereunder, or (iii) for interest on any money received by it except as the Trustee and the Issuer may agree in writing. The Issuer shall assume (with the consent of the Trustee, such consent not to be unreasonably withheld) the defense of claim for indemnification hereunder and any settlement of any such claim and pay all expenses in connection therewith, including reasonable counsel fees. If the consent of the Trustee required in the immediately preceding sentence is unreasonably withheld, the Issuer is relieved of its indemnification obligations hereunder with respect thereto.
56
The obligations of the Issuer set forth in this Section 6.07 are subject in all respects to Section 11.15(b) hereof and shall be paid solely pursuant to the Priority of Payments.
The Trustee hereby agrees not to cause the filing of a petition in bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect against the Issuer for the non-payment to the Trustee of any amounts provided by this Section 6.07 until at least one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all Notes issued under this Indenture.
The amounts payable to the Trustee pursuant to this Section 6.07 shall not, except as provided by Section 7.06 of the Sale and Servicing Agreement, exceed on any Payment Date the limitation on the amount thereof described in the Priority of Payments for such Payment Date and in the definition of Administrative Expenses in the Sale and Servicing Agreement; provided that (i) the Trustee shall not institute any proceeding for payment of any amount payable hereunder except in connection with an action pursuant to Section 5.03 or 5.04 hereof for the enforcement of the Lien of this Indenture for the benefit of the Noteholders and (ii) the Trustee may only seek to enforce payment of such amounts in conjunction with the enforcement of the rights of the Noteholders in the manner set forth in Section 5.04 hereof.
The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.07 and Section 7.06 of the Sale and Servicing Agreement, and only to the extent that the payment thereof would not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.08, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect against the Issuer for the nonpayment to the Trustee of any amounts provided by this Section 6.07 until at least one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all Notes issued under this Indenture.
The Issuer’s payment obligations and indemnity to the Trustee pursuant to this Section 6.07 shall survive the discharge of this Indenture and resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of an Event of Default specified in clauses (viii) or (ix) of the definition of “Event of Default” with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar law.
| Section 6.08 | Replacement of Trustee. |
No resignation or removal of the Trustee shall become effective until the appointment of a successor Trustee pursuant to this Section 6.08 and that meets the criteria set forth in Section 6.11 has become effective. The Trustee may resign at any time upon at least 30 days written notice by so notifying the Issuer and the Noteholders of that resignation. The Majority Noteholders or the Issuer, with the written consent of the Majority Noteholders, may remove the Trustee without cause upon at least 30 days written notice by so notifying the Trustee in writing (a copy of which notice shall promptly be provided by the Issuer to the Rating Agency). The Issuer shall remove the Trustee if:
57
(i) the Trustee fails to comply with Section 6.11 hereof;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Trustee or its property;
(iv) the Trustee otherwise becomes incapable of acting; or
(v) the Trustee defaults in any of its obligations under the Transaction Documents and such default is not cured within 30 days after a Responsible Officer of the Trustee receives written notice of such default.
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Upon the appointment becoming effective, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. No successor Trustee shall accept appointment as provided in this Section 6.08 unless at the time of such appointment becoming effective such Person shall be eligible under the provisions of Section 6.11 hereof. The retiring Trustee shall promptly transfer all property (including all Indenture Collateral) held by it as Trustee to the successor Trustee and shall execute and deliver such instruments and such other documents as may reasonably be required to more fully and certainly vest and confirm in the successor Trustee all such rights, powers, duties and obligations.
If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Majority Noteholders may petition any court of competent jurisdiction for the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section 6.08, the Issuer’s obligations under Section 6.07 hereof shall continue for the benefit of the retiring Trustee.
Upon the appointment of a successor Trustee as provided in this Section 6.08, the successor Trustee shall mail notice of such succession hereunder at the expense of the Issuer to all Holders of Notes at their addresses as shown in the Note Register.
| Section 6.09 | Successor Trustee by Merger. |
If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee; provided that such corporation or banking association shall be otherwise qualified and eligible under Section 6.11 hereof.
In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of
58
authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere provided for in the Notes or in this Indenture.
| Section 6.10 | Appointment of Co-Trustee or Separate Trustee. |
(a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Indenture Collateral may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Indenture Collateral, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such interest to the Indenture Collateral, or any part hereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 6.11 hereof and no notice to the Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.08 hereof. No appointment of a co-trustee or a separate trustee shall relieve the Trustee of its duties and obligations hereunder.
(b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Indenture Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating
59
to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.
| Section 6.11 | Eligibility; Disqualification. |
The Trustee hereunder shall at all times (i) be a national banking association or banking corporation or trust company organized and doing business under the laws of any state or the United States, (ii) be authorized under such laws to exercise corporate trust powers, (iii) have a combined capital and surplus of at least $50,000,000, (iv) have unsecured and unguaranteed long-term debt obligations rated at least “BBB (high)” (or its equivalent) or better by DBRS Morningstar, S&P and Moody’s, in each case to the extent that such rating agency has rated such Trustee, and (v) be subject to supervision or examination by federal or state authority. If such banking association publishes reports of condition at least annually, pursuant to Applicable Law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.11 its combined capital and surplus shall be deemed to be as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.11, the Trustee shall give prompt notice to the Issuer (who shall promptly forward the same to the Rating Agency), the Trust Depositor, the Servicer and the Noteholders that it has so ceased to be eligible to be the Trustee.
| Section 6.12 | Representations, Warranties and Covenants of the Trustee. |
As of the Closing Date, the Trustee hereby makes the following representations, warranties and covenants on which the Issuer, the Trust Depositor, the Servicer and the Noteholders shall rely:
(a) The Trustee is a national banking association and trust company duly organized and validly existing under the laws of the United States.
(b) The Trustee satisfies the criteria specified in Section 6.11 hereof.
(c) The Trustee has full power, authority and legal right to execute, deliver and perform this Indenture and the other Transaction Documents to which it is a party and has taken all necessary action to authorize the execution, deliver and performance by it of this Indenture and the other Transaction Documents to which it is a party.
(d) The execution, delivery and performance by the Trustee of this Indenture and the other Transaction Documents to which it is a party shall not (i) violate any provision of any law or any order, writ, judgment or decree of any court, arbitrator or governmental authority applicable to it or any of its assets, (ii) violate any provision of the corporate charter or by-laws of the Trustee or (iii) violate any provision of, or constitute, with or without notice or lapse of time, a default
60
under, or result in the creation or imposition of any Lien on any properties included in the Indenture Collateral pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or Lien could reasonably be expected to materially and adversely affect the Trustee’s performance or ability to perform its duties as Trustee under this Indenture and the other Transaction Documents to which it is a party or the transactions contemplated in this Indenture and the other Transaction Documents to which it is a party.
(e) The execution, delivery and performance by the Trustee of this Indenture and the other Transaction Documents to which it is a party shall not require the authorization, consent or approval of, the giving of notice to, the filing or registration with or the taking of any other action in respect of any governmental authority or agency regulating the banking and corporate trust activities of the Trustee.
(f) This Indenture and the other Transaction Documents to which it is a party have been duly executed and delivered by the Trustee and constitute the legal, valid and binding agreements of the Trustee enforceable in accordance with their respective terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or the application of equitable principles in any proceeding, whether at law or in equity. The Trustee hereby agrees and covenants that it will not, at any time in the future, deny that this Indenture and the other Transaction Documents to which it is a party constitute its legal, valid and binding agreements.
(g) The Trustee shall not take any action, or fail to take any action, if such action or failure to take action will materially interfere with the enforcement of any rights of the Noteholders under this Indenture or the other Transaction Documents.
(h) The Trustee is not affiliated, as that term is defined in Rule 405 under the Securities Act, with the Issuer.
| Section 6.13 | Directions to Trustee. |
The Trustee is hereby directed and authorized:
(i) to accept a collateral assignment of the Loans, and hold the assets of the Indenture Collateral as security for the Noteholders;
(ii) to authenticate and deliver the Notes substantially in the forms prescribed by Exhibit A hereto in accordance with the terms of this Indenture;
(iii) to execute and deliver the Transaction Documents to which it is a party; and
(iv) to take all other actions as shall be required to be taken by it by the terms of this Indenture and the other Transaction Documents to which it is party.
For avoidance of doubt, in entering into and performing hereunder or under the Transaction Documents to which it is a party, the Trustee or its Affiliate acting in the capacity of Securities
61
Intermediary, Paying Agent, Note Registrar or Certificate Registrar shall be subject to the protections, rights, indemnities and immunities afforded it under Article VI of this Indenture.
| Section 6.14 | Conflicts. |
If a Default occurs and is continuing and the Trustee is deemed to have a “conflicting interest” (as defined in the TIA) as a result of acting as trustee for the Notes, the Issuer, at its expense, shall appoint a successor Trustee for the affected Notes so that there will be a separate Trustee for such affected Notes. No such event shall alter the voting rights of the Noteholders under this Indenture or under any of the other Transaction Documents.
ARTICLE VII
NOTEHOLDERS’ LISTS AND REPORTS
| Section 7.01 | Issuer To Furnish Trustee Names and Addresses of Noteholders. |
The Issuer will furnish or cause to be furnished to the Trustee (a) within five (5) days after each Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Notes as of such Record Date and (b) at such other times as the Trustee may reasonably request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten (10) days prior to the time such list is furnished; provided that so long as the Trustee is the Note Registrar, no such list shall be required to be furnished.
| Section 7.02 | Preservation of Information; Communications to Noteholders. |
(a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Trustee as provided in Section 7.01 hereof and the names and addresses of Holders of Notes received by the Trustee in its capacity as Note Registrar. The Trustee may destroy any list furnished to it as provided in such Section 7.01 hereof upon receipt of a new list so furnished.
(b) The Trustee shall furnish or make available electronically to the Noteholders and the Backup Servicer promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates and financial statements of the Issuer or of the Servicer furnished to the Trustee under the Transaction Documents, subject to any confidentiality requirements or limitations of such documents.
| Section 7.03 | Fiscal Year. |
Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year. The Issuer shall notify the Trustee of any change in its fiscal year.
ARTICLE VIII
TRANSACTION ACCOUNTS, DISBURSEMENTS AND RELEASES
| Section 8.01 | Collection of Money. |
62
Except as otherwise expressly provided herein or in the Sale and Servicing Agreement, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Trustee pursuant to this Indenture. The Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture or in the Sale and Servicing Agreement, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Indenture Collateral, the Trustee (at the direction of the Servicer pursuant to the Sale and Servicing Agreement) may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V hereof.
| Section 8.02 | Transaction Accounts. |
(a) On or prior to the Closing Date, the Securities Intermediary on behalf of the Issuer shall establish and maintain, (i) in the name of the Trustee, for the benefit of the Noteholders, the Collection Account, the Distribution Account, the Reserve Account and the Investment Account and (ii) the Lockbox Account as a non-interest bearing, segregated account at the Lockbox Bank and in the name of the Issuer, on behalf of the Trustee for the benefit of the Noteholders, in each case, as provided in Sections 7.01, 7.02, 7.03 and 7.04 of the Sale and Servicing Agreement.
(b) All funds required to be deposited into the Collection Account with respect to the preceding Collection Period will be deposited into the Collection Account as provided in Section 7.03 of the Sale and Servicing Agreement. On or before the last day of each Collection Period or such other date as determined by the Trustee pursuant to Section 7.06(c) of the Sale and Servicing Agreement, the Collections with respect to the preceding Collection Period on deposit in the Collection Account will be transferred from the Collection Account to the Distribution Account as provided in Section 7.06 of the Sale and Servicing Agreement. On or before the Business Day immediately preceding each Payment Date, all other amounts then on deposit in the Collection Account (including, without limitation, any amounts deposited into the Collection Account from the Reserve Account pursuant to Section 7.02 of the Sale and Servicing Agreement) will be deposited into the Distribution Account and will remain uninvested while deposited in the Distribution Account. The Securities Intermediary shall invest any funds in the Reserve Account as provided in the Sale and Servicing Agreement. Funds will be deposited into the Reserve Account as provided in Section 7.06 of the Sale and Servicing Agreement. Each of the Transaction Accounts shall be under the control of the Trustee for the benefit of the Trustee and the Noteholders in accordance with Section 8.06 hereof.
(c) On each Payment Date or such other date as determined by the Trustee pursuant to Section 5.04(b) hereof, the Paying Agent shall distribute all amounts on deposit in the Distribution Account to Noteholders in respect of Notes and any other parties specified in the Priority of Payments, and to the Trustee, as paying agent under the Trust Agreement, for distribution to the Holders of the Trust Certificates in accordance with the Priority of Payments.
(d) All moneys deposited from time to time in the Distribution Account and the Reserve Account pursuant to the Sale and Servicing Agreement and all deposits therein pursuant to this Indenture are for the benefit of the Securityholders and all investments made with such
63
moneys including all income or other gain from such investments are for the benefit of the Securityholders as provided by the Sale and Servicing Agreement.
(e) The Required Redemption Amount described in Section 10.01 hereof shall be deposited into the Distribution Account.
| Section 8.03 | Officer’s Certificate. |
Except for releases or conveyances required or permitted by the Sale and Servicing Agreement and the other Transaction Documents, the Trustee shall receive at least two Business Days’ notice when requested by the Issuer to take any action pursuant to Section 8.05(a) hereof, accompanied by copies of any instruments to be executed, and the Trustee shall also require, as a condition to such action, an Officer’s Certificate, in form and substance reasonably satisfactory to the Trustee, stating the effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Notes or the rights of the Noteholders in contravention of the provisions of this Indenture.
| Section 8.04 | Termination Upon Distribution to Noteholders. |
Subject to Section 4.06, this Indenture and the respective obligations and responsibilities of the Issuer and the Trustee created hereby shall terminate upon the distribution to the Noteholders and the Trustee of all amounts required to be distributed to such parties pursuant to the applicable provisions of this Indenture and the Sale and Servicing Agreement.
| Section 8.05 | Release of Indenture Collateral. |
(a) Subject to the payment of its fees and reasonable expenses, the Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the Lien of this Indenture, or convey the Trustee’s interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture, the Sale and Servicing Agreement and the other Transaction Documents. No party relying upon an instrument executed by the Trustee as provided in Article IV hereof shall be bound to ascertain the Trustee’s authority, inquire into the satisfaction of any conditions precedent, or see to the application of any moneys. The Trustee shall not release any Loan from the Lien of this Indenture in connection with a sale of such Loan to an Affiliate of the Servicer or the Issuer without first receiving an Officer’s Certificate of the Servicer in the form of Exhibit F to the Sale and Servicing Agreement. The Trustee shall make copies of any such Officer’s Certificate available to any Noteholder upon written request of such Noteholder, subject to Section 11.01 hereof.
(b) The Trustee shall, at such time as (i) there are no Notes Outstanding and (ii) all sums due the Trustee pursuant to this Indenture have been paid, release any remaining portion of the Indenture Collateral that secured the Notes from the Lien of this Indenture. The Trustee shall release property from the Lien of this Indenture pursuant to this Section 8.05(b) only upon receipt of a request from the Issuer accompanied by an Officer’s Certificate and an Opinion of Counsel stating that all conditions precedent to such release have been satisfied.
| Section 8.06 | The Securities Intermediary. |
64
(a) There shall at all times be one or more securities intermediaries appointed for purposes of this Indenture (the “Securities Intermediary”). U.S. Bank N.A. is hereby appointed as the initial Securities Intermediary hereunder, and U.S. Bank N.A. accepts such appointment.
(b) The Securities Intermediary shall be, and U.S. Bank N.A. as initial Securities Intermediary hereby represents and warrants that it is as of the date hereof and shall be, for so long as it is the Securities Intermediary hereunder, a corporation or national banking association that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity hereunder. The Securities Intermediary shall, and U.S. Bank N.A. as initial Securities Intermediary does, agree with the parties hereto that each Transaction Account shall be an account to which financial assets may be credited and undertake to treat the Trustee as entitled to exercise the rights that comprise such financial assets. The Securities Intermediary shall, and U.S. Bank N.A. as initial Securities Intermediary does, agree with the parties hereto that each item of property credited to each Transaction Account shall be treated as a financial asset. The Securities Intermediary shall, and U.S. Bank N.A. as initial Securities Intermediary does, agree with the parties hereto that the securities intermediary’s jurisdiction of the Securities Intermediary with respect to the Collateral shall be the State of New York. The Securities Intermediary shall, and U.S. Bank N.A. as initial Securities Intermediary does, represent and covenant that it is not and will not be (as long as it is the Securities Intermediary hereunder) a party to any agreement that is inconsistent with the provisions of this Indenture. The Securities Intermediary shall, and U.S. Bank N.A. as initial Securities Intermediary does, covenant that it will not take any action inconsistent with the provisions of this Indenture applicable to it. The Securities Intermediary shall, and U.S. Bank N.A. as initial Securities Intermediary does, agree that any item of property credited to any Transaction Account shall not be subject to any security interest, Lien, encumbrance or right of setoff in favor of the Securities Intermediary or anyone claiming through the Securities Intermediary (other than the Trustee).
(c) It is the intent of the Trustee and the Issuer that each Transaction Account (other than the Lockbox Account) shall be a securities account of the Trustee and not an account of the Issuer. Nonetheless, the Securities Intermediary shall agree to comply with entitlement orders originated by the Trustee without further consent by the Issuer or any other person or entity, and U.S. Bank N.A. as initial Securities Intermediary agrees that, for so long as it is the Securities Intermediary hereunder, it will comply with entitlement orders originated by the Trustee without further consent by the Issuer or any other person or entity. The Securities Intermediary shall covenant that it will not agree with any person or entity other than the Trustee that it will comply with entitlement orders originated by any person or entity other than the Trustee, and U.S. Bank N.A. as initial Securities Intermediary hereby covenants that, for so long as it is the Securities Intermediary hereunder, it will not agree with any person or entity other than the Trustee that it will comply with entitlement orders originated by any person or entity other than the Trustee.
(d) Nothing herein shall imply or impose upon the Securities Intermediary any duties or obligations other than those expressly set forth herein and those applicable to a securities intermediary under the UCC and the United States Regulations (and the Securities Intermediary shall be entitled to all of the protections available to a securities intermediary under the UCC and the United States Regulations). Without limiting the foregoing, nothing herein shall imply or impose upon the Securities Intermediary any duties of a fiduciary nature.
65
(e) The Securities Intermediary may at any time resign by notice to the Trustee and may at any time be removed by notice from the Trustee; provided that it shall be the responsibility of the Servicer to appoint a successor Securities Intermediary and to cause the Transaction Accounts to be established and maintained with such successor Securities Intermediary in accordance with the terms hereof; and the responsibilities and duties of the retiring Securities Intermediary hereunder shall remain in effect until all of the Collateral credited to the Transaction Accounts held by such retiring Securities Intermediary have been transferred to such successor. Any Person into which the Securities Intermediary may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, consolidation or conversion to which the Securities Intermediary shall be a party, shall be the successor of the Securities Intermediary hereunder, without the execution or filing of any further act on the part of the parties hereto or such Securities Intermediary or such successor Person.
ARTICLE IX
SUPPLEMENTAL INDENTURES
| Section 9.01 | Supplemental Indentures Without Consent of Noteholders. |
(a) Without the consent of the Holders of any Notes but with prior written notice to all Noteholders, the Rating Agency and the Servicer, the Issuer and the Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into a supplemental indenture, in form reasonably satisfactory to the Trustee, for any of the following purposes; provided that the Issuer shall only enter into a supplemental indenture in compliance with Section 4.01(d) of the Trust Agreement and Section 9.06 hereof:
(i) to correct or amplify the description of any property at any time subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the Lien of this Indenture, or to subject to the Lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes;
(iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee;
(v) to cure any ambiguity or manifest error, to correct or supplement any provision in this Indenture or in any supplemental indenture that may be defective or inconsistent with any other provision herein or in any supplemental indenture or to make any modification that is of a formal, minor or technical nature;
(vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions
66
of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI;
(vii) to add to the conditions, limitations and restrictions on the authorized amount, terms and purposes of the issuance, authentication and delivery of Notes, as herein set forth, additional conditions, limitations and restrictions thereafter to be observed;
(viii) to modify the restrictions on and procedures for resales and other transfers of the Notes to reflect any changes in Applicable Law or regulations (or the interpretation thereof);
(ix) to enable the Issuer or the Trustee to rely upon any exemption from registration under the Securities Act or the 1940 Act or to remove restrictions on resale or transfer to the extent required under Applicable Law or otherwise make any changes necessary to comply with changes to U.S. securities laws or the regulations implementing such laws;
(x) to evidence or implement any change to this Indenture required by regulations or guidelines enacted to support the USA PATRIOT Act;
(xi) to comply with any changes to the Code or the regulations implementing the Code;
(xii) to reflect any written change to the guidelines, methodology or standards established by any Rating Agency that are applicable to this Indenture;
(xiii) to conform this Indenture to the Offering Memorandum;
(xiv) to amend, modify or otherwise accommodate changes to this Indenture relating to compliance with Rule 17g-5 under the Exchange Act or to permit compliance with the Dodd-Frank Act (including, without limitation, the Volcker Rule), as applicable to the Issuer, the Trustee, the Servicer or the Notes, or to comply with any rule or regulation enacted by regulatory agencies of the U.S. federal government after the Closing Date that are applicable to the Notes or the transactions contemplated by this Indenture; and
(xv) to add any new provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture that will not be inconsistent with any existing provisions of this Indenture or such supplemental indenture; provided that such action shall not, as evidenced by an Officer’s Certificate delivered to the Trustee, adversely affect in any material respect the interests of the Noteholders.
The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained.
(b) The Issuer and the Trustee, when authorized by an Issuer Order, may also, without the consent of any of the Holders of the Notes but with prior notice to the Rating Agency (to be delivered by the Issuer) and the Servicer, enter into a supplemental indenture for the purpose of
67
adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Noteholders under this Indenture (other than as included in clauses (i) through (xiv) of Section 9.01(a) above); provided that such action shall not, as evidenced by an Officer’s Certificate of the Servicer, materially adversely affect the interest of any Noteholder.
(c) The Issuer and the Trustee may only enter into one or more supplemental indentures pursuant to this Section 9.01, with or without the consent of the Noteholders, to the extent that an opinion from Dechert LLP or of tax counsel of nationally recognized standing in the United States experienced in such matters is delivered to the Issuer (with a copy to the Trustee) to the effect that such supplemental indenture will not (i) cause the Issuer to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (ii) cause the Notes to be deemed to have been sold or exchanged under Section 1001 of the Code or (iii) cause any Notes that were characterized as indebtedness at the time of issuance to be characterized as other than indebtedness.
(d) In the event that any proposed supplemental indenture pursuant to this Section 9.01, in the reasonable judgment of the Servicer (on behalf of the Issuer) does not satisfy the proviso in Section 9.01(b), such amendment may become effective with the consent of each Holder of a Note. It shall not be necessary for the Noteholders to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.
| Section 9.02 | Supplemental Indentures With Consent of Noteholders. |
(a) Except as provided in Section 9.01 or Section 9.02(b) hereof, the Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agency and the Servicer and with the consent of the Majority Noteholders, enter into a supplemental indenture for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided that the Issuer shall only enter into a supplemental indenture in compliance with Section 4.01(c) of the Trust Agreement and Section 9.06 hereof; provided further that (i) such action shall not, as evidenced by an Officer’s Certificate of the Servicer, materially adversely affect the interest of any Noteholder.
(b) No supplemental indenture shall, without the consent of the Holder of each Note adversely affected thereby:
(i) change the Legal Final Payment Date for the Notes or the due date of any installment of principal of or interest on any Note or reduce the principal amount of any Note, the Interest Rate specified for any Note or the Redemption Price with respect to any Note, change the provisions of the Indenture relating to the application of Collections on, or the proceeds of the sale of, the assets of the Issuer to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or any interest on any Note is payable;
(ii) impair the right to institute suit for the enforcement of any provisions of the Indenture regarding payment on the Notes;
68
(iii) reduce the percentage of the Aggregate Outstanding Principal Balance, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with any provision of this Indenture or defaults hereunder and their consequences provided for in this Indenture;
(iv) modify or alter the provisions hereunder regarding the voting of Notes held by the Issuer, the Seller, the Servicer, an affiliate of any of them or any obligor on the Notes;
(v) reduce the percentage of the Aggregate Outstanding Principal Balance, the consent of the Holders of which is required to direct the Trustee to sell or liquidate the Indenture Collateral pursuant to Section 5.04 hereof;
(vi) modify any provision hereunder specifying a percentage of the Outstanding Principal Balance of the Notes necessary to amend the Indenture, the Trust Agreement or the Sale and Servicing Agreement except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the other Transaction Documents cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby;
(vii) modify any provisions hereunder in such a manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date or to affect the rights of the Noteholders to the benefit of any provisions for the mandatory redemption of the Notes contained in the Indenture; or
(viii) permit the creation of any Lien ranking prior to or on a parity with the Lien of this Indenture with respect to any part of the Indenture Collateral or, except as otherwise permitted or contemplated herein, terminate the Lien of this Indenture on any property at any time subject hereto or deprive any Noteholder of the security provided by the Lien of this Indenture.
(c) Prior to entering into any supplemental indenture pursuant to this Section 9.02, the Issuer and Trustee shall obtain the written consent of each Holder of a Note. It shall not be necessary for any Act of Noteholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
(d) The Issuer and the Trustee may only enter into one or more supplemental indentures pursuant to this Section 9.02, to the extent that an opinion from Dechert LLP or an opinion of tax counsel of nationally recognized standing in the United States experienced in such matters is delivered to the Issuer (with a copy to the Trustee) to the effect that such supplemental indenture will not (i) cause the Issuer to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (ii) cause the Notes to be deemed to have been sold or exchanged under Section 1001 of the Code or (iii) cause any Notes that were characterized as indebtedness at the time of issuance to be characterized as other than indebtedness.
69
(e) Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to this Section 9.02, the Trustee shall forward to the Servicer (who shall promptly forward the same to the Rating Agency) and make available electronically to the Holders of the Notes to which such amendment or supplemental indenture relates a copy of such supplemental indenture or a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Trustee to mail or make available such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
| Section 9.03 | Execution of Supplemental Indentures. |
In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02 hereof, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and all conditions precedent have been satisfied, which Opinion of Counsel may rely upon an Officer’s Certificate of the Servicer with respect to the effect of any such supplemental indenture on the economic interests of the Holders of the Notes. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise. Any supplemental indenture affecting the rights, duties, immunities, indemnities or liabilities of the Backup Servicer, Custodian, Lockbox Bank, Owner Trustee, or Securities Intermediary shall require such party’s prior written consent. The Issuer shall provide copies of each supplemental indenture to the Rating Agency.
| Section 9.04 | Effect of Supplemental Indenture. |
Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Trustee, the Issuer and the Noteholders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
| Section 9.05 | Reference in Notes to Supplemental Indentures. |
Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes.
| Section 9.06 | Consent of the Servicer and Owner Trustee. |
70
The Issuer agrees that it will not permit to become effective any supplemental indenture that adversely affects the obligations or rights of the Servicer or the Owner Trustee or the amount or priority or payment of any fees or other amounts payable to the Servicer or the Owner Trustee unless, in each such case, the Servicer or the Owner Trustee has been given prior written notice of such supplemental indenture and has consented thereto in writing.
ARTICLE X
OPTIONAL REDEMPTION
| Section 10.01 | Optional Redemption. |
(a) The Issuer may effect an Optional Redemption, in whole but not in part, on any Optional Redemption Date (which Optional Redemption Date shall be a Business Day to be specified in a notice to be delivered to the Issuer and the Trustee at least 15 Business Days prior to the Optional Redemption Date) by deposit in full of the Required Redemption Amount in the Distribution Account for distribution to the Holders of the Notes and other persons entitled thereto by 10:00 a.m. (New York City time) on the business day preceding the Optional Redemption Date whereupon all such Notes shall be due and payable on the Optional Redemption Date, in connection with which the Issuer shall comply with the provisions of this Section 10.01 and Section 10.02 hereof. The Servicer or the Issuer will furnish notice of such election to the Trustee, the Owner Trustee and the Rating Agency no later than ten (10) Business Days prior to the proposed Optional Redemption Date and, provided that sufficient funds are received by the Servicer, the Servicer on behalf of the Issuer shall deposit in the Distribution Account an amount equal to the Required Redemption Amount on the Optional Redemption Date.
(b) The Notes to be redeemed shall, following delivery of a notice of an Optional Redemption complying with Section 10.02 hereof, on the Optional Redemption Date become due and payable at the Redemption Price with respect thereto and (unless such Redemption Price is not paid) no interest shall accrue on such Redemption Price for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price. On the Optional Redemption Date, upon deposit in full by the Servicer in the Distribution Account of an amount equal to the Required Redemption Amount, the Indenture Collateral (other than the Transaction Accounts) shall cease to constitute assets of the Issuer and the Noteholders shall have no interest therein nor any claim to any distributions in respect of the Indenture Collateral (other than the Transaction Accounts).
(c) The portion of the Redemption Price constituting payment of principal of the Notes shall be distributed to Noteholders in accordance with Section 7.06(b) of the Sale and Servicing Agreement and all other amounts included in the Redemption Price shall be distributed in accordance with Section 7.06(a) of the Sale and Servicing Agreement.
(d) The Issuer or the Servicer may withdraw any notice of Optional Redemption or specify a new Optional Redemption Date at any time prior to the proposed Optional Redemption Date set forth in any prior notice of Optional Redemption by providing written notice to the Trustee, the Owner Trustee and the Rating Agency by no later than the second Business Day preceding such Optional Redemption Date. A withdrawal of such notice of Optional Redemption or the inability of the Issuer to complete an Optional Redemption of the Notes will not constitute an Event of Default.
71
| Section 10.02 | Form of Redemption Notice by Trustee. |
(a) Notice of redemption under Section 10.01 hereof shall be given by the Trustee by facsimile, electronic mail, overnight courier or by first-class mail, postage prepaid, transmitted or mailed prior to the applicable Optional Redemption Date, to each Holder of Notes, as of the close of business on the Record Date preceding the applicable Optional Redemption Date at such Holder’s address appearing in the Note Register.
(b) All notices of redemption shall state:
(i) the Optional Redemption Date;
(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such Optional Redemption Date, is not applicable and that, unless waived by the Issuer, payments shall be made only upon presentation and surrender of such Notes and the place where such Notes are to be surrendered for payment of the Redemption Price with respect thereto (which shall be the office or agency of the Issuer to be maintained as provided in Section 3.02 hereof); and
(iv) that interest on the Notes shall cease to accrue on the Optional Redemption Date, as applicable; provided that the Redemption, as applicable, occurs on such date.
(c) Notice of redemption of the Notes shall be given by the Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note.
ARTICLE XI
MISCELLANEOUS
| Section 11.01 | Confidentiality. |
(a) No Receiving Party shall use any Confidential Information except to the extent necessary to evaluate and monitor the transaction represented by the Transaction Documents. Each Receiving Party agrees (and each Holder of a Note is deemed to agree) that it will make available Confidential Information only to (i) its officers, employees, directors, Affiliates, advisors, agents, shareholders, members, partners and managers who have a need to know such Confidential Information for the purpose of evaluating or monitoring the transaction, (ii) its accounting firms and legal counsel (and their respective officers, employees, directors, agents, Affiliates and advisors) and (iii) any prospective purchasers of a Note, in each case who have need to know such Confidential Information for the purposes of modeling, surveilling, evaluating or monitoring the transaction (collectively, “representatives”), and that all persons to whom such Confidential Information is made available will be made aware of the confidential nature of such Confidential Information and agree to be bound by the restrictions imposed by this Indenture on the use of Confidential Information. This Section 11.01 shall constitute a confidentiality agreement for purposes of Regulation FD under the Exchange Act.
72
(b) No Receiving Party or any of its representatives will disclose any Confidential Information to any third party, except as may be required by law or required or requested by any regulatory agency with authority over such Receiving Party or expressly permitted pursuant to this Section 11.01.
(c) Each Receiving Party acknowledges and agrees that the breach or threatened breach of this Section 11.01 by it may result in irreparable and continuing damage to the Disclosing Parties, for which there will be no adequate remedy at law. Accordingly, each Receiving Party agrees that the Disclosing Parties shall be entitled, without prejudice, to all the rights and remedies available to each of them, including an injunction or specific performance to prevent breaches or threatened breaches of any of the provisions of this Indenture by an action instituted in a court having proper jurisdiction.
(d) The confidentiality provisions of this Section 11.01 shall remain in effect for a period commencing on the date hereof and end two years after the Legal Final Payment Date.
(e) If any Receiving Party or any of its Affiliates or representatives is required by legal process to disclose any of the Confidential Information, such Receiving Party shall provide the Disclosing Parties with notice of such requirement so that the Disclosing Parties may seek a protective order or other appropriate remedy or waive compliance with the provisions of this Indenture. If a protective order or other remedy is not obtained, such Receiving Party, its Affiliates and representatives may, without violating this Indenture, disclose that portion of the Confidential Information that such party is legally required to disclose.
| Section 11.02 | Form of Documents Delivered to Trustee. |
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of a Responsible Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which the certificate or opinion is based are erroneous. Any such certificate of a Responsible Officer of the Issuer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Issuer, the Trust Depositor, or any other appropriate Person, stating that the information with respect to such factual matters is in the possession of the Servicer, the Issuer, the Trust Depositor or such other Person, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
73
Whenever in this Indenture, in connection with any application or certificate or report to the Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer’s compliance with any term hereof, it is intended that the truth and accuracy in all material respects, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Trustee’s right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI.
| Section 11.03 | Acts of Noteholders. |
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 11.03.
(b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register; provided that in all cases except where otherwise required by law or regulation, any act by a Holder of a Note may be taken by the Beneficial Owner of such Note.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.
| Section 11.04 | Notices, etc., to Trustee and Others. |
(a) Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture shall be in writing (which writing may be delivered by electronic mail) and if such request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders is to be made upon, given or furnished to or filed with:
(i) the Trustee by any Noteholder or by the Issuer, shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to and mailed, by certified mail, return receipt requested, hand delivered, sent by overnight courier service
74
guaranteeing next day delivery or by telecopy in legible form, to the Trustee addressed to it at U.S. Bank Trust Company, National Association, Global Corporate Trust Services, 190 S. LaSalle Street, 7th Floor, Chicago, IL 60603, Attention: Horizon Funding Trust 2022-1, Tel: 312-332-7453, Fax: 312-332-7996, Email: melissa.rosal@usbank.com and jose.galarza@usbank.com or at any other address previously furnished in writing to the Issuer, the Noteholder, or the Servicer by the Trustee;
(ii) the Issuer by the Trustee or by any Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to the Issuer addressed to it at c/o Wilmington Trust, National Association, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration, Facsimile No.: (302) 636‑4140, or at any other address previously furnished in writing to the Trustee by the Issuer;
(iii) the Servicer by the Issuer or the Trustee shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to the Servicer addressed to Horizon Technology Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032 Attention: Legal Department, Re: Horizon Funding Trust 2022-1
Telephone: (860) 676-8654, Facsimile No.: 860-676-8655; with a copy to Horizon Technology Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032, Attention: Legal Department, Re: Horizon Funding Trust 2022-1, Telephone: (860) 676-8654, Facsimile No.: 860-676-8655; or at any other address previously furnished in writing to the Issuer or the Trustee by the Servicer;
(iv) the Owner Trustee by the Issuer or the Trustee shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to the Owner Trustee addressed to Wilmington Trust, National Association, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890; Attention: Corporate Trust Administration; Facsimile No.: (302) 636‑4140; and
(v) the Securities Intermediary by the Issuer or the Trustee shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to the Securities Intermediary addressed to it at U.S. Bank National Association, Global Corporate Trust Services, 190 S. LaSalle Street, 7th Floor, Chicago, IL 60603, Attention: Horizon Funding Trust 2022-1, Tel: 312-332-7453, Fax: 312-332-7996, Email: melissa.rosal@usbank.com and jose.galarza@usbank.com.
(b) Notices required to be given to the Rating Agency shall be in writing, personally delivered or mailed by certified mail, return receipt requested, to DBRS Morningstar, at the following address: DBRS, Inc., d/b/a DBRS Morningstar, 140 Broadway, 43rd Floor New York, NY 10005, Attention ABS Surveillance, Email: ABS_Surveillance@morningstar.com; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties; provided that no notice shall be required to be given to DBRS Morningstar unless the Outstanding Notes is rated by DBRS Morningstar.
75
(c) Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in Person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender’s facsimile machine); (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; and (iv) if sent by email, on the date of transmission; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day.
| Section 11.05 | Notices to Noteholders; Waiver. |
Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, by nationally recognized overnight courier or by first-class, postage prepaid to each Noteholder affected by such event, at his address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, if any, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until definitive Notes shall have been issued to such Noteholders, the Trustee shall give all such notices and communications specified herein to be given to Noteholders of the book entry Notes to DTC, and shall have no obligation to such holders of the book entry Notes.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agency, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute an Event of Default.
| Section 11.06 | Alternate Payment and Notice Provisions. |
Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment,
76
or notice by the Trustee or any other party acting as paying agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Trustee a copy of each such agreement and the Trustee, at the expense of the Issuer, will cause payments to be made and notices to be given in accordance with such agreements.
| Section 11.07 | Effect of Headings. |
The Article and Section headings herein are for convenience only and shall not affect the construction hereof.
| Section 11.08 | Successors and Assigns. |
All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Trustee in this Indenture shall bind its successors, co-trustees and agents.
| Section 11.09 | Severability. |
In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
| Section 11.10 | Benefits of Indenture. |
Except as otherwise specifically provided herein, nothing in this Indenture or in the Notes shall give to any Person, other than the parties hereto and their successors hereunder, the Owner Trustee and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Indenture Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture.
| Section 11.11 | Legal Holidays. |
In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.
| Section 11.12 | GOVERNING LAW; JURY WAIVER. |
(a) THIS INDENTURE, EACH SUPPLEMENT AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
77
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS INDENTURE. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this Section 11.12(b).
| Section 11.13 | Counterparts; Electronic Signatures. |
This Indenture may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart may be transmitted by facsimile or other electronic transmission (including electronic PDF, Docusign, Adobe “fill and sign” or such other provider as specified in writing by the applicable party) and upon receipt shall be deemed (and shall have the same authority and binding effect as) an original executed counterparty. The words “execution,” “execute,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Indenture, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. Notwithstanding the foregoing, if any party shall request manually signed counterpart signatures to this Indenture, each of the other parties hereby agrees to provide such manually signed signature pages as soon as commercially reasonable. In case any provision in or obligation under this Indenture shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Indenture contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings other than any fee letter contemplated hereby.
| Section 11.14 | Issuer Obligation. |
No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under this Indenture or any of the other Transaction Documents or any certificate or other writing delivered in connection herewith or therewith, against (i) the Trustee or the Owner Trustee in its individual capacity, (ii) any of the Trust Depositor, the Seller, the Servicer and any holder of a Trust Certificate or (iii) any partner, owner, beneficiary, stockholder, manager, member, officer, director, employee or agent of any of the parties identified in clauses (i) and (ii) or of any successor or assign of any such Person. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee and the Trust Company shall be subject to, and entitled to the benefits of, the terms and provisions of the Trust Agreement.
| Section 11.15 | No Petition; Limited Recourse. |
78
(a) The Trustee and the Securities Intermediary, by entering into this Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree that they will not prior to the date which is one year and one day or, if longer, the preference period then in effect after payment in full of the Notes rated by any Rating Agency, institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the other Transaction Documents.
(b) Notwithstanding any other provisions of the Notes, this Indenture or any other Transaction Document, the obligations of the Issuer under the Notes and this Indenture and any other Transaction Document are limited recourse obligations of the Issuer payable solely from the Indenture Collateral in accordance with the Priority of Payments and, following realization of the Indenture Collateral and distribution in accordance with the Priority of Payments, any claims of the Noteholders, and any other parties to any Transaction Document shall be extinguished. No recourse shall be had against any officer, administrator, member, director, employee, security holder, holder of a beneficial interest in or incorporator of the Issuer or their respective successors or assigns for the payment of any amounts payable under the Notes, this Indenture or any other Transaction Document. It is understood that the foregoing provisions of this Section 11.15(b) shall not (i) prevent recourse to the Loan Assets or the Indenture Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Loan Assets or the Indenture Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Notes or secured by this Indenture or payable under any other Transaction Document until such Loan Assets and such Indenture Collateral have been realized and distributed in accordance with the Priority of Payments and the other applicable provisions of the Transaction Documents, whereupon any such outstanding indebtedness or obligation shall be extinguished. Except as otherwise provided hereunder or agreed in writing among the parties hereto, the Issuer shall retain the authority to institute, participate and join in any plan of reorganization, readjustment, merger or consolidation with respect to the issuer of any securities held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as individuals generally have and enjoy with respect to their own assets and investment, including power to vote upon any securities.
| Section 11.16 | Inspection; Confidentiality. |
The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Trustee, upon reasonable notice and during the Issuer’s normal business hours, and in a manner that does not unreasonably interfere with the Issuer’s normal operations, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer’s affairs, finances and accounts with the Issuer’s officers, employees, and Independent certified public accountants, all at such reasonable times, in such reasonable manner, and as often as may be reasonably requested. The Trustee shall and shall cause its representatives, its legal counsel and its auditors to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder and under Applicable Law.
79
| Section 11.17 | Limitation of Liability. |
It is expressly understood and agreed by the parties hereto that (i) this Indenture is executed and delivered by Wilmington Trust, National Association, not individually or personally but solely as Owner Trustee on behalf of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by Wilmington Trust, National Association but is made and intended for the purpose of binding only the Issuer, (iii) nothing herein contained shall be construed as creating any liability on Wilmington Trust, National Association individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties to this Indenture and by any person claiming by, through or under them and (iv) under no circumstances shall Wilmington Trust, National Association be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaking by the Issuer under this Indenture or any related documents.
| Section 11.18 | Disclaimer. |
Each Noteholder by accepting a Note and by accepting the benefits of this Indenture acknowledges and agrees that this Indenture and the Notes represent a debt obligation of the Issuer only and do not represent an interest in any assets (other than the Indenture Collateral) of the Trust Depositor or any holder of a Trust Certificate (including by virtue of any deficiency claim in respect of obligations not paid or otherwise satisfied from the Trust Assets and proceeds thereof).
| Section 11.19 | Disclaimer. |
It is expressly acknowledged, agreed and consented to that U.S. Bank will be acting in the capacities of the Backup Servicer, Lockbox Bank, the Securities Intermediary, and the Custodian and that U.S. Bank Trust Co. will be acting as Trustee and Backup Servicer. U.S. Bank and U.S. Bank Trust Co. may, in such multiple capacities, discharge its separate functions fully, without hindrance or regard to conflict of interest principles, duty of loyalty principles or other breach of fiduciary duties to the extent that any such conflict or breach arises from the performance by U.S. Bank or U.S. Bank Trust Co. of express duties set forth in this Agreement or any other Transaction Document in any of such capacities, all of which defenses, claims or assertions are hereby expressly waived by the parties hereto and any other person having rights pursuant hereto or thereto.
80
IN WITNESS WHEREOF, the Issuer, the Trustee and the Securities Intermediary have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written.
HORIZON FUNDING TRUST 2022-1
By: Wilmington Trust, National Association, not in its individual capacity, but solely as Owner Trustee on behalf of the Issuer
By: /s/
Name:
Title:
IN WITNESS WHEREOF, the Issuer, the Trustee and the Securities Intermediary have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written.
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
not in its individual capacity, except as expressly set forth herein, but solely as the Trustee
By: /s/
Name:
Title:
IN WITNESS WHEREOF, the Issuer, the Trustee and the Securities Intermediary have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written.
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity, except as expressly set forth herein, but solely as the Securities Intermediary
By: /s/
Name:
Title:
EXHIBIT 10.3
SALE AND CONTRIBUTION AGREEMENT
by and between
HORIZON TECHNOLOGY FINANCE CORPORATION,
as the Seller
and
HORIZON FUNDING 2022-1 LLC,
as the Trust Depositor
Dated as of November 9, 2022
Horizon Funding Trust 2022-1
Asset-Backed Notes
TABLE OF CONTENTS
|
Page |
||
|
ARTICLE I |
DEFINITIONS |
1 |
| Section 1.01 | Definitions. | 1 |
| Section 1.02 | Other Terms. | 4 |
| Section 1.03 | Computation of Time Periods. | 4 |
| Section 1.04 | Interpretation. | 4 |
| Section 1.05 | References. | 5 |
| Section 1.06 | Calculations. | 5 |
| ARTICLE II | TRANSFERS | 5 |
| Section 2.01 | Transfer of Loan Assets. | 5 |
| Section 2.02 | Conditions to Transfer of Loan Assets to the Trust Depositor. | 7 |
| Section 2.03 | Acceptance by the Trust Depositor. | 8 |
| Section 2.04 | Conveyance of Substitute Loans. | 8 |
| Section 2.05 | Conveyance of Additional Loans. | 9 |
| Section 2.06 | Release of Excluded Amounts. | 10 |
| Section 2.07 | Delivery of Documents in the Loan File. | 11 |
| ARTICLE III | REPRESENTATIONS AND WARRANTIES | 11 |
| Section 3.01 | Representations and Warranties Regarding the Seller. | 11 |
| Section 3.02 | Representations and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate. | 15 |
| Section 3.03 | [Reserved]. | 16 |
| Section 3.04 | Representations and Warranties Regarding the Required Loan Documents. | 16 |
| Section 3.05 | [Reserved]. | 16 |
| Section 3.06 | Representations and Warranties Regarding the Trust Depositor. | 16 |
| ARTICLE IV | PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS | 18 |
| Section 4.01 | Custody of Loans. | 18 |
| Section 4.02 | Filing. | 18 |
| Section 4.03 | Changes in Name, Organizational Structure or Location. | 18 |
| Section 4.04 | Costs and Expenses. | 19 |
| Section 4.05 | Sale Treatment. | 19 |
| Section 4.06 | Separateness from Trust Depositor. | 19 |
| ARTICLE V | COVENANTS OF THE ORIGINATOR | 19 |
| Section 5.01 | Corporate Existence. | 19 |
| Section 5.02 | [Reserved]. | 19 |
| Section 5.03 | Security Interests. | 19 |
| Section 5.04 | Compliance with Law. | 20 |
| Section 5.05 | Liability of Seller. | 20 |
| Section 5.07 | Reserved. | 20 |
| Section 5.08 | Merger or Consolidation of Seller. | 20 |
| Section 5.09 | Delivery of Collections. | 20 |
| Section 5.10 | Underlying Custodial Agreements. | 21 |
| ARTICLE VI | REMEDIES UPON MISREPRESENTATION | 21 |
| Section 6.01 | Repurchases of, or Substitution for, Loans for Breach of Representations and Warranties. | 21 |
| Section 6.02 | Reassignment of Repurchased, Substituted Loans or Acquired Additional Loans. | 22 |
| ARTICLE VII | INDEMNIFICATION BY THE ORIGINATOR | 22 |
| Section 7.01 | Indemnification. | 22 |
| Section 7.02 | Liabilities to Obligors. | 23 |
| Section 7.03 | Operation of Indemnities. | 23 |
| ARTICLE VIII | MISCELLANEOUS | 23 |
| Section 8.01 | Amendment. | 23 |
| Section 8.02 | Governing Law. | 24 |
| Section 8.03 | Notices. | 24 |
| Section 8.04 | Severability of Provisions. | 27 |
| Section 8.05 | Third Party Beneficiaries. | 27 |
| Section 8.06 | Counterparts; Electronic Signatures. | 27 |
| Section 8.07 | Headings. | 28 |
| Section 8.08 | No Bankruptcy Petition; Disclaimer. | 28 |
| Section 8.09 | Jurisdiction. | 28 |
| Section 8.10 | Prohibited Transactions with Respect to the Issuer. | 28 |
| Section 8.11 | No Partnership. | 29 |
| Section 8.12 | Successors and Assigns. | 29 |
| Section 8.13 | Duration of Agreement. | 29 |
| Section 8.14 | Limited Recourse. | 29 |
| Exhibit A | Form of Assignment | A-1 |
| Schedule A | Initial Loans | S-A-1 |
SALE AND CONTRIBUTION AGREEMENT
THIS SALE AND CONTRIBUTION AGREEMENT, dated as of November 9, 2022 (as amended, modified, restated, waived, or supplemented from time to time, this “Agreement”), is between HORIZON TECHNOLOGY FINANCE CORPORATION, a Delaware corporation (together with its successors and assigns, “Horizon,” and in its capacity as originator, together with its successors and assigns, the “Seller”) and HORIZON FUNDING 2022-1 LLC, a Delaware limited liability company (together with its successors and assigns, the “Trust Depositor”).
WHEREAS, in the regular course of its business, the Seller originates and/or otherwise acquires Loans;
WHEREAS, the Trust Depositor desires to acquire the Initial Loans (as defined herein) from the Seller and may acquire from time to time thereafter certain Substitute Loans or, during the Investment Period, certain Additional Loans;
WHEREAS, it is a condition to the Trust Depositor’s acquisition of the Initial Loans and any Substitute Loans or any Additional Loans from the Seller that the Seller make certain representations, warranties and covenants regarding the such Loans for the benefit of the Trust Depositor as well as Horizon Funding Trust 2022-1, a Delaware statutory trust (the “Issuer”);
WHEREAS, on the Closing Date, the Trust Depositor will purchase and accept assignment of the Initial Loan Assets and certain other assets from the Seller as provided herein; and
WHEREAS, on the Closing Date, the Trust Depositor will sell, convey and assign all its right, title and interest in the Initial Loan Assets, to the Issuer, pursuant to a Sale and Servicing Agreement, dated as of the date hereof (as amended, modified, restated, replaced, waived, substituted, supplemented or extended from time to time, the “Sale and Servicing Agreement”), among Horizon, as the seller and the servicer, the Trust Depositor, as the trust depositor, the Issuer, as the issuer, and U.S. Bank Trust Company, National Association, as the trustee, and U.S. Bank National Association as custodian, securities intermediary and backup servicer.
NOW, THEREFORE, based upon the above recitals, the mutual promises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
|
Section 1.01 |
Definitions. |
Capitalized terms used but not defined in this Agreement shall have the meanings attributed to such terms in the Sale and Servicing Agreement, unless the context otherwise requires. In addition, as used herein, the following defined terms, unless the context otherwise requires, shall have the following meanings:
“Additional Loan Assets” means any assets acquired by the Trust Depositor during the Investment Period in connection with the conveyance of one or more Additional Loans pursuant to Section 2.05, which assets shall include the Seller’s right, title and interest in the following:
(a) the Additional Loans listed in the related Subsequent List of Loans, and all monies due, to become due or paid in respect thereof accruing on and after the Cutoff Date and all Insurance Proceeds, Liquidation Proceeds and other recoveries thereon, in each case as they arise after the applicable Additional Loan Cutoff Date;
(b) all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Loans;
(c) all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character (including any warrants executed by an Obligor with respect to such Loans) from time to time supporting or securing payment of such Loans;
(d) the Transaction Accounts, together with all cash and investments in each of the foregoing;
(e) all collections and records (including Computer Records) with respect to the foregoing;
(f) all documents relating to the applicable Loan Files and other Records relating to such Loans and Related Property; and
(g) all income, payments, proceeds and other benefits of any and all of the foregoing, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the foregoing, but excluding any Excluded Amounts with respect thereto.
“Indemnified Party” shall have the meaning provided in Section 7.01.
“Ineligible Loan” shall have the meaning provided in Section 6.01.
“Initial Loan Assets” means any assets acquired by the Trust Depositor from the Seller on the Closing Date pursuant to Section 2.01, which assets shall include the Seller’s right, title and interest in the following:
(a) the Initial Loans, and all monies due, to become due or paid in respect thereof accruing on and after the Cutoff Date and all Insurance Proceeds, Liquidation Proceeds and other recoveries thereon, in each case as they arise after the Cutoff Date;
(b) all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Initial Loans;
2
(c) all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character (including any warrants executed by an Obligor with respect to such Loans) from time to time supporting or securing payment of such Initial Loans;
(d) the Transaction Accounts, together with all cash and investments in each of the foregoing;
(e) all collections and records (including Computer Records) with respect to the foregoing;
(f) all documents relating to the applicable Loan Files and other Records relating to the Initial Loans and Related Property; and
(g) all income, payments, proceeds and other benefits of any and all of the foregoing, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the foregoing, but excluding any Excluded Amounts with respect thereto.
“Initial Loans” means those Loans listed on Schedule A hereto, which Loans shall be conveyed to the Trust Depositor on the Closing Date.
“Loan” means an individual loan to an Obligor, or any portion thereof, made by the Seller.
“Loan Assets” means, collectively and as applicable, the Initial Loan Assets, the Substitute Loan Assets and the Additional Loan Assets.
“Related Property” means, with respect to any Loan and as applicable in the context used, the interest of the Obligor, or the interest of the Seller, Trust Depositor or Issuer under the Loan, in any property or other assets designated and pledged or mortgaged as collateral to secure repayment of such Loan (including, without limitation, a pledge of the stock, membership or other ownership interests in the Obligor, but excluding any warrant interest in an Obligor held by any Affiliate of the Seller other than the Issuer or Trust Depositor), including all Proceeds from any sale or other disposition of such property or other assets.
“Substitute Loan Assets” means any assets acquired by the Trust Depositor in connection with a substitution of one or more Substitute Loans pursuant to Section 2.04, which assets shall include the Seller’s right, title and interest in the following:
(a) the Substitute Loans listed in the related Subsequent List of Loans and all monies due, to become due or paid in respect thereof accruing on and after the applicable Substitute Loan Cutoff Date and all Insurance Proceeds, Liquidation Proceeds and other recoveries thereon, in each case as they arise after the applicable Substitute Loan Cutoff Date;
(b) all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Loans;
3
(c) all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character (including any warrants executed by an Obligor with respect to such Loans) from time to time supporting or securing payment of such Loans;
(d) all collections and records (including Computer Records) with respect to the foregoing;
(e) all documents relating to the applicable Loan Files and other Records relating to such Substitute Loans and Related Property; and
(f) all income, payments, proceeds and other benefits of any and all of the foregoing, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the foregoing, but excluding any Excluded Amounts with respect thereto.
|
Section 1.02 |
Other Terms |
All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States. The symbol “$” shall mean the lawful currency of the United States of America. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9.
|
Section 1.03 |
Computation of Time Periods. |
Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding,” and the word “within” means “from and excluding a specified date and to and including a later specified date.”
|
Section 1.04 |
Interpretation. |
In this Agreement, unless a contrary intention appears:
(a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by the Transaction Documents;
(c) reference to any gender includes each other gender;
(d) reference to day or days without further qualification means calendar days;
(e) unless otherwise stated, reference to any time means New York, New York time;
4
(f) references to “writing” include printing, typing, lithography, electronic or other means of reproducing words in a visible form;
(g) reference to any agreement (including any Transaction Document), document or instrument means such agreement, document or instrument as amended, modified, supplemented, replaced, restated, waived or extended and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Transaction Documents, and reference to any promissory note includes any promissory note that is an extension or renewal thereof or a substitute or replacement therefor; and
(h) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any Section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such Section or other provision.
|
Section 1.05 |
References. |
All section references (including references to the Preamble), unless otherwise indicated, shall be to Sections (and the Preamble) in this Agreement.
|
Section 1.06 |
Calculations. |
Except as otherwise provided herein, all interest rate and basis point calculations hereunder will be made on the basis of a 360 day year and the actual days elapsed in the relevant period and will be carried out to at least three decimal places.
ARTICLE II
TRANSFERS
|
Section 2.01 |
Transfer of Loan Assets. |
(a) The Seller shall sell, assign and convey Loan Assets to the Trust Depositor pursuant to the terms and provisions hereof.
(b) Subject to and upon the terms and conditions set forth herein, the Seller hereby sells, transfers, assigns, sets over and otherwise conveys to the Trust Depositor, for a purchase price equal to the fair market value of the Loan Assets, a portion of which shall be paid by wire transfer of immediately available funds and the remainder of which will be deemed to be a contribution to the capital of the Trust Depositor, all the right, title and interest of the Seller in and to the Initial Loan Assets.
To the extent the purchase price paid to the Seller for any Loan Assets is less than the fair market value of such Loan Assets, the difference between such fair market value and such purchase price shall be deemed to be a capital contribution made by the Seller to the Trust Depositor on the Closing Date in the case of the Initial Loans, as of the related Substitute Loan Cutoff Date in the
5
case of any Substitute Loans and as of the related Additional Loan Cutoff Date in the case of any Additional Loans. For all purposes of this Agreement, any contributed Loan Assets shall be treated the same as Loan Assets sold for cash, including without limitation for purposes of Section 6.01.
(c) The Seller and the Trust Depositor each acknowledge with respect to itself that the representations and warranties of the Seller in Sections 3.01, 3.02 and 3.04 hereof and of the Trust Depositor in the Sale and Servicing Agreement and in Section 3.06 hereof will run to and be for the benefit of the Issuer and the Trustees, and the Issuer and the Trustees may enforce directly (without joinder of the Trust Depositor when enforcing against the Seller) the repurchase obligations of the Seller or the Trust Depositor, as applicable, with respect to breaches of such representations and warranties that materially and adversely affect the interest of any Noteholder as set forth in the Sale and Servicing Agreement or in this Agreement.
(d) The sale, transfer, assignment, set-over and conveyance of the Loan Assets by the Seller to the Trust Depositor pursuant to this Agreement does not constitute and is not intended to result in a creation or an assumption by the Trust Depositor of any obligation of the Seller in connection with the Loan Assets, or any agreement or instrument relating thereto, including, without limitation, (i) any obligation to any Obligor relating to any unfunded commitment from the Seller, (ii) any taxes, fees, or other charges imposed by any Governmental Authority and (iii) any insurance premiums that remain owing with respect to any Loan Asset at the time such Loan Asset is sold hereunder. Without limiting the foregoing, (x) the Trust Depositor does not assume any obligation to purchase any additional notes or loans under agreements governing the Loan Assets and (y) the sale, transfer, assignment, set-over and conveyance of the Loan Assets by the Seller to the Trust Depositor pursuant to this Agreement does not constitute and is not intended to result in a creation or an assumption by the Trust Depositor or the Issuer of any obligation of the Seller as agent or collateral agent under any Co-Lender Loan.
(e) The Seller and the Trust Depositor intend and agree that (i) the transfer of the Loan Assets by the Seller to the Trust Depositor hereunder and the transfer of the Loan Assets by the Trust Depositor to the Issuer under the Sale and Servicing Agreement are each intended to be an absolute sale, conveyance and transfer of ownership of the applicable Loan Assets, as the case may be, rather than the mere granting of a security interest to secure a borrowing and (ii) such Loan Assets shall not be part of the Seller’s or the Trust Depositor’s estate in the event of a filing of a bankruptcy petition or other action by or against such Person under any Insolvency Law. In the event, however, that notwithstanding such intent and agreement, such transfers are deemed to be a mere granting of a security interest to secure indebtedness, the Seller shall be deemed to have granted (and as of the Closing Date hereby grants) to the Trust Depositor and the Trust Depositor shall be deemed to have granted and assigned (and as of the Closing Date hereby grants and assigns) to the Issuer, as the case may be, a security interest in all right, title and interest of the Seller or of the Trust Depositor, respectively, in such Loan Assets, and this Agreement shall constitute a security agreement under Applicable Law, securing the repayment of the purchase price paid hereunder, the obligations and/or interests represented by the Securities, in the order and priorities, and subject to the other terms and conditions of, this Agreement, the Sale and Servicing Agreement, the Indenture and the Trust Agreement, together with such other obligations or interests as may arise hereunder and thereunder in favor of the parties hereto and thereto.
6
(f) If any such transfer of the Loan Assets is deemed to be the mere granting of a security interest to secure a borrowing, the Trust Depositor may, to secure the Trust Depositor’s own borrowing under the Sale and Servicing Agreement (to the extent that the transfer of the Loan Assets thereunder is deemed to be a mere granting of a security interest to secure a borrowing), repledge and reassign (i) all or a portion of the Loan Assets pledged to the Trust Depositor by the Seller and with respect to which the Trust Depositor has not released its security interest at the time of such pledge and assignment, and (ii) all proceeds thereof. Such repledge and reassignment may be made by the Trust Depositor with or without a repledge and reassignment by the Trust Depositor of its rights under any agreement with the Seller, and without further notice to or acknowledgment from the Seller. The Seller waives, to the extent permitted by Applicable Law, all claims, causes of action and remedies, whether legal or equitable (including any right of setoff), against the Trust Depositor or any assignee of the Trust Depositor relating to such action by the Trust Depositor in connection with the transactions contemplated by this Agreement and the other Transaction Documents.
(g) The Seller and the Trust Depositor acknowledge and agree that, solely for administrative convenience, any assignment agreement required to be executed and delivered in connection with the transfer of an Initial Loan, Substitute Loan or Additional Loan in accordance with the terms of related Underlying Loan Agreements may reflect that the Seller or any Affiliate thereof is assigning such Initial Loan, Substitute Loan or Additional Loan directly to the Issuer. Nothing in such assignment agreements shall be deemed to impair the transfers of the Loan Assets by the Seller to the Trust Depositor in accordance with the terms of this Agreement and the subsequent transfer of the Loan Assets by the Trust Depositor to the Issuer in accordance with the terms of the Sale and Servicing Agreement.
|
Section 2.02 |
Conditions to Transfer of Loan Assets to the Trust Depositor. |
On or before the Closing Date, the Seller shall deliver or cause to be delivered to the Trust Depositor, the Owner Trustee and the Trustee each of the documents, certificates and other items as follows:
(a) a certificate of an officer of the Seller substantially in the form of Exhibit C to the Sale and Servicing Agreement;
(b) copies of resolutions of Horizon, as Seller and Servicer, approving the execution, delivery and performance of this Agreement, the Transaction Documents to which it is a party and the transactions contemplated hereunder and thereunder, certified in each case by the Secretary or an Assistant Secretary of Horizon;
(c) officially certified evidence dated within 30 days of the Closing Date of due formation and good standing of the Seller under the laws of the State of Delaware;
(d) the initial List of Loans, certified by an officer of the Seller, together with an Assignment with respect to the Initial Loan Assets substantially in the form of Exhibit A, attached hereto (along with the delivery of any instruments and Loan Files as required under Section 2.07);
(e) a letter from RSM US LLP, a Delaware limited liability partnership or another nationally recognized accounting firm, addressed to the Seller and the Trust Depositor (with a copy
7
to the Trustee and the Rating Agency), stating that such firm has reviewed a sample of the Initial Loans and performed specific procedures for such sample with respect to certain loan terms and that identifies those Initial Loans that do not conform;
(f) a UCC-1 financing statement, naming the Seller as seller or debtor, naming the Trust Depositor as assignor, buyer or secured party, and naming the Issuer as assignee of assignor, buyer or secured party and describing the Loan Assets being sold by it to the Trust Depositor as collateral, which financing statement shall be filed on the Closing Date with the office of the Secretary of State of the State of Delaware and in such other locations as the Trust Depositor shall have required;
(g) an Officer’s Certificate listing the Servicer’s Servicing Officers;
(h) a fully executed copy of each of the Transaction Documents.
On or before the Closing Date, the Servicer shall have notified and directed the Obligor with respect to each such Loan to make all payments on the Loans, whether by check, wire transfer or otherwise, directly to the Lockbox Account.
|
Section 2.03 |
Acceptance by the Trust Depositor. |
On the Closing Date, if the conditions set forth in Section 2.02 have been satisfied, the Seller shall deliver, on behalf of the Trust Depositor, to the Trustee (or the Custodian on its behalf) the Initial Loan Assets and such delivery to and acceptance by the Trustee shall be deemed to be delivery to and acceptance by the Trust Depositor.
|
Section 2.04 |
Conveyance of Substitute Loans. |
(a) With respect to any Substitute Loans to be conveyed to the Issuer by the Trust Depositor pursuant to Section 2.04 and Section 2.06 of the Sale and Servicing Agreement, the Seller hereby sells, transfers, assigns, sets over and otherwise conveys to the Trust Depositor, without recourse other than as expressly provided herein (and the Trust Depositor shall purchase through cash payment and/or by exchange of one or more related Loans released by the Issuer to the Trust Depositor on the related Substitute Loan Cutoff Date), all the right, title and interest of the Seller in and to such Substitute Loans and Related Property.
The purchase price may equal, exceed or be less than the fair market value of such Substitute Loan as of the related Substitute Loan Cutoff Date, plus in each case accrued interest thereon. To the extent the purchase price of any Substitute Loan is less than the fair market value thereof, the Seller will be deemed to have made a capital contribution with respect to such excess to the Trust Depositor. In the event that the Trust Depositor is no longer the sole Certificateholder, the Trust Depositor will obtain the approval of an independent pricing advisor prior to receiving any Substitute Loan from the Seller.
(b) [Reserved].
(c) The Seller shall transfer to the Trust Depositor hereunder the applicable Substitute Loans and Related Property only upon the satisfaction of each of the following conditions on or
8
prior to the related Substitute Loan Cutoff Date (in addition to the conditions set forth in Section 2.10 of the Sale and Servicing Agreement):
(i) the Seller shall have provided the Trust Depositor with timely notice of such substitution, which shall be delivered no later than 11:00 a.m. on the related Substitute Loan Cutoff Date;
(ii) there shall have occurred, with respect to each such Substitute Loan, a corresponding Substitution Event with respect to one or more Loans then in the Collateral;
(iii) the Seller and the Trust Depositor shall have delivered to the Issuer and the Trustee a Subsequent List of Loans listing the applicable Substitute Loans and an assignment agreement as required by the related Underlying Loan Agreement indicating that the Issuer is the holder of the related Substitute Loan;
(iv) the Seller shall have deposited or caused to be deposited in the Collection Account all Collections received by it with respect to the applicable Substitute Loans on and after the related Substitute Loan Cutoff Date;
(v) each of the representations and warranties made by the Seller pursuant to Sections 3.02 and 3.04 applicable to the Substitute Loans shall be true and correct as of the related Substitute Loan Cutoff Date; and
(vi) the Seller shall bear all incidental transaction costs incurred in connection with a substitution effected pursuant to this Agreement and shall, at its own expense, on or prior to the related Substitute Loan Cutoff Date, indicate in its Computer Records that ownership of each Substitute Loan identified on the Subsequent List of Loans has been sold by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer pursuant to the Transfer and Servicing Agreements.
(d) The Servicer, the Issuer and the Trustee (at the request of the Servicer) shall execute and deliver such instruments, consents or other documents and perform all acts reasonably requested by the Servicer in order to effect the transfer and release of any of the Issuer’s interests in the Loans that are being substituted.
(e) The Seller represents and warrants that each Substitute Loan is a Qualified Substitute Loan as of the date such Substitute Loan is transferred to the Trust Depositor hereunder.
|
Section 2.05 |
Conveyance of Additional Loans. |
(a) With respect to any Additional Loans to be conveyed to the Issuer by the Trust Depositor pursuant to Section 2.07 of the Sale and Servicing Agreement, the Seller hereby sells, transfers, assigns, sets over and otherwise conveys to the Trust Depositor, without recourse other than as expressly provided herein, all the right, title and interest of the Seller in and to such Additional Loans and Related Property.
9
(b) During the Investment Period, the Seller shall transfer to the Trust Depositor hereunder the applicable Additional Loans and Related Property only upon the satisfaction of each of the following conditions on or prior to the related Additional Loan Cutoff Date:
(i) such Additional Loan is a Qualified Additional Loan as of the date such Additional Loan is transferred to the Issuer;
(ii) the Seller shall have provided the Trust Depositor with timely notice of such acquisition, which shall be delivered no later than the related Additional Loan Cutoff Date;
(iii) the Seller and the Trust Depositor shall have delivered to the Issuer and the Trustee a Subsequent List of Loans listing the applicable Additional Loans and an assignment agreement as required by the related Underlying Loan Agreement indicating that the Issuer is the holder of the related Additional Loan;
(iv) the Seller shall have deposited or caused to be deposited in the Collection Account all Collections received by it with respect to the applicable Additional Loans on and after the related Additional Loan Cutoff Date;
(v) each of the representations and warranties made by the Seller pursuant to Sections 3.02 and 3.04 applicable to the Additional Loans shall be true and correct as of the related Additional Loan Cutoff Date; and
(vi) the Seller shall bear all incidental transaction costs incurred in connection with and acquisition of Additional Loans effected pursuant to this Agreement and shall, at its own expense, on or prior to the related Additional Loan Cutoff Date, indicate in its Computer Records that ownership of each Additional Loan identified on the Subsequent List of Loans has been sold by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer pursuant to the Transfer and Servicing Agreements.
(c) The Servicer, the Issuer and the Trustee (at the request of the Servicer) shall execute and deliver such instruments, consents or other documents and perform all acts reasonably requested by the Servicer in order to effect the transfer and release of any of the Issuer’s interests in the Loans that are being conveyed.
(d) The Seller represents and warrants that each Additional Loan is a Qualified Additional Loan as of the date such Additional Loan is transferred to the Trust Depositor hereunder.
|
Section 2.06 |
Release of Excluded Amounts. |
The parties acknowledge and agree that the Trust Depositor has no interest in the Excluded Amounts. Immediately upon the release to the Trust Depositor by the Issuer of any Excluded Amounts, the Trust Depositor hereby irrevocably agrees to release to the Seller such Excluded Amounts, which release shall be automatic and shall require no further act by the Trust Depositor; provided that the Trust Depositor shall execute and deliver such instruments of release and assignment or other documents, or otherwise confirm the foregoing release of such Excluded Amounts, as may be reasonably requested by the Seller in writing.
10
|
Section 2.07 |
Delivery of Documents in the Loan File. |
(a) Subject to the delivery requirements set forth in Section 2.07(b), the Seller shall deliver, on behalf of the Trust Depositor, possession of all the Loan Files to the Trustee (or the Custodian on its behalf) on behalf of and for the account of the Noteholders. The Seller shall also identify on the List of Loans (including any deemed amendment thereof associated with any Substitute Loans or Additional Loans), whether by attached schedule or marking or other effective identifying designation, all Loans that are evidenced by such instruments.
(b) With respect to each Loan in the Collateral, (i) at least two (2) Business Days before the Closing Date in the case of the Initial Loans, two (2) Business Days before the related Substitute Loan Cutoff Date in the case of any Substitute Loans and two (2) Business Days before the related Additional Loan Cutoff Date in the case of any Additional Loans (or, in each case, such lesser time as shall be acceptable to the Trustee (or the Custodian on its behalf)), the Seller or the Trust Depositor will deliver or cause to be delivered to the Trustee (or to the Custodian on its behalf), to the extent not previously delivered, each of the documents in the Loan File with respect to such Loan; and (ii) on or before the Closing Date in the case of the Initial Loans, on or before the related Substitute Loan Cutoff Date in the case of any Substitute Loans and on or before the related Additional Loan Cutoff Date in the case of any Additional Loans (or, in each case, such lesser time as shall be acceptable to the Trustee (or the Custodian on its behalf)), the Seller or the Trust Depositor will deliver or cause to be delivered to the Trustee (or to the Custodian on its behalf), to the extent not previously delivered, each of the documents in the Loan File that is not part of the Required Loan Documents with respect to such Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Seller makes, and upon each conveyance of Substitute Loans or Additional Loans, as applicable, is deemed to make, the representations and warranties in Section 3.01 through Section 3.04, on which the Trust Depositor will rely in conveying the Initial Loan Assets on the Closing Date (and any Substitute Loan Assets on the relevant Substitute Loan Cutoff Date and any Additional Loan Assets on the relevant Additional Loan Cutoff Date) to the Issuer, and on which the Issuer and the Securityholders will rely. The Seller acknowledges that such representations and warranties are being made by the Seller for the benefit of the Issuer and the Securityholders.
Such representations and warranties are given as of the execution and delivery of this Agreement and as of the Closing Date (or Substitute Loan Cutoff Date or Additional Loan Cutoff Date, as applicable), but shall survive the sale, transfer and assignment of the Loan Assets to the Trust Depositor and the sale, transfer and assignment of the Loan Assets by the Trust Depositor to the Issuer. The repurchase obligation or substitution obligation of the Seller set forth in Section 6.01 constitutes the sole remedy available for a breach of a representation or warranty of the Seller set forth in Section 3.01 through Section 3.04 of this Agreement.
|
Section 3.01 |
Representations and Warranties Regarding the Seller. |
The Seller represents and warrants that:
11
(a) Organization and Good Standing. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the power to own its assets and to transact the business in which it is currently engaged. The Seller is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would reasonably be expected to have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Seller.
(b) Authorization; Valid Sale; Binding Obligations. The Seller has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which it is a party, and to create the Trust Depositor and cause the Trust Depositor to make, execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which the Trust Depositor is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party. This Agreement shall effect a valid sale, transfer and assignment of or grant of a security interest in the Loan Assets from the Seller to the Trust Depositor, enforceable against the Seller and creditors of and purchasers from the Seller. This Agreement and the other Transaction Documents to which the Seller is a party constitute the legal, valid and binding obligation of the Seller enforceable in accordance with their respective terms, except as enforcement of such terms may be limited by applicable Insolvency Laws and general principles of equity, whether considered in a suit at law or in equity.
(c) No Consent Required. The Seller is not required to obtain the consent of any other party (other than (i) the filing of UCC financing statements and (ii) those that it has already obtained) or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority (other than those that it has already obtained) in connection with the execution, delivery, performance, validity or enforceability of this Agreement or the other Transaction Documents to which it is a party.
(d) No Violations. The execution, delivery and performance by the Seller of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, will not violate in any material respect any Applicable Law applicable to the Seller, or conflict with, result in a default under or constitute a breach of the Seller’s organizational documents or the material Contractual Obligations to which the Seller is a party or by which the Seller or any of the Seller’s properties may be bound, or result in the creation or imposition of any Lien of any kind upon any of its properties pursuant to the terms of any such material Contractual Obligations, other than as contemplated by the Transaction Documents.
(e) Litigation. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Seller threatened, against the Seller or any of its properties or with respect to this Agreement or the other Transaction Documents to which it is a party or the Securities (1) that, if adversely determined, would in the reasonable judgment of the Seller be expected to have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Seller or the transactions contemplated by this Agreement or the other Transaction Documents to which the Seller is a party
12
or (2) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Certificate or Notes.
(f) Solvency. The Seller, at the time of and after giving effect to each conveyance of Loan Assets hereunder, is Solvent on and as of the date thereof.
(g) Taxes. The Seller has filed or caused to be filed all tax returns which, to its knowledge, are required to be filed and has paid all taxes shown to be due and payable on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any amount of tax due, the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with generally accepted accounting principles have been provided on the books of the Seller); no tax Lien has been filed and, to the Seller’s knowledge, no claim is being asserted, with respect to any such tax, fee or other charge.
(h) Place of Business; No Changes. The Seller’s location (within the meaning of Article 9 of the UCC) is the State of Delaware. The Seller has not changed its name, whether by amendment of its Certificate of Incorporation, by reorganization or otherwise, within the four months preceding the Closing Date. The Seller has not changed its location within the four months preceding the Closing Date.
(i) Not an Investment Company. The Seller is not and, after giving effect to the transactions contemplated by the Transaction Documents, will not be required to be registered as an “investment company” under the 1940 Act.
(j) Sale Treatment. Other than for accounting and tax purposes, the Seller has treated the transfer of the Loan Assets to the Trust Depositor for all purposes as a sale and purchase on all of its relevant books and records and other applicable documents.
(k) Security Interest.
(i) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in favor of the Trust Depositor in all right, title and interest of the Seller in the Loan Assets, which security interest is prior to all other Liens (except for Permitted Liens), and is enforceable as such against creditors of and purchasers from the Seller;
(ii) the Loan Assets, along with the related Loan Files, constitute “general intangibles,” “instruments,” “accounts,” “investment property,” or “chattel paper,” within the meaning of the applicable UCC;
(iii) the Seller owns and has, and upon the sale and transfer thereof by the Seller to the Trust Depositor, the Trust Depositor will have good and marketable title to the Loan Assets free and clear of any Lien (other than Permitted Liens), claim or encumbrance of any Person;
(iv) the Seller has received all consents and approvals required by the terms of the Loan Assets to the sale of the Loan Assets hereunder to the Trust Depositor;
13
(v) the Seller has caused the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the security interest in the Loan Assets granted to the Trust Depositor under this Agreement to the extent perfection can be achieved by filing a financing statement;
(vi) other than the security interest granted to the Trust Depositor pursuant to this Agreement, the Seller has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Loan Assets. The Seller has not authorized the filing of and is not aware of any financing statements naming the Seller as debtor that include a description of collateral covering the Loan Assets other than any financing statement (A) relating to the security interest granted to the Trust Depositor under this Agreement, or (B) that has been terminated or for which a release or partial release has been filed. The Seller is not aware of the filing of any judgment or tax Lien filings against the Seller;
(vii) all original executed copies of each Underlying Note (if any) that constitute or evidence the Loan Assets have been delivered to the Trustee (or to the Custodian on its behalf);
(viii) the Seller has received a written acknowledgment from the Trustee (or the Custodian on its behalf) that the Trustee or the Custodian is holding any Underlying Notes that constitute or evidence any Loan Assets solely on behalf of and for the benefit of the Securityholders; and
(ix) none of the Underlying Notes that constitute or evidence any Loan Assets has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trust Depositor.
(l) Value Given. The cash payments and the corresponding increase in the Seller’s equity interest in the Trust Depositor received by the Seller in respect of the purchase price of the Loan Assets sold hereunder constitute reasonably equivalent value in consideration for the transfer to the Trust Depositor of such Loan Assets under this Agreement, such transfer was not made for or on account of an antecedent debt owed by the Seller to the Trust Depositor, and such transfer was not and is not voidable or subject to avoidance under any Insolvency Law.
(m) No Defaults. The Seller is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default would reasonably be expected to have consequences that would materially and adversely affect the condition (financial or otherwise) or operations of the Seller or its respective properties or might have consequences that would materially and adversely affect its performance hereunder.
(n) Bulk Transfer Laws. The transfer, assignment and conveyance of the Loan Assets by the Seller pursuant to this Agreement are not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction.
(o) Origination and Collection Practices. The origination and collection practices used by the Seller and any of its Affiliates with respect to each Loan have been consistent with the
14
Servicing Standard and have complied in all material respects with the Credit and Collection Policy.
(p) Lack of Intent to Hinder, Delay or Defraud. Neither the Seller nor any of its Affiliates sold, or will sell, any interest in any Loan Asset with any intent to hinder, delay or defraud any of their respective creditors.
(q) Nonconsolidation. The Seller conducts its affairs such that the Trust Depositor would not be substantively consolidated in the estate of the Seller and their respective separate existences would not be disregarded in the event of the Seller’s bankruptcy.
(r) Accuracy of Information. All written factual information heretofore furnished by the Seller for purposes of or in connection with this Agreement or the other Transaction Documents to which the Seller is a party, or any transaction contemplated hereby or thereby is, and all such written factual information hereafter furnished by the Seller to any party to the Transaction Documents will be, true and accurate in all material respects, on the date such information is stated or certified; provided that the Seller shall not be responsible for any factual information furnished to it by any third party not affiliated with it, or the Trust Depositor or the Servicer, except to the extent that a Responsible Officer of the Seller has actual knowledge that such factual information is inaccurate in any material respect.
The representations and warranties set forth in Section 3.01(k) may not be waived by any Person and shall survive the termination of this Agreement. The Seller and the Trust Depositor shall provide the Rating Agency with prompt written notice upon obtaining knowledge of any breach of the representations and warranties set out in Section 3.01(k).
|
Section 3.02 |
Representations and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate. |
The Seller represents and warrants (x) with respect to Section 3.02(a), Section 3.02(b), Section 3.02(d) and Section 3.02(e), as to each Loan as of the Closing Date, as of the related Substitute Loan Cutoff Date with respect to each Substitute Loan and as of the related Additional Loan Cutoff Date with respect to each Additional Loan and (y) with respect to Section 3.02(c), as to the Initial Loans in the aggregate as of the Closing Date, as of the related Substitute Loan Cutoff Date with respect to Substitute Loans and as of the related Additional Loan Cutoff Date with respect to Additional Loans (after giving effect to the addition of such Substitute Loans or Additional Loans to the Collateral), that:
(a) List of Loans. The information set forth in the List of Loans attached to the Sale and Servicing Agreement as Exhibit G (as the same may be amended or deemed amended in respect of a conveyance of Substitute Loans on the related Substitute Loan Cutoff Date or a conveyance of Additional Loans on the related Additional Loan Cutoff Date) is true, complete and correct.
(b) Eligible Loan. Each Initial Loan, each Substitute Loan and each Additional Loan satisfies the criteria for the definition of Eligible Loan set forth in the Sale and Servicing Agreement.
15
(c) No Liens. Each Initial Loan, each Substitute Loan and each Additional Loan is free and clear of all Liens, other than Permitted Liens, and, to the Seller’s knowledge, no offsets, defenses or counterclaims against the Seller have been asserted or threatened with respect to such Initial Loan, such Substitute Loan and such Additional Loan, respectively.
(d) Security Interest. Each Initial Loan, each Substitute Loan and each Additional Loan is secured by a perfected security interest in certain property of the related Obligor identified in the loan documentation in favor of the Seller, as registered lienholder, or the Seller has taken all necessary action with respect to each Initial Loan, each Substitute Loan and each Additional Loan to secure a perfected security interest in such property.
(e) Compliance with Law. Each Initial Loan, each Substitute Loan and each Additional Loan complies in all material respects, as of such date and as of the date on which it was originated, with applicable federal and state laws.
|
Section 3.03 |
[Reserved]. |
|
Section 3.04 |
Representations and Warranties Regarding the Required Loan Documents. |
The Seller represents and warrants on the Closing Date with respect to the Initial Loans (or as of the related Substitute Loan Cutoff Date, with respect to Substitute Loans, or as of the related Additional Loan Cutoff Date, with respect to Additional Loans), that except as otherwise provided in Section 2.07, the Required Loan Documents and each other item included in the Loan File for each Initial Loan (or Substitute Loan or Additional Loan, as applicable) are in the possession of the Trustee or the Custodian, on behalf of the Trustee.
|
Section 3.05 |
[Reserved]. |
|
Section 3.06 |
Representations and Warranties Regarding the Trust Depositor. |
By its execution of this Agreement, the Trust Depositor represents and warrants to the Seller that:
(a) Organization and Good Standing. The Trust Depositor is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware and has the power to own its assets and to transact the business in which it is currently engaged. The Trust Depositor is duly qualified to do business as and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets or condition (financial or other) of the Trust Depositor or the Issuer.
(b) Authorization; Valid Sale; Binding Obligations. The Trust Depositor has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which it is a party, and to create the Issuer and cause it to make, execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which the Issuer is a party, and the Trust Depositor has taken all necessary limited
16
liability company action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and to cause the Issuer to be created. This Agreement shall effect a valid sale, transfer and assignment of or grant of a security interest in the Loan Assets from the Seller to the Trust Depositor. This Agreement and the other Transaction Documents to which the Trust Depositor is a party constitute the legal, valid and binding obligation of the Trust Depositor enforceable in accordance with their respective terms, except as enforcement of such terms may be limited by applicable Insolvency Laws and general principles of equity, whether considered in a suit at law or in equity.
(c) No Consent Required. The Trust Depositor is not required to obtain the consent of any other party (other than those that it has already obtained) or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority (other than those that it has already obtained) in connection with the execution, delivery, performance, validity or enforceability of this Agreement or the other Transaction Documents to which it is a party.
(d) No Violations. The execution, delivery and performance by the Trust Depositor of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, will not violate in any material respect any Applicable Law applicable to the Trust Depositor, or conflict with, result in a default under or constitute a breach of the Trust Depositor’s organizational documents or any material Contractual Obligations to which the Trust Depositor is a party or by which the Trust Depositor or any of the Trust Depositor’s properties may be bound, or result in the creation or imposition of any Lien of any kind upon any of its properties pursuant to the terms of any such material Contractual Obligations, other than as contemplated by the Transaction Documents.
(e) Litigation. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Trust Depositor threatened, against the Trust Depositor or any of its properties or with respect to this Agreement, any other Transaction Documents to which it is a party or the Securities (i) that, if adversely determined, would in the reasonable judgment of the Trust Depositor be expected to have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Trust Depositor or the Issuer or the transactions contemplated by this Agreement or any other Transaction Documents to which the Trust Depositor is a party or (ii) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Securities.
(f) Solvency. The Trust Depositor, at the time of, and after giving effect to each conveyance of Loan Assets hereunder and of Combined Loan Assets under the Sale and Servicing Agreement, is Solvent.
(g) Taxes. The Trust Depositor has filed or caused to be filed all tax returns which, to its knowledge, are required to be filed and has paid all taxes shown to be due and payable on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any amount of tax due, the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with generally accepted accounting principles have been provided on the books of the Trust Depositor); no tax Lien has been filed and,
17
to the Trust Depositor’s knowledge, no claim is being asserted, with respect to any such tax, fee or other charge.
(h) Place of Business; No Changes. The Trust Depositor’s location (within the meaning of Article 9 of the UCC) is the State of Delaware. The Trust Depositor has not changed its name, whether by amendment of its certificate of formation, by reorganization or otherwise, and has not changed its location, within the four months preceding the Closing Date.
(i) Not an Investment Company. The Trust Depositor is not and, after giving effect to the transactions contemplated by the Transaction Documents, will not be required to be registered as an “investment company” within the meaning of the 1940 Act.
(j) Sale Treatment. Other than for accounting and tax purposes, the Trust Depositor has treated the transfer of Loan Assets from the Seller for all purposes as a sale and purchase on all of its relevant books and records and other applicable documents.
ARTICLE IV
PERFECTION OF TRANSFER AND
PROTECTION OF SECURITY INTERESTS
|
Section 4.01 |
Custody of Loans. |
The contents of each Loan File shall be held in the custody of the Custodian (on behalf of the Trustee) under the terms of the Sale and Servicing Agreement for the benefit of, and as agent for, the Securityholders.
|
Section 4.02 |
Filing. |
On the Closing Date, the Seller shall cause the UCC financing statement(s) referred to in Section 2.02(f) hereof to be filed. Notwithstanding the obligations of the Seller set forth in the preceding sentence, the Trust Depositor hereby authorizes the Servicer to prepare and file, at the expense of the Seller, such UCC financing statements (including but not limited to renewal, continuation or in lieu statements) and amendments or supplements thereto or other instruments as the Servicer may from time to time deem necessary or appropriate in order to perfect and maintain the security interest granted hereunder in accordance with the UCC.
|
Section 4.03 |
Changes in Name, Organizational Structure or Location. |
(a) During the term of this Agreement, the Seller shall not change its name, principal place of business, form of organization, existence, state of formation or location without first giving at least 30 days’ prior written notice to the Trust Depositor and Servicer.
(b) If any change in the Seller’s name, form of organization, existence, state of formation, location or other action would make any financing or continuation statement or notice of ownership interest or Lien relating to any Initial Loan Asset, Substitute Loan Asset or Additional Loan Asset seriously misleading within the meaning of applicable provisions of the UCC or any title statute, the Seller, or the Servicer on its behalf, no later than five (5) Business Days after the
18
effective date of such change, shall file such amendments as may be required (including, but not limited to, any filings and other acts necessary or advisable under the UCC of each relevant jurisdiction) to preserve and protect the Trust Depositor’s, the Issuer’s and the Trustee’s interests in the Initial Loan Assets, any Substitute Loan Assets and any Additional Loan Assets and the proceeds thereof.
|
Section 4.04 |
Costs and Expenses. |
The initial Servicer will be obligated to pay all reasonable costs and disbursements in connection with the perfection and the maintenance of perfection, as against all third parties, of the Trust Depositor’s and Issuer’s right, title and interest in and to the Initial Loan Assets, the Substitute Loan Assets and the Additional Loan Assets (including, without limitation, the security interests in the Related Property related thereto and the security interests provided for in the Indenture); provided that to the extent permitted by the Underlying Loan Agreements, the Servicer may seek reimbursement for such costs and disbursements from the related Obligors.
|
Section 4.05 |
Sale Treatment. |
Other than for accounting and tax purposes, the Seller shall treat the transfer of Loan Assets made hereunder for all purposes as a sale and purchase on all of its relevant books and records.
|
Section 4.06 |
Separateness from Trust Depositor. |
The Seller agrees to take or refrain from taking or engaging in with respect to the Trust Depositor, each of the actions or activities specified in the “substantive consolidation” opinion of Dechert LLP (including any certificates of the Seller delivered in connection therewith) delivered on the Closing Date, upon which the conclusions therein are based.
ARTICLE V
COVENANTS OF THE ORIGINATOR
|
Section 5.01 |
Corporate Existence. |
During the term of this Agreement, the Seller will keep in full force and effect its existence, rights and franchises as a corporation under the laws of the jurisdiction of its formation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Transaction Documents and each other instrument or agreement necessary or appropriate for the proper administration of this Agreement and the transactions contemplated hereby. In addition, all transactions and dealings between the Seller and the Trust Depositor will be conducted on an arm’s-length basis.
|
Section 5.02 |
[Reserved]. |
|
Section 5.03 |
Security Interests. |
19
The Seller will not sell, pledge, assign or transfer to any Person other than the Trust Depositor, or grant, create, incur, assume or suffer to exist any Lien on any Loan in the Collateral or its interest in any Related Property, other than the Lien granted to the Trust Depositor, whether now existing or hereafter transferred to the Trust Depositor, or as otherwise expressly contemplated by this Agreement. The Seller will promptly notify the Trust Depositor upon obtaining knowledge of the existence of any Lien on any Loan in the Collateral or its interest in any Related Property; and the Seller shall defend the right, title and interest of the Trust Depositor in, to and under the Loans in the Collateral and the Trust Depositor’s interest in any Related Property, against all claims of third parties; provided that nothing in this Section 5.03 shall prevent or be deemed to prohibit the Seller from suffering to exist Permitted Liens upon any of the Loans in the Collateral or its interest in any Related Property.
|
Section 5.04 |
Compliance with Law. |
The Seller hereby agrees to comply in all material respects with all Applicable Law applicable to the Seller except where the failure to do so would not reasonably be expected to have a material adverse effect on the Securityholders.
|
Section 5.05 |
Liability of Seller. |
The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Seller under this Agreement.
|
Section 5.06 |
Limitation on Liability of Seller and Others. |
The Seller and any director, officer, employee or agent of the Seller may rely in good faith on any document of any kind, prima facie properly executed and submitted by the appropriate Person respecting any matters arising hereunder. The Seller shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability.
|
Section 5.07 |
Reserved. |
|
Section 5.08 |
Merger or Consolidation of Seller. |
Any Person into which the Seller may be merged or consolidated, or any Person resulting from such merger, conversion or consolidation to which the Seller is a party, or any Person succeeding to substantially all of the business or substantially all of the lending business of the Seller shall be the successor to the Seller hereunder, without execution or filing of any paper or any further act on the part of any of the parties hereto, notwithstanding anything herein to the contrary; provided that if the Seller is the Servicer at the time of such merger, conversion, consolidation or sale, such transaction meets the requirements set forth in Section 5.13 of the Sale and Servicing Agreement.
|
Section 5.09 |
Delivery of Collections. |
The Seller agrees to deposit into the Collection Account promptly (but in no event later than two (2) Business Days after receipt) all Collections received by the Seller in respect of any
20
Initial Loan, Substitute Loan or Additional Loan, for application in accordance with Section 7.06 of the Sale and Servicing Agreement.
|
Section 5.10 |
Underlying Custodial Agreements. |
The Seller agrees to fully cooperate with the Trust Depositor, the Issuer and the Trustee, and from and after the occurrence and during the continuance of an Event of Default or Servicer Default to take such actions as may be requested in the reasonable discretion of the Trustee, under any Underlying Loan Agreements. The Seller further agrees to fully cooperate with the Trust Depositor, the Issuer and the Trustee, and from and after the occurrence and during the continuance of an Event of Default or Servicer Default to take such actions as may be requested in the sole and absolute discretion of the Trustee to cause to be defended, enforced, preserved and protected the rights and privileges of the Trust Depositor, the Issuer, the Trustee and the Secured Parties under or with respect to the Underlying Loan Agreements and any underlying loan documents or other collateral held by the underlying custodians.
ARTICLE VI
REMEDIES UPON MISREPRESENTATION
|
Section 6.01 |
Repurchases of, or Substitution for, Loans for Breach of Representations and Warranties. |
Upon a discovery by a Responsible Officer of the Trust Depositor, a Responsible Officer of the Servicer, a Responsible Officer of the Backup Servicer or any subservicer, a Responsible Officer of the Owner Trustee or a Responsible Officer of the Trustee of a breach of a representation or warranty as set forth in Section 3.01, Section 3.02 or Section 3.04 or as made or deemed made relating to any Initial Loan, Substitute Loan or Additional Loan, as applicable, that materially and adversely affects the interests of the Securityholders (each such Loan with respect to which such breach exists, an “Ineligible Loan”), the party discovering such breach or failure shall give prompt written notice to the other parties to this Agreement; provided that neither the Owner Trustee nor the Trustee shall have a duty or obligation to inquire or to investigate the breach of any of such representations or warranties; provided that neither the Owner Trustee, the Trustee nor the Backup Servicer shall have a duty or obligation (i) to discover or make an attempt to discover, inquire about or investigate the breach of any of such representations or warranties or (ii) to determine if such breach materially and adversely affects the interests of the Securityholders. Within 30 days of the earlier of (x) its discovery or (y) its receipt of notice of any breach of a representation or warranty, the Seller shall (a) promptly cure such breach in all material respects, (b) repurchase each such Ineligible Loan by depositing in the Lockbox Account, for further credit to the Collection Account, within such 30 day period, an amount equal to the Transfer Deposit Amount for such Ineligible Loan, or (c) remove such Initial Loan, Substitute Loan or Additional Loan from the Collateral, deposit the Transfer Deposit Amount with respect to such Loan into the Lockbox Account, for further credit to the Collection Account, and, not later than the date a repurchase of such affected Loan would be required hereunder, effect a substitution for such affected Loan with a Substitute Loan in accordance with the substitution requirements set forth in Section 2.04.
21
|
Section 6.02 |
Reassignment of Repurchased, Substituted Loans or Acquired Additional Loans. |
Upon receipt by the Trustee for deposit in the Collection Account of the amounts described in Section 6.01 (or upon the Substitute Loan Cutoff Date related to a Substitute Loan described in Section 6.01 or upon the Additional Loan Cutoff Date related to an Additional Loan described in Section 6.01), and upon receipt of an Officer’s Certificate of the Servicer in the form attached as Exhibit F to the Sale and Servicing Agreement, the Trustee and the Issuer shall assign to the Trust Depositor and the Trust Depositor shall assign to the Seller all of the Trustee’s and the Issuer’s (or Trust Depositor’s, as applicable) right, title and interest in the Initial Loans, Substitute Loans or Additional Loans being repurchased or substituted for the related Loan Assets without recourse, representation or warranty. Such reassigned Initial Loan, Substitute Loan or Additional Loan shall no longer thereafter be included in any calculations of Outstanding Loan Balances or otherwise be deemed a part of the Collateral.
ARTICLE VII
INDEMNIFICATION BY THE ORIGINATOR
|
Section 7.01 |
Indemnification. |
The Seller agrees to indemnify, defend and hold harmless the Trust Depositor, its officers, directors, employees and agents (any one of which is an “Indemnified Party”) from and against any and all claims, losses, penalties, fines, forfeitures, judgments (provided that any indemnification for damages is limited to actual damages, not consequential, special or punitive damages), reasonable legal fees and related costs and any other reasonable costs, fees and expenses that such Person may sustain as a result of the Seller’s fraud or the failure of the Seller to perform its duties in compliance in all material respects with the terms of this Agreement, except to the extent arising from gross negligence, willful misconduct or fraud by the Person claiming indemnification. Any Person seeking indemnification hereunder shall promptly notify the Seller if such Person receives a complaint, claim, compulsory process or other notice of any loss, claim, damage or liability giving rise to a claim of indemnification hereunder but failure to provide such notice shall not relieve the Seller of its indemnification obligations hereunder unless the Seller is deprived of material substantive or procedural rights or defenses as a result thereof. The Seller shall assume (with the consent of the Indemnified Party, such consent not to be unreasonably withheld) the defense and any settlement of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the Indemnified Party in respect of such claim. If the consent of the Indemnified Party required in the immediately preceding sentence is unreasonably withheld, the Seller shall be relieved of its indemnification obligations hereunder with respect to such Person. The parties agree that the provisions of this Section 7.01 shall not be interpreted to provide recourse to the Seller against loss by reason of the bankruptcy, insolvency or lack of creditworthiness of an Obligor with respect to an Initial Loan, Substitute Loan or Additional Loan. The Seller shall have no liability for making indemnification hereunder to the extent any such indemnification constitutes recourse for uncollectible or uncollected Initial Loans, Substitute Loans or Additional Loans.
22
|
Section 7.02 |
Liabilities to Obligors. |
No obligation or liability to any Obligor under any of the Initial Loans, Substitute Loans or Additional Loans is intended to be assumed by the Trust Depositor, the Trustees, the Issuer or the Securityholders under or as a result of this Agreement and the transactions contemplated hereby.
|
Section 7.03 |
Operation of Indemnities. |
If the Seller has made any indemnity payments to an Indemnified Party pursuant to this Article VII and such Indemnified Party thereafter collects any such amounts from others, such Indemnified Party will repay such amounts collected to the Seller.
ARTICLE VIII
MISCELLANEOUS
|
Section 8.01 |
Amendment. |
(a) This Agreement may be amended from time to time by the parties hereto by written agreement, with the prior written consent of the Trustee but without the consent of any Securityholder, to (i) cure any ambiguity or to correct or supplement any provisions herein that may be inconsistent with any other provisions in this Agreement or in the Offering Memorandum, (ii) comply with any changes in the Code, USA PATRIOT Act, or U.S. securities laws (including the regulations implementing such laws), (iii) add to the covenants of any party hereto for the benefit of the Securityholders, and (iv) add any new provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement; provided that no such amendment shall materially and adversely affect the interests of any Noteholder. Notice of any such proposed amendment must be sent to all Securityholders and the Rating Agency at least ten (10) Business Days prior to the execution of such amendment and (y) such amendment shall not be deemed to materially and adversely affect the interests of any Noteholder if the Person requesting such amendment obtains an Opinion of Counsel addressed to the Trustee to that effect.
(b) Except as provided in Section 8.01(a) hereof, this Agreement may be amended from time to time by the parties hereto by written agreement, with the prior written consent of the Trustee and with the consent of the Majority Noteholders and with notice to each of the Rating Agency and the Owner Trustee, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Securityholders; provided that (i) if such amendment materially and adversely affects any Notes, such amendment shall also require the consent of the majority of the Outstanding Principal Balance of such Notes and (ii) no such amendment shall reduce in any manner the amount of, or delay the timing of, any amounts received on any Initial Loans, Substitute Loans or Additional Loans which are required to be distributed on any Note or the Certificate without the consent of the Holder of such Note or the Certificate or reduce the percentage of Securityholders that are required to consent to any such amendment without the consent of the Securityholders holding 100% of the Notes or the Certificate affected thereby.
23
(c) [Reserved].
(d) Promptly after the execution of any such amendment or consent, written notification of the substance of such amendment or consent shall be furnished by the Trustee to the Noteholders, by the Owner Trustee to the Certificateholders and by the Seller to the Rating Agency. It shall not be necessary for the consent of any Securityholders required pursuant to Section 8.01(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization by the Securityholders of the execution thereof shall be subject to such reasonable requirements as the Trustee may prescribe for the Noteholders and as the Owner Trustee may prescribe for the Certificateholders.
(e) Prior to the execution of any amendment to this Agreement, the Owner Trustee and the Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel (which Opinion of Counsel may rely upon an Officer’s Certificate of the Servicer with respect to the effect of any such amendment on the economic interests of any Securityholders) stating that the execution of such amendment is authorized or permitted by this Agreement and all conditions precedent have been satisfied. Each of the Trustee and the Owner Trustee may, but shall not be obligated to, enter into or consent to any such amendment that affects such Person’s own rights, duties, indemnities or immunities under this Agreement or otherwise.
|
Section 8.02 |
Governing Law. |
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.02(b).
|
Section 8.03 |
Notices. |
All notices, demands, certificates, requests and communications hereunder (“notices”) shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be
24
effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to a Responsible Officer of the party to which sent, or (d) on the date transmitted by legible telecopier with a confirmation of receipt, in all cases addressed to the recipient as follows:
(i) if to the Servicer or the Seller:
Horizon Technology Finance Corporation
312 Farmington Avenue,
Farmington, Connecticut 06032
Attention: Legal Department
Re: Horizon Funding Trust 2022-1
Telephone: (860) 676-8654
Facsimile No.: 860-676-8655
with a copy to:
Horizon Technology Finance Corporation
312 Farmington Avenue,
Farmington, Connecticut 06032
Attention: Legal Department
Re: Horizon Funding Trust 2022-1
Telephone: (860) 676-8654
Facsimile No.: 860-676-8655
(ii) if to the Trust Depositor:
Horizon Funding 2022-1 LLC
c/o Horizon Technology Finance Corporation
312 Farmington Avenue,
Farmington, Connecticut 06032
Attention: Legal Department
Re: Horizon Funding Trust 2022-1
Telephone: (860) 676-8654
Facsimile No.: 860-676-8655
with a copy to:
Horizon Funding 2022-1 LLC
c/o Horizon Technology Finance Corporation
312 Farmington Avenue,
Farmington, Connecticut 06032
Attention: Legal Department
Re: Horizon Funding Trust 2022-1
Telephone: (860) 676-8654
Facsimile No.: 860-676-8655
25
(iii) if to the Trustee:
U.S. Bank Trust Company, National Association
190 S. LaSalle St., 7th Floor
Chicago, IL 60603
Attention: Global Structured Finance – Horizon 2022-1
Facsimile No.: (312) 332-7453
(iv) if to the Backup Servicer:
U.S. Bank Trust Company, National Association
190 S. LaSalle St., 7th Floor
Chicago, IL 60603
Attention: Global Structured Finance – Horizon 2022-1
Facsimile No.: (312) 332-7453
(v) If to the Custodian with respect to Loan Files:
U.S. Bank National Association
1133 Rankin Street, Suite 100
St. Paul, MN 55116
Attention: Document Custody Services
Ref: Horizon Funding Trust 2022-1
(vi) if to the Owner Trustee:
Wilmington Trust, National Association
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Facsimile No.: (302) 636‑4140
with a copy to:
the Seller and the Servicer as provided in clause (i) above
(vii) if to the Issuer:
Horizon Funding Trust 2022-1
c/o Wilmington Trust, National Association
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Facsimile No.: (302) 636‑4140
with a copy to:
the Seller and the Servicer as provided in clause (i) above
26
(viii) if to the Rating Agency:
DBRS, Inc., d/b/a DBRS Morningstar
140 Broadway, 35th Floor
New York, NY 10005
(ix) if to the Initial Purchaser:
KeyBanc Capital Markets Inc.
1301 Avenue of the Americas, 35th Floor
New York, New York 10019
Attention: Alan Staggers
Re: Horizon Funding Trust 2022-1
Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent.
|
Section 8.04 |
Severability of Provisions. |
If one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever prohibited or held invalid or unenforceable, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement, the Notes or Certificates or the rights of the Securityholders, and any such prohibition, invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenants, agreements, provisions or terms in any other jurisdiction.
|
Section 8.05 |
Third Party Beneficiaries. |
Except as otherwise specifically provided herein, the parties hereto hereby manifest their intent that no third party (other than the Issuer, the Trustee and the Owner Trustee) shall be deemed a third party beneficiary of this Agreement, and specifically that the Obligors are not third party beneficiaries of this Agreement.
|
Section 8.06 |
Counterparts; Electronic Signatures. |
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart may be transmitted by facsimile or other electronic transmission (including electronic PDF, DocuSign, Adobe “fill and sign” or such other provider as specified in writing by the applicable party) and upon receipt shall be deemed (and shall have the same authority and binding effect as) an original executed counterparty. The words “execution,” “execute,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable
27
law, including the Electronic Signatures in Global and National Commerce Act of 2000, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. Notwithstanding the foregoing, if any party shall request manually signed counterpart signatures to this Agreement, each of the other parties hereby agrees to provide such manually signed signature pages as soon as commercially reasonable. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings.
|
Section 8.07 |
Headings. |
The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.
|
Section 8.08 |
No Bankruptcy Petition; Disclaimer. |
(a) Each of the Seller and the Trust Depositor covenants and agrees that, prior to the date that is one year and one day (or, if longer, the preference period then in effect and one day) after the payment in full of all amounts owing in respect of all outstanding Notes rated by any Rating Agency, it will not institute against the Trust Depositor (in the case of the Seller), or the Issuer, or join any other Person in instituting against the Trust Depositor or the Issuer, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of the United States or any state of the United States. This Section 8.08 will survive the termination of this Agreement.
(b) The provisions of this Section 8.08 shall be for the third party benefit of those entitled to rely thereon, including the Securityholders, and shall survive the termination of this Agreement.
|
Section 8.09 |
Jurisdiction. |
Any legal action or proceeding with respect to this Agreement may be brought in the courts of the United States for the Southern District of New York, and by execution and delivery of this Agreement, each party hereto consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each such party irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any document related hereto.
|
Section 8.10 |
Prohibited Transactions with Respect to the Issuer. |
The Seller shall not:
28
(a) Provide credit to any Noteholder or Certificateholder for the purpose of enabling such Noteholder or Certificateholder to purchase Notes or Certificates, respectively;
(b) Purchase any Notes or Certificates in an agency or trustee capacity; or
(c) Except in its capacity as Servicer as provided in the Sale and Servicing Agreement, lend any money to the Issuer.
|
Section 8.11 |
No Partnership. |
Nothing herein contained shall be deemed or construed to create a co-partnership or joint venture between the parties hereto.
|
Section 8.12 |
Successors and Assigns. |
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.
|
Section 8.13 |
Duration of Agreement. |
This Agreement shall continue in existence and effect until the termination of the Sale and Servicing Agreement.
|
Section 8.14 |
Limited Recourse. |
The obligations of the Trust Depositor and the Seller under this Agreement and the other Transaction Documents are solely the obligations of the Trust Depositor and the Seller, respectively. No recourse shall be had for the payment of any amount owing by the Trust Depositor or the Seller or otherwise under this Agreement, any other Transaction Document or for the payment by the Trust Depositor or the Seller of any fee in respect hereof or thereof or any other obligation or claim of or against the Trust Depositor or the Seller arising out of or based upon this Agreement or any other Transaction Document, against any Affiliate, shareholder, partner, manager, member, director, officer, employee, representative or agent of the Trust Depositor or the Seller or of any Affiliate of such Person. The provisions of this Section 8.14 shall survive the termination of this Agreement.
[Remainder of Page Intentionally Left Blank.]
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.
HORIZON TECHNOLOGY FINANCE CORPORATION,
as the Seller
By: /s/
Name:
Title:
HORIZON FUNDING 2022-1 LLC
as the Trust Depositor
By: /s/
Name:
Title:
EXHIBIT 10.4
SALE AND SERVICING AGREEMENT
by and among
HORIZON FUNDING TRUST 2022-1,
as the Issuer,
HORIZON FUNDING 2022-1 LLC,
as the Trust Depositor,
HORIZON TECHNOLOGY FINANCE CORPORATION
as the Seller and as the Servicer,
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as the Trustee
and
U.S. BANK NATIONAL ASSOCIATION,
as the Backup Servicer, Custodian and Securities Intermediary
Dated as of November 9, 2022
Horizon Funding Trust 2022-1
Asset-Backed Notes
TABLE OF CONTENTS
|
Page |
||
|
ARTICLE 1. |
DEFINITIONS |
2 |
| Section 1.01. | Definitions. | 2 |
| Section 1.02. | Usage of Terms. | 35 |
| Section 1.03. | Section References. | 36 |
| Section 1.04. | Calculations. | 36 |
| Section 1.05. | Accounting Terms. | 36 |
| ARTICLE 2. | ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS | 36 |
| Section 2.01. | Creation and Funding of Issuer; Transfer of Loan Assets. | 36 |
| Section 2.02. | Conditions to Transfer of Initial Loan Assets to Issuer. | 38 |
| Section 2.03. | Acceptance by Issuer. | 40 |
| Section 2.04. | Conveyance of Substitute Loans. | 40 |
| Section 2.05. | Optional Sales of Loans. | 41 |
| Section 2.06. | Optional Substitution of Loans. | 42 |
| Section 2.07 | Acquisition of Additional Loans. | 42 |
| Section 2.08. | Release of Excluded Amounts. | 44 |
| Section 2.09. | Delivery of Documents in the Loan File. | 44 |
| Section 2.10. | Limitations on Optional Sale and Substitution. | 45 |
| Section 2.11. | Certification by Custodian; Possession of Loan Files. | 45 |
| ARTICLE 3. | REPRESENTATIONS AND WARRANTIES | 47 |
| Section 3.01. | Representations and Warranties Regarding the Trust Depositor. | 48 |
| Section 3.02. | Representations and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate. | 52 |
| Section 3.03. | [Reserved]. | 52 |
| Section 3.04. | Representations and Warranties Regarding the Required Loan Documents. | 52 |
| Section 3.05. | [Reserved]. | 52 |
| Section 3.06. | Representations and Warranties Regarding the Servicer. | 52 |
| Section 3.07. | Representations of the Backup Servicer. | 53 |
| ARTICLE 4. | PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS | 55 |
| Section 4.01. | Custody of Loans. | 55 |
| Section 4.02. | Filing. | 55 |
| Section 4.03. | Changes in Name, Organizational Structure or Location. | 55 |
| Section 4.04. | Costs and Expenses. | 56 |
| Section 4.05. | Sale Treatment. | 56 |
| Section 4.06. | Separateness from Trust Depositor. | 56 |
| Section 4.07. | Powers of Attorney. | 56 |
| ARTICLE 5. | SERVICING OF LOANS | 56 |
| Section 5.01. | Appointment and Acceptance. | 56 |
| Section 5.02 | Duties of the Servicer and the Backup Servicer. | 57 |
| Section 5.03 | Liquidation of Loans. | 63 |
| Section 5.04. | [Reserved.] | 64 |
| Section 5.05. | Maintenance of Insurance. | 64 |
| Section 5.06. | Collection of Certain Loan Payments. | 64 |
| Section 5.07. | Access to Certain Documentation and Information Regarding the Loans. | 65 |
| Section 5.08. | Satisfaction of Liens and Collateral and Release of Loan Files. | 65 |
| Section 5.09. | Scheduled Payment Advances; Servicing Advances and Nonrecoverable Advances. | 67 |
| Section 5.10. | Title, Management and Disposition of Foreclosed Property. | 68 |
| Section 5.11. | Servicing Compensation. | 69 |
| Section 5.12. | Assignment; Resignation. | 69 |
| Section 5.13. | Merger or Consolidation of Servicer. | 70 |
| Section 5.14. | Limitation on Liability of the Servicer and Others. | 71 |
| Section 5.15. | Determination of Reserve Account Required Balance. | 72 |
| Section 5.16. | Rights of and Limitation of Liability of Backup Servicer. | 72 |
| ARTICLE 6. | COVENANTS OF THE TRUST DEPOSITOR | 73 |
| Section 6.01. | Legal Existence. | 73 |
| Section 6.02. | [Reserved]. | 73 |
| Section 6.03. | Security Interests. | 73 |
| Section 6.04. | Delivery of Collections. | 73 |
| Section 6.05. | Regulatory Filings. | 73 |
| Section 6.06. | Compliance with Law. | 73 |
| Section 6.07. | Activities; Transfers of Notes or Certificates by Trust Depositor. | 74 |
| Section 6.08. | Indebtedness. | 74 |
| Section 6.09. | Guarantees. | 74 |
| Section 6.10. | Investments. | 74 |
| Section 6.11. | Merger; Sales. | 74 |
| Section 6.12. | Distributions. | 75 |
| Section 6.13. | Other Agreements. | 75 |
| Section 6.14. | Separate Legal Existence. | 75 |
| Section 6.15. | Location; Records. | 75 |
| Section 6.16. | Liability of Trust Depositor. | 75 |
| Section 6.17. | Bankruptcy Limitations. | 76 |
| Section 6.18. | Limitation on Liability of Trust Depositor and Others. | 76 |
| Section 6.19. | Payments from Obligors. | 76 |
| ARTICLE 7. | ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS; | 76 |
| Section 7.01. | Distribution Account; Lockbox Account and Other Accounts. | 76 |
| Section 7.02. | Reserve Account. | 77 |
| Section 7.03. | Collection Account. | 78 |
| Section 7.04. | Investment Account. | 81 |
| Section 7.05. | Securityholder Distributions. | 81 |
| Section 7.06. | Allocations and Distributions. | 82 |
| ARTICLE 8. | SERVICER DEFAULT; SERVICER TRANSFER | 85 |
| Section 8.01. | Servicer Default. | 85 |
| Section 8.02. | Servicer Transfer. | 86 |
| Section 8.03. | Acceptance by Successor Servicer; Reconveyance; Successor Servicer to Act. | 88 |
| Section 8.04. | Notification to Securityholders. | 91 |
| Section 8.05. | Effect of Transfer. | 91 |
| Section 8.06. | Database File. | 91 |
| Section 8.07. | Waiver of Defaults. | 92 |
| ARTICLE 9. | REPORTS | 92 |
| Section 9.01. | Monthly Reports. | 92 |
| Section 9.02. | Quarterly Reports. | 92 |
| Section 9.03. | Preparation of Reports; Officer’s Certificate. | 93 |
| Section 9.04. | Other Data; Obligor Financial Information. | 93 |
| Section 9.05. | Annual Report of Accountants. | 95 |
| Section 9.06. | Statements of Compliance from Servicer. | 96 |
| Section 9.07. | [Reserved]. | 96 |
| Section 9.08. | Notices of Event of Default, Servicer Default or Rapid Amortization Event. | 96 |
| Section 9.09. | Trustee’s Right to Examine Servicer Records, Audit Operations and Deliver Information to Noteholders. | 96 |
| ARTICLE 10. | TERMINATION | 97 |
| Section 10.01. | Optional Redemption of Notes; Rights of Certificateholders Following Satisfaction and Discharge of Indenture. | 97 |
| Section 10.02. | Termination. | 97 |
| ARTICLE 11. | REMEDIES UPON MISREPRESENTATION; REPURCHASE OPTION | 98 |
| Section 11.01. | Repurchases of, or Substitution for, Loans for Breach of Representations and Warranties. | 98 |
| Section 11.02. | Reassignment of Repurchased or Substituted Loans. | 98 |
| ARTICLE 12. | INDEMNITIES | 99 |
| Section 12.01. | Indemnification by Servicer. | 99 |
| Section 12.02. | Indemnification by Trust Depositor. | 99 |
| Section 12.03. | Survival. | 100 |
| ARTICLE 13. | MISCELLANEOUS | 100 |
| Section 13.01. | Amendment. | 100 |
| Section 13.02. | [Reserved]. | 102 |
| Section 13.03. | Governing Law. | 102 |
| Section 13.04. | Notices. | 102 |
| Section 13.05. | Severability of Provisions. | 105 |
| Section 13.06. | Third Party Beneficiaries. | 105 |
| Section 13.07. | Counterparts; Electronic Signatures. | 105 |
| Section 13.08. | Headings. | 106 |
| Section 13.09. | No Bankruptcy Petition; Disclaimer. | 106 |
| Section 13.10. | Jurisdiction. | 106 |
| Section 13.11. | Tax Characterization. | 107 |
| Section 13.12. | [Reserved]. | 107 |
| Section 13.13. | Limitation of Liability of Owner Trustee. | 107 |
| Section 13.14. | [Reserved]. | 107 |
| Section 13.15. | No Partnership. | 107 |
| Section 13.16. | Successors and Assigns. | 108 |
| Section 13.17. | Acts of Holders. | 108 |
| Section 13.18. | Duration of Agreement. | 108 |
| Section 13.19. | Limited Recourse. | 108 |
| Section 13.20. | Confidentiality. | 108 |
| Section 13.21. | Non-Confidentiality of Tax Treatment. | 109 |
| Section 13.22. | Multiple Roles | 109 |
EXHIBITS
|
Exhibit A |
Form of Assignment | A-1 |
| Exhibit B |
Form of Closing Certificate of Trust Depositor |
B-1 |
|
Exhibit C |
Form of Closing Certificate of Servicer/Seller |
C-1 |
| Exhibit D | Form of Liquidation Report | D-1 |
| Exhibit E | [Reserved] | E-1 |
| Exhibit F | Servicer Officer’s Certificate | F-1 |
| Exhibit G | List of Loans | G-1 |
| Exhibit H-1 | Form of Quarterly Report | H-1 |
| Exhibit H-2 | Form of Monthly Report | H-2 |
| Exhibit I | [Reserved] | I-1 |
| Exhibit J | [Reserved] | J-1 |
| Exhibit K | Form of Annual Report | K-1 |
| Exhibit L-1 | Form of Initial Certification | L-1 |
| Exhibit L-2 | Form of Final Certification | L-2 |
| Exhibit M | Form of Request for Release of Documents | M-1 |
SALE AND SERVICING AGREEMENT
THIS SALE AND SERVICING AGREEMENT, dated as of November 9, 2022, is by and among:
|
(1) |
HORIZON FUNDING TRUST 2022-1, a statutory trust created and existing under the laws of the State of Delaware (together with its successors and assigns, the “Issuer”); |
|
(2) |
HORIZON FUNDING 2022-1 LLC, a Delaware limited liability company, as the trust depositor (together with its successor and assigns, in such capacity, the “Trust Depositor”); |
|
(3) |
HORIZON TECHNOLOGY FINANCE CORPORATION, a Delaware corporation (together with its successors and assigns, “Horizon”), as the servicer (together with its successors and assigns, in such capacity, the “Servicer”), and as the seller (together with its successors and assigns, in such capacity, the “Seller”); |
&