hrzn20240618c_8k.htm
false 0001487428 0001487428 2024-06-24 2024-06-24 0001487428 hrzn:CommonStockParValue0001PerShareCustomMember 2024-06-24 2024-06-24 0001487428 hrzn:NotesDue20264875CustomMember 2024-06-24 2024-06-24 0001487428 hrzn:NotesDue2027625CustomMember 2024-06-24 2024-06-24
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): June 24, 2024
 
HORIZON TECHNOLOGY FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
814-00802
27-2114934
(State or other jurisdiction
of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
312 Farmington Avenue
Farmington, CT 06032
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code: (860) 676-8654
 
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
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))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Title of each class
 
Ticker symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.001 per share
 
HRZN
 
The Nasdaq Stock Market LLC
4.875% Notes due 2026
 
HTFB
 
The New York Stock Exchange
6.25% Notes due 2027
 
HTFC
 
The New York Stock Exchange
 
 

 
Section 1
Registrants Business and Operations
Item 1.01
Entry into a Material Definitive Agreement
 
On June 21, 2024, Horizon Funding II, LLC (the “Issuer”), a Delaware limited liability company and wholly owned subsidiary of Horizon Technology Finance Corporation (the “Company”), entered into an Indenture, dated as of June 21, 2024, by and among the Issuer, as issuer, U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), and U.S. Bank National Association, as securities intermediary (“US Bank”) (the “Indenture”), which provides the Issuer with a $100 million commitment from the Lenders and may increase to $200 million with the mutual agreement of the Company and the Lenders. Concurrently, the Issuer entered into a Note Funding Agreement, dated as of June 21, 2024, by and among the Issuer, as issuer, and the Initial Purchasers (as defined therein) (the “Lenders”) (the “Note Funding Agreement”), pursuant to which the Issuer may issue up to $100 million of senior secured notes. In addition, the Issuer entered into a Sale and Servicing Agreement, dated as of June 21, 2024, by and among the Issuer, as issuer, the Company, as originator, seller and servicer, the Trustee, as trustee, and U.S. Bank, as backup servicer, lockbox bank, custodian and securities intermediary (the “S&S Agreement,” together with the Indenture and the Note Funding Agreement, the “Credit Facility”), which, among other things, provides that borrowings under the Credit Facility shall bear interest, payable monthly, determined at a rate per annum equal to the greater of (i) the yield for the United States Treasury constant maturity 3-year and 5-year in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily) – H.15” interpolated to a 4.88-year weighted average life plus 3.15% and (ii) 5.00%.  The Credit Facility has a one-year funding period and a three-year reinvestment period.
 
The description of the documentation related to the Indenture, the Note Funding Agreement and the S&S Agreement contained in this Current Report on Form 8-K is only a summary of the material terms of the Indenture, the Note Funding Agreement and the S&S Agreement and are qualified in their entirety by the terms of the Indenture, the Note Funding Agreement and the S&S Agreement filed as exhibits hereto, which is incorporated herein by reference.
 
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
 
The information required by Item 2.03 is contained in Item 1.01 of this Current Report on Form 8-K and is incorporated herein by reference.
 
Section 7 Regulation FD
Item 7.01
Regulation FD Disclosure
 
On June 24, 2024, the Company issued a press release, a copy of which is attached hereto as Exhibit 99.1.
 
The information in this Item 7.01, including Exhibit 99.1 and the information set forth therein, is deemed to have been furnished to, and shall not be deemed to be “filed” with, the U.S. Securities and Exchange Commission.
 
Section 9 Financial Statements and Exhibits
Item 9.01
Financial Statements and Exhibits
 
(d) Exhibits.
 
Exhibit No.
Description
10.1 Indenture, dated as of June 21, 2024, by and among Horizon Funding II, LLC, as issuer, U.S. Bank Trust Company, National Association, as trustee, and U.S. Bank National Association, as securities intermediary.
10.2 Note Funding Agreement, dated as of June 21, 2024, by and among Horizon Funding II, LLC, as issuer, and the Initial Purchasers (as defined therein).
10.3
Sale and Servicing Agreement, dated as of June 21, 2024, by and among Horizon Funding II, LLC, as issuer, Horizon Technology Finance Corporation, as originator, seller and servicer, U.S. Bank Trust Company, National Association, as trustee, and U.S. Bank National Association, as backup servicer, lockbox bank, custodian and securities intermediary.
99.1 Press Release of the Company dated June 24, 2024.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
2
 

 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: June 24, 2024
HORIZON TECHNOLOGY FINANCE CORPORATION
   
 
By:
/s/ Robert D. Pomeroy, Jr.
   
Robert D. Pomeroy, Jr.
   
Chief Executive Officer
 
3
 
ex_690504.htm

Exhibit 10.1

 



 

 

 

 

INDENTURE

 

by and among

 

HORIZON FUNDING II, LLC,
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 June 21, 2024

 

 

HORIZON FUNDING II, LLC

 

Asset Backed Notes

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I DEFINITIONS

2

Section 1.01

Definitions

2

Section 1.02

Rules of Construction

10

ARTICLE II THE NOTES

10

Section 2.01

Form

10

Section 2.02

Execution, Authentication and Delivery

11

ARTICLE III COVENANTS

11

Section 3.01

Transaction Accounts

11

Section 3.02

Maintenance of Office or Agency

11

Section 3.03

Money for Payments To Be Held in Trust; Paying Agent

12

Section 3.04

Existence; Separate Legal Existence

13

Section 3.05

Payment of Principal and Interest

14

Section 3.06

Protection of Indenture Collateral

15

Section 3.07

Opinions as to Indenture Collateral

18

Section 3.08

Furnishing of Rule 144A Information

18

Section 3.09

Performance of Obligations; Sale and Servicing Agreement

18

Section 3.10

Negative Covenants

19

Section 3.11

Annual Statement as to Compliance

20

Section 3.12

[Reserved]

20

Section 3.13

Representations and Warranties Concerning the Loans

20

Section 3.14

Review of Loan Files

20

Section 3.15

Sale and Servicing Agreement

20

Section 3.16

Amendments to Sale and Servicing Agreement

21

Section 3.17

Servicer as Agent and Bailee of Trustee

21

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

23

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

 

-i-

 

TABLE OF CONTENTS

(continued)

Page

 

Section 3.24

Capital Expenditures

23

Section 3.25

Representations and Warranties of the Issuer

24

Section 3.26

Restricted Payments

26

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 Subsequent Loans and Substitute Loans

27

Section 3.31

FATCA Information

27

ARTICLE IV THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE

28

Section 4.01

The Notes

28

Section 4.02

Registration of Transfer and Exchange of Notes

28

Section 4.03

Mutilated, Destroyed, Lost or Stolen Notes

31

Section 4.04

Payment of Principal and Interest; Defaulted Interest

32

Section 4.05

Tax Treatment

33

Section 4.06

Satisfaction and Discharge of Indenture

33

Section 4.07

Application of Trust Money

35

Section 4.08

Repayment of Moneys Held by Paying Agent

35

ARTICLE V REMEDIES

35

Section 5.01

Events of Default

35

Section 5.02

Acceleration of Maturity; Rescission and Annulment

37

Section 5.03

Collection of Indebtedness and Suits for Enforcement by Trustee

38

Section 5.04

Remedies; Priorities

40

Section 5.05

[Reserved]

41

Section 5.06

Limitation of Suits

41

Section 5.07

Unconditional Rights of Noteholders to Receive Principal and Interest

42

Section 5.08

Restoration of Rights and Remedies

42

Section 5.09

Rights and Remedies Cumulative

42

Section 5.10

Delay or Omission Not a Waiver

42

Section 5.11

Control by Noteholders

42

 

-ii-

 

TABLE OF CONTENTS

(continued)

Page

 

Section 5.12

Waiver of Past Defaults

43

Section 5.13

Undertaking for Costs

43

Section 5.14

Waiver of Stay or Extension Laws

43

Section 5.15

Sale of Indenture Collateral

44

Section 5.16

Action on Notes

45

Section 5.17

Performance and Enforcement of Certain Obligations

45

ARTICLE VI THE TRUSTEE

46

Section 6.01

Duties of Trustee

46

Section 6.02

Rights of Trustee

47

Section 6.03

Individual Rights of Trustee

49

Section 6.04

Trustee’s Disclaimer

49

Section 6.05

Notice of Event of Default

50

Section 6.06

Reports by Trustee to Holders

50

Section 6.07

Compensation and Indemnity

50

Section 6.08

Replacement of Trustee

51

Section 6.09

Successor Trustee by Merger

52

Section 6.10

Appointment of Co-Trustee or Separate Trustee

53

Section 6.11

Eligibility; Disqualification

54

Section 6.12

Representations, Warranties and Covenants of the Trustee

54

Section 6.13

Directions to Trustee

55

Section 6.14

Conflicts

56

ARTICLE VII NOTEHOLDERS’ LISTS AND REPORTS

56

Section 7.01

Issuer to Furnish Trustee Names and Addresses of Noteholders

56

Section 7.02

Preservation of Information; Communications to Noteholders

56

Section 7.03

Fiscal Year

56

ARTICLE VIII TRANSACTION ACCOUNTS, DISBURSEMENTS AND RELEASES

57

Section 8.01

Collection of Money

57

Section 8.02

Transaction Accounts

57

Section 8.03

Officer’s Certificate

58

Section 8.04

Termination Upon Distribution to Noteholders

58

 

-iii-

 

TABLE OF CONTENTS

(continued)

Page

 

Section 8.05

Release of Indenture Collateral

58

Section 8.06

The Securities Intermediary

59

ARTICLE IX SUPPLEMENTAL INDENTURES

60

Section 9.01

Supplemental Indentures Without Consent of Noteholders

60

Section 9.02

Supplemental Indentures With Consent of Noteholders

62

Section 9.03

Execution of Supplemental Indentures

63

Section 9.04

Effect of Supplemental Indenture

64

Section 9.05

Reference in Notes to Supplemental Indentures

64

Section 9.06

Consent of the Servicer

64

ARTICLE X OPTIONAL REDEMPTION

64

Section 10.01

Optional Redemption

64

Section 10.02

Form of Redemption Notice by Trustee

65

ARTICLE XI MISCELLANEOUS

66

Section 11.01

Confidentiality

66

Section 11.02

Form of Documents Delivered to Trustee

67

Section 11.03

Acts of Noteholders

68

Section 11.04

Notices, etc., to Trustee and Others.

68

Section 11.05

Notices to Noteholders; Waiver

69

Section 11.06

Alternate Payment and Notice Provisions

70

Section 11.07

Effect of Headings

70

Section 11.08

Successors and Assigns

70

Section 11.09

Severability

70

Section 11.10

Benefits of Indenture

70

Section 11.11

Legal Holidays

71

Section 11.12

GOVERNING LAW

71

Section 11.13

Electronic Signatures; Counterparts

71

Section 11.14

Issuer Obligation

71

Section 11.15

No Petition; Limited Recourse

72

Section 11.16

Inspection; Confidentiality

72

Section 11.17

Reserved.

73

Section 11.18

Disclaimer

73

 

-iv-

 

INDENTURE

 

THIS INDENTURE, dated as of June 21, 2024 (as amended, modified, restated, supplemented and/or waived from time to time, this “Indenture”), is by and between Horizon Funding II, LLC, a Delaware limited liability company, 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”) 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.) not in its individual capacity, but solely in its capacity 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 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 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 of the Issuer, 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 Cutoff Date or Transfer Date, as applicable; (iii) the security interests in Related Property securing the Loans; (iv) the Loan Files relating to the Loans; (v) an assignment of all rights to Proceeds from liquidating the Loans; (vi) the Collection Account, the General Reserve Account, the Lockbox Account, the Distribution Account, and the Principal Reinvestment 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 funds therein; (vii) other rights under the Transaction Documents; (B) all proceeds from the items described above; (C) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, oil, gas and other minerals; and (D) all present and future claims, demands, causes 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, 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 Excluded Property and any and all proceeds of any 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 in accordance with the terms herein.

 

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.

 

Accredited Investors” has the meaning specified in Rule 501(a)(1)-(3) or (7) of Regulation D under the Securities Act.

 

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.

 

Board of Directors” means the board of directors (or comparable managers or managing members) of a Person or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers or managing members).

 

Change of Control” means any of the following: (a) Horizon Technology Finance Corporation no longer holds 100% of the equity interests in the Issuer; (b) the Issuer ceases to be advised by Horizon Technology Finance Corporation; or (c) Horizon Technology Finance Corporation ceases to be advised by Horizon Technology Finance Management LLC.

 

Commitment Amount” means the commitment of the Noteholders to fund Advances during the Investment Period in an amount not to exceed $100,000,000 outstanding at any given time; provided that the amount may be increased to $200,000,000 at the mutual discretion and agreement of the Issuer and the Initial Purchasers.

 

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, (i) for the purposes of ‎Section 3.02 hereof, 111 E. Fillmore Ave, EP-MN-WS2N, St. Paul, MN 51007, Attention: Bondholder Services – Horizon Funding II, LLC; and (ii) for all other purposes, 190 S. LaSalle St., 7th Floor, Chicago, IL 60603, Attention: Global Corporate Trust – Horizon Funding II, LLC, or, in each case, 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.

 

Disclosing Party” means each of the Issuer, the Servicer and the Originator, and “Disclosing Parties” means collectively all such parties.

 

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.

 

Event of Default” has the meaning provided in Section 5.01 hereof.

 

FATCA” means Sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder, or any amended or successor version, any current or future Treasury Regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, any applicable intergovernmental agreements entered into in connection with the implementation of such Sections of the Code and any applicable fiscal or regulatory legislation, rules or practices adopted pursuant to any such intergovernmental agreements.

 

FATCA Withholding Tax” has the meaning provided in Section 3.31 hereof.

 

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 herein.

 

Initial Purchasers” has the meaning provided in the Note Funding Agreement.

 

Institutional Accredited Investor” means any Person meeting the requirements of Rule 501 (a) (1), (2), (3) or (7) of Regulation D under the Securities Act.

 

3

 

Issuer Documents” has the meaning provided in Section 3.25(a) hereof.

 

Issuer LLC Agreement” means that certain amended and restated limited liability company agreement of the Issuer dated as of June 21, 2024.

 

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 on behalf of the Issuer and delivered to the Trustee.

 

Legal Final Payment Date” means the Payment Date occurring in June 2033.

 

Make-Whole Amount” means, an amount equal to the greater of (a) zero and (b) (i) with respect to any Optional Redemption occurring during the period commencing on the Closing Date and ending on (and including) the third (3rd) anniversary of the Closing Date, the positive difference, if any, between (x) the present value, computed using a discount rate equal to the Prepayment Benchmark Rate plus 0.50%, of all interest on the portion of such Notes being redeemed (less accrued interest up to (but excluding) such Redemption Date) and principal that would otherwise be expected to be payable on such Notes (assuming the Notes do not amortize and are redeemed in full on the third (3rd) anniversary of the Closing Date, at a price of 100% of the Outstanding Note Balance of such Notes as of such date) and (y) the portion of such Notes being redeemed, (ii) with respect to any Optional Redemption occurring during the period commencing on the third (3rd) anniversary of the Closing Date and ending on (and including) the fourth (4th) anniversary of the Closing Date, an amount equal to the product of (x) the portion of such Notes being redeemed and (y) 0.50%, and (iii) with respect to any Optional Redemption occurring commencing on the fourth (4th) anniversary of the Closing Date, 0.00%; provided, however, that if an Optional Redemption is being effected with the proceeds of a capital markets securitization occurring after the first (1st) anniversary of the Closing Date and the Noteholders have (in their sole discretion) decided to extend the Funding Period following such Optional Redemption, the “Make-Whole Amount” shall be the lesser of (i) the product of (x) 0.50% and (y) the portion of such Notes being redeemed and (y) the applicable Make-Whole Amount without giving effect to this proviso. Notwithstanding the provisions above, in the event that the Noteholder or its related entities will comprise a majority of Noteholders in any transaction arising from an Optional Redemption refinancing event, no Make Whole Payment shall be due to the Noteholder.

 

Minimum Denomination” of any Note means, (a) in respect of Notes purchased by an Initial Purchaser and subsequently retransferred to the first transferee thereof (provided that such initial transferee provides to such 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 (b) 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(j)(ii) hereof.

 

Note Register” has the meaning provided in Section 4.02(a) hereof.

 

4

 

Note Registrar” has the meaning provided in Section 4.02(a) hereof.

 

Noteholder FATCA Information” means, with respect to any Noteholder or the owner of a beneficial interest in any Note, information sufficient to eliminate the imposition of, or determine the amount of, U.S. withholding tax under FATCA with respect to such Person.

 

Noteholder Tax Identification Information” means properly completed and signed tax certifications (generally, in the case of U.S. Federal Income Tax, IRS 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 IRS 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).

 

Outstanding” means, as of any date of determination, all Notes theretofore executed, authenticated and delivered under this Indenture except: (a) Notes in exchange for or in lieu of which other Notes have been executed, authenticated and delivered pursuant to this Indenture; (b) 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 (c) 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, (i) Notes beneficially owned by the Issuer shall be disregarded and deemed not to be Outstanding and (ii) Notes beneficially owned by the Servicer, Originator, any Affiliate of the Originator 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 Originator, 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 owner of a beneficial interest in a Note.

 

Physical Note” means any Note in certificated form registered in the name of a holder.

 

Plan” has the meaning provided in Section 4.02(k) hereof.

 

Prepayment Benchmark Rate” means the yield determined by the Servicer in accordance with the following two paragraphs.

 

The Prepayment Benchmark Rate shall be determined by the Servicer after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors of the Federal Reserve System), on the third Business Day immediately preceding the Redemption Date based upon the yield for the most recent day that appears after

 

5

 

such time on such day in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily) - H.15” (or any successor designation or publication) (“H.15”) under the caption “U.S. government securities–Treasury constant maturities–Nominal” (or any successor caption or heading) (“H.15 TCM”). In determining the Prepayment Benchmark Rate, the Servicer shall select the yield for the Treasury constant maturity 3-year on H.15.

 

If on the third Business Day preceding the Redemption Date H.15 TCM is no longer published, the Servicer shall calculate the Prepayment Benchmark Rate based on the rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second Business Day preceding such Redemption Date of the 3-year United States Treasury. In determining the Prepayment Benchmark Rate in accordance with the terms of this paragraph, the semi-annual yield to maturity of the 3-year United States Treasury security shall be based upon the average of the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of the 3-year United States Treasury security, and rounded to three decimal places.

 

The Servicer shall provide notice to the Noteholders no later than one Business Day immediately preceding the Redemption Date of the relevant Prepayment Benchmark Rate.

 

None of the Trustee, Securities Intermediary, Custodian or Back-up Servicer shall be under any obligation (i) to monitor, determine or verify the unavailability or cessation of the Prepayment Benchmark Rate, (ii) to select, determine or designate any alternative reference rate or Prepayment Benchmark Rate, or other successor or replacement benchmark index, or whether any conditions to the designation of such a rate have been satisfied, or (iii) to select, determine or designate any adjustment to the Prepayment Benchmark Rate, or other modifier to any replacement or successor index, or (iv) to determine whether or what amendments are necessary or advisable, if any, in connection with any of the foregoing.

 

None of the Trustee, Securities Intermediary, Custodian or Back-up Servicer shall be liable for any inability, failure or delay on its part to perform any of its duties set forth in this Indenture as a result of the unavailability of the Prepayment Benchmark Rate and the absence of a designated replacement Prepayment Benchmark Rate, including as a result of any inability, delay, error or inaccuracy on the part of any other transaction party, in providing any direction, instruction, notice or information required or contemplated by the terms of this Indenture and reasonably required for the performance of such duties.

 

Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.

 

PTCE” has the meaning provided in Section 4.02(k) hereof.

 

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.

 

6

 

Receiving Party” means each Holder of a Note (other than the Originator or any Affiliate thereof) and the Trustee.

 

Regulation S” means Regulation S under the Securities Act.

 

Rule 144A Certification” means a letter substantially in the form attached to this Indenture as Exhibit D-2.

 

Sale” has the meaning provided in Section 5.15 hereof.

 

Sale and Servicing Agreement” means the Sale and Servicing Agreement, dated as of the date hereof, by and among Horizon Funding II, LLC, as the Issuer, Horizon Technology Finance Corporation, as the Originator, Seller, and the Servicer, U.S. Bank Trust Company, National Association, as the Trustee, and U.S. Bank National Association, as the Backup Servicer, Custodian, Lockbox Bank 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) 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 (B) AN INSTITUTION THAT QUALIFIES AS AN “ACCREDITED INVESTOR” MEETING THE REQUIREMENTS OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN “INSTITUTIONAL ACCREDITED INVESTOR”) THAT IS A QUALIFIED PURCHASER AS DEFINED IN SECTION 2(A)(51) OF THE INVESTMENT COMPANY ACT OF 1940 PURSUANT TO AN EXEMPTION UNDER THE SECURITIES ACT AND, IN EITHER CASE, IS ACQUIRING SUCH NOTE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE INSTITUTIONAL ACCREDITED INVESTORS), PURSUANT TO AN EXEMPTION FROM REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT; 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

 

7

 

RULE 144A WHO IS A QUALIFIED PURCHASER (AS DEFINED ABOVE) AND THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A “QUALIFIED INSTITUTIONAL BUYER” TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR WHO IS A QUALIFIED PURCHASER AND IS ACQUIRING SUCH NOTE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE INSTITUTIONAL ACCREDITED INVESTORS) OR (D) TO A NON-U.S. PERSON THAT IS A QUALIFIED PURCHASER 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. 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 CLAUSES (C) OR (D) 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 IN THIS NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO, OR WITH RESPECT TO INVESTORS IN PHYSICAL NOTES 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 IV, SUBTITLE B, TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A PLAN, ACCOUNT OR ARRANGEMENT DESCRIBED IN AND 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 (COLLECTIVELY, A “BENEFIT PLAN INVESTOR”) 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 SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (“SIMILAR LAW”) OR (II) ITS ACQUISITION AND 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 OWNER OF AN INTEREST IN THIS NOTE THAT IS NOT BOTH (A) A QUALIFIED

 

8

 

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 AN INSTITUTIONAL ACCREDITED INVESTOR OR (2) A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT, TO SELL ITS INTEREST IN THIS NOTE, OR MAY SELL SUCH INTEREST ON BEHALF OF SUCH OWNER.”

 

Similar Law” has the meaning provided in Section 4.02(k) hereof.

 

Stock” means all shares, options, warrants, membership interests, units of membership interests, other interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or non-voting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Exchange Act).

 

Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the Board of Directors of such corporation, partnership, limited liability company, or other entity.

 

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 Note Balance.

 

Transferee Letter” means the letter set forth in Exhibit D-1 to this Indenture.

 

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 hereof.

 

U.S. Person” means a “U.S. person” within the meaning of Regulation S.

 

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;

 

9

 

 

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;

 

 

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 of the Issuer 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 of the Issuer 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.

 

10

 

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 up to the Commitment Amount.

 

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 different denomination.

 

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.

 

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 General Reserve Account, the Distribution Account and the Principal Reinvestment Account specified in Section 7.01, Section 7.02 and Section 7.03 of the Sale and Servicing Agreement. The Issuer 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 hereof and as provided in Section 3.05 hereof, from moneys on deposit in the Distribution Account.

 

Section 3.02 MAINTENANCE OF OFFICE OR AGENCY.

 

The Issuer shall 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 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, Inc., d/b/a Morningstar DBRS (if rated by DBRS, Inc., d/b/a Morningstar DBRS) 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 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

 

12

 

 

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 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 on an Issuer Order; and 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 limited liability company 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.

 

13

 

(ii)     Ensure that it is at all times in compliance with its organizational documents.

 

(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 limited liability company formalities, including, but not limited to, holding all regular and special board of trustees meetings, if any, as required under the terms of its organizational documents appropriate to authorize all limited liability company 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.

 

(vi)    Conduct its affairs in accordance with the separateness provisions set forth in Section 4 of the Issuer LLC Agreement.

 

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.

 

14

 

(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 N.A., U.S. Bank N.A. 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 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 Trustee and causing the

 

15

 

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 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 the 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 Custodian as bailee 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 under the Sale and Servicing Agreement for the benefit of the Issuer, and (ii) it holds the Indenture Collateral delivered to it pursuant to this Indenture for the benefit of the Noteholders. The Trustee agrees to maintain (directly or through a Custodian on its behalf) continuous possession of such delivered instruments as pledgee hereunder and the Custodian will maintain continuous possession of the Loan Files 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.

 

16

 

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 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.

 

Except as otherwise provided in or permitted by the Sale and Servicing Agreement or this Indenture, the Trustee shall not remove any portion of the Indenture Collateral held by it that consists of money or is evidenced by an instrument, certificate or other writing from the jurisdiction in which it was held at the date of the most recent Opinion of Counsel delivered pursuant to Section 3.07 hereof (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.07(a) hereof, if no Opinion of Counsel has yet been delivered pursuant to Section 3.07(b) hereof) unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

 

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.

 

17

 

(b)    On or before June 30 in each calendar year, beginning in 2025, 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.

 

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 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 Owner, or (iii) to the Trustee for delivery to such Noteholder, Owner or prospective purchaser, in order to permit compliance by such Noteholder or Owner with Rule 144A in connection with the resale of such Note or beneficial interest therein by such Noteholder or 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 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 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 Loans or any such instrument, except such actions as the Servicer is expressly permitted to take in the Transaction Documents.

 

18

 

(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 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 remedy such failure. So long as any such Servicer Default shall be continuing, the Trustee may 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.

 

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 Loans 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.

 

 

19

 

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 2024), 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.

 

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 Servicing Agreement (except for the Excluded Property), and the Trustee has the benefit of the representations and warranties made by the Originator in such documents concerning the Loans transferred into the Loan Assets and the right to enforce any remedy against the Originator provided in the Sale and Servicing Agreement, to the same extent as though such representations and warranties were made directly to the Trustee.

 

Section 3.14 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 Loans, the Issuer authorizes 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.

 

20

 

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.

 

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 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)    the Majority Noteholders have 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 of Counsel (and shall have delivered copies thereof to the Trustee on which the Trustee may conclusively rely) to the effect that such transaction will not have any material adverse tax consequence to the Issuer, any Noteholder;

 

(v)     all 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 an Opinion of Counsel to such effect shall, if requested by the Trustee or the Majority Noteholders, have been delivered to the Trustee; 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

 

21

 

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.

 

(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 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)    the Majority Noteholders have consented in writing to such transaction (and written notice thereof has been provided to Rating Agency);

 

(iv)    the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Trustee on which the Trustee shall be entitled to rely) to the effect that such transaction will not have any material adverse tax consequence to the Issuer or any Noteholder;

 

(v)     any action that is necessary to maintain the lien and security interest created by this Indenture 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) hereof, 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) hereof, 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 5.13 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 as otherwise expressly permitted in the 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 Originator’s transfer of the Initial Loans to the Issuer, the Issuer will transfer the Initial Advance to the Originator 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.

 

The Issuer represents and warrants as of the date hereof and as of each Transfer Date, as follows:

 

23

 

(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 breach of any of the material 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 limited liability company 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.

 

(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 Originator, 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.

 

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;

 

(i)        the Indenture Collateral constitutes “general intangibles,” “instruments,” “accounts,” “investment property,” or “chattel paper,” within the meaning of the applicable UCC;

 

(ii)       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;

 

(iii)      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;

 

(iv)      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;

 

(v)      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 (that covers any Indenture Collateral) has been filed. The Issuer is not aware of the filing of any judgment or tax Lien filings against the Issuer;

 

(vi)      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;

 

(vii)     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

 

25

 

Agreement, any Underlying Notes that constitute or evidence any Loan Assets solely on behalf of and for the benefit of the Noteholders; and

 

(viii)    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) hereof shall survive the termination of this Indenture.

 

(k)    Solvency. At the time of and after giving effect to each conveyance of Loan Assets under the Sale and Servicing Agreement, the Issuer is Solvent on and as of the date thereof.

 

Section 3.26 RESTRICTED PAYMENTS.

 

The Issuer shall not, directly or indirectly, (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to 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, (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (c) set aside or otherwise segregate any amounts for any such purpose; provided that the Issuer may make, or cause to be made, (i) distributions to or at the direction of the Issuer as contemplated by, and to the extent funds are available for such purpose under, the Sale and Servicing Agreement (including without limitation Sections 7.02(f), 7.05(a), 7.05(b) and 7.05(c) thereof), (ii) payments to the Servicer pursuant to the terms of the Sale and Servicing Agreement or the other Transaction Documents and (iii) payments to the Trustee 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 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.

 

26

 

The Trustee shall make available on its internet website to each Noteholder and the Rating Agency on a password protected basis the Monthly Reports prepared by the Servicer pursuant to Article IX of the Sale and Servicing Agreement; 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 Originator 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 internet website shall be initially located at https://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 may (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 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 information that is disseminated in accordance with this Indenture.

 

Section 3.30 GRANT OF SUBSEQUENT LOANS AND SUBSTITUTE LOANS.

 

In consideration of the delivery of Loans transferred on each Transfer Date pursuant to and in accordance with the terms of the Sale and Servicing Agreement, and simultaneously with the transfer of the Subsequent Loans and/or Substitute Loans, as applicable, the Issuer will cause the related Loan File to be delivered to the Trustee or the Custodian, its bailee.

 

Section 3.31 FATCA INFORMATION.

 

The Issuer represents, warrants and covenants to the Trustee that, (i) to the best of the Issuer’s knowledge, the Trustee is not obligated in respect of any payments to be made by it pursuant to this Indenture, to make any withholding or deduction pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code and any regulations or agreements thereunder or official interpretations thereof (“FATCA Withholding Tax”); (ii) the Issuer will require the Noteholders or the beneficial holders of Notes to collect and provide the Noteholder FATCA Information to the Issuer or the Trustee. The Issuer will provide the Noteholder FATCA Information to the Trustee promptly after receipt from any Noteholder or the beneficial holders of any Note; and (iii) to the extent the Issuer determines that FATCA Withholding Tax is applicable, it will promptly notify the Trustee of such fact.

 

ARTICLE IV

 

THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE

 

Section 4.01 THE NOTES.

 

The Notes shall be issued as Physical Notes.

 

27

 

The Notes shall, on original issue, be executed on behalf of the Issuer 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. U.S. Bank Trust shall be “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Note Register shall contain the name, note numbers and remittance instructions.

 

(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 an amount up to the Commitment Amount. On the Closing Date and pursuant to an Issuer Order, the Trustee will execute and authenticate Physical Notes all in an aggregate principal amount that shall equal the Commitment Amount.

 

(c)    The maximum Aggregate Outstanding Note Balance shall be the Commitment Amount.

 

(d)    The Trustee, the Note Registrar, the Servicer, the Paying Agent and the Issuer shall recognize the Holders of the Physical Notes as Noteholders hereunder.

 

(e)    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 or Trustee upon request.

 

(f)    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.

 

(g)    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.

 

28

 

(h)    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, the following restrictions shall apply with respect to the transfer and registration of transfer to a transferee that takes delivery in the form of a Physical Note:

 

(i)    The Note Registrar shall register the transfer of an 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 Originator in a transfer which otherwise complies with Section 4.02(j) hereof; or

 

(ii)    The Note Registrar shall register the transfer of any Physical Note if (A) the transferor has advised the Note Registrar in writing that the Note is being transferred to a Person that is both an Institutional Accredited Investor and a Qualified Purchaser; (B) prior to the transfer the transferee furnishes to the Note Registrar a Transferee Letter; and (C) such transfer otherwise complies with Section 4.02(j) hereof.

 

(i)    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 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.

 

(j)

 

(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 an Physical Note to an Affiliate of the Originator, (A) 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 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 (B) 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 Purchasers 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, or the Servicer is obligated to register or qualify any Note under the Securities Act or any state or international securities laws.

 

29

 

(ii)    If, at any time, any Holder of any Note is not both a Qualified Purchaser and either (A) a Qualified Institutional Buyer, (B) an Institutional Accredited Investor or (C) a non-U.S. Person that acquired such Note outside of the United States in compliance with Regulation S (any such person, a “Non-Permitted Holder”), the Issuer shall, promptly after obtaining actual knowledge that such person is a Non-Permitted Holder, 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 30 days of the date of such notice. If such Non-Permitted Holder fails to transfer such Notes, the Issuer 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 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 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 exercise of such discretion.

 

(k)    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 Title I of ERISA, any plan described in and subject to Section 4975 of the Code (collectively, a “Plan”) 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 that its acquisition and holding 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 by reason of any of Section 408(b)(17) of ERISA or Section 4975(d)(20) of the Code, Prohibited Transaction Class Exemption (“PTCE”) 96-23, PTCE 95-60, PTCE 91-38, PTCE 90-1, PTCE 84-14, each as amended, or an exemption similar to the foregoing exemptions or, in the case of a governmental, non-U.S. or church plan or arrangement subject to Similar Law, will not constitute or result in a non-exempt violation of Similar Law. Such representation shall be made in a certification from the transferee to the Trustee.

 

(l)    The Trustee and Note 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 to be provided to the Trustee or the Note Registrar by a prospective transferee or transferor, the Trustee or Note 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 4.02.

 

(m)  Any Note may be cancelled by the Note Registrar without any notice to or approval of any Noteholder in accordance with Section 4.03 hereof or once such Note has been properly surrendered for (i) final payment, (ii) transfer and exchange or (iii) redemption. Any Note acquired

 

30

 

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.

 

(n)    Each Noteholder and each Owner of a Note shall be deemed to acknowledge that (i) none of the Issuer, the Servicer, the Backup Servicer, the Trustee, the Custodian, or any of their respective Affiliates is acting as a fiduciary or financial or investment adviser for such Owner; and (ii) such 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 Backup Servicer, the Trustee, the Custodian or any of their respective Affiliates.

 

(o)    Each Noteholder shall be deemed to have acknowledged and agreed that (i) it may not transfer any portion of the Notes during the Investment Period unless the Issuer shall have consented to such transfer in its sole discretion and any such transferee shall have entered into an agreement to make Advances under the same terms as the Initial Purchasers, such agreement to be in form satisfactory to the Issuer in its sole discretion and (ii) following the Investment Period, each Noteholder may not transfer any portion of the Notes unless the Issuer shall have consented to such transfer, such consent not to be unreasonably withheld.

 

Section 4.03 MUTILATED, DESTROYED, LOST OR STOLEN NOTES.

 

If (a) 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 (b) 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 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 expenses of the Trustee) connected therewith.

 

31

 

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 as calculated in accordance with the Sale and Servicing Agreement. 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, in the manner set forth in Section 7.04 of the Sale and Servicing Agreement, except that 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 hereof.

 

(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 shall have occurred and be continuing, if the Trustee with the consent or at the direction of the Super-Majority Noteholders has declared the Notes to be immediately due and payable in the manner provided in Section 5.02 hereof. 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 electronically 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 federal, state and local income, business and franchise tax purposes, (i) the Notes will qualify as indebtedness secured by the Indenture Collateral and (ii) the Issuer will not be treated as an association, taxable mortgage pool or publicly traded partnership, in each case, taxable as a corporation. The Issuer, by entering into this Indenture, and each Noteholder, by the acceptance of any such Note (and each Owner, by its acceptance of an interest in the applicable

 

32

 

Note), agree to treat such Notes for federal, state and local income and franchise tax purposes as indebtedness of the Issuer (or, if the Issuer is disregarded for federal income tax purposes, of the Issuer’s owner). Each Holder of any such Note agrees that it will cause any Owner 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 or partnership for federal income tax purposes. The provisions of this Indenture shall be construed in furtherance of the foregoing intended tax treatment.

 

(b)    Each Holder and each Owner acknowledge and agree, or by acceptance of such Note or its interest in such Note shall be deemed to acknowledge and agree, 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) may result in amounts being withheld from payments in respect of such Note.

 

(c)    Each Holder and each Owner represent, or by acceptance of such Note or its interest in such Note, shall be deemed to represent that, if it is not a “United States Person” (within the meaning of Section 7701(a)(30) of the Code), either (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 “10‑percent shareholder” with respect to the Issuer (or, for so long as the equity is held by a single holder, such holder of the equity) within the meaning of Section 871(h)(3) or Section 881(c)(3)(D) of the Code, or (iii) a “controlled foreign corporation” that is related to the Issuer (or, for so long as the equity is held by a single holder, such holder of the equity) within the meaning of Section 881(c)(3)(C) of the Code; (b) 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 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.

 

(d)    Each Holder of a Note or an interest therein, by acceptance of such Note or such interest, will be deemed to have agreed to provide the Trustee or the Paying Agent, as applicable, with its Noteholder Tax Identification Information and, to the extent FATCA Withholding Tax is applicable, its Noteholder FATCA Information. In addition, each holder of a Note will be deemed to understand that the Trustee or the Paying Agent, as applicable, has the right to withhold interest payable with respect to the Note (without any corresponding gross-up) on any Owner that fails to comply with the foregoing requirements.

 

Section 4.06 SATISFACTION AND DISCHARGE OF INDENTURE.

 

33

 

(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) Section 3.03, Section 3.04, Section 3.06, Section 3.10, Section 3.19, Section 3.21, Section 3.22, Section 4.05, Section 6.07, Section 11.15 hereof and the second sentence of Section 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 hereof) 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

 

(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 ‎4.06(a)(A)(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

 

34

 

(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)    the Issuer has delivered to the Trustee an opinion of counsel to the effect that the satisfaction and discharge of the Indenture will not cause any Noteholder to be treated as having sold or exchanged its notes for purposes of Section 1001 of the Code; and

 

(D)    the Issuer has made payment of all other sums due under this Indenture 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 in trust 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 held and applied according to Section 3.05 hereof 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”:

 

35

 

(a)    failure to pay all accrued interest on the Notes on any Payment Date and such failure continues unremedied for two Business Days;

 

(b)    failure to pay all accrued interest and to reduce the aggregate Outstanding Note Balance of the Notes to zero by the Legal Final Payment Date;

 

(c)    failure by the Issuer to make any other required payment on any Payment Date and such failure continues unremedied for two Business Days;

 

(d)    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 or the Originator made in this Indenture or any other Transaction Document 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 the Originator, as applicable, or (B) there shall have been given, by registered, certified or electronic mail, to the Issuer or the Originator by the Trustee or any Noteholder, a written notice specifying such default and requiring it to be remedied and stating that such notice is a notice of default hereunder;

 

(e)    any representation, warranty, certification or written statement of the Issuer or the Originator in this Indenture or any other Transaction Document or in any certificate delivered under this Indenture shall prove to have been incorrect in any material respect when made, 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 the Originator, as applicable, or (B) the delivery to the Issuer or the Originator by the Trustee or any Noteholder, by registered, certified or electronic 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;

 

(f)     there occurs the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of 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 Issuer or for any substantial part of the Indenture Collateral, or ordering the winding-up or liquidation of the Issuer’s affairs, and such decree or order shall remain unstayed and in effect for a period of 30 consecutive days;

 

(g)    there occurs the commencement by 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 Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Indenture Collateral, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of any action by the Issuer in furtherance of any of the foregoing; (i) 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;

 

36

 

(h)    [reserved];

 

(i)     there shall remain in force, undischarged, unsatisfied, and unstayed for more than 30 consecutive days, any final non-appealable judgment in the amount of $50,000 or more against the Issuer not covered by insurance or bond;

 

(j)     any material provision of any Transaction Document ceases to create an enforceable obligation against the Issuer or the Originator, as applicable;

 

(k)    the Issuer becomes subject to registration as an “investment company” under the Investment Company Act of 1940, as amended;

 

(l)     any of the Notes shall be characterized by the Internal Revenue Service as other than indebtedness for federal income tax purposes;

 

(m)   a tax Lien in excess of $500,000 or any ERISA lien is created that secures the payment of money owed by the Issuer; and

 

(n)    the Issuer shall become an association, publicly traded partnership or taxable mortgage pool, that is, in each case, taxable as a corporation for U.S. federal income tax purposes.

 

The Issuer shall deliver to the Trustee and the Rating Agency, within two Business Days after the occurrence of an Event of Default, written notice in the form of an Officer’s Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (e) or clause (f) above, its status and what action the Issuer is taking or proposes to take with respect thereto.

 

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 Section 5.01(f) or Section 5.01(g) 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 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 Section 5.01(f) or Section 5.01(g) 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:

 

(A)    the Issuer has paid or deposited with the Trustee a sum sufficient to pay:

 

37

 

(i)    all payments of principal of 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

 

(ii)    all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, indemnities, disbursements and advances of the Trustee and its agents and counsel; and

 

(B)    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, 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 7.05(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 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 to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law.

 

38

 

(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 expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

 

(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

 

39

 

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 hereof):

 

(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 of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Trustee and the Holders of the Notes;

 

(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; and

 

(v)     provide instructions to the Lockbox Bank regarding the access, transfer and withdrawal of funds pursuant to Section 4 of the Deposit Account Control Agreement;

 

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 have otherwise become immediately due and payable in accordance with Section 5.02 hereof 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, and all amounts due

 

40

 

to the 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 Originator, 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 Originator, 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 the 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 7.05(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 25% of the Aggregate Outstanding Note 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 reasonable indemnity 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 Aggregate Outstanding Note Balance.

 

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,

 

41

 

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 Note 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 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.

 

42

 

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)    subject to the express terms of Section 5.04 hereof, any direction to the Trustee to sell or liquidate the Indenture Collateral shall be by Holders of the Notes representing the Majority Noteholders; 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 (a) any suit instituted by the Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 25% of the Aggregate Outstanding Note Balance or (c) 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.

 

43

 

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)    Other than as permitted under the Sale and Servicing Agreement, 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 Note 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 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 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;

 

44

 

(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 Servicer in connection with the liquidation or sale of the Indenture Collateral shall be deposited into the Lockbox Account no later than two 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.

 

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 may request to compel or secure the performance and observance by the Originator and the Servicer, as applicable, of each of their obligations to the Issuer under or

 

45

 

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 Originator or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Originator 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 (which direction shall be in writing or by telephone (confirmed in writing promptly thereafter)) 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, 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, except that:

 

(i)    this paragraph does not limit the effect of Section 6.01(b) hereof;

 

(ii)    the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

 

46

 

(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 hereof.

 

(d)    Every provision of this Indenture that in any way relates to the Trustee is subject to Section 6.01(a), Section 6.01(b), Section 6.01(c) and Section 6.01(g) hereof.

 

(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 in trust 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 Default, Event of Default, 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 or an Opinion of Counsel. 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 or an Opinion of Counsel.

 

(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 supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder.

 

47

 

(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, accountants or other experts or an Opinion of Counsel with respect to legal matters 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, accountants, or other experts or such Opinion of Counsel.

 

(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 in writing to do so by Noteholder evidencing not less than 25% of the of the Aggregate Outstanding Note Balance and such Noteholders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by the Trustee, its agents and its counsel in compliance with such request or direction.

 

(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)    Except as expressly provided herein or in any other Transaction Document, 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 by it from the Issuer or Servicer or to otherwise monitor the activities of the Issuer or Servicer.

 

(i)     The Custodian, Securities Intermediary, Paying Agent, Backup Servicer, Lockbox Bank and Note Registrar hereunder and under the other Transaction Documents, shall be afforded the same rights, protections, immunities and indemnities afforded the Trustee pursuant to this Article VI.

 

(j)     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 in its individual capacity to personal liability, is contrary to law or is inconsistent with this Indenture or any other Basic Document.

 

(k)    Any discretion, permissive right or privilege of the Trustee to take or refrain from taking actions enumerated in this Indenture shall not be construed as a duty or obligation.

 

(l)     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

 

48

 

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.

 

(m)   The Trustee shall be without liability for any damage or loss resulting from or caused by events or circumstances beyond its 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, civil and military disturbance, pandemics or epidemics, 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.

 

(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.

 

(o)    Knowledge of the Trustee shall not be attributed or imputed to U.S. Bank Trust Company, National Association or U.S. Bank National Association in its other roles in the transaction, if any, and the knowledge of U.S. Bank Trust Company, National Association or U.S. Bank National Association in any other role shall not be attributed or imputed to U.S. Bank Trust Company, National Association as Trustee or in its other roles.

 

(p)    The Trustee’s receipt of publicly available reports hereunder shall not constitute constructive or actual notice or knowledge of any information contained therein or determinable therefrom, including but not limited to a party’s compliance with covenants under this Indenture.

 

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 6.01 hereof.

 

Section 6.04 TRUSTEES 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 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.

 

49

 

Section 6.05 NOTICE OF EVENT OF DEFAULT.

 

The Trustee shall mail to each Noteholder and the Servicer (who shall promptly forward the same to the Rating Agency, for so long as any of the Notes are Outstanding) notice of an Event of Default within 30 days after a Responsible Officer of the Trustee has actual knowledge thereof in accordance with Section 6.01 hereof.

 

Section 6.06 REPORTS BY TRUSTEE TO HOLDERS.

 

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 Internal Revenue Code Sections 6011(a), 6111(d) or 6112, 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 pursuant to a separate agreement dated as of the date hereof 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 the Trustee and its officers, directors, employees, representatives and agents against any and all loss, liability or expense (including attorneys’ fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder, 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 of the other Issuer Documents, including any legal fees or expenses incurred by the Trustee in connection with the enforcement of the Issuer’s indemnification or other contractual obligations hereunder. The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations. 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

 

50

 

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. 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 7.05 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 Section 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 7.05 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 hereof, 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 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 (f) or (g) 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.

 

51

 

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 hereof has become effective. The Trustee may resign with 30 days prior written notice to the Issuer, the Noteholders and the Servicer. The Majority Noteholders or the Issuer, with the written consent of the Majority Noteholders, may remove the Trustee with 30 days prior written notice to 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:

 

(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.

 

52

 

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 or banking association 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 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

 

53

 

(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 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 (a) 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, (b) be authorized under such laws to exercise corporate trust powers, (c) have a combined capital and surplus of at least $50,000,000, (d) have its long‑term debt obligations rated or have an issuer rating that is at least Baa3 by Moody’s or an equivalent rating by DBRS, Inc., d/b/a Morningstar DBRS (if rated by DBRS, Inc., d/b/a Morningstar DBRS), and (e) 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 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.

 

The Trustee hereby makes the following representations, warranties and covenants as of the date hereof on which the Issuer, the Servicer and the Noteholders shall rely:

 

(a)    The Trustee is a national banking association duly organized and validly existing under the laws of the United States.

 

(b)    The Trustee satisfies the criteria specified in Section 6.11 hereof.

 

54

 

(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 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.

 

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;

 

55

 

(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 under the Transaction Documents to which it is a party, the Trustee shall be subject to the protections, rights, indemnities and immunities afforded it under Article VI hereof.

 

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 Notes so that there will be separate Trustees for each of the 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 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 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.

 

56

 

ARTICLE VIII

TRANSACTION ACCOUNTS, DISBURSEMENTS AND RELEASES

 

Section 8.01 COLLECTION OF MONEY.

 

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 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, in the name of the Trustee, for the benefit of the Noteholders, the Distribution Account, the General Reserve Account, the Collection Account and the Principal Reinvestment Account and the Issuer shall establish the Lockbox Account as a non-interest bearing, segregated account at the Lockbox Bank and in the name of the Trustee for the benefit of the Noteholders, in each case, as provided in Sections 7.01, 7.02 and 7.03 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 after each Reference Date (but prior to the related Payment Date) or such other date as determined by the Trustee pursuant to Section 7.05(c) of the Sale and Servicing Agreement, all Collections with respect to the related Collection Period on deposit in the Collection Account and all other amounts then on deposit in the Collection Account constituting Available Funds (including, without limitation, any amounts deposited into the Collection Account from the General Reserve Account pursuant to Section 7.02 of the Sale and Servicing Agreement) will be transferred from the Collection Account to the Distribution Account as provided in Section 7.05 of the Sale and Servicing Agreement. Such amounts will remain uninvested while deposited into the Distribution Account. The Securities Intermediary shall invest any funds in the General Reserve Account and the Principal Reinvestment Account as provided in the Sale and Servicing Agreement. Funds will be deposited into the General Reserve Account as provided in Section 7.05 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

 

57

 

Account to Noteholders in respect of Notes and any other parties specified in the Priority of Payments.

 

(d)    All moneys deposited from time to time in the Distribution Account, the General Reserve Account and the Principal Reinvestment Account pursuant to the Sale and Servicing Agreement and all deposits therein pursuant to this Indenture are for the benefit of the Noteholders, and all investments made with such moneys including all income or other gain from such investments are for the benefit of the Noteholders as provided by the Sale and Servicing Agreement.

 

(e)    The Redemption Price described in Section 10.01 hereof shall be deposited into the Distribution Account.

 

(f)    The Issuer shall not change the Lockbox Account without the consent of the Majority Noteholders.

 

Section 8.03 OFFICERS 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 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 hereof, 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

 

58

 

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.

 

(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 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

 

59

 

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.

 

(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 corporation into which the Securities Intermediary may be merged or converted or with which it may be consolidated, or any corporation 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 corporation.

 

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:

 

(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;

 

60

 

(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 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 hereof;

 

(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; and

 

(xiii)   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

 

61

 

delivered by the Issuer) and the Servicer, 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 Noteholders under this Indenture (other than as included in clauses (i) through (xiv) of Section 9.01(a) hereof); provided that such action shall not, as evidenced by an Opinion of Counsel, (A) materially adversely affect the interest of any Noteholder or (B) cause the Issuer to be subject to an entity level tax or be classified as a taxable mortgage pool within the meaning of Section 7701(i) of the Code (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 Noteholder).

 

(c)    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) hereof, 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 9.02(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 9.06 hereof; provided further that (i) such action shall not, as evidenced by an Opinion of Counsel, (A) materially adversely affect the interest of any Noteholder or (B) cause the Issuer to be subject to an entity level tax or be classified as a taxable mortgage pool within the meaning of Section 7701(i) of the Code (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 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 or the due date of any payment of principal of or interest, as applicable, on any Note, reduce the principal amount of any Note or any rate of interest or the portion of the Redemption Price payable to the Holders of the Notes, change the earliest date on which any Note may be redeemed, change the provisions of this Indenture relating to the application of proceeds of any Loan Assets to the payment of principal, interest or of distributions pursuant to the Sale and Servicing Agreement, change any place where, or the coin or currency in which, any Note or the principal thereof, or interest thereon, is payable, or impair the right to institute suit for the enforcement of any provisions of the Indenture regarding payment on the Notes;

 

(ii)    reduce the percentage of the Aggregate Outstanding Note Balance, the consent of the Holders of which is required for any such supplemental indenture, or the

 

62

 

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;

 

(iii)    modify or alter the provisions of the proviso to the definition of the term “Outstanding” or modify or alter the provisions of the proviso to the definition of the term “Holder”;

 

(iv)    modify or alter the provisions hereunder regarding the voting of Notes held by the Issuer, the Originator, the Servicer, an Affiliate of any of them or any obligor on the Notes;

 

(v)     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 this Indenture; or

 

(vi)    reduce the percentage of the Aggregate Outstanding Note 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;

 

(vii)    modify any provision of this Section 9.02 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 Note affected thereby; 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 expressly permitted 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)    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 provide 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.

 

63

 

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 Section 6.01 and Section 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, 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.

 

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 amount or priority or payment of any fees or other amounts payable to the Servicer unless the Servicer 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.

 

64

 

(a)    The Issuer may effect an Optional Redemption of the Notes, in whole or in part, and reduce the Commitment Amount, on any Redemption Date (such Redemption Date shall be a date to be specified in a notice to be delivered as described in the second sentence of this Section 10.01(a)) by deposit in full of the Redemption Price in the Distribution Account for distribution to the applicable Holders of the Notes and other persons entitled thereto by 10:00 a.m. (New York, New York time) on the Business Day preceding the applicable Redemption Date whereupon all such Notes shall be due and payable on the applicable Redemption Date, in connection with which the Issuer shall comply with the provisions of this Section 10.01 and Section 10.02 hereof. The Issuer will furnish notice of such election to the Trustee, the Owner Trustee, the Trust’s Agent and the Rating Agency no later than ten (10) Business Days prior to the proposed Redemption Date. Any Optional Redemption of the Notes during the Aggregation Period shall be accompanied by a corresponding, equal and permanent reduction of the Commitment Amount.

 

(b)    The Notes to be redeemed shall, following delivery of a notice of an Optional Redemption complying with Section 10.02 hereof, on the 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 Redemption Date, upon deposit in full by the Issuer in the Distribution Account of an amount equal to the Redemption Price, 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 or the Make-Whole Amount, if applicable, of the Notes shall be distributed to Noteholders in accordance with Section 7.05(b) of the Sale and Servicing Agreement and all other amounts included in the Redemption Price shall be distributed in accordance with Section 7.05(a) of the Sale and Servicing Agreement.

 

(d)    The Issuer may withdraw any notice of Optional Redemption or specify a new Redemption Date at any time prior to the proposed Redemption Date set forth in any prior notice of Optional Redemption by providing written notice to the Trustee and the Rating Agency by no later than the second Business Day preceding such 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.

 

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 electronic mail, overnight courier or by first-class mail, postage prepaid, transmitted or mailed prior to the applicable Redemption Date, to each Holder of Notes, as of the close of business on the Record Date preceding the applicable Redemption Date at such Holder’s address appearing in the Note Register.

 

(b)    All notices of redemption shall state:

 

(i)    the Redemption Date;

 

(ii)    the Redemption Price;

 

65

 

(iii)    that the Record Date otherwise applicable to such 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 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.

 

(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.

 

66

 

(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 unless such notice is prohibited by statute, regulation, rule or court order. 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.

 

(f)    Notwithstanding the foregoing in this Section 11.01, all parties hereto agree that each of them and each of their managers, officers, employees, representatives, and other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure. “Tax treatment” and “tax structure” shall have the same meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4.

 

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 or any other appropriate Person, stating that the information with respect to such factual matters is in the possession of the Servicer, the Issuer 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.

 

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

 

67

 

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 hereof.

 

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 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 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 guaranteeing next day delivery or by telecopy in legible form, to the Trustee addressed to it at U.S. Bank Trust Company, National Association, 190 S. LaSalle St., 7th Floor, Chicago, IL 60603, Attention: Global Corporate Trust – Horizon Funding II, LLC, Telephone: (732) 321-2514; Email: Melissa.rosal@usbank.com;

 

68

 

Jennifer.napolitano@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 312 Farmington Avenue, Farmington, CT 06032; Telephone: 860-674-9977; Facsimile No.: 860-674-8655; Email: dtrolio@horizontechfinance.com, 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, CT 06032; Telephone: 860-674-9977; Facsimile No.: 860-674-8655; Email: dtrolio@horizontechfinance.com, or at any other address previously furnished in writing to the Issuer or the Trustee by the Servicer;

 

(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, Inc., d/b/a Morningstar DBRS, at the following address: DBRS, Inc., d/b/a Morningstar DBRS 140 Broadway, 43rd Floor New York, NY 10005 Attention: U.S. 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, Inc., d/b/a Morningstar DBRS unless the Outstanding Notes is rated by DBRS, Inc., d/b/a Morningstar DBRS.

 

(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); or (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; and 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

 

69

 

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.

 

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, 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.

 

70

 

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, 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.

 

(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 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 ELECTRONIC SIGNATURES; COUNTERPARTS.

 

This Indenture may be executed in any number of counterparts (including by facsimile), each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. The words “execution,” “signed,” “signature,” and words of like import this Indenture or any of the other Transaction Document and any amendment, consent or waiver thereof shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms 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 Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

Section 11.14 ISSUER OBLIGATION.

 

71

 

No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer 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 (a) the Trustee in its individual capacity, (b) any of the Originator, the Servicer and any member of the Issuer or (c) 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.

 

Section 11.15 NO PETITION; LIMITED RECOURSE.

 

(a)    The Trustee, 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 the Rating Agency, institute against the Issuer, or join in any institution against 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.

 

Section 11.16 INSPECTION; CONFIDENTIALITY.

 

The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Trustee, 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. Subject to and in accordance with Section 11.01 hereof, the Trustee shall and shall

 

72

 

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.

 

Section 11.17 RESERVED.

 

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 Originator or any member of the Issuer (including by virtue of any deficiency claim in respect of obligations not paid or otherwise satisfied from the Indenture Collateral and proceeds thereof).

 

Section 11.19 Related Parties.

 

The parties expressly acknowledge that U.S. Bank Trust is an Affiliate of U.S. Bank N.A. and consent to such Affiliates serving in the capacities of Trustee (U.S. Bank Trust), Securities Intermediary, Custodian, Backup Servicer, and Lockbox Bank (U.S. Bank N.A.), respectively. Each of U.S. Bank N.A., as Custodian, Backup Servicer, Securities Intermediary, and Lockbox Bank, and U.S. Bank Trust, as Trustee may 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 N.A. or U. S. Bank Trust, as applicable, of its express duties set forth in this Indenture or any other Transaction Document, all of which defenses, claims or assertions are hereby expressly waived by the other parties hereto except in the case of gross negligence, bad faith or willful misconduct by U.S. Bank N.A. or U.S. Bank Trust, as applicable.

 

[signature page follows]

 

73

  

 

 

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 II, LLC 

   
  By: Horizon Technology Finance Corporation, its sole member

 

 

 

 

By:

/s/ Daniel R. Trolio

  Name:  Daniel R. Trolio
  Title: Chief Financial Officer
   
   

 

 

 

 

 

[Signature Page - Indenture]

 

 

 

IN WITNESS WHEREOF, the Issuer and the Trustee 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/ Jennifer Napolitano

 

Name: 

 Jennifer Napolitano

 

Title: 

 Vice President

 

 

U.S. BANK NATIONAL ASSOCIATION
not in its individual capacity, except as expressly set forth herein, but solely as Securities Intermediary 

 

 

 

 

By:

/s/ Jennifer Napolitano

 

Name: 

Jennifer Napolitano

 

Title: 

 Vice President

 

 

 

 

 

[Signature Page - Indenture]

 

 
ex_690505.htm

Exhibit 10.2

 

NOTE FUNDING AGREEMENT
Between

 

HORIZON FUNDING II, LLC,

 

as Issuer,

 

and

 

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA,

 

PACIFIC LIFE INSURANCE COMPANY

 

and

 

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

 

as the Initial Purchasers

 

dated as of June 21, 2024

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

 

ARTICLE I DEFINITIONS

1

SECTION 1.1

Certain Defined Terms.

1

SECTION 1.2

Other Definitional Provisions.

2

ARTICLE II PURCHASE OF NOTES; ADVANCES

3

SECTION 2.1

Purchase of Notes; Initial Advance; Commitment.

3

SECTION 2.2

Procedures for Advances.

3

ARTICLE III CONDITIONS TO ADVANCES

4

SECTION 3.1

Conditions Precedent to Advances

4

ARTICLE IV CLOSING

5

SECTION 4.1

Closing.

5

SECTION 4.2

Transactions to be Effected at the Closing.

5

ARTICLE V REPRESENTATIONS AND WARRANTIES  WITH RESPECT TO THE INITIAL PURCHASERS

6

SECTION 5.1

Securities Laws; Transfer Restrictions.

6

ARTICLE VI COVENANTS

6

SECTION 6.1

Reports and Notices under the Transaction Documents.

6

SECTION 6.2

Amendments to Indenture and Sale and Servicing Agreement.

6

ARTICLE VII MISCELLANEOUS

7

SECTION 7.1

Amendments.

7

SECTION 7.2

Notices.

7

SECTION 7.3

No Waiver; Remedies.

9

SECTION 7.4

Binding Effect; Assignability.

9

SECTION 7.5

Confidentiality.

9

SECTION 7.6

GOVERNING LAW; JURISDICTION.

9

SECTION 7.7

Waiver of Trial by Jury.

10

SECTION 7.8

Execution in Counterparts.

10

SECTION 7.9

No Recourse.

10

SECTION 7.10

No Petition.

11

SECTION 7.11

Survival

11

SECTION 7.12

Waiver of Special Damages.

11

SECTION 7.13

Costs and Expenses; Indemnification.

11

 

 

 

TABLE OF CONTENTS

 

Page

 

EXHIBITS

 

Exhibit A

Form of Advance Request

 

SCHEDULES

 

Schedule I

Commitments

 

 

 

This NOTE FUNDING AGREEMENT (this “Agreement”), dated as of June 21, 2024, is by and among Horizon Funding II, LLC, a Delaware limited liability company, as Issuer (the “Issuer”), Teachers Insurance and Annuity Association of America, Pacific Life Insurance Company and The Lincoln National Life Insurance Company, as initial purchasers (together with their respective successors and assignees, the “Initial Purchasers”).

 

RECITALS

 

WHEREAS, the Issuer will issue the Notes (the “Notes”) pursuant to an Indenture, dated as of June 21, 2024 (as amended, supplemented or otherwise modified from time to time, the “Indenture”), between the Issuer and U.S. Bank Trust Company, National Association, as Trustee (the “Trustee”);

 

WHEREAS, the Issuer may, from time to time during the Funding Period, subject to and in accordance with the terms of the Indenture and this Agreement, request that the Initial Purchasers make Advances, and such Advances to be evidenced by increases in the Aggregate Outstanding Note Balance of such Initial Purchaser’s Note; and

 

WHEREAS, the Initial Purchasers desire to acquire such Notes and have, subject to and in accordance with the terms of the Indenture and this Agreement, a commitment to make Advances.

 

NOW, THEREFORE, based upon the above Recitals, the mutual premises 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 1.1 Certain Defined Terms. Capitalized terms used herein without definition shall have the meanings set forth in the Indenture and the Sale and Servicing Agreement. Additionally, the following terms shall have the following meanings:

 

Advance” means an advance made by the Initial Purchasers to the Issuer under and in accordance with the terms of this Agreement.

 

Advance Account” shall mean, unless another account is specified by the Issuer in the Advance Request, the Principal Reinvestment Account.

 

Advance Availability” means, for any Advance Date, the lesser of (i) the Commitment Amount minus the Aggregate Outstanding Note Balance and (ii) the Borrowing Base minus the Aggregate Outstanding Note Balance, in each case measured as of the Business Day before the Issuer’s delivery of an Advance Request (giving pro forma effect to the Advance requested and any Loans to be acquired on the proposed Advance Date). Following the occurrence of the Investment Period Termination Date, the Advance Availability shall be zero.

 

 

 

 

Advance Date” means the day on which the Initial Purchasers make an Advance in accordance with and subject to the terms and conditions of this Agreement.

 

Advance Request” means a written notice in the form of Exhibit A, to be used by the Issuer to request the funding of an Advance from the Initial Purchasers.

 

Closing Date” has the meaning specified in Section 4.1.

 

Commitment Amount” means, collectively, the commitment of the Initial Purchasers to fund Advances during the Funding Period in an amount not to exceed $100,000,000 in the aggregate outstanding at any given time; provided that the amount may be increased at the mutual discretion and agreement of the Issuer and the Initial Purchasers, provided that, if the Aggregate Outstanding Note Balance is less than $25,000,000 as of November 30, 2024, the Commitment Amount will be automatically and permanently reduced to $25,000,000 without any further action by any party to the Transaction Documents. The Commitment Amounts of the Initial Purchasers are set forth on Schedule I hereto (as may be amended from time to time with the consent of the Initial Purchasers).

 

Funding Period” means the period commencing on the Closing Date and ending on the earlier to occur of (i) 12 months after the Closing Date and (ii) the Investment Period Termination Date.

 

Indenture” has the meaning specified in the recitals.

 

Initial Advance” has the meaning specified in Section 2.1(a).

 

Initial Purchasers” is defined in the Preamble.

 

Private Rating Letter” has the meaning specified in the Note Purchase Agreement.

 

Related Parties” means with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

 

Sale and Servicing Agreement” means that certain sale and servicing agreement, as amended, by and among the Issuer, Horizon Technology Finance Corporation, as Servicer, Originator and Seller, U.S. Bank Trust Company, National Association, as Trustee, and U.S. Bank National Association, as Backup Servicer, Custodian, Lockbox Bank and Securities Intermediary.

 

SECTION 1.2 Other Definitional Provisions. (a) All terms defined in this Agreement shall have the meanings defined herein when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

 

(b)    As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 hereof, and accounting terms partially defined in Section 1.1 hereof to the extent not defined, shall have the respective meanings given to them under GAAP. To the extent that the definitions of accounting terms herein

 

2

 

are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained herein shall control.

 

(c)    The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection, and Exhibit references contained in this Agreement are references to Sections, subsections and the Exhibits in or to this Agreement unless otherwise specified.

 

ARTICLE II

PURCHASE OF NOTES; ADVANCES

 

SECTION 2.1 Purchase of Notes; Initial Advance; Commitment. (a) On the terms and subject to the satisfaction of the conditions set forth in this Agreement and Section 2.02 of the Sale and Servicing Agreement, and in reliance on the covenants, representations, warranties and agreements set forth herein and therein, the Issuer has sold to the Initial Purchasers and each Initial Purchaser has purchased on the Closing Date, Notes with initial Outstanding Note Balances of at least $50,000,000(the “Initial Advance”).

 

(b)    Subject to the terms and conditions of this Agreement, during the Funding Period, each Initial Purchaser agrees to make Advances to the Issuer in an amount not to exceed its Percentage Interest of the Advance Availability in effect for each Advance Date. The Initial Purchasers shall have no obligation to make Advances hereunder to the extent any additional Advances would cause the Aggregate Outstanding Note Balance to exceed the Commitment Amount. Amounts advanced pursuant to this Agreement may be repaid in accordance with Section 7.05(b)(i)(2) of the Sale and Servicing Agreement. For the avoidance of doubt, amounts so prepaid may not be re-borrowed.

 

(c)    Nothing contained herein shall confer upon any Initial Purchaser any interest in, or subject any Initial Purchaser to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Initial Purchaser. No Initial Purchaser shall have any liability for the acts of any other Initial Purchaser. No Initial Purchaser shall be responsible to Issuer or any other Person for any failure by any other Initial Purchaser to fulfill its obligations to make credit available hereunder, nor to advance for such Initial Purchaser or on its behalf, nor to take any other action on behalf of such Initial Purchaser hereunder or in connection with the financing contemplated herein.

 

(d)    No Initial Purchaser shall be obligated to make an Advance under this Agreement and each other Transaction Document upon the earlier to occur of (i) the expiration of the Funding Period and (ii) the date upon which such Initial Purchaser shall have made Advances in an aggregate amount equal to the Commitment Amount of such Initial Purchaser.

 

SECTION 2.2 Procedures for Advances. (a) On the terms and conditions hereinafter set forth, the Issuer may, by delivery of an Advance Request to the Initial Purchasers and the Trustee, from time to time, on any Business Day during the Funding Period, request that each Initial

 

3

 

Purchaser make Advances to it in an amount which, at any time, shall not exceed its Percentage Interest of the Advance Availability in effect for the proposed Advance Date.

 

(b)   Each Advance Request shall be delivered not later than 1:00 P.M. (New York time) on the date which is three (3) Business Days prior to the requested Advance Date; provided, however, that the Issuer may revoke an Advance Request upon written notice to the Initial Purchasers delivered not later than 3:00 P.M. (New York time) on the Business Day prior to the requested Advance Date.

 

(c)    Each Advance Request shall contain the following information:

 

(i)    the proposed Advance Date;

 

(ii)    the amount of the requested Advance;

 

(iii)    the Advance Availability for such Advance Date;

 

(iv)    the amount of Principal Proceeds to be withdrawn from the Collection Account and deposited to the Principal Reinvestment Account on such Advance Date;

 

(v)    the Advance Account to which the Advance should be funded; and

 

(vi)    a certification that, as of the related Advance Date, the conditions set forth in Section 3.1 hereof have been satisfied.

 

(d)    Each Advance Request must be accompanied by (i) a Borrowing Base Certificate as of the Business Day before the Issuer’s delivery of such Advance Request (giving pro forma effect to the Advance requested and any Loans to be acquired on the proposed Advance Date) and (ii) an updated List of Loans (including any Loans to be acquired on such Advance Date).

 

(e)    On each Advance Date, upon the satisfaction of the applicable conditions set forth in this Section 2.2 and ARTICLE III hereof, the Initial Purchasers shall transfer to the Advance Account, an amount equal to the requested Advance. Each wire transfer of an Advance to the Issuer shall be initiated by the Initial Purchasers at the later of (i) 12:00 P.M. (New York time) on the applicable Advance Date and (ii) satisfaction of the conditions set forth in Section 3.1 hereof.

 

ARTICLE III

CONDITIONS TO ADVANCES

 

SECTION 3.1 Conditions Precedent to Advances. (a) The Initial Purchasers shall not be obligated to make an Advance on any Advance Date unless the following conditions have been satisfied or waived by the Initial Purchasers:

 

(i)     The representations and warranties of the Issuer in Section 3.25 of the Indenture and of the Servicer and the Originator, as applicable, set forth in Sections

 

4

 

3.01, 3.02, 3.04 and 3.06 of the Sale and Servicing Agreement are true and correct in all respects on the Closing Date and in all material respects or in all respects for any representation or warranty already qualified by materiality on any other Advance Date on and as of such Advance Date, before and after giving effect to such Advance;

 

(ii)    The Funding Period shall not have terminated and as of the date of the Advance Request, no Rapid Amortization Event has occurred since the Closing Date;

 

(iii)   No Event of Default, Rapid Amortization Event or Servicer Default has occurred and is continuing or will occur, after giving effect to such Advance;

 

(iv)   After giving effect to such Advance and to the application of proceeds therefrom, the Aggregate Outstanding Note Balance will not exceed the Borrowing Base;

 

(v)    After giving effect to such Advance and to the application of proceeds therefrom, the Aggregate Outstanding Note Balance shall not exceed the Commitment Amount;

 

(vi)   The Issuer shall have caused the Required Loan Documents for any Loans being acquired on such Advance Date to be delivered to the Custodian in accordance with the Sale and Servicing Agreement; and

 

(vii)  To the extent the Issuer is directing that Principal Proceeds be withdrawn from the Collection Account and deposited to the Principal Reinvestment Account on such Advance Date, the Issuer reasonably believes that funds on deposit in the Collection Account will be sufficient to pay Required Payments on the next Payment Date.

 

(b)    To the extent the Initial Purchasers shall fund an Advance on an Advance Date, it shall be deemed to have agreed that each of the foregoing conditions have been satisfied or waived as to such Advance and Advance Date.

 

(c)    The Issuer shall have issued one or more Notes under the Indenture in respect of such Advances, which Notes shall include a Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO).

 

ARTICLE IV

CLOSING

 

SECTION 4.1 Closing. The closing of the purchase of the Notes and the funding of the Initial Advance will be held on or about 10:00 A.M. (New York time), on June 20, 2024 (the “Closing Date”).

 

SECTION 4.2 Transactions to be Effected at the Closing. On the Closing Date, simultaneously (i) the Issuer shall deliver the Notes to the Initial Purchasers, (ii) the Originator will sell, convey and assign all its right, title and interest in the Initial Loan Assets to the Issuer in

 

5

 

accordance with Section 2.02 of the Sale and Servicing Agreement, and (iii) the Initial Purchasers shall transfer to the Advance Account, for deposit in same day funds, the Initial Advance.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE INITIAL PURCHASERS

 

SECTION 5.1 Securities Laws; Transfer Restrictions. Each Initial Purchaser represents and warrants that:

 

(a)    it has (i) reviewed the Indenture, the Sale and Servicing Agreement and all other documents which have been provided by the Issuer to it with respect to the transactions contemplated thereby, (ii) participated in due diligence sessions with the Originator and the Servicer and (iii) had an opportunity to discuss the Issuer’s, the Servicer’s and the Originator’s businesses, management and financial affairs, and the terms and conditions of the proposed purchase with the Issuer, the Originator and the Servicer and their respective representatives;

 

(b)    it is an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act and has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of investing in, and it is able and prepared to bear the economic risk of investing in, the Notes;

 

(c)    it is a “qualified purchaser” within the meaning of Section 2(A)(51) of the Investment Company Act of 1940 pursuant to an exemption under the Securities Act; and

 

(d)    it understands and acknowledges and agrees that the Notes are subject to the transfer restrictions set forth in the Indenture.

 

ARTICLE VI

COVENANTS

 

SECTION 6.1 Reports and Notices under the Transaction Documents. So long as the Notes remain outstanding:

 

(a)    Monthly Report and Liquidation Report. The Issuer will cause each Monthly Report and Liquidation Report under the Sale and Servicing Agreement to be delivered to the Initial Purchasers, contemporaneously with the delivery thereof to the Trustee.

 

(b)    Notices. The Issuer will cause a copy of all notices required to be delivered by it or the Servicer under the Sale and Servicing Agreement or the Indenture to be promptly delivered to the Initial Purchasers.

 

(c)    Annual Report. Provided that the Initial Purchasers execute such specified user forms as required by the Independent Accountants, if any, the Issuer will cause to be delivered to the Initial Purchasers the annual reports prepared by the Independent Accountants pursuant to Article IX of the Sale and Servicing Agreement.

 

6

 

(d)    Rating Letter.  From time to time at the request of the Initial Purchasers, the Issuer shall deliver, or caused to be delivered, to the Initial Purchasers, one or more Private Rating Letters issued by the Rating Agency confirming the Debt Rating for the Notes then issued and outstanding and setting forth the Private Placement Numbers issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) in respect of such Notes.

 

SECTION 6.2 Amendments to Indenture and Sale and Servicing Agreement. Notwithstanding that Section 9.01 of the Indenture permits the Issuer and the Trustee to enter into a supplemental indenture without the consent of the Initial Purchasers and Section 13.01(a) of the Sale and Servicing Agreement permits the parties thereto to enter into certain amendments without the consent of the Initial Purchasers, so long as the Initial Purchasers own 100% of the Notes, the Issuer agrees that it will not enter into any such supplemental indenture or amendment to the Indenture or the Sale and Servicing Agreement without the prior written consent of the Initial Purchasers.

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1 Amendments. No amendment or waiver of any provision of this Agreement shall in any event be effective without the written agreement of the Issuer and the Initial Purchasers.

 

SECTION 7.2 Notices. All notices and other communications hereunder, except as herein otherwise specifically provided, shall be in writing and, if to the Initial Purchasers, shall be mailed, delivered or telegraphed and confirmed to the Initial Purchasers at the following address:

 

If to Teachers Insurance and Annuity Association of America:

 

Teachers Insurance and Annuity Association of America
c/o Nuveen Alternatives Advisors LLC
8500 Andrew Carnegie Boulevard
Charlotte, North Carolina 28262
Attention: Private Placements

E-mail:

NuveenPrivatePlacements@nuveen.com

DL_InvestmentsCenterofExcellence@tiaa.org

KCTIAAGenCustodian@StateStreet.com

KCTIAAGenInvManagers@StateStreet.com

Telephone:

(704) 988-4349 (Name: Ho-Young Lee)

(212) 916-4000 (General Number)

Facsimile:  (704) 988-4916

    

With a copy to:

 

Nuveen Alternatives Advisors LLC

8500 Andrew Carnegie Boulevard

 

7

 

Charlotte, North Carolina 28262-8500

Attention: Legal Department
Attention: Trevor Sanford, Associate General Counsel
E-mail: Trevor.Sanford@nuveen.com
Telephone:

(704) 988-4092

(212) 916-4000 (General Number)

 

If to The Lincoln National Life Insurance Company:

 

The Lincoln National Life Insurance Company

c/o Nuveen Alternatives Advisors LLC

8500 Andrew Carnegie Blvd

Charlotte, NC 28262

Attention: Private Placements

Telephone: (704) 988-4552 (Ken Price)
Facsimile: (704) 988-4916
Email:

NuveenPrivatePlacements@nuveen.com

kenneth.price@nuveen.com

 

With a copy to:

 

Nuveen Alternatives Advisors LLC

8500 Andrew Carnegie Boulevard

Charlotte, North Carolina 28262-8500

Attention: Legal Department
Attention: Trevor Sanford, Associate General Counsel
E-mail: Trevor.Sanford@nuveen.com
Telephone:

(704) 988-4092

(212) 916-4000 (General Number)

 

If to Pacific Life Insurance Company:

 

Pacific Life Insurance Company

c/o Nuveen Alternatives Advisors LLC

8500 Andrew Carnegie Blvd

Charlotte, NC 28262

Attention: Private Placements

Telephone: (704) 988-4349 (Ho Young-Lee)
Facsimile: (704) 988-4916
Email:

NuveenPrivatePlacements@nuveen.com

hoyoung.lee@nuveen.com

  

With a copy to:

 

Nuveen Alternatives Advisors LLC

8500 Andrew Carnegie Boulevard

Charlotte, North Carolina 28262-8500

         

8

 

Attention: Legal Dept.
Attention: Trevor Sanford, Associate General Counsel
E-mail: Trevor.Sanford@nuveen.com
Telephone:

(704) 988-4092

(212) 916-4000 (General Number)

 

if to the Issuer, shall be mailed, delivered or telegraphed and confirmed to the Issuer at the following address:

 

Horizon Funding II, LLC

312 Farmington Avenue
Farmington, CT 06032
Telephone: 860-674-9977
Fax: 860-676-8655
Email: dtrolio@horizontechfinance.com

 

SECTION 7.3 No Waiver; Remedies. No failure on the part of any party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

SECTION 7.4 Binding Effect; Assignability. (a) This Agreement shall be binding on the parties hereto and their respective successors and assigns; provided, however, that the Issuer may not assign any of its rights or delegate any of its duties hereunder without the prior written consent of the Initial Purchasers; provided, further that each Initial Purchaser acknowledges and agrees that it is subject to the transfer restrictions related to the Notes that are set forth in the Indenture.

 

(b)    This Agreement shall create and constitute the continuing obligation of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time as all amounts payable with respect to the Notes shall have been paid in full.

 

(c)    Any Noteholder may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Noteholder, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Noteholder from any of its obligations hereunder or substitute any such pledgee or assignee for such Noteholder as a party hereto.

 

SECTION 7.5 Confidentiality.

 

Unless otherwise consented to by each of the Initial Purchasers or the Issuer, as applicable, each of the Initial Purchasers and the Issuer hereby agree that it will not disclose the contents of any Transaction Document, or any other confidential or proprietary information furnished by the Initial Purchasers or the Issuer, to any Person other than its Affiliates (which Affiliates shall have executed an agreement satisfactory in form and in substance to the Purchaser to be bound by this Section 7.5), auditors and attorneys or as required by applicable law.

 

9

 

SECTION 7.6 GOVERNING LAW; JURISDICTION. 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 SECTIONS ‎5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT HAVING JURISDICTION TO REVIEW THE JUDGMENTS THEREOF. EACH OF THE PARTIES HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

 

SECTION 7.7 Waiver of Trial by Jury. To the extent permitted by applicable law, each of the parties hereto irrevocably waives all right of trial by jury in any action, proceeding or counterclaim arising out of or in connection with this Agreement or any matter arising hereunder.

 

SECTION 7.8 Execution in Counterparts. This Agreement may be executed in any number of counterparts (including by facsimile), each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. The words “execution,” “signed,” “signature,” and words of like import this Agreement or any of the other Transaction Document and any amendment, consent or waiver thereof shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms 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 Federal Electronic Signatures in Global and National Commerce Act, 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 7.9 No Recourse. Notwithstanding anything to the contrary contained herein, the obligations of the Initial Purchasers under this Agreement are solely the corporate obligations of the Initial Purchasers.

 

No recourse under any obligation, covenant or agreement of any Initial Purchaser contained in this Agreement shall be had against any incorporator, stockholder, officer, director, member, manager, employee or agent of such Initial Purchaser (solely by virtue of such capacity)

 

10

 

by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Agreement is solely a corporate obligation of the Initial Purchasers, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, member, manager, employee or agent of any Initial Purchaser (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of the Initial Purchasers contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by any Initial Purchaser of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, member, manager, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Agreement; provided that the foregoing shall not relieve any such Person from any liability it might otherwise have as a result of fraudulent actions taken or fraudulent omissions made by them.

 

SECTION 7.10 No Petition. Each Initial Purchaser hereby covenants and agrees that it 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 the Rating Agency, institute against the Issuer, or join in any institution against 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 Agreement or any of the other Transaction Documents.

 

SECTION 7.11 Survival. All representations, warranties, covenants and guaranties contained in this Agreement and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the sale, transfer or repayment of the Notes.

 

SECTION 7.12 Waiver of Special Damages. In no event shall the Purchaser be liable under or in connection with this Agreement or any other Transaction Document to any Person for indirect, special, or consequential losses or damages of any kind, including lost profits, even if advised of the possibility thereof and regardless of the form of action by which such losses or damages may be claimed.

 

SECTION 7.13 Costs and Expenses; Indemnification.

 

(a)    The Issuer shall reimburse the Initial Purchasers and the Trustee for all reasonable and documented out-of-pocket expenses including attorney’s fees of a single counsel (plus one local counsel in each relevant jurisdiction) for each of the Initial Purchasers or the Trustee, (i) incurred by it in connection with the negotiation and preparation of this Agreement, any other Transaction Documents or the Notes and the transactions contemplated thereby, or any amendments, modifications, consents or waivers of the provisions hereof or thereof requested by the Servicer or the Issuer (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) incurred in enforcing its rights under this Agreement, and (iii) incurred in connection with the insolvency or bankruptcy of the Issuer or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes and any Transaction Document.

 

(b)    The Issuer shall indemnify the Initial Purchasers and the Trustee, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities

 

11

 

and related expenses (including the reasonable, documented and out-of-pocket fees, charges and disbursements of outside counsel for any Indemnitee) incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any third party or the Issuer) arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Transaction Document or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder, the failure of any representation or warranty of the Issuer, the Servicer or the Originator hereunder or under any other Transaction Document to be true and correct in all material respects (or in all respects for any representation or warranty already qualified by materiality) or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Trustee and its Related Parties, the administration of this Agreement and in the case of the Trustee, the Initial Purchasers and their Related Parties, enforcement of this Agreement (in each case, including all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving the Issuer as a debtor thereunder), (ii) any Advance or the use or proposed use of the proceeds therefrom, or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Issuer, and regardless of whether any Indemnitee is a party thereto (including, without limitation, any settlement arrangement arising from or relating to the foregoing); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) with respect to the Initial Purchasers only, result from a claim brought by the Issuer or any other Person against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Transaction Document, if the Issuer has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 7.14(b) shall not apply with respect to taxes other than any taxes that represent losses, claims, damages, etc. arising from any non-tax claim.

 

(c)    The obligations under this Section shall survive the termination of this Agreement and payment of the obligations hereunder.

 

 

 

[SIGNATURE PAGE FOLLOWS.]

 

12

  

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

 

HORIZON FUNDING II, LLC,
as Issuer

   
  By: Horizon Technology Finance Corporation, its sole member
   
 

By: 

/s/ Daniel R. Trolio
 

Name:

Daniel R. Trolio
 

Title:

Chief Financial Officer
   
 

TEACHERS INSURANCE AND ANNUITY

ASSOCIATION OF AMERICA, a New York

domiciled life insurance company,
as Initial Purchaser

   
 

By:          Nuveen Alternatives Advisors LLC,
         a Delaware limited liability company,
         its investment manager

   
   
 

By: 

/s/ Ken Price
 

Name:

Ken Price
 

Title:

Senior Director
   
   
 

PACIFIC LIFE INSURANCE COMPANY,
as Initial Purchaser

   
  By:   Nuveen Alternatives Advisors LLC,
         a Delaware limited liability company,
         its investment manager
   
 

By: 

/s/ Ken Price
 

Name:

Ken Price
 

Title:

Senior Director
   
 

THE LINCOLN NATIONAL LIFE

INSURANCE COMPANY,
as Initial Purchaser

   
  By:    Nuveen Alternatives Advisors LLC,
         a Delaware limited liability company,
         its investment manager
   
 

By:

/s/ Ken Price
 

Name:

Ken Price
 

Title:

Senior Director

 

 

 

SCHEDULE I

 

COMMITMENTS

 

Teachers Insurance and Annuity

Association of America

$40,000,000

Pacific Life Insurance Company

 

$40,000,000

The Lincoln National Life Insurance Company

 

$20,000,000

Total

 

$100,000,000

 

 

 

 

Exhibit A

 

Form of Advance Request

 

Date: [_________], 202 _

 

Nuveen Alternatives Advisors LLC, as Beneficiary, and U.S. Bank Trust Company, National Association, as Trustee
850 Andrew Carnegie Boulevard
Charlotte, North Carolina 28262-8500
Attention: Legal Department
Attention: Trevor Sanford, Associate General Counsel
E-mail: Trevor.Sanford@nuveen.com
Telephone: (704) 988-4092

(212) 916-4000 (General Number)

 

 

Reference is made to that certain Note Funding Agreement, dated as of June 21, 2024, by and among Horizon Funding II, LLC, a Delaware limited liability company, as Issuer (the “Issuer”) and the Initial Purchasers (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Note Funding Agreement)”. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Note Funding Agreement. The Issuer hereby gives you notice, pursuant to Section 2.1 of the Note Funding Agreement, that it requests an Advance under the Note Funding Agreement.

 

The Issuer hereby certifies as follows:

 

1.

The Issuer hereby requests that such Advance be made on _____________.

 

2.

The Issuer hereby requests an Advance of $ _____________.

 

3.

The Advance Availability for the requested Advance Date is $ _____________.

 

4.

[The Issuer hereby requests that the Advance be funded to the Principal Reinvestment Account set forth in the Note Funding Agreement.] [The Issuer hereby requests that the Advance be funded to the following account: [__].]

 

5.

The Issuer has directed the Servicer to withdraw Principal Proceeds in the amount of $_____ from the Collection Account and to deposit such amount to the Principal Reinvestment Account on such Advance Date.

 

6.

The Issuer hereby certifies that the conditions set forth in Section 3.1 of the Note Funding Agreement have been satisfied.

 

7.

The Issuer hereby certifies that the Borrowing Base Certificate attached hereto as Schedule A is a true, accurate and complete calculation of the Borrowing Base.

 

 

 

8.

The Issuer hereby requests that such Advance be funded pursuant to the wire instructions set forth on Schedule C hereto.

 

9.

The Issuer hereby certifies that the attached List of Loans attached hereto as Schedule B is a true, accurate and complete list of Loans that are owned by the Issuer and subject to the lien of the Indenture.

 

[The Remainder Of This Page Is Intentionally Left Blank]

 

 

 

IN WITNESS WHEREOF, each of the undersigned has executed the Advance Request this day of _____ day of __________, 202_.

 

 

HORIZON FUNDING II, LLC,
as Issuer

   
 

By: 

 
 

Name: 

 
 

Title: 

 

 

 

 

 

 

Schedule A to Advance Request
[Attach Borrowing Base Calculation]

 

 

 

 

 

Schedule B to Advance Request
[Attach List of Loans]

 

 

 

 

 

Schedule C to Advance Request

[Attach Wire Instructions]

 

 

 

 
ex_690506.htm

Exhibit 10.3

 



 

SALE AND SERVICING AGREEMENT

 

by and among

 

HORIZON FUNDING II, LLC,
as the Issuer,

 

HORIZON TECHNOLOGY FINANCE CORPORATION,
as the Originator and as the Seller,

 

HORIZON TECHNOLOGY FINANCE CORPORATION,
as the Servicer,

 

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as the Trustee,

 

and

 

U.S. BANK NATIONAL ASSOCIATION,
as the Backup Servicer, Lockbox Bank, Custodian and Securities Intermediary

 

Dated as of

 

 

June 21, 2024

 



 

HORIZON FUNDING II, LLC
Asset-Backed Notes

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

Article I DEFINITIONS

2

Section 1.01.

Definitions

2

Section 1.02.

Usage of Terms

33

Section 1.03.

Section References

33

Section 1.04.

Calculations

33

Section 1.05.

Accounting Terms

33

Article II ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS

34

Section 2.01.

Creation and Funding of Issuer; Transfer of Loan Assets

34

Section 2.02.

Conditions to Transfer of Initial Loan Assets to Issuer

35

Section 2.03.

Acceptance by Issuer

36

Section 2.04.

Administrative Convenience with respect to Acquisitions of Subsequent Loans.

36

Section 2.05.

Conveyance of Substitute Loans

36

Section 2.06.

Conveyance of Subsequent Loans

38

Section 2.07.

Optional Sales of Loans

39

Section 2.08.

Optional Substitution of Loans

40

Section 2.09.

Release of Excluded Property

41

Section 2.10.

Delivery of Documents in the Loan File

41

Section 2.11.

Limitations on Optional Sale and Substitution

41

Section 2.12.

Certification by Trustee and Custodian; Possession of Loan Files

42

Article III REPRESENTATIONS AND WARRANTIES

44

Section 3.01.

Representations and Warranties Regarding the Originator

45

Section 3.02.

Representations and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate

48

Section 3.03.

[Reserved]

48

Section 3.04.

Representations and Warranties Regarding the Required Loan Documents

48

Section 3.05.

[Reserved]

49

Section 3.06.

Representations and Warranties Regarding the Servicer

49

Section 3.07.

Representations of the Backup Servicer

50

 

-i-

 

TABLE OF CONTENTS

(continued)

Page

 

Article IV PERFECTION OF TRANSFER AND  PROTECTION OF SECURITY INTERESTS

51

Section 4.01.

Custody of Loans

51

Section 4.02.

Filing

51

Section 4.03.

Changes in Name, Organizational Structure or Location

51

Section 4.04.

Costs and Expenses

52

Section 4.05.

Sale Treatment

52

Section 4.06.

Separateness from Issuer

52

Section 4.07.

Powers of Attorney

52

Article V SERVICING OF LOANS

52

Section 5.01.

Appointment and Acceptance

52

Section 5.02.

Duties of the Servicer and the Backup Servicer

53

Section 5.03.

Liquidation of Loans

57

Section 5.04.

[Reserved]

58

Section 5.05.

[Reserved]

58

Section 5.06.

Collection of Certain Loan Payments

58

Section 5.07.

Access to Certain Documentation and Information Regarding the Loans

59

Section 5.08.

Satisfaction of Liens and Collateral and Release of Loan Files

59

Section 5.09.

Scheduled Payment Advances; Servicing Advances and Nonrecoverable Advances

60

Section 5.10.

Title, Management and Disposition of Foreclosed Property

61

Section 5.11.

Servicing Compensation

62

Section 5.12.

Assignment; Resignation

62

Section 5.13.

Merger or Consolidation of Servicer

63

Section 5.14.

Limitation on Liability of the Servicer and Others

63

Section 5.15.

Determination of General Reserve Account Required Balance

64

Section 5.16.

Determination of Principal Reinvestment Account Allocation Amount during Investment Period

64

 

-ii-

 

TABLE OF CONTENTS

(continued)

Page

 

Article VI COVENANTS OF THE ORIGINATOR

64

Section 6.01.

Legal Existence

64

Section 6.02.

Business Development Company.

64

Section 6.03.

Security Interests

65

Section 6.04.

Delivery of Collections

65

Section 6.05.

Regulatory Filings

65

Section 6.06.

Compliance with Law

65

Section 6.07.

Limitation on Liability of Originator and Others

65

Section 6.08.

Payments from Obligors

65

Article VII ESTABLISHMENT OF ACCOUNTS;  DISTRIBUTIONS;

66

Section 7.01.

Distribution Account; Lockbox Account and Other Accounts

66

Section 7.02.

General Reserve Account

67

Section 7.03.

Collection Account

68

Section 7.04.

Noteholder Distributions

70

Section 7.05.

Allocations and Distributions

71

Article VIII SERVICER DEFAULT; SERVICER TRANSFER

77

Section 8.01.

Servicer Default

77

Section 8.02.

Servicer Transfer

78

Section 8.03.

Acceptance by Successor Servicer; Reconveyance; Successor Servicer to Act

79

Section 8.04.

Notification to Noteholders

82

Section 8.05.

Effect of Transfer

82

Section 8.06.

Database File

82

Section 8.07.

Waiver of Defaults

83

Article IX REPORTS

83

Section 9.01.

Monthly Reports

83

Section 9.02.

[Reserved]

83

Section 9.03.

Preparation of Reports; Officer’s Certificate

83

Section 9.04.

Other Data; Obligor Financial Information

84

Section 9.05.

Annual Report of Accountants

85

 

-iii-

 

TABLE OF CONTENTS

(continued)

Page

 

Section 9.06.

Statements of Compliance from Servicer

85

Section 9.07.

Notices of Event of Default, Servicer Default or Rapid Amortization Event

86

Section 9.08.

Trustee’s Right to Examine Servicer Records, Audit Operations and Deliver Information to Noteholders

86

Article X TERMINATION

86

Section 10.01.

[Reserved]

86

Section 10.02.

Termination

86

Article XI REMEDIES UPON MISREPRESENTATION;  REPURCHASE OPTION

87

Section 11.01.

Repurchases of, or Substitution for, Loans for Breach of Representations and Warranties

87

Section 11.02.

Reassignment of Repurchased or Substituted Loans

87

Article XII INDEMNITIES

87

Section 12.01.

Indemnification by Servicer

87

Section 12.02.

Indemnification by Originator

88

Section 12.03.

Survival

89

Article XIII MISCELLANEOUS

89

Section 13.01.

Amendment

89

Section 13.02.

Acts of God

90

Section 13.03.

Governing Law

90

Section 13.04.

Notices

90

Section 13.05.

Severability of Provisions

92

Section 13.06.

Third Party Beneficiaries

92

Section 13.07.

Counterparts; Electronic Signatures

92

Section 13.08.

Headings

92

Section 13.09.

No Bankruptcy Petition; Disclaimer

92

Section 13.10.

Jurisdiction

93

Section 13.11.

No Partnership

93

Section 13.12.

Successors and Assigns

93

Section 13.13.

Acts of Holders

93

 

-iv-

 

TABLE OF CONTENTS

(continued)

Page

 

Section 13.14.

Duration of Agreement

93

Section 13.15.

Limited Recourse

93

Section 13.16.

Confidentiality

94

Section 13.17.

Non-Confidentiality of Tax Treatment

94

Section 13.18.

Payments; Taxes

94

Section 13.19.

Increased Costs, Etc

97

Section 13.20.

Related Parties

98

 

-v-

 

TABLE OF CONTENTS

 

Page

 

EXHIBITS, SCHEDULES, AND APPENDIX

 

Exhibit A

Form of Assignment

A-1

Exhibit B

Form of Borrowing Base Certificate

B-1

Exhibit C

Form of Closing Certificate of Servicer/Originator

C-1

Exhibit D

Form of Liquidation Report

D-1

Exhibit E

Servicer Officer’s Certificate

E-1

Exhibit F

List of Loans

F-1

Exhibit G

Form of Monthly Report

G-1

Exhibit H-1

Form of Initial Certification

H-1

Exhibit H-2

Form of Final Certification

H-2

Exhibit I

Form of Request for Release of Documents

I-1

Exhibit J

Initial Loans Eligibility Criteria

J-1

Exhibit K

Form of Transfer Notice

K-1

Exhibit L

Runway Report

L-1

 

-vi-

 

SALE AND SERVICING AGREEMENT

 

THIS SALE AND SERVICING AGREEMENT, dated as of June 21, 2024, is by and among:

 

 

(1)

Horizon Funding II, LLC, a limited liability company created and existing under the laws of the State of Delaware (together with its successors and assigns, the “Issuer”);

 

 

(2)

HORIZON TECHNOLOGY FINANCE CORPORATION, a corporation created and existing under the laws of the State of Delaware (together with its successors and assigns, the “Fund”), as the seller (together with its successors and assigns, in such capacity, the “Seller”), as the originator (together with its successors and assigns, in such capacity, the “Originator”) and as the servicer (together with its successors and assigns, in such capacity, the “Servicer”);

 

 

(3)

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION (together with its successors and assigns, “U.S. Bank Trust”), not in its individual capacity but as the indenture trustee (together with its successors and assigns, in such capacity, the “Trustee”); and

 

 

(4)

U.S. BANK NATIONAL ASSOCIATION (together with its successors and assigns, “U.S. Bank N.A.” and together with U.S. Bank Trust, “U.S. Bank”), not in its individual capacity but as the backup servicer (together with its successors and assigns, in such capacity, the “Backup Servicer”), not in its individual capacity but as the custodian (together with its successors and assigns in such capacity, the “Custodian”), not in its individual capacity but as the lockbox bank (together with its successors and assigns in such capacity, the “Lockbox Bank”) and not in its individual capacity but solely as securities intermediary (together with its successors and assigns, in such capacity, the “Securities Intermediary”).

 

R E C I T A L S

 

WHEREAS, in the regular course of its business, the Originator originates and/or otherwise acquires Loans (as defined herein);

 

WHEREAS, on the Closing Date, the Originator will sell, convey and assign all its right, title and interest in the Initial Loan Assets and certain other assets to the Issuer as provided herein;

 

WHEREAS, on each Transfer Date, the Originator may sell, convey and assign all its right, title and interest in Subsequent Loan Assets and/or Substitute Loan Assets, as applicable, and certain other assets to the Issuer as provided herein;

 

WHEREAS, it is a condition to the Issuer’s acquisition of the Initial Loan Assets and any Subsequent Loan Assets and Substitute Loan Assets from the Originator that the Originator make certain representations and warranties regarding the Loan Assets for the benefit of the Issuer;

 

WHEREAS, the Issuer is willing to purchase and accept assignment of the Loan Assets from the Originator pursuant to the terms hereof;

 

WHEREAS, the Servicer is willing to service the Loan Assets for the benefit and account of the Issuer pursuant to the terms hereof; and

 

WHEREAS, the Backup Servicer is willing to provide backup servicing for all such Loan Assets.

 

 

  

 

NOW, THEREFORE, based upon the above recitals, the mutual premises 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.

 

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

 

1940 Act” means the Investment Company Act of 1940, as amended.

 

Adjusted Pool Balance” means, as of any date of determination, the Aggregate Outstanding Loan Balance minus (a) the Excess Concentration Amounts and (b) the aggregate Outstanding Loan Balance of all Delinquent Loans (other than such Delinquent Loans that are Defaulted Loans), Defaulted Loans and Ineligible Loans required to be repurchased by the Originator pursuant to Section 11.01, in each case, as of such date of determination and only to the extent not included in the Excess Concentration Amounts determined in clause (a).

 

Administrative Expenses” means fees and expenses (excluding amounts related to indemnification) due or accrued with respect to any Payment Date and payable by the Issuer in the following order of priority:

 

(a)    to any Person in respect of any governmental fee, charge or tax in relation to the Issuer;

 

(b)    pro rata, to the Trustee, the Custodian, the Backup Servicer, the Lockbox Bank and any Successor Servicer, (i) the Trustee Fee, (ii) any fees of the Custodian, (iii) the Backup Servicer Fee, (iv) any fees of the Lockbox Bank and (v) any additional fees, expenses or other amounts due and owing the Trustee, the Custodian, the Backup Servicer, the Securities Intermediary and the Lockbox Bank, including (A) any unpaid fees and expenses of the Trustee (including reasonable and documented fees and expenses of its agents and counsel) incurred in the exercise of the Trustee rights and remedies on behalf of the Noteholders pursuant to Article V of the Indenture and (B) any reasonable and documented expenses of the Backup Servicer incurred in the exercise of the Backup Servicer’s obligations under Section 5.02(y) hereunder and (vi) if a Successor Servicer is being appointed, the Successor Servicer Engagement Fee;

 

(c)    to the Independent Accountants, agents and counsel of the Issuer for fees and expenses including, but not limited to, audit fees and expenses, and to the Servicer for expenses and other amounts (excluding the Servicing Fee, any Scheduled Payment Advances and any Servicing Advances) payable under this Agreement; and

 

(d)    to Morningstar DBRS for its surveillance fees in relation to the Notes.

 

provided that Administrative Expenses will not include (I) any amounts due or accrued with respect to the actions taken on or in connection with the Closing Date, (II) any principal of or interest on any Notes or (III) amounts payable to the Trustee, the Custodian, the Backup Servicer, the Lockbox Bank, and any Successor Servicer in respect of indemnification.

 

2

 

Advance” means an advance made by the Noteholders in accordance with the terms hereof and in the Note Funding Agreement.

 

Advance Date” means the date on which the Noteholders make an Advance to the Issuer in accordance with the terms hereof and in the Note Funding Agreement.

 

Advance Rate” means at any time:

 

(a)    if the Collateral consists of Loans to five to seven Distinct Obligors, 30.00%;

 

(b)    if the Collateral consists of Loans to eight or more Distinct Obligors but less than ten Distinct Obligors, 50.00%;

 

(c)    if the Collateral consists of Loans to ten or more Distinct Obligors but less than fifteen Distinct Obligors, 60.00%;

 

(d)    if the Collateral consists of Loans to fifteen or more Distinct Obligors but less than 20 Distinct Obligors, 65.00%;

 

(e)    if the Collateral consists of Loans to twenty or more Distinct Obligors, 67.50%;

 

provided, that notwithstanding the foregoing, the maximum Advance Rate for Second Lien Loans shall be 60.00%; provided further that for each Advance Date and Payment Date on which an Overcollateralization Adjustment Event occurs and is continuing, the applicable Advance Rate shall be reduced by 10 percentage points.

 

Advance Request” means a written notice in the form of Exhibit A to the Note Funding Agreement, to be used by the Issuer to request the funding of an Advance.

 

Affiliate” of any specified Person means any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person, or is a director or officer of such Person; provided that for purposes of determining whether an Obligor is an Affiliate of another Obligor for purposes of determining the Advance Rate, Excess Concentration Amounts or whether the Eligibility Criteria are satisfied, the term Affiliate shall not include any Affiliate relationship which may exist solely as a result of direct or indirect ownership of, or control by, a common owner which is a financial institution, fund or other investment vehicle which is in the business of making diversified investments including investments independent from the Loans. For the purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”), when used with respect to any specified Person means the possession, direct or indirect, of the power to vote 25% or more of the voting securities of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. The Trustee may conclusively presume that a Person is not an Affiliate of another Person unless a Responsible Officer of the Trustee has actual knowledge to the contrary.

 

Agented Loan” means, with respect to any Loan, (a) the Loan is originated by the Originator in accordance with the Operating Guidelines that has been fully consummated prior to such Loan becoming part of the Collateral, (b) the Issuer, as assignee of the Loan, has all of the rights (including without limitation voting rights) of the Originator with respect to such Loan and the Originator’s right, title and interest in and to the Related Property, (c) the Loan is secured by an undivided interest in the Related Property that also secures and is shared by, on a pro rata basis, all other holders of such Obligor’s notes of equal priority issued in such syndicated loan transaction and (d) the Originator, one of its Affiliates (including, without limitation,

 

3

 

Monroe Capital Management Advisors, LLC or any Affiliate thereof) is the lead agent or collateral agent for all lenders in such loan transaction and receives payment directly from the Obligor and may collect such payments on behalf of such lenders.

 

Aggregate Outstanding Loan Balance” means, as of any date, the sum of the Outstanding Loan Balance for each Loan owned by the Issuer.

 

Aggregate Outstanding Note Balance” means, as of any date of determination, the sum of the Outstanding Note Balances of the Notes on such date.

 

Aggregation Period” means the period commencing on the Closing Date and ending on the earliest to occur of (i) 12 months from the Closing Date; (ii) the date on which Loans owned by the Issuer equal or exceed $50,000,000 or (iii) the date on which the Loans owned by the Issuer are comprised of at least fifteen (15) Distinct Obligors.

 

Agreement” means this Sale and Servicing Agreement, as amended, modified, waived, supplemented or restated from time to time in accordance with the terms hereof.

 

Amortization Period” means the period commencing on the Investment Period Termination Date and ending on the date the Aggregate Outstanding Note Balance and all related obligations have been reduced to zero.

 

Applicable Law” means, for any Person or property of such Person, all existing and future applicable laws, rules, regulations (including proposed, temporary and final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by any Governmental Authority (including, without limitation, usury laws, the Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System), and applicable judgments, decrees, injunctions, writs, awards or orders of any court, arbitrator or other administrative, judicial, or quasi-judicial tribunal or agency of competent jurisdiction.

 

Assignment” means each Assignment, substantially in the form of Exhibit A hereto, relating to an assignment, transfer and conveyance of Loans and the Related Property by the Originator to the Issuer.

 

Available Funds” means, with respect to any Payment Date, an amount equal to the sum of, without duplication, (a) Collections received during the related Collection Period; (b) interest earned on and any other investment earnings with respect to funds on deposit in the Collection Account during the related Interest Period; and (c) any Scheduled Payment Advances deposited into the Collection Account on the related Reference Date.

 

Backup Servicer” has the meaning provided in the Preamble.

 

Backup Servicer Fee” shall be equal to the product of: (i) one-twelfth of 0.056% (or, with respect to the first Collection Period, a fraction equal to the number of days from and including the Closing Date through and including July 10, 2024 over 360) and (ii) the Aggregate Outstanding Loan Balance as of the beginning of the related Collection Period; provided, however, that the Backup Servicer Fee shall be no less than $3,500 per month, commencing when the Aggregate Outstanding Loan Balance is greater than zero at the beginning of the related Collection Period.

 

Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.), as amended from time to time.

 

4

 

Borrowing Base” means, as of any date of determination, an amount equal to the sum of (A) the product of (x) the Weighted Average Advance Rate and (y) the Adjusted Pool Balance as of such date, (B) the amount on deposit in the Principal Reinvestment Account as of such date (including for the avoidance of doubt, any capital contributions) after giving effect to all payments and distributions to be made on such date and (C) without duplication all Principal Collections in the Distribution Account anticipated to be deposited into the Principal Reinvestment Account on such Payment Date pursuant to the Priority of Payments, in each case on such Payment Date after giving effect to all payments and distributions to be made on such date.

 

Borrowing Base Certificate” means a certificate prepared and signed by a Responsible Officer of the Servicer in the form of Exhibit B hereto, including a calculation of the Borrowing Base as of the relevant date of determination.

 

Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in Chicago, Illinois, Minnesota, or New York, New York are authorized or obligated by law or executive order to be closed.

 

Cash Yield Rate” means, with respect to a Loan, the stated interest rate on such Loan plus all Finance Charges and other earned fees.

 

Closing Date” means June 21, 2024.

 

Co-Agented Loan” means, with respect to any Loan, (a) the Loan is originated or otherwise underwritten by the Originator in accordance with the Operating Guidelines as a part of a syndicated loan transaction that has been fully consummated prior to such Loan becoming part of the Collateral, (b) the Issuer, as assignee of the Loan, has all of the rights (including without limitation voting rights) of the Originator with respect to such Loan and the Originator’s right, title and interest in and to the Related Property, (c) the Loan is secured by an undivided interest in the Related Property that also secures and is shared by, on a pro rata basis, all other holders of such Obligor’s notes of equal priority issued in such syndicated loan transaction and (d) either (i) the Originator (or a wholly owned subsidiary of the Originator) is a co-agent, collateral agent or paying agent in such syndicated loan transaction, (ii) neither the Originator nor any other lender is deemed to be the collateral agent in such syndicated loan transaction, or (iii) the Originator receives payment directly from the Obligor thereof on behalf of itself (but not on behalf of any other holders of such Obligor’s notes) and no other holder of such Obligor’s notes (nor any affiliate thereof) is identified as the lead agent, collateral agent or paying agent in such syndicated loan transaction.

 

Code” means the Internal Revenue Code of 1986, as amended, or any successor legislation thereto.

 

Collateral” means, as of any date, the “Indenture Collateral,” as such term is defined in the Indenture.

 

Collection Account” means the segregated account so designated and established and maintained pursuant to Section 7.03(a).

 

Collection Period” means (i) a period commencing on the first day of a calendar month and ending on the last day of such calendar month; provided that, the initial Collection Period shall be the period commencing on the Closing Date and ending on the last day of the calendar month in which the Closing Date occurs, and (ii) with respect to the Legal Final Payment Date, or any other date on which the full principal amount of the Notes are paid in full, including any redemption date, the period commencing on the first day of the calendar month and ending on such Legal Final Payment Date or such other date on which the full principal amount of the Notes are paid in full, including any redemption.

 

5

 

Collections” means the aggregate of Interest Collections and Principal Collections.

 

Commission” means the United States Securities and Exchange Commission.

 

Communication” shall have the meaning provided in Section 13.07.

 

Computer Records” means the computer records generated by the Servicer that provide information relating to the Loans and that were used by the Originator in selecting the Loans conveyed to the Issuer pursuant to Section 2.01 (and any Subsequent Loans or Substitute Loans conveyed to the Issuer pursuant to Section 2.05 and Section 2.06, respectively).

 

Continued Errors” shall have the meaning provided in Section 8.03(e).

 

Contractual Obligation” means, with respect to any Person, any provision of any securities issued by such Person or any indenture, contract, undertaking, agreement, instrument or other document to which such Person is a party or by which it or any of its property is bound or is subject.

 

Corporate Trust Office” means, (i) for the purposes of Section 3.02 hereof, 111 E. Fillmore Ave, EP-MN-WS2N, St. Paul, MN 51007, Attention: Bondholder Services – Horizon Funding II, LLC; and (ii) for all other purposes, 190 S. LaSalle St., 7th Floor, Chicago, IL 60603, Attention: Global Corporate Trust – Horizon Funding II, LLC, or, in each case, 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.

 

Curtailment” means, with respect to a Loan, any payment of principal received by the Issuer during a Collection Period as part of a payment allocable to a Loan that is in excess of the principal portion of the Scheduled Payment due for such Collection Period and which is not intended to satisfy the Loan in full, nor is intended to cure a delinquency including any accelerated amortization due to structural features of the related Loan.

 

Custodian” has the meaning provided in the Preamble.

 

Cutoff Date” means May 31, 2024.

 

Defaulted Loan” means a Loan as to which the earliest of the following has occurred: (i) any payment, or any part of payment, due under such Loan (taking into account any waivers or modifications granted by the Servicer on such Loans) has become 120 days or more delinquent; (ii) the Servicer has foreclosed upon and sold the related collateral; (iii) the Servicer has determined in accordance with its customary practices that the Loan is uncollectible or the final recoverable amounts have been received; or (iv) an Insolvency Event has occurred with respect to such Obligor; provided, however, that any Loan which the Originator has repurchased pursuant to Section 11.01 will not be deemed to be a Defaulted Loan.

 

Delinquent Loan” means a Loan (i) as to which any payment, or any part of payment, due under such Loan (taking into account any waivers or modifications granted by the Servicer on such Loans) has become 60 days or more delinquent and (ii) that is not a Defaulted Loan. In no event shall the application of Scheduled Payment Advances prevent a Loan from being or becoming a Delinquent Loan.

 

Deposit Account Control Agreement” means the deposit account control agreement, dated as of June 21, 2024, by and among the Issuer, the Trustee and the Lockbox Bank.

 

6

 

Distinct Obligor” means any Obligor or, to the extent any two or more Obligors are Affiliates (subject to the proviso in the definition thereof), collectively, such Obligors.

 

Distribution Account” means the segregated account so designated and established and maintained pursuant to Section 7.01.

 

Dollar” and “$” means the lawful currency of the United States.

 

ECA Calculation Balance” means as of any date of determination, Payment Date or Transfer Date, the sum of (i) Adjusted Pool Balance as of the last day of the related Collection Period (or for any Transfer Date, such Transfer Date), (ii) all funds on deposit in the Principal Reinvestment Account as of the last day of the related Collection Period (or for any Transfer Date, such Transfer Date) after giving effect to all payments and distributions to be made on such date and (iii) without duplication, all Principal Collections in the Collection Account that are anticipated to be deposited in the Principal Reinvestment Account on such Payment Date (or in the case of a Transfer Date or any other date of determination, the immediately following Payment Date) pursuant to Priority of Payments after giving effect to all payments and distributions to be made on such date.

 

Electronic Copy” shall have the meaning provided in Section 13.07.

 

Electronic Record” shall have the meaning provided in Section 13.07.

 

Electronic Signature” shall have the meaning provided in Section 13.07.

 

Eligibility Criteria” means (i) on and as of the Cutoff Date, in the case of the Initial Loans, (ii) on and as of the related Subsequent Loan Cutoff Date, in the case of any Subsequent Loan and (iii) on and as of the related Substitute Loan Cutoff Date, in the case of any Substitute Loans, a Loan as to which each of the following is true:

 

(a)    such Loan is current and is not a Restructured Loan;

 

(b)    such Loan has been originated by the Originator in the ordinary course of the Originator’s business and has been fully and properly executed by the parties thereto;

 

(c)    such Loan provides for periodic payments of interest and/or principal in cash, which are due and payable on a monthly or quarterly basis;

 

(d)    such Loan provides for, in the event that such Loan is prepaid in whole or in part, a prepayment that fully pays the principal amount of such prepayment together with interest at the related Cash Yield Rate through the date of payment;

 

(e)    the information provided to the Issuer and its assigns in respect of such Loan pursuant to the related underlying transaction documents is true and correct in all material respects;

 

(f)    such Loan satisfies in all material respects the requirements under the Operating Guidelines and was originated in accordance therewith;

 

(g)    such Loan represents the legal, valid and binding payment obligation in writing of the related Obligor, enforceable by the holder thereof in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity;

 

7

 

(h)    the related Obligor of such Loan is not the United States or any state thereof or from any agency, department or instrumentality of the United States or any state thereof;

 

(i)    immediately prior to its conveyance, transfer, contribution and assignment by the Originator to the Issuer, such Loan is secured by a valid, binding and enforceable first priority (or, in the case of any Second Lien Loans, second priority) perfected security interest (subject to Permitted Liens) in favor of the Originator, or, in the case of Agented Loans, the applicable agent, as applicable, in all of the assets of the Obligor pledged as collateral under the Underlying Loan Agreement, which security interest has been assigned by the Originator or, in the case of Agented Loans, the applicable agent, as applicable, to the Issuer, and by the Issuer to the Trustee;

 

(j)    such Loan is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of any contract, or the exercise of any right thereunder, will not render such contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the Originator has not received written notice of the assertion of any such right of rescission, setoff, counterclaim or defense asserted with respect thereto;

 

(k)    such Loan does not have liens or claims (other than Permitted Liens) that exist or have been filed for unpaid state or federal taxes relating to collateral that are prior to, or equal or coordinate with, the security interest in such collateral created by the related Loan contract, except for such liens or claims that have been waived or modified as permitted hereunder;

 

(l)    (i) no part of any payment due under such Loan (taking into account any waivers or modifications granted by the Servicer on such Loans) has become thirty (30) days or more delinquent, (ii) such Loan is not a Delinquent Loan or a Defaulted Loan, (iii) no default, breach, violation or event permitting acceleration under the terms of any Loan contract has occurred with respect to such Loan, and (iv) there is not a continuing condition with respect to such Loan that, with notice or the lapse of time or both, would constitute a default, breach, violation or event permitting acceleration under the terms of any contract, except for such defaults, breaches, violations or events which have been waived or modified as permitted under the Servicing Standard and the Operating Guidelines;

 

(m)    such Loan does not relate to property that has been foreclosed upon;

 

(n)    such Loan has not been sold, transferred, assigned or pledged to any person other than the Issuer and has not been discharged;

 

(o)   (x) immediately prior to the transfer of such Loan to the Issuer, the Originator had good and marketable title to such Loan and, immediately upon such transfer, the Issuer shall have good and marketable title to such Loan and (y) except with respect to any Second Lien Loan, immediately prior to the transfer of such Loan to the Issuer, such Loan was free and clear of all liens, encumbrances, security interests and rights of others (other than Permitted Liens) and, immediately upon such transfer, such Loan shall be free and clear of all liens, encumbrances, security interests and rights of others;

 

(p)    such Loan has been perfected against the related Obligor by all necessary action under the relevant UCC, Personal Property Security Act, or other applicable statutes existing in jurisdictions in Canada that do not use the Personal Property Security Act, or other Applicable Law, provided, that collateral provided by subsidiaries or affiliates of the Obligor need not satisfy the requirements of this clause ‎(p) to the extent any such subsidiaries are domiciled in a jurisdiction other than the United States or Canada;

 

8

 

(q)    such Loan has not been originated in, and is not subject to the laws of, any jurisdiction under which the sale, transfer, assignment and conveyance of such contract under this Agreement or the pledge of such Loan under the Indenture is unlawful, void or voidable;

 

(r)    other than with respect to Noteless Loans, such Loan has only one original executed promissory note for each note relating to such Loan;

 

(s)    such Loan was not due from an Obligor that was the subject of a proceeding under the Bankruptcy Code or was bankrupt;

 

(t)    such Loan had a Cash Yield Rate of at least 9% per annum;

 

(u)    the Required Loan Documents relating to such Loan have been delivered to the Custodian prior to the Closing Date or Transfer Date, as applicable; provided that, to the extent any originals of documents contained in the Required Loan Documents are required by Section 2.10(b) to be delivered following the related Transfer Date, such originals have been delivered on or prior to the date set forth in ‎Section 2.10(b);

 

(v)    such Loan is due from an Obligor with its headquarters, principal place of business and primary operations in the United States or Canada (but not Quebec); provided, for the avoidance of doubt, that guarantors or other parties to the Loan (other than the related Obligor) may be domiciled in a jurisdiction other than the United States or Canada;

 

(w)    such Loan is payable in U.S. Dollars;

 

(x)    such Loan has a Risk Rating as set forth in the Operating Guidelines;

 

(y)    such Loan has an original LTV of no more than 40%;

 

(z)    if the Loan is an Agented Loan, Co-Agented Loan or a Third Party Agented Loan:

 

(i)    if the entity serving as the collateral agent of the security for all notes of the Obligor issued under the applicable Underlying Loan Agreement has changed from the time of the origination of the Loan, all appropriate assignments of the collateral agent’s rights in and to the collateral on behalf of the holders of the indebtedness of the Obligor under such facility have been executed and filed or recorded as appropriate prior to such Loan becoming a part of the Collateral;

 

(ii)    all required notifications, if any, have been given to the collateral agent, the paying agent and any other parties required by the Underlying Loan Agreement of, and all required consents, if any, have been obtained with respect to, the Originator’s assignment of such Loan and the Originator’s right, title and interest in the Related Property to the Issuer and the Trustee’s security interest therein on behalf of the Noteholders;

 

(iii)    except as otherwise provided in the related intercreditor agreement, the right to control certain actions of and replace the collateral agent and/or the paying agent of the Obligor’s indebtedness under the facility is to be exercised by at least a majority in interest of all holders of such indebtedness; and

 

9

 

(iv)    all indebtedness of the Obligor of the same priority within each facility is cross-defaulted, the Related Property securing such indebtedness is held by the collateral agent for the benefit of all holders of such indebtedness and all holders of such indebtedness (A) have an undivided pari passu interest in the collateral securing such indebtedness, (B) share in the proceeds of the sale or other disposition of such collateral on a pro rata basis and (C) may transfer or assign their right, title and interest in the Related Property;

 

(aa)   such Loan has an original term to maturity of no more than 60 months;

 

(bb)   the stated maturity of such Loan is not later than the Legal Final Payment Date;

 

(cc)   the Loan is characterized under the Originator’s Operating Guidelines as a Technology Loan, a Healthcare Loan, a Life Sciences Loan or a Sustainability Loan;

 

(dd)   the Loan under the Originator’s Operating Guidelines has a rating of no less than a “3”; and

 

(ee)   if such Loan is a participation interest, it shall satisfy the definition of “Participated Loan” hereunder.

 

Eligible Deposit Account” means either (a) a segregated account with a Qualified Institution, or (b) a segregated account with the corporate trust department of a depository institution organized under the laws of the United States or any state of the United States or the District of Columbia, or any domestic branch of a foreign bank, having corporate trust powers and holding funds for the benefit of the trustee in the related account, so long as any of the securities of that depository institution has a long-term issuer credit rating from Morningstar DBRS (if rated by Morningstar DBRS) of at least “BBB (high)” or a long-term issuer credit rating from Moody’s of Baa1 or S&P of BBB+.

 

Eligible Loan” means a Loan that satisfies all of the Eligibility Criteria and is not otherwise an Ineligible Loan pursuant to the definition thereof.

 

End of Term Payments” means with respect to any Loan, payments required to be made by the applicable Obligor on the maturity date or prepayment date, of such Loan in an amount equal to a specified percentage of the original principal amount of such Loan, but excluding, for the avoidance of doubt, any amounts representing repayment of principal due on such date under such Loan.

 

Error” shall have the meaning provided in Section 8.03(e).

 

Event of Default” shall have the meaning specified in Section 5.01 of the Indenture.

 

Excess Concentration Amounts” means, as of any date of determination, the sum of (without duplication):

 

(a)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to Technology Obligors that exceeds 70% of the ECA Calculation Balance;

 

(b)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to Life Sciences Obligors that exceeds 70% of the ECA Calculation Balance;

 

(c)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to Healthcare Obligors that exceeds 50% of the ECA Calculation Balance;

 

10

 

(d)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to Life Sciences Obligors and Healthcare Obligors that exceeds 70% of the ECA Calculation Balance;

 

(e)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to Sustainability Obligors that exceeds 20% of the ECA Calculation Balance;

 

(f)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to a Distinct Obligor during the Aggregation Period that exceeds 14% of the ECA Calculation Balance;

 

(g)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to the five largest Distinct Obligors during the Aggregation Period that exceeds 60% of the ECA Calculation Balance;

 

(h)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to a Distinct Obligor after the Aggregation Period that exceeds 10% of the ECA Calculation Balance;

 

(i)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to the five largest Distinct Obligors after the Aggregation Period that exceeds 35% of the ECA Calculation Balance;

 

(j)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans made to the ten largest Distinct Obligors following the Aggregation Period that exceeds 60% of the ECA Calculation Balance;

 

(k)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans for which the related Underlying Loan Agreements require the related Obligor to make payments of interest or principal less frequently than monthly that exceeds 15% of the ECA Calculation Balance;

 

(l)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans that have more than 25% of their original Outstanding Loan Balance due at maturity that exceeds 20% of the ECA Calculation Balance;

 

(m)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans that have an interest only period greater than 36 months that exceeds 15% of the ECA Calculation Balance;

 

(n)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans that causes the weighted average LTV of all Loans to be greater than 25% of the ECA Calculation Balance;

 

(o)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans that are Second Lien Loans that exceeds 50% of the ECA Calculation Balance;

 

(p)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans that are Restructured Loans and, without duplication, Loans that have been subject to a Material Modification, that exceeds 15% of the ECA Calculation Balance;

 

(q)    The amount by which the Outstanding Loan Balance of a Loan (or Loans) causes (i) the weighted average current Cash Yield Rate minus (ii) the current blended cost of funds for the Notes multiplied by the current effective advance rate to equal less than 2.0%;

 

(r)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans that are Agented Loans that exceeds 25% of the ECA Calculation Balance;

 

11

 

(s)    The amount by which the Outstanding Loan Balance of a Loan (or Loans) that are Second Lien Loans subordinate to a term loan exceeds 17.5% of the ECA Calculation Balance;

 

(t)    The amount by which the Outstanding Loan Balance of a Loan causes the weighted average Cash Yield Rate of all Loans to be less than 10.25%; and

 

(u)    The pro rata portion of the aggregate Outstanding Loan Balance of all Loans that are Co-Agented Loans and Third Party Agented Loans that exceeds 15% of the ECA Calculation Balance.

 

During the Aggregation Period, references to “ECA Calculation Balance” in this definition shall be replaced by “Reference Amount.”

 

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

Excluded Property” means (a) any amount received by, on or with respect to any Loan in the Collateral, which amount is attributable to the payment of any tax, fee or other charge imposed by any Governmental Authority on such Loan, (b) any amount representing escrows relating to taxes, insurance and other amounts in connection with any Loan which is held in an escrow account for the benefit of the related Obligor and the secured party pursuant to an escrow agreement, (c) any origination fee retained by the Originator in connection with the origination of any Loan or (d) any amendment fee retained by the Originator in connection with the amendment of any Loan.

 

Excluded Taxes” means any of the following Taxes imposed on or with respect to a Noteholder or required to be withheld or deducted from a payment to a Noteholder, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Noteholder being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Noteholder with respect to an applicable interest in an Advance or commitment under the Note Funding Agreement pursuant to a law in effect on the date on which (i) such Noteholder acquires its Note or (ii) such Noteholder changes its lending office, except in each case to the extent that pursuant to Section 13.18 amounts with respect to such Taxes were payable either to such Noteholder’s assignor immediately before such Noteholder acquired its Note or to such Noteholder immediately before it changed its lending office, (c) Taxes attributable to such Noteholder’s failure to comply with Section 13.18(e), and (d) any withholding Taxes imposed under FATCA.

 

FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code and any intergovernmental agreements with respect thereto and any law, rule, regulation or other official guidance implementing the foregoing.

 

FDIC” means the Federal Deposit Insurance Corporation and any successor thereto.

 

Finance Charges” means, with respect to any Loan, any interest or finance charges owing by an Obligor pursuant to or with respect to such Loan.

 

Foreclosed Property” means Related Property acquired by the Issuer or a subsidiary thereof for the benefit of the Noteholders in foreclosure or by deed in lieu of foreclosure or by other legal process.

 

12

 

Foreclosed Property Disposition” means the final sale of a Foreclosed Property or of Repossessed Property. The proceeds of any “Foreclosed Property Disposition” constitute part of the definition of Liquidation Proceeds.

 

Foreign Noteholder” means a Noteholder that is not a U.S. Person.

 

Fund” has the meaning provided in the Preamble.

 

General Reserve Account” means the segregated account so designated and established and maintained pursuant to Section 7.02(a).

 

General Reserve Account Required Balance” means, as of any Payment Date, an amount equal to 0.75% of the Adjusted Pool Balance on such date after taking into account all amounts applied to the Adjusted Pool Balance on such date.

 

General Reserve Available Funds” means all amounts deposited into the Collection Account from the General Reserve Account pursuant to Section 7.02.

 

Governmental Authority” means, with respect to any Person, any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over such Person or its property.

 

Healthcare Loan” means a Loan made to an Obligor principally engaged in providing healthcare products and/or services, including, but not limited to new diagnostics, medical records, and service and patient management software.

 

Healthcare Obligor” means an Obligor of a Healthcare Loan.

 

Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Issuer under any Transaction Document and (b) to the extent not otherwise described in (a), Other Taxes.

 

Indenture” means the Indenture, dated as of the date hereof, among the Issuer, the Securities Intermediary and the Trustee, as such agreement may be amended, modified, waived, supplemented or restated from time to time.

 

Independent” means, when used with respect to any specified Person, the Person (a) is in fact independent of the Issuer, any other obligor on the Notes and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor or any Affiliate of any of the foregoing Persons as an officer, employee, trustee, partner, director or person performing similar functions.

 

Independent Accountants” shall have the meaning provided in Section 9.05.

 

Ineligible Loan” shall have the meaning provided in Section 11.01.

 

Initial Advance” means the initial Advance made by the Noteholders on the Closing Date pursuant to the Note Funding Agreement to the Issuer in respect of the Initial Loans.

 

13

 

Initial Loan Assets” means any assets acquired by the Issuer from the Originator on the Closing Date pursuant to Section 2.01, which assets shall include the Originator’s right, title and interest in the following (excluding any Excluded Property related thereto):

 

(i)    the Initial Loans listed in the initial List of Loans, all payments paid in respect thereof 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;

 

(ii)    all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Loans;

 

(iii)    all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Loans;

 

(iv)    all collections and records (including Computer Records) with respect to the foregoing;

 

(v)    all documents relating to the applicable Loan Files; and

 

(vi)    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.

 

Initial Loans” means those Loans conveyed to the Issuer on the Closing Date and identified for inclusion in the Collateral on the initial List of Loans required to be delivered pursuant to Section 2.02(d).

 

Initial Loans Eligibility Criteria” means the criteria set forth in Exhibit J hereto.

 

Initial Purchasers” shall have the meaning set forth in the Note Funding Agreement.

 

Insolvency Event” means, with respect to a specified Person, (i) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the ordering of the winding-up or liquidation of such Person’s affairs, which decree or order shall remain unstayed or undismissed and in effect for a period of 45 consecutive days; or (ii) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or the taking of possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

 

14

 

Insolvency Laws” means the Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

 

Insolvency Proceeding” means any case, action or proceeding before any court or other Governmental Authority relating to any Insolvency Event.

 

Insurance Policy” means, with respect to any Loan, an insurance policy covering liability and physical damage to or loss of the applicable Related Property, including, but not limited to, title, hazard, life, accident and/or flood insurance policies.

 

Insurance Proceeds” means any amounts payable or any payments made on or with respect to a Loan or the Related Property under any Insurance Policy which are not applied or paid by the Obligor, the Servicer or, in the case of Co-Agented Loans or Third Party Agented Loans, the party primarily responsible for servicing such Loans, as applicable, to the restoration or repair of the Related Property or released to the Obligor, another creditor or any other Person in accordance with the Applicable Law, the Required Loan Documents, the Operating Guidelines, the Servicing Standard and this Agreement, net of costs of collection.

 

Interest Amount” means, for each Interest Period, the sum, for each Note, of (A) product of (i) the Interest Rate in effect for such Note for each day during such Interest Period, multiplied by (ii) the Outstanding Note Balance of such Note on such day (giving effect to Advances funded and Investment Period Principal Distribution Amounts applied), and (iii) 1/365, and (B) all unpaid Interest Shortfalls from any prior Payment Dates (and interest accrued thereon at the Interest Rate).

 

Interest Collections” means the aggregate of:

 

(a)    amounts deposited into the Collection Account in respect of:

 

(i)    all payments received on or after the Cutoff Date on account of interest on the Initial Loans (including Finance Charges and fees) and all late payment, default and waiver charges and prepayment fees;

 

(ii)    all payments received on or after the Subsequent Loan Cutoff Date in the case of any Subsequent Loans and the applicable Substitute Loan Cutoff Date in the case of any Substitute Loans on account of interest of such Loans (including Finance Charges and fees) and all late payment, default and waiver charges, and prepayment fees;

 

(iii)    any End of Term Payments; and

 

(iv)    the interest portion of any amounts received (x) in connection with the purchase or repurchase of any Loan and (y) as Scheduled Payment Advances (if any); plus

 

(b)    investment earnings on funds invested in Permitted Investments in the Collection Account; minus

 

(c)    the amount of any losses incurred in connection with investments in Permitted Investments in the Collection Account.

 

15

 

Interest Period” means, with respect to (i) the first Payment Date, the period from and including the Closing Date to but excluding July 10, 2024, (ii) any Payment Date thereafter other than the Legal Final Payment Date, the period from and including the 10th day of the calendar month in which the prior Payment Date occurred to but excluding the 10th day of the calendar month in which such Payment Date occurs and (iii) the Legal Final Payment Date or any other date on which the full principal amount of the Notes are paid in full, including any redemption date, the period from and including the 10th day of the calendar month in which the prior Payment Date occurred to but excluding the Legal Final Payment Date or such other date on which the full principal amount of the Notes are paid in full, including any redemption.

 

Interest Rate” means, for any quarterly date of determination, a rate per annum equal to the greater of (i) the Pricing Benchmark in effect on such date plus 3.15% and (ii) 5.00%. For the avoidance of doubt, the Interest Rate (inclusive of the Pricing Benchmark) will be reset on each quarterly date of determination; provided that such reset Interest Rate shall only apply to Advances made on or after such quarterly date of determination.

 

Interest Shortfall” means, with respect to the Notes and any Payment Date, as applicable, an amount equal to the excess, if any, of (a) the related Interest Amount over (b) the amount of interest actually paid to the Notes on such Payment Date.

 

Investment Period” means the period commencing on the Closing Date and ending on the Investment Period Termination Date, unless otherwise extended by mutual written agreement of the Issuer (or the Servicer on behalf of the Issuer) and the Noteholders.

 

Investment Period Principal Distribution Amount” means the amount determined by the Servicer pursuant to Section 5.16 that will be paid to the Noteholders during the Investment Period as a payment of principal.

 

Investment Period Termination Date” means the earliest to occur of (i) June 21, 2027, or such later date as may be mutually agreed by the Noteholders and the Issuer (or the Servicer of behalf of the Issuer) with Rating Agency Confirmation and (ii) the date on which an Investment Period Termination Event has occurred.

 

Investment Period Termination Event” means (i) the Aggregate Outstanding Loan Balance of all Defaulted Loans ever owned by the Issuer minus (with respect to Substitute Loans, without duplication) the Liquidation Proceeds divided by the original Aggregate Outstanding Loan Balance of all Loans exceeds 8% from the Closing Date, or (ii) the occurrence of a Rapid Amortization Event.

 

Issuer” has the meaning provided in the Preamble.

 

Issuer LLC Agreement” means that certain amended and restated limited liability company agreement dated June 21, 2024 as may be amended from time to time.

 

Legal Final Payment Date” means the Payment Date occurring in June 2033.

 

Lien” means any pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing (including any UCC financing statement or any similar instrument filed against a Person’s assets or properties).

 

16

 

Life Sciences Loan” means a Loan made to an Obligor principally engaged in providing life sciences products and/or services including, but not limited to, medical devices, biopharmaceuticals, drug discovery and drug delivery.

 

Life Sciences Obligor” means an Obligor of a Life Sciences Loan.

 

Liquidation Expenses” means, with respect to any Loan, the aggregate amount of all out-of-pocket expenses reasonably incurred by the Servicer and any reasonably allocated costs of counsel (if any), in each case in accordance with the Servicer’s customary procedures in connection with the repossession, refurbishing and disposition of any Related Property securing such Loan upon or after the expiration or earlier termination of such Loan and other out-of-pocket costs related to the liquidation of any such Related Property, including the attempted collection of any amount owing pursuant to such Loan if it is a Defaulted Loan, and, if requested by the Trustee, the Servicer must provide to the Trustee a breakdown of the Liquidation Expenses for any Loan along with any supporting documentation therefor.

 

Liquidation Proceeds” means, with respect to any Defaulted Loan, whatever is receivable or received when such Loan or the Related Property is sold, liquidated, foreclosed, exchanged, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes all amounts representing late fees and penalties relating thereto net of, without duplication, (a) Liquidation Expenses relating to such Loan or Related Property reimbursed to the Servicer therefrom pursuant to the terms of this Agreement and (b) amounts required to be released to other creditors, including any other costs, expenses and taxes, or the related Obligor or grantor pursuant to Applicable Law or the governing Required Loan Documents.

 

Liquidation Report” shall have the meaning provided in Section 5.03(d).

 

List of Loans” means the list identifying each Loan constituting part of the Loan Assets, which list shall consist of the initial List of Loans reflecting the Initial Loans transferred to the Issuer on the Closing Date, together with any Subsequent List of Loans amending the most current List of Loans reflecting any Subsequent Loans or Substitute Loans transferred to the Issuer on a Transfer Date (together with, if applicable, a deletion from such list of the related Loan or Loans with respect to which a Substitution Event has occurred), and which list in each case (a) identifies by account number each Loan included in the Collateral, and (b) sets forth as to each such Loan (i) the Outstanding Loan Balance as of the Cutoff Date in the case of the Initial Loans and the related Transfer Date in the case of Subsequent Loans or Substitute Loans, as applicable, (ii) the maturity date, (iii) the Loan Type, (iv) whether such Loan is a Co-Agented Loan or Third-Party Agented Loan (and the name of the agent thereunder), (v) whether such Loan is a Noteless Loan or a Participated Loan, and (vi) whether evidence of filing of UCC-1 financing statements naming the Originator as secured party with respect to such Loan are available, and which list (as in effect on the Closing Date) is attached to this Agreement as Exhibit F.

 

Loan” means, to the extent transferred by the Originator to the Issuer, an individual loan to an Obligor, or portion thereof made by the Originator including, but not limited to, Agented Loans, Co-Agented Loans, Third Party Agented Loans and Participated Loans; provided that no Loan shall include any Excluded Property.

 

Loan Assets” means, collectively and as applicable, the Initial Loan Assets, the Subsequent Loan Assets and the Substitute Loan Assets.

 

Loan Checklist” means a checklist delivered by the Originator or the Issuer to the Custodian, for each Loan, of all Required Loan Documents to be included within the respective loan file, including, but not limited to, as applicable, one or more assignment agreements evidencing the transfer of such Loan to the Issuer, loan facility and security agreement, requisition and direction, intellectual property security

 

17

 

agreement, officer’s certificates, subordination agreements, deposit account control agreements, intellectual property security filings, insurance binder or insurance certificates, all guarantees related thereto (or other collateral agreement), copies of the UCC-1 financing statements (or comparable filings in jurisdictions outside of the United States) and (if not a Noteless Loan) an Underlying Note (or such Loan Checklist shall specify if such Loan is a Noteless Loan), and which shall include the name of the Obligor with respect to such Loan, in each case as of the date of acquisition thereof by the Issuer.

 

Loan File” means, with respect to any Loan and Related Property, each of the Required Loan Documents and duly executed original or copies (including electronic copies), in each case as indicated on the List of Loans, of any other Records relating to such Loan and Related Property.

 

Loan Rate” means, for each Loan and Collection Period, the current cash pay interest rate for such Loan in such period, as specified in the related Underlying Note or related Required Loan Documents.

 

Loan Type” means, with respect to any Loan, the characterization of such Loan as a Technology Loan, a Life Sciences Loan, a Healthcare Loan or a Sustainability Loan.

 

Lockbox Account” means the segregated account so designated and established and maintained pursuant to Section 7.01(a).

 

Lockbox Bank” shall have the meaning provided in Section 7.01(a).

 

LTV” shall mean with respect to any Loan, the Outstanding Loan Balance of the Loan divided by the market value of such Loan or the underlying assets securing such Loan, expressed as a percentage.

 

Majority Noteholders” means, as of any date of determination, the Noteholders evidencing at least 51% of the Aggregate Outstanding Note Balance of all Notes (voting as a single class).

 

Material Modification” means any amendment or waiver of, or modification or supplement to, the Underlying Loan Agreement governing such Loan as a result of the related Obligor financial under-performance or the related Obligor credit-related concerns which:

 

(a)    reduces or forgives any or all of the principal amount due under such Loan;

 

(b)    (i) waives one or more interest payments (other than any incremental interest accrued due to a default or event of default with respect to such Loan), (ii) permits any interest due in cash to be deferred or capitalized and added to the principal amount of such Loan or (iii) reduces the spread or coupon payable on such Loan unless such reduction (when taken together with all other reductions with respect to such Loan) is by less than 10% of the spread or coupon payable at the time of the initial funding;

 

(c)    either (i) extends the maturity date of such Loan by more than 120 days past the maturity date as of the initial funding or (ii) extends the amortization schedule with respect thereto;

 

(d)    substitutes, alters or releases the Underlying Notes related to such Loan, and such substitution, alteration or release, individually or in the aggregate and as determined with reasonable discretion, materially and adversely affects the value of such Loan; or

 

(e)    waives any other material requirement under such Underlying Loan Agreement;

 

18

 

provided that no Material Modification may extend the maturity of any Loan beyond the Legal Final Payment Date.

 

Monthly Report” shall have the meaning provided in Section 9.01.

 

Moodys” means Moody’s Investors Service, Inc. and any successor thereto.

 

Morningstar DBRS” means DBRS, Inc., doing business as Morningstar DBRS, and any successor thereto.

 

Nonrecoverable Advance” means any Scheduled Payment Advance or Servicing Advance, as applicable, previously made in respect of a Loan or any Related Property that, as determined by the Servicer in its reasonable, good faith judgment, will not be ultimately recoverable from subsequent payments or collections with respect to the applicable Loan including, without limitation, payments or reimbursements from the related Obligor, Insurance Proceeds or Liquidation Proceeds on or in respect of such Loan or Related Property.

 

Note” means any one of the notes of the Issuer, executed and authenticated in accordance with the Indenture.

 

Note Funding Agreement” means that certain Note Funding Agreement, dated as of the date hereof, between the Issuer and the Initial Purchasers, as such agreement may be amended, modified, waived, supplemented or restated from time to time.

 

Note Purchase Agreement” means that certain Note Purchase Agreement, dated as of the Closing Date, among the Issuer, the Originator and the Initial Purchasers, as such agreement may be amended, modified, waived, supplemented or restated from time to time.

 

Note Register” shall have the meaning provided in Section 4.02(a) of the Indenture.

 

Noteholder” or “Holder” means each Person in whose name a Note is registered in the Note Register; provided that an Owner of a Note shall be deemed a Holder of such Note as provided in Section 13.13.

 

Noteless Loan” means any Loan that, pursuant to the terms of the related credit agreement (or equivalent document), is not evidenced by a promissory note.

 

Notice of Substitution” shall have the meaning provided in Section 2.08.

 

Obligor” means, with respect to any Loan, any Person or Persons obligated to make payments pursuant to or with respect to such Loan, including any guarantor thereof, but excluding, in each case, any such Person that is an obligor or guarantor that is in addition to the primary obligors or guarantors with respect to the assets, cash flows or credit of which the related Loan is principally underwritten.

 

Officers Certificate” means a certificate delivered to the Trustee signed by a Responsible Officer of (i) the Originator, or (ii) the Servicer, or (iii) any other Person acting on behalf of the Issuer, as required by this Agreement or any other Transaction Document.

 

Operating Guidelines” means the written operating guidelines (which covers credit, collection and servicing policies and procedures) of the Originator and the initial Servicer in effect on the Cutoff Date, as amended or supplemented from time to time in accordance with Section 5.02(l), a copy of which has been provided to the Issuer and the Backup Servicer; and, with respect to any Successor Servicer, the

 

19

 

written collection policies and procedures of such Person at the time such Person becomes a Successor Servicer.

 

Opinion of Counsel” means a written opinion of counsel, who may be outside counsel, or internal counsel (except with respect to federal securities law, tax law, bankruptcy law or UCC matters), for the Issuer, the Originator or the Servicer, including Dechert LLP or other counsel reasonably acceptable to the Trustee.

 

Optional Redemption” means a redemption of the Notes pursuant to Section 10.01 of the Indenture.

 

Originator” shall have the meaning provided in the Preamble.

 

Other Connection Taxes” means, with respect to any Noteholder, Taxes imposed as a result of a present or former connection between such Noteholder and the jurisdiction imposing such Tax (other than connections arising from such Noteholder having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Transaction Document, or sold or assigned an interest in any Advance, its commitment under the Note Funding Agreement or Transaction Document).

 

Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Transaction Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

 

Outstanding” shall have the meaning provided in Section 1.01 of the Indenture.

 

Outstanding Loan Balance” means, as of any date of determination with respect to a Loan, the outstanding principal amount of such Loan.

 

Outstanding Note Balance” means, as of any date of determination with respect to any Notes, (i) the original principal amount of such Notes on the Closing Date, plus (ii) any Advances made by the Noteholders after the Closing Date minus (iii) all amounts paid by the Issuer with respect to such principal amount up to such date.

 

Overcollateralization Adjustment Event” will be deemed to have occurred and be continuing on any date of determination if (i) the aggregate Outstanding Loan Balance of all Delinquent Loans exceeds 15% of the Pool Balance as of the last day of the most recent Collection Period (if related to a Payment Date) or the Business Day prior to an Advance Date (if related to an Advance Date), or, without duplication, (ii) the aggregate Outstanding Loan Balance of all Defaulted Loans ever owned by the Issuer exceeds 10% of the Pool Balance as of the last day of the most recent Collection Period (if related to a Payment Date) or the third (3rd ) Business Day prior to an Advance Date (if related to an Advance Date).

 

Owner” shall have the meaning provided in the Indenture.

 

Participated Loans” means the Loans in which the Originator holds a participation interest as of the Closing Date which interest has been assigned to the Issuer pursuant to this Agreement; provided that such Loan shall cease to constitute a Participated Loan if it has not been elevated to a full assignment within 60 days after the Closing Date.

 

Payment Date” means the tenth (10th) day of each month, commencing July 10, 2024, or if such day is not a Business Day, on the next succeeding Business Day.

 

20

 

Percentage Interest” means, for the Holder of any Note, the fraction, expressed as a percentage, the numerator of which is the then current Outstanding Note Balance represented by such Note and the denominator of which is the then current Aggregate Outstanding Note Balance.

 

Permitted Distributions” means with respect to each taxable year, distributions to the Servicer in an amount equal (in the aggregate) to (a) the sum of (i) the Servicer’s “investment company taxable income” (within the meaning of Section 852(b)(2) of the IRC), determined without regard to Section 852(b)(2)(D) of the IRC, and (ii) the excess of the Servicer’s interest income excludable from gross income under Section 103(a) of the IRC over its deductions disallowed under Sections 265 or 171(a)(2) of the IRC, in each case recognized by the Servicer in respect of its ownership of the Issuer for U.S. federal income tax purposes, as certified by the Servicer and the Issuer to the Noteholders in a written notice setting forth the calculation thereof, minus (b) the sum of any distributions previously made to the Servicer under this Agreement in respect of taxes each such taxable year.

 

Permitted Investments” means on any date of determination, book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form with maturities not exceeding the next Payment Date that evidence:

 

(i)      direct obligations of, and obligations fully guaranteed by, the United States or any agency or instrumentality of the United States;

 

(ii)     demand deposits, time deposits or certificates of deposit of any depository institution (including any affiliate of the Servicer or the Trustee) or trust company incorporated under the laws of the United States or any state thereof or the District of Columbia (or any domestic branch of a foreign bank) and subject to supervision and examination by Federal or state banking or depository institution authorities (including depository receipts issued by any such institution or trust company as custodian with respect to any obligation referred to in clause (i) above or a portion of such obligation for the benefit of the holders of such depository receipts); provided that at the time of the investment or contractual commitment to invest therein (which shall be deemed to be made again each time funds are reinvested following each Payment Date), the commercial paper or other short-term senior unsecured debt obligations (other than such obligations the rating of which is based on the credit of a person other than such depository institution or trust company) of such depository institution or trust company shall have a credit rating from Moody’s of “P-1” or R-1(High) by Morningstar DBRS (if rated by Morningstar DBRS);

 

(iii)     commercial paper (including commercial paper of any affiliate of the Servicer or the Trustee) having, at the time of the investment or contractual commitment to invest therein, a rating from Moody’s of “P-1” or R-1(High) by Morningstar DBRS (if rated by Morningstar DBRS);

 

(iv)     investments in money market funds (including funds for which the Servicer or the Trustee or any of their respective affiliates is investment manager or advisor) having a rating from Moody’s of “Aaa (mf)” or the equivalent by Morningstar DBRS (if rated by Morningstar DBRS);

 

(v)      banker’s acceptances issued by any depository institution or trust company referred to in clause (ii) above; and

 

21

 

(vi)    repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States, in either case entered into with a depository institution or trust company (acting as principal) referred to in clause (ii) above.

 

The Trustee may purchase from or sell to itself or an Affiliate, as principal or agent, the Permitted Investments described above.

 

Permitted Liens” means:

 

(i)      with respect to the interest of the Originator and the Issuer in the Loans included in the Collateral: (a) Liens in favor of the Issuer created pursuant to this Agreement, and (b) Liens in favor of the Trustee created pursuant to the Indenture and/or this Agreement, (c) in respect of Second Lien Loans, a first priority perfected security interest of any related senior loan described in the definition thereof; and

 

(ii)     with respect to the interest of the Originator and the Issuer in the Related Property: (a) materialmen’s, warehousemen’s, mechanics’ and other Liens arising by operation of law in the ordinary course of business for sums not due or sums that are being contested in good faith, (b) purchase money security interests in certain items of equipment, (c) Liens for state, municipal and other local taxes if such taxes shall not at the time be due and payable or the validity or amount thereof is currently being contested by an appropriate Person in good faith by appropriate proceedings, (d) other customary Liens permitted with respect thereto consistent with the Operating Guidelines or the Servicing Standard, (e) Liens in favor of the Issuer created by the Originator pursuant to this Agreement, (f) Liens in favor of the Trustee created pursuant to the Indenture and/or this Agreement, and (g) with respect to Agented Loans, Co-Agented Loans and Third Party Agented Loans, Liens in favor of the lead agent, the collateral agent or the paying agent on behalf of all holders of indebtedness of such Obligor under the related facility.

 

Person” means any individual, corporation, estate, partnership, business or statutory trust, limited liability company, sole proprietorship, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or other entity.

 

Pool Balance” means the aggregate Outstanding Loan Balance of all Loan Assets ever owned by the Issuer, in each case of their respective Cutoff Date, Subsequent Loan Cutoff Date or Substitute Loan Cutoff Date, as applicable.

 

Predecessor Servicer Work Product” shall have the meaning provided in ‎Section 8.03(e).

 

Prepayments” means any and all (a) prepayments, including prepayment premiums, on or with respect to a Loan (including, with respect to any Loan and any Collection Period, any Scheduled Payment, Finance Charge or portion thereof that is due in a subsequent Collection Period that the Servicer has received and expressly permitted the related Obligor to make in advance of its scheduled due date, and that will be applied to such Scheduled Payment on such due date), (b) Liquidation Proceeds, and (c) Insurance Proceeds.

 

22

 

Pricing Benchmark” means with respect to any date of determination, the yield determined by the Issuer in accordance with the following two paragraphs.

 

The Pricing Benchmark shall be determined by the Issuer after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors of the Federal Reserve System), on the third Business Day immediately preceding (i) the Closing Date and (ii) the first day of each quarterly period following the Closing Date based upon the yield for the most recent day that appears after such time on such day in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily) – H.15” (or any successor designation or publication) (“H.15”) under the caption “U.S. government securities–Treasury constant maturities–Nominal” (or any successor caption or heading) (“H.15 TCM”). In determining the Pricing Benchmark, the Issuer shall select the yield for the United States Treasury constant maturity 3-year and 5-year on H.15, interpolate to a 4.88-year weighted average life, and rounded to three decimal places (in percent).

 

If on any date of determination in accordance with the preceding paragraph H.15 TCM is no longer published, the Issuer shall calculate the Pricing Benchmark based on the rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second Business Day preceding such date of determination of the 3-year and 5-year United States Treasury, and interpolate to a 4.88-year weighted average life. In determining the Pricing Benchmark in accordance with the terms of this paragraph, the semi-annual yield to maturity of the 3-year and 5-year United States Treasury security shall be based upon the average of the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of the 3-year and 5-year United States Treasury security, and rounded to three decimal places.

 

The Issuer shall provide notice to the Noteholders no later than one Business Day immediately preceding the applicable date of determination of the relevant Pricing Benchmark.

 

None of the Trustee, Securities Intermediary, Custodian or Backup Servicer shall be under any obligation (i) to monitor, determine or verify the unavailability or cessation of the Pricing Benchmark, (ii) to select, determine or designate any alternative reference rate or Pricing Benchmark, or other successor or replacement benchmark index, or whether any conditions to the designation of such a rate have been satisfied, or (iii) to select, determine or designate any adjustment to the Pricing Benchmark, or other modifier to any replac