Exhibit 10.1

 

REVOLVING WAREHOUSE FINANCING AGREEMENT


among

FALCON FINANCIAL INVESTMENT TRUST,
as Customer,


iSTAR FINANCIAL INC.,
as Buyer,

and

THE BANK OF NEW YORK,
as Paying Agent and Custodian


Dated as of April 28, 2004

 

 

TABLE OF CONTENTS

 

ARTICLE I  DEFINITIONS
Section 1.1.	Certain Defined Terms
Section 1.2.	Interpretation.
ARTICLE II  PURCHASES AND SETTLEMENT
Section 2.1.	Assignment and Conveyance
Section 2.2.	Facility and Incremental Investments.
Section 2.3.	Changes to Tranche Periods and Rate.
Section 2.4.	Interest, Fees and Other Costs and Expenses.
Section 2.5.	Non-Liquidation Settlement Procedures.
Section 2.6.	Settlement Procedures to Be Followed if a Liquidation Day Occurs.
Section 2.7.	Facility Fees
Section 2.8.	Protection of Ownership Interest of Buyer; Attorney-in-Fact.
Section 2.9.	General Settlement Procedures.
Section 2.10.	Payments and Computations, etc
Section 2.11.	Reports.
Section 2.12.	Cash Trap.
Section 2.13.	Whole Loan Repurchases
ARTICLE III  REPRESENTATIONS AND WARRANTIES
Section 3.1.	Representations and Warranties
Section 3.2.	Reaffirmation of Representations and Warranties
ARTICLE IV  CONDITIONS PRECEDENT
Section 4.1.	Conditions to Closing
Section 4.2.	Conditions to All Investments of Principal
ARTICLE V  COVENANTS
Section 5.1.	Affirmative Covenants of Customer
Section 5.2.	Negative Covenants of Customer
ARTICLE VI  ADMINISTRATION AND COLLECTIONS
Section 6.1.	Designation of Servicer
Section 6.2.	Lock Box Arrangements
Section 6.3.	Enforcement Rights
Section 6.4.	Responsibilities of Customer
ARTICLE VII  TERMINATION EVENTS
Section 7.1.	Termination Events
Section 7.2.	Remedies.
Section 7.3.	Injunctive Relief
Section 7.4.	Remedies Cumulative
ARTICLE VIII  SECURITY INTEREST
Section 8.1.	Grant of Security Interest

 

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ARTICLE IX  INDEMNIFICATION
Section 9.1.	Indemnities by Customer
Section 9.2.	Tax Indemnification and Characterization.
Section 9.3.	Increased Cost and Reduced Return.
Section 9.4.	Other Costs and Expenses
Section 9.5.	Due Diligence
Section 9.6.	Withholding Taxes.
ARTICLE X  CUSTODIAN
Section 10.1.	Duties of Custodian.
Section 10.2.	Rights of Custodian.
Section 10.3.	Individual Rights of Custodian
Section 10.4.	Custodian’s Disclaimer
Section 10.5.	Notice of Termination Event
Section 10.6.	Reports by Custodian to Facility Agent and Buyer
Section 10.7.	Compensation
Section 10.8.	Replacement of Custodian
Section 10.9.	Successor Custodian by Merger
Section 10.10.	Appointment of Co-Custodian or Separate Custodian.
Section 10.11.	Eligibility; Disqualification
Section 10.12.	Representations and Warranties of Custodian
ARTICLE XI  SECONDARY MARKET TRANSACTION
Section 11.1.	Secondary Market Transaction; Cooperation
ARTICLE XII  MISCELLANEOUS
Section 12.1.	Survival of Representations and Indemnities
Section 12.2.	Waivers; Amendments
Section 12.3.	Notices
Section 12.4.	Independence of Covenants
Section 12.5.	Governing Law
Section 12.6.	Consent to Jurisdiction and Service of Process
Section 12.7.	Integration
Section 12.8.	Severability; Counterparts
Section 12.9.	Successors and Assigns
Section 12.10.	Confidentiality
Section 12.11.	Time is of the Essence
Section 12.12.	Waiver of Jury Trial
Section 12.13.	Headings
Section 12.14.	No Presumption
Section 12.15.	Continuing Assignment; Reversion of Warehouse Assets
Section 12.16.	Independent Contractor
Section 12.17.	Statements of Account
Section 12.18.	Publicity

 

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EXHIBITS
Exhibit A-1	-	Form of Investment of Principal Request and Sources and Uses Statement
Exhibit B	-	Contract Forms
Exhibit C	-	Form of Power of Attorney
Exhibit D	-	Form of Assignment of Insurance
Exhibit E	-	Form of Auditor’s Letter
SCHEDULES
Schedule 1.1		-	Warehouse Asset Approved by Buyer for Purchase on Closing Date
Schedule 1.1(a)		-	Loan Origination Guidelines
Schedule 1.1(b)		-	List of Franchises
Schedule 1.1(c)		-	Form of Customer’s Standard Loan Submission Memorandum
Schedule 1.1(d)		-	Receivable Delivery Documents
Schedule 2.2-1		-	Transaction Procedure
Schedule 2.2-2		-	Form of Confirmation
Schedule 2.2-3		-	Form of Closing Certificate
Schedule 2.11(f)		-	Form of Servicing Report
Schedule 3.1(a)		-	Subsidiaries
Schedule 3.1(g)		-	Litigation
Schedule 3.1(l)		-	Account Banks and Payment Instructions
Schedule 3.1(k)		-	Location of Records
Schedule 3.1(n)		-	Customer’s Business Names
Schedule 3.1(t)		-	Employee Benefit Plans
Schedule 3.1(y)		-	Representations and Warranties regarding Warehouse Assets
Schedule 5.2(a)		-	Permitted Liens
Schedule 5.2(f)		-	Permitted Indebtedness

 

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THIS REVOLVING WAREHOUSE FINANCING AGREEMENT (this “ Agreement ”) is dated as of April 28, 2004, among FALCON FINANCIAL INVESTMENT TRUST, a Maryland real estate investment trust, as Customer (the “ Customer ”), THE BANK OF NEW YORK, as Paying Agent and Custodian (the “ Paying Agent ” or the “ Custodian ,” as the context requires), and iSTAR FINANCIAL INC., a Maryland corporation, as Buyer (the “ Buyer ”).

 

RECITALS

 

A.            Customer is primarily in the business of extending financing to certain franchised new car automobile and motorcycle dealers, by making term loans directly to a dealer.

 

B.            Customer, in order to finance such loans under this warehouse financing facility, desires to sell, transfer and assign (with full recourse to Customer) from time to time, an undivided 100% interest in all of its term loans, to Buyer, and, subject to the terms and conditions of this Agreement, Buyer subject to the terms and conditions of this Agreement, desires to purchase such undivided 100% interests.  Customer commits to repurchase such loans and repay all such principal with interest in accordance with the terms hereof.

 

C.            Capitalized terms used in these Recitals without definition shall have the respective meanings set forth in Article I .

 

In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1.             Certain Defined Terms .  As used in this Agreement, the following terms shall have the following meanings:

 

“ Accounting Period ” means the period commencing on a Cut-Off Date (or, in the case of the initial Accounting Period, the Closing Date), to but not including the next succeeding Cut-Off Date.

 

“ Advance Rate ” means 80%; provided , however , as to any Receivable with regard to which an Obligor Financial Covenant Default shall exist, the Advance Rate means, 40%.

 

“ Adverse Claim ” means any claim of ownership interest or any mortgage, deed of trust, deed to secure debt, trust deed, pledge, hypothecation, assignment, deposit arrangement, encumbrance, Lien (statutory or other) or other security agreement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement and any financing lease having substantially the same economic effect as any of the foregoing.

 

“ Affiliate ” as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, that Person.  For purposes of this definition “control” (including the correlative meanings the terms “controlling,”

 

 

“controlled by,” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by contract or otherwise; provided , that Buyer and its respective Affiliates shall not be considered an Affiliate of Customer or any of its Subsidiaries.

 

“ Affiliate Guaranty ” means a guaranty by an Obligor Affiliate of an Obligor’s obligations under the relevant Receivable, in substantially the form of one of the form contracts set forth in Exhibit B annexed hereto.

 

“ Alternate Rate ” means, in the event the LIBOR Rate is no longer published, as of any date of determination, in The Wall Street Journal or charging of Interest that is calculated based upon the LIBOR Rate would violate applicable law or regulation, the “prime rate” (or “base rate”) reported in the Money Rates column or section of The Wall Street Journal published on the second full Business Day preceding the first day of the applicable Tranche Period as having been the rate in effect for corporate loans at large U.S. money center commercial banks (whether or not such rate has actually been charged by any such bank) or, if The Wall Street Journal ceases publication of such “prime rate” or “base rate,” the annual rate of interest announced by JP Morgan Chase Bank (or another financial institution with a main or branch office in New York City, New York, selected, from time to time, by Buyer in its reasonable discretion) from time to time as its “prime rate” or “base rate” in effect at its principal office in New York, New York at 5:00 p.m., New York City time (in either case, the “ Prime Rate ”), for such date minus 2.0%.

 

“ Agreement ” means this Revolving Warehouse Financing Agreement, together with its exhibits, schedules and other attachments, as the same may be amended, modified or supplemented from time to time.

 

“ Aggregate Principal Outstanding ” means, at any time, the sum of the Outstanding Principal Invested less the sum of (x) the aggregate amount of Collections received and applied to reduce such Aggregate Principal Outstanding pursuant to Sections 2.5 or 2.6 , plus (y) without duplication, Partial Prepayments of Invested Principal; provided that the Aggregate Principal Outstanding shall be restored in the amount of any Collections or Partial Prepayments of Invested Principal so received and applied if at any time the distribution of any such Collections or Partial Prepayments of Invested Principal is rescinded or must otherwise be returned for any reason.

 

“ Applicable Margin ” means 2.9%.

 

“ Applicable Rate ” means, the Base Rate or the Overdue Rate as is deemed to be in effect pursuant to the terms of this Agreement, at which Interest accrues on the Aggregate Principal Outstanding.

 

“ Asset Sale ” means the sale by Customer or any of its Subsidiaries to any Person of any assets (whether tangible or intangible) of Customer or any of its Subsidiaries outside of the ordinary course of business, including, in any event, a sale of Eligible Receivables by Customer to a Subsidiary (including a trust) in connection with a Securitization Transaction.

 

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“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute.

 

“ Base Rate ” means a variable rate per annum equal to the sum of (a) the LIBOR Rate, or the Alternate Rate, as the case may be, plus (b) the Applicable Margin increasing or decreasing with each increase or decrease in the LIBOR Rate, or the Alternate Rate, as the case may be (as and when the LIBOR Rate or the Alternate Rate change as described in this Agreement).

 

“ Business Day ” means any day, other than a Saturday or a Sunday, on which banks are open for business in New York, New York and on which dealings in U.S. dollars are carried out on the London interbank market.

 

“ Buyer ” means iStar Financial Inc., and its successors and assigns.

 

“ Capital Lease ”, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

 

“ Capital Lease Obligations ” means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

 

“ Change of Control ” means following the Closing Date, (a) the sale, transfer, or other disposition of all or substantially all of Customer’s assets (excluding any sale of Receivables that provides proceeds simultaneously paid to Buyer pursuant to Section 2.13 ); (b) the consummation of a merger or consolidation of Customer with or into another entity or any other corporate reorganization, if 30% or more of the combined voting power of the continuing or surviving entity’s stock outstanding immediately after such merger, consolidation or such other reorganization is owned, directly or indirectly, by Persons who were not stockholders of Customer immediately prior to such merger, consolidation or other reorganization or Persons who were not stockholders of Customer immediately prior to such merger, consolidation or event have the power to select a majority of the Board of Directors, Board of Trustees or analogous body of Customer; or (c) a majority of the members of the board of directors, board of trustees or analogous body of Customer changes during any twelve (12) month period; provided , however , the resignation, termination or replacement of a director or trustee with a Person supported by a majority of the trustees or directors of Customer immediately prior to the resignation, termination or replacement in question shall not be counted for purposes of this part (c).

 

“ Charge-Off ” or “ Charge-Off Receivable ” means a Receivable:  (i) which has been identified by Customer as uncollectible, (ii) which in accordance with GAAP should be written off Customer’s books as uncollectible, (iii) which is a Defaulted Receivable, (iv) for which any obligations thereunder have been charged by Customer against any reserves, holdbacks, or discounts or otherwise accounted for as a loss by Customer in accordance with

 

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Customer’s practices as in effect on the date hereof or (v) with respect to which Customer has commenced a foreclosure action or other lawsuit against the Obligor.

 

“ Charge-Off Losses ” means, as of the end of any Accounting Period, with respect to the aggregation of all Receivables as of such date, the quotient of (i) (A) the principal balance of all Defaulted Receivables which become Defaulted Receivables during Accounting Period minus (B) amounts deposited in the Collection Account from Net Recoveries on Defaulted Receivables (which became Defaulted Receivables during a prior Accounting Period) and allocated to principal divided by (ii) the principal balance of all Receivables which are not Defaulted Receivables, which quotient shall be expressed as a percentage, and calculated in accordance with GAAP.

 

“ Closing Certificate ” means a certificate executed by Customer in the form of Schedule 2.2-3, certifying that (i) it has deposited all funds required to be deposited by it pursuant to the Escrow Agreement with the Escrow Agent, (ii) the representations and warranties of Customer in the Transaction Documents are true and correct on and as of the Funding Date in question (after giving effect to the applicable funding of Invested Principal and related sale of Warehouse Assets), (ii) all conditions to the funding of the Invested Principal have been satisfied, and (iv) the original Contract and other Receivable Delivery Documents deposited with the Custodian (or Escrow Agent) have been executed and delivered by the applicable party thereto and, are substantially in (x) the form of the applicable Contract document attached hereto as Exhibit B , or (y) the same form as the draft documents delivered to Buyer with the relevant Contract Approval Request, or, in the event of any modification of the underlying Contracts, in the same form as comparisons of the same to the forms delivered to Buyer and previously approved by Buyer.

 

“ Closing Date ” means the Business Day following the date on which all of the conditions set forth in Section 4.1 are satisfied or expressly waived, in writing, by Buyer, in the exercise of Buyer’s sole discretion.

 

“ Code ” means The Internal Revenue Code of 1986, as amended, as now and hereafter in effect, or any successor statute.

 

“ Collection Account ” means the segregated account in Customer’s name, in which Buyer has a first priority, perfected security interest, maintained by Paying Agent at The Bank of New York, or such other bank approved by Buyer for the purpose of receiving and concentrating Collections and such accounts as may be added thereto or deleted therefrom.  As of the Closing Date, the Collection Account is maintained by Paying Agent at The Bank of New York (ABA No.  021-000-018), 101 Barclay Street, 8 West, New York, NY 10286, designated as Account Number:  8900393297.

 

“ Collections ” means, with respect to any Receivable or Related Security, all cash collections and other cash proceeds of such Receivable or Related Security, including, without limitation, all Scheduled Payments, Finance Charges, full or partial prepayments, liquidation proceeds, insurance proceeds, refunds, late charges, fees (including “insufficient funds” and returned check fees and extension fees) or other cash proceeds of Related Security with respect to such Receivable, and any amount deemed to have been received by or on behalf of Customer

 

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with respect to such Receivable, including, without limitation, cash collections or proceeds received whenever any Receivable or Related Security is sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.

 

“ Consolidated Capital Expenditures ” means, for any period, the sum of (i) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Customer and its Subsidiaries) by Customer and its Subsidiaries during that period that, in conformity with GAAP, are included in “additions to property, plant or equipment” or comparable items reflected in the consolidated statement of cash flows of Customer and its Subsidiaries plus (ii) to the extent not covered by clause (i) of this definition, the aggregate of all expenditures by Customer and its Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person.

 

“ Consolidated Net Worth ” means, for Customer and its Subsidiaries on a consolidated basis, as of a particular date: (a) all amounts which would be included under capital on a balance sheet of such Person at such date, determined in accordance with GAAP; less (b) (i) amounts owing to such Person from Affiliates, or from officers, employees, shareholders or other Persons similarly affiliated with such Person, (ii) intangible assets and (iii) deferred tax liabilities.

 

“ Consolidated Rental Payments ” means, for any period, the aggregate amount of all rents paid or payable by Customer and its Subsidiaries on a consolidated basis during that period under all Capital Leases and Operating Leases to which Customer or any of its Subsidiaries is a party as lessee.

 

“ Consolidated Total Debt ” means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Customer and its Subsidiaries, determined on a consolidated basis, in accordance with GAAP.

 

“ Contingent Obligation ,” as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under interest rate swap, cap or collar agreements and currency swap or cap agreements or any other similar agreements.  Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such

 

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obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (Y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence.  The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited.

 

“ Contract ” means the agreements and instruments evidencing a Receivable and pursuant to which a security interest in the Related Security is granted and perfected, including, but not limited to, each promissory note, security agreement, Affiliate Guaranty, deed of trust, mortgage, deed to secure debt and other loan documents, to the extent applicable.

 

“ Contract Approval Request ” is defined in Schedule 2.2-1 .

 

“ Contractual Obligation ” as applied to any Person, means any provision of any Securities issued by that Person or of any material indenture, mortgage, deed of trust, deed to secure debt, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

 

“ Corporate Custodian Office ” means the principal office of Custodian at which at any particular time its corporate custodian business shall be administered, which office at the date of the execution of this Agreement is located at New York, New York; or at such other address as Custodian may designate from time to time by notice to Customer, Buyer and the Purchaser Representatives, or the principal corporate custodian office of any successor Custodian (of which address such successor Custodian will notify Customer, Buyer and the Purchaser Representatives).

 

“ Custodian ” means The Bank of New York, and its permitted successors and assigns, acting in its capacity as Custodian under this Agreement.

 

“ Customer ” means Falcon Financial Investment Trust, a Maryland real estate investment trust, and its successors.

 

“ Customer Obligations ” means all obligations of every nature of Customer from time to time owed to Buyer, or Servicer or any Purchaser Representative under any Transaction Document, whether for the Aggregate Principal Outstanding, interest, fees, expenses, indemnification or otherwise.

 

“ Customer Repurchase Price ” means an amount equal to: the sum of: (a) the aggregate amount of all outstanding Invested Principal, plus (b) all Interest accrued on such Invested Principal through the date of the repurchase, plus (c) any unpaid Late Charges.

 

“ Cut-Off Date ” means the sixth day of each month; provided that if such sixth day is not a Business Day, the Cut-Off Date for such month shall be the next Business Day; provided , further , that if a Cut-Off Date as so determined would fall on a Business Day that is less than four (4) Business Days prior to the next succeeding Interest Payment Date, such Cut-Off

 

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Date shall instead be the Business Day that is four (4) Business Days prior to the next succeeding Interest Payment Date.

 

“ Defaulted Receivable ” means a Receivable (i) for which all, or any part, of any scheduled payment is due and unpaid more than thirty (30) days after the due date for such scheduled payment, (ii) which has been settled for less than its principal balance, (iii) which has been liquidated by Servicer through the sale of such Receivable or any Related Security, (iv) with respect to which proceeds have been received which in Buyer’s judgment, constitute the final amounts recoverable in respect of such Receivable, (v) which is a Charge-Off Receivable (or should be a Charge-Off Receivable) in accordance with the Loan Origination Guidelines, (vi) the Obligor of which is a party to a proceeding under the Bankruptcy Code or similar debtor relief law (other than as a creditor or claimant), (vii) with regard to which a material non-monetary default (other than an Obligor Financial Covenant Default) has occurred under the relevant Contract which has not been cured within the applicable grace period set forth in the applicable Contract or (viii) the scheduled maturity date of which has been accelerated.

 

“ Direct Loan Receivable ” means any term loan secured, in whole or in part, by a first priority lien on real estate made by Customer to a franchised new car automobile dealer, in each case as amended, modified or supplemented from time to time, and all rights of every nature of Customer and all obligations of Obligor thereunder, including but not limited to all Indebtedness or other obligations owed to Customer (without giving effect to any transfer or conveyance to Buyer hereunder) of such Obligor arising thereunder, and includes, without limitation, the obligation to pay any Finance Charges with respect thereto.

 

“ DOL ” means the United States Department of Labor and any successor department or agency.

 

“ Eligible Direct Loan Receivable ” means, at any time, any Direct Loan Receivable that is listed on a List of Receivables that has been delivered to Buyer which has been approved by Buyer, in Buyer’s sole discretion and which, in Buyer’s sole discretion, also satisfies each of the following requirements:

 

(a)           In each case pursuant to the Franchise Loan Origination Guidelines, as in effect at the time such Receivable originated: (i) the Obligor of the Receivable meets the criteria for eligibility as a borrower; (ii) the Obligor Affiliates meet the criteria for eligibility as guarantors; (iii) the Related Security provided by the Obligor and the Obligor Affiliates meets the criteria for required collateral.

 

(b)           The Obligor of the Receivable, or one of the Obligor Affiliates providing an Affiliate Guaranty, owns one or more of the franchises set forth on Schedule 1.1(b) attached hereto, as amended from time to time with the prior written consent of Buyer.

 

(c)           Neither the Obligor of the Receivable nor any of the Obligor Affiliates is an Affiliate of any of the parties hereto.

 

(d)           Neither the Obligor of the Receivable nor any of the Obligor Affiliates is the Obligor or an Obligor Affiliate of any Receivable that has at any time been a Defaulted Receivable.

 

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(e)           The Receivable is not, and has not at any time been, a Defaulted Receivable.

 

(f)            The Receivable is evidenced by an “instrument” within the meaning of the UCC of all applicable jurisdictions.

 

(g)           The Receivable is denominated and payable only in United States dollars in the United States.

 

(h)           The Receivable, each Affiliate Guaranty and all other instruments evidencing the Related Security arise under a Contract in substantially the form of one or more of the form contracts set forth in Exhibit B annexed hereto; the applicable Contract documents (including the applicable Receivable Delivery Documents) and assignments thereof to Buyer (or, in blank) are substantially in the form of the draft documents provided to Buyer pursuant to Schedule 2.2-1 , or in the alternative, Customer has provided Buyer with machine-generated comparisons of such documents against the draft documents provided to Buyer, with such changes reasonably approved by Buyer; such Contract and such Receivable and the related Receivable Delivery Documents are in full force and effect and constitute the legal, valid and binding obligations of the Obligor and the Obligor Affiliates enforceable against such Obligor and Obligor Affiliates in accordance with their respective terms subject to no offset, counterclaim or other defense, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditor’s rights generally or by equitable principles relating to enforceability.

 

(i)            The Receivable, each Affiliate Guaranty and all other instruments evidencing the Related Security arise under a Contract which (i) does not require the Obligor or Obligor Affiliate under such Contract to consent to the transfer, sale or assignment of the rights and duties of Customer under such Contract and (ii) does not contain a confidentiality provision that purports to restrict the ability of Buyer or its successors or assigns to exercise rights under this Agreement or the other Transaction Documents, including, without limitation, their right to review such Contract.

 

(j)            The Receivable is legally and beneficially owned by Customer, free and clear of any Adverse Claim, except as created or permitted hereunder, and any assignment of such Receivable by Customer or its transferees is not prohibited by the applicable Contract or any Related Security with respect thereto.

 

(k)           The Receivable together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy, usury and other consumer laws) and with respect to which no part of the Contract related thereto is in violation of any such law, rule or regulation.

 

(l)            The Receivable was generated in the ordinary course of Customer’s business.

 

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(m)          The Receivable arises under a Contract the terms of which call for monthly and no more than 240 installment payments. Where the Receivable is a fixed rate obligation pursuant to the Franchise Loan Origination Guidelines, the terms of the Contract call for level pay installment payments, except for the first installment and the final installment, each of which may be less but not more than the other monthly payments. The Receivable has a first installment due date no later than the next succeeding Cut-Off Date unless the first installment is prepaid, in which case the next installment has a due date no later than the second Cut-Off Date following the date on which the Receivable is made. Each payment is due on the same day of the month.

 

(n)           Buyer has a perfected ownership interest in or a first perfected security interest in the Receivable and all Related Security and the Related Security includes, without limitation, (i) the fee simple interest in all real property owned by the Obligor and/or the Obligor Affiliates and used in connection with the operation of the automobile dealership to which the Receivable relates, and (ii) if the Obligor is not the owner thereof and/or the Obligor is not the franchisee, the leasehold interest in such real property.

 

(o)           Buyer has not notified Customer in writing that it has determined, in its good faith discretion, that such Receivable or class of Receivables is not acceptable as an Eligible Receivable because such Receivable poses a material risk of uncollectibility or inability to be included in a Securitization Transaction.

 

(p)           The Contract contains the original signatures of the respective Obligor and Obligor Affiliates.

 

(q)           No provision of the Contract has been waived, extended, altered or modified in any material respect except in accordance with the Franchise Loan Origination Guidelines, or, if criteria for such waiver, extension, alteration or modification is not contained in the Franchise Loan Origination Guidelines, with the prior consent of Buyer.

 

(r)            All Scheduled Payments made on the Receivable have been applied to the Outstanding Principal Balance as required by the Contract and by law.  Any payments in respect of interest and principal in excess of the Scheduled Payments due at the time of such payment were applied to the final maturing Scheduled Payments and not the Scheduled Payments next due.

 

(s)           On the date the Receivable was originated, the Obligor and each Obligor Affiliate had the capacity to contract and was solvent. Customer is not aware of facts which indicate Obligor or any Obligor Affiliate did not have the capacity to contract or which indicate a material adverse change since the date of the Contract in the Obligor’s or any Obligor Affiliate’s financial condition or the value of the Related Security.

 

(t)            Customer has not commenced a foreclosure action or other lawsuit against the Obligor or any Obligor Affiliate; nor has Customer designated the Contract for such action.

 

(u)           The Contract relating to such Receivable is to be collected and otherwise serviced by Servicer.

 

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(v)           The obligations of the original Obligor and the Obligor Affiliates have not been released or assumed by another Person unless the release or assumption was properly documented (or, in the case of an assumption, occurred by operation of law) and Buyer consents in writing to any such release or assumption for purposes of the Contract being an Eligible Receivable.

 

(w)          The Contract has not been, nor is it designated to be, terminated, satisfied, canceled, subordinated or rescinded in whole or in part; nor has any Related Security been released, or designated for release, from the security interest granted by the Contract, unless, and only to the extent, expressly provided in the Contract or otherwise consented to by Buyer.

 

(x)            No claims of rescission, setoff, counterclaim, defense or other dispute have been asserted with respect to the Contract.  Neither Customer nor any Affiliate of Customer has made any agreement with Obligor or any Obligor Affiliate to reduce the amount owed or the obligations incurred under the Contract.  Neither Customer nor any such Affiliate are required to perform any additional service for, or perform or incur any additional obligation to, Obligor or any Obligor Affiliate in order for Customer to enforce the Contract.

 

(y)           Except for payment defaults cured within thirty (30) days and Obligor Financial Covenant Defaults expressly disclosed in writing to Buyer, no default, breach, violation or event permitting acceleration under the terms of the Contract has occurred.

 

(z)            Custodian or Escrow Agent has received for delivery to Custodian: (i) the original Contract, bearing the original signatures of Obligor and each Obligor Affiliate, including any modifications or supplements thereto; and (ii) to the extent not subsumed in (i), the original Receivable Delivery Documents together with all other documents, agreements and instruments listed in the Schedules to the Closing Instructions delivered pursuant to the Escrow Agreement in connection with the closing of such Receivable.

 

“ Eligible Investment ” means (i) marketable securities issued or directly and unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor’s Ratings Group or at least P-1 from Moody’s Investors Service, Inc.; (iv) certificates of deposit or bankers’ acceptances maturing within one year from the date of acquisition thereof issued by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia having unimpaired capital and surplus of not less than $250,000,000 (each such commercial bank herein called an “ Eligible Bank ”); (v) Eurodollar time deposits having a maturity of less than one year purchased directly from any Eligible Bank (whether such deposit is with such Eligible Bank or any other Eligible Bank); (vi) money market funds having the highest rating obtainable from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; and (vii) debt securities issued by

 

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REITs held as a temporary qualifying investments for REITs under the Code; provided , however , the investments described in part (vii) of this definition of Eligible Investments shall not be deemed Eligible Investment for purposes of investments of funds in the Collection Account.

 

Any of the foregoing Eligible Investments may, but shall not be required to, be purchased by or through Custodian or any of its Affiliates.  Eligible Investments may, but shall not be required to, include any of the aforesaid items which are obligations of Custodian and otherwise qualify pursuant to the preceding provision of this definition.

 

“ Eligible Mortgage Loan Receivable ” means, at any time, any Mortgage Loan Receivable that is listed on a List of Receivables that has been delivered to Buyer and which has been approved by Buyer, in Buyer’s sole discretion, and which, in Buyer’s sole discretion, also satisfies each of the following requirements:

 

(a)           The Obligor of which meets the criteria for eligibility as a borrower pursuant to the Mortgage Loan Origination Guidelines, as in effect at the time such Receivable originated.

 

(b)           The Obligor of which is not an Affiliate of any of the parties hereto.

 

(c)           The Obligor of which is not the Obligor of any Receivable that has at any time been a Defaulted Receivable.

 

(d)           The Receivable is not, and has not at any time been, a Defaulted Receivable.

 

(e)           The Receivable is evidenced by an “instrument” within the meaning of the UCC of all applicable jurisdictions.

 

(f)            The Receivable is denominated and payable only in United States dollars in the United States.

 

(g)           The Receivable arises under a Contract in substantially the form of one of the form contracts set forth on Exhibit B annexed hereto; the applicable Contract documents and assignments thereof to Buyer (or in blank) evidencing or securing the applicable Receivable are substantially in the form of the documents provided to Buyer pursuant to Schedule 2.2-1 or in the alternative, Customer has provided Buyer with machine-generated comparisons of such documents against the draft documents provided to Buyer, with such changes reasonably approved by Buyer; such Contract and such Receivable and the related Receivable Delivery Documents are in full force and effect and constitute the legal, valid and binding obligations of the Obligor enforceable against such Obligor in accordance with their respective terms subject to no offset, counterclaim or other defense, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditor’s rights generally or by equitable principles relating to enforceability.

 

(h)           The Receivable arises under a Contract which (i) does not require the Obligor under such Contract to consent to the transfer, sale or assignment of the rights and duties

 

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of Customer under such Contract and (ii) does not contain a confidentiality provision that purports to restrict the ability of Buyer or its successors or assigns to exercise rights under this Agreement or the other Transaction Documents, including, without limitation, their right to review such Contract.

 

(i)            The Receivable is legally and beneficially owned by Customer, free and clear of any Adverse Claim, except as created or permitted hereunder, and any assignment of such Receivable by Customer or its transferees is not prohibited by the applicable Contract or any Related Security with respect thereto.

 

(j)            The Receivable together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy, usury and other consumer laws) and with respect to which no part of the Contract related thereto is in violation of any such law, rule or regulation.

 

(k)           The Receivable was generated in the ordinary course of Customer’s business.

 

(l)            The Receivable arises under a Contract the terms of which call for monthly and no more than 240 installment payments. Where the Receivable is a fixed rate obligation pursuant to the Mortgage Loan Origination Guidelines, the terms of the Contract call for level pay installment payments, except for the first installment and the final installment, each of which may be less but not more than the other monthly payments. The Receivable has a first installment due date no later than the next succeeding Cut-Off Date unless the first installment is prepaid, in which case the next installment has a due date no later than the second Cut-Off Date following the date on which the Receivable is made. Each payment is due on the same day of the month.

 

(m)          Buyer has a first perfected ownership interest in or a first perfected security interest in the Receivable and all Related Security.

 

(n)           Buyer has not notified Customer in writing that it has determined, in its good faith discretion, that such Receivable or class of Receivables is not acceptable as an Eligible Receivable because such Receivable poses a material risk of uncollectibility.

 

(o)           The Contract contains the original signature of the respective Obligor.

 

(p)           No provision of the Contract has been waived, extended, altered or modified in any material respect except in accordance with the Mortgage Loan Origination Guidelines, or, if criteria for such waiver, extension, alteration or modification is not contained in the Mortgage Loan Origination Guidelines, with the prior consent of Buyer.

 

(q)           All Scheduled Payments made on the Contract have been applied to the Outstanding Principal Balance as required by the Contract and by law.  Any payments in respect of interest and principal in excess of the Scheduled Payments due at the time of such payment

 

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were applied to the final maturing Scheduled Payments (thereby reducing the Outstanding Principal Balance thereof) and not the Scheduled Payments next due.

 

(r)            On the date of the Contract, the Obligor had the capacity to contract and was solvent.  Customer is not aware of facts, arising after the date of the Receivable, which indicate Obligor did not have the capacity or which indicate a materially adverse change since the date of the Contract in the Obligor’s financial condition or the value of the Related Security.

 

(s)           Customer has not commenced a foreclosure action or other lawsuit against the Obligor; nor has Customer designated the Contract for such action.

 

(t)            The Contract is to be collected and otherwise serviced by Customer.

 

(u)           The obligation of the original Obligor has not been released or assumed by another Person unless the release or assumption was properly documented (or, in the case of an assumption, occurred by operation of law) and Buyer consents in writing to it for purposes of the Contract being an Eligible Receivable.

 

(v)           The Contract has not been, nor is it designated to be, terminated, satisfied, canceled, subordinated or rescinded in whole or in part; nor has any Related Security been released, or designated for release, from the security interest granted by the Contract, unless, and only to the extent, consented to by Buyer.

 

(w)          No claims of rescission, setoff, counterclaim, defense or other dispute have been asserted with respect to the Contract.  Neither Customer nor any Affiliate of Customer has made any agreement with Obligor to reduce the amount owed under the Contract.  Neither Customer nor any such Affiliate are required to perform any additional service for, or perform or incur any additional obligation to, Obligor in order for Customer to enforce the Contract.

 

(x)            Except for payment defaults cured within thirty (30) days and Obligor Financial Covenants Defaults expressly disclosed, in writing, to Buyer, no default, breach, violation or event permitting acceleration under the terms of the Contract has occurred.

 

(y)           Custodian, on behalf of Buyer or Escrow Agent, pursuant to the Paying Agent Agreement, as Buyer’s agent, has received for delivery to Custodian: (i) the original Contract, bearing the original signature of Obligor, including any modifications or supplements thereto; and (ii)  to the extent not subsumed in (i), the Receivable Delivery Documents, and all of the documents, agreements and instruments listed in the Schedules to the Closing Instructions delivered pursuant to the Escrow Agreement in connection with the closing of such Receivable.

 

“ Eligible Receivable ” means any Eligible Direct Loan Receivable and any Eligible Mortgage Loan Receivable.

 

“ Environmental Laws ” means all statutes, ordinances, orders, rules, regulations, plans, policies or decrees and the like relating to (i) environmental matters, including, without limitation, those relating to fines, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or

 

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(iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Customer or any of its Subsidiaries or any of their respective properties.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

 

“ ERISA Affiliate ” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.  Any former ERISA Affiliate of Customer or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Customer or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Customer or such Subsidiary and with respect to liabilities arising after such period for which Customer or such Subsidiary could be liable under the Internal Revenue Code or ERISA.

 

“ ERISA Event ” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for thirty (30) day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by their due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Customer any of its Subsidiaries or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Customer, any of its Subsidiaries or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Customer, any of its Subsidiaries or any of its ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Customer, any of its Subsidiaries or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Customer, any of its Subsidiaries or any of its ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the

 

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Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Customer, any of its Subsidiaries or any of its ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.

 

“ Escrow Agent ” means Lawyers Title Insurance Corporation or another escrow agent selected by Customer with the approval of Buyer, as Escrow Agent, under the Escrow Agreement.

 

“ Escrow Agreement ” means an Escrow Agreement among Buyer, Customer and Escrow Agent executed and delivered on or prior to the Closing Date in form and substance satisfactory to Buyer.

 

“ Excess Principal ” means the remainder of (x) the product of (1) the Advance Rate, multiplied by (2) the Net Receivables Balance, minus (y) the Aggregate Principal Outstanding; provided , that for purposes of calculating available Excess Principal, the Aggregate Principal Outstanding will be reduced by Partial Prepayments of Invested Principal only to the extent made on a voluntary basis by Customer pursuant to Section 2.9(d) hereof; provided, however, after giving effect to any proposed disbursement request (or actual disbursement) in respect of Excess Principal, the Aggregate Principal Outstanding may not exceed the lesser of (x) the Facility Limit and (y) the Warehouse Asset Limit Amount.

 

“ Facilities ” means all real property now, hereafter or heretofore owned, leased, operated or used by Customer or any of its Subsidiaries or any of their respective predecessors or Affiliates.

 

“ Facility Limit ” means $150,000,000; provided , however , the Facility Limit may be increased, upon ten (10) Business Days’ notice from Customer, to Buyer to $200,000,000, but only with Buyer’s consent, which consent may be given or withheld in the sole discretion of Buyer ( i.e. , it may be given or withheld by Buyer for any or no reason) and payment to Buyer by Customer of an additional fee equal to $625,000.

 

“ Facility Termination Date ” means April 10, 2005.

 

“ Financial Condition Covenants ” is defined in Section 5.1(n) .

 

“ Finance Charges ” means, with respect to a Contract, any finance, interest, late or similar charges owing by an Obligor pursuant to such Contract.

 

“ Fiscal Quarter ” means a fiscal quarter of any Fiscal Year.

 

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“ Fiscal Year ” means the fiscal year of Customer and its Subsidiaries ending on December 31 of each calendar year.

 

“ Franchise Loan Origination Guidelines ” means Customer’s loan origination policies and practices relating to Direct Loan Receivables existing on the date hereof and set forth in Schedule 1.1(a) annexed hereto, as modified from time to time by Customer’s Board of Directors.

 

“ Funding Date ” means, with respect to each Investment of Principal, the Business Day on which such Investment of Principal is made.

 

“ GAAP ” means generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination.

 

“ Governmental Authority ” means the United States of America, any state or other political subdivision thereof and any other foreign or domestic court, tribunal or entity of any nature exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

“ Governmental Authorization ” means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority.

 

“ Gross Negligence ” means willful misconduct, recklessness or the absence of the slightest care or the complete disregard of consequences.  Gross Negligence does not mean the absence of ordinary care or diligence, or an inadvertent act or an inadvertent failure to act.  To the extent the term “gross negligence” is used with respect to Buyer or another Purchaser Representative or any other indemnitee in any of the Transaction Documents, it shall have the meaning set forth herein.

 

“ Guaranty ” of a Person means any agreement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement or take-or-pay contract and shall include, without limitation, the contingent liability of such Person in connection with any application for a letter of credit.

 

“ Hazardous Materials ” means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority, or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of the Facilities.

 

“ Indebtedness ” means, with respect to any Person on a consolidated basis: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the

 

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issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements; (g) indebtedness of others subject to a Guaranty by such Person; and (h) indebtedness of general partnerships of which such Person is a general partner.

 

“ Indemnified Amount ” has the meaning assigned to that term in Section 9.1 .

 

“ Indemnified Party ” has the meaning assigned to that term in Section 9.1 .

 

“ Interest ” means, with respect to any Tranche Period or other applicable period, the aggregate of the following:

 

 

provided , however , that no provision of this Agreement shall require the payment or permit the collection of Interest in excess of the maximum permitted by applicable law; and provided further , that Interest shall not be considered paid by any payment if at any time such payment is rescinded or must be returned for any reason.

 

“ Interest Payment Date ” means the tenth day of each month, commencing with the first such date after the first Funding Date; provided that if such tenth day is not a Business Day, the Interest Payment Date for such month shall be the next succeeding Business Day.

 

“ Invested Principal ” means, with respect to any Investment of Principal, the amount paid to Customer by Buyer hereunder in connection with such Investment of Principal.

 

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“ Investment ” means any direct or indirect purchase or other acquisition by Customer or any of its Subsidiaries of, or of a beneficial interest in, any stock or other Securities of any other Person or any direct or indirect loan, advance (other than acquisitions of Warehouse Assets permitted hereunder) or capital contribution by Customer or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business.  The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.

 

“ Investment of Principal ” means any advance of principal by Buyer hereunder to Customer.

 

“ Investment of Principal Request ” means a notice substantially in the form of Exhibit A-1 annexed hereto delivered by Customer to Buyer pursuant to Section 2.2(c) with respect to a proposed Investment of Principal.

 

“ Joint Venture ” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any corporate subsidiary of any Person be considered to be a Joint Venture to which such Person is a party.

 

“ Late Charge ” is defined in Section 2.4(c) .

 

“ LIBOR Rate ” means the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) equal to the London Interbank Offered Rate (LIBOR) with a one-month maturity as reported in the Money Rates column or section of The Wall Street Journal published on the second Business Day preceding the first day of the relevant Tranche Period (or other relevant period).  For purposes hereof, the LIBOR Rate for the period commencing on the Closing Date and ending on May 9, 2004 shall be 1.10%.

 

“ Lien ” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance (including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest, and any mechanic’s Liens) and any credit insurance arrangement option, trust or other preferential arrangement having the practical effect of any of the foregoing.

 

“ Liquidation Day ” for any portion of the Warehouse Assets means any day on or after the Termination Date.

 

“ List of Receivables ” means the list delivered to Buyer and Custodian by Customer with each Receivable which:  (i) identifies each Receivable being delivered by account number, the name of the Obligor and the Outstanding Principal Balance and (ii) identifies all Related Security with respect to each Receivable.

 

“ Loan Origination Guidelines ” means the Franchise Loan Origination Guidelines and the Mortgage Loan Origination Guidelines, collectively.

 

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“ Market Value ” means, as of any relevant date, the lesser of (x) market value of the Receivables on such date, as determined by Buyer in the manner set forth below, and (y) the Net Receivables Balance.  The Market Value of all Receivables on the Receivables List shall be determined by Buyer, in its sole but commercially reasonable discretion, on each Business Day during the term of the Agreement taking into account, among other things, the then current market value of the Swap Agreement.  Customer shall cooperate with Buyer in its determination of Market Value of each of the Receivables (including, without limitation, providing all information and documentation in the possession of Customer regarding such Receivables or otherwise required by Buyer in its commercially reasonable judgment).  For purposes of clarification, it is agreed that in the event (x) a payment delinquency of more than thirty (30) days by an Obligor or Obligor Affiliate shall exist, or (y) the applicable Receivable is a Defaulted Receivable or is no longer an Eligible Direct Loan Receivable or Eligible Mortgage Loan Receivable, the Market Value of the applicable Receivable shall be zero.  In no event shall the Market Value of any Warehouse Asset be deemed to exceed $25,000,000.

 

“ Material Adverse Change ” means an event or condition the occurrence of which has had, or could reasonably be expected to have (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Customer or the value or collectibility of the Warehouse Assets or (ii) a material adverse effect on the ability of Customer to pay or perform any Customer Obligation or any other obligations under any of the Transaction Documents, or on the rights and remedies of Buyer under any Transaction Document with respect to the Warehouse Assets or otherwise.

 

“ Maximum Advance Rate ” means 66.6%.

 

“ Mortgage Loan Origination Guidelines ” means Customer’s loan origination policies and practices relating to Mortgage Loan Receivables existing on the date hereof and set forth in Schedule 1.1(a) annexed hereto, as modified from time to time by Customer’s Board of Directors.

 

“ Mortgage Loan Receivable ” means any term loan made by Customer to a borrower in connection with a Real Estate Mortgage Loan, in each case as amended, modified or supplemented from time to time, and all rights of every nature of Customer and all obligations of Obligor thereunder, including but not limited to all Indebtedness or other obligations owed to Customer (without giving effect to any transfer or conveyance to Buyer hereunder) of such Obligor arising thereunder, and includes, without limitation, the obligation to pay any Finance Charges with respect thereto.

 

“ Multiemployer Plan ” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA.

 

“ NAIC ” means The National Association of Insurance Commissioners.

 

“ Net Receivables Balance ” means, at any time, an amount equal to the Outstanding Principal Balance of all Eligible Receivables reduced by the entire Outstanding Principal Balance of all Eligible Receivables constituting Defaulted Receivables or other Charge-Off Receivables.

 

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“ Net Recoveries ” means, with respect to a Defaulted Receivable, the monies collected from whatever source, during any Accounting Period following the Accounting Period in which such Receivable became a Defaulted Receivable, net of the reasonable costs of liquidation plus any amounts required by law to be remitted to the respective Obligor.

 

“ Obligor ” means, with respect to any Receivable, the Person or Persons obligated to make payments pursuant to the Contract or any Guaranty relating to such Receivable.

 

“ Obligor Affiliate ” means each Affiliate of the Obligor granting a security interest in all or part of the Related Security and/or providing an Affiliate Guaranty.

 

“ Obligor Financial Covenants ” means the financial covenants of an Obligor or Obligor Affiliate set forth in a Contract.

 

“ Obligor Financial Covenant Default ” means the failure of an Obligor or Obligor Affiliate to comply with its Obligor Financial Covenants.

 

“ Officers’ Certificate ” means, as applied to any corporation, a certificate executed on behalf of such corporation by its chairman of the board (if an officer) or its president or one of its vice presidents and by its chief financial officer or its treasurer.

 

“ Operating Lease ” means, as applied to any Person, any lease of any property that is not a Capital Lease, other than any such lease under which that Person is the lessor.

 

“ Other Costs ” has the meaning assigned to such term in Section 9.4 .

 

“ Outstanding Principal Balance ” means the outstanding principal balance of a Contract.

 

“ Outstanding Principal Invested ” means the aggregate outstanding principal balance of all Invested Principal.

 

“ Overdue Rate ” means at all times (including after the occurrence of a Termination Event), a rate per annum equal to (a) the Base Rate plus (b) 5%.

 

“ Partial Prepayments of Invested Principal ” means amounts paid from time to time in reduction of the Aggregate Principal Outstanding pursuant to the requirements of Section 2.9(c) or made voluntarily by Customer pursuant to Section 2.9(d) or Section 2.13 .

 

“ Paying Agent ” means The Bank of New York, and its permitted successors and assigns, acting in its capacity as Paying Agent under the Paying Agent Agreement.

 

“ Paying Agent Agreement ” means the Custodial and Paying Agent Agreement to be entered into on or prior to the Closing Date among Buyer, Paying Agent and Customer on terms and conditions satisfactory to Buyer.

 

“ PBGC ” means the Pension Benefit Guaranty Corporation and any Person succeeding to any or all of the functions thereof.

 

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“ Permitted Tax Distributions ” means a declaration or payment of any dividend or the making of any distribution by Customer equal to the greater of: (a) the amount determined by Customer’s Board of Directors, board of trustees or analogous body, to be necessary to permit Customer to distribute to its shareholders with respect to any calendar year (whether made during such year or after the end thereof) 100% of the “real estate investment trust taxable income” of Customer within the meaning of Code Section 857(b)(2), determined without regard to deductions for dividends paid; or (b) the amount that is determined by Customer’s Board of Directors, board of trustees or analogous body, to be necessary either to maintain Customer’s status as a REIT under the Code for any calendar year or to enable Customer to avoid the payment of any tax for any calendar year that could be avoided by reason of a distribution by Customer to its shareholders, with such distributions to be made as and when determined by Customer’s Board of Directors, board of trustees or analogous body, whether during or after the end of the relevant calendar year.

 

“ Person ” means any legal person, including any individual, corporation, limited liability company, partnership, limited partnership, limited liability partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

“ Potential Termination Event ” means an event which but for the lapse of time or the giving of notice, or both, would constitute a Termination Event.

 

“ Prior Period ” means, with respect to any Interest Payment Date, the period commencing on the prior Interest Payment Date to but excluding the referenced Interest Payment Date.

 

“ Preliminary Due Diligence Package ” shall mean with respect to any proposed Warehouse Asset, Customer’s standard loan submission memorandum substantially, in the form of Schedule 1.1(c) attached hereto, accompanied by (a) a final or draft third-party appraisal of the real property securing the applicable Warehouse Asset, (b) a draft or final third-party environmental site assessment report for the applicable Warehouse Asset, (c) a draft or final third party real estate asset physical condition report for the applicable Warehouse Asset and (d) to the extent such approvals have occurred, a copy of all Customer internal approvals required for the origination of the Receivable in question.

 

“ Proceeding ” has the meaning assigned to that term in Section 5.1(b)(iv) .

 

“ Property ” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

 

“ Purchase ” means the acquisition hereunder by Buyer of the Warehouse Assets.

 

“ Purchaser Representative ” means each of Buyer, Custodian and Paying Agent.

 

“ Real Estate Mortgage Loan ” means loans or notes secured by a first lien on real estate upon which is located one or more commercial structures.

 

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“ Receivable ” means any Direct Loan Receivable and any Mortgage Loan Receivable.

 

“ Receivable Delivery Documents ” means (i) the original Contracts with respect to each Receivable and its Related Security and (ii) each other document, agreement or instrument listed in the schedules to the Closing Instructions delivered pursuant to the Escrow Agreement in connection with the closing of such Receivable.  The Receivable Delivery Documents shall, in each instance, include the documents identified on Schedule 1.1(d) .

 

“ Records ” means, with respect to any Receivable, the Receivable Delivery Documents and other documents, books, records, reports, files, documents and other information (including, without limitation, computer programs, electronic data, tapes, discs, punch cards, data processing software and related property and rights) relating to such Receivable and the related Warehouse Assets or the related Obligor.

 

“ Regulatory Change ” has the meaning assigned to that term in Section 9.3 .

 

“ REIT ” means a domestic trust or corporation that qualifies as a real estate investment trust under the provisions of Section 856, et. seq. of the Code.

 

“ Related Security ” means with respect to any Receivable:

 

(a)           (i) the Records and any other documents contained in any receivable file; and (ii) funds deposited in the Collection Account and proceeds thereof;

 

(b)           all property from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable;

 

(c)           all Guarantees, insurance and other agreements or arrangements of whatever character from time to time supporting or guaranteeing payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise; and

 

(d)           all proceeds, products or any other distributions of, from or in respect of any or all of the foregoing, including, without limitation, whatever is receivable or received when any of the foregoing is sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.

 

“ Release ” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the environment, or into or out of any Facility.

 

“ Requirements of Law ” means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator or Governmental Authority applicable to or binding upon such Person or to which such Person is subject, whether federal, state or local, regulations promulgated pursuant to any of the foregoing and all state and local counterparts of such laws.

 

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“ Responsible Officer ” means, with respect to Custodian, any officer within the Corporate Custodian Office of Custodian, including any Vice President (however designated), Assistant Treasurer, Assistant Secretary, Managing Director or other officer of Custodian customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

“ Restricted Junior Payment ” means (a) any dividend or other distribution, direct or indirect, on account of any shares of or interests in any class of equity Securities of Customer now or hereafter outstanding, except a dividend payable solely in shares of or interests in that class of equity Securities to the holders of that class, (b) any redemption, retirement, sinking fund, or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of or interests in any class of equity Securities of Customer now or hereafter outstanding, and (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of or interests in any class of equity Securities of Customer now or hereafter outstanding.

 

“ Schedule of Payments ” means the schedule of payments disclosed on a Contract.

 

“ Scheduled Payment ” means the periodic installment payment amount disclosed in the Schedule of Payments for the Contract.

 

“ Securities ” means any stock, limited liability company interests, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, certificates issued in connection with a Securitization Transaction, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

 

“ Securities Act ” means The Securities Act of 1933, as amended, as now and hereafter in effect, or any successor statute.

 

“ Securitization Transaction ” means a securitization of Receivables by a Subsidiary of Customer in rated (by one or more nationally recognized rating agencies) asset backed transactions on terms acceptable to Buyer or that simultaneously with the closing thereof, causes payment in full, to Buyer, of the entire Customer Repurchase Price for all Receivables sold to Buyer not previously repurchased by Customer.

 

“ Servicer ” means BNY Asset Solutions, LLC, a Delaware limited liability company, in its capacity as Servicer under the Servicing Agreement.

 

“ Servicing Agreement ” means the Interim Servicing Agreement dated as of even date herewith among Servicer, Customer and Buyer.

 

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“ Servicer Default ” means any “Event of Default” as defined in the Servicing Agreement unless such Event of Default has been timely remedied by Servicer or waived by Buyer.

 

“ Solvent ” means, with respect to any Person, that as of the date of determination both (a) (i) the then fair saleable value of the property of such Person is (y) greater than the total amount of liabilities (including contingent liabilities) of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person’s then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person’s capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (b) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.  For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

“ Subsidiary ” means, for any Person, any corporation or other business organization 50% or more of the outstanding voting Securities or other equity Securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more such corporations or organizations or by such Person and one or more such corporations or organizations, and any partnership of which such corporation or organization is a general partner.

 

“ Swap Agreement ” means interest rate swap agreements between Customer and one or more counterparties, which shall be collaterally assigned to Buyer.

 

“ Tax ” or “ Taxes ” means all taxes, charges, fees, levies or other assessments including, without limitation, income, gross receipts, profits, withholding, excise, property, sales, use, occupation and franchise taxes (including, in each such case, any interest, penalties or additions attributable to or imposed on or with respect to any such taxes, charges, fees or other assessments) imposed by the United States, any state or political subdivision thereof, any foreign government or any other jurisdiction or taxing authority.

 

“ Taxable Non-REIT Assets ” means Property of Customer that Customer’s Board of Directors, board of trustees or analogous body, determines is necessary to transfer to a Subsidiary or a grantor trust of which such Subsidiary is the sole beneficiary (a ‘ Taxable REIT Subsidiary Entity ’) in order to establish or maintain Customer’s status as a REIT under the Code, together with any other Property principally associated with Customer’s servicing and loan underwriting business, including, without limitation, leases, equipment, employment arrangements and cash, but excluding any Property the transfer of which would constitute a breach of Section 5.2(n) hereof.

 

“ Termination Date ” means the earliest to occur of (a) the date of the occurrence of a Termination Event described in Section 7.1 , or (b) the Facility Termination Date.

 

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“ Termination Event ” means an event described in Section 7.1 .

 

“ Tranche ” means a portion of the Aggregate Principal Outstanding allocated to a Tranche Period.

 

“ Tranche Period ” means with respect to any Investment of Principal, initially a period of days commencing on the date of such Investment of Principal to and excluding the next succeeding Interest Payment Date, and, with respect to each continuation thereof, a period of days commencing on the Interest Payment Date on which such continuation began to and excluding the next succeeding Interest Payment Date.  No Tranche Period shall extend beyond the Termination Date.

 

“ Transaction Documents ” means this Agreement, the Servicing Agreement, the Paying Agent Agreement, the Swap Agreements and all other agreements, instruments, documents, UCC financing statements or certificates necessary to effectuate the transactions contemplated herein and therein.

 

“ UCC ” means, with respect to any state, the Uniform Commercial Code as from time to time in effect in such state or, if no state is specified, in the State of New York.

 

“ Warehouse Assets ” means, at any time, (a) each Receivable, including, without limitation, each Receivable identified on any List of Receivables delivered by Customer or Servicer to Buyer or any other Purchaser Representative and, for each such Receivable, the note representing such Receivable and the related Receivable Delivery Documents, (b) all Related Security with respect to each such Receivable, (c) each Collection with respect to each Receivable or its Related Security and (d) all proceeds, products or any other distributions of, from or in respect of any of the foregoing, including, without limitation, whatever is receivable or received when any of the foregoing is sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.  For avoidance of doubt, the Warehouse Assets identified on Schedule 1.1 have been approved by Buyer for purchase on the Closing Date.

 

“ Warehouse Asset Limit Amount ” means, at any time, the sum of (a) the product of (i) the Maximum Advance Rate times (b) the Market Value of the Warehouse Assets with respect to which no Obligor Financial Covenant Default exists plus (b) the product of  (i) the Advance Rate applicable to Warehouse Assets as to which an Obligor Financial Covenant Default exists (i.e., 40%) times (ii) the Market Value of Warehouse Assets with respect to which an Obligor Financial Covenant Default exists.

 

Section 1.2 .            Interpretation .

 

(a)           In each Transaction Document, unless a clear contrary intention appears:

 

(i)            the singular number includes the plural number and vice versa;

 

(ii)           reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by the

 

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Transaction Documents, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

 

(iii)          reference to any gender includes each other gender;

 

(iv)          reference to any agreement (including any Transaction Document), document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Transaction Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor;

 

(v)           reference to any law means such law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any law means that provision of such law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

 

(vi)          reference in any Transaction Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit thereto;

 

(vii)         “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to a Transaction Document as a whole and not to any particular Article, Section or other provision hereof;

 

(viii)        “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

 

(ix)           “or” is not exclusive; and

 

(x)            relative to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding.”

 

(b)           Accounting Terms .  In each Transaction Document, unless expressly otherwise provided, accounting terms shall be construed and interpreted, and accounting determinations and computations shall be made, in accordance with GAAP.

 

(c)           Conflict in Transaction Documents .  If there is any conflict between any Transaction Documents, such Transaction Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, this Agreement shall prevail and control.

 

(d)           Legal Representation of the Parties .  The Transaction Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring the Transaction Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof.

 

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(e)           Defined Terms .  Unless a clear contrary intention appears, terms defined herein have the respective indicated meanings when used in each Transaction Document.

 

ARTICLE II
PURCHASES AND SETTLEMENT

 

Section 2.1 .            Assignment and Conveyance .  Customer hereby sells, assigns, transfers and conveys to Buyer, as of the Closing Date, and Buyer hereby purchases and accepts, as of the Closing Date, assignment and transfer from Customer of, with recourse, all of Customer’s right, title and interest of every nature in and to the Warehouse Assets, whether now or hereafter existing or in which Customer now has or hereafter acquires an interest.

 

Section 2.2 .            Facility and Incremental Investments .

 

(a)           Upon the terms and subject to the conditions and in reliance upon the representations and warranties of Customer herein and in the Transaction Documents set forth, Customer may, at its option, after the Closing Date, request Buyer make, from time to time, and Buyer may make, from time to time, additional Investments of Principal; provided , however , that, at no time shall any Investment be made at any time that the Aggregate Principal Outstanding exceeds the lesser of (i) Facility Limit or (ii) the Warehouse Asset Limit Amount.

 

(b)           No Investment of Principal shall be made on or after the Termination Date.  In addition, no Investment of Principal shall be made if after giving effect to such Investment of Principal, the Aggregate Principal Outstanding would exceed the lesser of (i) the Facility Limit or (ii) the Warehouse Asset Limit Amount.  No Receivable shall be originated, and no Investment of Principal with respect thereto shall be made after the date that both Vernon Schwartz and David A. Karp cease to be employed by Customer, as an executive officer of Customer in the same or similar capacity and with the same decision making authority as of the date of the Agreement.

 

(c)           The procedure for approval of Warehouse Asset sales to Buyer and Customer’s obtaining funds with respect thereto from Buyer is set forth in this Section 2.2 , and, is further subject to satisfaction of the applicable conditions, set forth in Sections 4.1 and 4.2 , and the conditions, processes and requirements set forth on Schedule 2.2-1 .  In the event Customer shall desire that Buyer acquire a Warehouse Asset, the following procedures shall apply:

 

(i)            Investment of Principal Request .  Customer shall provide Buyer and Custodian with a request in substantially the form of Exhibit A-1 annexed hereto (an “ Investment of Principal Request ”) of each requested Investment of Principal, specifying, among other things, the requested Investment of Principal, the requested Funding Date for such Investment of Principal (which shall not be less than three (3) Business Days following the date of the Investment of Principal Request) and the proposed Eligible Receivable that Customer desires Buyer to acquire and shall be delivered together with a detailed sources and uses statement relating to such Investment of Principal in substantially the form of Schedule 1 to Exhibit A-1 annexed hereto.

 

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(ii)           Preliminary Due Diligence Package . Prior to, or simultaneous with, an Investment of Principal Request, Customer shall deliver to Buyer the Preliminary Due Diligence Package pertaining to the Receivable in question.

 

(iii)          Buyer Review and Confirmation . Buyer shall inform Customer of its determination with respect to any assets proposed to be sold to Buyer by Customer in accordance with the procedures set forth on Schedule 2.2-1 attached hereto.   Notwithstanding Schedule 2.2-1 or any other provisions of this Agreement, Buyer shall have the right to review and approve, in accordance with the terms of this Agreement, all proposed Warehouse Assets (and the related Investment of Principal) proposed to be sold to Buyer and to conduct, at Customer’s sole cost and expense, its own due diligence investigation of such proposed Warehouse Assets as Buyer determines, in its sole discretion.  Upon agreeing to make an Investment of Principal, Buyer shall promptly deliver to Customer a written confirmation in the form of Schedule 2.2-2 attached hereto (a “ Confirmation ”), which Confirmation shall be promptly executed and delivered to Buyer by Customer (and, in any event not later than the earlier of (x) the date of the requested funding of Invested Principal and (y) two (2) Business Days after Buyer gives such Confirmation to Customer); provided, that unless otherwise agreed by Customer, Buyer shall deliver a separate Confirmation with respect to each Warehouse Asset which is the subject of an Investment of Principal.   Unless otherwise extended pursuant to Section 2.2(c)(vi) , the Funding Date shall occur no later than fourteen (14) days following the date of the Confirmation.

 

(iv)          Contract Approval Request . Not later than three (3) Business Days prior to the applicable Funding Date, Customer will provide Buyer a Contract Approval Request in accordance with Schedule 2.2-1 together with the related drafts required to be delivered in accordance with Schedule 2.2-1 . Buyer shall approve or disapprove such Contract Approval Request in accordance with Schedule 2.2-1 .

 

(v)           Funding .  If Buyer has approved a Warehouse Asset, a Confirmation has been jointly executed and delivered by Buyer and Customer, and Buyer has approved a Contract Approval Request in accordance with Schedule 2.2-1 , then, on the Funding Date for the Investment of Principal requested by Customer in the applicable Investment of Principal Request, the Warehouse Asset in question shall be transferred to Buyer against the additional Investment of Principal, subject to the conditions that (A) each of the conditions set forth in Section 4.2 have been satisfied, (B) Customer shall have provided Custodian (or the Escrow Agent on behalf of Custodian, as provided in the Escrow Agreement) the originals of the Contract and other Receivable Delivery Documents with respect to the Receivable(s) to be purchased with such Investment of Principal, (C) Escrow Agent shall have executed and delivered to Buyer and Customer the Closing Confirmation Letter (as defined in the Escrow Agreement) in accordance with Section 5.d of the Escrow Agreement; and (D) Customer shall have executed and delivered to Buyer its Closing Certificate. Upon and subject to the terms and conditions and in reliance on the representations and warranties set forth herein, Buyer shall deposit on the requested Funding Date as set forth in the Investment of Principal Request in immediately available funds, an amount equal to the requested Investment of Principal to Escrow Agent’s account as set forth in the Escrow Agreement.  Buyer shall cause such

 

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deposit to be made not later than 1:00 p.m. (New York time) on the requested Funding Date provided all conditions to such funding have been timely satisfied.   On the same Business Day as Buyer acquires a Warehouse Asset, Customer shall furnish Buyer and Custodian an updated List of Receivables including the Warehouse Asset in question.

 

(vi)          Funding Date Delay .  In the event the Funding Date is extended beyond fourteen (14) days following the date of the Confirmation, the related Investment of Principal Request shall be deemed rescinded and must be resubmitted for Buyer’s approval and the procedures set forth in this Section 2.2 adhered to, and in connection therewith, in the event of any modification of the Preliminary Due Diligence Package or the underlying Contracts, Customer shall deliver any applicable updates to the Preliminary Due Diligence Package and/or comparisons of the Contracts to the forms previously approved, as well as, if applicable, an updated Investment of Principal Request setting forth any revisions to the proposed Receivable, and the other changes, if any, to the Investment of Principal Request.

 

(vii)         Closing Date Funding; Excess Principal .  Subject to the satisfaction of the conditions set forth in Sections 4.1 and 4.2 , as applicable, the procedures set forth in clauses (i) – (vi) of this Section 2.2(c) shall not apply to (i) the Investment of Principal to be made on the Closing Date or (ii) any Investment of Principal with respect to Excess Principal.  In the case of an Investment of Principal with respect to Excess Principal, Customer may (i) deliver a notice requesting such Investment of Principal at any time not later than three (3) Business Days prior to the requested Funding Date, and subject to the other conditions set forth in Sections 4.1 and 4.2 , Buyer shall fund such requested Investment of Principal on the requested Funding Date in immediately available funds to Customer’s account designated for such purpose in the relevant Investment of Principal Request.  Any Investment of Principal with respect to Excess Principal may be used for any general corporate purpose of Customer including working capital requirements.

 

(d)           Each Investment of Principal Request shall be irrevocable and binding on Customer and Customer shall indemnify Buyer and Custodian against any loss or expense incurred by any of them as a result of any failure by Customer to accept such Investment of Principal, including, without limitation, any loss or expense incurred by any Buyer by reason of the liquidation or reemployment of funds acquired or requested by Buyer to fund such Investment of Principal.

 

(e)           Each Investment of Principal with respect to which Receivables are to be acquired with the proceeds thereof shall be in a minimum amount of $2,500,000 and in any amount in excess thereof.  Each such Investment of Principal shall be in an amount not in excess of the sum of (i) the Advance Rate multiplied by the Market Value of the Eligible Receivable to be acquired with the proceeds of such Investment of Principal and (ii) the maximum available amount of Excess Principal.  Each Investment of Principal with respect to Excess Principal that is not made in connection with an acquisition of Receivables shall be in a minimum amount of $2,500,000 (or, in the case the maximum available amount of Excess Principal is less than $2,500,000, such lesser amount) and in any amount in excess thereof up to maximum available

 

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amount of Excess Principal.  The maximum Invested Principal allocable to any Receivable shall not exceed $20,000,000.

 

(f)            The aggregate number of Investments of Principal and principal prepayments pursuant to Section 2.9(d) , shall not exceed six per month.

 

(g)           On each Interest Payment Date, Tranches representing the Aggregate Principal Outstanding less the amount paid in reduction thereof on such Interest Payment Date pursuant to Sections 2.5(c) or 2.6(b) or pursuant to any other Partial Prepayments of Invested Principal shall be continued without further action of the parties.

 

(h)           On the Termination Date, Customer shall repurchase the Warehouse Assets from Buyer and pay Customer Repurchase Price to Buyer.

 

(i)            In the event that Buyer disapproves (or is deemed to disapprove) any Warehouse Asset in accordance with this Agreement, Customer may nevertheless originate such Warehouse Asset using it own funds.

 

Section 2.3 .            Default Interest .

 

(a)           At all times on and after the Facility Termination Date or the occurrence and continuation of a Termination Event, the Aggregate Principal Outstanding shall accrue Interest at the Overdue Rate.

 

Section 2.4.             Interest, Fees and Other Costs and Expenses .

 

(a)           Customer shall pay, as a full recourse obligation, as and when due in accordance with this Agreement, all amounts payable as Interest and fees and costs and indemnities payable hereunder, the Aggregate Principal Outstanding, all amounts payable pursuant to Article IX hereof, if any, the Paying Agent and Custodian fees payable pursuant to the Paying Agent Agreement and all other amounts payable hereunder, if any.

 

(b)           All Investments of Principal shall, unless accruing interest at the Overdue Rate pursuant to Section 2.3(c) , accrue Interest at the Base Rate.

 

(c)           In the event any payment of Interest or any other payment required under the Transaction Documents is not paid by Customer when due, Customer shall pay to Buyer, a late charge (“ Late Charge ”) equal to 5% of the overdue payment to compensate Buyer for the cost and expense arising from the late payment in question.

 

(d)           Not less than one Business Day prior to each Interest Payment Date, Customer shall, to the extent necessary to make all payments required to be made on an Interest Payment Date, pay to Custodian an amount equal to accrued and unpaid Interest on all Tranches for the related Tranche Periods.  If any amount hereunder shall be payable on a day that is not a Business Day, such amount shall be payable on the next succeeding Business Day.  Interest shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed in the period during which it accrues, excluding the date of payment.  Nothing in this

 

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Agreement (including Sections 2.5 and 2.6 hereof) shall limit in any way the obligations of Customer to pay the amounts set forth in Section 2.2(h) or in this Section 2.4 .

 

Section 2.5 .            Non-Liquidation Settlement Procedures .

 

(a)           On each day (other than a Liquidation Day) on which Collections are received in the Collection Account, Custodian shall set aside and hold all such funds in trust for the benefit of Paying Agent and the recipients described below.  On each Interest Payment Date, Paying Agent will in turn transfer such funds to the recipients described below in accordance with the terms of the Paying Agent Agreement.

 

(b)           On or prior to the Business Day preceding each Cut-Off Date, Buyer will provide Customer with written notice detailing Interest owing to Buyer on the next succeeding Interest Payment Date.  On or prior to each Cut-Off Date, Buyer and each of the Purchaser Representatives will provide Customer with written notice detailing all unpaid amounts then owing by Customer to such Person (and, in the case of Buyer, including amounts owing to Buyer in respect of Interest) under this Agreement for payment on the next succeeding Interest Payment Date in accordance with the respective priorities set forth in Sections 2.5(c) and 2.6(b) below.  Any amounts not so invoiced or paid may be submitted on or before any subsequent Cut-Off Date for payment on the next succeeding Interest Payment Date.

 

(c)           On each Interest Payment Date (if no Liquidation Day shall have occurred since the last Interest Payment Date), Paying Agent shall make remittances in accordance with the terms of the Paying Agent Agreement in the following priority:

 

(i)            first , concurrently, (A) to Servicer an amount equal to (i) the sums paid into the Collection Account by an Obligor for deposit into any escrow account to be maintained by Servicer and (ii) the unpaid fees and expenses owing to Servicer under the Servicing Agreement for all Prior Periods and (B) to itself, an amount equal to the unpaid fees and expenses payable to Custodian and Paying Agent under this Agreement with respect to all Prior Periods;

 

(ii)           second , to Buyer, an amount equal to the Interest accrued and unpaid through such day on the Aggregate Principal Outstanding;

 

(iii)          third , to Buyer, any other amounts (other than Aggregate Principal Outstanding) owing to Buyer under this Agreement, including under Section 2.7 hereof;

 

(iv)          fourth , concurrently, to Custodian, Buyer, Servicer or any other Purchaser Representative any fees, expenses and other amounts owing for any indemnification of such person by Customer that have not otherwise be provided for in items (i)-(iii) above;

 

(v)           fifth , to Buyer for the reduction of the Aggregate Principal Outstanding, an amount equal to the sum of the aggregate principal amount of Receivables scheduled to be paid for the Prior Period and the aggregate principal amount prepaid during such Prior Period;

 

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(vi)          sixth , if the Aggregate Principal Outstanding is in an amount that exceeds the lesser of (1) the Facility Limit or (2) the Warehouse Asset Limit Amount, to Buyer for the reduction of the Aggregate Principal Outstanding, an amount equal to such excess, if any;

 

(vii)         seventh , if Buyer has given Customer and Paying Agent notice of the existence of monetary Potential Termination Event or a non-monetary Potential Termination Event determined by Buyer, in its sole discretion to be material or that would be material if it ripened into a Termination Event, to Buyer to be held by Buyer as security for Customer’s Obligations in accordance with Section 2.12 ; and

 

(viii)        eighth , the remainder, if any, to Customer.

 

Section 2.6 .            Settlement Procedures to Be Followed if a Liquidation Day Occurs .

 

(a)           On each Liquidation Day on which Collections are received in the Collection Account, Custodian shall set aside and hold all such funds in trust for the benefit of Paying Agent and the recipients described below.  On each Interest Payment Date following one or more Liquidation Days, Paying Agent will in turn transfer such funds to the recipients described below in accordance with the terms of the Paying Agent Agreement.

 

(b)           On each Interest Payment Date (if one or more Liquidation Days shall have occurred after the prior Interest Payment Date), Paying Agent shall make remittances in the following priority:

 

(i)            first , concurrently, (A) to Servicer an amount equal to (i) the sums paid into the Collection Account by an Obligor for deposit into any escrow account to be maintained by Servicer and (ii) an amount equal to unpaid fees and expenses owing to Servicer under the Servicing Agreement with respect to all Prior Periods and (B) to itse