EIGHTH AMENDMENT TO RECEIVABLES LOAN AND SECURITY AGREEMENT AND WAIVER

Exhibit 10.3

EXECUTION COPY

EIGHTH AMENDMENT TO

RECEIVABLES LOAN AND SECURITY AGREEMENT AND WAIVER

THIS EIGHTH AMENDMENT TO THE RECEIVABLES LOAN AND SECURITY AGREEMENT AND WAIVER, dated as of June 18, 2009 (this “Amendment”), is entered into by and among:

(1) LEAF CAPITAL FUNDING III, LLC, a Delaware limited liability company, as the borrower (the “ Borrower ”);

(2) LEAF FINANCIAL CORPORATION, a Delaware corporation, as the servicer (the “ Servicer ”);

(3) MORGAN STANLEY BANK, N.A. (f/k/a Morgan Stanley Bank) (“ Morgan Stanley ”), as a Class A Lender (a “ Class A Lender ”) and as Collateral Agent (the “ Collateral Agent ”);

(4) MORGAN STANLEY ASSET FUNDING INC., as a Class B Lender (a “ Class B Lender ”);

(5) THE ROYAL BANK OF SCOTLAND PLC, as a Class A Lender (a “ Class A Lender ”), and as a Class B Lender (a “ Class B Lender ”) (the Class A Lenders and the Class B Lenders shall be collectively referred to herein as the “ Lenders ”); and

(6) MORGAN STANLEY CAPITAL SERVICES INC., as the Qualifying Swap Counterparty (the “ Qualifying Swap Counterparty ”).

R E C I T A L S

A. WHEREAS , the Borrower, the Servicer, the Lenders, the Collateral Agent, U.S. Bank National Association, as Custodian and as Lenders’ Bank, and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services), as the Backup Servicer, are parties to the Receivables Loan and Security Agreement, dated as of November 1, 2007 (as amended, supplemented or otherwise modified through the date hereof, the “ Agreement ”);

B. WHEREAS , the Borrower and the Qualifying Swap Counterparty are parties to a Qualifying Interest Rate Swap dated as of November 1, 2007 (as amended, supplemented or otherwise modified through the date hereof, and including all swap transactions entered into pursuant thereto, the “ Swap Agreement ”);

C. WHEREAS , the parties hereto desire to amend the Agreement on the terms and conditions set forth herein;

D. WHEREAS , the Borrower and the Servicer have requested that (i) the Lenders and the Collateral Agent (collectively, the “ Waiving Parties ”) waive certain provisions of the Agreement solely in respect of the Breach described below and (ii) the Qualifying Swap Counterparty waive certain provisions of the Swap Agreement solely in respect of the Breach, each as set forth in Section 3 below. Such Persons are willing to make such waivers, subject to the terms and conditions hereof; and

NOW THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Certain Defined Terms . Capitalized terms used but not defined herein shall have the meanings set forth for such terms in Section 1.01(a) of the Agreement.

2. Amendments to the Agreement . The Agreement is hereby amended to incorporate the changes reflected on Exhibit A hereto.

3. Waivers . (a) The Servicer and the Borrower hereby advise the Waiving Parties that the financial statements of Resource America for the quarter ending March 31, 2009, which were delivered by Borrower on or about May 15, 2009, showed that the Tangible Net Worth of Resource America was less than its Minimum Tangible Net Worth (such condition, the “ Breach ”). The occurrence of the Breach constitutes each of the events set forth on Schedule A attached hereto (the “ Covenant Failures ”) that, in each case without giving effect to this Amendment, have occurred and are continuing. Each of the Waiving Parties hereby agrees to irrevocably waive each Covenant Failure which has arisen solely and directly from the Breach. Nothing in this Amendment shall constitute a waiver by the Waiving Parties of any other Event of Default, Program Termination Event, Termination Event, Unmatured Event of Default, Servicer Default or other right under the Agreement, now or in the future, including, without limitation with respect to any subsequent Covenant Failures.

(b) The Borrower hereby notifies the Qualifying Swap Counterparty that one or more of the Covenant Failures constitutes an “Additional Termination Event” (as defined in the Swap Agreement) set forth in clause (i)  of Part 1(j) of the Swap Agreement that, without giving effect to this Amendment, has occurred and is continuing. The Qualifying Swap Counterparty hereby agrees to irrevocably waive such “Additional Termination Event” solely with respect to the Breach. Each of the Qualifying Swap Counterparty and the Borrower hereby agrees not to exercise its right to designate an “Early Termination Date” under (and as defined in) the Swap Agreement solely as a result of the “Additional Termination Event” caused by the Breach. Nothing in this Amendment shall constitute a waiver by the Qualifying Swap Counterparty of any other “Event of Default” (as defined in the Swap Agreement), “Termination Event” (as defined in the Swap Agreement) or other right under the Swap Agreement, now or in the future, including, without limitation with respect to any subsequent “Additional Termination Event” under clause (i)  of Part 1(j) of the Swap Agreement.

4. Consent . The Qualifying Swap Counterparty hereby consents to Section 2 of this Amendment.

5. Conditions Precedent . The effectiveness of this Amendment is expressly conditioned upon the receipt by the Waiving Parties of (i) copies of executed signature pages to this Amendment from each of the parties hereto and (ii) such other documents, instruments and opinions as the Lenders may request.

 

2

6. Representations and Warranties . Each of the Borrower and the Servicer represents and warrants that:

(a) this Amendment has been duly authorized, executed and delivered on its behalf, and the Agreement, as so amended, constitutes its legal, valid and binding obligation enforceable against it in accordance with the terms hereof or thereof;

(b) after giving effect to this Amendment (including Section 3 above), the representations and warranties made by it in the Agreement (as amended by this Amendment), the Swap Agreement and the other Transaction Documents are true and correct as of the date hereof (except to the extent any such representations or warranties relate to a prior date, in which case such representation or warranty shall relate to such prior date); and

(c) after giving effect to this Amendment (including Section 3 above), no Program Termination Event, Event of Default, Termination Event, Unmatured Event of Default, Servicer Default, “Termination Event” under the Swap Agreement or “Event of Default” under the Swap Agreement shall exist on the date hereof.

7. Effect of Amendment . Except as expressly waived, amended and/or modified by this Amendment, all provisions of the Agreement and the Swap Agreement shall remain in full force and effect. After the date hereof, all references in the Agreement to “this Agreement”, “hereof”, or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. Except as expressly set forth in Section 3 above, this Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Agreement or the Swap Agreement other than as specifically set forth herein.

8. Counterparts . This Amendment may be executed in any number of counterparts and by different parties on separate counterparts (including by facsimile or electronic transmission), each of which shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.

9. Governing Law; Severability . THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Wherever possible each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable laws, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

10. Successors and Assigns . This Amendment shall be binding upon the parties hereto and their respective successors and assigns, and shall inure to the sole benefit of the parties hereto.

 

3

11. Section Headings . The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof.

[remainder of page intentionally left blank]

 

4

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

 

 

 

 

 

SCHEDULE A

“ Covenant Failures ” means the occurrence of any of the following events:

(i) the Event of Default set forth in Section 7.01(k) of the Agreement,

(ii) the Event of Default set forth in Section 7.01(n) of the Agreement,

(iii) the Event of Default set forth in Section 7.01(o) of the Agreement,

(iv) the Event of Default set forth in Section 7.01(s) of the Agreement,

(v) the Event of Default set forth in Section 7.01(z) of the Agreement,

(vi) the Program Termination Event set forth in clause (ii)  of the definition thereof in the Agreement,

(vii) the Program Termination Event set forth in clause (x)  of the definition thereof in the Agreement,

(viii) the Program Termination Event set forth in clause (xi)(2) of the definition thereof in the Agreement and

(ix) the Servicer Default set forth in clause (iv)  of the definition thereof in the Agreement.

 

Sch. A-1

EXHIBIT A

(attached)

[incorporates Consent, dated as

of December 7, 2007, Second Amendment,

dated as of December 27, 2007,

Third Amendment, dated as of May 16, 2008,

Fourth Amendment, dated as of September 15, 2008,

Fifth Amendment, dated as of October 31, 2008 2008,

Sixth Amendment, dated as of November 7, 2008 2008,

and Seventh Amendment, dated as of November 13, 2008 ] and

Eighth Amendment, dated as of June 18, 2009]

EXECUTION VERSION

RECEIVABLES LOAN AND SECURITY AGREEMENT

Dated as of November 1, 2007

Among

LEAF CAPITAL FUNDING III, LLC,

as the Borrower

and

LEAF FINANCIAL CORPORATION,

as the Servicer

and

MORGAN STANLEY BANK , N.A.

as a Class A Lender and Collateral Agent

and

MORGAN STANLEY ASSET FUNDING INC.

as a Class B Lender

and

THE ROYAL BANK OF SCOTLAND PLC

as a Class A Lender and as a Class B Lender

and

U.S. BANK NATIONAL ASSOCIATION,

as the Custodian and the Lenders’ Bank

and

LYON FINANCIAL SERVICES, INC. (D/B/A U.S. BANK PORTFOLIO SERVICES),

as the Backup Servicer

This RECEIVABLES LOAN AND SECURITY AGREEMENT is made as of November 1, 2007, among:

(1) LEAF CAPITAL FUNDING III, LLC, a Delaware limited liability company (the “ Borrower ”);

(2) LEAF FINANCIAL CORPORATION, a Delaware corporation (“ LEAF Financial ” or the “ Initial Servicer ”), as the Servicer (as defined herein);

(3) MORGAN STANLEY BANK, N.A. (f/k/a Morgan Stanley Bank), as a Class A Lender (“ Morgan Stanley ” and a “ Lender ” hereunder) and Collateral Agent (as defined herein);

(4) THE ROYAL BANK OF SCOTLAND PLC, as a Class A Lender (“RBS” and a “Lender” hereunder) and as a Class B Lender (a “ Lender ” hereunder);

(5) MORGAN STANLEY ASSET FUNDING INC., as a Class B Lender (“ Morgan Stanley AFI ” and a “ Lender ” hereunder and, together with Morgan Stanley and RBS, the “ Lenders ”);

(6) U.S. BANK NATIONAL ASSOCIATION, as the Custodian and the Lenders’ Bank (as each such term is defined herein); and

(7) LYON FINANCIAL SERVICES, INC. (d/b/a U.S. Bank Portfolio Services), a Minnesota corporation, as the Backup Servicer (as defined herein).

IT IS AGREED as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Certain Defined Terms . (a) Certain capitalized terms used throughout this Agreement are defined above or in this Section 1.01 .

(b) As used in this Agreement and the exhibits and schedules thereto (each of which is hereby incorporated herein and made a part hereof), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ Accountants’ Report ” has the meaning assigned to that term in Section 6.11(b) .

“ Active Backup Servicer’s Fee ” means, for any Fee Period or portion thereof after the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the greater of (i) the Active Backup Servicing Fee Rate, multiplied by the Eligible Receivables Balance as of the first day of such Fee Period, multiplied by a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360, and (ii) $7,000. The Active Backup Servicer’s Fees shall also include reasonable out-of-pocket expenses incurred by the Backup Servicer in performing its duties as Servicer.

“ Active Backup Servicing Fee Rate ” means 1.50%.

“ Adjusted Eurodollar Rate ” means, (i) on and prior to November 23, 2008, with respect to any Interest Period for any Loan (or portion thereof) allocated to such Interest Period, an interest rate per annum equal to the average of the interest rates per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) reported during such Interest Period on Reuters LIBOR01 Page (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for United States dollar deposits having a term of thirty (30) days and in a principal amount of $1,000,000 or more (or, if such page shall cease to be publicly available or, if the information contained on such page, in each applicable Lender’s sole judgment, shall cease to accurately reflect such London Interbank Offered Rate, such rate as reported by any publicly available recognized source of similar market data selected by such Lender that, in such Lender’s reasonable judgment, accurately reflects such London Interbank Offered Rate), and (ii) thereafter, with respect to each other Interest Period for any Loan (or portion thereof) allocated to such Interest Period, an interest rate per annum equal to the interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) reported on the date that is two (2) Business Days prior to the end of the immediately preceding Interest Period on Reuters LIBOR01 Page (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for United States dollar deposits having a term of thirty (30) days and in a principal amount of $1,000,000 or more (or, if such page shall cease to be publicly available or, if the information contained on such page, in each applicable Lender’s sole judgment, shall cease to accurately reflect such London Interbank Offered Rate, such rate as reported by any publicly available recognized source of similar market data selected by such Lender that, in such Lender’s reasonable judgment, accurately reflects such London Interbank Offered Rate).

“ Adverse Claim ” means a lien, security interest, charge, encumbrance or other right or claim of any Person other than, with (i) respect to the Pledged Assets, any lien, security interest, charge, encumbrance or other right or claim in favor of the Collateral Agent or (ii) any Permitted Lien.

“ Affected Party ” has the meaning assigned to that term in Section 2.09 .

“ Affiliate ” when used with respect to a Person, means any other Person controlling, controlled by or under common control with such Person. For the purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“ Aggregate Advance Amount ” means the Class A Advance Amount plus the Class B Advance Amount.

 

2

“ Agreement ” means this Receivables Loan and Security Agreement, as the same may be amended, restated, supplemented and/or otherwise modified from time to time hereafter in accordance with its terms.

“ Allocable Share ” means, in respect of any Segregated Collateral Pool at any time, such Segregated Collateral Pool’s share of any amount, which shall be determined by multiplying such amount by a fraction, (x) the numerator of which is the aggregate Discounted Balance of all Pledged Receivables included in such Segregated Collateral Pool at such time and (y) the denominator of which is the aggregated Discounted Balance of all Pledged Receivables at such time.

“ Amendment Consent Parties ” has the meaning assigned to that term in Section 9.01 .

“ Amortized Equipment Cost ” means, (i) with respect to all Eligible Receivables (a) as of the Borrowing Date, the present value of the remaining Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment), discounted monthly at the rate at which the present value of all Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment) equals the Purchase Price and, (b) as of any subsequent date of determination, shall mean the present value of the then remaining Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment) discounted monthly at the aforementioned discount rate, and (ii) with respect to an Eligible Receivable (a) as of the Borrowing Date, the present value of the remaining Scheduled Payments under such Eligible Receivable (including any Balloon Payment or Put Payment), discounted monthly at the rate at which the present value of all Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment) equals the Purchase Price and, (b) as of any subsequent date of determination, shall mean the present value of the then remaining Scheduled Payments under such Eligible Receivable (including any Balloon Payment or Put Payment) discounted monthly at the aforementioned discount rate.

“ Approved Lienholder ” means any Person that (i) has entered into a Nominee Lienholder Agreement, a copy of which has been delivered by the Collateral Agent to the Custodian and (ii) appears on the list of approved lienholders provided by LEAF Financial Corporation to the Custodian from time to time.

“ Assigned Documents ” has the meaning assigned to that term in Section 2.10 .

“ Assignment ” has the meaning set forth in the Purchase and Sale Agreement.

“ Assignment and Acceptance ” has the meaning assigned to that term in Section 9.04 .

“ Available Cash ” has the meaning assigned to that term in Section 7.01(t)(i) .

“ Available Funds ” has the meaning assigned to that term in Section 2.04(a) .

“ Backup Servicer ” means Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) or any successor Backup Servicer appointed by the Lenders pursuant to Section 6.13 .

 

3

“ Backup Servicer Delivery Date ” has the meaning assigned to that term in Section 6.10(d) .

“ Balloon Payment ” means a payment due, or which may be required, at the end of the term of a Contract (which constitutes a loan) equal to the principal amount under such Contract which remains outstanding after the payment of all regular scheduled payments of principal during the term of such Contract.

“ Bankruptcy Code ” means Title 11, United States Code, 11 U.S.C. §§ 101 et seq. , as amended.

“ Bankruptcy Event ” shall be deemed to have occurred with respect to a Person if either:

(a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or

(b) such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors or members shall vote to implement any of the foregoing.

“ Base Rate ” means, on any date, a fluctuating rate of interest per annum equal to the arithmetic average of the rates of interest publicly announced by JPMorgan Chase Bank and Citibank, N.A. (or their respective successors) as their respective prime commercial lending rates (or, as to any such bank that does not announce such a rate, such bank’s “base” or other rate determined by the Collateral Agent to be the equivalent rate announced by such bank), except that, if any such bank shall, for any period, cease to announce publicly its prime commercial lending (or equivalent) rate, the Collateral Agent shall, during such period, determine the Base Rate based upon the prime commercial lending (or equivalent) rates announced publicly by the other such bank or, if each such bank ceases to announce publicly its prime commercial lending (or equivalent) rate, based upon the prime commercial lending (or equivalent) rate or rates announced publicly by one or more other banks selected by the Collateral Agent. The prime commercial lending (or equivalent) rates used in computing the Base Rate are not intended to be the lowest rates of interest charged by such banks in connection with extensions of credit to debtors. The Base Rate shall change as and when such banks’ prime commercial lending (or equivalent) rates change.

 

4

“ Borrower ” has the meaning assigned to that term in the preamble hereto.

“ Borrower Pension Plan ” means a “pension plan” as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA and to which the Borrower or any ERISA Affiliate of Borrower may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“ Borrowing ” means the borrowing of the Class A Loan and the Class B Loan under this Agreement.

“ Borrowing Date ” means, with respect to the Borrowing, the date on which the Borrowing is funded.

“ Borrowing Limit ” means on the Borrowing Date, the least of (i) the Facility Limit, (ii) the Maximum Advance Amount and (iii) the Aggregate Advance Amount; provided , however , that at all times, on or after the Program Termination Date, the Borrowing Limit shall mean the aggregate outstanding principal balance of the Loans.

“ Breakage Fee ” means, for Loans allocated to any Interest Period during which such Loans are repaid (in whole or in part) prior to the end of such Interest Period, the breakage costs, if any, related to such repayment plus the amount, if any, by which (i) interest (calculated without taking into account any Breakage Fee), which would have accrued on the amount of the payment of such Loans during such Interest Period (as so computed) if such payment had not been made, as the case may be, exceeds (ii) the sum of (A) interest actually received by each Lender in respect of such Loans for such Interest Period and, if applicable, (B) the income, if any, received by the Lenders from each Lender’s investing the proceeds of such payments on such Loans.

“ Business Day ” means a day of the year other than a Saturday or a Sunday or any other day on which banks are authorized or required to close in New York City, St. Paul, Minnesota or Salt Lake City, Utah; provided , that, if any determination of a Business Day shall relate to a Loan bearing interest at the Adjusted Eurodollar Rate, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“ Calculated Swap Amortizing Balance ” means, with respect to a Qualifying Interest Rate Swap and as of any date of determination, the projected scheduled amortizing balance of the Pledged Receivables which were Pledged during the period ending on the Remittance Date on which such Qualifying Interest Rate Swap became effective and beginning on the day following the immediately preceding Remittance Date, determined by the Servicer and accepted by the Lenders based upon the Discounted Balance of such Pledged Receivables as of such date of determination, adjusted for prepayments using an absolute prepayment speed which, in the judgment of the Lenders, is consistent with the speed with which the Pledged Receivables have prepaid in the past.

 

5

“ Capital Stock ” of any Person means any and all shares, interests, rights to purchase, warrants, options, contingent share issuances, participations or other equivalents of or interest in equity (however designated) of such Person.

“ Certificate of Title ” means with respect to a Vehicle, (i) if such Vehicle is registered in Florida, (x) to the extent the related Receivable has been originated by an Originator, an original certificate of title or (y) to the extent the related Receivable has been Originated by a Person other than an Originator, (A) an original certificate of title or (B) if the original certificate of title has been sent to the registered owner of such Vehicle, an original computer confirmation of lien, (ii) if such Vehicle is registered in Kansas, a true copy of the application for certificate of title and registration, (iii) if such Vehicle is registered in Kentucky, an original notice of lien, (iv) if such Vehicle is registered in Maryland, an original notice of security interest filing, (v) if such Vehicle is registered in Minnesota, an original lien card, (vi) if such Vehicle is registered in Missouri, an original notice of recorded lien, (vii) if such Vehicle is registered in Montana, a true copy of the application for certificate of title, (viii) if such Vehicle is registered in New York, an original notice of lien, (ix) if such Vehicle is registered in Oklahoma, an original, file-stamped lien entry form, (x) if such Vehicle is registered in Wisconsin, an original lien confirmation card or (xi) if such Vehicle is registered in any other State, an original certificate of title, in each case issued by the Registrar of Titles of the applicable State listing the lienholder of record with respect to such Vehicle (it being understood and agreed that solely for purposes of clauses (i)  through (x)  above (other than clauses (i)(x) and (i)(y)(A) ), the “original” of any document required thereby shall consist of whatever documentation has been issued by the Registrar of Titles of the related State to the lienholder).

“ Change of Control ” means that at any time (i) Owner shall own directly or indirectly less than 100% of all membership interests of the Borrower, (ii) Resource America shall own directly or indirectly less than 50.1% of all Capital Stock or voting power of the Initial Servicer, (iii) the Initial Servicer shall own directly or indirectly less than 80% of all Capital Stock or voting power of Originator and Owner, (iv) Resource America, Owner or the Borrower merges or consolidates with any other Person without the prior written consent of the Lenders, (v) the Initial Servicer or the Originator merges or consolidates with any other Person and the Initial Servicer or the Originator, as applicable, is not the surviving entity or (vi) either of Crit DeMent or Miles Herman is not employed in a senior management position at the Initial Servicer, is not involved in the day-to-day operations of the Initial Servicer or is not able to perform substantially all of his duties as an employee of the Initial Servicer during any three month period and, in each case, has not been replaced by a person approved by the Lenders in writing within 90 days of any such event.

“ Check-in Repurchase Event ” has the meaning set forth in Section 5.02(e) .

“ Check-in Requirements ” means the procedures set forth in Section 5.02 of this Agreement.

“ Class A Advance Amount ” means $333,380,316.91.

 

6

“ Class A Facility Limit ” means, at any time, with respect to the Class A Notes, the product of (x) 97.10%, (y) 89%, and (z) the Amortized Equipment Cost with respect to all Pledged Receivables that are Eligible Receivables.

“ Class A Interest Rate ” means (i) from August 8, 2008 through October 31, 2008, the Adjusted Eurodollar Rate plus 2.50%; (ii) from November 1, 2008 through the Facility Maturity Date, the Adjusted Eurodollar Rate plus 4.00%; and (iii) from and after the Facility Maturity Date or at any time upon the occurrence and continuation of any Program Termination Event, the Adjusted Eurodollar Rate plus 5.00%.

“ Class A Lender ” means each Lender in respect of the Class A Loan.

“ Class A Loan ” has the meaning set forth in Section 2.01(a) .

“ Class A Note ” has the meaning set forth in Section 2.01(b) .

“ Class B Advance Amount ” means $33,712,616.32.

“Class B Equity Coupon” means, on any Remittance Date, the product of (x) the Adjusted Eurodollar Rate plus 8.00% times (y) the Cumulative Class B Principal Paydowns as of the immediately prior Remittance Date.

“ Class B Interest Rate ” means (i) from August 8, 2008 through October 31, 2008, the Adjusted Eurodollar Rate plus 12.50%; (ii) from November 1, 2008 through the Facility Maturity Date, the Adjusted Eurodollar Rate plus 17.50%; and (iii) from and after the Facility Maturity Date or at any time upon the occurrence and continuation of any Program Termination Event, the Adjusted Eurodollar Rate plus 20.00%.

“ Class B Lender ” means each Lender in respect of the Class B Loan.

“ Class B Loan ” means the sum of the Class B Advance Amount plus $1,000,000.

“ Class B Note ” has the meaning set forth in Section 2.01(b) .

“ Closing Date ” means November 7, 2007.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Collateral Agent ” means Morgan Stanley, in its capacity as collateral agent on behalf of the Secured Parties, and any other Person appointed as Collateral Agent hereunder.

“ Collateral Agent’s Fee ” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the amount listed in the Fee Letter.

“ Collateral Receipt ” has the meaning assigned to that term in the Custodial Agreement.

“ Collateral Split ” has the meaning set forth in Section 7.03(b) . The Collateral Split shall be deemed to occur on the Collateral Split Effective Date.

 

7

“ Collateral Split Accrued Expenses ” means, as of any date, each of the following amounts to the extent accrued or invoiced on or prior to such date: all amounts payable under clauses (i) , (ii)  (including, without limitation, all applicable swap breakage costs, indemnities and Other Swap Breakage Costs), (iii) , (iv) , (v) , (vi) , (viii)  and (xiii)  of Section 2.04(a) ; it being understood and agreed that extraordinary amounts reasonably expected to be incurred in connection with any Program Termination Event or the Collateral Split may be invoiced in advance and shall be included in the Collateral Split Accrued Expenses.

“ Collateral Split Buyout Right ” has the meaning set forth in Section 7.04 .

“ Collateral Split Effective Date ” means (i) the day after the first Remittance Date to occur following the later of (a) the date on which each applicable Lender’s Collateral Split Buyout Rights expire pursuant to Section 7.03 and (b) the date on which all Collateral Split Accrued Expenses are paid in full or (ii) any other date agreed to by the parties hereto and the Qualifying Swap Counterparty.

“ Collateral Split Notice ” has the meaning set forth in Section 7.04(a) .

“ Collection Account ” means a special trust account (account number 119320000 at the Lenders’ Bank) in the name of the Borrower and under the control of U.S. Bank National Association, as securities intermediary, on behalf of the Lenders; provided , that the funds deposited therein (including any interest and earnings thereon) from time to time shall constitute the property and assets of the Borrower and the Borrower shall be solely liable for any taxes payable with respect to the Collection Account.

“ Collection Account Agreement ” means that certain Collection Account Agreement, dated the date of this Agreement, among the Borrower, the Servicer, the Lenders’ Bank, the Lenders and the Collateral Agent, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.

“ Collection Date ” means the date on which the aggregate outstanding principal amount of the Loans have been repaid in full and all interest and Fees and all other Obligations have been paid in full.

“ Collection Period ” means, (i) with respect to any Remittance Date (including the initial Remittance Date), the period beginning on, and including, the first day of the most recently ended calendar month and ending on, and including, the last day of the most recently ended calendar month; provided , that the final Collection Period shall begin on, and include, the first day of the then current calendar month and shall end on the Collection Date and (ii) in any context other than with respect to any Remittance Date, a calendar month.

“ Collections ” means, without duplication, with respect to any Pledged Receivable, all Scheduled Payments related to such Receivable, all prepayments and related penalty payments with respect to the Contract related to such Receivable, all overdue payments and related interest and penalty payments with respect to the Contract related to such Receivable, all Guaranty Amounts, all Insurance Proceeds, all Servicing Charges, all proceeds under “buyout letters” or other prepayment/termination agreements and all Recoveries related to such Receivable, all amounts paid to the Borrower related to such Receivable pursuant to the terms of the Purchase and Sale Agreement, all amounts paid by the Servicer related to such Receivable in connection with its obligations under

 

8

Section 6.20 hereof, and all other payments received with respect to the Contract related to such Receivable, all cash receipts and proceeds in respect of the Other Conveyed Property or Related Security (including, without limitation, the Obligor Collateral) related to such Receivable, any Servicer Advances related to such Receivable, and any amounts paid to the Borrower under or in connection with any Qualifying Interest Rate Swap or the hedging arrangements contemplated thereunder.

“ Computer Tape or Listing ” means the computer tape or listing (whether in electronic form or otherwise) generated by the Servicer on behalf of the Borrower, which provides information relating to the Receivables included in the Eligible Receivables Balance.

“ Consolidated EBITDA ” means, with respect to LEAF Financial and its consolidated subsidiaries for any period, the aggregate net income (or loss) of LEAF Financial and its consolidated subsidiaries for such period plus , without duplication and to the extent deducted in the calculation of such aggregate net income (or loss) for such period, the sum of (a) income tax expense, (b) Consolidated Interest Expense (including interest on the Loans) for such period, (c) depreciation and amortization expense and (d) amortization of intangibles (including, without limitation, goodwill, trademarks, tradenames, copyrights, patents, patent allocations, licenses and rights in any of the foregoing and other items treated as intangibles in accordance with GAAP).

“ Consolidated Interest Expense ” means, with respect to LEAF Financial and its consolidated subsidiaries for any period, the aggregate of the interest expense of LEAF Financial and its consolidated subsidiaries for such period, as determined in accordance with GAAP, and including, without duplication, net cash costs under all Qualifying Interest Rate Swaps (excluding amortization or accretion of original discount or cost).

“ Contract ” means a Lease Contract or a Loan Contract.

“ Controlling Holders ” means, (i) at any time prior to a Collateral Split, both of the Primary Lenders acting together and (ii) at any time after a Collateral Split, with respect to any Loan Agreement and the related Transaction Documents, the holders of a majority of the aggregate outstanding principal amount of the Class A Notes and the Class B Notes governed by such Loan Agreement or, if there are only two holders of such Class A Notes and the Class B Notes, all of such holders of such Class A Notes and the Class B Notes.

“ Credit and Collection Policy ” means (i) collectively, the “Operations Policies & Procedures” memorandum and certain other items, as annexed hereto as Schedule IV as such policy may hereafter be amended, modified or supplemented from time to time in compliance with this Agreement and (ii) with respect to any Servicer other than LEAF Financial, that Servicer’s collection policies for similar assets in effect from time to time.

“Cumulative Class B Principal Paydowns” means, as of any date of determination, an amount equal to the sum of the principal payments in respect of the Class B Notes made by the Borrower to the Class B Lenders pursuant to Section 2.16, if any.

“ Cumulative Net Loss Rate ” means, as of any date of determination following November 1, 2008, an amount (expressed as a percentage) equal to (i) the difference of (x) the aggregate Discounted Balances of all Pledged Receivables which were Eligible Receivables at the time of their Pledge hereunder and which became Defaulted Receivables at any time, minus (y) Recoveries received, divided by (ii) the Purchase Price.

 

9

“ Cumulative Net Loss Rate Percentage ” means, for each calendar month, the corresponding percentage set forth in the “Cumulative Net Loss Rate Percentage” column on Schedule IX hereto.

“ Custodial Agreement ” means that certain Custodial Agreement dated as of the date hereof among the Servicer, the Borrower, the Lenders and the Custodian, together with all instruments, documents and agreements executed in connection therewith, as such Custodial Agreement may from time to time be amended, restated, supplemented and/or otherwise modified in accordance with the terms thereof.

“ Custodian ” means U.S. Bank National Association (or a sub-custodian on its behalf) or any substitute Custodian appointed by the Lenders pursuant to the Custodial Agreement.

“ Custodian’s Fee ” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the aggregate fees (and, following a Collateral Split, the aggregate fees with respect to each related Segregated Collateral Pool, without duplication) listed in that certain “Schedule of Fees” letter dated October 23, 2007 between U.S. Bank National Association and LEAF Financial Corporation, as amended, which relate to such Fee Period.

“ Debt ” of any Person means (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments related to transactions that are classified as financings under GAAP, (iii) obligations of such Person to pay the deferred purchase price of property or services, (iv) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations secured by an Adverse Claim upon property or assets owned (under GAAP) by such Person, even though such Person has not assumed or become liable for the payment of such obligations and (vi) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor, against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above.

“ Defaulted Receivable ” means, as of any date of determination, any Pledged Receivable:

(i) with respect to which any part of any Scheduled Payment, or any tax-related payment, owed by the applicable Obligor under the terms of the related Contract remains unpaid for more than 120 days after the due date therefor set forth in such Contract;

(ii) with respect to which the first or second Scheduled Payment is not paid in full when due under the related Contract;

 

10

(iii) with respect to which any payment or other material terms of the related Contract have been modified due to credit related reasons after such Contract was acquired by the Borrower pursuant to the Purchase and Sale Agreement;

(iv) which has been or should be charged off as a result of the occurrence of a Bankruptcy Event with respect to the related Obligor, if any, or which has been or should otherwise be deemed uncollectible by the Servicer, in each case, in accordance with the Credit and Collection Policy; or

(v) with respect to which the Servicer has repossessed the related Equipment.

“ Deficiency ” has the meaning assigned to that term in the Custodial Agreement.

“ Delinquency Rate ” means, as of any date of determination, an amount (expressed as a percentage) equal to (i) the aggregate Discounted Balances of all Delinquent Receivables as of the last day of the immediately preceding Collection Period divided by (ii) aggregate Discounted Balances of all Pledged Receivables which are Eligible Receivables as of such day.

“ Delinquent Receivable ” means, as of any date of determination, any Pledged Receivable (other than a Defaulted Receivable) with respect to which any part of any Scheduled Payment (or other amount payable under the terms of the related Contract) remains unpaid for more than 60 days but not more than 120 days after the due date therefor set forth in such Contract.

“ Depository Institution ” means a depository institution or trust company, incorporated under the laws of the United States or any State thereof, that is subject to supervision and examination by federal and/or State banking authorities.

“ Discount Rate ” means, as of any date of determination, a percentage equal to the sum of (i) 7.20% per annum, (ii) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, the Servicing Fee Rate and the Standby Backup Servicing Fee Rate, (iii) at any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, the Active Backup Servicing Fee Rate and (iv) a rate per annum equal to 0.05%.

“ Discounted Balance ” means, with respect to any Contract, as of any date of determination, the present value of the aggregate amount of Scheduled Payments (including any Balloon Payment or Put Payment but, in any event, calculated without giving effect to any booked residual value with respect to any related Equipment) due or to become due under the terms of the related Contract after the Cut-Off Date applicable to the Receivable related thereto, which remain unpaid as of such date of determination, calculated by discounting such aggregate amount of such Scheduled Payments to such date of determination at an annual rate equal to the Discount Rate.

“ Discrepancy Procedure ” has the meaning assigned to that term in the eighth paragraph of Section 6.13 .

“ Dollar Purchase Option Contract ” means a Contract (i) in connection with which an agreement was executed which grants the related Obligor a right to purchase the Equipment leased under such Contract for $1.00 or other nominal consideration at the end of

 

11

the initial term of such Contract or (ii) grants the related Obligor a right to purchase the Equipment leased under such Contract for $1.00 or other nominal consideration at the end of the initial term of such Contract.

“ Eligible Depository Institution ” means a Depository Institution the short term unsecured senior indebtedness of which is rated at least Prime-1 by Moody’s, A-1 by S&P, and F1 by Fitch, if rated by Fitch.

“ Eligible Receivable ” means, at any time, a Pledged Receivable with respect to which each of the representations and warranties regarding the Contract related to such Pledged Receivable contained in Schedule III hereto is true and correct at such time.

“ Eligible Receivables Balance ” means, at any time, the aggregate Discounted Balances of all Eligible Receivables which are Pledged Receivables hereunder to secure Loans at such time.

“ Equipment ” means the equipment or Vehicle leased to an Obligor, or serving as collateral for a loan to an Obligor, under a Contract together with any replacement parts, additions and repairs thereof, and any accessories incorporated therein and/or affixed thereto.

“ Equipment Category ” means any of the Equipment Categories set forth on Schedule V hereto, as such schedule may be updated from time to time by the Borrower with the consent of the Lenders (which such consent shall not be unreasonably withheld).

“ Equity Event ” means (i) the occurrence and continuation of any Other Default, unless waived by the Lenders in their sole discretion or (ii) the Delinquency Rate in respect of the most recent Collection Period, calculated by the Lenders solely with respect to Receivables, exceeds 3.5%.

“ Equity Investment ” means $10,210.637.42.

“ Equity Payment ” means (a) on any Remittance Date prior to the Facility Maturity Date and so long as an Equity Event shall not have occurred and then be continuing, the least of (i) the amount then required to be paid by the Partnership (pursuant to its partnership agreement) to its limited partners, (ii) 5% times the remaining Collections, if any, to be distributed on such Remittance Date after giving effect to the application of Collections in accordance with the priority of payments set forth in clauses (i)  through (x)  of Section 2.04(a) (and/or, if applicable, subsections (a)(i) through (a)(ix) of Schedule 2.04(a)) on such Remittance Date, and (iii) $72,325.35, or (b) on any Remittance Date on or after the Facility Maturity Date or if an Equity Event shall have occurred and is continuing, zero.

“ ERISA ” means the United States Employee Retirement Income Security Act of 1974, as amended from time to time.

“ ERISA Affiliate ” means a corporation, trade or business that is, along with any Person, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414 of the Internal Revenue Code of 1986, as amended, or section 4001 of ERISA.

 

12

“ Eurodollar Disruption Event ” means any of the following: (i) a determination by any Lender that it would be contrary to law or to the directive of any central bank or other governmental authority (whether or not having the force of law) for such Lender to obtain United States dollars in the London interbank market to make, fund or maintain any Loan, (ii) a determination by any Lender that the rate at which deposits of United States dollars are being offered in the London interbank market does not accurately reflect the cost to such Lender of making, funding or maintaining any Loan or (iii) the inability of any Lender to obtain United States dollars in the London interbank market to make, fund or maintain any Loan.

“ Eurodollar Index ” means an index based upon an interest rate reported on Reuters LIBOR01 Page (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for United States dollar deposits.

“ Event of Default ” has the meaning assigned to that term in Section 7.01 .

“ Exception Report ” has the meaning set forth in the Custodial Agreement.

“ Exception Sublimit Receivable ” means a Receivable arising under a Lease Contract related to Equipment having an Amortized Equipment Cost of less than $100,000 as to which the original, executed Lease Contract has not been forwarded to the Custodian for inclusion in the related Receivable File.

“Excluded Amounts” has the meaning assigned to that term in Section 2.11.

“ Excluded Assets ” means all Receivables and other assets acquired by the Originator pursuant to the FDIC Purchase Agreement which are not Pledged Assets.

“ Exit Fee ” has the meaning set forth in the Fee Letter.

“ Facility Amount ” means, at any time, the difference between the aggregate Loans Outstanding hereunder minus $1,000,000 (the deferred, capitalized portion of the Class B Arrangement Fee (as defined in the Fee Letter) payable by the Borrower to Morgan Stanley AFI, as Class B Lender).

“ Facility Deficiency ” means, at any time, that either: (i) the Class A Facility Limit is less than the aggregate outstanding principal balance of the Class A Notes, or (ii) the Facility Limit is less than the Facility Amount; an amount equal to the amount of such deficiency, respectively.

“ Facility Limit ” means, at any time, with respect to the Class A Notes and the Class B Notes, collectively, the product of (x) 97.10%, (y) 98%, and (z) the Amortized Equipment Cost with respect to all Pledged Receivables that are Eligible Receivables.

“ Facility Limit Certificate ” means a report, in substantially the form of Exhibit A , prepared by the Borrower (or the Initial Servicer on its behalf) for the benefit of Lenders pursuant to Section 6.10(c) .

 

13

“ Facility Maturity Date ” means November 1, 2009, unless extended by all of the Lenders in their sole discretion, at the written request of the Borrower, by written notice to the other parties hereto.

“ FDIC Documents ” has the meaning specified in the Purchase and Sale Agreement.

“ FDIC Purchase Agreement ” means the Loan Sale Agreement between Federal Deposit Insurance Corporation, as Receiver of Netbank and the Originator with respect to the Pledged Receivables and other assets.

“ Fee Letter ” has the meaning assigned to that term in Section 2.08(a) .

“ Fee Period ” means a period commencing on (and including) a Remittance Date and ending on (and including) the day prior to the next Remittance Date; provided , that, the initial Fee Period hereunder shall commence on (and include) the date hereof and end on (and include) December 13, 2007.

“ Fees ” has the meaning assigned to that term in Section 2.08(a) .

“ Fitch ” means Fitch, Inc. (or its successors in interest).

“ FMV Contract ” means a Contract which (i) in connection with which any agreement was executed which grants the related Obligor a right to purchase the Equipment leased under such Contract for the fair market value thereof at the end of the initial term of such Contract or (ii) grants the related Obligor a right to purchase the Equipment leased under such Contract for the fair market value thereof at the end of the initial term of such Contract.

“ GAAP ” means generally accepted accounting principles as in effect from time to time in the United States.

“ Government Entity ” means the United States, any State, any political subdivision of a State and any agency or instrumentality of the United States or any State or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“ Guaranty Amounts ” means any and all amounts paid by any guarantor with respect to the applicable Contract.

“ Included Repurchased Receivable ” means any Receivable repurchased by the Originator pursuant to Section 6.1(b) of the Purchase and Sale Agreement with respect to which, as of the date of repurchase, any part of any Scheduled Payment (or other amount payable under the terms of the related Contract) remained unpaid after the due date therefor set forth in such Contract.

“ Indemnified Amounts ” has the meaning assigned to that term in Section 8.01 .

“ Independent Accountants ” has the meaning assigned to that term in Section 6.11(b) .

“Initial Class B Principal Paydown Amount” means $500,000.00.

 

14

“ Initial Class B Principal Paydown Date ” means June 23, 2009 .

“ Initial Qualifying Swap Counterparty ” means Morgan Stanley Capital Services Inc., a Delaware corporation, and its successors and permitted assigns.

“ Initial Servicer ” has the meaning assigned to that term in the preamble hereto.

“ Insurance Certificate ” means the insurance certificate related to the Insurance Policy with respect to such Receivable (which insurance certificate shall list the Originator as a loss payee).

“ Insurance Policy ” means, with respect to any Obligor Collateral, the insurance policy maintained by or on behalf of the Obligor pursuant to the related Contract that covers physical damage to the related Equipment (in an amount sufficient to insure completely the value of such Equipment) and general liability (including policies procured by the Borrower or the Servicer, or any agent thereof, on behalf of the Obligor).

“ Insurance Proceeds ” means, with respect to an item of Obligor Collateral and a related Contract, any amount paid under an Insurance Policy issued with respect to such Obligor Collateral and/or the related Contract.

“ Interest Coverage Ratio ” means, in respect of any fiscal quarter, the ratio (calculated based on the most recent financial statements of LEAF Financial and its consolidated subsidiaries delivered pursuant to Section 6.11 hereof) of (a) the Consolidated EBITDA of LEAF Financial and its consolidated subsidiaries for fiscal quarter to (b) Consolidated Interest Expense of LEAF Financial and its consolidated subsidiaries for fiscal quarter but excluding accrued and unpaid interest on subordinated Debt of LEAF Financial to its parent company.

“ Interest Period ” means, for any outstanding Loans, a period determined pursuant to Section 2.03(a) .

“ Interest Rate ” has the meaning assigned to such term in Section 2.03(b) .

“ LEAF Financial ” has the meaning assigned to that term in the preamble hereto.

“ LEAF Managed Entity ” means any Person for which LEAF Financial has contractually agreed (pursuant to any agreement, including, without limitation, a partnership agreement or other organizational document, management agreement or servicing agreement) to act as a manager or a servicer with respect to the equipment leases and loans owned by such Person and which is (i) contractually obligated to purchase all such leases and loans only from LEAF Financial and its affiliates and only at such seller’s cost basis and (ii) not contractually limited in when it can purchase such leases and loans.

“ Lease Contract ” means (i) the standard form equipment lease contract of NBBF in the form delivered to the Servicer and the Lenders and which shall be deemed incorporated herein as Exhibit D-1 attached hereto or (ii) a lease agreement otherwise approved by the Servicer in compliance with the Credit and Collection Policy, pursuant to which Equipment is leased to an Obligor by NBBF or Originator, together with all schedules, supplements and amendments thereto and each other document and instrument related to such lease.

 

15

“ Lease File ” has the meaning assigned to that term in clause (a)  of the definition of “Receivable File”.

“ Lender ” means, any one of and “Lenders” means all of, the Class A Lenders and the Class B Lenders, and each such Person’s successors and assigns.

“ Lenders’ Bank ” means U.S. Bank National Association and its successors and assigns that are Eligible Depository Institutions.

“ Lenders’ Bank Fee ” means an annual fee paid in advance, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to $6,000. The “Lenders’ Bank Fee” shall also include (i) a one-time acceptance fee of $4,500 payable on the Closing Date and (ii) reasonable out-of-pocket expenses incurred by the Lenders’ Bank in the performance of its duties; provided , that all expenses exceeding a total of $50,000 shall be approved in advance by all Lenders and the Borrower so long as an Event of Default shall not have occurred and then be continuing.

“ Leverage Ratio ” means, with respect to LEAF Financial or Resource America, as of any date of determination, the ratio of (a) all recourse Debt (including (I) in the case of LEAF Financial, the revolving credit facility with National City Bank, as agent, or other similar types of credit facilities existing on or after the date hereof, and (II) in the case of Resource America, similar types of credit facilities), to (b) the Tangible Net Worth of such Person.

“ Liquidation Proceeds ” means, with respect to a Receivable with respect to which the related Obligor Collateral has been repossessed or foreclosed upon by the Servicer, all amounts realized with respect to such Receivable net of (i) reasonable expenses of the Servicer incurred in connection with the collection, repossession, foreclosure and/or disposition of the related Obligor Collateral and (ii) amounts that are required to be refunded to the Obligor on such Receivable; provided , however , that the Liquidation Proceeds with respect to any Receivable shall in no event be less than zero.

“Liquidity Availability Amount” means, with respect to any calendar quarter, the aggregate amount of funds that any LEAF Managed Entity may draw under revolving lines of any credit facility that does not have a maturity within 120 days of the last day of such calendar quarter.

“ Loan ” means either of the Class A Loan or the Class B Loan and “ Loans ” means the Class A Loan and the Class B Loan.

“ Loan Agreement ” has the meaning assigned to that term in Section 7.03(c)(i) .

“ Loan Contract ” means, (i) the standard form equipment loan/security contract of NBBF delivered to the Servicer and the Lenders and which shall be deemed incorporated herein as Exhibit D-2 and Exhibit D-3 or (ii) a loan/security agreement and promissory note otherwise approved by the Servicer in compliance with the Credit and Collection Policy, in each case, pursuant to

 

16

which NBBF or the Originator makes a loan to an Obligor secured by Equipment purchased by such Obligor, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

“ Loan File ” has the meaning assigned to that term in clause (b)  of the definition of “Receivable File”.

“ Loans Outstanding ” means the sum of the principal amounts of all Loans, as reduced from time to time by Collections with respect to any Pledged Receivable received and distributed as repayment of principal amounts of Loans outstanding pursuant to Section 2.04 and any other amounts received by the Lenders to repay the principal amounts of Loans outstanding pursuant to Section 2.15 or otherwise; provided , however , that the principal amounts of Loans outstanding shall not be reduced by any Collections with respect to any Pledged Receivable or other amounts if at any time such Collections or other amounts are rescinded or must be returned for any reason.

“ Lockbox ” means a post office box to which Collections with respect to any Pledged Receivable are remitted for retrieval by the Lockbox Bank and for deposit by the Lockbox Bank into the Lockbox Account.

“ Lockbox Account ” means the deposit account (account number 153910088597 at the Lockbox Bank) in the name of “U.S. Bank NA as Securities Intermediary for LEAF Financial and various lenders”.

“ Lockbox Bank ” means U.S. Bank National Association and its successors in interest.

“ Lockbox Intercreditor Agreement ” means the Amended and Restated Lockbox Intercreditor Agreement, dated as of April 18, 2005, among the Lockbox Bank, the Servicer, the Borrower, and certain other parties.

“ Material Adverse Effect ” means a material adverse effect on (i) the ability of the Borrower, the Originator and/or the Servicer to conduct its business, (ii) the ability of the Borrower, the Originator and/or the Servicer to perform its respective obligations under this Agreement and/or any other Transaction Document to which it is a party, (iii) the validity or enforceability of this Agreement and/or any other Transaction Document to which the Borrower, the Originator and/or the Servicer is a party, (iv) the rights and remedies of any Lender under this Agreement and/or any of the Transaction Documents and/or (v) the validity, enforceability or collectibility of all or any portion of the Pledged Receivables.

“ Maximum Advance Amount ” means, on the Borrowing Date, $367,092,933.23.

“ Minimum Equity Requirement ” means $10,000,000.

“ Minimum Tangible Net Worth ” means, (i) with respect to Resource America, a Tangible Net Worth (measured as of each fiscal quarter end) of $ 125,000,000 100,000,000 and (ii) with respect to LEAF Financial, a Tangible Net Worth (measured as of each fiscal quarter end) of (x) $34,170,544 plus (y) 75% of the net income from each preceding fiscal quarter (beginning with and including September 30, 2008) in which net income is positive.

 

17

“ Monthly Remittance Report ” means a report, in substantially the form of Exhibit C , furnished by the Servicer to the Lenders and each Qualifying Swap Counterparty pursuant to Section 6.10(b) and to the Backup Servicer pursuant to Section 6.10(d) .

“ Moody’s ” means Moody’s Investors Service, Inc. (or its successors in interest).

“ Morgan Stanley ” has the meaning assigned to that term in the preamble hereto.

“ Morgan Stanley AFI ” has the meaning assigned to that term in the preamble hereto.

“ MS Loan Agreement ” has the meaning assigned to that term in Section 7.03(c)(iv) .

“ MS Primary Lender ” means Morgan Stanley; provided , however , that (i) if Morgan Stanley no longer owns any interest in the Loans, Morgan Stanley AFI shall succeed Morgan Stanley as MS Primary Lender so long as it owns any interest in the Loans, and (ii) if neither Morgan Stanley nor Morgan Stanley AFI owns any interest in the Loans, then the Person who acquired directly or indirectly from Morgan Stanley or Morgan Stanley AFI Loans having the greatest principal balance of all such Loans shall succeed Morgan Stanley and Morgan Stanley AFI as MS Primary Lender.

“ NetBank ” means NetBank, FSB, Alpharetta, Georgia, a federally chartered savings bank.

“ NBBF ” means NetBank Business Finance, a division of NetBank. All references to NBBF shall also mean NetBank or any other applicable division thereof.

“ Nominee Lienholder Agreement ” means either (i) a “Vehicle Lienholder Nominee Agreement” in the form attached hereto as Exhibit E (with such modifications as the Collateral Agent may approve) or (ii) any other nominee lienholder agreement or collateral agency agreement approved in writing by the Collateral Agent.

“ Non-Level Payment Contract ” means a Contract that does not provide for level Scheduled Payments during the term of such Contract.

“ Notes ” has the meaning assigned to that term in Section 2.01(b) hereof.

“ Notice of Borrowing ” has the meaning assigned to that term in Section 2.02(b) hereof.

“ Notice of Pledge ” has the meaning assigned to that term in the Custodial Agreement.

“ Obligations ” means all present and future indebtedness and other liabilities and obligations (howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or due or to become due) of the Borrower to the Secured Parties arising under this Agreement, the Notes and/or any other Transaction Document and shall include, without limitation, all liability for principal of and interest on the Loans, indemnifications and other amounts due or to become due by the Borrower to the Secured

 

18

Parties under this Agreement and/or any other Transaction Document, including, without limitation, interest, fees and other obligations that accrue after the commencement of an insolvency proceeding (in each case whether or not allowed as a claim in such insolvency proceeding).

“ Obligor ” means, collectively, each Person obligated to make payments under a Contract.

“ Obligor Collateral ” means (i) the Equipment leased to an Obligor under a Lease Contract, (ii) the Equipment and other property pledged by an Obligor to secure its obligations under a Loan Contract and (iii) any other property pledged by an Obligor to secure its obligations under a Loan Contract.

“ Obligor Financing Statement ” means a UCC financing statement filed by Originator or the Underlying Originator against an Obligor under a Contract which evidences a security interest in the related Obligor Collateral.

“ Officer’s Certificate ” means a certificate signed by the president, the secretary, the chief financial officer or any vice president of any Person.

“ Opinion of Counsel ” means a written opinion of independent counsel acceptable to the Lenders, which opinion, if such opinion or a copy thereof is required by the provisions of this Agreement or any other Transaction Document to be delivered to the Borrower or the Lenders, is acceptable in form and substance to the Lenders.

“ Originator ” means LEAF Funding, LLC, a Delaware limited liability company and/or the Partnership.

“ Originator Insurance Agreement ” means that certain letter agreement regarding the Originator’s obligations as named loss payee under Insurance Policies, dated as of the date hereof, among the Originator, the Servicer, the Borrower and the Lenders, as such agreement may from time to time be amended, restated, supplemented and/or otherwise modified in accordance with the terms thereof.

“ Other Conveyed Property ” means, with respect to any Receivable, all of the Borrower’s right, title and interest in, to and under (i) all Collections and other monies at any time received or receivable with respect to such Receivable after the applicable Cut-Off Date (as defined in the Purchase and Sale Agreement), (ii) the Equipment related to such Receivable (to the extent of the Borrower’s ownership rights, if any, therein), (iii) in the case of a Receivable related to any Contract, any and all agreements, documents, certificates and instruments evidencing the Borrower’s security interest or other interest in and to the related Obligor Collateral or any intercreditor agreement with respect thereto, including, without limitation, any Certificate of Title, (iv) the Obligor Collateral related to such Receivable including, without limitation, the security interest in such Obligor Collateral granted by the related Obligor to Originator under the related Contract and assigned by Originator to the Borrower under the Purchase and Sale Agreement, (v) the Obligor Financing Statement, if any, related to such Receivable, (vi) the Insurance Policy and any proceeds from the Insurance Policy relating to such Receivable, including rebates of premiums not otherwise due to an Obligor, (vii) the related Contract and all other items required to be contained in the related Receivable File, any and all other documents or electronic records that the Borrower

 

19

keeps on file in accordance with its customary procedures relating to such Receivable, the related Obligor Collateral or the related Obligor, (viii) all property (including the right to receive future Liquidation Proceeds) that secures such Receivable and that has been acquired by or on behalf of the Borrower pursuant to the liquidation of such Receivable, and (ix) all present and future rights, claims, demands, causes and chooses in action in respect of any or all of the foregoing and all payments on or under and all proceeds and investments of any kind and nature in respect of any of the foregoing.

“ Other Default ” has the meaning set forth in Section 5.01(z) .

“ Other Swap Breakage Cost ” has the meaning assigned to that term in Section 2.15 hereof.

“ Overdue Payment ” means, with respect to a Collection Period, all payments due in a prior Collection Period that the Servicer receives from or on behalf of an Obligor during such Collection Period, including any Servicing Charges.

“ Owner ” means (i) the Originator or (ii) subject to the prior written consent of the Lenders (such consent not to be unreasonably withheld), the Partnership or any subsidiary thereof or of the Initial Servicer (each, a “Permitted Transferee”) which acquires all of the membership interests of the Borrower.

“ Partnership ” means, LEAF Equipment Leasing Income Fund III, L.P., a Delaware limited partnership.

“ Percentage ” means, with respect to any Lender at any time, a fraction (expressed as a percentage) (x) the numerator of which is the outstanding principal amount of such Lender’s Loans and (y) the denominator of which is the aggregate principal amount of all Loans outstanding at such time.

“ Permitted Investments ” means any one or more of the following:

(i) direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States;

(ii) repurchase obligations (the collateral for which is held by a third party or the Collateral Agent), with respect to any security described in clause (i) above, provided that the long-term unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by Moody’s and S&P in one of their two highest long-term rating categories and if rated by Fitch, in one of its two highest long-term rating categories;

(iii) certificates of deposit, time deposits, demand deposits and bankers’ acceptances of any bank or trust company incorporated under the laws of the United States or any State thereof or the District of Columbia, provided that the short-term commercial paper of such bank or trust company (or, in the case of the principal depository institution in a depository institution holding company, the long-term unsecured debt obligations of the depository institution holding company) at the date of acquisition thereof has been rated by Moody’s and S&P in their highest short-term rating category, and if rated by Fitch, in its highest short-term rating category;

 

20

(iv) commercial paper (having original maturities of not more than 270 days) of any corporation incorporated under the laws of the United States or any State thereof or the District of Columbia, having a rating, on the date of acquisition thereof, of no less than A-1 by Moody’s, P-1 by S&P and F-1 if rated by Fitch;

(v) money market mutual funds, including funds managed by the Lenders’ Bank or its Affiliates, registered under the Investment Company Act of 1940, as amended, having a rating, at the time of such investment, of no less than Aaa by Moody’s, AAA by S&P and AAA if rated by Fitch; and

(vi) any other investments approved in writing by the Lenders;

provided , that no such instrument shall be a Permitted Investment if such instrument evidences the right to receive either (a) interest only payments with respect to the obligations underlying such instrument or (b) both principal and interest payments derived from obligations underlying such instrument, where the principal and interest payments with respect to such instrument provide a yield to maturity exceeding 120% of the yield to maturity at par of such underlying obligation. Each Permitted Investment may be purchased by the Lenders’ Bank or through an Affiliate of the Lenders’ Bank.

“ Permitted Liens ” means with respect to Obligor Collateral, (A) liens and security interests in favor of the Collateral Agent, granted pursuant to the Transaction Documents, (B) the interests of an Obligor arising under the Contract to which it is a party in the Obligor Collateral related to such Contract, (C) liens for taxes, assessments, levies, fees and other governmental and similar charges either not yet due or being contested in good faith and by appropriate proceedings, provided, that appropriate reserves shall have been established with respect to any such taxes either not yet due or being contested in good faith and by appropriate proceedings, (D) any liens with respect to any mechanics, suppliers, materialmen, laborers, employees, repairmen and other like liens arising in the ordinary course of a servicer’s, lessor’s/lender’s or lessee’s/borrower’s business securing obligations which are not due and payable, and (E) salvage rights of insurers with respect to the equipment subject to a Contract under insurance policies maintained pursuant to the Transaction Documents or a Contract.

“ Permitted Transferee ” has the meaning given to such term in the definition of “Owner” herein.

“ Person ” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture, government (or any agency or political subdivision thereof) or other entity.

“ Pledge ” means the pledge of any Receivable pursuant to Article II .

“ Pledged Assets ” has the meaning assigned to that term in Section 2.11 .

 

21

“ Pledged Receivables ” has the meaning assigned to that term in Section 2.11(a) .

“ Prepayment Amount ” means the principal amount of Loans repaid by the Borrower in connection with an optional prepayment of Loans made by the Borrower pursuant to Section 2.15 hereof.

“ Prepayment Date ” means any date on which an optional prepayment of Loans is made by the Borrower pursuant to Section 2.15 hereof.

“ Primary Lender ” means each of the MS Primary Lender and the RBS Primary Lender.

“ Priority Documents ” means, (i) with respect to a Lease Contract, the related original, executed Lease Contract (or, in the case of a Lease Contract under a master lease, a machine or facsimile copy of the related master lease certified by an authorized officer of the Borrower and stamped “I hereby certify that this is a true and exact copy of the original” and an original, executed schedule thereto describing the related Equipment) and the item listed in clause (4) of subsection (a)(i) of the definition of Receivable File, and (ii) with respect to a Loan Contract, the items listed in clauses (1), (2) and (4) of subsection (b)(i) of the definition of Receivable File. The term “Priority Documents” shall also include a machine copy of the existing Certificate of Title with respect to any Vehicle subject to a Contract.

“ Program Termination Date ” means the date of the occurrence of a Program Termination Event which has not been waived by the Controlling Holders.

“ Program Termination Event ” means the occurrence of any of the following events:

(i) a regulatory, tax or accounting body has ordered that the activities of any Lender or any Affiliate thereof contemplated hereby be terminated or, as a result of any other event or circumstance, the activities of any Lender or any Affiliate contemplated hereby may reasonably be expected to cause such Lender or the Person, if any, then acting as the administrator or the manager for such Lender or any of its Affiliates to suffer materially adverse regulatory, accounting or tax consequences;

(ii) an Event of Default has occurred and is continuing;

(iii) Reserved;

(iv) the rolling weighted average of the Delinquency Rates in respect of any three consecutive Collection Periods, calculated by the Lenders solely with respect to Receivables, exceeds 3.5%;

(v) Reserved;

(vi) the Cumulative Net Loss Rate, calculated by (or in a manner satisfactory to) the Lenders solely with respect to Receivables, exceeds the applicable Cumulative Net Loss Rate Percentage on the last day of the corresponding calendar month;

(vii) Reserved;

 

22

(viii) Reserved;

(ix) Reserved;

(x) a Servicer Default has occurred and is continuing; or

(xi) (1) any Qualifying Swap Counterparty (other than the Initial Qualifying Swap Counterparty) ceases to maintain the long-term debt ratings required of a Qualifying Swap Counterparty and (A) does not post cash collateral in a manner acceptable to the Lenders within 45 days or (B) is not replaced within 45 days by a replacement acceptable to the Lenders or (2) the Borrower fails to comply with any term, covenant or agreement hereunder related to the maintenance of any Qualifying Interest Rate Swaps; or

(xii) the occurrence of three or more Termination Events.

“ Purchase and Sale Agreement ” means that certain Purchase and Sale Agreement, dated as of the date hereof, between the Originator, as seller, and the Borrower, as purchaser, together with all instruments, documents and agreements executed in connection therewith, as such Purchase and Sale Agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms hereof.

“ Purchase Date ” has the meaning set forth in the Purchase and Sale Agreement.

“ Purchase Price ” means $385,772,014.15.

“ Put Payment ” means with respect to any Contract constituting a lease, the payment, if any, required to be made by the Obligor under the terms of such lease in connection with the required purchase by such Obligor of the related Equipment at the end of the term of such lease.

“ Qualifying Interest Rate Swap ” means (X) an interest rate swap agreement (i) between the Borrower and a Qualifying Swap Counterparty, (ii) under which the Borrower shall receive a floating rate of interest based on a Eurodollar Index acceptable to the Lenders in exchange for the payment by the Borrower of a fixed rate of interest equal to the applicable Swapped Rate, (iii) the effective date of which is the Borrowing Date, (iv) having a varying notional balance which is, as of the effective date thereof, in an amount equal to the aggregate principal amount of the Loans advanced on such effective date and (v) which shall otherwise be on such terms and conditions and pursuant to such documentation as shall be acceptable to the Lenders or (Y) an alternative interest rate hedging agreement agreed to in writing by the Borrower and the Lenders, in each case, as amended in accordance with the terms hereof and thereof.

“ Qualifying Swap Counterparty ” means (A) Morgan Stanley Capital Services Inc. (or any successors or permitted assigns) or (B) any Lender or any Affiliate of a Lender, provided that in the case of a Person set forth in this clause (B) or any successors or permitted assigns of Morgan Stanley Capital Services Inc., such Person or its credit support provider (x) shall have (i) a short-term rating of at least “A1+” or the equivalent and (ii) a long-term rating of at least “AA-” or the equivalent from S&P, Moody’s or Fitch (and no lower than the equivalent rating by any of them) and (y) is otherwise acceptable to the Collateral Agent and the Controlling Holders.

 

23

“ Rating Agencies ” means Moody’s, S&P and Fitch, or any other nationally recognized statistical rating organizations as may be designated by the Lenders.

“ RBS ” has the meaning assigned to that term in the preamble hereto.

“ RBS Collateral Agent ” has the meaning assigned to that term in Section 7.03(c)(v) .

“ RBS Loan Agreement ” has the meaning assigned to that term in Section 7.03(c)(i) .

“ RBS Primary Lender ” means RBS; provided , however , that if RBS no longer owns any interest in the Loans, then the Person who acquired directly or indirectly from RBS Loans having the greatest principal balance of all such Loans shall succeed RBS as RBS Primary Lender.

“ Receivable ” means the rights to all payments from an Obligor under a Contract, including, without limitation, any right to the payment with respect to (i) Scheduled Payments, (ii) any prepayments or overdue payments made with respect to such Scheduled Payments, (iii) any Guaranty Amounts, (iv) any Insurance Proceeds, (v) any Servicing Charges and (vi) any Recoveries.

“ Receivable File ” means with respect to each Receivable:

(a) if such Receivable is related to a Lease Contract the following items (collectively, a “ Lease File ”):

(i) (1) the related original, executed Lease Contract and certified copies of all amendments thereto (or, in the case of a Lease Contract under a master lease, a machine or facsimile copy of the related master lease and all amendments thereto, in each case certified by an authorized officer of the Borrower and stamped “I hereby certify that this is a true and exact copy of the original” and an original, executed schedule thereto describing the related Equipment and certified copies of all amendments thereto) unless such Lease Contract is related to an Exception Sublimit Receivable, in which event the executed Lease Contract and all amendments thereto (or, in the case of Lease Contracts under a master lease, the related schedule and all amendments thereto) may be a machine or facsimile copy certified in the manner described above, (2) a true, executed copy of the related delivery/installation certificate or acknowledgment and acceptance of delivery certificate if such Receivable is related to Equipment with an Amortized Equipment Cost in excess of $50,000, (3) a true copy of the Insurance Certificate if such Receivable is related to Equipment with an Amortized Equipment Cost in excess of $100,000, (4) other than with respect to a Lease Contract related to Equipment which has an Amortized Equipment Cost of less than $25,000 if such Lease Contract is a Dollar Purchase Option Contract or $50,000 if such Lease Contract is a FMV Contract, a “transmittal order” from the Servicer to a filing service company and an “in process report” from such filing service company to the Servicer (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement and (5) vendor order(s) or invoice(s); and

 

24

(ii) copies of any additional documents, other than servicing related documents (except for vendor contracts), that the Borrower keeps on file with respect to such Receivable;

(b) if such Receivable is related to a Loan Contract the following items (collectively, a “ Loan File ”):

(i) (1) the original, executed payment schedule or promissory note (if any) and certified copies of all amendments thereto, (2) a true, executed copy of the related “Master Agreement” or “Finance Agreement” and all amendments thereto, (3) a true copy of the related Insurance Certificate if such Receivable is related to Equipment with an Amortized Equipment Cost in excess of $100,000 and (4) other than with respect to a Receivable related to Equipment which has an Amortized Equipment Cost of less than $25,000, a “transmittal order” from the Servicer to a filing service company and an “in process report” from such filing service company to the Servicer (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement; and

(ii) copies of any additional documents, other than servicing related documents (except for vendor contracts), that the Borrower keeps on file with respect to such Receivable;

In addition, if the Obligor Collateral related to such Receivable is a Vehicle, the related Receivable File shall include the original copy of the Certificate of Title with respect to such Vehicle, which such Certificate of Title satisfies the Titling Requirements or (prior to the 90th day after such Receivable was first included in the calculation of the Eligible Receivables Balance, if such Certificate of Title has not yet been received by the Servicer or the Borrower) a copy of the application for such Certificate of Title.

“ Receivables Schedule ” has the meaning assigned to that term in the Custodial Agreement.

“ Records ” means all documents, books, records and other information (including, without limitation, tapes, disks, punch cards and related property and rights) maintained with respect to Receivables and the related Obligors which the Borrower has itself generated, in which the Borrower has acquired an interest pursuant to the Purchase and Sale Agreement or in which the Borrower has otherwise obtained an interest.

“ Recoveries ” means, for any Collection Period during which, or any Collection Period after the date on which, any Receivable becomes a Defaulted Receivable and with respect to such Defaulted Receivable, all payments that the Servicer received from or on behalf of the related Obligor during such Collection Period in respect of such Defaulted Receivable or from the repossession, liquidation or re-leasing of the related Obligor Collateral, including but not limited to Scheduled Payments, Overdue Payments, Guaranty Amounts and Insurance Proceeds.

 

25

“ Registrar of Titles ” means with respect to any State, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon.

“ Related Custodial Agreement ” has the meaning assigned to that term in Section 7.03(c)(iii) .

“ Related Lender ” means each Lender determined as follows:

(i) with respect to Morgan Stanley, so long as Morgan Stanley is the MS Primary Lender, its Related Lenders shall be Morgan Stanley AFI and any other Person to whom Morgan Stanley or Morgan Stanley AFI has directly or indirectly assigned any of the Loans;

(ii) with respect to Morgan Stanley AFI, so long as Morgan Stanley AFI is the MS Primary Lender, its Related Lenders shall be each other Person to whom Morgan Stanley or Morgan Stanley AFI has directly or indirectly assigned any of the Loans;

(iii) with respect to any Person that has succeeded Morgan Stanley or Morgan Stanley AFI as MS Primary Lender, its Related Lenders shall be each other Person who acquired any Loans directly or indirectly from Morgan Stanley or Morgan Stanley AFI;

(iv) with respect to RBS so long as RBS is the RBS Primary Lender, its Related Lenders shall be each other Person to whom RBS has directly or indirectly assigned any of the Loans; and

(v) with respect to any Person that has succeeded RBS as the RBS Primary Lender, its Related Lenders shall be each other Person who acquired any Loans directly or indirectly from RBS.

“ Related Security ” means with respect to any Receivable:

(i) any and all security interests or liens and property subject thereto from time to time securing or purporting to secure payment of such Receivable;

(ii) all guarantees, indemnities, warranties, letters of credit, insurance policies and proceeds and premium refunds thereof and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable; and

(iii) all proceeds of the foregoing.

“ Release Price ” means, with respect to a Pledged Receivable to be released hereunder, an amount equal to the present value of the then remaining Scheduled Payments under such Pledged Receivables (including any Balloon Payment or Put Payment) discounted monthly at the discount rate used in calculating the Amortized Equipment Cost, plus interest accrued thereon from and including the Remittance Date immediately preceding the date such Pledged Receivable is to be released through (but not including) the next succeeding Remittance Date.

 

26

“ Remittance Date ” means the (23 ^rd ) day of each month beginning December, 2007, or, if such date is not a Business Day, the next succeeding Business Day; provided, that the first Remittance Date shall occur on December 13, 2007; provided, further, that the final Remittance Date shall occur on the Collection Date.

“ Reuters LIBOR01 Page ” means the display page so designated on the Reuters Monitor Money Rates Service or any other page that may replace that page on that service for the purpose of displaying comparable rates or prices.

“ Resource America ” means Resource America, Inc., a Delaware corporation.

“ Rollover Interest Period ” means any Interest Period other than any Interest Period applicable to the Loan arising as a result of the Borrowing on the Borrowing Date.

“ S&P ” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (or its successors in interest).

“ Scheduled Payments ” means, with respect to any Receivable, the periodic payments payable under the terms of the related Contract (but not including any such periodic payment to the extent paid in advance by the related Obligor).

“ Secured Parties ” means each Class A Lender, each Class B Lender, the Servicer, the Backup Servicer and any other successor Servicer, the Custodian, the Lenders’ Bank, each Qualified Swap Counterparty and their respective successors and assigns.

“ Segregated Collateral Pool ” means each pool of Pledged Assets selected by the Collateral Agent or the MS Primary Lender pursuant to Section 7.03(b) .

“ Servicer ” means, at any time, LEAF Financial or any other Person then authorized, pursuant to Section 6.01 , to service, administer and collect Pledged Receivables.

“ Servicer Advance ” has the meaning assigned to such term in Section 6.19 .

“ Servicer Default ” means the occurrence of any of the following events:

(i) the failure of the Servicer to deliver any payments, collections or proceeds which it is obligated to deliver under the terms hereof or of any other Transaction Document at the times it is obligated to make such deliveries under the terms hereof or of any other Transaction Document, and such failure remains unremedied for two Business Days;

(ii) the failure of the Servicer to satisfy any of its reporting, certification, notification or documentation requirements under the terms hereof or of any other Transaction Document or the failure of the Servicer to observe or perform any material term, covenant or agreement hereunder or under any other Transaction Document (other than those described in clause (i) above) and such failure shall remain unremedied for 10 days (or, with respect to a failure with respect to any such requirement set forth in (x)  Sections 6.10(b) or 6.10(d) hereof, 5 Business Days or (y)  Section 6.10(e) hereof, 1 Business Day) after the Servicer first has knowledge, whether constructive or actual, of such failure;

 

27

(iii) any representation, warranty or statement of the Servicer made herein or in any other Transaction Document shall prove to be incorrect in any material respect, and, solely if such incorrect representation, warranty or statement can be remedied, such representation, warranty or statement is not made true within 15 days;

(iv) the occurrence of an Event of Default;

(v) the occurrence of a Program Termination Event described in clauses (iv), (vi) or (xii) of the definition of Program Termination Events; or

(vi) the occurrence of any Bankruptcy Event in respect of the Servicer.

“ Servicer Pension Plan ” means a “pension plan” as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA and to which the Servicer or any ERISA Affiliate of Servicer may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“ Servicing Agreement Electronic Images ” has the meaning set forth in Section 5.03 .

“ Servicing Charges ” means the sum of (a) all late payment charges paid by Obligors under Contracts after payment in full of any Scheduled Payments due in a prior Collection Period and Scheduled Payments for the related Collection Period and (b) any other incidental charges or fees received from an Obligor, including, but not limited to, late fees, collection fees, taxes and charges for insufficient funds.

“ Servicing Fee ” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to (i) the Servicing Fee Rate multiplied by (ii) the Eligible Receivables Balance as of the first day of such Fee Period multiplied by (iii) a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360. Upon assuming the duties of the Servicer hereunder, the Backup Servicer shall also be entitled to receive a one-time acceptance fee of $60,000, which shall be considered part of the “Servicing Fee” hereunder but shall be in addition to the amount set forth in the sentence above.

“ Servicing Fee Rate ” means 1.00%.

“ Standby Backup Servicer’s Fee ” means, for any Fee Period or portion thereof prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the greater of (i) the Standby Backup Servicing Fee Rate, multiplied by the Eligible Receivables Balance as of the first day of such Fee Period, multiplied by a fraction, the

 

28

numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360, or (ii) $2,800. The “Standby Backup Servicer’s Fee” shall also include (i) a one-time acceptance fee of $6,000 payable on November 13, 2008 and (ii) reasonable out-of-pocket expenses incurred by the Standby Backup Servicer in the performance of its duties.

“ Standby Backup Servicing Fee Rate ” means .0220%.

“ State ” means one of the fifty states of the United States or the District of Columbia.

“ Successor Servicer’s Indemnified Amounts ” has the meaning assigned to that term in Section 6.09 .

“ Successor Servicing Agreement ” has the meaning set forth in Section 6.01(a) .

“ Swapped Rate ” means, with respect to any Qualifying Interest Rate Swap, the annual rate of interest (expressed as a percentage) which the Borrower, as the fixed-rate payor, is required to pay under such Qualifying Interest Rate Swap in order to receive the floating rate of interest provided for under such Qualifying Interest Rate Swap.

“ Tangible Net Worth ” means, with respect to any Person, the amount calculated in accordance with GAAP as (i) the consolidated net worth of such Person and its consolidated subsidiaries (excluding any mark-to-market gain or loss on any swap or other hedging agreement (only to the extent included in such consolidated net worth) that is secured by collateral which is not marked-to-market), plus (ii) to the extent not otherwise included in such consolidated net worth, the unsecured subordinated Debt of such Person and the unsecured subordinated Debt of each of such Person’s consolidated subsidiaries, in each case, which has been issued to such Person’s or consolidated subsidiary’s parent, the terms and conditions of which are reasonably satisfactory to the Lenders, minus (iii) the consolidated intangibles of such Person and its consolidated subsidiaries, including, without limitation, goodwill, trademarks, tradenames, copyrights, patents, patent allocations, licenses and rights in any of the foregoing and other items treated as intangibles in accordance with GAAP, plus (iv) all preferred stock issued by such Person.

“ Targeted Advance Rate ” means, on any Remittance Date, a fraction, (i) the numerator of which is the sum of the aggregate principal balance of the Class A Notes and the Class B Notes as of the immediately preceding Remittance Date after giving effect to distributions of principal on such Remittance Date in accordance with the priority of payments in Section 2.04(a) , and (ii) the denominator of which is the aggregate Amortized Equipment Cost of all Pledged Receivables as of the immediately preceding Remittance Date.

“ Target Principal Amount ” means, for any Remittance Date, the lesser of (a) the product of (i) the Targeted Advance Rate for such Remittance Date, times (ii) the amount equal to the aggregate Amortized Equipment Cost of all Pledged Receivables as of the immediately preceding Remittance Date less the aggregate Amortized Equipment Cost of all Pledged Receivables as of such Remittance Date and (b) the aggregate principal balance of the Class A Notes as of such Remittance Date prior to any principal payments on the Class A Notes.

 

29

“ Termination Event ” means the occurrence, on or after 60 days after the Borrowing Date, of any of the following events:

(i) the rolling weighted average of the Delinquency Rates in respect of any three consecutive Collection Periods, calculated by the Lenders solely with respect to Receivables, exceeds 3.5%; or

(ii) the Cumulative Net Loss Rate, calculated by (or in a manner satisfactory to) the Lenders solely with respect to Receivables, exceeds the applicable Cumulative Net Loss Rate Percentage on the last day of the corresponding calendar month.

“ Titling Requirements ” means, (i) in the case of any Vehicle leased or sold to an Obligor pursuant to a Contract, the Certificate of Title for such Vehicle indicates the Obligor, as owner, and the Borrower or an Approved Lienholder, as lienholder, or (ii) in the event that any Vehicle leased or sold to an Obligor pursuant to a Contract indicates NBBF, as owner, on the related Certificate of Title, then within 90 days after the Closing Date the Certificate of Title for such Vehicle shall indicate the Borrower, as owner, and an Approved Lienholder, as lienholder.

“ Transaction Documents ” means this Agreement, the Purchase and Sale Agreement, the Lockbox Intercreditor Agreement, the Collection Account Agreement, the Fee Letter, the Custodial Agreement, the Originator Insurance Agreement, the FDIC Documents, the Class A Notes, the Class B Notes, each lease bailment agreement with a sub-custodian, each Qualifying Interest Rate Swap and each document and instrument related to any of the foregoing.

“ Transition Costs ” means any documented expenses and allocated cost of personnel reasonably incurred by the Backup Servicer in connection with a transfer of servicing from the Servicer to the Backup Servicer as the successor Servicer; provided, that such expenses and allocated costs do not exceed $60,000.

“ UCC ” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

“ Underlying Originator ” means Netbank or other originator of a Contract, other than the Originator, engaged, in the ordinary course of business in providing financing to Obligors for the purposes of acquiring or leasing the related Equipment.

“ Underlying Originator Credit and Collection Policy ” means the credit and collection policy of an Underlying Originator, as such policy may hereafter be amended, modified or supplemented from time to time in compliance with this Agreement.

“ United States ” means the United States of America.

“ Unmatured Event of Default ” means any event that, if it continues uncured, will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default.

“ Vehicle ” means a new or a used automobile, minivan, sports utility vehicle, light duty truck or heavy duty truck, or any other equipment, ownership of which is subject to a motor vehicle certificate of title statute.

 

30

“ Warehouse Facility ” means the facility in the aggregate amount of up to $250,000,000, as evidenced by the Receivables Loan and Security Agreement, dated as of October 31, 2006, among Resource Capital Funding II, LLC as borrower, LEAF Financial, Morgan Stanley Bank, N.A., as lender, and U.S. Bank National Association, as same may be modified, amended, or supplemented from time to time.

“ Weekly Collection Period ” means, with respect to any calendar week, the period beginning on, and including, the first day of the most recently ended calendar week and ending on, and including, the last day of the most recently ended calendar week.

“ Weekly Reporting Date ” has the meaning set forth in Section 6.10(e) .

“ Weighted Average Swapped Rate ” means, as of any date of determination, the weighted average (weighted solely based on the Calculated Swap Amortizing Balances of such Qualifying Interest Rate Swaps as of such date of determination) of the Swapped Rates of the Qualifying Interest Rate Swaps in effect on such date of determination.

SECTION 1.02 Other Terms . All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9.

SECTION 1.03 Interpretation following Collateral Split . On and after the Collateral Split Effective Date, all terms in this Article I and all terms defined elsewhere in this Agreement shall have the meanings set for herein in each of the Loan Agreements, in each case as modified by Section 7.03 hereof.

SECTION 1.04 Computation of Time Periods . Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

ARTICLE II

THE RECEIVABLES FACILITY

SECTION 2.01 Borrowings . (a) On the Borrowing Date, subject to the terms and conditions hereinafter set forth, Morgan Stanley, as Class A Lender, and Morgan Stanley AFI, as Class B Lender, shall make the term loan in principal amounts equal to (i) in the case of the Class A Lenders, the Class A Advance Amount (the “ Class A Loan ” and a “ Loan ”), and (ii) in the case of the Class B Lenders, the Class B Advance Amount, respectively, to the Borrower secured by Pledged Assets. On the Borrowing Date, no Loan shall be made if (i) the Aggregate Advance Amount shall exceed the Maximum Advance Amount, (ii) any Program Termination Event or an event that but for notice or lapse of time or both would constitute a Program Termination Event shall have occurred and be continuing or (iii) the Facility Amount, after giving effect to such Borrowing, would exceed the Borrowing Limit.

 

31

(b) The Class A Loan shall be evidenced by one or more promissory notes substantially in the form of Exhibit H-1 (each, a “ Class A Note ” and collectively the “ Class A Notes ”) and the Class B Loan shall be evidenced by one or more promissory notes substantially in the form of Exhibit H-2 (each, a “ Class B Note ” and collectively the “ Class B Notes ” and, together with the Class A Notes, collectively, the “ Notes ”).

SECTION 2.02 The Borrowing .

(a) Reserved.

(b) (i) The Borrowing shall be made on at least two (2) Business Days’ irrevocable written notice from the Borrower to the applicable Lender (such written notice, the “ Notice of Borrowing ”), provided that such Notice of Borrowing is received by such Lender no later than 12:00 noon (New York City time) on the Business Day of receipt. Any Notice of Borrowing received after 12:00 noon (New York City time) shall be deemed received prior to 12:00 noon (New York City time) on the following Business Day. The Notice of Borrowing shall specify (A) the aggregate amount of the Borrowing, (B) the date of the Borrowing, (C) the allocation of the Loans as Class A Loans and Class B Loans and (D) in an electronic file acceptable to the Lenders, the Eligible Receivables to be Pledged in connection with the Borrowing (and upon the Borrowing, such Receivables shall be Pledged Receivables hereunder). On the date of the Borrowing, upon satisfaction of the applicable conditions set forth in Article III Morgan Stanley, as Class A Lender, and Morgan Stanley AFI, as Class B Lender, shall make available to the Borrower the portion of the Borrowing constituting the Class A Advance Amount and the Class B Advance Amount, respectively, on the Borrowing Date, no later than 2:00 P.M. (New York City time), in same day funds (net of amounts payable to or for the benefit of each related Lender), by payment into the account which the Borrower has designated in writing.

(ii) The Notice of Borrowing delivered to a Lender pursuant to this Section 2.02(b) shall be in an electronic file format acceptable to such Lender (A) accompanied by a copy of the Notice of Pledge (and the Receivables Schedule attached thereto), which was sent to the Custodian pursuant to the terms of the Custodial Agreement in connection with the pledge of Eligible Receivables to be made in connection therewith and (B) specifying for each Receivables pledged therein the information set forth on Exhibit B hereto.

(iii) The Class A Loan shall bear interest at the Class A Interest Rate and the Class B Loan shall bear interest at the Class B Interest Rate.

(iv) The Borrower may not reborrow any amounts that are repaid with respect to the Loans.

(v) Determinations by any Lender of the existence of any Eurodollar Disruption Event (any such determination to be communicated to the Borrower and the other Lenders by written notice from such Lender promptly after such Lender learns of such event), or of the effect of any Eurodollar Disruption Event on its making or maintaining Loans at the Adjusted Eurodollar Rate or the Base Rate, shall be conclusive absent manifest error.

 

32

SECTION 2.03 Determination of Interest Periods and Interest Rates.

(a) The initial Interest Period applicable to the Borrowing shall commence on, and include, the date of the Borrowing and shall terminate on, and include, the day immediately prior to the next occurring Remittance Date. Each Rollover Interest Period shall commence on, and include, the Remittance Date following the last day of the immediately preceding Interest Period and shall terminate on, and include, the day immediately prior to the next occurring Remittance Date.

(b) The interest rate per annum (the “ Interest Rate ”) applicable to any Loan for any Interest Period shall be equal to the applicable Class A Interest Rate (for the Class A Notes) or the applicable Class B Interest Rate (for the Class B Notes); provided , however , that if a Lender shall have notified the Borrower that a Eurodollar Disruption Event has occurred, the Interest Rate for all Loans shall be equal to the Base Rate until such Eurodollar Disruption Event has ceased, at which time the Interest Rate shall again be equal to the applicable Class A Interest Rate and applicable Class B Interest Rate.

SECTION 2.04 Remittance Procedures . Subject to Section 7.03(c)(i)(E) (if then applicable) and the proviso set forth in Section 2.04(a) , the Servicer, as agent for the Lenders, with the prior written consent of the Collateral Agent, shall instruct the Lenders’ Bank and, if the Servicer fails to do so, the Collateral Agent shall instruct the Lenders’ Bank, to apply funds on deposit in the Collection Account as described in this Section 2.04 .

(a) Remittance Date Transfers From Collection Account . The Servicer shall, with the prior written consent of the Collateral Agent, and if the Servicer fails to do so, the Collateral Agent shall, by 10:00 a.m. (St. Paul, Minnesota time) on each Remittance Date, direct the Lenders’ Bank to transfer collected funds held by the Lenders’ Bank in the Collection Account which were remitted to the Collection Account during the Collection Period with respect to such Remittance Date (“ Available Funds ”), in the following amounts and priority; provided , however , that if the Lenders’ Bank does not receive such instruction from (i) the Servicer (accompanied by the Collateral Agent’s written consent) or (ii) the Collateral Agent by 10:00 a.m. (St. Paul, Minnesota time) on such Remittance Date, subject to the provisions of the Discrepancy Procedure, the Lenders’ Bank shall apply such funds in accordance with the information calculated by the Servicer on the related Monthly Remittance Report:

(i) to the Borrower, in an amount equal to such funds which were paid by Obligors with respect to their obligation under the related Contracts to pay any taxes (it being agreed by the Borrower that such amount shall be promptly paid to the taxing authorities entitled thereto), together with (provided the current Scheduled Payment has been paid in full) late fees, interest on overdue amounts and other amounts not in respect of Scheduled Payments;

(ii) to the related Qualifying Swap Counterparty under each Qualifying Interest Rate Swap, in an amount equal to (and for the payment of) all amounts which are due and payable by the Borrower to such Qualifying Swap Counterparty on such Remittance Date, pursuant to the terms of the applicable Qualifying Interest Rate Swap or this Agreement;

 

33

(iii) on a pro rata basis, to (v) the Backup Servicer in an amount equal to the Standby Backup Servicer’s Fee (to the extent accrued and unpaid as of the last day of the immediately preceding Fee Period) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder and (w) the Custodian, the Custodian’s Fee, (x) the Collateral Agent, the Collateral Agent’s Fee, (y) the Lenders’ Bank, the Lenders’ Bank Fee and (z) each Lender, only on the Remittance Date occurring in November 2008, all of such Lender’s portion of the “Amendment Fee” (as defined in that certain Amendment Fee Letter, dated as of November 13, 2008, among the Borrower and each Lender);

(iv) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, to the Servicer in an amount equal to the Servicing Fee which is accrued and unpaid as of the last day of the immediately preceding Fee Period and, at any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, to the Backup Servicer in an amount equal to (1) the Active Backup Servicer’s Fees which are accrued and unpaid as of the last day of the immediately preceding Fee Period plus (2) any Transition Costs not previously reimbursed to the Backup Servicer plus (3) the Successor Servicer’s Indemnified Amounts;

(v) on a pro rata basis, (x) to the Collateral Agent, any indemnification amounts then due and payable to the Collateral Agent and (y) to the Custodian, any indemnification amounts then due and payable to the Custodian;

(vi) to the parties hereto on a pro rata basis, all reasonable (and reasonably documented) costs and expenses of such parties (including, without limitation reasonable attorney’s fees) incurred in connection with the Collateral Split;

(vii) (A) first, to each Class A Lender, in an amount equal to (and for the pro rata payment of) interest (including post-petition interest) on its Class A Loans which is accrued and unpaid as of the last day of the immediately preceding Fee Period; and then (B) second, to each Class B Lender, in an amount equal to (and for the pro rata payment of) interest (including post-petition interest) on its Class B Loans which is accrued and unpaid as of the last day of the immediately preceding Fee Period ; ; and then (C) third, to the Borrower or its designee, so long as no Program Termination Event, Termination Event or Event of Default has occurred and is continuing, and prior to the Facility Maturity Date (and, at any time after a Collateral Split, no Program Termination Event, Termination Event or Event of Default under either the MS Loan Agreement or the RBS Loan Agreement has occurred and is continuing), the Class B Equity Coupon;

(viii) to the Servicer in an amount equal to any Servicer Advances (and amounts to be reimbursed as Servicer Advances pursuant to Section 6.19 ) not previously reimbursed to the Servicer;

(ix) so long as no Termination Event or Event of Default has occurred and is continuing, and prior to the Facility Maturity Date, to the holders of the Class A Notes, pro rata , the Target Principal Amount;

 

34

(x) if the principal amount of all Class A Notes shall have been paid in full, pro rata , to the holders of the Class B Notes until the principal amount of all Class B Notes shall have been paid in full;

(xi) to the Owner, so long as no Termination Event or Event of Default has occurred and is continuing, and prior to the Facility Maturity Date (and, at any time after a Collateral Split, no Termination Event or Event of Default under either the MS Loan Agreement or the RBS Loan Agreement has occurred and is continuing), the Equity Payment;

(xii) (A) to the holders of the Class A Notes, pro rata , all remaining amounts to pay principal of the Class A Notes until the principal amount of all Class A Notes shall have been paid in full, and (B) thereafter, to the holders of the Class B Notes, pro rata , until the principal amount of all Class B Notes shall have been paid in full;

(xiii) (A) first, to the Class A Lenders, pro rata, in an amount equal to the aggregate amount of all other Obligations then due from the Borrower to the Class A Lenders or any Affected Party hereunder related to the Class A Lenders for the account of such parties as applicable; and then (B) second, to the Class B Lenders, pro rata, in an amount equal to the aggregate amount of all other Obligations then due from the Borrower to the Class B Lenders or any Affected Party hereunder related to the Class B Lenders for the account of such parties as applicable;

(xiv) (A) first, to Morgan Stanley, as Class A Lender, in an amount equal to (and for the pro rata payment of) the Fees, if any, which are due and payable to it on such Remittance Date pursuant to the terms of the Fee Letter; and then (B) second, to Morgan Stanley AFI, as Class B Lender, in an amount equal to (and for the pro rata payment of) the Fees, if any, which are due and payable to it on such Remittance Date pursuant to the terms of the Fee Letter;

(xv) at any time after a Collateral Split, to the Collateral Agent under the RBS Loan Agreement for application in accordance with the priority of payments set forth in Section 2.04(a) of the RBS Loan Agreement; and

(xvi) to the order of the Borrower, any remaining amounts.

(b) Subordination . In the event that any Lender receives a payment or other distribution hereunder other than in accordance with the priority of payments set forth in Section 2.04(a) , such Lender promptly shall pay over all such amounts to the Person(s) to whom such amounts are due in accordance with the priority of payments set forth in Section 2.04(a) .

(c) Deficiency Payments . Notwithstanding anything to the contrary contained in this Section 2.04 or in any other provision in this Agreement, if, on any day prior to the Collection Date, a Facility Deficiency shall have occurred, then the Borrower shall remit to the respective Lenders no later than the close of business of such Lender on such day (or if such day is not a Business Day, no later than the close of business of such Lender on the next succeeding Business Day), (i) so long as no Termination Event or Event of Default shall have occurred and be continuing, the amount required to eliminate any Facility Deficiency or (ii) if any Termination Event or Event of Default shall have occurred and is continuing, the entire outstanding Facility Amount, first to the Class A Notes until paid in full, and then to the Class B Notes until paid in full.

 

35

(d) Remittance Reports . On each Remittance Date, the Servicer shall deliver to the Lenders an electronic file, in a form acceptable to the Lenders, setting forth all of the information set forth on Schedule VII .

(e) Instructions to the Lenders’ Bank . All instructions and directions given to the Lenders’ Bank by the Servicer, the Borrower or the Lenders pursuant to this Section 2.04 shall be in writing (including instructions and directions transmitted to the Lenders’ Bank in electronic format), and such written instructions and directions shall be delivered with a written certification that such instructions and directions are in compliance with the provisions of this Section 2.04 . The Servicer and the Borrower shall immediately transmit to the Lenders by telecopy a copy of all instructions and directions given to the Lenders’ Bank by such party pursuant to this Section 2.04 . Each applicable Lender shall immediately transmit to the Servicer and the Borrower by telecopy a copy of all instructions and directions given to the Lenders’ Bank by the Lenders, pursuant to this Section 2.04 .

SECTION 2.05 Reserved .

SECTION 2.06 Reserved .

SECTION 2.07 Payments and Computations, Etc . (a) All amounts to be deposited or paid by the Borrower or the Servicer to any Lender hereunder shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (New York City time) on the day when due in lawful money of the United States in immediately available funds to the Collection Account or such other account as is designated by such Lender. The Borrower shall, to the extent permitted by law, pay to each applicable Lender interest on all amounts not paid or deposited when due hereunder (whether owing by the Borrower or the Servicer) at the Base Rate, plus 2%, payable on demand; provided , however , that such interest rate shall not at any time exceed the maximum rate permitted by applicable law. Such interest shall be for the account of such Lender in respect of each of the Class A Notes and the Class B Notes and shall be paid in accordance with Section 2.04(a) . Any Obligation hereunder shall not be reduced by any distribution of any portion of Collections with respect to any Pledged Receivable if at any time such distribution is rescinded or returned by a Lender to the Borrower or any other Person for any reason. All computations of interest and all computations of Breakage Fee and other fees hereunder (including, without limitation, the Fees, the Active Backup Servicer’s Fee, the Standby Backup Servicer’s Fee, the Custodian’s Fee and the Servicing Fee) shall be made on the basis of a year of 360 days (or 365 or 366 days for interest calculated at the Base Rate) for the actual number of days (including the first but excluding the last day) elapsed.

(b) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or any fee payable hereunder, as the case may be; provided , however , that with respect to the calculation of interest, such extension of time shall not be included in more than one Interest Period.

 

36

(c) If the Borrowing requested by the Borrower and approved by the Lenders pursuant to Section 2.02 is not for any reason whatsoever, except as a result of the gross negligence or willful misconduct of a Lender or an Affiliate thereof, made or effectuated, as the case may be, on the date specified therefor, the Borrower shall indemnify such Lender against any loss, cost or expense incurred by such Lender related thereto (other than any such loss, cost or expense solely due to the gross negligence or willful misconduct of such Lender or an Affiliate thereof), including, without limitation, any loss (including cost of funds and reasonable out-of-pocket expenses), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund Loans or maintain Loans made by such Lender during such Interest Period. The applicable Lender shall provide to the Borrower documentation setting forth the amounts of any loss, cost or expense referred to in the previous sentence, such documentation to be conclusive absent manifest error.

SECTION 2.08 Fees . (a) The Borrower shall pay Morgan Stanley, as Class A Lender, and Morgan Stanley AFI, as Class B Lender, certain fees, including the Exit Fee (the “ Fees ”), in the amounts and on the dates set forth in a fee letter (the “ Fee Letter ”), dated the date hereof, among the Borrower, Morgan Stanley and Morgan Stanley AFI.

(b) All of the Fees payable pursuant to this Section 2.08 (other than Fees payable on or prior to the Borrowing Date) shall be payable solely from amounts available for application pursuant to, and subject to the priority of, payment set forth in, Section 2.04 .

SECTION 2.09 Increased Costs; Capital Adequacy . (a) If, due to either (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation (including, without limitation, any law or regulation resulting in any interest payments paid to any Lender under this Agreement being subject to United States withholding tax) or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender or any Affiliate, successor or assign or participant thereof (each of which shall be an “ Affected Party ”) of agreeing to make or making, funding or maintaining any Loan (or any reduction of the amount of any payment (whether of principal, interest, fee, compensation or otherwise) to any Affected Party hereunder), as the case may be, the Borrower shall, from time to time, within ten days after written demand complying with Section 2.09(c) by such Lender, on behalf of such Affected Party, pay to such Lender, on behalf of such Affected Party, additional amounts sufficient to compensate such Affected Party for such increased costs or reduced payments.

(b) If either (i) the introduction of or any change in or in the interpretation of any law, guideline, rule or regulation, directive, request or accounting principle or (ii) the compliance by any Affected Party with any law, guideline, rule, regulation, directive, request or accounting principle from any central bank, other governmental authority, agency or accounting authority (whether or not having the force of law), including, without limitation, compliance by an Affected Party with any request or directive regarding capital adequacy, has or would have the effect of reducing the rate of return on the capital of any Affected Party, as a consequence of

 

37

its obligations hereunder or any related document or arising in connection herewith or therewith to a level below that which any such Affected Party could have achieved but for such introduction, change or compliance (taking into consideration the policies of such Affected Party with respect to capital adequacy), by an amount deemed by such Affected Party to be material, then, from time to time, after demand by such Affected Party (which demand shall be accompanied by a statement setting forth the basis of such demand), each Lender shall be paid, on behalf of such Affected Party (from Collections with respect to Pledged Receivables pursuant to, and subject to the priority of payment set forth in, Section 2.04 ), such additional amounts as will compensate such Affected Party for such reduction.

(c) In determining any amount provided for in this Section 2.09 , the Affected Party may use any reasonable averaging and attribution methods. Each Lender, on behalf of any Affected Party making a claim under this Section 2.09 , shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and the computations of such additional or increased costs, which certificate shall be conclusive absent demonstrable error.

(d) If, as a result of any event or circumstance similar to those described in Section 2.09(a) or 2.09(b) , any Affected Party (that is a Lender) is required to compensate a bank or other financial institution (including, without limitation, any Affiliate of Morgan Stanley) providing liquidity support, credit enhancement or other similar support to such Affected Party in connection with this Agreement, then, upon demand by such Affected Party, the Borrower shall pay, in accordance with Section 2.04 , to such Affected Party such additional amount or amounts as may be necessary to reimburse such Affected Party for any amounts paid by it, and shall notify each Qualified Swap Counterparty of such payment.

SECTION 2.10 Collateral Assignment of Agreements . The Borrower hereby collaterally assigns to the Collateral Agent (and its successors and assigns) for the benefit of the Secured Parties, all of the Borrower’s right and title to and interest in, to and under (but not any obligations under) the Purchase and Sale Agreement, each Qualifying Interest Rate Swap, the Contract related to each Pledged Receivable, all other agreements, documents and instruments evidencing, securing or guarantying any Pledged Receivable and all other agreements, documents and instruments related to any of the foregoing (the “ Assigned Documents ”). Without limiting any obligation of the Servicer hereunder, the Borrower confirms and agrees that the Collateral Agent (or any designee thereof, including, without limitation, the Servicer), following an Event of Default or a Program Termination Event, shall have the right to enforce the Borrower’s rights and remedies under each Assigned Document, but without any obligation on the part of the Collateral Agent or any of its Affiliates to perform any of the obligations of the Borrower under any such Assigned Document. In addition, each of the Servicer and the Borrower confirms and agrees that the Servicer and the Borrower will, upon receipt of notice or discovery thereof, promptly send to the Collateral Agent and each Lender a notice of (i) any breach of any representation, warranty, agreement or covenant under any such Assigned Document or (ii) any event or occurrence that, upon notice, or upon the passage of time or both, would constitute such a breach, in each case, immediately upon learning thereof. The parties hereto agree that such assignment to the Collateral Agent shall terminate upon the Collection Date.

 

38

SECTION 2.11 Grant of a Security Interest . To secure the prompt and complete payment when due of the Obligations and the performance by the Borrower of all of the covenants and obligations to be performed by it pursuant to this Agreement, the Borrower hereby (i) collaterally assigns and pledges to the Collateral Agent (and its successors and assigns), for the benefit of the Secured Parties, and (ii) grants a security interest to the Collateral Agent (and its successors and assigns), for the benefit of the Secured Parties, in all property of the Borrower, whether tangible or intangible and whether now owned or existing or hereafter arising or acquired and wheresoever located ( other than any amounts paid to or on behalf of the Borrower pursuant to Sections 2.04(a)(vii)(C) or 2.04(a)(xvi) (and, if applicable, subsection (a)(vi)(C) of Schedule 2.04(a)), if any (collectively, the “Excluded Amounts”)) ( collectively, the “ Pledged Assets ”), including, without limitation, all of the Borrower’s right, title and interest in, to and under:

(a) all Receivables purchased by, or otherwise transferred or pledged to (pursuant to the terms of the Purchase and Sale Agreement) the Borrower under the Purchase and Sale Agreement from time to time (such Receivables, the “ Pledged Receivables ”, all Other Conveyed Property related to the Pledged Receivables purchased by (or otherwise transferred or pledged pursuant to the terms of the Purchase and Sale Agreement) to the Borrower under the Purchase and Sale Agreement, all Related Security related to the Pledged Receivables, all interest of the Borrower in all Obligor Collateral related to the Pledged Receivables (together with all security interests in and Insurance Proceeds related to such Obligor Collateral and all proceeds from the disposition of such Obligor Collateral, whether by sale to the related Obligors or otherwise), all Collections and other monies due and to become due under the Contracts related to the Pledged Receivables received on or after the date such Pledged Receivables were purchased by (or purportedly purchased by) the Borrower under the Purchase and Sale Agreement;

(b) the Assigned Documents, including, in each case, without limitation, all monies due and to become due to the Borrower under or in connection therewith (other than the Excluded Amounts) ;

(c) the Collection Account, the Lockbox, the Lockbox Account, and all other bank and similar accounts relating to Collections with respect to Pledged Receivables (whether now existing or hereafter established) and all funds held therein, and all investments in and all income from the investment of funds in the Collection Account, the Lockbox Account, and such other accounts;

(d) the Records relating to any Pledged Receivables;

(e) all UCC financing statements filed by the Borrower against the Originator under or in connection with the Purchase and Sale Agreement;

(f) Reserved;

(g) each Qualifying Interest Rate Swap, any other interest rate protection agreement entered into with respect to the transactions contemplated under the RLSA and, in each case, all payments thereunder;

(h) all Liquidation Proceeds relating to any Pledged Receivables; and

 

39

(i) all proceeds of the foregoing property described in clauses (a) through (g) above, including interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for or on account of the sale or other disposition of any or all of the then existing Pledged Receivables.

The Borrower hereby authorizes the Collateral Agent to file financing statements describing as the collateral covered thereby as “all of the debtor’s personal property or assets” or words to that effect, notwithstanding that such wording may be broader in scope than the collateral described in this Agreement.

SECTION 2.12 Evidence of Debt . Each Lender shall maintain an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from the related Loan (and its related Class A Note and Class B Note) owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. The entries made in such account(s) of such Lender shall be conclusive and binding for all purposes, absent manifest error.

SECTION 2.13 Release of Pledged Receivables . (a) Subject to Section 2.15 hereof, upon the repayment of the Loans and all other Obligations payable to each Secured Party under this Agreement and any other Transaction Document, the security interest of the Collateral Agent in each Pledged Receivable and the related Other Conveyed Property and Related Security shall be released and the Borrower hereby authorized to file, on behalf of the Collateral Agent, UCC termination statements in respect thereof.

(b) The Borrower shall notify the Collateral Agent of any Release Price to be paid pursuant to this Section 2.13 on the Business Day on which such Release Price shall be paid specifying the Pledged Receivables to be released and the Release Price.

(c) Promptly after the Collection Date has occurred, the Collateral Agent shall re-assign and transfer to the Borrower, for no consideration but at the sole expense of the Borrower, their respective remaining interests in the Pledged Assets, free and clear of any Adverse Claim resulting solely from an act by the Collateral Agent but without any other representation or warranty, express or implied, by or recourse against the Collateral Agent.

SECTION 2.14 Treatment of Amounts Paid by the Borrower . Amounts paid by the Borrower pursuant to Section 2.13 on account of Pledged Receivables shall be treated as payments on Pledged Receivables hereunder.

SECTION 2.15 Prepayment; Certain Indemnification Rights; Termination . (a) The Borrower may prepay, in whole or in part, the outstanding principal amount of any Class A Notes and/or Class B Notes. All such prepayments with respect to the Class A Notes shall be made on a pro rata basis among the Class A Lenders. All such prepayments with respect to the Class B Notes shall be made on a pro rata basis among the Class B Lenders. Any amounts