EXECUTION COPY
EXHIBIT 10.13
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$65,000,000
LOAN PURCHASE AND SERVICING AGREEMENT
Dated as of December 23, 1998
Among
FNBNE FUNDING CORP.
as the Seller
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FIRST NATIONAL BANK OF NEW ENGLAND
as the Servicer
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the INVESTORS
named herein
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VARIABLE FUNDING CAPITAL CORPORATION
as a Purchaser
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FIRST UNION CAPITAL MARKETS, a
division of WHEAT FIRST SECURITIES, INC.
as the Deal Agent
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FIRST UNION NATIONAL BANK
as the Liquidity Agent
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and
MARINE MIDLAND BANK
as the Collateral Custodian and Backup Servicer
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TABLE OF CONTENTS
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Page
ARTICLE I DEFINITIONS.................................................................................. 1
Section 1.1 Certain Defined Terms..................................................................... 1
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Section 1.2 Other Terms............................................................................... 25
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Section 1.3 Computation of Time Periods............................................................... 25
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ARTICLE II THE PURCHASE FACILITY........................................................................ 25
Section 2.1 Purchases of Asset Interests.............................................................. 25
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Section 2.2 The Initial Purchase and Incremental Purchases............................................ 26
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Section 2.3 Reduction of the Purchase Limit........................................................... 27
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Section 2.4 Determination of Yield.................................................................... 27
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Section 2.5 Percentage Evidenced by Asset Interest.................................................... 27
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Section 2.6 Dividing or Combining Asset Interests..................................................... 27
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Section 2.7 Settlement Procedures..................................................................... 28
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Section 2.8 [Reserved.]............................................................................... 30
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Section 2.9 Substitution of Loans..................................................................... 30
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Section 2.10 Collections and Allocations............................................................... 31
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Section 2.11 Payments, Computations, Etc............................................................... 31
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Section 2.12 Optional Repurchase...................................................................... 32
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Section 2.13 Fees...................................................................................... 32
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Section 2.14 Increased Costs; Capital Adequacy; Illegality............................................. 33
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Section 2.15 Taxes..................................................................................... 34
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Section 2.16 Assignment of the Purchase Agreement...................................................... 36
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ARTICLE III CLOSING; CONDITIONS OF CLOSING AND PURCHASES................................................. 36
Section 3.1 Conditions to Closing and Initial Purchase................................................ 36
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Section 3.2 Conditions Precedent to All Purchases and Remittances of Collections...................... 37
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ARTICLE IV REPRESENTATIONS AND WARRANTIES............................................................... 38
Section 4.1 Representations and Warranties of the Seller.............................................. 38
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Section 4.2 Representations and Warranties of Seller Relating to the Agreement and the Loans.......... 42
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Section 4.3 Representations and Warranties of the Seller Relating to the Purchase Limit and Capital
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Limit..................................................................................... 44
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ARTICLE V GENERAL COVENANTS OF THE SELLER.............................................................. 44
Section 5.1 General Covenants......................................................................... 44
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Section 5.2 Covenants of Seller....................................................................... 44
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Section 5.3 Release of Lien........................................................................... 48
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Section 5.4 Hedging Agreement......................................................................... 49
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Section 5.5 Retransfer of Ineligible Loans............................................................ 50
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Section 5.6 Retransfer of Assets...................................................................... 51
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Section 5.7 Year 2000 Compatibility................................................................... 52
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ARTICLE VI ADMINISTRATION AND SERVICING OF LOANS........................................................ 52
Section 6.1 Appointment and Acceptance; Duties........................................................ 52
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Section 6.2 Duties and Responsibilities of the Servicer and the Collateral Custodian.................. 52
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Section 6.3 Authorization of the Servicer............................................................. 56
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Section 6.4 Collection of Payments.................................................................... 57
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Section 6.5 Servicer Advances......................................................................... 58
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Section 6.6 Realization Upon Defaulted Loans.......................................................... 59
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Section 6.7 Representations and Warranties of Backup Servicer and Collateral Custodian................ 59
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Section 6.8 Maintenance of Insurance Policies......................................................... 61
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Section 6.9 Representations and Warranties of Servicer................................................ 61
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Section 6.10 Covenants of Servicer..................................................................... 63
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Section 6.11 Covenants of Backup Servicer and Collateral Custodian..................................... 64
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Section 6.12 Servicing Compensation.................................................................... 65
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Section 6.13 Custodial Compensation.................................................................... 65
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Section 6.14 Payment of Certain Expenses by Servicer................................................... 65
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Section 6.15 Reports................................................................................... 65
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Section 6.16 Annual Statement as to Compliance......................................................... 66
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Section 6.17 Annual Independent Public Accountant's Servicing Reports.................................. 66
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Section 6.18 Adjustments............................................................................... 67
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Section 6.19 Merger or Consolidation of the Servicer................................................... 67
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Section 6.20 Limitation on Liability of the Servicer and Others........................................ 68
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Section 6.21 Indemnification of the Seller, the Deal Agent, the Liquidity Agent and the Secured
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Parties................................................................................... 68
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Section 6.22 The Servicer and Backup Servicer Not to Resign............................................ 69
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Section 6.23 Access to Certain Documentation and Information Regarding the Loans....................... 69
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Section 6.24 Backup Servicer........................................................................... 70
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Section 6.25 Identification of Records................................................................. 72
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Section 6.26 Servicer Termination Events............................................................... 72
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Section 6.27 Appointment of Successor Servicer......................................................... 73
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Section 6.28 Notification.............................................................................. 74
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Section 6.29 Protection of Right, Title and Interest in Assets......................................... 74
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Section 6.30 Release of Loan Files..................................................................... 75
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ARTICLE VII EARLY AMORTIZATION EVENTS.................................................................... 75
Section 7.1 Early Amortization Events................................................................. 75
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ARTICLE VIII INDEMNIFICATION.............................................................................. 77
Section 8.1 Indemnities by the Seller................................................................. 77
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ARTICLE IX THE DEAL AGENT AND THE LIQUIDITY AGENT....................................................... 80
Section 9.1 Authorization and Action.................................................................. 80
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Section 9.2 Delegation of Duties...................................................................... 80
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Section 9.3 Exculpatory Provisions.................................................................... 81
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Section 9.4 Reliance.................................................................................. 82
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Section 9.5 Non-Reliance on Deal Agent, Liquidity Agent and Others.................................... 82
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Section 9.6 Reimbursement and Indemnification......................................................... 83
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Section 9.7 Deal Agent and Liquidity Agent in their Individual Capacities............................ 83
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Section 9.8 Successor Deal Agent or Liquidity Agent.................................................. 83
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ARTICLE X ASSIGNMENTS; PARTICIPATIONS.................................................................. 84
Section 10.1 Assignments and Participations........................................................... 84
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ARTICLE XI MISCELLANEOUS................................................................................ 87
Section 11.1 Amendments and Waivers................................................................... 87
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Section 11.2 Notices, Etc............................................................................. 88
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Section 11.3 [Reserved.].............................................................................. 88
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Section 11.4 No Waiver, Rights and Remedies........................................................... 88
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Section 11.5 Binding Effect........................................................................... 88
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Section 11.6 Term of this Agreement................................................................... 89
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Section 11.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE..................... 89
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Section 11.8 WAIVER OF JURY TRIAL..................................................................... 89
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Section 11.9 Costs, Expenses and Taxes................................................................ 89
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Section 11.10 No Proceedings........................................................................... 90
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Section 11.11 Recourse Against Certain Parties......................................................... 90
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Section 11.12 Protection of Ownership Interest; Appointment of Deal Agent as Attorney-in-Fact.......... 91
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Section 11.13 Confidentiality.......................................................................... 92
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Section 11.14 Execution in Counterparts; Severability; Integration..................................... 93
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EXHIBITS
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EXHIBIT A Form of Notice of Sale
EXHIBIT B Form of Lock-Box Notice
EXHIBIT C "Limited Purpose" Provisions
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Monthly Report
EXHIBIT F Form of Servicer's Certificate
EXHIBIT G Credit and Collection Policies
EXHIBIT H Form of Purchase Certificate
EXHIBIT I Form of Hedging Agreement (including Schedule and Confirmation)
EXHIBIT J Form of Officer's Certificate as to Solvency
EXHIBIT K Form of Officer's Closing Certificate
EXHIBIT L Form of Power of Attorney
SCHEDULES
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SCHEDULE I Conditions Precedent
SCHEDULE II Concentration and Mix Requirements
SCHEDULE III Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV List of Loans
SCHEDULE V Locations of Loan Documents
SCHEDULE VI Lock-Box Banks and Lock-Box Accounts
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THIS LOAN PURCHASE AND SERVICING AGREEMENT (the "Agreement") is made as of
December 23, 1998, among:
(1) FNBNE FUNDING CORP., a Delaware corporation, as borrower (the
"Seller");
(2) FIRST NATIONAL BANK OF NEW ENGLAND, a national banking association,
("FNBNE"), as servicer (the "Servicer");
(3) the financial institutions listed on the signature pages of this
Agreement under the heading "Investors" and their respective successors and
assigns (the "Investors");
(4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation ("VFCC");
(5) FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST SECURITIES,
INC. ("FCM"), as deal agent (the "Deal Agent");
(6) FIRST UNION NATIONAL BANK ("First Union"), as liquidity agent (the
"Liquidity Agent"); and
(7) MARINE MIDLAND BANK ("Marine Midland"), as collateral custodian (the
"Collateral Custodian") and as backup servicer (the "Backup Servicer").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS.
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(a) Certain capitalized terms used throughout this Agreement are defined
above or in this Section 1.1.
(b) As used in this Agreement and its exhibits, 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).
Addition Date: With respect to any Additional Loans, the date on which such
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Additional Loans become Pool Assets.
Additional Loans: All Loans that become Pool Assets after the Closing Date (or,
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if no Purchase is made on the Closing Date, then on the date of the initial
Purchase hereunder).
Adjusted Eurodollar Rate: On any day, an interest rate per annum equal to the
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quotient, expressed as a percentage and rounded upwards (if necessary), to the
nearest 1/100 of 1%, obtained by dividing (i) the LIBOR Rate, as applicable, on
such day by (ii) the decimal equivalent of 100% minus the Eurodollar Reserve
Percentage on such day.
Administration Agreement: That certain Amended and Restated Administration
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Agreement executed between VFCC and FCM, as the same may be amended,
supplemented, or otherwise modified from time to time.
Adverse Claim: A lien, security interest, pledge, charge, encumbrance or other
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right or claim of any Person.
Affected Party: As defined in Section 2.14(a).
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Affiliate: With respect to a Person means any other Person controlling,
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controlled by or under common control with such Person. For 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" or "controlled" have meanings correlative
to the foregoing.
Aggregate Outstanding Loan Balance: As of any date of determination, the sum of
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the Outstanding Loan Balances of all Eligible Loans included as part of the
Asset Pool on such date.
Aggregate Unpaids: At any time, an amount, equal to the sum of all Yield
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(accrued and to accrue), Capital and all other amounts owed hereunder, under any
Hedging Agreement (including, without limitation, payments in respect of the
termination of any such Hedging Agreement) or under any fee letter delivered by
the Originator to the Deal Agent and the Purchasers and outstanding at such time
(whether due or accrued).
Agent's Account: A special account (account number 01 41 96 47) in the name of
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the Deal Agent or, so long as VFCC is the sole Purchaser hereunder, in the name
of VFCC, at Bankers Trust Company.
Agreement: This Loan Purchase and Servicing Agreement, dated as of December 23,
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1998, as amended, modified, supplemented or restated from time to time.
AIG: National Union Fire Insurance Company of Pittsburgh, PA, which is a member
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company of American International Group, Inc.
AIG Loan: A Loan to an Obligor that is a short term import loan, with a term of
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360 days or less and with interest and principal payable at maturity, a portion
of the Outstanding Loan Balance of which is insured by the AIG Policy.
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AIG Policy: That policy no. 649-8512, dated July 28, 1998, of AIG in favor of
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FNBNE, which insures the AIG Loans, as such policy or successor policy may be
replaced or renewed from time to time, so long as the Deal Agent, as agent for
the Secured Parties, is (i) named as a loss payee, or as an additional insured,
on such policy and on such renewal or replacement policy or (ii) otherwise
satisfied that the AIG Policy inures to its benefit.
Amortization Period: The period beginning on the Termination Date and ending on
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the Collection Date.
Asset: All right, title and interest of the transferring party to and under any
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and all of the following:
(i) the Transferred Loans, and all monies due or to become due
in payment of such Loans on and after the related Transfer Date;
(ii) any Related Property securing the Transferred Loans
including all proceeds from any sale or other disposition of such Related
Property;
(iii) the Loan Documents;
(iv) the Lock-Box Account, all funds held in such account, and
all certificates and instruments, if any, from time to time representing or
evidencing the Lock-Box Account or such funds;
(v) the Cash Collateral Account, all funds held in such
account, and all certificates and instruments, if any, from time to time
representing or evidencing the Cash Collateral Account or such funds;
(vi) the Collection Account, all funds held in such account,
and all certificates and instruments, if any, from time to time
representing or evidencing the Collection Account or such funds;
(vii) all Collections and all other payments made or to be made
in the future with respect to such Loans or by the Obligor thereunder and
under any guarantee or similar credit enhancement with respect to such
Loans, including but not limited to SBA guarantees and the AIG Policy;
(viii) all payments received pursuant to any Hedging Agreement or
Hedge Transaction; and
(ix) all income and Proceeds of the foregoing.
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Asset Interest: At any time, an undivided variable percentage ownership
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interest in all Assets. Each Asset Interest shall be calculated in accordance
with Section 2.5. The undivided percentage interest of an Asset Interest shall
equal
C+R
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AOLB
where:
C = equals the Capital in respect of such Asset Interest.
R = equals the aggregate Reserves in respect of such Asset
Interest.
AOLB = equals the Aggregate Outstanding Loan Balance.
Asset Pool: At any time, all then outstanding Assets.
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Assignment and Acceptance: An assignment and acceptance entered into by an
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Investor and an Eligible Assignee, and accepted by the Deal Agent, in
substantially the form of Exhibit D hereto.
Available Collections: As defined in Section 2.7 hereof.
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Average Default Ratio: For any Determination Date, the arithmetic average of
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the Default Ratios, expressed as percentages, for the three (3) Collection
Periods ended on such date, except that (i) in the case of the first
Determination Date following the Closing Date, the "Average Default Ratio" shall
be the Default Ratio for the Collection Period ended on such date, and (ii) in
the case of the second Determination Date following the Closing Date, the
"Average Default Ratio" shall be the arithmetic average of the Default Ratios
for the two (2) Collection Periods ended on such date.
Average Net Loss Ratio: For any Determination Date, the arithmetic average of
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the Net Loss Ratios, expressed as percentages, for the three (3) Collection
Periods ended on such date, except that (i) in the case of the first
Determination Date following the Closing Date, the "Average Net Loss Ratio"
shall be the Net Loss Ratio for the Collection Period ended on such date, and
(ii) in the case of the second Determination Date following the Closing Date,
the "Average Net Loss Ratio" shall be the arithmetic average of the Net Loss
Ratios for the two (2) Collection Periods ended on such date.
Backup Servicer: Marine Midland Bank, and its permitted successors and assigns.
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Backup Servicer Fee: As set forth in the Backup Servicer and Collateral
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Custodian Fee Letter.
Backup Servicer and Collateral Custodian Fee Letter: The letter, dated as of
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the Closing Date, among FNBNE, the Seller, the Backup Servicer, the Collateral
Custodian, the Deal Agent and
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First Union, setting forth among other things the Backup Servicer Fee and the
Collateral Custodian Fee.
Bankruptcy Code: The Federal Bankruptcy Code, as amended from time to time
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(Title 11 of the United States Code).
Base Rate: On any date, a fluctuating rate of interest per annum equal to the
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higher of (a) the Prime Rate or (b) the Federal Funds Rate plus one-half of one
percent (0.5%).
Benefit Plan: Any employee benefit plan as defined in Section 3(3) of ERISA in
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respect of which the Seller or any ERISA Affiliate of the Seller is, or at any
time during the immediately preceding six years was, an "employer" as defined in
Section 3(5) of ERISA.
Breakage Costs: Any amount or amounts as shall compensate a Purchaser for any
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loss, cost or expense incurred by such Purchaser (as determined in such
Purchaser's sole discretion) as a result of a prepayment by the Seller of
Capital or Yield pursuant to the terms hereof.
Business Day: Any day of the year other than a Saturday or a Sunday on which
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(a) banks are not required or authorized to be closed in New York City,
Charlotte, North Carolina, and Hartford, Connecticut, and (b) if the term
"Business Day" is used in connection with the Adjusted Eurodollar Rate, means
the foregoing only if such day is also a day of year on which dealings in United
States dollar deposits are carried on in the London interbank market.
Capital: The sum of the amounts paid to the Seller for the initial Purchase and
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in connection with each Incremental Purchase pursuant to Section 2.2, reduced
from time to time by Collections and other payments received and distributed to
Purchasers on account of such Capital pursuant to Section 2.7; provided,
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however, that such Capital shall not be reduced by any distribution of any
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portion of Principal Collections if at any time such distribution is rescinded
or must be returned for any reason.
Capital Limit: At any time the sum of (i) the Aggregate Outstanding Loan
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Balance for all Eligible Loans that are Commercial Loans multiplied by the
Purchase Rate with respect to Commercial Loans, (ii) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are SBA Loans multiplied by the
Purchase Rate with respect to SBA Loans, and (iii) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are AIG Loans multiplied by the
Purchase Rate with respect to AIG Loans.
Cash Collateral Account: As defined in Section 6.4(g).
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Casualty Loss: With respect to any item of Related Property, the loss, theft,
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damage beyond repair or governmental condemnation or seizure of such item of
Related Property.
Change in Control: The date on which (i) any Person or "group" acquires any
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"beneficial ownership" (as such terms are defined under Rule 13d-3 of, and
Regulation 13D under, the
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Securities Exchange Act of 1934, as amended), either directly or indirectly, of
membership interests or other equity interests or any interest convertible into
any such interest in the Originator having more than fifty percent (50%) of the
voting power for the election of directors of the Originator, if any, under
ordinary circumstances, or (ii) (except in connection with any Securitization or
in connection with the sale of Assets under the Purchase Agreement) the
Originator sells, transfers, conveys, assigns or otherwise disposes of all or
substantially all of the assets of the Originator; provided, however, it shall
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not be a Change in Control for any one or more of the following Persons,
individually or collectively, to gain more than fifty percent (50%) of such
voting power: ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and any family members, Affiliates, and heirs of
any of the foregoing (collectively, the "Permitted Owners"), and any trusts,
partnerships or other entities as to which the sole beneficiaries are any of the
Permitted Owners.
Charged-Off Loan: Any Loan (i) for which an Insolvency Event has occurred with
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respect to the related Obligor, (ii) for which the related Obligor has suffered
any other change which materially and adversely affects its viability as a going
concern, or (iii) which is or otherwise should be written off as uncollectible
by the Servicer in accordance with the Credit and Collection Policies.
Closing Date: December 23, 1998.
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Code: The Internal Revenue Code of 1986, as amended.
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Collateral Custodian: Marine Midland Bank, and its permitted successors and
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assigns.
Collateral Custodian Fee: As set forth in the Backup Servicer and Collateral
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Custodian Fee Letter.
Collection Account: As defined in Section 2.10.
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Collection Date: The date following the Termination Date on which the aggregate
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outstanding Capital has been reduced to zero, the Purchasers have received all
Yield and other amounts due to the Purchasers in connection with this Agreement
each Hedge Transaction has been terminated and each Hedge Counterparty has
received all amounts owing to it under its respective Hedging Agreement and the
Deal Agent has received all amounts due to it in connection with this Agreement.
Collection Period: Each calendar month, except in the case of the first
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Collection Period, the period beginning on the Closing Date to and including the
last day of the calendar month in which the Closing Date occurs.
Collections: With respect to any Transferred Loan, all cash collections or
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other cash proceeds of such Loan received by the Servicer, Originator or Seller
from or on behalf of any Obligor in payment of any amounts owed in respect of
such Loan, including, without limitation, any Interest Collections, any
Principal Collections, Deemed Collections, Insurance Proceeds, interest
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earnings in the Collection Account, all recoveries on Charged-Off Loans, and all
payments received pursuant to any Hedging Agreement or Hedge Transaction.
Commercial Line of Credit: A revolving, line of credit Loan to an Obligor that
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is neither an SBA Loan nor an AIG Loan.
Commercial Loans: All of the Commercial Lines of Credit and the Commercial Term
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Loans.
Commercial Term Loan: A term loan to an Obligor that is neither an SBA Loan nor
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an AIG Loan.
Commercial Paper Notes: On any day, any short-term promissory notes issued by
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VFCC with respect to financing its purchase of any Asset Interest hereunder.
Commitment: For each Investor, the commitment of such Investor to purchase
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Asset Interests from the Seller in an amount not to exceed the amount set forth
opposite such Investor's name on the signature pages of this Agreement, as such
amount may be modified in accordance with the terms hereof.
Commitment Fee: As defined in Section 2.13(a) hereof.
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Commitment Termination Date: December 23, 2001 or such later date to which the
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Commitment Termination Date may be extended (if extended) in the sole discretion
of VFCC and each Investor in accordance with the terms of Section 2.1(b).
Conversion: As defined in Section 2.1(c).
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Cost of Funds Adjustment: The difference by which the CP Rate exceeds the
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Adjusted Eurodollar Rate.
CP Rate: For any Fixed Period, the per annum rate equivalent to the weighted
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average of the per annum rates paid or payable by VFCC from time to time as
interest on or otherwise (by means of interest rate ▇▇▇▇▇▇ or otherwise) in
respect of the promissory notes issued by VFCC that are allocated, in whole or
in part, by the Deal Agent (on behalf of VFCC) to fund or maintain the Asset
Interest during such period, as determined by the Deal Agent (on behalf of VFCC)
and reported to the Seller and the Servicer, which rates shall reflect and give
effect to (i) the commissions of placement agents and dealers in respect of such
promissory notes, to the extent such commissions are allocated, in whole or in
part, to such promissory notes by the Deal Agent (on behalf of VFCC), (ii) any
incremental carrying costs associated with the issuance of such promissory notes
maturing on dates other than those dates on which funds are received by VFCC,
and (iii) other borrowings by VFCC, including, without limitation, borrowings to
fund small or odd dollar amounts that are not easily accommodated in the
commercial paper market; provided, however, that if any component of such rate
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is a discount rate, in calculating the "CP Rate," the
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Deal Agent shall for such component use the rate resulting from converting such
discount rate to an interest bearing equivalent rate per annum.
Credit and Collection Policies: Those credit, collection, customer relation and
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service policies of the Originator and the Servicer as of the date hereof
relating to the Loans and related Loan Documents, set forth in Exhibit G, as the
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same may be amended or modified from time to time in accordance with Section
6.10(e).
Deal Agent: FCM, as Deal Agent hereunder, together with its successors and
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assigns.
Deemed Collections: On any day, an amount equal to the unpaid balance
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(including any principal and accrued interest thereon) of any Loan included in
the Asset Pool if on such day (a) the Deal Agent, as agent for the Secured
Parties, does not have a valid perfected security interest in such Loan and any
Related Property, or (b) a Warranty Event has occurred with respect to such
Loan.
Defaulted Loan: As of any day of determination, a Loan (i) as to which the
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Obligor thereof has failed to make any payment, or part thereof, required to be
made thereunder for 60 days following the due date thereof, or (ii) that is a
Charged-Off Loan.
Default Ratio: For any Collection Period, the percentage equivalent of a
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fraction, the numerator is which is the product of (a) the Outstanding Loan
Balance of Defaulted Loans at the end of such Collection Period, and (b) 12, and
the denominator of which is the Outstanding Loan Balance of Additional Loans
added to the Asset Pool during such Collection Period.
Delinquent: On any day with respect to any Loan and any specified time period
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any payment, or portion thereof, due with respect thereto, has not been made by
the Obligor of such loan for the specified time period from the due date of such
payment.
Derivatives: Any exchange-traded or over-the-counter (i) forward, future,
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option, swap, cap, collar, floor, foreign exchange contract, any combination
thereof, whether for physical delivery or cash settlement, relating to any
interest rate, interest rate index, currency, currency exchange rate, currency
exchange rate index, debt instrument, debt price, debt index, depository
instrument, depository price, depository index, equity instrument, equity price,
equity index, commodity, commodity price or commodity index, (ii) any similar
transaction, contract, instrument, undertaking or security, or (iii) any
transaction, contract, instrument, undertaking or security containing any of the
foregoing.
Determination Date: With respect to any Payment Date, the last day of the
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immediately preceding Collection Period.
Early Amortization Event: As defined in Section 7.1.
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Eligible Assignee: A Person whose short-term rating is at least A-1 from S&P
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and P-1 from ▇▇▇▇▇'▇, or whose obligations under this Agreement are guaranteed
by a Person whose short-term rating is at least A-1 from S&P and P-1 from
▇▇▇▇▇'▇ and is satisfactory to VFCC and the Deal Agent.
Eligible Loan: On any date of determination, each Loan (a) which is a
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Transferred Loan and identified on the list of Loans delivered by the Seller to
the Collateral Custodian as part of a Notice of Sale, (b) which is a Commercial
Loan, an AIG Loan or an SBA Loan, and (c) which satisfies each of the following
requirements (unless otherwise agreed to in writing by the Deal Agent in its
sole discretion):
(i) the Loan is evidenced by a promissory note which has been
duly authorized and which, together with the related Loan Documents, is in
full force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Loan to pay the stated amount of the Loan
and interest thereon, and the related Loan Documents are enforceable
against such Obligor in accordance with their respective terms;
(ii) the Loan was originated and maintained in accordance with
the terms of the Credit and Collection Policies and arose in the ordinary
course of the Originator's business from the loaning of money to the
Obligor thereof;
(iii) the Loan is not a Defaulted Loan or a Charged-Off Loan or a
Loan any payment or portion thereof is more than 30 days Delinquent;
(iv) the Obligor of such Loan is an Eligible Obligor and has
executed all appropriate documentation including documentation relating to
its collateral required by the Originator;
(v) the promissory note which evidences the Loan is an
"instrument" and is not a "general intangible," an "account," or "chattel
paper" as such terms are defined and used in the UCC of all jurisdictions
which govern the perfection of the security interest granted therein;
(vi) all material consents, licenses, approvals or
authorizations of, or registrations or declarations with, any Governmental
Authority required to be obtained, effected or given in connection with the
making of such Loan have been duly obtained, effected or given and are in
full force and effect and the Loan was otherwise originated in accordance
with all federal and state governmental consumer and other applicable laws
and regulations;
(vii) the Loan is denominated and payable only in United States
Dollars in the United States and the collateral securing such Loan is
located only in the United States
9
unless otherwise agreed in writing by the Deal Agent upon its credit approval,
including receipt and review of due diligence conducted by FNBNE;
(viii) [Reserved]
(ix) the Loan, together with the Loan Documents related
thereto, does not contravene in any material respect any laws, rules or
regulations applicable thereto (including, without limitation, laws, rules
and regulations relating to usury, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the Loan
Documents related thereto is in material violation of any such law, rule or
regulation in any respect;
(x) the Loan, together with the related Loan Documents, is
fully assignable;
(xi) the Loan was documented and closed in accordance with the
Originator's policies and procedures, including the relevant opinions and
assignments, and only one current original promissory note with respect to
such Loan, which promissory note has been delivered to the Collateral
Custodian, duly endorsed for transfer under this Agreement;
(xii) except for Permitted Liens, the Loan and all Related
Property are free of any Liens; and all filings and other actions required
to perfect the security interest of the Deal Agent as agent for the Secured
Parties in the Assets related thereto have been made or taken;
(xiii) the Required Loan Documents relating to such Loan are in
the possession of the Collateral Custodian;
(xiv) [Reserved]
(xv) no right of recission, set off, counterclaim, defense or
other material dispute has been asserted with respect to such Loan;
(xvi) the Loan was made under the existing Loan Documents,
which Loan Documents have not been modified in any respect or such Loan
extended as a result of any adverse credit reason (including, without
limitation on, rescheduling of installment payments);
(xvii) any Related Property with respect to such Loan is insured
in accordance with the Credit and Collection Policies;
(xviii) the Loan Documents with respect to such Loan are complete
in accordance with the Credit and Collection Policies;
10
(xix) the Obligor with respect to such Loan is an Eligible
Obligor ;
(xx) the Loan has an Eligible Risk Rating of 3.0 or better and
was otherwise approved according to the Originator's Credit and Collection
Policies;
(xxi) if a Loan is a Commercial Line of Credit, (i) interest is
due and payable monthly, (ii) the initial term of the Loan does not exceed
12 months, with all outstanding principal and interest due at the end of 12
months, and (iii) its respective Loan Documents provide that if it is not
renewed it shall be amortized over a period not to exceed 36 additional
months;
(xxii) if a Loan is an SBA Loan, (i) the initial term of the
Loan does not exceed 12 months and the Schedule of Payments provides for
monthly interest payments with all outstanding principal and interest due
at the end of 12 months, (ii) it was originated and approved under SBA
policies and guidelines, and (iii) it is supported by a 90% SBA guaranty;
(xxiii) if a Loan is a Commercial Term Loan, (i) the first
Scheduled Payment on such Loan is due within 45 days after its Purchase
Date, (ii) its term does not exceed 25 years, and (iii) its Schedule of
Payments has equal payments of principal and interest except for the final
payment which may be less than the other payments; and
(xxiv) if a Loan is an AIG Loan, (i) its term to maturity does
not exceed 360 days and such term may not be extended, (ii) the Obligor
thereunder qualifies as a covered "Buyer" under the AIG Policy and is not
on the "Excluded Buyer List" provided for under the AIG Policy, and a
portion of such Loan is supported by AIG insurance pursuant to the AIG
Policy, (iii) it qualifies as an "Insured Transaction" under the AIG
Policy; and (iv) AIG's corporate unsecured debt rating is at least AA by
S&P and Aa2 by ▇▇▇▇▇'▇.
Eligible Obligor: Any Obligor which satisfies each of the following
----------------
requirements at all times:
(i) the Obligor is not in the gaming, nuclear waste, bio-
tech, oil and gas or real estate industries;
(ii) the Obligor is a legal operating entity, duly organized
and validly existing under the laws of its jurisdiction of organization;
(iii) the Obligor is not the subject of any Insolvency Event;
(iv) the Obligor is not an Affiliate of any of the parties
hereto;
(v) the Obligor is not the Obligor of any Loan, any payment
or portion thereof is more than 30 days Delinquent or any Charged-Off
Loans;
11
(vi) the Obligor is not a Governmental Authority;
(vii) the Obligor is in compliance with all material terms and
conditions of its Loan Documents;
(viii) the Obligor's principal office and any Related Property
are located in the United States or any other country or territory of the
United States approved by the Deal Agent upon receipt and review of
satisfactory legal due diligence, Rating Agency discussions and credit
approval; and
(ix) the Obligor has an Eligible Risk Rating of 3.0 or better.
Eligible Risk Rating: As of any date of determination, with respect to a
--------------------
designated Loan or Obligor, a risk rating of "1.0," "2.0," or "3.0" as
determined by, or should have been determined by, the Servicer in accordance
with the Credit and Collection Policies or as designated by the Originator.
ERISA: The U.S. Employee Retirement Income Security Act of 1974, as amended
-----
from time to time, and the regulations promulgated and rulings issued
thereunder.
ERISA Affiliate: (a) Any corporation which is a member of the same controlled
---------------
group of corporations (within the meaning of Section 414(b) of the Code) as the
Seller; (b) a trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Code) with the Seller; or
(c) a member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as the Seller, any corporation described in clause (a) above
or any trade or business described in clause (b) above.
Eurodollar Disruption Event: The occurrence of any of the following: (a) a
---------------------------
determination by a Purchaser 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) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase, (b) the failure of one or more of
the Reference Banks to furnish timely information for purposes of determining
the Adjusted Eurodollar Rate, (c) a determination by a Purchaser that the rate
at which deposits of United States dollars are being offered to such Purchaser
in the London interbank market does not accurately reflect the cost to such
Purchaser of making, funding or maintaining any Purchase or (d) the inability of
a Purchaser to obtain United States dollars in the London interbank market to
make, fund or maintain any Purchase.
Eurodollar Reserve Percentage: For any day, that percentage (expressed as a
-----------------------------
decimal) which is in effect from time to time under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor), as such regulation
may be amended from time to time or any successor regulation, as the reserve
requirement (including, without limitation, any basic, supplemental, emergency,
special, or marginal reserves) applicable with respect to Eurocurrency
12
Liabilities as that term is defined in Regulation D (or against any other
category of liabilities that includes deposits by reference to which the LIBOR
Rate is determined), whether or not the Purchasers have any Eurocurrency
Liabilities subject to such reserve requirement at that time. All Capital whose
Yield is computed by reference to the Adjusted Eurodollar Rate shall be deemed
to constitute Eurocurrency Liabilities and as such shall be deemed subject to
reserve requirements without benefits of credits for proration, exceptions or
offsets that may be available from time to time to a Purchaser. The Adjusted
Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
Facility: This Loan Purchase and Servicing Agreement, dated as of December 23,
--------
1998, as amended, modified, supplemented or restated from time to time.
Federal Funds Rate: For any period, a fluctuating interest rate per annum equal
-------------------
for each day during such period to the weighted average of the federal funds
rates as quoted by First Union and confirmed in Federal Reserve Board
Statistical Release H.15(519) or any successor or substitute publication
selected by First Union (or, if such day is not a Business Day, for the
preceding Business Day), or, if, for any reason, such rate is not available on
any day, the rate determined, in the sole opinion of First Union, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 A.M. Charlotte, North Carolina time.
Fee Letter: The letter, dated as of the Closing Date, among the Seller, the
-----------
Servicer, the Deal Agent and First Union setting forth, among other things, the
Commitment Fee rate.
First Union: First Union National Bank, in its individual capacity, and its
------------
successors or assigns.
Fixed Period: For any Payment Date the period beginning on, and including the
------------
sixteenth day of the immediately preceding calendar month (or, with respect to
the first Fixed Period, the Closing Date) and ending on, and including the
fifteenth day of the calendar month in which such Payment Date occurs.
FNBNE Existing Account: Account No. 2005 maintained at FNBNE for the purpose of
----------------------
receiving Collections.
GAAP: Generally accepted accounting principles as in effect from time to time
----
in the United States.
Governmental Authority: Any nation or government, any state or other political
----------------------
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
court or arbitrator having jurisdiction over such Person.
H.15: Federal Reserve Statistical Release H.15.
----
13
Hedge Breakage Costs: For any Hedge Transaction, any amount payable by the
--------------------
Seller for the early termination of that Hedge Transaction or any portion
thereof.
Hedge Counterparty: Any entity which (a) on the date of entering into any Hedge
------------------
Transaction (i) is an interest rate swap dealer that is either a Purchaser or an
Affiliate of a Purchaser, or has been approved in writing by the Deal Agent
(which approval shall not be unreasonably withheld), and (ii) has a long-term
unsecured debt rating of not less than "A" by S&P and not less than "A-2" by
▇▇▇▇▇'▇ ("Long-term Rating Requirement") and a short-term unsecured debt rating
of not less than "A-1" by S&P and not less than "P-1" by ▇▇▇▇▇'▇ ("Short-term
Rating Requirement"), and (b) in a Hedging Agreement (i) consents to the
assignment of the Seller's rights under the Hedging Agreement to the Deal Agent
pursuant to Section 5.4(a) and (ii) agrees that in the event that ▇▇▇▇▇'▇ or S&P
reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, it shall transfer its rights and obligations under each Hedging
Transaction to another entity that meets the requirements of clause (a) and (b)
hereof and has entered onto a Hedging Agreement with the Seller on or prior to
the date of such transfer.
Hedge Notional Amount: For any Purchase, the aggregate notional amount in effect
---------------------
on any day under all Hedge Transactions entered into pursuant to Section 5.4(a)
for that Purchase.
Hedge Transaction: Each interest rate swap transaction between the Seller and a
-----------------
Hedge Counterparty which is entered into pursuant to Section 5.4(a) and is
governed by a Hedging Agreement.
Hedging Agreement: Each agreement between the Seller and a Hedge Counterparty
-----------------
which governs one or more Hedge Transactions entered into pursuant to Section
5.4, which agreement shall consist of a "Master Agreement" in a form published
by the International Swaps and Derivatives Association, Inc., together with a
"Schedule" thereto substantially in the form of Exhibit I hereto or such other
----------
form as the Deal Agent shall approve in writing, and each "Confirmation"
thereunder confirming the specific terms of each such Hedge Transaction.
Increased Costs: Any amounts required to be paid by the Seller to an Affected
---------------
Party pursuant to Section 2.14.
Incremental Purchase: Any Purchase that increases the aggregate outstanding
--------------------
Capital hereunder.
Indebtedness: With respect to any Person at any date, (a) all indebtedness of
------------
such Person for borrowed money or for the deferred purchase price of property or
services (other than current liabilities incurred in the ordinary course of
business and payable in accordance with customary trade practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under capital leases, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (d) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (e) all indebtedness, obligations or liabilities of that Person in respect
of Derivatives.
14
Indemnified Amounts: As defined in Section 8.1.
-------------------
Indemnified Party: As defined in Section 8.1.
-----------------
Industry: The industry of an Obligor as determined by reference to the four
--------
digit standard industry classification codes.
Insolvency Event: With respect to a specified Person, (a) the filing of a
----------------
decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable Insolvency Law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
law, or the consent by such Person to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
Insolvency Laws: The Bankruptcy Code of the United States and all other
---------------
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.
Insurance Policy: With respect to any Loan included in the Asset Pool, an
----------------
insurance policy covering physical damage to or loss to any assets or Related
Property of the Obligor securing such Loan.
Insurance Proceeds: Any amounts payable or any payments made, to the Servicer
------------------
under any Insurance Policy.
Interest Collections: Any and all amounts received in respect of any interest,
--------------------
fees or other similar charges on a Loan from or on behalf of any Obligors that
are deposited into the Collection Account, or received by the Servicer,
Originator, or Seller in respect of Loans, in the form of cash, checks, wire
transfers, electronic transfers or any other form of cash payment (net of any
payment owed by the Seller to, and including any receipts from, any Hedge
Counterparties).
Investment: With respect to any Person, any direct or indirect loan, advance or
----------
investment by such Person in any other Person, whether by means of share
purchase, capital contribution, loan or otherwise, excluding the acquisition of
assets pursuant to the Purchase Agreement and
15
excluding commission, travel and similar advances to officers, employees and
directors made in the ordinary course of business.
Issuer: VFCC and any other Investor whose principal business consists of
------
issuing commercial paper or other securities to fund its acquisition and
maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar Assets.
Jurisdiction: Delaware and Connecticut.
------------
LIBOR Rate: For a Fixed Period, an interest rate per annum equal to the average
----------
(rounded upward to the nearest one-sixteenth (1/16) of one percent) per annum
rate of interest determined by First Union at its the principal office in
Charlotte, North Carolina as its LIBOR Rate (each such determination, absent
manifest error, to be conclusive and binding) as of two Business Days prior to
the first day of the applicable Fixed Period, as the rate at which deposits in
immediately available funds in U.S. dollars are being, have been, or would be
offered or quoted by First Union to major banks in the applicable interbank
market for Eurodollar deposits at or about 11:00 a.m. (Charlotte, North Carolina
time) on the Business Day which is the second Business Day immediately preceding
the first day of the applicable Fixed Period, for delivery on the first day of
such Fixed Period, for a term comparable to such Fixed Period and in an amount
approximately equal to the requested Capital. If no such offers or quotes are
generally available for such amount, then the LIBOR Rate shall be the rate
appearing on the Telerate Page 3750 as of 11:00 A.M. (London time) on the
Business Day which is the second Business Day immediately preceding the first
day of such Fixed Period for a term comparable to such Fixed Period.
Lien: With respect to any Asset, (a) any mortgage, lien, pledge, charge
----
security interest or encumbrance of any kind in respect of such Asset or (b) the
interest of a vendor or lessor under any conditional sale agreement, financing
lease or other title retention agreement relating to such Asset.
Liquidation Expenses: With respect to any Defaulted Loan, the aggregate amount
--------------------
of all out-of-pocket expenses reasonably incurred by the Servicer (including
amounts paid to any subservicer) in connection with the repossession,
refurbishing and disposition of any related assets securing such Loan including
the attempted collection of any amount owing pursuant to such Loan.
Liquidity Bank: Each liquidity bank that is a party to the Liquidity Purchase
--------------
Agreement.
Liquidity Purchase Agreement: The Liquidity Purchase Agreement, dated as of
----------------------------
December 23, 1998, among VFCC, the Deal Agent, the Liquidity Agent, and First
Union, as an investor, and each other liquidity bank a party thereto.
Loan: A secured commercial loan arising from the extension of credit to an
----
Obligor by the Originator or one of its subsidiaries in the ordinary course of
the Originator's business, including, without limitation, all Commercial Loans,
all SBA Loans, and all AIG Loans, which loan is secured by accounts receivable,
inventory, machinery and equipment or real property; and such
16
term further includes all monies due or owing and all Interest Collections,
Principal Collections and other amounts received from time to time with respect
to such loan receivable and all Proceeds.
Loan Document: With respect to any Loan, (i) the related original promissory
-------------
note, (ii) any related loan agreement, (iii) any security agreement, (iv) where
real property serves as the primary Collateral for the Loan, the mortgage, if
any, related thereto, (v) any assignment of leases, and (vi) any other
documents, instruments, certificates or assignments (including amendments or
modifications thereof) executed by the Obligor thereof or by another Person on
the Obligor's behalf in respect of such Loan and related promissory note,
including, without limitation, general or limited guaranties, and any power of
attorney.
Lock-Box: A post office box to which Collections are remitted for retrieval by
--------
a Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box Account.
Lock-Box Account: An account maintained for the purpose of receiving
----------------
Collections at a bank or other financial institution which has executed a Lock-
Box Notice for the purpose of receiving Collections, but specifically excluding
the FNBNE Existing Account.
Lock-Box Bank: Any of the banks or other financial institutions holding one or
-------------
more Lock-Box Accounts.
Lock-Box Notice: A notice, in substantially the form of Exhibit B, among the
--------------- ---------
Seller, the Originator (if applicable) and a Lock-Box Bank.
Minimum Net Portfolio Yield: 2.0%.
---------------------------
Monthly Report: As defined in Section 6.15(a).
--------------
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc., and any successor thereto.
-------
Multiemployer Plan: A "multiemployer plan" as defined in Section 4001(a)(3) of
------------------
ERISA which is or was at any time during the current year or the immediately
preceding five years contributed to by the Seller or any ERISA Affiliate on
behalf of its employees.
Net Loss Ratio: For any Collection Period, the percentage equivalent of a
--------------
fraction, the numerator of which is the Outstanding Loan Balance of all Loans
that became Charged-Off Loans during such Collection Period, and the denominator
of which is the Aggregate Outstanding Loan Balance as of the end of such
Collection Period.
Net Portfolio Yield: For any Fixed Period, the difference between the Portfolio
-------------------
Yield for such Fixed Period and the Yield for such Fixed Period.
17
Notice of Sale: A notice, substantially in the form of Exhibit A hereto,
-------------- ---------
delivered pursuant to Section 2.2.
Obligor: With respect to any Loan, the Person or Persons obligated to make
-------
payments pursuant to the respective Loan Documents, including any guarantor
thereof (but not including the SBA or AIG). For purposes of calculating any of
the concentration and mix criteria set forth on Schedule II, all Loans in the
Asset Pool or to be transferred to the Asset Pool, the Obligor of which is an
Affiliate of another Obligor, shall be aggregated with all Loans of such other
Obligor. For example, if Obligor A is an Affiliate of Obligor B, and the
--- -------
aggregate Outstanding Loan Balance of all of Obligor A's Loans in the Asset Pool
constitutes 5% of the Aggregate Outstanding Loan Balance, and the aggregate
Outstanding Loan Balance of all of Obligor B's Loans in the Asset Pool
constitutes 5% of the Aggregate Outstanding Loan Balance, then the Obligor
concentration for Obligor A would be 10% and the Obligor concentration for
Obligor B would also be 10%.
Officer's Certificate: A certificate signed by any officer of the Seller or the
---------------------
Servicer, as the case may be, and delivered to the Deal Agent.
Officer's Certificate as to Solvency: A certificate signed by any officer of
------------------------------------
the Seller or FNBNE, as the case may be, and delivered to the Deal Agent in the
form of Exhibits J-1 and J-2 attached hereto.
-------- --- ---
Officer's Closing Certificate: A certificate signed by any officer of the
-----------------------------
Seller or FNBNE, as the case may be, and delivered to the Deal Agent in the form
of Exhibits K-1 and K-2.
------------ ---
Opinion of Counsel: A written opinion of counsel, who may be counsel for the
------------------
Seller or the Servicer and who shall be reasonably acceptable to the Deal Agent.
Originator: FNBNE.
----------
Originator Assets: Any Asset that was transferred to the Seller by the
-----------------
Originator.
Outstanding Loan Balance: With respect to any Loan, the then outstanding
-------------------------
principal balance thereof.
Payment Date: The twenty-first (21st) day of each calendar month or, if such
------------
day is not a Business Day, the next succeeding Business Day, commencing with
January 21, 1999.
Permitted Investments: Any one or more of the following types of investments:
---------------------
(a) marketable obligations of the United States, the full and timely
payment of which are backed by the full faith and credit of the United States
and which have a maturity of not more than 270 days from the date of
acquisition;
18
(b) marketable obligations, the full and timely payment of which are
directly and fully guaranteed by the full faith and credit of the United States
and which have a maturity of not more than 270 days from the date of
acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not more than
270 days from the date of acquisition) denominated in dollars and issued by any
bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated A-1 by S&P and P-1
by Moody's;
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
entered into with any bank of the type described in clause (c) above;
(e) commercial paper rated at least A-1 by S&P and P-1 by
Moody's; and,
(f) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States or any state
thereof (or domestic branches of any foreign bank) and subject to supervision
and examination by federal or state banking or depository institution
authorities; provided, however that at the time such investment, or the
-------- -------
commitment to make such investment, is entered into, the short-term debt rating
of such depository institution or trust company shall be at least A-1 by S&P and
P-1 by Moody's.
Permitted Liens: Liens in favor of the Deal Agent as agent for the Secured
---------------
Parties created pursuant to this Agreement.
Person: An individual, partnership, corporation (including a business trust),
------
limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.
Pool Assets: On any day any and all Assets in the Asset Pool.
------------
Portfolio Yield: As of any date of determination the weighted average interest
---------------
rate of all Loans in the Asset Pool.
Power of Attorney: A power of attorney signed by any officer of the Seller in
-----------------
the form of Exhibit L hereto.
---------
Prepaid Loan: Other than Commercial Lines of Credit which may be prepaid but
------------
for which the commitment to make advances thereunder is still in effect, any
Loan that has terminated or been prepaid in full prior to its scheduled maturity
date (including because of a Casualty Loss), other than a Defaulted Loan.
19
Prime Rate: The rate announced by First Union from time to time as its prime
----------
rate in the United States, such rate to change as and when such designated rate
changes. The Prime Rate is not intended to be the lowest rate of interest
charged by First Union in connection with extensions of credit to debtors.
Principal Collections: Any and all amounts received in respect of any principal
---------------------
due and payable under any Loan from or on behalf of Obligors that are deposited
into the Collection Account, or received by the Servicer, Originator, or Seller
in respect of Loans, in the form of cash, checks, wire transfers, electronic
transfers or any other form of cash payment.
Proceeds: With respect to any Pool Asset, whatever is receivable or received
--------
when such Pool Asset is sold, collected, liquidated, foreclosed, exchanged, or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes all rights to payment with respect to any insurance relating to such
Pool Asset.
Program Fee: As defined in the Section 2.13(b).
-----------
Purchase: A purchase by a Purchaser of an undivided interest in the Assets from
--------
the Seller pursuant to Article II, including a reinvestment under Clause
ELEVENTH of Section 2.7.
Purchasers: Collectively, VFCC, First Union, and the Investors and any other
----------
Person that agrees, pursuant to the pertinent Assignment and Acceptance, to
purchase an Asset Interest pursuant to this Agreement.
Purchase Agreement: The Purchase and Sale Agreement dated as of the date
------------------
hereof, between the Originator and the Seller, as amended, modified,
supplemented or restated from time to time.
Purchase Date: The Closing Date (or, if a Purchase is not made on the Closing
-------------
Date, then the date of the initial Purchase after the Closing Date), and as to
any Incremental Purchase, any Business Day that is (i) at least one (1) calendar
week following the immediately preceding Purchase Date and (ii) five (5)
Business Days immediately following the receipt by the Deal Agent of a written
request by the Seller to sell an Asset Interest, such notice to be in the form
of Exhibit A hereto.
---------
Purchase Limit: At any time, $65,000,000, on or after the Termination Date, the
--------------
"Purchase Limit" shall mean the aggregate outstanding Capital.
Purchase Rate: (i) With respect to Commercial Loans, 85%, (ii) with respect to
-------------
SBA Loans, 90%, and (iii) with respect to AIG Loans, a fraction expressed as a
percentage the numerator of which is the portion of the Outstanding Loan Balance
of such AIG Loans which is insured by an AIG Policy, and the denominator of
which is the Outstanding Loan Balance of such AIG Loans.
Qualified Institution: As defined in Section 6.4(d).
---------------------
20
Rating Agency: Each of S&P, Moody's and any other rating agency that has been
-------------
requested to issue a rating with respect to the commercial paper notes issued by
the Issuer.
Recoveries: With respect to a Defaulted Loan, proceeds from the sale of the
----------
Related Property, proceeds of any related Insurance Policy and any other
recoveries with respect to such Defaulted Loan and the related Equipment and
related property, and other amounts representing late fees and penalties net of
Liquidation Expenses and amounts, if any, so received that are required to be
refunded to the Obligor on such Loan.
Records: With respect to any Loans, all documents, books, records and other
-------
information (including without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and rights)
maintained with respect to any Pool Asset and the related Obligors, other than
the Loan Documents.
Register: As defined in Section 10.1(c).
--------
Related Property: With respect to a Loan, any property or other assets of the
----------------
Obligor thereunder pledged as collateral to the Originator to secure such Loan.
Replaced Loan: As defined in Section 2.9.
-------------
Reporting Date: The date which is two Business Days after the end of the Fixed
--------------
Period.
Required Investors: At a particular time, Investors with Commitments equal to
------------------
or in excess of 66 2/3 % of the Purchase Limit.
Required Loan Documents: The documents described in clause (i), (ii), (iii) and
-----------------------
(iv) of the definition of Loan Document.
Required Reports: Collectively, the Monthly Report, the Servicer's Certificate
----------------
and the financial statements of the Servicer required to be delivered to the
Deal Agent pursuant to Section 6.12(c) hereof.
Requirements of Law: For any Person shall mean the certificate of incorporation
-------------------
or articles of association and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or order or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
Reserve Percentage: The percentage that is 100% minus the applicable Purchase
------------------ -----
Rate.
21
Reserves: As to any Asset Interest on any day, an amount equal to the Reserve
--------
Percentage multiplied by the Capital of such Asset Interest as of the close of
business of the Collateral Custodian on such day.
Responsible Officer: As to any Person, any officer of such Person with direct
-------------------
responsibility for the administration of this Agreement and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
Retransfer Amount: As defined in Section 5.6.
-----------------
Retransfer Date: As defined in Section 5.6.
---------------
Revolving Period: The period commencing on the Closing Date and ending on the
----------------
day immediately preceding the Termination Date.
SBA: The United States Small Business Administration.
---
SBA Loan: A Loan to an Obligor that is a revolving line of credit, originated
--------
and approved under SBA policies, ninety percent (90%) of the Outstanding Loan
Balance of which is guaranteed through the SBA.
S&P: Standard & Poor's Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇
---
Companies, Inc. and any successor thereto.
Scheduled Payment: With respect to a date on which a payment is due under a
-----------------
Loan, the periodic payment (exclusive of any amounts in respect of insurance or
taxes and reflecting any adjustment for any partial prepayment) set forth in the
applicable Loan Documents as due from the Obligor.
Secured Party: (i) Each Purchaser and (ii) each Hedge Counterparty that is
-------------
either a Purchaser or an Affiliate of a Purchaser if that Affiliate executes a
counterpart of this Agreement agreeing to be bound by the terms of this
Agreement applicable to a Secured Party.
Securitization: A disposition of Loans in one or a series of structured finance
--------------
securitization transactions.
Seller: FNBNE Funding Corp., or any permitted successor thereto.
------
Servicer: FNBNE and its permitted successors and assigns.
--------
Servicer Advance: An advance of Scheduled Payments made by the Servicer
-----------------
pursuant to Section 6.5.
Servicer Assignee: As defined in Section 6.19.
-----------------
22
Servicer Termination Event: As defined in Section 6.23.
--------------------------
Servicer's Certificate: As defined in Section 6.12(b).
----------------------
Servicing Duties: As defined in Section 6.1.
----------------
Servicing Fee: As defined in Section 2.13(c).
-------------
Servicing Fee Rate: As defined in the Fee Letter.
------------------
Servicing Records: All documents, books, records and other information
-----------------
(including, without limitation, computer programs, tapes, disks, data processing
software and related property rights) prepared and maintained by the Servicer
with respect to the Loans and the related Obligors.
Solvent: As to any Person at any time, having a state of affairs such that all
-------
of the following conditions are met: (a) the fair value of the property owned by
such Person is greater than the amount of such Person's liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy
Code; (b) the present fair saleable value of the property owned by such Person
in an orderly liquidation of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute unreasonably small capital.
Structuring Fee: The structuring fee agreed to between the Seller and the Deal
---------------
Agent in the Fee Letter.
Substitute Loan: As defined in Section 2.9.
---------------
Successor Servicer: As defined in Section 6.27(a).
------------------
Taxes: Any present or future taxes, levies, imposts, duties, charges,
-----
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any Government Authority.
Termination Date: The earliest to occur of (a) the date of the occurrence of an
----------------
Early Amortization Event pursuant to Section 7.1, (b) the Commitment Termination
Date, (c) the termination of the Purchase Limit pursuant to Section 2.3, and (d)
the occurrence of an Insolvency Event with respect to either FNBNE or the
Seller.
23
Termination Notice: As defined in Section 6.26.
------------------
Transaction: As defined in Section 3.2.
-----------
Transaction Documents: This Agreement, the Purchase Agreement, the Liquidity
---------------------
Purchase Agreement, the Hedge Agreement, dated as of the date hereof among the
Seller, the Servicer and the Deal Agent, and any additional document the
execution of which is necessary or incidental to carrying out the terms of the
foregoing documents.
Transfer Date: As defined in the Purchase Agreement.
-------------
Transferred Loans: Each Loan that is sold by the Originator to the Seller under
-----------------
the Purchase Agreement.
Trigger Event: Any of the Early Amortization Events described in clauses (n),
-------------
(o), (p) and (u) of Section 7.1, without regard to any applicable cure period.
UCC: The Uniform Commercial Code as from time to time in effect in the
---
specified jurisdiction.
United States: The United States of America.
-------------
Unreimbursed Servicer Advances: At any time, the amount of all previous
------------------------------
Servicer Advances (or portions thereof) as to which the Servicer has not been
reimbursed as of such time pursuant to Section 2.7 and which the Servicer has
determined in its sole discretion will not be recoverable from Collections with
respect to the related Loan.
Warranty Event: As to any Loan included as part of the Asset Pool, the
--------------
occurrence and continuance of a material breach of any representation or
warranty relating to such Loan and such breach is not cured within the relevant
cure period.
Yield: For each Asset Interest for any Fixed Period, the products (for each day
-----
during such Fixed Period) of:
YR x C x 1
-----
360
where:
C = the Capital of such Asset Interest, and
YR = the Yield Rate applicable on such day;
24
provided, however, that (a) no provision of this Agreement shall require the
-------- --------
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (b) Yield shall not be considered paid by any distribution if
at any time such distribution is rescinded or must otherwise be returned for any
reason.
Yield Rate: With respect to any Fixed Period and for each Asset Interest
----------
purchased by a Purchaser for each day during such period, a per annum rate equal
to the Adjusted Eurodollar Rate; provided, however, that if the CP Rate is
-------- -------
greater than the Adjusted Eurodollar Rate on any day during such Fixed Period,
then the "Yield Rate" for that day will include a Cost of Funds Adjustment; and
provided, further, that if any portion of the Capital is funded under the
-------- -------
Liquidity Purchase Agreement by the Investors, then the "Yield Rate" for such
portion shall be a rate equal to (i) the Adjusted Eurodollar Rate, or (ii) the
Base Rate if the relevant Investor shall have notified the Deal Agent that a
Eurodollar Disruption Event has occurred.
SECTION 1.2 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 States of New York and Connecticut, as applicable, and not specifically
defined herein, are used herein as defined in such Article 9.
SECTION 1.3 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 PURCHASE FACILITY
SECTION 2.1 PURCHASES OF ASSET INTERESTS.
----------------------------
(a) On the terms and conditions hereinafter set forth, the Seller may
on any Purchase Date during the period from the date hereof to but not including
the Termination Date, at its option, sell and assign Asset Interests to the
Purchasers. The Deal Agent may act on behalf of and for the benefit of the
Purchasers in this regard. VFCC may, in its sole discretion, purchase, or if
VFCC shall decline to purchase, the Liquidity Agent shall purchase on behalf of
the Investors, Asset Interests from time to time during the period from the date
hereof to but not including the Termination Date. Under no circumstances shall
any Purchaser make the initial Purchase or any Incremental Purchase if, after
giving effect to such Purchase or Incremental Purchase, the aggregate Capital
outstanding hereunder would exceed the lesser of (i) the Purchase Limit or (ii)
the Capital Limit. Each Asset Interest purchased by any Purchaser hereunder is
subject to the interests of the Hedge Counterparties under Sections 2.7(a)(i)
and (x) of this Agreement.
25
(b The Seller may, within 60 days, but no later than 45 days, prior to
each one year anniversary of the Closing Date, by written notice to the Deal
Agent, make written request for VFCC and the Investors to extend the Commitment
Termination Date for an additional period of one year following the then
existing Commitment Termination Date. The Deal Agent will give prompt notice to
VFCC and each of the Investors of its receipt of such request for extension of
the Commitment Termination Date. VFCC and each Investor shall make a
determination, in their sole discretion and after a full credit review, not less
than 15 days prior to such anniversary date, as to whether or not it will agree
to extend the Commitment Termination Date; provided, however, that the failure
-------- -------
of VFCC or any Investor to make a timely response to the Seller's request for
extension of the Commitment Termination Date shall be deemed to constitute a
refusal by VFCC or the Investor, as the case may be, to extend the Commitment
Termination Date. The Commitment Termination Date shall only be extended upon
the consent of both (i) VFCC and (ii) 100% of the Investors.
(c Notwithstanding the foregoing Section 2.1(b), upon the proposed
conversion of FNBNE from a regulated bank to a commercial finance company (the
"Conversion"), which is otherwise subject to the provisions of this Agreement,
the Commitment Termination Date shall be the date that is the earlier of (i) the
date that is 364 days after the date of the Conversion, or (ii) the then
Commitment Termination Date, unless the Deal Agent and 100% of the Investors,
upon appropriate due diligence and credit approvals agree that the then
Commitment Termination Date should not be accelerated.
SECTION 2.2 THE INITIAL PURCHASE AND INCREMENTAL PURCHASES.
----------------------------------------------
(a Subject to the conditions described in Section 2.1, the initial
Purchase and each Incremental Purchase shall be made in accordance with the
procedures described in Section 2.2(b). After the Collection Date has occurred,
each of the Purchasers and the Deal Agent, in accordance with their respective
interests, shall assign and transfer to the Seller their respective remaining
interest in Asset Interests without any representation or warranty, express or
implied and without recourse of any kind.
(b The initial Purchase and each Incremental Purchase shall be made
pursuant to the terms of a Purchase Certificate in the form of Exhibit H hereto,
---------
after receipt by the Purchaser of a Notice of Sale delivered by the Seller to
the Deal Agent (with a copy to the Collateral Custodian) at least one (1)
Business Day prior to the Closing Date in the case of the initial Purchase and
at least five (5) Business Days prior to such proposed Purchase Date in the case
of any Incremental Purchase. Each such notice shall specify (i) the aggregate
amount of such initial Purchase or Incremental Purchase which amount must
satisfy the applicable minimum requirement set forth in the following sentence
and (ii) the date of such Purchase or Incremental Purchase. The Seller may
deliver up to four (4) notices in a calendar month (or more frequently subject
to the prior written consent of the Deal Agent), and each amount specified in
any such notice must be in an amount equal to (i) at least $5,000,000 in the
case of the initial Purchase, and (ii) $1,000,000 or an integral multiple of
$1,000 in excess thereof in the case of any Incremental Purchase. Each
26
such notice shall be irrevocable. Following receipt of such notice, the Deal
Agent will consult with VFCC in order to assist VFCC in determining whether or
not to make the Purchase. If VFCC declines to make a proposed Purchase, the
initial Purchase or Incremental Purchase will be made by the Investors. On the
date of such Purchase or Incremental Purchase, as the case may be, VFCC or each
Investor shall, upon satisfaction of the applicable conditions set forth in
Article III, make available to the Seller in same day funds, at such bank or
other location reasonably designated by Seller in its Notice of Sale given
pursuant to this Section 2.2(b), an amount equal to (i) the Capital of the Asset
Interest related to such initial Purchase or Incremental Purchase, as the case
may be, in the case of a purchase by VFCC or (ii) such Investor's pro rata share
of the Capital of the Asset Interest related to such initial Purchase or
Incremental Purchase, in the case of a Purchase by the Investors.
SECTION 2.3 REDUCTION OF THE PURCHASE LIMIT.
-------------------------------
The Seller may, upon at least five Business Days' notice to the Deal Agent,
terminate in whole or reduce in part the portion of the Purchase Limit that
exceeds the sum of the aggregate Capital and Yield accrued and to accrue
thereon, and the Commitments of the Investors shall be reduced proportionately;
provided, however, that each partial reduction of the Purchase Limit shall be in
-------- -------
an aggregate amount equal to $1,000,000 or an integral multiple of $100,000 in
excess thereof. Each notice of reduction or termination pursuant to this
Section 2.3 shall be irrevocable.
SECTION 2.4 Determination of Yield.
----------------------
The Deal Agent shall determine the Yield (including unpaid Yield, if any,
due and payable on a prior Payment Date) to be paid on each Payment Date for the
Fixed Period and shall advise the Servicer thereof on the first Business Day
after the Fixed Period.
Section 2.5 Percentage Evidenced by Asset Interest.
--------------------------------------
The variable percentage represented by an Asset Interest shall be initially
computed on its date of purchase. Thereafter, until the Termination Date, each
Asset Interest shall be automatically recomputed (or deemed to be recomputed) on
each day prior to the Termination Date. The variable percentage represented by
an Asset Interest as computed (or deemed recomputed) as of the close of business
on the day immediately preceding the Termination Date shall remain constant at
all times after the Termination Date. The variable percentage represented by the
Asset Interest shall become zero when its Capital and Yield has been paid in
full.
SECTION 2.6 DIVIDING OR COMBINING ASSET INTERESTS.
-------------------------------------
The Deal Agent may, with the consent of a Purchaser, take any of the
following actions at the end of such Fixed Period with respect to any Asset
Interest: (i) divide the Asset Interest owned by such Purchaser into two or more
portions of Asset Interests having aggregate Capital equal to the Capital of
such divided Asset Interest, (ii) combine one portion of an Asset Interest
27
of such Purchaser with another portion of an Asset Interest of such Purchaser
with a Fixed Period ending on the same day, creating a new portion of an Asset
Interest having Capital equal to the Capital of the two portions of Asset
Interest combined or (iii) combine the Asset Interest of such Purchaser with the
Asset Interest to be purchased on such day by such Purchaser, creating a new
Asset Interest having Capital equal to the Capital of the two Asset Interests
combined; provided, that an Asset Interest of VFCC may not be combined with an
Asset Interest of the Investors.
SECTION 2.7 SETTLEMENT PROCEDURES.
---------------------
(a) On each Payment Date, the Servicer shall pay to the following Persons,
from (i) the Collection Account, to the extent of available funds including
interest earnings on the Collection Account, (ii) a Servicer Advance if made or
required pursuant to Section 6.5, and (iii) amounts received in respect of any
Hedge Agreement during the applicable Collection Period (the sum of such amounts
described in clauses (i), (ii) and (iii) being the "Available Collections") the
following amounts in the following order of priority:
(A) FIRST, pro rata to each Hedge Counterparty, any amounts,
-----
including any Hedge Breakage Costs, owing that Hedge Counterparty under its
respective Hedging Agreement in respect of any Hedge Transaction(s) (other
than payments in respect of Termination of any Hedging Agreement), for the
payment thereof;
(B) SECOND, to the Servicer, but only out of proceeds on the AIG
------
Policy that were paid with respect to such AIG Loan, in an amount equal to
any Unreimbursed Servicer Advances with respect to an AIG Loan, for the
payment thereof;
(C) THIRD, to the Servicer, but only out of Interest Collections, in
-----
an amount equal to any Unreimbursed Servicer Advances, for the payment
thereof;
(D) FOURTH, to the Servicer, in an amount equal to its accrued and
------
unpaid Servicing Fees to the end of the preceding Collection Period;
(E) FIFTH, to the extent not paid for by FNBNE, to the Backup
-----
Servicer, in an amount equal to any accrued and unpaid Backup Servicer Fee,
for the payment thereof;
(F) SIXTH, to the extent not paid for by FNBNE, to the Collateral
-----
Custodian, in an amount equal to any accrued and unpaid Collateral
Custodian Fee, for the payment thereof;
(G) SEVENTH, to the Deal Agent for the ratable payment to each
--------
Purchaser, in an amount equal to any accrued and unpaid Yield for such
Payment Date;
(H) EIGHTH, to the Deal Agent for the ratable payment to each
------
Purchaser in an amount equal (I) to the extent not paid by FNBNE, to any
accrued and unpaid Commitment Fees and (II) to any accrued and unpaid
Program Fees;
28
(I) NINTH, to the Deal Agent, in the amount of unpaid Increased Costs
-----
and/or Taxes, for payment to the Purchasers in respect thereof;
(J) TENTH, so long as any AIG Loans are outstanding, to the Cash
-----
Collateral Account, to the extent that the balance in such account is less
than the lesser of (i) $500,000 or (ii) the Aggregate Outstanding Loan
Balance of AIG Loans on such Payment Date;
(K) ELEVENTH, to the extent that funds are available, any remaining
--------
amounts may be reinvested in Eligible Loans; provided, however, that if the
-------- -------
aggregate Capital exceeds the lesser of (i) the Capital Limit or (ii) the
Purchase Limit, an amount equal to such excess shall be paid to the Deal
Agent to pay down Capital outstanding;
(L) TWELFTH, pro rata to each Hedge Counterparty, any amounts owing
-------
that Hedge Counterparty under its respective Hedging Agreement in respect
of the termination of such Hedging Agreement;
(M) THIRTEENTH, to the extent funds are available to satisfy any
----------
unpaid Indemnified Amounts, amounts required to be paid by the Seller
pursuant to the indemnification provisions of Section 8.1 and any other
amounts due hereunder; and
(N) FOURTEENTH, (A) if such Payment Date occurs during the Revolving
----------
Period, any remaining amount shall be distributed to the Seller, and (B) if
such Payment Date occurs during the Amortization Period, to the Deal Agent
in reduction of the outstanding Capital to zero and the payment in full of
the Aggregate Unpaids.
(b) On each Business Day during the Revolving Period, the Servicer may, to
the extent of any Principal Collections on deposit in the Collection Account as
of the last day of the related Collection Period, use such funds toward the
Purchase of Eligible Loans pursuant to item ELEVENTH in subsection (a) above.
(c) Notwithstanding anything to the contrary contained in this Section 2.7
or any other provision in this Agreement, if on any Business Day during the
Revolving Period the aggregate outstanding amount of Capital shall exceed the
lesser of (i) the Purchase Limit or (ii) the Capital Limit, then the Seller
shall remit to the Deal Agent, prior to any reinvestment of funds as set forth
in item ELEVENTH of Section 2.7(a) and in any event no later than the close of
business of the Deal Agent on the next succeeding Business Day, a payment (to be
applied by the Deal Agent to outstanding Capital) in such amount as may be
necessary to reduce outstanding Capital to an amount less than or equal to the
lesser of (i) the Purchase Limit or (ii) the Capital Limit.
(d) On each Business Day occurring during the Amortization Period, all
Principal Collections on deposit in the Collection Account as of such Business
Day shall be paid to the
29
Deal Agent in reduction, to zero, of the outstanding Capital and repayment in
full of the Aggregate Unpaids.
Section 2.8 [Reserved.]
-----------
Section 2.9 Substitution of Loans.
---------------------
On any day prior to the occurrence of an Early Amortization Event, the
Seller may, and upon the request of the Deal Agent shall, subject to the
conditions set forth in this Section 2.9, replace any Loan subject to a Warranty
Event or in respect of which the Obligor thereunder has requested the rewriting
and/or restructuring of such Loan with one or more other Loans (each, a
"Substitute Loan"), provided that no such replacement shall occur unless each of
the following conditions is satisfied as of the date of such replacement and
substitution:
(a) the Loan to be replaced (i) is a Defaulted Loan, (ii) has suffered a
credit rating downgrading below 3 in accordance with the Servicer's internal
credit scoring system, or (iii) has experienced a decline in its fair market
value at least 25% compared to its Purchase Price;
(b) the Seller has previously recommended to the Deal Agent (with a copy to
the Collateral Custodian) in writing that the Loan to be replaced should be
replaced (each a "Replaced Loan");
(c) each Substitute Loan is an Eligible Loan on the date of substitution
having an approximate Outstanding Loan Balance equal to that of the Replaced
Loan (with any difference paid in cash);
(d) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of the (i) Purchase Limit and
(ii) the Capital Limit;
(e) the aggregate Outstanding Loan Balance of such Substitute Loans shall
be equal to or greater than the lesser of (i) the aggregate Outstanding Loan
Balance of the Replaced Loans and (ii) the amount necessary to prevent the
occurrence of a Trigger Event;
(f) all representations and warranties of the Seller contained in Sections
4.1 and 4.2 shall be true and correct as of the date of substitution of any such
Substitute Loan;
(g) the substitution of any Substitute Loan does not cause an Early
Amortization Event to occur; and
(h) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date.
30
In connection with any such substitution, the Deal Agent as agent for the
Secured Parties shall, automatically and without further action, be deemed to
transfer to the Seller, free and clear of any Lien created pursuant to this
Agreement, all of the right, title and interest of the Deal Agent as agent for
the Secured Parties in, to and under such Replaced Loans, and the Deal Agent as
agent for the Secured Parties shall be deemed to represent and warrant that it
has the corporate authority and has taken all necessary corporate action to
accomplish such transfer, but without any other representation and warranty,
express or implied. The Deal Agent, as agent for the Purchasers, shall, at the
sole expense of the Servicer execute such documents and instruments of transfer
as may be prepared by the Servicer on behalf of the Seller and take other such
actions as shall reasonably be requested by the Seller to effect the transfer of
such Replaced Loan pursuant to this Section. Any right of the Deal Agent as
agent for the Secured Parties to substitute any Loan in the Asset Pool pursuant
to this Section 2.9 shall be in addition to, and without limitation of, any
other rights and remedies that the Deal Agent as agent for the Secured Parties
or any Secured Party may have to require the Seller or the Servicer, as
applicable, to substitute for, or accept retransfer of, any Loan pursuant to the
terms of this Agreement.
SECTION 2.10 COLLECTIONS AND ALLOCATIONS.
---------------------------
The Servicer shall promptly (but in no event later than two (2) Business
Days after the receipt thereof) identify any Collections received by it as being
on account of Interest Collections or Principal Collections and deposit all such
Interest Collections or Principal Collections received directly by it into the
Collection Account (the "Collection Account"). The Servicer shall make such
deposits or payments by wire transfer, in immediately available funds.
SECTION 2.11 PAYMENTS, COMPUTATIONS, ETC.
---------------------------
(a) Unless otherwise expressly provided herein, all amounts to be paid or
deposited by the Seller or the Servicer hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 A.M. (Charlotte, North
Carolina time) on the day when due in lawful money of the United States in
immediately available funds to the Agent's Account. The Seller shall, to the
extent permitted by law, pay to the Secured Parties interest on all amounts not
paid or deposited when due hereunder at 1% per annum above the Base Rate,
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 retained by the Deal Agent except to the extent that such failure to make a
timely payment or deposit has continued beyond the date for distribution by the
Deal Agent of such overdue amount to the Secured Parties, in which case such
interest accruing after such date shall be for the account of, and distributed
by the Deal Agent to, the Secured Parties. All computations of interest and all
computations of Yield and other fees hereunder shall be made on the basis of a
year of 360 days 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
31
extension of time shall in such case be included in the computation of payment
of Yield, interest or any fee payable hereunder, as the case may be.
(c) If any Purchase or Incremental Purchase requested by the Seller and
approved by a Purchaser and the Deal Agent pursuant to Section 2.2, is not, for
any reason whatsoever related to a default or nonperformance by the Seller, made
or effectuated, as the case may be, on the date specified therefor, the Seller
shall indemnify such Purchaser against any reasonable loss, cost or expense
incurred by such Purchaser, including, without limitation, any loss (including
loss of anticipated profits, net of anticipated profits in the reemployment of
such funds in the manner determined by such Purchaser), cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Purchaser to fund or maintain such Purchase or Incremental Purchase, as
the case may be, during such Fixed Period.
SECTION 2.12 OPTIONAL REPURCHASE.
-------------------
At any time following the Termination Date when the Aggregate Outstanding
Loan Balance is less than ten percent of the Aggregate Outstanding Loan Balance
as of the Termination Date, the Servicer may notify the Deal Agent in writing of
its intent to purchase all remaining Assets in the Asset Pool, provided that all
Hedge Transactions have been terminated. On the Payment Date next succeeding any
such notice, the Servicer shall purchase all such Assets for a price equal to
the sum of the Aggregate Unpaids, including for illustrative purposes but not in
limitation, all Yield accrued and to accrue, as reasonably determined by the
Deal Agent, and all accrued and unpaid Commitment Fees, Backup Servicer Fees,
Custodial Fees, Increased Costs, Taxes, Hedge Breakage Costs, Breakage Costs and
any other amounts payable by the Seller hereunder or under or with respect to
any Hedging Agreement, and the proceeds of such purchase will be deposited into
the Collection Account and paid in accordance with Section 2.9(b).
SECTION 2.13 FEES.
----
(a) FNBNE, in its individual capacity, shall pay to the Deal Agent from its
own funds on each Payment Date, monthly in arrears, a fee (the "Commitment
Fee"), as set forth in the Fee Letter.
(b) The Seller shall pay to the Deal Agent, on each Payment Date, monthly
in arrears, a Program Fee (the "Program Fee"), as set forth in the Fee Letter.
(c) The Servicer shall be entitled to receive out of Interest Collections a
fee (the "Servicing Fee"), monthly in arrears in accordance with Section 2.7(a),
which fee shall be equal to the product of (i) the Servicing Fee Rate and (ii)
the Aggregate Outstanding Loan Balance as of the close of business on the
immediately preceding Determination Date.
(d) The Backup Servicer shall be entitled to receive the Backup Servicer
Fee in accordance with Section 2.7(a).
32
(e) The Collateral Custodian shall be entitled to receive the Custodial Fee
in accordance with Section 2.7(a).
(f) The Seller shall pay to the Deal Agent, on the Closing Date, the
Structuring Fee (net of any amounts previously paid) in immediately available
funds.
SECTION 2.14 INCREASED COSTS; CAPITAL ADEQUACY; ILLEGALITY.
---------------------------------------------
(a) If 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 or (ii) the compliance by a
Purchaser or any Affiliate thereof (each of which, an "Affected Party") with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), (A) shall subject an
Affected Party to any Tax (except for Taxes on the overall net income of such
Affected Party), duty or other charge with respect to an Asset Interest, or any
right to make Purchases hereunder, or on any payment made hereunder or (B) shall
impose, modify or deem applicable any reserve requirement (including, without
limitation, any reserve requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve requirement, if any, included
in the determination of Yield), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Affected Party or (C) shall impose any other condition affecting an Asset
Interest or a Purchaser's rights hereunder, the result of which is to increase
the cost to any Affected Party or to reduce the amount of any sum received or
receivable by an Affected Party under this Agreement, then within ten days after
demand by such Affected Party (which demand shall be accompanied by a statement
setting forth the basis for such demand), the Seller shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such additional or increased cost incurred or such reduction
suffered.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or request or
(ii) compliance by any Affected Party with any law, guideline, rule, regulation,
directive or request from any central bank or other governmental authority or
agency (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 its obligations hereunder or
arising in connection herewith 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, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis for
such demand), the Seller shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
reduction.
33
(c) If as a result of any event or circumstance similar to those described
in clauses (a) or (b) of this section, and not in duplication of any payments
made under those clauses, any Affected Party is required to compensate a bank or
other financial institution providing liquidity support, credit enhancement or
other similar support to such Affected Party in connection with this Agreement
or the funding or maintenance of Purchases hereunder, then within ten days after
demand by such Affected Party, the Seller shall pay to such Affected Party such
additional amount or amounts as may be necessary to reimburse such Affected
Party for any amounts paid by it.
(d) In determining any amount provided for in this section, the Affected
Party may use any reasonable averaging and attribution methods. Any Affected
Party making a claim under this section shall submit to the Seller a certificate
as to such additional or increased cost or reduction, which certificate shall be
conclusive absent demonstrable error.
(e) If a Purchaser shall notify the Deal Agent that a Eurodollar Disruption
Event as described in clause (a) of the definition of "Eurodollar Disruption
Event" has occurred, the Deal Agent shall in turn so notify the Seller,
whereupon all Capital in respect of which Yield accrues at the Adjusted
Eurodollar Rate shall immediately be converted into Capital in respect of which
Yield accrues at the Base Rate.
SECTION 2.15 TAXES.
-----
(a) All payments made by an Obligor in respect of a Loan and all payments
made by the Seller or the Servicer under this Agreement will be made free and
clear of and without deduction or withholding for or on account of any Taxes,
unless such withholding or deduction is required by law. If withholding or
deduction is required by law, the Obligor, Seller, or Servicer (as the case may
be) shall pay to the appropriate taxing authority any such Taxes required to be
deducted or withheld and the amount payable to each Purchaser or the Deal Agent
(as the case may be) will be increased (such increase, the "Additional Amount")
such that every net payment made under this Agreement after deduction or
withholding for or on account of any Taxes (including, without limitation, any
Taxes on such increase) is not less than the amount that would have been paid
had no such deduction or withholding been deducted or withheld. The foregoing
obligation to pay Additional Amounts, however, will not apply with respect to
net income or franchise taxes imposed on a Purchaser or the Deal Agent,
respectively, with respect to payments required to be made by the Seller or
Servicer under this Agreement, by a taxing jurisdiction in which such Purchaser
or Deal Agent is organized, conducts business or is paying taxes as of the
Closing Date (as the case may be). If a Purchaser or the Deal Agent pays any
Taxes in respect of which the Seller is obligated to pay Additional Amounts
under this Section 2.15(a), the Seller shall promptly reimburse such Purchaser
or Deal Agent the amount of such Additional Amounts.
(b) The Seller will indemnify each Purchaser and the Deal Agent for
the full amount of Taxes in respect of which the Seller is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
jurisdiction on such Additional Amounts) paid by such Purchaser or the Deal
Agent (as the case may be) and any liability (including penalties, interest
34
and expenses) arising therefrom or with respect thereto; provided, however, that
-------- -------
such Purchaser or the Deal Agent, as appropriate, making a demand for indemnity
payment shall provide the Seller, at its address set forth under its name on the
signature pages hereof, with a certificate from the relevant taxing authority or
from a responsible officer of such Purchaser or the Deal Agent stating or
otherwise evidencing that such Purchaser or the Deal Agent has made payment of
such Taxes and will provide a copy of or extract from documentation, if
available, furnished by such taxing authority evidencing assertion or payment of
such Taxes. This indemnification shall be made within ten days from the date
the Purchaser or the Deal Agent (as the case may be) makes written demand
therefor.
(c) Within 30 days after the date of any payment by the Seller of any
Taxes, the Seller will furnish to the Deal Agent, at its address set forth under
its name on the signature pages hereof, appropriate evidence of payment thereof.
(d) If a Purchaser is not created or organized under the laws of the United
States or a political subdivision thereof, such Purchaser shall, to the extent
that it may then do so under applicable laws and regulations, deliver to the
Seller with a copy to the Deal Agent (i) within 15 days after the date hereof,
or, if later, the date on which such Purchaser becomes a Purchaser hereof two
(or such other number as may from time to time be prescribed by applicable laws
or regulations) duly completed copies of IRS Form 4224 or Form 1001 (or any
successor forms or other certificates or statements which may be required from
time to time by the relevant United States taxing authorities or applicable laws
or regulations), as appropriate, to permit the Seller to make payments hereunder
for the account of such Purchaser, as the case may be, without deduction or
withholding of United States federal income or similar Taxes and (ii) upon the
obsolescence of or after the occurrence of any event requiring a change in, any
form or certificate previously delivered pursuant to this Section 2.15(d),
copies (in such numbers as may from time to time be prescribed by applicable
laws or regulations) of such additional, amended or successor forms,
certificates or statements as may be required under applicable laws or
regulations to permit the Seller to make payments hereunder for the account of
such Purchaser, without deduction or withholding of United States federal income
or similar Taxes.
(e) For any period with respect to which a Purchaser or the Deal Agent has
failed to provide the Seller with the appropriate form, certificate or statement
described in clause (d) of this section (other than if such failure is due to a
change in law occurring after the date of this Agreement), the Deal Agent or
such Purchaser, as the case may be, shall not be entitled to indemnification
under clauses (a) or (b) of this section with respect to any Taxes.
(f) Within 30 days of the written request of the Seller therefor, the Deal
Agent and the Purchasers, as appropriate, shall execute and deliver to the
Seller such certificates, forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Seller in applying for refunds of Taxes remitted hereunder; provided, however,
-------- -------
that the Deal Agent and the Purchasers shall not be required to deliver such
certificates forms or other documents if in their respective sole discretion it
is determined that the deliverance of such certificate, form or other document
would have a material adverse effect on
35
the Deal Agent or any Purchaser and provided further, however, that the Seller
-------- ------- -------
shall reimburse the Deal Agent or any such Purchaser for any reasonable expenses
incurred in the delivery of such certificate, form or other document.
(g) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the Purchasers
in connection with this Agreement or the funding or maintenance of Purchases
hereunder, the Purchasers are required to compensate a bank or other financial
institution in respect of Taxes under circumstances similar to those described
in this section then within ten days after demand by the Purchasers, the Seller
shall pay to the Purchasers such additional amount or amounts (without
duplication) as may be necessary to reimburse the Purchasers for any amounts
paid by them.
(h) Without prejudice to the survival of any other agreement of the
Seller hereunder, the agreements and obligations of the Seller contained in this
section shall survive the termination of this Agreement.
SECTION 2.16 ASSIGNMENT OF THE PURCHASE AGREEMENT.
------------------------------------
The Seller hereby represents, warrants and confirms to the Deal Agent
that the Seller has assigned to the Deal Agent, for the ratable benefit of the
Secured Parties hereunder, all of the Seller's right and title to and interest
in the Purchase Agreement. The Seller confirms that following an Early
Amortization Event the Deal Agent shall have the sole right to enforce the
Seller's rights and remedies under the Purchase Agreement for the benefit of the
Secured Parties, but without any obligation on the part of the Deal Agent, the
Purchasers or any of their respective Affiliates, to perform any of the
obligations of the Seller under the Purchase Agreement. The Seller further
confirms and agrees that such assignment to the Deal Agent shall terminate upon
the Collection Date; provided, however, that the rights of the Deal Agent and
-------- -------
the Secured Parties pursuant to such assignment with respect to rights and
remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Purchase Agreement, which rights and remedies survive the termination of the
Purchase Agreement, shall be continuing and shall survive any termination of
such assignment.
ARTICLE III
CLOSING; CONDITIONS OF CLOSING AND PURCHASES
SECTION 3.1 CONDITIONS TO CLOSING AND INITIAL PURCHASE.
------------------------------------------
The initial Purchase hereunder is subject to the conditions precedent
listed in Schedule I, each of which shall have been satisfied or waived, in the
Deal Agent's and the Purchasers' sole discretion, on or before the Closing Date
(unless otherwise indicated), in form and substance satisfactory to the Deal
Agent and the Purchasers.
36
SECTION 3.2 CONDITIONS PRECEDENT TO ALL PURCHASES AND REMITTANCES OF
--------------------------------------------------------
COLLECTIONS.
-----------
Each Purchase (including the Initial Purchase) from the Seller by a
Purchaser, the right of the Servicer to remit Collections to the Seller pursuant
to Section 2.7(b) and each Incremental Purchase (each, a "Transaction") shall be
subject to the further conditions precedent that (a) with respect to any
Purchase (including the Initial Purchase) or Incremental Purchase, the Servicer
shall have delivered to the Deal Agent, at least one (1) Business Day prior to
the initial Purchase and at least five (5) Business Days prior to the date of
any Incremental Purchase in form and substance satisfactory to the Deal Agent,
(i) a Purchase Notice (Exhibit A), (ii) a Purchase Certificate (Exhibit H), and
--------- ---------
(iii) a Certificate of Assignment (Exhibit A to the Purchase Agreement)
including Schedule I thereto and such additional information as may be
reasonably requested by the Deal Agent; (b) on the date of such Transaction the
following statements shall be true and the Seller shall be deemed to have
certified that:
(i) The representations and warranties contained in Sections 4.1
and 4.2 are true and correct on and as of such day as though made on and as
of such date;
(ii) No event has occurred and is continuing, or would result from
such Transaction which constitutes an Early Amortization Event;
(iii) On and as of such day, after giving effect to such Transaction,
the outstanding Capital does not exceed the lesser of (x) the Purchase
Limit, or (y) the Capital Limit;
(iv) On and as of such day, the Seller and the Servicer each has
performed all of the agreements contained in this Agreement to be performed
by such person at or prior to such day;
(v) No law or regulation shall prohibit, and no order, judgment or
decree of any federal, state or local court or governmental body, agency or
instrumentality shall prohibit or enjoin, the making of such Purchase,
remittance of Collections or Incremental Purchase by the Purchaser in
accordance with the provisions hereof;
(vi) No Servicer Termination Date shall have occurred;
(c) The Commitment Termination Date shall not have occurred;
(d) There shall have been no material adverse change in the condition
(financial or otherwise), business, operations, results of operations, or
properties of the Originator or the Seller since the preceding Purchase; and
37
(e) The Originator and Seller shall have taken such other action,
including delivery of approvals, consents, opinions, documents, and instruments
to the Purchasers and the Deal Agent as each may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
--------------------------------------------
The Seller represents and warrants as follows:
(a) Organization and Good Standing. The Seller is a corporation organized,
------------------------------
validly existing, and in good standing under the laws of the jurisdiction of its
formation, and has full corporate power, authority and legal right to own or
loan its properties and conduct its business as such properties are presently
owned or loaned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Purchase
Agreement.
(b) Due Qualification. The Seller is duly qualified to do business and is
-----------------
in good standing as a corporation, and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which the nature of its business
requires it to be so qualified.
(c) Due Authorization. The execution and delivery of this Agreement and
-----------------
the Purchase Agreement and the consummation of the transactions provided for
herein and therein have been duly authorized by the Seller by all necessary
corporate action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement and the
-----------
Purchase Agreement, the performance by the Seller of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof will not conflict with or result in any breach of any of the material
terms and provisions of, and will not constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a party or
by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement and the
------------
Purchase Agreement, the performance of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof will not conflict
with or violate, in any material respect, any Requirements of Law applicable to
the Seller.
(f) No Proceedings. There are no proceedings or investigations pending or,
--------------
to the best knowledge of the Seller, threatened against the Seller, before any
Governmental Authority (i) asserting the invalidity of this Agreement or the
Purchase Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or the Purchase
38
Agreement or (iii) seeking any determination or ruling that could reasonably be
expected to be adversely determined, and if adversely determined, would
materially and adversely affect the performance by the Seller of its obligations
under this Agreement or the Purchase Agreement.
(g) All Consents Required. All approvals, authorizations, consents,
---------------------
orders or other actions of any Person or of any Governmental Authority required
in connection with the execution and delivery by the Seller of this Agreement
and the Purchase Agreement, the performance by the Seller of the transactions
contemplated by this Agreement and the Purchase Agreement, and the fulfillment
of the terms hereof and thereof by the Seller, have been obtained, unless the
failure to obtain such shall not materially and adversely affect the Seller's
performance of its obligations under this Agreement or under the Purchase
Agreement.
(h) Bulk Sales. The execution, delivery and performance of this
----------
Agreement do not require compliance with any "bulk sales" law by Seller.
(i) Solvency. The transactions under this Agreement and Purchase
--------
Agreement do not and will not render the Seller not Solvent.
(j) Selection Procedures; Credit and Collection Policies. No
----------------------------------------------------
procedures believed by the Seller to be materially adverse to the interests of
VFCC or the Purchasers were utilized by the Seller in identifying and/or
selecting the Loans that are in the Asset Pool. In addition, each Loan shall
comply in all respects with the Credit and Collection Policies.
(k) Taxes. The Seller has filed or caused to be filed all Tax returns
-----
which, to its knowledge, are required to be filed. The Seller has paid or made
adequate provisions for the payment of all Taxes and all assessments made
against it or any of its property (other than any amount of Tax the validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which reserves in accordance with generally accepted accounting
principles have been provided on the books of the Seller), and no Tax lien has
been filed and, to the Seller's knowledge, no claim is being asserted, with
respect to any such Tax, fee or other charge.
(l) Agreements Enforceable. This Agreement and the Purchase Agreement
----------------------
constitute the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with their respective terms, except as such
enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(m) Exchange Act Compliance. No proceeds of any Purchase will be used
-----------------------
by the Seller to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(n) No Liens. Each Asset, together with the Loan Documents related
--------
thereto, shall, at all times, be owned by the Seller free and clear of any
Adverse Claim except as provided herein,
39
and upon each Purchase, Incremental Purchase or remittance of Collections, the
relevant Secured Party shall acquire (subject to recordation where necessary) a
valid and perfected first priority undivided ownership interest in each Asset
then existing or thereafter arising and Collections with respect thereto, free
and clear of any Adverse Claim except as provided hereunder. No effective
financing statement or other instrument similar in effect covering any Asset or
Collections shall at any time be on file in any recording office except such as
may be filed in favor of the Deal Agent relating to this Agreement.
(o) Reports Accurate. No Monthly Report (if prepared by the Seller,
----------------
or to the extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Deal Agent or a Purchaser in
connection with this Agreement is or will be inaccurate in any material respect
as of the date it is or shall be dated or (except as otherwise disclosed to the
Deal Agent or such Purchaser, as the case may be, at such time) as of the date
so furnished.
(p) Location of Offices. The principal place of business and chief
-------------------
executive office of the Seller and the office where the Seller keeps all the
Records is located at the address of the Seller referred to in Section 11.2
hereof (or at such other locations as to which the notice and other requirements
specified in Section 5.2(l) shall have been satisfied).
(q) Tradenames. Except as described in Schedule III, the Seller has
----------
no trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(r) Purchase Agreement. The Purchase Agreement is the only agreement
------------------
pursuant to which the Seller purchases Assets.
(s) Value Given. The Seller shall have given reasonably equivalent
-----------
value to the Originator in consideration for the transfer to the Seller of the
Assets under the Purchase Agreement, no such transfer shall have been made for
or on account of an antecedent debt owed by the Originator to the Seller, and no
such transfer is or may be voidable or subject to avoidance under any section of
the Bankruptcy Code; no event or circumstance has occurred that would constitute
an Early Amortization Event.
(t) Special Purpose Entity. The Certificate of Incorporation of the
----------------------
Seller includes substantially the provisions set forth on Exhibit C hereto, and
---------
the Originator has confirmed in writing to the Seller that, so long as the
Seller is not "insolvent" within the meaning of the Bankruptcy Code, the
Originator will not cause the Seller to file a voluntary petition under the
Bankruptcy Code or any other Insolvency Laws. Each of the Seller and the
Originator is aware that in light of the circumstances described in the
preceding sentence and other relevant facts, the filing of a voluntary petition
under the Bankruptcy Code for the purpose of making the assets of the Seller
available to satisfy claims of the creditors of the Originator would not result
in making such assets available to satisfy such creditors under the Bankruptcy
Code.
40
(u) Accounting. The Seller accounts for the transfers to it from the
----------
Originator of interests in Assets and Collections under the Purchase Agreement
as sales of such Asset Interests in its books, records and financial statements,
in each case consistent with GAAP and with the requirements set forth herein.
(v) Separate Entity. The Seller is operated as an entity with assets
---------------
and liabilities distinct from those of the Originator and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the Deal Agent
and the Purchasers are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal entity from
the Originator and from each such other Affiliate of the Originator.
(w) Security Interest. The Seller has granted a security interest (as
-----------------
defined in the UCC) to the Deal Agent, as agent for the Secured Parties, in the
Assets and Collections, which is enforceable in accordance with applicable law
upon execution and delivery of this Agreement. Upon the making of each
Purchase, the Deal Agent, as agent for the Secured Parties, shall have acquired
a first priority perfected security interest in Assets and Collections as may be
perfected under the UCC by filing a financing statement or the delivery of
possession (except for any Permitted Liens). All filings (including, without
limitation, such UCC filings) as are necessary in any Jurisdiction to perfect
the interest of the Deal Agent as agent for the Secured Parties, in the Assets
and Collections have been (or prior to the applicable Purchase will be) made.
(x) Investments. The Seller does not own or hold directly or
-----------
indirectly, any capital stock or equity security of, or any equity interest in,
any Person.
(y) Business. Since its formation, the Seller has conducted no
--------
business other than the sale of Assets from the Originator under the Purchase
Agreement, the sale of Assets under this Agreement and such other activities as
are incidental to the foregoing.
(z) Investment Company Act.
-----------------------
(i) The Seller represents and warrants that the Seller has never
been, is not now, and will not in the future be operated in such a
manner as to cause the Seller to be an "investment company," as such
term is defined in Section 3 of the Investment Company Act of 1940, as
amended (the "1940 Act");
(ii) The Seller represents and warrants that the business and
other activities of the Seller, including but not limited to, the sale
of the Asset Interests to the Purchasers, the application and use of
the proceeds thereof by the Seller and the consummation and conduct of
the transactions contemplated by the Transaction Documents to which
the Seller is a party (a) do now and will in the future comply in all
respects with the provisions of Rule 3a-7 promulgated under the 1940
Act; and (b) do not now and will not in the future result in a
violation by the Seller, the Servicer or any other person or entity of
the 1940 Act or the rules and regulations promulgated thereunder.
41
(aa) Lock-Boxes. The names and addresses of all the Lock-Box Banks,
----------
together, with the account numbers of the Lock-Box Accounts of the Seller at
such Lock-Box Banks and the names, addresses and account numbers of all accounts
to which Collections of the Assets outstanding before the initial Purchase
hereunder have been sent, are specified in Schedule VI (which shall be deemed to
be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof).
(bb) FNBNE Existing Account. All Collections in the FNBNE Existing
----------------------
Account are free and clear of any Adverse Claim. As long as any Collections are
held therein, no effective financing statement or other instruments similar in
effect shall at any time be on file in any recording office with respect to the
FNBNE Existing Account except such as may be filed in favor of the Deal Agent
relating to this Agreement.
(cc) Accuracy of Representations and Warranties. Each representation
------------------------------------------
or warranty by the Seller contained herein or in any certificate or other
document furnished by the Seller pursuant hereto or in connection herewith is
true and correct in all material respects.
The representations and warranties set forth in this section shall
survive the transfer of the Assets to the Deal Agent as agent for the Secured
Parties. Upon discovery by the Seller, the Servicer, any Secured Party, the
Liquidity Agent or the Deal Agent of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO THE
--------------------------------------------------------
AGREEMENT AND THE LOANS.
-----------------------
The Seller hereby represents and warrants to the Deal Agent, each
Secured Party, the Liquidity Agent and each Investor that, as of the Closing
Date and as of each Purchase Date:
(a) Binding Obligation, Valid Transfer and Security Interest.
--------------------------------------------------------
(i) This Agreement and the Purchase Agreement each constitute
legal, valid and binding obligations of the Seller, enforceable
against the Seller in accordance with its respective terms, except as
such enforceability may be limited by Insolvency Laws and except as
such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(ii) This Agreement constitutes either (A) a valid transfer to
the Deal Agent as agent for the Secured Parties of all right, title
and interest of the Seller in, to and under all Assets in the Asset
Pool to the extent of the Asset Interest, and such transfer will be
free and clear of any Lien of any Person claiming through or under the
Seller or its Affiliates, except for Permitted Liens, or (B) a grant
of a security interest in all Assets in the Asset Pool to the Deal
Agent as agent for the Secured Parties. In connection with the
foregoing
42
clause (B), upon the filing of the financing statements described in
Section 6.9(c) the Deal Agent as agent for the Secured Parties shall
have a first priority perfected security interest in such Assets in
the Asset Pool as may be perfected under the UCC by filing a financing
statement or the delivery of possession, subject only to Permitted
Liens. Neither the Seller nor any Person claiming through or under the
Seller shall have any claim to or interest in the Collection Account,
except, if this Agreement is deemed to grant a security interest in
such property, for the interest of the Seller in such property as a
debtor for purposes of the UCC.
(b) Eligibility of Loans. As of the later of the Closing Date or the
--------------------
initial Purchase Date, (i) Schedule IV to this Agreement and the information
contained in the Notice of Sale and Purchase Certificate delivered pursuant to
Section 2.2 is an accurate and complete listing in all material respects of all
the Loans that are in the Asset Pool as of such date and the information
contained therein with respect to the identity of such Loans and the amounts
owing thereunder is true and correct in all material respects as of such date,
(ii) each such Loan is an Eligible Loan, (iii) each such Loan and the Related
Property is free and clear of any Lien of any Person (other than Permitted
Liens) and in compliance with all Requirements of Law applicable to the Seller
and/or the Originator and (iv) with respect to each such Loan, all consents,
licenses, approvals or authorizations of or registrations or declarations with
any Governmental Authority required to be obtained, effected or given by the
Seller in connection with the transfer of an interest in such Loan and the
Related Property to the Deal Agent, as agent for the Secured Parties, have been
duly obtained, effected or given and are in full force and effect. On each
Purchase Date, the Seller shall be deemed to represent and warrant that (i)
Additional Loan referenced on the related Seller Notice delivered pursuant to
Section 2.2 is an Eligible Loan, (ii) each such Loan and the related Property is
free and clear of any Lien of any Person (other than Permitted Liens) and in
compliance with all Requirements of Law applicable to Seller and/or the
Originator, (iii) with respect to each such Loan, all consents, licenses,
approvals, authorizations, registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Seller in connection
with the addition of such Loan and the Related Property to the Asset Pool have
been duly obtained, effected or given and are in full force and effect and (iv)
the representations and warranties set forth in Section 4.2(a) are true and
correct with respect to each Loan transferred on such day as if made on such
day.
(c) Notice of Breach. The representations and warranties set forth in
----------------
this Section 4.2 shall survive the transfer of an interest in the respective
Assets to the Deal Agent as agent for the Secured Parties. Upon discovery by
the Seller, the Servicer, any Secured Party, the Deal Agent, the Liquidity Agent
of any Investor of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written notice
to the others.
43
SECTION 4.3 REPRESENTATIONS AND WARRANTIES OF THE SELLER RELATING TO THE
------------------------------------------------------------
PURCHASE LIMIT AND CAPITAL LIMIT.
--------------------------------
The Seller is hereby deemed to represent and warrant that on each day prior
to the Termination Date, the amount of Capital outstanding on such day shall not
exceed the lesser of (x) the Purchase Limit or (y) the Capital Limit.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.1 GENERAL COVENANTS.
-----------------
Until the date on which all Aggregate Unpaids have been indefeasibly paid
in full, the Seller hereby covenants that it will comply in all material
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges the loss of which rights, franchises, qualifications and privileges
would have a material adverse effect on the Seller.
SECTION 5.2 COVENANTS OF SELLER.
-------------------
The Seller hereby covenants that:
(a) Security Interests. Except as contemplated in this Agreement, the
------------------
Seller will not sell, pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien on any Loan or Related
Property that is in the Asset Pool, whether now existing or hereafter
transferred hereunder, or any interest therein, and the Seller will not sell,
pledge, assign or suffer to exist any Lien on its interest, if any, hereunder.
The Seller will promptly notify the Deal Agent of the existence of any Lien on
any Loan or Related Property that is in the Asset Pool and the Seller shall
defend the right, title and interest of the Deal Agent as agent for the Secured
Parties in, to and under any Loan and the Related Property that is in the Asset
Pool, against all claims of third parties, provided, however, that nothing in
-------- -------
this Section 5.2(a) shall prevent or be deemed to prohibit the Seller from
suffering to exist Permitted Liens upon any Loan or any Related Property that is
in the Asset Pool.
(b) Delivery of Collections. The Seller agrees to pay to the Servicer
-----------------------
promptly (but in no event later than two Business Days after receipt) all
Collections (including any Deemed Collections) received by Seller in respect of
the Loans that are in the Asset Pool.
(c) Compliance with the Law. The Seller hereby agrees to comply in all
-----------------------
respects with all Requirements of Law applicable to the Seller, the Loans that
are in the Asset Pool and the Related Property, if the failure to do so would
have a material adverse effect on the Seller, the Loans that are in the Asset
Pool or the Related Property.
44
(d) Activities of Seller. The Seller shall not engage in any business or
--------------------
activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, which is not
authorized by or related to the transactions contemplated by the Transaction
Documents.
(e) Indebtedness. The Seller shall not create, incur, assume or suffer to
------------
exist any Indebtedness or other liability whatsoever, except (i) obligations
incurred under this Agreement or the Purchase Agreement and instruments related
thereto, or under any Hedging Agreement required by Section 5.4(a), or (ii)
liabilities incident to the maintenance of its corporate existence in good
standing.
(f) Guarantees. The Seller shall not become or remain liable, directly or
----------
indirectly, in connection with any Indebtedness or other liability of any other
Person, whether by guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance funds, or
otherwise.
(g) Investments. The Seller shall not make or suffer to exist any loans
-----------
or advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except for purchases of Loans and other Assets
pursuant to the Purchase Agreement, or for investments in Permitted Investments
in accordance with the terms of this Agreement.
(h) Merger; Sales. The Seller shall not enter into any transaction of
-------------
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or convey,
sell, lease or otherwise dispose of all or substantially all of its property or
business, except as provided for in this Agreement.
(i) Distributions. The Seller may, provided it is in compliance with any
-------------
applicable State laws and no Early Amortization Event has occurred or will occur
as a result thereof, declare or pay, directly or indirectly, any dividend or
make any other distribution (whether in cash or other property) with respect to
the profits, assets or capital of the Seller or any Person's interest therein,
or purchase, redeem or otherwise acquire for value any of its capital stock now
or hereafter outstanding.
(j) Agreements. The Seller shall not become a party to, or permit any of
----------
its properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except this Agreement, the Purchase
Agreement and any Hedging Agreement or amend or modify the provisions of its
operating agreement, without the consent of the Deal Agent, or issue any power
of attorney except to the Deal Agent or the Servicer.
(k) Separate Corporate Existence. The Seller shall:
----------------------------
45
(i) Maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions. The funds of
the Seller will not be diverted to any other Person or for other than
corporate uses of the Seller.
(ii) Ensure that, to the extent that it shares the same officers
or other employees as any of its stockholders or Affiliates, the salaries
of and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and each
such entity shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees.
(iii) Ensure that, to the extent that it jointly contracts with
any of its stockholders or Affiliates to do business with vendors or
service providers or to share overhead expenses, the costs incurred in so
doing shall be allocated fairly among such entities, and each such entity
shall bear its fair share of such costs. To the extent that the Seller
contracts or does business with vendors or service providers when the goods
and services provided are partially for the benefit of any other Person,
the costs incurred in so doing shall be fairly allocated to or among such
entities for whose benefit the goods and services are provided, and each
such entity shall bear its fair share of such costs. All material
transactions between Seller and any of its Affiliates shall be only on an
arm's length basis.
(iv) Maintain a principal executive and administrative office
through which its business is conducted separate from those of its
Affiliates. To the extent that Seller and any of its stockholders or
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity
shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with its
Certificate of Incorporation and observe all necessary, appropriate and
customary corporate formalities, including, but not limited to, holding all
regular and special stockholders, and directors' meetings appropriate to
authorize all corporate action, keeping separate and accurate minutes of
its meetings, passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and separate books,
records and accounts, including, but not limited to, payroll and
intercompany transaction accounts.
(vi) Take or refrain from taking, as applicable, each of the
activities specified in the "non-consolidation" opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ LLP
delivered on the Closing Date, upon which the conclusions expressed therein
are based.
(l) Location of Seller, Records; Instruments. The Seller (x) shall
----------------------------------------
not move the location of its principal executive office, without 30 days' prior
written notice to the Deal Agent and (y) shall not move, or consent to the
Servicer or Collateral Custodian moving, the Loan Documents without 30 days'
prior written notice to the Deal Agent and (z) will promptly take all
46
actions required of each relevant jurisdiction in order to continue the first
priority perfected security interest of the Deal Agent as agent for the Secured
Parties (except for Permitted Liens) in all Assets in the Asset Pool, including
delivery of an opinion of counsel acceptable to the Deal Agent.
(m) ERISA Matters. The Seller will not (a) engage or permit any ERISA
-------------
Affiliate to engage in any prohibited transaction for which an exemption is not
available or has not previously been obtained from the United States Department
of Labor; (b) permit to exist any accumulated funding deficiency, as defined in
Section 302(a) of ERISA and Section 412(a) of the Code, or funding deficiency
with respect to any Benefit Plan other than a Multiemployer Plan; (c) fail to
make any payments to a Multiemployer Plan that the Seller or any ERISA Affiliate
may be required to make under the agreement relating to such Multiemployer Plan
or any law pertaining thereto; (d) terminate any Benefit Plan so as to result in
any liability; or (e) permit to exist any occurrence of any reportable event
described in Title IV of ERISA.
(n) Originator Assets. With respect to each Asset acquired by the
-----------------
Seller, the Seller will (i) acquire such Asset pursuant to and in accordance
with the terms of the Purchase Agreement, (ii) take all action necessary to
perfect, protect and more fully evidence the Seller's ownership of such Asset,
including, without limitation, (A) filing and maintaining, effective financing
statements (Form UCC-1) against the Originator in all necessary or appropriate
filing offices, and filing continuation statements, amendments or assignments
with respect thereto in such filing offices and (B) executing or causing to be
executed such other instruments or notices as may be necessary or appropriate,
(iii) perform in accordance with those terms of the Assets requiring performance
thereof by the Seller, and (vi) take all additional action that the Deal Agent
may reasonably request to perfect, protect and more fully evidence the
respective interests of the parties to this Agreement in the Assets and interest
therein represented by the Asset Interests.
(o) Transactions with Affiliates. The Seller will not enter into, or
----------------------------
be a party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by this Agreement, the Purchase Agreement
and any Hedging Agreements and (ii) other transactions (including, without
limitation, the lease of office space or computer equipment or software by the
Seller to or from an Affiliate) (A) in the ordinary course of business, (B)
pursuant to the reasonable requirements of the Seller's business, (C) upon fair
and reasonable terms that are no less favorable to the Seller than could be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of the Seller, and (D) not inconsistent with the factual assumptions set forth
in the "non-consolidation" legal opinion letter issued by ▇▇▇▇▇▇▇ ▇▇▇▇ LLP and
delivered to the Deal Agent as a condition to the initial Purchase, as such
assumptions may be modified in any subsequent opinion letters delivered to the
Deal Agent pursuant to Section 3.2 or otherwise. It is understood that any
compensation arrangement for officers shall be permitted under clause (ii)(A)
through (C) above if such arrangement has been expressly approved by the board
of directors of the Seller.
47
(p) Change in the Purchase Agreement. The Seller will not amend,
--------------------------------
modify, waive or terminate any terms or conditions of the Purchase Agreement,
without the consent of Deal Agent.
(q) Amendment to Certificate of Incorporation. The Seller will not
-----------------------------------------
amend, modify or otherwise make any change to its Certificate of Incorporation
which would delete or otherwise nullify or circumvent the provisions set forth
on Exhibit C hereto.
---------
(r) Credit and Collection Policies. The Seller shall take all actions
------------------------------
necessary to comply with the terms of the Credit and Collection Policies, and
the Seller shall not cause or permit any changes to be made to the Credit and
Collection Policies in any manner that would materially and adversely affect the
collectibility of the Loans that are in the Asset Pool without the prior written
consent of the Deal Agent.
(s) Accounting of Purchases. Other than for federal, state and local
-----------------------
income tax purposes, the Seller will not account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby in any
manner other than as the sale, or absolute assignment, of Assets by the Seller
to a Purchaser. The Seller will not account for or treat (whether in financial
statements or otherwise) the transaction contemplated by the Purchase Agreement
in any manner other than as the sale, or absolute assignment, of the Originator
Assets by the Originator to the Seller, as the case may be.
(t) AIG Policy. If any AIG Loans are outstanding, (i) on or before
----------
the expiration of the then existing AIG Policy, the Seller will deliver to the
Deal Agent a copy of a renewal or replacement AIG Policy, showing the Seller as
an insured and the Deal Agent as a loss payee, and the Seller will notify the
Deal Agent on or before such expiration date of any Obligor under an AIG Loan
which has been excluded from policy coverage upon such renewal or replacement;
(ii) the Seller will comply with all warranties, covenants and agreements of the
"Insured" under the AIG Policy; and (iii) the Seller will cooperate with the
Servicer and take all actions reasonably required by the Servicer to collect
amounts under the AIG Policy.
(u) FNBNE Existing Account/Establishment of Lock-Box Account. As long
--------------------------------------------------------
as any Collections are held therein, the Seller will not grant, create, incur or
suffer to exist any Adverse Claim with respect to the Collections in the FNBNE
Existing Account. The Seller will promptly notify the Deal Agent of the
existence of any Adverse Claim with respect to any Collections in the FNBNE
Existing Account and the Seller shall defend the right, title and interest of
the Deal Agent as agent for the Secured Parties in such Collections against all
claims of third parties. Upon the request of the Deal Agent, the Seller shall
cause a Lock-Box Account to be established within five (5) Business Days and
shall promptly transfer all Collections in the FNBNE Existing Account into such
Lock-Box Account.
SECTION 5.3 RELEASE OF LIEN.
---------------
At the same time as (i) any Loan in the Asset Pool expires by its
terms and all amounts in respect thereof have been paid by the related Obligor
and deposited in the Collection Account or
48
(ii) any Loan becomes a Prepaid Loan and all amounts in respect thereof have
been paid by the related Obligor and deposited in the Collection Account, the
Deal Agent as agent for the Purchasers will, to the extent requested by the
Servicer, release its interest in such Loan and Loan Documents.
SECTION 5.4 HEDGING AGREEMENT.
-----------------
(a) On or prior to each Purchase Date for any Purchase, the Seller
shall enter into one or more Hedge Transactions for that Purchase, provided that
each such Hedge Transaction shall:
(i) be entered into with a Hedge Counterparty and governed by a
Hedging Agreement;
(ii) have monthly payment periods the first of which commences on
the Purchase Date of that Purchase and the last of which ends on the last
Scheduled Payment due to occur under the Loans to which that Purchase
relates;
(iii) have an amortizing notional amount such that the Hedge Notional
Amount in effect during any monthly payment period shall be equal to at
least seventy-five percent (75%) but not more than one hundred percent
(100%) of the aggregate Capital outstanding hereunder; provided, however,
-------- -------
that the above percentage shall increase to one hundred percent (100%) for
any period during which the difference between the Portfolio Yield and the
Adjusted Eurodollar Rate is less than 2%; and
(iv) provide for two series of monthly payments to be netted against
each other, one such series being payments to be made by the Seller to a
Hedge Counterparty (solely on a net basis) by reference to a fixed interest
rate, and the other such series being payments to be made by the Hedge
Counterparty to the Deal Agent (solely on a net basis) by reference to the
money market yield of the rate set forth in Federal Reserve Statistical
Release H.15 (519) under the caption "Commercial Paper-Nonfinancial" for a
30-day maturity as in effect on the first day of each monthly payment
period, the net amount of which shall be paid into the Collection Account
(if payable by the Hedge Counterparty) or from the Collection Account to
the extent funds are available under Section 2.7 or 2.9 of this Agreement
(if payable by the Seller).
(b) As additional security hereunder, Seller hereby assigns to the Deal
Agent, as agent for the Secured Parties, all right, title and interest of Seller
in each Hedging Agreement, each Hedge Transaction, and all present and future
amounts payable by a Hedge Counterparty to Seller under or in connection with
the respective Hedging Agreement and Hedge Transaction(s) with that Hedge
Counterparty ("Hedge Collateral"), and grants a security interest to the Deal
Agent, as agent for the Secured Parties, in the Hedge Collateral. Seller
acknowledges that, as a result of that assignment, Seller may not, without the
prior written consent of the Deal Agent, exercise any rights under any Hedging
Agreement or Hedge Transaction, except for Seller's right under any Hedging
Agreement to enter into Hedge Transactions in order to meet the Seller's
obligations
49
under Section 5.4(a) hereof. Nothing herein shall have the effect of releasing
the Seller from any of its obligations under any Hedging Agreement or any Hedge
Transaction, nor be construed as requiring the consent of the Deal Agent or any
Secured Party for the performance by Seller of any such obligations.
SECTION 5.5 RETRANSFER OF INELIGIBLE LOANS.
------------------------------
In the event of a breach of any representation or warranty set forth
in Section 4.2 with respect to a Loan in the Asset Pool (each such Loan, an
"Ineligible Loan") which breach results in a Trigger Event, or would result in a
Trigger Event at the next Determination Date or other date of determination, no
later than thirty (30) days after the earlier of (i) knowledge by the Seller of
such Loan becoming an Ineligible Loan and causing a Trigger Event or prospective
Trigger Event, and (ii) receipt by the Seller from the Deal Agent or Servicer of
written notice thereof, the Seller shall either (a) accept the retransfer of
each such Ineligible Loan, and the Deal Agent as agent for the Purchasers shall
convey to the Seller, without recourse, representation or warranty, all of its
right, title and interest in such Ineligible Loan; or (b) subject to the
satisfaction of the conditions in Section 2.9, substitute for such Ineligible
Loan a Substitute Loan; provided, however, that no such retransfer shall be
-------- -------
required to be made with respect to such Ineligible Loan (and such Loan shall
cease to be an Ineligible Loan) if, on or before the expiration of such 30-day
period, the representations and warranties in Section 4.2 with respect to such
Loan shall be made true and correct in all material respects with respect to
such Loan as if such Loan had been transferred to the Purchasers on such day.
Notwithstanding anything contained in this Section 5.5 to the contrary, in the
event of breach of any representation and warranty set forth in Section 4.2,
with respect to any interest in each Loan and the Related Property having been
conveyed to the Purchasers free and clear of any Lien of any Person claiming
through or under the Seller and its Affiliates (other than Permitted Liens) and
in compliance in all material respects, with all Requirements of Law applicable
to the Seller, immediately upon the earlier to occur of the discovery of such
breach by the Seller or receipt by the Seller of written notice of such breach
given by the Deal Agent, the Seller shall repurchase and the Deal Agent on
behalf of the Secured Parties shall convey, free and clear of any Lien created
pursuant to this Agreement, all of its right, title and interest in such
Ineligible Loan, and the Deal Agent shall, in connection with such conveyance
and without further action, be deemed to represent and warrant on behalf of the
Secured Parties that it has the corporate authority and has taken all necessary
corporate action to accomplish such conveyance, but without any other
representation or warranty, express or implied. In any of the foregoing
instances, the Seller shall accept the retransfer of each such Ineligible Loan,
and the Aggregate Outstanding Loan Balance shall be reduced by the Outstanding
Loan Balance of each such Ineligible Loan and, if applicable, increased by the
Outstanding Loan Balance of each such Substitute Loan. On and after the date of
retransfer, the Ineligible Loan so retransferred shall not be included in the
Asset Pool and, as applicable, the Substitute Loan shall be included in the
Asset Pool. In consideration of such retransfer without substitution of a
Substitute Loan, the Seller shall, on the date of retransfer of such Ineligible
Loan, make a deposit to the Collection Account (for allocation pursuant to
Section 2.7) in immediately available funds in an amount equal to the
Outstanding Loan Balance of such Ineligible Loan (to the extent that the Deemed
Collections with respect to such Ineligible Loan
50
have not already been deposited in the Collection Account), plus interest
thereon from the last day of the immediately preceding Fixed Period to and
including the date of repurchase at a rate per annum equal to the weighted
average of the Yield Rates. Upon each retransfer to the Seller of such
Ineligible Loan, the Deal Agent, as agent for the Purchasers, shall
automatically and without further action be deemed to transfer, assign and set-
over to the Seller, without recourse, representation or warranty, all the right,
title and interest of the Deal Agent, as agent for the Purchasers, in, to and
under such Ineligible Loan and all monies due or to become due with respect
thereto, and all proceeds of such Ineligible Loan and Recoveries and Insurance
Proceeds relating thereto and all rights to Related Property and other security
for any such Ineligible Loan, and all proceeds and products of the foregoing.
The Deal Agent, as agent for the Purchasers, shall, at the sole expense of the
Servicer execute such documents and instruments of transfer as may be prepared
by the Servicer on behalf of the Seller and take other such actions as shall
reasonably be requested by the Seller to effect the transfer of such Ineligible
Loan pursuant to this subsection.
SECTION 5.6 RETRANSFER OF ASSETS.
--------------------
In the event of a breach of any representation or warranty set forth in
Section 4.2 hereof which breach could reasonably be expected to have a material
adverse effect on the rights of the Secured Parties or the Deal Agent, as agent
of the Secured Parties, or on the ability of the Seller to perform its
obligations hereunder, by notice then given in writing to the Seller, the Deal
Agent may direct the Seller to accept the retransfer of all of the Assets, in
which case the Seller shall be obligated to accept retransfer of such Assets on
a Payment Date specified by the Seller which date shall be at least thirty (30)
days after the date of such notice (such date, the "Retransfer Date") and to
terminate all Hedge Transactions prior to the Retransfer Date; provided,
--------
however, that no such retransfer shall be required to be made if, on or before
-------
expiration of such applicable period, the representations and warranties
contained in Section 4.2 shall then be true and correct in all material
respects. The Seller shall deposit on the Retransfer Date an amount equal to
the deposit amount provided below for such Assets in the Collection Account for
distribution to the Secured Parties in accordance with Section 2.7. The deposit
amount (the "Retransfer Amount") for such retransfer will be equal to (A) the
Aggregate Unpaids minus (B) the amount, if any, available in the Collection
-----
Account on such Payment Date. On the Retransfer Date, provided that the full
Retransfer Amount has been deposited into the Collection Account, the Assets
shall be transferred to the Seller; and the Deal Agent as agent for the Secured
Parties shall, at the sole expense of the Servicer, execute and deliver such
instruments of transfer, in each case without recourse, representation or
warranty, as shall be prepared and reasonably requested by the Servicer on
behalf of the Seller to vest in the Seller, or its designee or assignee, all
right, title and interest of the Deal Agent as agent for the Secured Parties in,
to and under the Assets. If the Deal Agent gives a notice directing the Seller
to accept such a retransfer as provided above, the obligation of Seller to
accept a retransfer pursuant to this Section 5.6 shall constitute the sole
remedy respecting a breach of the representations and warranties contained in
Section 4.2 available to the Secured Parties and the Deal Agent on behalf of the
Secured Parties.
51
SECTION 5.7 YEAR 2000 COMPATIBILITY.
-----------------------
The Seller shall take all action necessary to assure that, prior to January
1, 2000, the Seller's computer system is able to operate and effectively process
data including dates on and after January 1, 2000. At the request of the Deal
Agent, the Seller shall provide assurance acceptable to the Deal Agent of the
Seller's Year 2000 compatibility.
ARTICLE VI
ADMINISTRATION AND SERVICING OF LOANS
SECTION 6.1 APPOINTMENT AND ACCEPTANCE; DUTIES.
----------------------------------
The Seller hereby appoints FNBNE as Servicer pursuant to this Agreement.
FNBNE accepts such appointment and agrees to act as the Servicer pursuant to
this Agreement to service the Transferred Loans and to serve in such capacity
until the termination of its responsibilities pursuant to Section 6.26. Marine
Midland is hereby appointed as Backup Servicer and Collateral Custodian pursuant
to this Agreement. Marine Midland accepts the appointment and agrees to act as
the Backup Servicer and Collateral Custodian pursuant to this Agreement.
SECTION 6.2 DUTIES AND RESPONSIBILITIES OF THE SERVICER AND THE COLLATERAL
--------------------------------------------------------------
CUSTODIAN.
----------
(a) The Servicer shall conduct the servicing, administration and collection
of the Transferred Loans and shall take, or cause to be taken, all such actions
as may be necessary or advisable to service, administer and collect Transferred
Loans from time to time on behalf of the Purchasers. The Servicer will perform
its servicing duties with reasonable care, using that degree of skill and
attention that a prudent person engaging in such activities would exercise, but
in any event shall not act with less care than the Servicer exercises with
respect to all comparable loans that it services for itself or others. Neither
the Secured Parties, the Deal Agent nor the Collateral Custodian shall have any
obligation or liability with respect to any Transferred Loans, nor shall any of
them be obligated to perform any of the obligations of the Servicer hereunder.
(b) The duties of the Servicer, as the Purchasers' agent, shall include,
without limitation:
(i) preparing and submitting of claims to, and post-billing liaison
with, Obligors on Transferred Loans;
(ii) maintaining all necessary Servicing Records with respect to the
Transferred Loans and providing such reports to the Liquidity Agent and the
Deal Agent in respect of the servicing of the Transferred Loans (including
information relating to its
52
performance under this Facility) as may be required hereunder or as the
Liquidity Agent or the Deal Agent may reasonably request;
(iii) maintaining and implementing administrative and operating
procedures (including, without limitation, an ability to recreate Servicing
Records evidencing the Transferred Loans in the event of the destruction of
the originals thereof) and keeping and maintaining all documents, books,
records and other information reasonably necessary or advisable for the
collection of the Transferred Loans (including, without limitation, records
adequate to permit the identification of each new Transferred Loan and all
Collections of and adjustments to each existing Transferred Loan);
(iv) promptly delivering to the Deal Agent, from time to time, such
information and Servicing Records relating to the Transferred Loans
(including information relating to its performance under this Facility) as
the Deal Agent may from time to time reasonably request;
(v) identifying each Transferred Loan clearly and unambiguously in
its Servicing Records to reflect that such Transferred Loan is owned by the
Purchasers;
(vi) complying in all material respects with the Credit and
Collection Policies in regard to each Transferred Loan;
(vii) complying in all material respects with all applicable laws,
rules, regulations and orders with respect to it, its business and
properties and all Transferred Loans and Collections with respect thereto;
(viii) preserving and maintaining its existence, rights, franchises
and privileges as a National Banking Association and qualifying to and
remaining authorized to perform obligations as Servicer (including
enforcement of collection of Transferred Loans on behalf of the Secured
Parties) in each jurisdiction where the failure to preserve and maintain
such existence, rights, franchises, privileges and qualification would
materially adversely affect (A) the rights or interests of the Secured
Parties in the Transferred Loans, (B) the collectibility of any Transferred
Loan, or (C) the ability of the Servicer to perform its obligations
hereunder;
(ix) immediately, but not later than three (3) Business Days after
such occurrence, notifying the Liquidity Agent and the Deal Agent of the
occurrence of an Early Amortization Event (including, without limitation, a
material adverse change in the financial condition of the Originator);
(x) notifying the Liquidity Agent and the Deal Agent of any
material action, suit, proceeding, dispute, offset deduction, defense or
counterclaim that is or may be (1) asserted by an Obligor with respect to
any Transferred Loan; or (2) reasonably expected to have a material adverse
effect on the Loans as a whole or on the ability of the Servicer
53
or the Originator to perform its obligations under the Transaction
Documents or on the Servicer or the Seller or any of their respective
property; and
(xi) notifying the Deal Agent of any change in the Credit and
Collections Policies.
(c) Disposition Upon Defaulted Loan. Upon any Loan in the Asset Pool
-------------------------------
becoming a Defaulted Loan, the Servicer will use commercially reasonable efforts
in accordance with the Credit and Collection Policies to dispose of any Related
Property. Without limiting the generality of the foregoing, to the extent
provided by law, the Servicer may dispose of any such Related Property by
purchasing such Related Property or by selling such Related Property to any of
its Affiliates for a purchase price equal to the fair market value thereof, any
such sale to be evidenced by a certificate of a Responsible Officer of the
Servicer delivered to the Deal Agent setting forth the Loan, the Related
Property, the sale price of the Related Property and certifying that such sale
price is the fair market value of such Related Property.
(d) Further Assurances. The Deal Agent will, at the sole expense of the
------------------
Servicer, furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
(e) Custodial Duties. The Collateral Custodian shall take and retain
----------------
custody of the Required Loan Documents delivered by the Seller in accordance
with the terms and conditions of this Agreement, all for the benefit of the
Purchasers and subject to the Lien thereon in favor of the Deal Agent as agent
for the Secured Parties. Within five Business Days of its receipt of any
Required Loan Document, the Collateral Custodian shall review the related
Required Loan Documents to verify that such Required Loan Documents have been
executed and have no missing or mutilated pages and to confirm that such Loan is
referenced on the related list of Loans delivered in connection with the related
Purchase Certificate. In order to facilitate the foregoing review by the
Collateral Custodian, in connection with each delivery of Required Loan
Documents hereunder to the Collateral Custodian, the Servicer shall provide to
the Collateral Custodian an electronic file (in EXCEL or a comparable format)
that contains the related list of Required Loan Documents or which otherwise
contains the Loan number and the name of the Obligor with respect to each
related Loan. If, at the conclusion of such review, the Collateral Custodian
shall determine that such Required Loan Documents are not executed or in proper
form on its face, or that the respective Loan is not referenced on such list of
Required Loan Documents, the Collateral Custodian shall promptly notify the
Seller and the Deal Agent of such determination by providing a written report to
such Persons setting forth, with particularity, the lack of execution of such
Required Loan Documents, that such Required Loan Documents have missing or
mutilated pages, or the fact that such Loan was not referenced on the related
list. In addition, unless instructed otherwise in writing by the Seller or the
Deal Agent within 10 days of the Collateral Custodian's delivery of such report,
the Collateral Custodian shall return any Required Loan Documents not referenced
on such list of Loans to the Seller. Other than the foregoing, the Collateral
Custodian shall not have any responsibility for reviewing any Required Loan
Documents.
54
In taking and retaining custody of the Required Loan Documents, the
Collateral Custodian shall be deemed to be acting as the agent of the Deal Agent
as agent for the Purchasers and Secured Parties, provided, however, that the
-------- -------
Collateral Custodian makes no representations as to the existence, perfection or
priority of any Lien on the Required Loan Documents or the instruments therein,
and provided, further, that the Collateral Custodian's duties as agent shall be
-------- -------
limited to those expressly contemplated herein. All Required Loan Documents
shall be kept in fireproof vaults or cabinets at the locations specified on
Schedule V attached hereto, or at such other office as shall be specified to the
Deal Agent by the Collateral Custodian in a written notice delivered at least 45
days prior to such change. All Required Loan Documents shall be placed together
in a separate file cabinet with an appropriate identifying label and maintained
in such a manner so as to permit retrieval and access. All Required Loan
Documents shall be clearly segregated from any other documents or instruments
maintained by the Collateral Custodian. The Collateral Custodian shall clearly
indicate that such Required Loan Documents are the sole property of the
Purchasers and that the Seller has granted an interest therein to the Deal Agent
on behalf of the Secured Parties. In performing its duties, the Collateral
Custodian shall use the same degree of care and attention as it employs with
respect to similar contracts which it holds as Collateral Custodian.
(f) Concerning the Collateral Custodian.
-----------------------------------
(i) The Collateral Custodian may conclusively rely on and shall be
fully protected in acting upon any certificate, instrument, opinion,
notice, letter, telegram or other document delivered to it and which in
good faith it reasonably believes to be genuine and which has been signed
by the proper party or parties. The Collateral Custodian may rely
conclusively on and shall be fully protected by in acting upon (A) the
written instructions of any designated officer of the Deal Agent (and shall
provide a copy thereof to the Seller) or (B) the verbal instructions of the
Deal Agent, which the Collateral Custodian shall promptly confirm in
writing (and shall provide a copy thereof to the Seller).
(ii) The Collateral Custodian may consult counsel satisfactory to it
and the written advice or opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(iii) The Collateral Custodian shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it, in good
faith, or for any mistakes of fact or law, or for anything which it may do
or refrain from doing in connection herewith except in the case of its
willful misconduct or grossly negligent performance or omission.
(iv) The Collateral Custodian makes no warranty or representation and
shall have no responsibility (except as expressly set forth in this
Agreement) as to the content, enforceability, completeness, validity,
sufficiency, value, genuineness, ownership or
55
transferability of the Loans, and will not be required to and will not make
any representations as to the validity or value (except as expressly set
forth in this Agreement) of any of the Loans. The Collateral Custodian
shall not be obligated to take any legal action hereunder which might in
its judgment involve any expense or liability unless it has been furnished
with an indemnity reasonably satisfactory to it.
(v) The Collateral Custodian shall have no duties or
responsibilities except such duties and responsibilities as are
specifically set forth in this Agreement and no covenants or obligations
shall be implied in this Agreement against the Collateral Custodian.
(vi) Except for overhead and general administrative expenses,
the Collateral Custodian shall not be required to expend or risk its own
funds in the performance of its duties hereunder.
(vii) It is expressly agreed and acknowledged that the Collateral
Custodian is not guaranteeing performance of or assuming any liability for
the obligations of the other parties hereto or any parties to the Loans.
SECTION 6.3 AUTHORIZATION OF THE SERVICER.
-----------------------------
(a) Each of the Originator, the Seller and the Deal Agent on behalf of the
Secured Parties and each Hedge Counterparty hereby authorizes the Servicer
(including any successor thereto) to take any and all reasonable steps in its
name and on its behalf necessary or desirable and not inconsistent with the sale
of the Transferred Loans to the Purchasers, in the determination of the
Servicer, to collect all amounts due under any and all Transferred Loans,
including, without limitation, endorsing any of their names on checks and other
instruments representing Collections, executing and delivering any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Transferred
Loans and, after the delinquency of any Transferred Loan and to the extent
permitted under and in compliance with applicable law and regulations, to
commence proceedings with respect to enforcing payment thereof, to the same
extent as the Originator could have done if it had continued to own such Loan.
The Originator, the Seller and the Deal Agent on behalf of the Secured Parties
and each Hedge Counterparty shall furnish the Servicer (and any successors
thereto) with any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder, and shall cooperate with the Servicer to the fullest extent in
order to ensure the collectibility of the Transferred Loans. In no event shall
the Servicer be entitled to make any Secured Party, any Hedge Counterparty, the
Collateral Custodian or the Deal Agent a party to any litigation without such
party's express prior written consent, or to make the Seller a party to any
litigation (other than any routine foreclosure or similar collection procedure)
without the Deal Agent's consent.
(b) After an Early Amortization Event has occurred and is continuing, at
the Agent's direction the Servicer shall take such action as the Deal Agent may
deem necessary or advisable
56
to enforce collection of the Transferred Loans; provided, however, that the Deal
--------
Agent may, at any time that an Early Amortization Event has occurred and is
continuing, notify any Obligor with respect to any Transferred Loans of the
assignment of such Transferred Loans, to the Deal Agent and direct that payments
of all amounts due or to become due to any other party thereunder be made
directly to the Deal Agent or any servicer, collection agent or lockbox or other
account designated by the Deal Agent and, upon such notification and at the
expense of the Seller, the Deal Agent may enforce collection of any such
Transferred Loans and adjust, settle or compromise the amount or payment
thereof.
SECTION 6.4 COLLECTION OF PAYMENTS.
----------------------
(a) Collection Efforts, Modification of Loans. The Servicer will make
-----------------------------------------
reasonable efforts to collect all payments called for under the terms and
provisions of the Loans included in the Asset Pool as and when the same become
due, and will follow those collection procedures which it follows with respect
to all comparable Loans that it services for itself or others; provided,
--------
however, that so long as FNBNE or the Servicer Assignee is the Servicer the
-------
Servicer shall collect all payments in accordance with the Credit and Collection
Policies. The Servicer may not waive, modify or otherwise vary any provision of
a Loan that is included in the Asset Pool other than as permitted in the Credit
and Collection Policies or as permitted by the Deal Agent. The Servicer may in
its discretion waive any late payment charge or any other fees that may be
collected in the ordinary course of servicing any Loan included in the Asset
Pool.
(b) Prepaid Loan. The Servicer may not permit a Loan in the Asset Pool to
------------
become a Prepaid Loan (which shall not include a Loan that becomes a Prepaid
Loan due to a Casualty Loss), unless (x) the Servicer provides an Additional
------
Loan or (y) such prepayment will not result in the Collection Account receiving
an amount (the "Prepayment Amount") less than the sum of (A) the Outstanding
Loan Balance on the date of such prepayment, (B) any outstanding Servicer
Advances thereon, (C) all Hedge Breakage Costs owing to the relevant Hedge
Counterparty for any termination of one or more Hedge Transactions, in whole or
in part, as required by the terms of any Hedging Agreement as the result of any
such Loan becoming a Prepaid Loan, and (D) any accrued and unpaid Yield thereon
and all Breakage Costs arising as a result of such prepayment. After an Early
Amortization Event has occurred, the Servicer may not permit a Loan in the Asset
Pool to become a Prepaid Loan (which shall not include a Loan that becomes a
Prepaid Loan due to a Casualty Loss), unless the Servicer collects an amount
------
equal to the sum of (A) the Outstanding Loan Balance on the date of such
prepayment, (B) any outstanding Servicer Advances thereon, (C) all Hedge
Breakage Costs owing to the relevant Hedge Counterparty for any termination of
one or more Hedge Transactions, in whole or in part, as required by the terms of
any Hedging Agreement as the result of any such Loan becoming a Prepaid Loan,
and (D) any accrued and unpaid Yield thereon and all Breakage Costs arising as a
result of such prepayment.
(c) Acceleration. The Servicer shall accelerate the maturity of all or
------------
any Scheduled Payments under any Loan included in the Asset Pool under which a
default under the terms thereof has occurred and is continuing (after the lapse
of any applicable grace period) promptly after such Loan becomes a Defaulted
Loan; provided, however, that so long as FNBNE or the
57
Servicer Assignee is the Servicer the Servicer shall collect all Defaulted Loans
in accordance with the Credit and Collections Policies.
(d) Taxes and other Amounts. To the extent provided for in any Loan
-----------------------
included in the Asset Pool, the Servicer will use its best efforts to collect
all payments with respect to amounts due for taxes, assessments and insurance
premiums relating to such Loans or the Related Property and remit such amounts
to the appropriate Governmental Authority or insurer on or prior to the date
such payments are due.
(e) Payments to FNBNE Existing Account and Lock-Box Account. On or before
-------------------------------------------------------
each applicable Purchase Date, the Servicer shall have instructed all
Obligors to make all payments in respect of the Loans in the Asset Pool to the
FNBNE Existing Account; provided, however, notwithstanding the foregoing, upon
-------- -------
the establishment of a Lock-Box Account pursuant to Section 5.2 hereof, the
Servicer shall promptly instruct all Obligors to make all payments in respect of
the Loans in the Asset Pool to a Lock-Box or directly to a Lock-Box Account.
(f) Establishment of the Collection Account. The Servicer shall cause to
---------------------------------------
be established, on or before the Closing Date, and maintained in the name of
the Deal Agent, with a "Qualified Institution" (as hereinafter defined) the
Collection Account. A "Qualified Institution" shall be a depository institution
or trust company that at all times shall be organized under the laws of the
United States or any one of the States thereof or the District of Columbia (or
any domestic branch of a foreign bank), (i) (A) which has either (1) a long-term
unsecured debt rating of A- or better by S&P and A 3 or better by ▇▇▇▇▇'▇ or (2)
a short-term unsecured debt rating or certificate of deposit rating of A-1 or
better by S&P or P-1 or better by ▇▇▇▇▇'▇, (B) the parent corporation of which
has either (1) a long-term unsecured debt rating of A- or better by S&P and A 3
or better by ▇▇▇▇▇'▇ or (2) a short-term unsecured debt rating or certificate of
deposit rating of A-1 or better by S&P and P-1 or better by ▇▇▇▇▇'▇ or (C) is
otherwise acceptable to the Deal Agent and (ii) whose deposits are insured by
the Federal Deposit Insurance Corporation.
(g) Establishment of the Cash Collateral Account. On or prior to the date
--------------------------------------------
any AIG Loans are outstanding, the Servicer shall cause to be established,
on or before the Closing Date, and maintained in the name of the Deal Agent,
with a "Qualified Institution" (as defined in subsection (f) above) the Cash
Collateral Account.
SECTION 6.5 SERVICER ADVANCES.
-----------------
For each Collection Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) which was due and payable pursuant to a Loan in the
Asset Pool during such Collection Period was not received prior to the end of
such Collection Period, the Servicer may make an advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof); in addition,
if on any day there are not sufficient funds on deposit in the Collection
Account to pay accrued Yield on any Asset Interest the Fixed Period of which
ends on such day, the Servicer shall make an advance in the amount necessary to
pay such Yield (in either
58
case, any such advance, a "Servicer Advance"). Notwithstanding the preceding
sentence, (i) the Servicer shall be required to make a Servicer Advance with
respect to any Loan if, and only if, the Servicer determines (such determination
to be conclusive and binding) in good faith that such Servicer Advance will
ultimately be recoverable from future collections on, or the liquidation of, the
Asset Pool and payments by one or more Hedge Counterparties under one or more
Hedging Agreements, (ii) the Servicer's obligation to make a Servicer Advance
for any Loan shall cease on the day such Loan becomes a Defaulted Loan or a
Charged-Off Loan and (iii) any successor Servicer, including the Backup
Servicer, will not be obligated to make any Servicer Advances. The Servicer will
deposit any Servicer Advances into the Collection Account on or prior to 11:00
a.m. (Charlotte, North Carolina time) on the related Payment Date, in
immediately available funds.
SECTION 6.6 REALIZATION UPON DEFAULTED LOANS.
--------------------------------
The Servicer will use reasonable efforts to repossess or otherwise
comparably convert the ownership of any Related Property with respect to a
Defaulted Loan and will act as sales and processing agent for Related Property
which it repossesses. The Servicer will follow such other practices and
procedures as it deems necessary or advisable and as are customary and usual in
its servicing of loans and other actions by the Servicer in order to realize
upon such Related Property, which practices and procedures may include
reasonable efforts to enforce all obligations of Obligors and repossessing and
selling such Related Property at public or private sale in circumstances other
than those described in the preceding sentence, provided, however, that so long
-------- -------
as FNBNE or the Servicer Assignee is Servicer the Servicer shall follow the
practices and procedures with respect to the servicing of loans and the
realization upon any Related Property as are set forth in the Credit and
Collection Policies. Without limiting the generality of the foregoing, the
Servicer may sell any such Related Property with respect to the Servicer or its
Affiliates for a purchase price equal to the then fair market value thereof, any
such sale to be evidenced by a certificate of a Responsible Officer of the
Servicer delivered to the Deal Agent setting forth the Loan, the Related
Property, the sale price of the Related Property and certifying that such sale
price is the fair market value of such Related Property. In any case in which
any such Related Property has suffered damage, the Servicer will not expend
funds in connection with any repair or toward the repossession of such Related
Property unless it reasonably determines that such repair and/or repossession
will increase the Recoveries by an amount greater than the amount of such
expenses. The Servicer will remit to the Collection Account the Recoveries
received in connection with the sale or disposition of Related Property with
respect to a Defaulted Loan.
SECTION 6.7 REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER AND
-----------------------------------------------------
COLLATERAL CUSTODIAN.
--------------------
Each of the Backup Servicer and the Collateral Custodian represents and
warrants to the Deal Agent, as agent for the Secured Parties, and the Secured
Parties that, as of the Closing Date and on each Purchase Date, insofar as any
of the following affects the Backup Servicer's or the
59
Collateral Custodian's, as the case may be, ability to perform its obligations
pursuant to this Agreement in any material respect:
(a) Organization and Good Standing. Marine Midland is a New York banking
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of New York with all requisite corporate power and authority to own
its properties and to conduct its business as presently conducted and to enter
into and perform its obligations pursuant to this Agreement.
(b) Power and Authority. Each of the Backup Servicer and the Collateral
-------------------
Custodian has the corporate power and authority to execute and deliver this
Agreement and to carry out its terms. Each of the Backup Servicer and the
Collateral Custodian has duly authorized the execution, delivery and performance
of this Agreement by all requisite corporate action.
(c) No Violation. The consummation of the transactions contemplated by,
------------
and the fulfillment of the terms of, this Agreement by the Backup Servicer and
the Collateral Custodian will not (i) conflict with, result in any breach of any
of the terms or provisions of, or constitute a default under, the charter or
bylaws of the Backup Servicer or the Collateral Custodian, or any term of any
material agreement, indenture, mortgage, deed of trust or other instrument to
which the Backup Servicer or the Collateral Custodian is a party or by which it
or any of its property is bound, (ii) result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or (iii) violate any
law, regulation, order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority applicable to Marine Midland or any of its
properties that might (in the reasonable judgment of the Backup Servicer or the
Collateral Custodian, as the case may be) materially and adversely affect the
performance by the Backup Servicer or the Collateral Custodian of its
obligations under, or the validity or enforceability of, this Agreement.
(d) No Consent. No consent, approval, authorization, order, registration,
----------
filing, qualification, license or permit (collectively, the "Consents") of or
with any Governmental Authority having jurisdiction over the Backup Servicer or
the Collateral Custodian or any of its respective properties is required to be
obtained by or with respect to the Backup Servicer or the Collateral Custodian
in order for the Backup Servicer or the Collateral Custodian, as the case may
be, to enter into this Agreement or perform its obligations hereunder (except
with respect to performance only, such Consents as the Backup Servicer or the
Collateral Custodian, as the case may be, may need to obtain prior to the
commencement of its performance of its duties hereunder in the certain
jurisdictions outside of New York, provided that in lieu of obtaining for itself
the requisite Consents, the Backup Servicer or the Collateral Custodian, as the
case may be, may and shall be permitted to delegate the performance of its
duties to parties having the requisite Consents in such jurisdictions; provided,
--------
however, in the case of such delegation of performance the Backup Servicer or
the Collateral Custodian, as the case may be, shall not be relieved of their
responsibility under this Agreement with respect to such duties).
60
(e) Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of Marine Midland, enforceable against the Backup Servicer
and the Collateral Custodian in accordance with its terms, except as such
enforceability may be limited by (i) applicable Insolvency Laws and (ii) general
principles of equity (whether considered in a suit at law or in equity).
(f) No Proceeding. There are no proceedings or investigations pending or,
-------------
to the best of its knowledge, threatened, against the Backup Servicer or the
Collateral Custodian, before any Governmental Authority (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Backup
Servicer or the Collateral Custodian, as the case may be) materially and
adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.
SECTION 6.8 MAINTENANCE OF INSURANCE POLICIES.
---------------------------------
The Servicer will require that each Obligor with respect to a Loan
included in the Asset Pool maintains an Insurance Policy with respect to each
Loan and the Related Property, in accordance with the Credit and Collection
Policies. In connection with its activities as Servicer, the Servicer agrees to
present, or to require the Obligor to present, on behalf of the Deal Agent as
agent for the Secured Parties, claims to the insurer under each Insurance Policy
and any such liability policy, and to settle, adjust and compromise such claims,
in each case, consistent with the terms of each related Loan.
SECTION 6.9 REPRESENTATIONS AND WARRANTIES OF SERVICER.
------------------------------------------
The Servicer represents and warrants to the Deal Agent, as agent for the
Secured Parties, each Secured Party, the Liquidity Agent and each Investor that,
as of the Closing Date and on each Purchase Date:
(a) Organization and Good Standing. The Servicer is a National Banking
------------------------------
Association duly organized and validly existing with all requisite corporate
power and authority to own its properties and to conduct its business as
presently conducted and to enter into and perform its obligations pursuant to
this Agreement.
(b) Due Qualification. The Servicer is qualified to do business, is in
-----------------
good standing, and has obtained all licenses and approvals as required under the
laws of all jurisdictions in which the ownership or lease of its property and or
the conduct of its business (other than the performance of its obligations
hereunder) requires such qualification, standing, license or approval, except to
the extent that the failure to so qualify, maintain such standing or be so
licensed or approved would not have a material adverse effect on the interests
of the Seller or of the Purchasers. The Servicer is qualified to do business, is
in good standing, and has obtained all
61
licenses and approvals as required under the laws of all states in which the
performance of its obligations pursuant to this Agreement requires such
qualification, standing, license or approval and where the failure to qualify or
obtain such license or approval would have material adverse effect on its
ability to perform hereunder.
(c) Power and Authority. The Servicer has the corporate power and
-------------------
authority to execute and deliver this Agreement and to carry out its terms. The
Servicer has duly authorized the execution, delivery and performance of this
Agreement by all requisite corporate action. The execution, delivery and
performance of this Agreement does not contravene the Servicer's Certificate of
Incorporation or by-laws.
(d) No Violation. The consummation of the transactions contemplated by,
------------
and the fulfillment of the terms of, this Agreement by the Servicer (with or
without notice or lapse of time) will not (i) conflict with, result in any
breach of any of the terms or provisions of, or constitute a default under, the
[articles of incorporation] or by-laws of the Servicer, or any term of any
agreement, indenture, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which it or any of its property is bound, (ii) result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (iii) violate any law, regulation, order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority
applicable to the Servicer or any of its properties.
(e) No Consent. No consent, approval, authorization, order, registration,
----------
filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Servicer or any of its
properties is required to be obtained by or with respect to the Servicer in
order for the Servicer to enter into this Agreement or perform its obligations
hereunder.
(f) Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except as such enforceability may be limited by (i)
applicable Insolvency Laws and (ii) general principles of equity (whether
considered in a suit at law or in equity).
(g) No Proceeding. There are no proceedings or investigations pending or
-------------
threatened against the Servicer, before any Governmental Authority (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Servicer)
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement.
(h) Reports Accurate. No Servicer Certificate, information, exhibit,
----------------
financial statement, document, book, Servicer Record or report furnished or to
be furnished by the Servicer to the Deal Agent or a Secured Party in connection
with this Agreement is or will be inaccurate in any material respect as of the
date it is or shall be dated or (except as otherwise
62
disclosed to the Deal Agent or such Secured Party, as the case may be, at such
time) as of the date so furnished.
(i) Investment Company Act.
----------------------
(i) The Servicer represents and warrants that the Servicer has never
been, is not now, and will not in the future be operated in such a manner
as to cause the Servicer to be an "investment company," as such term is
defined in Section 3 of the 1940 Act; and
(ii) The Servicer represents and warrants that the business and other
activities of the Servicer, including but not limited to, the consummation
and conduct of the transactions contemplated by the Transaction Documents
to which the Servicer is a party do not now and will not in the future
result in a violation by the Servicer, the Borrower, or any other person or
entity of the 1940 Act or the rules and regulations promulgated thereunder.
SECTION 6.10 COVENANTS OF SERVICER.
---------------------
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply with all laws and
-------------------
regulations of any Governmental Authority applicable to the Servicer or the
Loans included in the Asset Pool and Related Property and Loan Documents or any
part thereof.
(b) Obligations with Respect to Loans; Modifications. The Servicer will
------------------------------------------------
duly fulfill and comply with all obligations on the part of the Seller to be
fulfilled or complied with under or in connection with each Loan included in the
Asset Pool and will do nothing to impair the rights of the Deal Agent as agent
for the Secured Parties or of the Secured Parties in, to and under the Assets.
The Servicer will perform its obligations under the Loans included in the Asset
Pool and will not change or modify such Loans other than as permitted in the
Credit and Collection Policies or as approved by the Deal Agent.
(c) Preservation of Security Interest. The Servicer will execute and
---------------------------------
file such financing and continuation statements and any other documents which
may be required by any law or regulation of any Governmental Authority to
preserve and protect fully the interest of the Deal Agent as agent for the
Secured Parties in, to and under the Assets.
(d) No Bankruptcy Petition. Prior to the date that is one year and one
----------------------
day after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, the Servicer will not institute against the
Seller or VFCC, or join any other Person in instituting against the Seller or
VFCC, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States or
any state of the United States. This Section 6.10(d) will survive the
termination of this Agreement.
63
(e) Amendments to Credit and Collection Policies. The Servicer, without
--------------------------------------------
the prior written consent of the Deal Agent, will not agree or consent
to or otherwise permit to occur any amendment, modification, change, supplement,
or recission of the Credit and Collection Policies in whole or in part or in any
manner that could have a material adverse effect upon the Loans or the interests
of the Deal Agent or the Secured Parties.
(f) Year 2000 Compatibility. The Servicer shall take all action necessary
-----------------------
to assure that, prior to January 1, 2000, the Servicer's computer
system is able to operate and effectively process data including dates on and
after January 1, 2000. At the request of the Deal Agent, the Servicer shall
provide assurance acceptable to the Deal Agent of the Servicer's Year 2000
compatibility.
(g) Backup Servicer and Collateral Custodian Fee Letter. The Servicer
---------------------------------------------------
will not amend, modify, waive or terminate any terms or provisions of the Backup
Servicer and Collateral Custodian Fee Letter without the prior written consent
of the Deal Agent.
SECTION 6.11 COVENANTS OF BACKUP SERVICER AND COLLATERAL CUSTODIAN.
-----------------------------------------------------
Each of the Backup Servicer and the Collateral Custodian hereby covenants
that:
(a) Loan Files. The Collateral Custodian will not dispose of any
----------
documents constituting the Loan Files in any manner which is inconsistent with
the performance of its obligations as the Collateral Custodian pursuant to this
Agreement and will not dispose of any Loan Files except as contemplated by this
Agreement.
(b) Compliance with Law. Each of the Backup Servicer and the Collateral
-------------------
Custodian will comply with all laws and regulations of any Governmental
Authority applicable to the Backup Servicer and the Collateral Custodian.
(c) No Bankruptcy Petition. Prior to the date that is one year and one
----------------------
day after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, neither the Backup Servicer nor the Collateral
Custodian will institute against the Seller or VFCC, or join any other Person in
instituting against the Seller or VFCC, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States. This
Section 6.11(c) will survive the termination of this Agreement.
(d) Location of Loan Files. The Loan Files shall remain at all times in
----------------------
the possession of the Collateral Custodian at the address set forth herein
unless notice of a different address is given in accordance with the terms
hereof.
(e) No Changes in Backup Servicer and Collateral Custodian Fee. The
----------------------------------------------------------
Backup Servicer and Collateral Custodian will not make any changes to the fees
set forth in the Backup
64
Servicer and Collateral Custodian Fee Letter without the prior written approval
of the Deal Agent.
(f) Year 2000 Compatibility. The Backup Servicer and Collateral Custodian
-----------------------
shall take all action necessary to assure that, prior to January 1, 2000, the
Backup Servicer and Collateral Custodian's computer system is able to operate
and effectively process data including dates on and after January 1, 2000. At
the request of the Deal Agent, the Backup Servicer and Collateral Custodian
shall provide assurance acceptable to the Deal Agent of the Backup Servicer and
Collateral Custodian's Year 2000 Compatibility.
SECTION 6.12 SERVICING COMPENSATION.
----------------------
As compensation for its servicing activities hereunder and reimbursement
for its expenses, the Servicer shall be entitled to receive a servicing fee (the
"Servicing Fee") in respect of each Collection Period (or portion thereof) equal
to one-twelfth of the product of (A) the Servicing Fee Rate and (B) the
Aggregate Outstanding Loan Balance as on the most recent Determination Date,
such Servicing Fee to be payable monthly in arrears on each Payment Date to the
extent of funds available therefor pursuant to the provisions of Section 2.7.
SECTION 6.13 CUSTODIAL COMPENSATION.
----------------------
As compensation for its custodial activities hereunder and reimbursement
for its expenses, the Collateral Custodian shall be entitled to receive a
custodial fee (the "Custodial Fee") as provided in the Backup Servicer and
Collateral Custodian Fee Letter.
SECTION 6.14 PAYMENT OF CERTAIN EXPENSES BY SERVICER.
---------------------------------------
The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of legal counsel and independent accountants, Taxes imposed on the
Servicer, expenses incurred in connection with payments and reports pursuant to
this Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Seller, but excluding Liquidation Expenses. The
Servicer will be required to pay all reasonable fees and expenses owing to any
bank or trust company in connection with the maintenance of the FNBNE Existing
Account, the Collection Account and the Lock-Box Account. The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Servicing Fee.
SECTION 6.15 REPORTS.
-------
(a) Monthly Report. With respect to each Determination Date and the
--------------
related Collection Period, the Servicer will provide to the Seller and the Deal
Agent and the Backup Servicer, on the related Reporting Date, a monthly
statement (a "Monthly Report"), signed by a Responsible Officer of the Servicer
and substantially in the form of Exhibit E.
---------
65
(b) Servicer's Certificate. Together with each Monthly Report, the
----------------------
Servicer shall submit to the Seller, the Deal Agent and the Backup Servicer a
certificate (a "Servicer's Certificate"), signed by a Responsible Officer of the
Servicer and substantially in the form of Exhibit F.
---------
(c) Financial Statements. The Servicer will submit to the Deal Agent,
--------------------
within 45 days of the end of each of the Servicer's fiscal quarters, commencing
March 31, 1999 unaudited consolidated financial statements of the Servicer (or,
so long as FNBNE or the Servicer Assignee is the Servicer, First International
Bancorp, Inc.) (including an analysis of delinquencies and losses for each
fiscal quarter) as of the end of each such fiscal quarter. The Servicer shall
submit to the Deal Agent, within 90 days of the end of the Servicer's fiscal
year, commencing December 31, 1999, annual consolidated audited financial
statements of the Servicer (or, so long as the Originator is the Servicer, First
International Bancorp, Inc.) as of the end of such fiscal year.
SECTION 6.16 ANNUAL STATEMENT AS TO COMPLIANCE.
---------------------------------
The Servicer will provide to the Deal Agent, on or prior to March 31 of
each year, commencing March 31, 1999, an annual report signed by a Responsible
Officer of the Servicer certifying that (a) a review of the activities of the
Servicer, and the Servicer's performance pursuant to this Agreement, for the
period ending on the last day of the preceding fiscal year has been made under
such Person's supervision and (b) the Servicer has performed or has caused to be
performed in all material respects all of its obligations under this Agreement
throughout such year and no Servicer Termination Event has occurred and is
continuing (or if a Servicer Termination Event has so occurred and is
continuing, specifying each such event, the nature and status thereof and the
steps necessary to remedy such event, and, if a Servicer Termination Event
occurred during such year and no notice thereof has been given to the Deal
Agent, specifying such Servicer Termination Event and the steps taken to remedy
such event).
SECTION 6.17 ANNUAL INDEPENDENT PUBLIC ACCOUNTANT'S SERVICING REPORTS.
--------------------------------------------------------
The Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer) to furnish to
the Deal Agent, on or prior to March 31 of each year, commencing March 31, 1999,
(i) a report relating to the previous fiscal year to the effect that (A) such
firm has reviewed certain documents and records relating to the servicing of the
Loans included in the Asset Pool, and (B) based on such examination, such firm
is of the opinion that the Monthly Reports for such year were prepared in
compliance with this Agreement, except for such exceptions as it believes to be
immaterial and such other exceptions as will be set forth in such firm's report
and (ii) a report covering the preceding fiscal year to the effect that such
accountants have applied certain agreed-upon procedures to certain documents and
records relating to the servicing of Loans under this Agreement, compared the
information contained in the Servicer's Certificates delivered during the period
covered by such report with such documents and records and that no matters came
to the attention of such accountants that caused them to believe that such
servicing was not conducted in compliance with this Article VI
66
of this Agreement, except for such exceptions as such accountants shall believe
to be immaterial and such other exceptions as shall be set forth in such
statement.
SECTION 6.18 ADJUSTMENTS.
-----------
If (i) the Servicer makes a deposit into the Collection Account in respect
of a Collection of a Loan included in the Asset Pool and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Scheduled Payment in respect of which a dishonored check
is received shall be deemed not to have been paid.
SECTION 6.19 MERGER OR CONSOLIDATION OF THE SERVICER.
---------------------------------------
The Servicer shall not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any
Person, unless the Servicer is the surviving entity and unless:
(i) the Servicer has delivered to the Deal Agent and the Backup
Servicer an Officer's Certificate and an Opinion of Counsel each stating
that any consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 6.19 and that all
conditions precedent herein provided for relating to such transaction have
been complied with and, in the case of the Opinion of Counsel, that such
supplemental agreement is legal, valid and binding with respect to the
Servicer and such other matters as the Deal Agent may reasonably request;
(ii) the Servicer shall have delivered notice of such consolidation,
merger, conveyance or transfer to the Deal Agent; and
(iii) after giving effect thereto, no Early Amortization Event or
event which with notice or lapse of time would constitute an Early
Amortization Event shall have occurred.
Notwithstanding anything to the contrary contained herein, so long as the
Servicer and the Originator are the same Person, the Servicer is permitted as
part of a Conversion to assign its rights hereunder to, and the Servicer's
obligations hereunder can be assumed by, another wholly-owned subsidiary of
First International Bancorp, Inc. (the "Servicer Assignee") (in which case all
of the provisions of this Agreement shall, to the same extent as they apply to
the Servicer hereunder, apply to the Servicer Assignee rather than to the
Servicer) on the condition that (a) the Servicer Assignee acquires substantially
all of the Servicer's assets relating to its commercial lending business, (b)
the Servicer Assignee assumes substantially all of the Servicer's liabilities
relating to its commercial lending business, but expressly excluding the
Servicer's deposits, (c)
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Deal Agent receives such documents evidencing (a) and (b) above as Deal Agent
shall reasonably request, and (d) the Servicer Assignee executes and deliver to
Deal Agent such amendments to this Agreement and such opinions of counsel as
Deal Agent may deem necessary including, but not limited to opinions to evidence
that the Servicer Assignee has assumed all of the Servicer's rights and
obligations, and is bound by all of the Servicer's agreements, set forth herein.
Upon such conversion, the Commitment Termination Date may be accelerated
pursuant to the provisions of Section 2.1(c).
SECTION 6.20 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
--------------------------------------------------
Except as provided herein, neither the Servicer nor any of the directors or
officers or employees or agents of the Servicer shall be under any liability to
the Deal Agent, the Secured Parties or any other Person for any action taken or
for refraining from the taking of any action pursuant to this Agreement whether
arising from express or implied duties under this Agreement; provided, however,
-------- -------
that this provision shall not protect the Servicer or any such Person against
any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its willful misconduct hereunder.
SECTION 6.21 INDEMNIFICATION OF THE SELLER, THE DEAL AGENT, THE LIQUIDITY
------------------------------------------------------------
AGENT AND THE SECURED PARTIES.
-----------------------------
The Servicer shall indemnify and hold harmless the Seller, the Deal Agent,
the Liquidity Agent and each Secured Party and their respective officers,
directors, employees and agents (collectively, the "Indemnified Persons") from
and against any loss, liability, expense, damage or injury suffered or sustained
by any Indemnified Person by reason of any acts, omissions or alleged acts or
omissions of the Servicer, including, but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim, but excluding allocations of overhead expenses of any such Indemnified
Party or other non-monetary damages of any such Indemnified Party.
Notwithstanding the foregoing, the Servicer shall not indemnify an Indemnified
Person if such loss, liability, expense, damage or injury results or arises (i)
as a result of fraud, gross negligence or willful misconduct by any Indemnified
Person; and (ii) under any federal, state or local income or franchise taxes or
any other Tax imposed on or measured by income (or any interest or penalties
with respect thereto or arising from a failure to comply therewith) required to
be paid by the Seller, the Deal Agent, the Liquidity Agent or the Secured
Parties in connection herewith to any taxing authority. The provisions of this
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof. If the Servicer has made any indemnity payment
pursuant to this Section 6.21 and such payment fully indemnified the recipient
thereof and the recipient thereafter collects any payments from others in
respect of such Indemnified Amounts, the recipient shall repay to the Servicer
an amount equal to the amount it has collected from others in respect of such
indemnified amounts.
If for any reason the indemnification provided above in this Section 6.21
is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer
68
shall contribute to the amount paid or payable by such Indemnified Person as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Person on the one hand and Servicer on the other hand but also the
relative fault of such Indemnified Person as well as any other relevant
equitable considerations.
The parties hereto agree that the provisions of this Section 6.21 shall not
be interpreted to provide recourse to the Seller against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by, related
Obligor on, any Loan.
Any indemnification pursuant to this Section shall not be payable from the
Assets.
Any indemnification pursuant to this Section shall not be in duplication of
any other indemnification for the same loss under Section 8.1.
The obligations of the Servicer under this Section 6.21 shall survive the
resignation or removal of the Deal Agent and the Liquidity Agent, and the
termination of this Agreement.
SECTION 6.22 THE SERVICER AND BACKUP SERVICER NOT TO RESIGN.
----------------------------------------------
Neither the Servicer nor the Backup Servicer shall resign from the
obligations and duties hereby imposed on it except upon such Person's
determination that (i) the performance of its duties hereunder is or becomes
impermissible under applicable law and (ii) there is no reasonable action which
such Person could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer or Backup Servicer shall be evidenced as to clause
(i) above by an Opinion of Counsel to such effect delivered to the Deal Agent.
No such resignation shall become effective until a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 6.27, or a successor Backup Servicer shall have assumed the
responsibilities and obligations of the Backup Servicer, respectively.
SECTION 6.23 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
---------------------------------------------------------
THE LOANS.
---------
The Servicer shall provide to the Deal Agent access to the Loan Documents
and all other documentation regarding the Loans included in the Asset Pool and
the Related Property in such cases where the Deal Agent is required in
connection with the enforcement of the rights or interests of the Secured
Parties, or by applicable statutes or regulations, to review such documentation,
such access being afforded without charge but only (i) upon two Business Days'
prior written request, (ii) during normal business hours and (iii) subject to
the Servicer's normal security and confidentiality procedures. Prior to the
Closing Date and periodically thereafter at the discretion of the Deal Agent,
the Deal Agent may review the Servicer's collection and administration of the
Loans in order to assess compliance by the Servicer with the Servicer's written
policies and procedures, as well as with this Agreement and may conduct an audit
of the
69
Loans, Loan Documents and Records in conjunction with such a review. Such review
shall be reasonable in scope and shall be completed in a reasonable period of
time. The Seller shall bear the cost of up to four of such audits per calendar
year in an amount not to exceed $5,000 per audit.
SECTION 6.24 BACKUP SERVICER.
---------------
(a) On or before the date on which the initial Purchase occurs, until the
receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Deal Agent and the Secured Parties, the following
duties and obligations:
(i) On or before the Closing Date, the Backup Servicer shall
accept from the Servicer delivery of the information required to be set
forth in the Monthly Reports in hard copy and on computer tape; provided,
--------
however, the computer tape is in an MS-DOS, PC readable ASCII format or
-------
format to be agreed upon by the Backup Servicer and the Servicer on or
prior to closing.
(ii) Not later than 12:00 noon New York time two Business Days prior
to each Reporting Date, the Backup Servicer shall accept delivery of tape
from the Servicer, which shall include but not be limited to the following
information: the name, number and name of the related Obligor for each
Loan, the collection status, the contract status, the principal balance and
the Aggregate Outstanding Loan Balance (the "Tape").
The Servicer shall provide the Tape on each Reporting Date as described
above.
(b) On or before the date on which the initial Purchase occurs, and until
the receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Secured Parties and the Deal Agent, the following
duties and obligations:
(i) Prior to the related Payment Date, the Backup Servicer shall
review the Monthly Report to ensure that it is complete on its face and
that the following items in such Monthly Report have been accurately
calculated, if applicable, and reported: (A) the Aggregate Outstanding Loan
Balance, (B) the Backup Servicing Fee, (C) the Loans that are 30-60 days
past due, (D) the Loans that are 61-90 days past due, (E) the Loans that
are 90+ days past due, (F) the Loans that are Defaulted Loans, (G) the
Average Default Rate, and (H) the Average Net Loss Ratio. The Backup
Servicer shall notify the Deal Agent and the Servicer of any disagreements
with the Monthly Report based on such review not later than the Business
Day preceding such Payment Date to such Persons.
(ii) If the Servicer disagrees with the report provided under
paragraph (i) above by the Backup Servicer or if the Servicer or any
subservicer has not reconciled such discrepancy, the Backup Servicer agrees
to confer with the Servicer to resolve such disagreement on or prior to the
next succeeding Determination Date and shall settle such discrepancy with
the Servicer if possible, and notify the Deal Agent of the resolution
70
thereof. The Servicer hereby agrees to cooperate at its own expense, with
the Backup Servicer in reconciling any discrepancies herein. If within 20
days after the delivery of the report provided under paragraph (i) above by
the Backup Servicer, such discrepancy is not resolved, the Backup Servicer
shall promptly notify the Deal Agent of the continued existence of such
discrepancy. Following receipt of such notice by the Deal Agent, the
Servicer shall deliver to the Deal Agent, the Secured Parties, and the
Backup Servicer no later than the related Payment Date a certificate
describing the nature and amount of such discrepancies and the actions the
Servicer proposes to take with respect thereto.
With respect to the foregoing, the Backup Servicer, in the performance of
its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.
(c) After the receipt of an effective Termination Notice by the Servicer
in accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this Agreement, whether with respect to
the Loans or otherwise shall pass to and be vested in the Backup Servicer,
subject to and in accordance with the provisions of Section 6.27, as long as the
Backup Servicer is not prohibited by an applicable provision of law from
fulfilling the same, as evidenced by an Opinion of Counsel.
(d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on the
part of any of the parties to this Agreement.
(e) As compensation for its back-up servicing obligations hereunder, the
Backup Servicer shall be entitled to receive the Backup Servicing Fee in respect
of each Monthly Period (or portion thereof) until the first to occur of the date
on which the Backup Servicer becomes a Successor Servicer, resigns or is removed
as Backup Servicer or termination of this Agreement.
(f) The Backup Servicer may be removed without cause by the Deal Agent by
notice then given in writing to the Servicer, the Seller and the Backup
Servicer. In the event of any such removal, the Backup Servicer may be replaced
by (i) the Servicer, acting with the consent of the Deal Agent or (ii) if no
such replacement is appointed within 30 days following such removal or
resignation, by the Deal Agent.
(g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or obligations
of the Backup Servicer hereunder. Without limiting the generality of the
foregoing, the Backup Servicer, except as expressly set forth herein,
71
shall have no obligation to supervise, verify, monitor or administer the
performance of the Servicer. The Backup Servicer may act through its agents,
attorneys and custodians in performing any of its duties and obligations under
this Agreement, it being understood by the parties hereto that the Backup
Servicer will be responsible for any misconduct or negligence on the part of
such agents, attorneys or custodians acting on the routine and ordinary day-to-
day operations for and on behalf of the Backup Servicer. Neither the Backup
Servicer nor any of its officers, directors, employees or agents shall be
liable, directly or indirectly, for any damages or expenses arising out of the
services performed under this Agreement other than damages or expenses which
result from the gross negligence or willful misconduct of it or them or the
failure to perform materially in accordance with this Agreement.
(h) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer contained
in any computer tape, certificate or other data or document delivered to the
Backup Servicer hereunder or on which the Backup Servicer must rely in order to
perform its obligations hereunder, and the Seller, Secured Parties, Deal Agent,
Liquidity Agent, Collateral Custodian and Backup Servicer, shall look only to
the Servicer to perform such obligations. The Backup Servicer and the Collateral
Custodian shall have no responsibility and shall not be in default hereunder or
incur any liability for any failure, error, malfunction or any delay in carrying
out any of their respective duties under this Agreement if such failure or delay
results from the Backup Servicer acting in accordance with information prepared
or supplied by a Person other than the Backup Servicer or the failure of any
such other Person to prepare or provide such information.
SECTION 6.25 IDENTIFICATION OF RECORDS.
-------------------------
The Servicer shall clearly and unambiguously identify each Loan that is in
the Asset Pool and the Related Property in its computer or other records to
reflect that the Asset Interests in such Loans and Related Property have been
transferred to and are owned by the Purchasers and that the Deal Agent has the
interest therein granted by the Seller pursuant to this Agreement.
SECTION 6.26 SERVICER TERMINATION EVENTS.
---------------------------
(a) If any one of the following events (a "Servicer Termination Event")
shall occur and be continuing on any day:
(i) any failure by the Servicer to make any payment, transfer or
deposit on or before the date occurring two (2) Business Days after the
date such payment, transfer or deposit is required to be made, or any
failure by the Servicer to give instructions or notice to the Deal Agent as
required by this Agreement or to deliver any Required Reports hereunder and
such failure continues unremedied more than two (2) Business Days after
notice thereof to the Servicer.
(ii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this
72
Agreement or any other Transaction Document which continues unremedied for
a period of 30 days after the first to occur of (i) the date on which
written notice of such failure requiring the same to be remedied shall have
been given to the Servicer by the Deal Agent and (ii) the date on which the
Servicer becomes aware thereof;
(iii) any representation, warranty or certification made
by the Servicer in this Agreement or in any certificate delivered pursuant
to this Agreement shall prove to have been incorrect when made, and which
continues to be unremedied for a period of 30 days after the first to occur
of (i) the date on which written notice of such incorrectness requiring the
same to be remedied shall have been given to the Servicer by the Deal Agent
and (ii) the date on which the Servicer becomes aware thereof;
(iv) the Servicer shall fail in any material respect to service the
Loans in accordance with the Credit and Collection Policies;
(v) an Insolvency Event shall occur with respect to the Servicer; or
(vi) (x) the Servicer ceases to be a wholly-owned subsidiary of First
International Bancorp., Inc., or (y) the Servicer's principal place of
business and chief executive office ceases to be located in the United
States, without the prior written consent of the Deal Agent, VFCC and the
Required Investors.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Termination Events shall not have been remedied at the expiration of any
applicable cure period, the Deal Agent, by written notice to the Servicer (a
"Termination Notice"), may, subject to the provisions of Section 6.27, terminate
all of the rights and obligations of the Servicer as Servicer under this
Agreement. The Seller shall pay all reasonable set-up and conversion costs
associated with the transfer of servicing rights to the Successor Servicer.
SECTION 6.27 APPOINTMENT OF SUCCESSOR SERVICER.
---------------------------------
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 6.26, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Deal Agent in writing or, if no such date
is specified in such Termination Notice or otherwise specified by the Deal
Agent, until a date mutually agreed upon by the Servicer and the Deal Agent.
The Deal Agent may at the time described in the immediately preceding sentence
in its sole discretion, appoint the Backup Servicer as the Servicer hereunder,
and the Backup Servicer shall on such date assume all obligations of the
Servicer hereunder, and all authority and power of the Servicer under this
Agreement shall pass to and be vested in the Backup Servicer (the Backup
Servicer or such other successor, the "Successor Servicer"); provided, however,
-------- -------
that the Successor Servicer shall not be responsible or liable for any past
actions or omissions of the outgoing Servicer. In the event that a Successor
Servicer has not been appointed and has not accepted its appointment at the time
when the Servicer ceases to act as Servicer, the Deal Agent shall petition a
court of
73
competent Jurisdiction to appoint any established financial institution having a
net worth of not less than U.S. $25,000,000 and whose regular business includes
the servicing of Loans as the Successor Servicer hereunder.
(b) Upon its appointment, the Backup Servicer (subject to 6.27(a)) or
the Successor Servicer, as applicable, shall be the successor in all respects to
the Servicer with respect to servicing functions under this Agreement and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and all references in
this Agreement to the Servicer shall be deemed to refer to the Backup Servicer
or the Successor Servicer, as applicable.
(c) All authority and power granted to the Servicer under this Agreement
shall automatically cease and terminate upon termination of this Agreement and
shall pass to and be vested in the Seller and, without limitation, the Seller is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such transfer of servicing rights. The Servicer agrees to
cooperate with the Seller in effecting the termination of the responsibilities
and rights of the Servicer to conduct servicing with respect to the Loans
included in the Asset Pool.
(d) Upon the Backup Servicer receiving notice that it is required to serve
as Servicer hereunder pursuant to the foregoing provisions of this Section 6.27,
the Backup Servicer will promptly begin the transition to its role as Servicer.
SECTION 6.28 NOTIFICATION.
------------
Upon the Servicer becoming aware of the occurrence of any Servicer
Termination Event, the Servicer shall promptly give written notice thereof to
the Deal Agent.
SECTION 6.29 PROTECTION OF RIGHT, TITLE AND INTEREST IN ASSETS.
-------------------------------------------------
The Servicer shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the right, title and interest of the Deal Agent as agent for
the Secured Parties and of the Secured Parties to the Assets to be promptly
recorded, registered and filed, and at all times to be kept recorded, registered
and filed, all in such manner and in such places as may be required by law fully
to preserve and protect the right, title and interest of the Deal Agent as agent
for the Secured Parties hereunder to all property comprising the Asset Pool. The
Servicer shall deliver to the Deal Agent file-stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above, as
soon as available following such recording, registration or filing. The Seller
shall cooperate fully with the Servicer in connection with the obligations set
forth above and will execute any and all documents reasonably required to
fulfill the intent of this Section.
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SECTION 6.30 RELEASE OF LOAN FILES.
---------------------
The Seller may, with the prior written consent of the Deal Agent (such
consent not to be unreasonably withheld), require that the Collateral Custodian
release each Loan File (a) delivered to the Collateral Custodian in error, (b)
for which a Substitute Loan has been substituted in accordance with Section 2.9,
(c) as to which the lien on the Related Property has been so released pursuant
to Section 5.3, (d) which has been retransferred to the Seller pursuant to
Section 5.5 or 5.6, or (e) which is required to be redelivered to the Seller in
connection with the termination of this Agreement, in each case by submitting to
the Collateral Custodian and the Deal Agent a written request (signed by both
the Seller and the Deal Agent) specifying the Loans to be so released and
reciting that the conditions to such release have been met (and specifying the
section or sections of this Agreement being relied upon for such release). The
Collateral Custodian shall upon its receipt of each such request for release
executed by the Seller and the Deal Agent promptly, but in any event within 5
Business Days, release the Loan Files so requested to the Seller.
ARTICLE VII
EARLY AMORTIZATION EVENTS
SECTION 7.1 EARLY AMORTIZATION EVENTS.
-------------------------
If any of the following events (each, an "Early Amortization Event") shall
occur and be continuing:
(a) the Seller or the Servicer shall default in the payment of any amount
required to be made under the terms of this Facility and such failure continues
unremedied for a period of three (3) Business Days after written notice thereof
shall have been given by the Deal Agent or the Collateral Custodian to the
Seller or Servicer; or
(b) the amount of outstanding Capital shall exceed the Capital Limit for
more than three (3) Business Days; or
(c) termination of the then existing AIG Policy without simultaneous
renewal or replacement thereof, unless at such time no AIG Loans are
Outstanding; or
(d) (i) the Seller or the Originator shall fail to perform or observe in
any material respect any other covenant or other agreement of the Seller or the
Originator set forth in this Facility, or (ii) the Originator shall fail to
perform or observe in any material respect any term, covenant or agreement of
such Originator set forth in the Purchase Agreement, in each case when such
failure continues unremedied for more than thirty (30) days after the earlier of
(x) the date written notice thereof shall have been given by the Deal Agent or
the Collateral Custodian to such Person or (y) the date of actual knowledge
thereof by the Seller; or
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(e) any representation or warranty made or deemed made hereunder shall
prove to be incorrect in any material respect as of the time when the same shall
have been made, and such incorrect representation or warranty shall not have
been eliminated or otherwise cured within a period of thirty (30) days after
written notice thereof shall have been given by the Deal Agent or the Collateral
Custodian to the Seller; or
(f) an Insolvency Event shall occur with respect to the Seller or
the Originator; or
(g) a Servicer Termination Event occurs; or
(h) any Change in Control of the Seller or Originator occurs; or
(i) the Seller or the Originator defaults in making any payment required
to be made under any material agreement for borrowed money to which either is a
party and such default gives the relevant lender a right to accelerate the
Seller's or Originator's obligations thereunder and is not cured within the
relevant cure period; or
(j) the Deal Agent, as agent for the Secured Parties, shall fail for any
reason to have a valid and perfected first priority security interest in any of
the Assets; or
(k) (i) a final judgment for the payment of money in excess of $5,000,000
shall have been rendered against the Originator or $1,000,000 against the Seller
by a court of competent jurisdiction and, if such judgment relates to the
Originator, the Originator shall not have either: (1) discharged or provided for
the discharge of such judgment in accordance with its terms, or (2) perfected a
timely appeal of such judgment and caused the execution thereof to be stayed (by
supersedes or otherwise during the pendency of such appeal or (ii) the Seller,
shall have made payments of amounts in excess of $100,000 in settlement of any
litigation; or
(l) the Seller or Originator agrees or consents to, or otherwise permits
to occur, any amendment, modification, change, supplement or recission of or to
the Credit and Collection Policies in whole or in part that could have a
material adverse effect upon the Loans or interest of any Purchaser, without the
prior consent of the Deal Agent or the Purchaser; or
(m) any failure to comply with Section 5.4 and such failure continues for
a period of fifteen (15) days; or
(n) on any Determination Date, the Net Portfolio Yield does not equal or
exceed the Minimum Net Portfolio Yield and such failure continues for a period
of fifteen (15) consecutive days; or
(o) As of any Determination Date, the Average Default Ratio is greater
than four percent (4.0%); or
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(p) As of any Determination Date, the Average Net Loss Ratio is greater
than one and one-half percent (1.5%); or
(q) [Reserved]
(r) the Originator ceases to be a wholly-owned subsidiary of First
International Bancorp., Inc.; or
(s) the Seller ceases to be a "bankruptcy-remote entity" under customary
criteria; or
(t) the Seller shall become an "investment company" within the meaning of
the 1940 Act; or
(u) the noncompliance at any time of the composition of the Asset Pool
with the concentration and mix requirements set forth on Schedule II hereof and
such noncompliance is not cured within five (5) Business Days; or
(v) the business and other activities of the Seller or the Servicer (if
the Originator is the Servicer), including but not limited to, the Purchases
made by the Purchasers, the application and use of the proceeds thereof by the
Seller and the consummation and conduct of the transactions contemplated by the
Transaction Documents to which the Seller or Servicer is a party do not now and
will not in the future result in a violation by the Servicer, the Seller, or any
other person or entity of the 1940 Act or the rules and regulations promulgated
thereunder,
then, and in any such event, the Deal Agent shall, at the request, or may with
the consent, of the Required Investors, by notice to the Seller declare the
Termination Date to have occurred, without demand, protest or future notice of
any kind, all of which are hereby expressly waived by the Seller, and all
Aggregate Unpaids and all other amounts owing by the Seller under this Facility
shall be accelerated and become immediately due and payable, provided, that in
--------
the event that the Termination Event described in subsection (f) herein has
occurred, the Termination Date shall automatically occur, without demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Seller.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNITIES BY THE SELLER.
-------------------------
Without limiting any other rights which the Deal Agent, the Liquidity
Agent, any Secured Party or its assignee, or any of their respective Affiliates
may have hereunder or under applicable law, the Seller hereby agrees to
indemnify the Deal Agent, the Liquidity Agent, any Secured Party or its assignee
and each of their respective Affiliates and officers, directors, employees and
agents thereof (collectively, the "Indemnified Parties") from and against any
and all damages,
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losses, claims, liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") awarded against or incurred by, any such
Indemnified Party or other non-monetary damages of any such Indemnified Party
any of them arising out of or as a result of this Agreement, excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of any Indemnified Party. Without limiting the foregoing,
the Seller shall indemnify the Indemnified Parties for Indemnified Amounts
relating to or resulting from:
(i) any Loan treated as or represented by the Seller to be an
Eligible Loan which is not at the applicable time an Eligible Loan;
(ii) reliance on any representation or warranty made or deemed made
by the Seller, the Servicer (or one of its Affiliates) or any of their
respective officers under or in connection with this Agreement, which shall
have been false or incorrect in any material respect when made or deemed
made or delivered;
(iii) the failure by the Seller or the Servicer (or one of its
Affiliates) to comply with any term, provision or covenant contained in
this Agreement or any agreement executed in connection with this Agreement,
or with any applicable law, rule or regulation with respect to any Loan
comprising a portion of the Assets Pool, the Related Property, or the
nonconformity of any Loan, the Related Property with any such applicable
law, rule or regulation or any failure by the Originator, the Seller or any
Affiliate thereof to perform its respective duties under the Loans included
as a part of the Assets;
(iv) the failure to vest and maintain vested in the relevant
Purchaser or to transfer to such Purchaser, an undivided ownership interest
in the Assets, together with all Collections, free and clear of any Adverse
Claim whether existing at the time of any Purchase or at any time
thereafter;
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Asset
whether at the time of any Purchase or at any subsequent time and as
required by the Transaction Documents;
(vi) any dispute, claim, offset or defense (other than the discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any Loan
included in the Asset Pool which is, or is purported to be, an Eligible
Loan (including, without limitation, a defense based on the Loan not being
a legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms);
(vii) any failure of the Seller or the Servicer (if the Originator or
one of its Affiliates) to perform its duties or obligations in accordance
with the provisions of this
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Agreement or any failure by the Originator, the Seller or any Affiliate
thereof to perform its respective duties under the Loans;
(viii) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever sort
arising out of or in connection with merchandise or services which are the
subject of any Loan included in the Asset Pool or the Related Property
included in the Asset Pool;
(ix) the failure by Seller to pay when due any Taxes for which the
Seller is liable, including without limitation, sales, excise or personal
property taxes payable in connection with the Assets Pool;
(x) any repayment by the Deal Agent, the Liquidity Agent or a
Secured Party of any amount previously distributed in reduction of Capital
or payment of Yield or any other amount due hereunder or under any Hedging
Agreement, in each case which amount the Deal Agent, the Liquidity Agent or
a Secured Party believes in good faith is required to be repaid;
(xi) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of Purchases or in respect of any Loan
included in the Asset Pool or the Related Property included in the Asset
Pool;
(xii) any failure by the Seller to give reasonably equivalent value
to the Originator in consideration for the transfer by the Originator to
the Seller of any Loan or the Related Property or any attempt by any Person
to void or otherwise avoid any such transfer under any statutory provision
or common law or equitable action, including, without limitation, any
provision of the Bankruptcy Code;
(xiii) the failure of the Seller, the Originator or any of their
respective agents or representatives to remit to the Servicer or the Deal
Agent, Collections on the Pool Assets remitted to the Seller or any such
agent or representative; or
(xiv) the failure to maintain, as of the close of business on each
Business Day prior to the Termination Date, an amount of Capital
outstanding which is less than or equal to the lesser of (x) the Purchase
Limit on such Business Day, or (y) the Capital Limit on such Business Day.
Any amounts subject to the indemnification provisions of this Section 8.1 shall
be paid by the Seller solely pursuant to the provisions of Sections 2.7 and 2.9
hereof as the case may be to the Deal Agent within two Business Days following
the Deal Agent's demand therefor.
Any indemnification pursuant to this Section 8.1 shall not be in
duplication of any other indemnification for the same loss under Section 6.21.
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ARTICLE IX
THE DEAL AGENT AND THE LIQUIDITY AGENT
SECTION 9.1 AUTHORIZATION AND ACTION.
------------------------
(a) Each Secured Party hereby designates and appoints the Deal Agent as
Deal Agent hereunder, and authorizes the Deal Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Deal
Agent by the terms of this Agreement together with such powers as are reasonably
incidental thereto. The Deal Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Deal
Agent shall be read into this Agreement or otherwise exist for the Deal Agent.
In performing its functions and duties hereunder, the Deal Agent shall act
solely as agent for the Secured Parties and does not assume nor shall be deemed
to have assumed any obligation or relationship of trust or agency with or for
the Seller or any of its successors or assigns. The Deal Agent shall not be
required to take any action which exposes the Deal Agent to personal liability
or which is contrary to this Agreement or applicable law. The appointment and
authority of the Deal Agent hereunder shall terminate at the indefeasible
payment in full of the Aggregate Unpaids.
(b) Each Investor hereby designates and appoints First Union as Liquidity
Agent hereunder, and authorizes the Liquidity Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the
Liquidity Agent by the terms of this Agreement together with such powers as are
reasonably incidental thereto. The Liquidity Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Liquidity Agent shall be read into this Agreement or otherwise exist for the
Liquidity Agent. In performing its functions and duties hereunder, the Liquidity
Agent shall act solely as agent for the Investors and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. The Liquidity Agent shall
not be required to take any action which exposes the Liquidity Agent to personal
liability or which is contrary to this Agreement or applicable law. The
appointment and authority of the Liquidity Agent hereunder shall terminate at
the indefeasible payment in full of the Aggregate Unpaids.
SECTION 9.2 DELEGATION OF DUTIES.
--------------------
(a) The Deal Agent may execute any of its duties under this Agreement by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Deal Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys-
in-fact selected by it with reasonable care.
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(b) The Liquidity Agent may execute any of its duties under this Agreement
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Liquidity Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 9.3 EXCULPATORY PROVISIONS.
----------------------
(a) Neither the Deal Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Deal Agent, the breach of its obligations expressly set forth in
this Agreement), or (ii) responsible in any manner to any of the Secured Parties
for any recitals, statements, representations or warranties made by the Seller
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document furnished
in connection herewith, or for any failure of the Seller to perform its
obligations hereunder, or for the satisfaction of any condition specified in
Article III. The Deal Agent shall not be under any obligation to any Secured
Party to ascertain or to inquire as to the observance or performance of any of
the agreements or covenants contained in, or conditions of, this Agreement, or
to inspect the properties, books or records of the Seller. The Deal Agent shall
not be deemed to have knowledge of any Early Amortization Event unless the Deal
Agent has received notice from the Seller or a Secured Party.
(b) Neither the Liquidity Agent nor any of its directors, officers, agents
or employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Liquidity Agent, the breach of its obligations expressly set forth
in this Agreement), or (ii) responsible in any manner to the Deal Agent or any
of the Secured Parties for any recitals, statements, representations or
warranties made by the Seller contained in this Agreement or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other document furnished in connection herewith, or for any failure of the
Seller to perform its obligations hereunder, or for the satisfaction of any
condition specified in Article III. The Liquidity Agent shall not be under any
obligation to the Deal Agent or any Secured Party to ascertain or to inquire as
to the observance or performance of any of the agreements or covenants contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Seller. The Liquidity Agent shall not be deemed to have knowledge
of any Early Amortization Event unless the Liquidity Agent has received notice
from the Seller, the Deal Agent or a Secured Party.
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SECTION 9.4 RELIANCE.
--------
(a) The Deal Agent shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Seller), independent accountants and other
experts selected by the Deal Agent. The Deal Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other document furnished in connection herewith unless it shall first receive
such advice or concurrence of VFCC or the Required Investors or all of the
Secured Parties, as applicable, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Secured Parties; provided, that, unless
-------- ----
and until the Deal Agent shall have received such advice, the Deal Agent may
take or refrain from taking any action, as the Deal Agent shall deem advisable
and in the best interests of the Secured Parties. The Deal Agent shall in all
cases be fully protected in acting, or in refraining from acting, in accordance
with a request of VFCC or the Required Investors or all of the Secured Parties,
as applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Secured Parties.
(b) The Liquidity Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, upon any document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Seller), independent accountants and other
experts selected by the Liquidity Agent. The Liquidity Agent shall in all cases
be fully justified in failing or refusing to take any action under this
Agreement or any other document furnished in connection herewith unless it shall
first receive such advice or concurrence of Required Investors as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Investors, provided that unless and until the Liquidity Agent shall have
--------
received such advice, the Liquidity Agent may take or refrain from taking any
action, as the Liquidity Agent shall deem advisable and in the best interests of
the Investors. The Liquidity Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the
Required Investors and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Investors.
SECTION 9.5 NON-RELIANCE ON DEAL AGENT, LIQUIDITY AGENT AND OTHERS.
------------------------------------------------------
Each Secured Party expressly acknowledges that neither the Deal Agent, the
Liquidity Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by the Deal Agent or the Liquidity Agent
hereafter taken, including, without limitation, any review of the affairs of the
Seller, shall be deemed to constitute any representation or warranty by the Deal
Agent or the Liquidity Agent. Each Secured Party represents and warrants to the
Deal Agent and to the Liquidity Agent that it has and will, independently and
without reliance upon the Deal Agent, the Liquidity Agent or any other Secured
Party and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business,
82
operations, property, prospects, financial and other conditions and
creditworthiness of the Seller and made its own decision to enter into this
Agreement.
SECTION 9.6 REIMBURSEMENT AND INDEMNIFICATION.
---------------------------------
The Investors agree to reimburse and indemnify VFCC, the Deal Agent, the
Liquidity Agent and each of their respective officers, directors, employees,
representatives and agents ratably according to their pro rata shares, to the
extent not paid or reimbursed by the Seller (i) for any amounts for which VFCC,
the Liquidity Agent, acting in its capacity as Liquidity Agent, or the Deal
Agent, acting in its capacity as Deal Agent, is entitled to reimbursement by the
Seller hereunder and (ii) for any other expenses incurred by VFCC, the Liquidity
Agent, acting in its capacity as Liquidity Agent, or the Deal Agent, in its
capacity as Deal Agent and acting on behalf of the Secured Parties, in
connection with the administration and enforcement of this Agreement.
SECTION 9.7 DEAL AGENT AND LIQUIDITY AGENT IN THEIR INDIVIDUAL CAPACITIES.
-------------------------------------------------------------
The Deal Agent, the Liquidity Agent and each of their respective Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Seller or any Affiliate of the Seller as though the Deal Agent
or the Liquidity Agent, as the case may be, were not the Deal Agent or the
Liquidity Agent, as the case may be, hereunder. With respect to the making of
Purchases pursuant to this Agreement, the Deal Agent, the Liquidity Agent and
each of their respective Affiliates shall have the same rights and powers under
this Agreement as any Purchaser and may exercise the same as though it were not
the Deal Agent or the Liquidity Agent, as the case may be, and the terms
"Investor," "Purchaser," "Investors" and "Purchasers" shall include the Deal
Agent or the Liquidity Agent, as the case may be, in its individual capacity.
SECTION 9.8 SUCCESSOR DEAL AGENT OR LIQUIDITY AGENT.
---------------------------------------
(a) The Deal Agent may, upon 5 days' notice to the Seller and the Secured
Parties, and the Deal Agent will, upon the direction of all of the Secured
Parties (other than the Deal Agent, in its individual capacity) resign as Deal
Agent. If the Deal Agent shall resign, then the Required Investors during such
5-day period shall appoint from among the Secured Parties a successor agent. If
for any reason no successor Deal Agent is appointed by the Required Investors
during such 5-day period, then effective upon the expiration of such 5-day
period, the Secured Parties shall perform all of the duties of the Deal Agent
hereunder and the Seller shall make all payments in respect of the Aggregate
Unpaids or under any fee letter delivered by the Originator to the Deal Agent
and the Secured Parties directly to the applicable Purchaser and for all
purposes shall deal directly with the Secured Parties. After any retiring Deal
Agent's resignation hereunder as Deal Agent, the provisions of Article VIII and
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Deal Agent under this Agreement.
(b) The Liquidity Agent may, upon 5 days' notice to the Seller, the Deal
Agent and the Investors, and the Liquidity Agent will, upon the direction of all
of the Investors (other than
83
the Liquidity Agent, in its individual capacity) resign as Liquidity Agent. If
the Liquidity Agent shall resign, then the Required Investors during such 5-day
period shall appoint from among the Investors a successor Liquidity Agent. If
for any reason no successor Liquidity Agent is appointed by the Required
Investors during such 5-day period, then effective upon the expiration of such
5-day period, the Investors shall perform all of the duties of the Liquidity
Agent hereunder and all payments in respect of the outstanding Capital. After
any retiring Liquidity Agent's resignation hereunder as Liquidity Agent, the
provisions of Article VIII and Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Liquidity Agent under
this Agreement.
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
SECTION 10.1 ASSIGNMENTS AND PARTICIPATIONS.
------------------------------
(a) Each Investor may upon at least 30 days' notice to VFCC, the Deal
Agent and the Liquidity Agent, and prior to the Termination Date with the
consent of the Seller (which consent shall not be unreasonably withheld), assign
to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement; provided, however, that (i) each such
-------- -------
assignment shall be of a constant, and not a varying percentage of all of the
assigning Investor's rights and obligations under this Agreement, (ii) the
amount of the Commitment of the assigning Investor being assigned pursuant to
each such assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than the lesser of
(A) $10,000,000 or an integral multiple of $1,000,000 in excess of that amount
and (B) the full amount of the assigning Investor's Commitment, (iii) each such
assignment shall be to an Eligible Assignee, (iv) the parties to each such
assignment shall execute and deliver to the Deal Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a
processing and recordation fee of $3,000 or such lesser amount as shall be
approved by the Deal Agent, (v) the parties to each such assignment shall have
agreed to reimburse the Deal Agent, the Liquidity Agent and VFCC for all
reasonable fees, costs and expenses (including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for each of the Deal
Agent, the Liquidity Agent and VFCC) incurred by the Deal Agent, the Liquidity
Agent and VFCC, respectively, in connection with such assignment and (vi) there
shall be no increased costs, expenses or taxes incurred by the Deal Agent, the
Liquidity Agent or VFCC upon such assignment or participation; and provided,
---------
further, that upon the effective date of such assignment the provisions of
--------
Section 3.03(f) of the Administration Agreement shall be satisfied. Upon such
execution, delivery and acceptance by the Deal Agent and the Liquidity Agent and
the recording by the Deal Agent, from and after the effective date specified in
each Assignment and Acceptance, which effective date shall be the date of
acceptance thereof by the Deal Agent and the Liquidity Agent, unless a later
date is specified therein, (i) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
of an Investor hereunder and (ii) the Investor assignor thereunder shall, to the
extent that rights
84
and obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Investor's rights and obligations under
this Agreement, such Investor shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Investor assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Investor makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of VFCC or the performance or observance by VFCC of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Deal Agent or the
Liquidity Agent, such assigning Investor or any other Investor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assigning Investor and such assignee confirm that such
assignee is an Eligible Assignee; (vi) such assignee appoints and authorizes
each of the Deal Agent and the Liquidity Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
such agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as an Investor.
(c) The Deal Agent shall maintain at its address referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Investors and the
Commitment of, and principal amount of, each Asset Interest owned by each
investor from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and VFCC, the
Seller and the Investors may treat each Person whose name is recorded in the
Register as an Investor hereunder for all purposes of this Agreement. The
Register shall be available for inspection by VFCC, the Liquidity Agent or any
Investor at any reasonable time and from time to time upon reasonable prior
notice.
(d) Subject to the provisions of Section 10.1(a), upon its receipt of
an Assignment and Acceptance executed by an assigning Investor and an assignee,
the Deal Agent and the Liquidity Agent shall each, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit D
---------
hereto, accept such Assignment and Acceptance, and the Deal Agent shall
85
then (i) record the information contained therein in the Register and (ii) give
prompt notice thereof to VFCC.
(e) Each Investor may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and each Asset Interest owned by it); provided, however, that (i)
-------- -------
such Investor's obligations under this Agreement (including, without limitation,
its Commitment hereunder) shall remain unchanged, (ii) such Investor shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Deal Agent and the other Investors shall continue
to deal solely and directly with such Investor in connection with such
Investor's rights and obligations under this Agreement; and provided, further,
--------- --------
that the Deal Agent shall have confirmed that upon the effective date of such
participation the provisions of Section 3.03(f) of the Administration Agreement
shall be satisfied. Notwithstanding anything herein to the contrary, each
participant shall have the rights of an Investor (including any right to receive
payment) under Sections 2.14 and 2.15; provided, however, that no participant
-------- -------
shall be entitled to receive payment under either such Section in excess of the
amount that would have been payable under such Section by the Seller to the
Investor granting its participation had such participation not been granted, and
no Investor granting a participation shall be entitled to receive payment under
either such Section in an amount which exceeds the sum of (i) the amount to
which such Investor is entitled under such Section with respect to any portion
of any Asset Interest owned by such Investor which is not subject to any
participation plus (ii) the aggregate amount to which its participants are
----
entitled under such Sections with respect to the amounts of their respective
participations. With respect to any participation described in this Section
10.1, the participant's rights as set forth in the agreement between such
participant and the applicable Investor to agree to or to restrict such
Investor's ability to agree to any modification, waiver or release of any of the
terms of this Agreement or to exercise or refrain from exercising any powers or
rights which such Investor may have under or in respect of this Agreement shall
be limited to the right to consent to any of the matters set forth in Section
11.1 of this Agreement.
(f) Each Investor may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.1, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Seller or VFCC furnished to such
Investor by or on behalf of the Seller or VFCC, but such Investor shall require
such assignee or participant or proposed assignee or participant to keep all
such information confidential.
(g) In the event (i) an Investor ceases to qualify as an Eligible
Assignee, or (ii) an Investor makes demand for compensation pursuant to Section
2.15 or Section 2.16, VFCC may, and, upon the direction of the Seller and prior
to the occurrence of the Termination Date, shall, in any such case,
notwithstanding any provision to the contrary herein, replace such Investor with
an Eligible Assignee by giving three Business Days' prior written notice to such
Investor. In the event of the replacement of an Investor, such Investor agrees
(i) to assign all of its rights and obligations hereunder to an Eligible
Assignee selected by VFCC upon payment to such Investor
86
of the amount of such Investor's Asset Interests together with any accrued and
unpaid Yield thereon, all accrued and unpaid commitment fees owing to such
Investor and all other amounts owing to such Investor hereunder and (ii) to
execute and deliver an Assignment and Acceptance and such other documents
evidencing such assignment as shall be necessary or reasonably requested by VFCC
or the Deal Agent. In the event that any Investor ceases to qualify as an
Eligible Assignee, such affected Investor agrees (1) to give the Deal Agent, the
Seller and VFCC prompt written notice thereof and (2) subject to the following
proviso, to reimburse the Deal Agent, the Liquidity Agent, the Seller, VFCC and
the relevant assignee for all fees, costs and expenses (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for each
of the Deal Agent, the Liquidity Agent, the Seller and VFCC and such assignee)
incurred by the Deal Agent, the Liquidity Agent, the Seller, VFCC and such
assignee, respectively, in connection with any assignment made pursuant to this
Section 10.1(g) by such affected Investor; provided, however, that such affected
-------- -------
Investor's liability for such costs, fees and expenses shall be limited to the
amount of any up-front fees paid to such affected Investor at the time that it
became a party to this Agreement.
(h) Nothing herein shall prohibit any Investor from pledging or
assigning as collateral any of its rights under this Agreement to any Federal
Reserve Bank in accordance with applicable law and any such pledge or collateral
assignment may be made without compliance with Section 10.1(a) or Section
10.1(b).
(i) In the event any Investor causes increased costs, expenses or
taxes to be incurred by the Deal Agent, Liquidity Agreement or VFCC in
connection with the assignment or participation of such Investor's rights and
obligations under this Agreement to an Eligible Assignee then such Investor
agrees that it will make reasonable efforts to assign such increased costs,
expenses or taxes to such Eligible Assignee in accordance with the provisions of
this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 AMENDMENTS AND WAIVERS.
----------------------
(a) Except as provided in this Section 11.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the
written agreement of the Seller, the Deal Agent, VFCC and the Required
Investors; provided, however, that any amendment of this Agreement which is
-------- -------
solely for the purpose of adding a Purchaser or increasing the Commitment of all
Purchasers may be effected with the written consent of the Deal Agent. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
87
(b) No amendment, waiver or other modification affecting the rights or
obligations of any Hedge Counterparty shall be effective against such Hedge
Counterparty without the written agreement of such Hedge Counterparty.
(c) No amendment, waiver or other modification adversely affecting the
rights or obligations of the Backup Servicer or Collateral Custodian shall be
effective against such Backup Servicer or Collateral Custodian without their
written agreement.
(d) The Seller shall not agree to any amendment, waiver or other
modification if the effect thereof is to jeopardize the Seller's status as a
qualifying special purpose entity under FASB statement 125, as amended and
interpreted.
SECTION 11.2 NOTICES, ETC.
------------
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or specified in such party's Assignment and Acceptance or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall be
effective, upon receipt, or in the case of (a) notice by mail, five days after
being deposited in the United States mail, first class postage prepaid, (b)
notice by telex, when telexed against receipt of answer back, or (c) notice by
facsimile copy, when verbal communication of receipt is obtained, except that
notices and communications pursuant to Article 11 shall not be effective until
received with respect to any notice sent by mail or telex.
SECTION 11.3 [RESERVED.]
---------
SECTION 11.4 NO WAIVER, RIGHTS AND REMEDIES.
------------------------------
No failure on the part of the Deal Agent, the Liquidity Agent or any
Secured Party or any assignee of any Secured Party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right. The
rights and remedies herein provided are cumulative and not exclusive of any
rights and remedies provided by law.
SECTION 11.5 BINDING EFFECT.
--------------
This Agreement shall be binding upon and inure to the benefit of the
Seller, the Deal Agent, the Liquidity Agent, the Secured Parties and their
respective successors and permitted assigns and, in addition, the provisions of
Section 2.7 and 2.9 applicable to the Hedge Counterparty shall inure to the
benefit of each Hedge Counterparty, whether or not that Hedge Counterparty is a
Secured Party.
88
SECTION 11.6 TERM OF THIS AGREEMENT.
----------------------
This Agreement, including, without limitation, the Seller's obligation to
observe its covenants set forth in Article V, and the Servicer's obligation to
observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
-------- -------
remedies with respect to any breach of any representation and warranty made or
deemed made by the Seller pursuant to Articles III and IV and the
indemnification and payment provisions of Article VIII and Article IX and the
provisions of Section 11.10 and Section 11.11 shall be continuing and shall
survive any termination of this Agreement.
SECTION 11.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION
-----------------------------------------------------------
TO VENUE.
--------
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK. EACH OF THE SECURED PARTIES, THE SELLER, THE
LIQUIDITY AGENT AND THE DEAL AGENT HEREBY AGREES TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF
THE PARTIES HERETO AND EACH SECURED PARTY HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
SECTION 11.8 WAIVER OF JURY TRIAL.
--------------------
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE SECURED PARTIES, THE
SELLER AND THE DEAL AGENT WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
SECTION 11.9 COSTS, EXPENSES AND TAXES.
-------------------------
(a) In addition to (but without duplication of) the rights of
indemnification granted to the Deal Agent, the Liquidity Agent, the Secured
Parties and its or their Affiliates and officers, directors, employees and
agents thereof under Article VIII hereof, the Seller agrees to pay on demand all
reasonable costs and expenses of the Deal Agent, the Liquidity Agent, and the
Secured Parties incurred in connection with the preparation, execution,
delivery, administration (including periodic auditing), amendment or
modification of, or any waiver or consent issued in
89
connection with, this Agreement and the other documents to be delivered
hereunder or in connection herewith, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Deal Agent, the
Liquidity Agent, and the Secured Parties with respect thereto and with respect
to advising the Deal Agent, the Liquidity Agent, and the Secured Parties as to
their respective rights and remedies under this Agreement and the other
documents to be delivered hereunder or in connection herewith in an amount not
to exceed $85,000 (excluding any Hedge Agreement) provided that the transaction
contemplated herein closes on or before December 29, 1998, and the structure
described in the summary of terms does not materially change, and all costs and
expenses, if any (including reasonable counsel fees and expenses), incurred by
the Deal Agent, the Liquidity Agent, or the Secured Parties in connection with
the enforcement of this Agreement and the other documents to be delivered
hereunder or in connection herewith (including any Hedge Agreement); provided,
--------
that the fees above other than legal fees may not exceed $5,000 per occurrence
and per service provider without FNBNE's consent which shall not unreasonably be
withheld.
(b) The Seller shall pay on demand any and all stamp, sales, excise and
other taxes (excluding taxes based on income) and fees payable or determined to
be payable in connection with the execution, delivery, filing and recording of
this Agreement, the other documents to be delivered hereunder or any agreement
or other document providing liquidity support, credit enhancement or other
similar support to the Purchasers in connection with this Agreement or the
funding or maintenance of Capital hereunder.
(c) The Seller shall pay on demand all other costs, expenses and taxes
(excluding income taxes) ("Other Costs"), including, without limitation, all
reasonable costs and expenses incurred by the Deal Agent in connection with
periodic audits of the Seller's or the Servicer's books and records and the cost
of rating VFCC's commercial paper by independent financial rating agencies,
which are incurred as a result of the execution of this Agreement.
SECTION 11.10 NO PROCEEDINGS.
--------------
Each of the Seller, the Deal Agent, the Liquidity Agent and the Secured
Parties hereby agrees that it will not institute against, or join any other
Person in instituting against VFCC any proceedings of the type referred to in
Section 4.1(f) so long as any commercial paper issued by VFCC shall be
outstanding and there shall not have elapsed one year and one day since the last
day on which any such commercial paper shall have been outstanding.
SECTION 11.11 RECOURSE AGAINST CERTAIN PARTIES.
--------------------------------
(a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Secured Party as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any manager or administrator of such
Secured Party or any incorporator, affiliate, stockholder, officer, employee
90
or director of such Secured Party or of any such manager or administrator, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise; it being expressly agreed and
-- ----- --------- ------ ---
understood that the agreements of such Secured Party contained in this Agreement
----------
and all of the other agreements, instruments and documents entered into by it
pursuant hereto or in connection herewith are, in each case, solely the
corporate obligations of such Secured Party, and that no personal liability
whatsoever shall attach to or be incurred by any manager or administrator of
such Secured Party or any incorporator, stockholder, affiliate, officer,
employee or director of such Secured Party or of any such manager or
administrator, as such, or any other of them, under or by reason of any of the
obligations, covenants or agreements of such Secured Party contained in this
Agreement or in any other such instruments, documents or agreements, or which
are implied therefrom, and that any and all personal liability of every such
manager or administrator of such Secured Party and each incorporator,
stockholder, affiliate, officer, employee or director of such Secured Party or
of any such administrator, or any of them, for breaches by such Secured Party of
any such obligations, covenants or agreements, which liability may arise either
at common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement.
(b) Notwithstanding anything in this Agreement or any other Transaction
Document to the contrary, VFCC shall have no obligation to pay any amount
required to be paid by it hereunder or thereunder in excess of any amount
available to VFCC after paying or making provision for the payment of its
Commercial Paper Notes. All payment obligations of VFCC hereunder are contingent
upon the availability of funds in excess of the amounts necessary to pay
Commercial Paper Notes; and each of the Seller, the Servicer, the Backup
Servicer, the Deal Agent, the Liquidity Agent and the Secured Parties agrees
that they shall not have a claim under Section 101(5) of the Bankruptcy Code if
and to the extent that any such payment obligation exceeds the amount available
to VFCC to pay such amounts after paying or making provision for the payment of
its Commercial Paper Notes.
(c) The provisions of this Section 11.11 shall survive the termination of
this Agreement.
SECTION 11.12 PROTECTION OF OWNERSHIP INTEREST; APPOINTMENT OF DEAL AGENT
-----------------------------------------------------------
AS ATTORNEY-IN-FACT.
-------------------
(a) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may reasonably be necessary or desirable, or that the Deal Agent
may reasonably request, to perfect, protect or more fully evidence the Asset
Interests and the undivided ownership interest in the Assets in the Asset Pool
represented by such Asset Interests, or to enable the Deal Agent or the Secured
Parties to exercise and enforce their rights and remedies hereunder.
(b) If the Seller or the Servicer fails to perform any of its obligations
hereunder after five Business Days' notice from the Deal Agent, the Deal Agent
or any Secured Party may (but
91
shall not be required to) perform, or cause performance of, such obligation; and
the Deal Agent's or such Secured Party's reasonable costs and expenses incurred
in connection therewith shall be payable by the Seller (if the Servicer that
fails to so perform is the Seller or an Affiliate thereof) as provided in
Article VIII, as applicable. The Seller irrevocably authorizes the Deal Agent
and appoints the Deal Agent as its attorney-in-fact to act on behalf of the
Seller (i) to execute on behalf of the Seller as debtor and to file financing
statements necessary or desirable in the Deal Agent's sole discretion to perfect
and to maintain the perfection and priority of the interest of the Secured
Parties in the Asset Pool and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to the
Asset Pool as a financing statement in such offices as the Deal Agent in its
sole discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the interests of the Secured Parties in the Asset
Pool. This appointment is coupled with an interest and is irrevocable.
(c) The parties hereto intend that the conveyance of Asset Interests by
the Seller to the Purchasers shall be treated as sales for all purposes. If,
despite such intention, a determination is made that such transactions shall not
be treated as sales, then the parties hereto intend that this Agreement
constitutes a security agreement and the transactions effected hereby constitute
secured loans by the Purchasers to the Seller under applicable law. For such
purpose, the Seller hereby transfers, conveys, assigns and grants to the Deal
Agent, for the benefit of the Secured Parties, a continuing security interest in
all Assets, all Collections, all Hedging Agreements and the proceeds of the
foregoing to secure the repayment of all Capital, all payments at any time due
or accrued in respect of the Yield on any Asset Interest and all other payments
at any time due (whether accrued or due) by the Seller hereunder (including
without limit any amount owing under Article VIII hereof), under any Hedging
Agreement (including, without limitation, payments in respect of the termination
of any such Hedging Agreement) or under any fee letter to the Deal Agent and
each Purchaser.
SECTION 11.13 CONFIDENTIALITY
---------------
(a) Each of the Deal Agent, the Secured Parties, the Liquidity Agent and
the Seller shall maintain and shall cause each of its employees and officers to
maintain the confidentiality of the Agreement and the other confidential
proprietary information with respect to the other parties hereto and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers and employees may (i) disclose such information
to its external accountants and attorneys and as required by an applicable law
or order of any judicial or administrative proceeding, (ii) disclose the
existence of this Agreement, but not the financial terms thereof and (iii)
disclose the Agreement and such information in any suit, action, proceeding or
investigation (whether in law or in equity or pursuant to arbitration) involving
and of the Transaction Documents or any Hedging Agreement for the purpose of
defending itself, reducing itself, reducing its liability, or protecting or
exercising any of its claims, rights, remedies, or interests under or in
connection with any of the Transaction Documents or any Hedging Agreement.
92
(b) Anything herein to the contrary notwithstanding, the Seller hereby
consents to the disclosure of any nonpublic information with respect to it (i)
to the Deal Agent, the Liquidity Agent, or the Secured Parties by each other,
(ii) by the Liquidity Agent, the Deal Agent or the Secured Parties to any
prospective or actual Eligible Assignee or participant of any of them or (iii)
by the Deal Agent, the Liquidity Agent or the Secured Parties to any Rating
Agency, commercial paper dealer or provider of a surety, guaranty or credit or
liquidity enhancement to a Secured Party and to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing, provided
each such Person is informed of the confidential nature of such information and
agree to be bound hereby. In addition, the Secured Parties, the Liquidity Agent
and the Deal Agent may disclose any such nonpublic information pursuant to any
law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings.
SECTION 11.14 EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION.
----------------------------------------------------
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Originator to the Deal Agent and the
Purchasers.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
63
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: FNBNE FUNDING CORP.
By___________________________________
Title:
FNBNE Funding Corp.
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
THE SERVICER: FIRST NATIONAL BANK OF NEW ENGLAND
By___________________________________
Title:
First National Bank of New England
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
THE BACKUP SERVICER: MARINE MIDLAND BANK
By______________________________________
Title: Assistant Vice President
Marine Midland Bank
▇▇▇ ▇▇▇▇▇▇▇▇
Corporate Trust Department, 12th Floor
New York, NY 10005
Attention: ▇▇▇▇▇ Barstock
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
THE COLLATERAL CUSTODIAN: MARINE MIDLAND BANK
By______________________________________
Title: Assistant Vice President
Marine Midland Bank
▇▇▇ ▇▇▇▇▇▇▇▇
Corporate Trust Department, 12th Floor
New York, New York 10005
Attention: ▇▇▇▇▇ Barstock
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
THE INVESTORS: FIRST UNION NATIONAL BANK
By_______________________________
Title:
Commitment: $65,000,000
First Union National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No: (▇▇▇) ▇▇▇-▇▇▇▇
VFCC: VARIABLE FUNDING CAPITAL CORPORATION
By First Union Capital Markets, a division of
Wheat First Securities, Inc., as attorney-in-
fact
By_______________________________
Title:
Variable Funding Capital Corporation
c/o First Union Capital Markets
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Conduit Administration
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Lord Securities Corp.
Attention:
Facsimile No.: (____) __________
Confirmation No.: (____) __________
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS, a
division of WHEAT FIRST SECURITIES, INC.
By_____________________________________
Title:
First Union Capital Markets
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Conduit Administration
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
THE LIQUIDITY AGENT: FIRST UNION NATIONAL BANK
By_____________________________________
Title:
First Union National Bank
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇