Exhibit 10.1
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SECURITIES REPURCHASE AGREEMENT
by and among
Renaissance REIT Investment Corp.,
as Seller
Delta Funding Corporation,
as Seller,
Delta Financial Corporation,
as Guarantor
and
AG Delta Holdings, LLC,
as Buyer
Dated as of August 13, 2007
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TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS......................................................1
SECTION 2. INITIATION; TERMINATION..........................................9
SECTION 3. PERIODIC PAYMENTS...............................................11
SECTION 4. SECURITY INTEREST...............................................11
SECTION 5. PAYMENT, TRANSFER AND CUSTODY...................................11
SECTION 6. REPRESENTATIONS.................................................12
SECTION 7. COVENANTS OF SELLERS............................................16
SECTION 8. EVENTS OF DEFAULT...............................................19
SECTION 9. REMEDIES........................................................21
SECTION 10. JOINT AND SEVERAL OBLIGATIONS OF SELLERS........................23
SECTION 11. GUARANTEE.......................................................23
SECTION 12. INDEMNIFICATION.................................................25
SECTION 13. NOTICES AND OTHER COMMUNICATIONS................................26
SECTION 14. ENTIRE AGREEMENT; SEVERABILITY..................................27
SECTION 15. ASSIGNMENTS.....................................................27
SECTION 16. TERMINABILITY...................................................27
SECTION 17. GOVERNING LAW...................................................28
SECTION 18. SUBMISSION TO JURISDICTION; WAIVERS.............................28
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SECTION 19. NO WAIVERS, ETC.................................................29
SECTION 20. MISCELLANEOUS...................................................29
SECTION 21. CONFIDENTIALITY.................................................29
SECTION 22. INTENT..........................................................30
SECTION 23. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS..............30
SECTION 24. CONFLICTS.......................................................30
SECTION 25. TAX TREATMENT...................................................30
SECTION 26. BUYER OBLIGATIONS...............................................31
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SCHEDULES
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SCHEDULE I Purchased Securities
SCHEDULE II Bond File Documents
SCHEDULE III Disclosures
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SECURITIES REPURCHASE AGREEMENT
This SECURITIES REPURCHASE AGREEMENT (this "REPURCHASE
AGREEMENT"), dated as of August 13, 2007, is entered into by and among
Renaissance REIT Investment Corp. ("RENAISSANCE"), a Maryland corporation and
Delta Funding Corporation ("DELTA"), a New York corporation, each as a seller
(each, a "SELLER" and together, the "SELLERS"), Delta Financial Corporation, a
Delaware corporation, as guarantor (the "GUARANTOR") and AG Delta Holdings, LLC,
a Delaware limited liability company, as buyer (the "BUYER").
In consideration of the mutual promises and obligations set
forth herein, the parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Repurchase Agreement in the singular to have the same meanings when used in the
plural and VICE VERSA):
"AFFILIATE" shall mean with respect to any Person, any
"affiliate" of such Person, as such term is defined in the Bankruptcy Code.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code
of 1978, as amended from time to time.
"BOND CUSTODIAN" shall mean either (i) Buyer, or (ii) any
other Person designated by Buyer, as custodian of the Purchased Securities and
Bond Files.
"BOND FILE" shall have the meaning provided in Schedule II
hereto.
"BUSINESS DAY" shall mean a day other than (i) a Saturday or
Sunday, (ii) any day on
which banking institutions are authorized or required by law, executive order or
governmental decree to be closed in the State of New York, or (iii) any day on
which the New York Stock Exchange is closed.
"BUYER" shall mean AG Delta Holdings, LLC, its successors and
assigns.
"CASH EQUIVALENTS" shall mean (a) securities with maturities
of 90 days or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b) certificates
of deposit and eurodollar time deposits with maturities of 90 days or less from
the date of acquisition and overnight bank deposits of any commercial bank
having capital and surplus in excess of $500,000,000, (c) repurchase obligations
of any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than seven days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d)
commercial paper of a domestic issuer rated at least "A-1" or the equivalent
thereof by Standard and Poor's Ratings Group ("S&P") or "P-1" or the equivalent
thereof by ▇▇▇▇▇'▇ Investors Service, Inc. ("MOODY'S") and in either case
maturing within 90 days after the day of acquisition, (e) securities with
maturities of 90 days or
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less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least "A" by S&P or "A-2" by Moody's, (f) securities with maturities of
90 days or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank satisfying the requirements of clause (b) of this
definition or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.
"CHANGE IN CONTROL" shall mean the occurrence of any of the
following: (i) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any Person
(other than a Person owning such an interest on the date hereof) becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act), directly or indirectly, of more than 50% of the voting stock
of either Seller or Guarantor (measured by general voting power rather than
number of shares) or (ii) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation and excluding sales,
leases, transfers, conveyances or other dispositions pursuant to
Securitizations, Warehouse Facilities or residual financing arrangements entered
into in the ordinary course of business), in one or a series of transactions, of
all or substantially all of the assets of Guarantor and its Consolidated
Subsidiaries taken as a whole.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"CONSOLIDATED SUBSIDIARY" shall mean any subsidiary of the
Guarantor consolidated with the Guarantor for accounting purposes in accordance
with GAAP.
"DEFAULT" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"DELTA PARTY" SHALL MEAN EACH OF THE GUARANTOR AND EACH OF THE
SELLERS AND "DELTA PARTIES" SHALL MEAN THE GUARANTOR AND BOTH OF THE SELLERS,
COLLECTIVELY.
"DOLLARS" and "$" shall mean lawful money of the United States
of America.
"EFFECTIVE DATE" shall mean the date upon which the conditions
precedent set forth in Section 3(a) shall have been satisfied.
"ELIGIBLE FINANCIAL Institution" shall mean a financial
institution with a short term deposit rating or the equivalent thereof of at
least "A-1" by S&p or at least "P-1" by Moody's or a long term debt rating of
"A" by S&P or "A3" by Moody's.
"EQUITY DOCUMENTS" shall mean the Warrant Acquisition
Agreement, Warrant, Management Rights Letter, Voting and Support Agreement and
Investor Rights Agreement, each entered into by Guarantor or one or more
Affiliates of Guarantor, on the one hand, and AG Delta Holdings, LLC or one or
more Affiliates of AG Delta Holdings, LLC, on the other hand, in each
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case dated on or about the date hereof, and such other related agreements as may
be entered into in connection therewith.
"EVENT OF DEFAULT" has the meaning specified in Section 8
hereof.
"EVENT OF INSOLVENCY" shall mean, for any Person:
(a) that such Person shall fail generally to, or admit its
inability to, pay its debts as they become due; or
(b) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
such Person in an involuntary case under any applicable bankruptcy, insolvency,
liquidation, reorganization or other similar law now or hereafter in effect, or
for the appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrate, conservator or other similar official of such Person, or for any
substantial part of its property, or for the winding-up or liquidation of its
affairs and such proceeding shall not be dismissed within thirty (30) days from
the commencement thereof; or
(c) the commencement by such Person of a voluntary case under
any applicable bankruptcy, insolvency, liquidation, reorganization or other
similar Law now or hereafter in effect, or such Person's consent to the entry of
an order for relief in an involuntary case under any such Law, or consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrate, conservator or other similar official of such
Person, or for any substantial part of its property, or any general assignment
for the benefit of creditors; or (d) if such Person is a corporation, such
Person, or any Subsidiary of such Person, shall take any corporate action in
furtherance of, or the action of which would result in any of the actions set
forth in the preceding clause (a), (b), (c) or (d).
"GAAP" shall mean generally accepted accounting principles in
the United States of America, as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles board and the American
Institute of Certified Public Accountants and the Statements of the Financial
Accounting Standards Board, which are applicable to the circumstances as of the
date of determination, consistently applied.
"GOVERNING AGREEMENT" Shall mean, with respect to a Purchased
Security, the agreement or agreements under which such Purchased Security was
issued and pursuant to which the rights of a holder thereof are governed.
"GOVERNMENTAL AUTHORITY" shall mean the government of the
United States of America or of any state, county, municipality or other
political subdivision thereof or any governmental body, agency, authority,
department or commission (including, without limitation, any taxing authority)
or any instrumentality or officer of any of the foregoing (including, without
limitation, any court or tribunal) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
corporation, partnership or other entity directly or indirectly owned by or
controlled by the foregoing having jurisdiction over Sellers or any of its
properties.
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"INCOME" shall mean, with respect to any Purchased Security at
any time after the date hereof, any principal thereof then payable and all
interest, dividends or other distributions payable thereon.
"INDEBTEDNESS" shall mean, for any Person: (a) all obligations
for borrowed money; (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
and paid within ninety (90) days of the date the respective goods are delivered
or the respective services are rendered; (c) indebtedness of others secured by a
lien on the Property of such Person, whether or not the respective indebtedness
so secured has been assumed by such Person; (d) obligations (contingent or
otherwise) of such Person in respect of letters of credit or similar instruments
issued for account of such Person; (e) capital lease obligations of such Person;
(f) obligations of such Person under repurchase agreements or like arrangements;
(g) indebtedness of others guaranteed on a recourse basis by such Person; (h)
all obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; (i) indebtedness of general
partnerships of which such Person is a general partner; and (j) any other
indebtedness of such Person by a note, bond, debenture or similar instrument.
Notwithstanding the foregoing, the term "Indebtedness" does not include
obligations pursuant to representations, warranties, covenants and indemnities
in connection with a Securitization or Warehouse Facility.
"INSTRUCTION LETTER" shall mean with respect to each Purchased
Security which is not registered in the name of Buyer, a letter of irrevocable
instruction from the applicable Seller to, and acknowledged by, the paying agent
under the related Governing Agreement and any other Person, if any, to whom such
instruction is required to be delivered pursuant to the terms of the related
Governing Agreement, in which such Person(s) agree to remit any collections with
respect to the applicable Purchased Security to or at the direction of Buyer as
Buyer may direct in writing from time to time.
"LATE PAYMENT FEE" has the meaning specified in Section 3(a)
hereof.
"LEVERAGE RATIO" shall mean, with respect to the Guarantor and
its Consolidated Subsidiaries, the ratio of total liabilities (excluding
non-recourse securitization debt and including any contingent liabilities) to
Tangible Net Worth.
"LIBOR DETERMINATION DATE" shall mean, with respect to each
Payment Accrual Period, the second Business Day preceding such Payment Accrual
Period.
"LIBOR RATE" as of any LIBOR Determination Date shall mean the
London interbank offered rate for deposits in U.S. dollars on the basis of the
rate for deposits in United States dollars for a one-month period which appears
on Reuters Screen LIBOR01 as of 11:00 a.m., London time, on such date. If such
rate does not appear on Reuters Screen LIBOR01, the rate for that LIBOR
Determination Date shall be determined on the basis of the rates at which
deposits in United States dollars are offered by at least two major banks,
selected by Buyer, at approximately 11:00 a.m., London time, on that day to
prime banks in the London interbank market for a one-month period.
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"LIEN" shall mean any lien, charge, pledge, security interest,
mortgage, deed of trust or other similar encumbrance.
"LIQUIDITY" shall mean, with respect to a Person, unrestricted
cash and Cash Equivalents and available and unused borrowing capacity under any
committed credit facility in favor of such Person from an Eligible Financial
Institution.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (a) the Property, business, operations, or financial condition of the Sellers
or the Guarantor, (b) the ability of the Sellers or the Guarantor to perform its
respective obligations under this Repurchase Agreement, (c) the validity or
enforceability of this Repurchase Agreement against Sellers or the Guarantor,
(d) the rights and remedies of Buyer under this Repurchase Agreement, or (e) the
Market Value of the Purchased Securities taken as a whole.
"MOODY'S" shall mean Moody's Investor's Service, Inc. or any
successors thereto.
"MORTGAGE" shall mean each mortgage, assignment of rents,
security agreement and fixture filing, deed of trust and deed to secure debt or
similar instrument creating and evidencing a first or second lien on real
property and other property and rights incidental thereto.
"NET INCOME" shall mean, for any Person for any period, the
net income of such Person for such period as determined in accordance with GAAP.
"NET WORTH" shall mean, as of any date of determination
thereof, the net worth of Guarantor, as determined in accordance with GAAP.
"OBLIGATIONS" shall mean any amounts due and payable by
Sellers to Buyer in connection with the Transaction hereunder (including,
without duplication, interest which would be payable as post-petition interest
in connection with any bankruptcy or similar proceeding) and all other
reasonable fees or expenses which are payable hereunder.
"OPTIONAL REPURCHASE DATE" SHALL HAVE THE MEANING SET FORTH IN
SECTION 2(C) HEREOF.
"PABRAI FUNDS COMMITMENT" shall mean a binding commitment to
Guarantor from funds controlled by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to purchase convertible notes
from Guarantor.
"PATRIOT ACT" shall mean the USA Patriot Act, Title III of
Pub. L. 107-56, signed into law on October 26, 2001 or any subsequent
legislation that amends, supplements or supersedes such Act.
"PAYMENT DATE" shall mean the 25th day of each month or if
such day is not a Business Day the following Business Day, commencing in August
2007.
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"PAYMENT ACCRUAL PERIOD" with respect to any Payment Date
shall mean the period from an including one Payment Date to but excluding the
immediately following Payment Date, provided, however, that (i) the initial
Payment Accrual Period shall commence on and include the Purchase Date and (ii)
the final Payment Accrual Period shall end on but exclude the Repurchase Date.
"PERMITTED LIENS" shall mean, (a) Liens created by this
Repurchase Agreement, (b) Liens securing the payment of taxes, assessments or
other governmental charges or levies either not yet overdue or the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Seller or Guarantor, as the case may be, and with
respect to which adequate reserves have been set aside on its books, (c)
carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like
Liens imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 calendar days or are being
contested in good faith, (d) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations (e) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property or interfere with the ordinary conduct of business of the Sellers or
Guarantors, (f) judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided that such
liens are being contested in good faith and by appropriate proceedings
diligently pursued, adequate reserves or other appropriate provision, if any, as
are required by GAAP have been made therefore and a stay of enforcement of any
such lien is in effect, (g) Liens on receivables or other assets securing
Warehouse Facilities or Securitizations (or guarantees of Warehouse Facilities
or Securitizations), (h) Liens on property of a Person existing at the time such
Person is merged into or consolidated with Guarantor; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with Guarantor, (i) Liens on property existing at the time of
acquisition thereof by Guarantor, provided that such Liens were in existence
prior to the contemplation of such acquisition, (j) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other Obligations of a like nature incurred in the ordinary course of
business, (k) Liens existing on the date of this Repurchase Agreement, (m) Liens
on real property acquired by any Seller, (l) Liens created in connection with
Indebtedness permitted under this Repurchase Agreement (m) Liens on notes,
certificates or other securities issued in connection with a Securitization and
(n) Liens incurred in the ordinary course of business of Guarantor and its
Consolidated Subsidiaries securing obligations that do not exceed one million
Dollars at any one time outstanding and that (i) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (ii) do not in the
aggregate materially detract from the value of the property or materially impair
the use thereof in the operation of business by the Guarantor or applicable
Subsidiary.
"PERSON" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, limited liability company,
trust, unincorporated association or government (or any agency, instrumentality
or political subdivision thereof).
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"POST-PETITION RATE" shall mean the LIBOR Rate plus two
percent (2.00%).
"PRICE DIFFERENTIAL" shall mean, with respect to any Payment
Date, the sum of the amounts obtained by application of the Pricing Rate to the
Repurchase Price for each day during the related Payment Accrual Period on a 360
day per year basis.
"PRICING RATE" with respect to each Payment Accrual Period,
shall mean a rate per annum equal to the sum of (a) the applicable LIBOR Rate
plus (b) 6.00%; provided, however, that upon the occurrence of an Event of
Insolvency with respect to any Seller or the Guarantor, the Pricing Rate shall
thereafter mean (a) the applicable LIBOR Rate plus (b) 8.00%;.
"PROPERTY" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PURCHASE DATE" shall mean the date on which the Purchased
Securities are transferred by Sellers to Buyer or its designee.
"PURCHASE PRICE" shall mean $60,000,000 (Sixty Million
Dollars).
"PURCHASED SECURITIES" shall mean, as of any date, the
securities as set forth on Schedule I hereto sold by each Seller to Buyer on the
Purchase Date and not yet repurchased by the applicable Seller as of such date
and the Series 2007-3 Residual.
"QRS" shall mean a "Qualified REIT Subsidiary" as defined in
the Code.
"RATING AGENCY" shall mean each of S&P and Moody's.
"REIT" shall mean a "Real Estate Investment Trust" as defined
in the Code.
"REIT SECURITIES" as defined in Schedule I attached hereto.
"REPURCHASE DATE" shall mean the first to occur of (i) the
Termination Date, (ii) the Optional Repurchase Date, (iii) the date on which an
Event of Default occurs in accordance with Section 8 hereof, (iv) the date on
which the Repurchase Price and all other amounts owing by Sellers and Guarantor
to Buyer hereunder have been paid in full and (v) the date on which any material
provision of this Repurchase Agreement shall cease to be valid, binding and
enforceable with respect to a Seller or the Guarantor in accordance with its
terms.
"REPURCHASE PRICE" shall mean the price at which the Purchased
Securities are to be transferred from Buyer or its designee to applicable
Seller, which on any date will be the Purchase Price decreased by the amount of
any Income received by Buyer and applied to reduce the Sellers' obligations
under Section 3(b) hereof and increased by any accrued and unpaid Price
Differential.
"S&P" shall mean Standard & Poor's Ratings Service, or any
successor thereto.
"SECURITIZATION" shall mean a pooling together and conveyance
of mortgage loans or mortgage-related securities to a newly formed trust or
other entity (i) that is established for the
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limited purpose of (x) receiving such mortgage loans or mortgage-related
securities, and (y) issuing securities for which the source of payment is the
cash flows generated by such mortgage loans or mortgage-related securities and
(ii) as to the Indebtedness of which the Guarantor and its Affiliates do not
have any direct or contingent liability (except for the standard representations
and warranties typically made as part of a sale of loans on a non-recourse
basis).
"SELLERS" shall mean Renaissance REIT Investment Corp. and
Delta Funding Corporation, or in each case, any successor in interest thereto.
"SERIES 2007-3 RESIDUAL" shall mean the security evidencing
the residual interest in the first Securitization entered into by Guarantor or
any of its Affiliates on or after the date hereof so long as such security has
not been sold to an arms length third party at the time of issuance thereof.
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"TANGIBLE NET WORTH" shall mean Net Worth, less the sum of the
following (without duplication): (a) any other assets of the Guarantor and its
consolidated Subsidiaries that would be treated as intangibles under GAAP,
including, without limitation, any write up of assets (other than adjustments to
market value to the extent required under GAAP with respect to excess servicing,
residual interests in offerings of Asset Backed Securities and Asset Backed
Securities which are interest-only securities), good will, research and
development costs, trade marks, trade names, copyrights, patents and unamortized
debt discount and expenses and (b) loans or other extensions of credit to
officers of the Sellers or any of its consolidated Subsidiaries other than
mortgage loans made to such Persons in the ordinary course of business.
"TERMINATION DATE" shall mean the Business Day immediately
preceding the first anniversary of the date hereof.
"TRANSACTION" shall mean, collectively, the sale and
repurchase transactions contemplated hereunder.
"WAREHOUSE FACILITY" shall mean a credit facility pursuant to
which a lender under a loan agreement or buyer under a repurchase agreement
advances funds, the repayment of which is collateralized by mortgage loans and
related collateral, to finance or refinance the purchase or origination of
mortgage loans by a Seller, the Guarantor or its Affiliates.
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SECTION 2 INITIATION; TERMINATION
(a) CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO PURCHASE.
Buyer's obligation to purchase the Purchased Securities is subject to the
satisfaction of the following conditions precedent:
(i) the Purchased Securities, other than the Series 2007-3
Residual, and the related Bond Files shall have been transferred to Buyer or its
agent against, in form suitable for transfer, with accompanying, duly executed
instruments of transfer or appropriate instruments of assignment executed in
blank;
(ii) Buyer shall have received from Sellers and Guarantor any fees
and expenses payable hereunder on or before the Purchase Date;
(iii) the following documents, each of which shall be, in form and
substance, reasonably satisfactory to Buyer and its counsel shall have been
received by Buyer:
(A) this Repurchase Agreement, duly executed by the parties
thereto;
(B) an opinion or opinions of in house counsel of the Sellers
and the Guarantor as to general corporate matters;
(C) an opinion or opinions of outside counsel to Sellers and
the Guarantor (i) with respect to the enforceability of this Repurchase
Agreement, (ii) with respect to the creation and perfection of the
security interests created hereby, (iii) as required under the
documents pursuant to which the Purchased Securities were issued as a
result of the transactions contemplated hereby and (iv) with respect to
such other matters as Buyer and its counsel may reasonably request; and
(D) a certificate of existence of each Seller and the
Guarantor delivered to Buyer prior to the Purchase Date (or if
unavailable, as soon as available thereafter) and certified copies of
the formation documents (or equivalent documents) of each Seller and
the Guarantor and of all corporate or other authority for each Seller
and the Guarantor with respect to the execution, delivery and
performance of this Repurchase Agreement and each other document to be
delivered by each Seller and the Guarantor from time to time in
connection herewith;
(iv) no Default or Event of Default shall have occurred and be
continuing under this Repurchase Agreement;
(v) both immediately prior to the Transaction and after giving effect
thereto and to the intended use thereof, the representations and warranties made
by Sellers and Guarantor in Section 6 hereof, shall be true, correct and
complete on and as of the Purchase Date in all material respects with the same
force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date);
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(vi) the terms and conditions of the Equity Documents shall be
satisfactory in all respects to Buyer and shall be effective in accordance with
the terms thereof and applicable law;
(vii) neither the Guarantor nor any of its Affiliates, individually or
in the aggregate, shall have outstanding obligations in respect of margin calls
that exceeds $24 million.
(viii) the Pabrai Funds Commitment is in full force and effect and
conditions precedent to the funding of the Pabrai Funds Commitment have been
satisfied other than, to the extent applicable, the purchase by Buyer of the
Purchased Securities hereunder.
(b) PURCHASE. Buyer shall on such Business Day as is requested
by Sellers (or on such following Business Day if the conditions set forth in
Section 2(a) are not satisfied before 4:00 p.m. on the date requested),
following satisfaction by Sellers or waiver, in its sole discretion, by Buyer,
of the provisions of Section 2(a) hereof, remit the Purchase Price to or at the
direction of the Sellers pursuant to wire instructions provided to Buyer by each
of the Sellers. Simultaneously with receipt of such payment of the Purchase
Price, Sellers shall be deemed to have transferred, conveyed and assigned to
Buyer, or its designee, without recourse, but subject to the terms of this
Repurchase Agreement, all the right, title and interest of the Sellers in and to
(i) the Purchased Securities, (ii) all Income, (iii) the Bond Files and (iv) all
proceeds of each of the foregoing (the items set forth in the foregoing clauses
(i)-(iv), collectively, the "PURCHASED ASSETS"). Purchased Securities
transferred to Buyer pursuant to this Repurchase Agreement shall be in suitable
form for transfer or shall be accompanied by duly executed instruments of
transfer or assignment in blank or such other documentation as Buyer may
reasonably request in connection therewith.
(c) REPURCHASE AND TERMINATION.
(i) On the Repurchase Date, termination of the Transaction will be
effected by reassignment to Sellers or their respective designee of the
Purchased Securities (and any Income in respect thereof received by Buyer not
previously credited or transferred to, or applied to the obligations of, Sellers
pursuant to Section 3) against the simultaneous transfer of the Repurchase Price
to an account of Buyer by wire transfer initiated by 4:00 p.m. (New York time).
Buyer is obligated to return the Bond Files to Sellers, at Sellers' expense, on
the Repurchase Date.
(ii) On the first date on which Sellers shall have been paid in full to
Buyer, the Buyer shall deliver to Sellers all such documents and take all such
further actions as are reasonably requested by Sellers in order to record or
register the Purchased Securities in the name of the Sellers and release any
security interest therein granted to the Buyer.
(iii) Sellers may, at their option, on any Business Day (the "OPTIONAL
REPURCHASE DATE") upon not less than two (2) Business Day's irrevocable notice
to Buyer, repurchase all, but not less than all, of the Purchased Securities by
the payment of the Price Differential accrued during the Payment Accrual Period
up to such Optional
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Repurchase Date, and the Repurchase Price as of such date, including without
limitation, any accrued and unpaid Price Differential thereon.
SECTION 3. PERIODIC PAYMENTS
(a) Sellers shall pay to Buyer the Price Differential due on
each Payment Date. Any Price Differential not paid when due shall be added to
the Repurchase Price.
(b) 100% of all Income on the Purchased Securities shall be
distributed to Buyer and shall be applied to reduce the Repurchase Price on each
Payment Date. If, notwithstanding the Instruction Letters, any Income or other
amounts payable in respect of a Purchased Security shall be paid to a Seller,
such amounts shall be remitted to Buyer forthwith and, prior thereto, shall be
held by such Seller in trust for Buyer and segregated from other funds of such
Seller.
(c) In the event that ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ redeems the convertible
notes issued in connection with the Pabrai Funds Commitment, the Sellers shall
pay to Buyer, on the same day as the redemption, an amount equal to $10,000,000
(Ten Million Dollars) which shall be applied to reduce the Repurchase Price.
SECTION 4. SECURITY INTEREST
(a) Although the parties intend the Transaction hereunder to
be a sale and purchase and not a loan, in the event the Transaction is deemed to
be a loan, Sellers hereby grant, assign and pledge to Buyer, as security for the
performance by Sellers of their Obligations hereunder, a first priority security
interest in the Purchased Assets).
(b) Sellers hereby authorize Buyer to file such financing
statements relating to the Purchased Securities without Sellers' signatures
thereon as Buyer, at its option, may deem appropriate. Unless an Event of
Default shall have occurred and be continuing, the description of the Purchased
Securities included in such financing statements shall be subject to the
reasonable satisfaction of the Sellers. Sellers shall pay the filing costs for
any financing statement or statements prepared pursuant to this Section 4.
(c) Upon payment of the Repurchase Price, provided that no
Event of Default shall have occurred and be continuing, Buyer shall release the
related Purchased Securities and, if requested by Sellers, shall execute a
security release in connection therewith.
SECTION 5. PAYMENT, TRANSFER AND CUSTODY
Unless otherwise mutually agreed in writing, all payments and/or
transfers of funds to be made by Sellers hereunder shall be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to
Buyer at the following account maintained by
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Buyer: Citibank N.A, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇, ABA#: 021 000 089, For
Credit to A/C Name: Bear ▇▇▇▇▇▇▇ Securities Corp., For Credit to: 092-53186, For
further credit to Sub A/C Name: Silver Oak Capital, LLC, For Further Credit to
Sub A/C#: 102-74048. Funds received after 4:00 p.m. New York City time shall be
deemed to have been made on the next succeeding Business Day.
SECTION 6. REPRESENTATIONS
Each Seller and the Guarantor represent and warrant to Buyer that as of
the date of this Repurchase Agreement, the Purchase Date and at all times while
this Repurchase Agreement and the Transaction hereunder are in full force and
effect, except that all representations and warranties with respect to the
Series 2007-3 Residual shall be as of the date of issuance and all times
thereafter while this Repurchase Agreement and the Transaction hereunder are in
full force and effect:
(a) DUE ORGANIZATION AND QUALIFICATION. Each Seller and the
Guarantor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Each Seller and
the Guarantor is duly qualified to do business and has obtained all
necessary licenses, permits, charters, registrations and approvals
necessary for the conduct of its business as currently conducted and
the performance of its obligations under this Repurchase Agreement
except where any failure to obtain such a license, permit, charter,
registration or approval will not cause a Material Adverse Effect or
impair the enforceability of any Purchased Security.
(b) POWER AND AUTHORITY. Each Seller and the Guarantor has all
necessary power and authority to conduct its business as currently
conducted, to, execute, deliver and perform its obligations under this
Repurchase Agreement and to consummate the transactions contemplated
hereby.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of the Repurchase Agreement by each Seller and the Guarantor have been
duly authorized by all necessary action and do not require any
additional approvals or consents or other action by or any notice to or
filing with any Person other than any that have heretofore been
obtained, given or made.
(d) NONCONTRAVENTION. None of the execution and delivery of
this Repurchase Agreement by either Seller or the Guarantor or the
consummation of the transactions hereunder:
(i) conflicts with, breaches or violates any provision of any
material agreement of the Sellers or any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award currently in
effect having applicability to Sellers, the Guarantor, or either of its
properties;
(ii) constitutes a material default by Sellers under any loan or
repurchase agreement, mortgage, indenture or other material agreement
or instrument to which
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Sellers or the Guarantor is a party or by which it or any of its
properties is or may be bound or affected; or
(iii) results in or requires the creation of any lien upon or in
respect of any of the assets of the Sellers or the Guarantor except the
lien arising under this Repurchase Agreement.
(e) LEGAL PROCEEDING. Except as set forth on Schedule III
attached hereto, there is no action, proceeding or investigation by or
before any court, governmental or administrative agency or arbitrator
affecting any of the Purchased Securities, Sellers or any of its
Affiliates, pending or to the knowledge of the Sellers threatened,
which, if decided adversely, would have a reasonable likelihood of
having a Material Adverse Effect.
(f) VALID AND BINDING OBLIGATIONS. The Repurchase Agreement,
when executed and delivered by Sellers will constitute the legal, valid
and binding obligations of the Sellers, enforceable against Sellers, in
accordance with their respective terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and general
equitable principles.
(g) FINANCIAL STATEMENTS. The consolidated financial
statements of the Guarantor and its Consolidated Subsidiaries (which
include the consolidated balance sheet and statements of income and of
cash flows), copies of which have been furnished to Buyer, (i) are, as
of the dates and for the period referred to therein, complete and
correct in all material respects, (ii) present fairly the financial
condition and results of operations of the Guarantor and its
Consolidated Subsidiaries as of the dates and for the periods indicated
and (iii) have been prepared in accordance with GAAP consistently
applied, except as noted therein (subject as to interim statements to
normal year-end adjustments). Since the date of the most recent
financial statements, there has been no Material Adverse Effect with
respect to the Guarantor or Sellers. Except as disclosed in such
financial statements or on Schedule III attached hereto, neither
Sellers nor the Guarantor are subject to any contingent liabilities or
commitments that, individually or in the aggregate, have a material
possibility of causing a Material Adverse Effect with respect to
Sellers.
(h) ACCURACY OF INFORMATION. None of the documents or
information prepared by or on behalf of the Sellers and Guarantor and
provided by Sellers and Guarantor to Buyer relating to Sellers' and
Guarantor's financial condition contain any statement of a material
fact with respect to Sellers and Guarantor or the Transaction that was
untrue or misleading in any material respect when made or omits to
state any material fact necessary to make the statements therein, in
the light of the circumstances under which they are made, not
misleading. Since the furnishing of such documents or information,
there has been no change, nor any development or event involving a
prospective change known to Sellers and Guarantor, that would render
any of such documents or information untrue or misleading in any
material respect.
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(i) NO CONSENTS. No consent, license, approval or
authorization from, or registration, filing or declaration with, any
regulatory body, administrative agency, or other governmental,
instrumentality, nor any consent, approval, waiver or notification of
any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by Sellers or
Guarantor of this Agreement, other than any that have heretofore been
obtained, given or made.
(j) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by Sellers and Guarantor in the
conduct of their respective businesses violates any law, regulation,
judgment, agreement, order or decree applicable which, if enforced,
would result in a Material Adverse Effect with respect to Sellers or
Guarantor
(k) PURCHASED SECURITIES. The Purchased Securities have been
offered, issued and sold in compliance with all applicable laws and (i)
there are no outstanding rights, options, warrants or agreements for
the purchase from, or sale or issuance, in connection with the
Purchased Securities, (ii) there are no agreements (other than this
Repurchase Agreement) to issue, sell or distribute the Purchased
Securities and (iii) Sellers has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any securities or
any interest therein or to pay any dividend or in respect of the
Purchased Securities; the Purchased Securities have been validly
issued, and are fully paid and non-assessable and not subject to
preemptive rights.
(l) TITLE. Each Seller and the Guarantor is the beneficial
owner of, and has good and marketable title to all of its property and
assets, including the Purchased Securities free and clear of any Liens
or options in favor of, or claims of, any Person, except the Liens and
other rights in favor of Buyer created by this Repurchase Agreement.
(m) SOLVENCY; FRAUDULENT CONVEYANCE. Each Seller and the
Guarantor is solvent and will not be rendered insolvent by the
Transaction contemplated hereunder and, after giving effect to the
Transaction, neither Sellers nor the Guarantor will be left with an
unreasonably small amount of capital with which to engage in its
business. Neither Seller nor the Guarantor intends to incur, nor does
it believe that it has incurred, debts beyond its ability to pay such
debts as they mature. Sellers and Guarantor are not contemplating the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of the Sellers, the Guarantor or
any of their respective assets. The amount of consideration being
received by Sellers upon the sale of the Purchased Securities to Buyer
constitutes reasonably equivalent value and fair consideration for such
Purchased Securities. Sellers are not transferring any Purchased
Securities with any intent to hinder, delay or defraud any of their
respective creditors.
(n) INVESTMENT COMPANY ACT AND PUBLIC UTILITY HOLDING COMPANY
ACT COMPLIANCE. Neither Sellers nor the Guarantor are (i) required to
be registered as an "investment company" as defined under the
Investment Company Act nor as an entity under the control of an
"investment company" as defined under the Investment Company
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Act or (ii) a "holding company" as defined in, or subject to
recognition under the Public Utility Holding Company Act of 1935.
(o) TAXES. Sellers and Guarantor have filed all federal and
state tax returns which are required to be filed and paid, all taxes,
including any assessments received by it, to the extent that such taxes
are shown to be due and payable on such returns (other than assessments
(a) the amount of which is not individually or in the aggregate
material or (b) the amount, applicability or validity of which is being
contested in good faith or for which it has established adequate
reserves). Any taxes, fees and other governmental charges payable by
Sellers or Guarantor in connection with a Transaction and the execution
and delivery of the Repurchase Agreement have been paid.
(p) NO BROKER. Sellers and Guarantor have not dealt with any
broker, investment banker, agent, or other person, except for Buyer,
who may be entitled to any commission or compensation in connection
with the sale of Purchased Securities pursuant to this Agreement;
provided, that if Sellers or Guarantor have dealt with any broker,
investment banker, agent, or other person, except for Buyer, who may be
entitled to any commission or compensation in connection with the sale
of Purchased Securities pursuant to this Agreement, such commission or
compensation shall have been paid in full by Sellers.
(q) SECURITY INTEREST. Other than the security interest
granted to Buyer pursuant to Section 3 of this Agreement, as of the
related Purchase Date, Sellers have not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the
Purchased Securities, except for such security interests that have been
released simultaneously with or prior to the transfer of the Purchased
Securities to Buyer.
(r) TRUSTEE PERFORMANCE. Neither Seller has waived the
performance by the Trustee of any action , if the Trustee's failure to
perform such action would cause the Governing Agreement to be in
default, nor has either Seller waived any default resulting from any
action or inaction by the Trustee.
(s) PURCHASED SECURITIES. The Purchased Securities are
certificated securities in registered form and each Purchased Security
is the legal, valid and binding obligation of the maker thereof
enforceable in accordance with its terms.
(t) GOVERNING AGREEMENTS. Buyer has received complete and
accurate copies of each of the Governing Agreements and any other
agreements governing the rights of a holder of any Purchased Security,
none of which agreements has been amended or modified in any respect
from the versions received by Buyer. Each Governing Agreement and the
transactions evidenced thereby are in full force and effect, and, to
the best knowledge of the Guarantor and each of the Sellers, there do
not exist any claims or actions challenging the validity or
enforceability of any of the Governing Agreements or the Purchased
Securities.
(u) NO MARGIN STOCK. The proceeds of the Transaction will not
be used to purchase or carry any "margin stock" (as defined or used in
the regulations of the Board
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of Governors of the Federal Reserve System, including Regulations T, U
and X thereof) in such a way that could cause the transactions
contemplated by hereunder to fail to comply with the regulations of the
Board of Governors of the Federal Reserve System, including Regulations
T, U and X thereof. Neither Seller nor the Guarantor owns or is engaged
in the business of extending credit for the purpose of purchasing or
carrying any margin stock.
(v) ERISA. No assets of an employee benefit plan subject to
any provision of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") shall be used by the Sellers in the Transaction.
(w) SURVIVAL OF REPRESENTATIONS. The representations and
warranties set forth in this Repurchase Agreement shall survive
transfer of the Purchased Securities to Buyer and shall continue for so
long as the Purchased Securities are subject to this Repurchase
Agreement.
SECTION 7. COVENANTS OF SELLERS
On and as of the date of this Repurchase Agreement and until this
Repurchase Agreement is no longer in force with respect to the Transaction, each
Seller and the Guarantor covenants as follows:
(a) DEFENSE OF TITLE. Each Seller and the Guarantor warrants
and will defend the right, title and interest of Buyer in and to the
Purchased Securities against all adverse claims and demands.
(b) NO AMENDMENT OR COMPROMISE. Without Buyer's prior written
consent, neither Seller nor Guarantor, nor those acting on such
Seller's or the Guarantor's behalf shall amend or modify, or waive any
term or condition of, or settle or compromise any claim in respect of,
any item of the Purchased Securities, any related rights or the
Repurchase Agreement.
(c) NO ASSIGNMENT. Except as permitted herein, neither Seller
nor the Guarantor shall sell, assign, transfer or otherwise dispose of,
or grant any option with respect to, or pledge, hypothecate or grant a
security interest in or lien on or otherwise encumber (except pursuant
to this Repurchase Agreement), any of the Purchased Securities or any
interest therein.
(d) EXISTENCE; PRESERVATION OF BUSINESS. Each Seller and the
Guarantor will do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its respective legal existence
and the rights, licenses, permits, privileges and franchises material
to the conduct of its respective business.
(e) PAYMENT OF OBLIGATIONS. Each Seller will pay to Buyer all
Obligations arising under this Repurchase Agreement and the Guarantor
will guarantee such payment in accordance with the terms of Section 10
hereof.
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(f) PRESERVATION OF PURCHASED SECURITIES. Each Seller and the
Guarantor shall do all things necessary to preserve each Purchased
Security so that it remains subject to a first priority perfected
security interest hereunder. Without limiting the foregoing, each
Seller and the Guarantor will comply with all rules, regulations and
other laws of any Governmental Authority applicable to such Seller or
the Guarantor relating to the Purchased Securities and cause the
Purchased Securities to comply with all applicable rules, regulations
and other laws of any such Governmental Authority. Neither Seller nor
the Guarantor will allow any default for which it is responsible to
occur under any Purchased Security or any Repurchase Agreement and each
Seller and the Guarantor shall fully perform or cause to be performed
when due all of its obligations under any Purchased Security or the
Repurchase Agreement.
(g) Financial Statements: Accountants' Reports: Other
Information.
(i) Each Seller shall keep or cause to be kept in reasonable detail
books and records of account of its respective assets and business and shall
clearly reflect therein the transfer of the Purchased Securities to Buyer.
Guarantor shall furnish or cause to be furnished to Buyer (x) as soon as
available and in any event within 90 days after the end of each fiscal year, its
consolidated, audited balance sheet as of the end of each fiscal year, and its
audited financial statements of income and changes in its respective financial
position, and its audited statement of cash flows, for such fiscal year together
with an opinion unqualified by reference to the status of Guarantor as a "going
concern", or a reference of similar import, from an independent certified public
accountant, and (y) as soon as available and in any event within 45 days after
the end of the first three quarters of each fiscal year of Guarantor, its
consolidated, unaudited balance sheet as of the end of each fiscal quarter, and
its unaudited financial statements of income and changes in its respective
financial position, and its respective unaudited statement of cash flows for the
portion of the fiscal year then ended, all of which have been prepared and
presented fairly in accordance with GAAP and certified by Guarantor's chief
financial officer.
(ii) At the end of each fiscal quarter, Guarantor shall maintain (i) a
Tangible Net Worth that is not less than the greater of (x) the sum of (1) 85%
of existing Tangible Net Worth at December 31, 2006 plus (2) 85% of positive net
income generated subsequent to December 31, 2006 plus (3) 100% of contributions
to equity capital received subsequent to December 31, 2006, or (y) $80,000,000;
(ii) a Leverage Ratio that is not greater than 7:1 and (iii) Liquidity that is
equal to at least $15 million.
(h) NOTICE OF MATERIAL EVENTS. Each Seller and the Guarantor
shall promptly inform Buyer in writing of any of the following:
(i) any Default or Event of Default of any other material
obligation under this Repurchase Agreement and, to the extent it has actual
knowledge thereof, any event of default under any Governing Agreement;
(j) any material dispute, litigation, investigation, (which
shall not include requests for information), proceeding or suspension between
the applicable Seller or the Guarantor, on the one hand, and any Governmental
Authority or any other Person as
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to which there is a reasonable likelihood of an adverse determination that would
result in a Material Adverse Effect; and
(k) any material change in accounting policies or financial
reporting practices of the related Seller or Guarantor.
(l) TAXES. Sellers and Guarantor shall file on a timely basis
all federal, and material state and local tax returns, which are required to be
filed and pay all taxes, including any assessments received by it, to the extent
that such taxes are shown to be due and payable on such returns (other than
assessments (a) the amount of which is not material, individually or in the
aggregate, or (b) the amount, applicability or validity of which is being
contested in good faith or for which it has established adequate reserves).
(m) CHANGE IN NATURE OF BUSINESS. Neither Seller nor the
Guarantor shall make any change in the nature of its respective business as
carried on at the date hereof.
(n) LIMITATION ON DISTRIBUTIONS. Without the written consent
of Buyer, Guarantor shall not, after the date hereof, increase the size or
frequency of its dividend per share (after adjustment to give effect to any
split or reverse splits on or after the date hereof) with respect to any of its
capital stock or other equity interests, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
obligations of the Guarantor.
(o) INSURANCE. Each Seller and the Guarantor will obtain and
maintain insurance with responsible companies in such amounts and against such
risks as are customarily carried by business entities engaged in similar
businesses similarly situated, and will furnish Buyer on request full
information as to all such insurance, and provide within fifteen (15) days after
receipt of such request the certificates or other documents evidencing renewal
of each such policy.
(p) AFFILIATE TRANSACTION. Sellers will not at any time, nor
will the Guarantor directly or indirectly, sell, lease or otherwise transfer any
property or assets to, or otherwise acquire any property or assets from, or
otherwise engage in any transactions with, any of their respective Affiliates
unless the terms thereof are no less favorable to such Seller or the Guarantor
than those that could be obtained at the time of such transaction in an arm's
length transaction with a Person who is not such an Affiliate.
(q) CHANGE OF FISCAL YEAR. Neither Seller nor the Guarantor
will at any time, directly or indirectly, except upon 90 days' prior written
notice to Buyer, change the date on which its respective fiscal year begins from
its respective current fiscal year beginning date.
(r) USE OF PROCEEDS. The proceeds of the Purchased Securities
will be used by Sellers solely for general corporate purposes and as otherwise
limited hereunder.
(s) INDEBTEDNESS. Sellers will not create, incur, assume or
permit to exist any Indebtedness, other than (a) Indebtedness arising under
Warehouse Facilities, (b)
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Indebtedness incurred in connection with equipment financing (c) Indebtedness
arising under the Pabrai Funds Commitment, (d) Indebtedness incurred in
connection with originations occurring in the ordinary course of business, (e)
Indebtedness occurring in connection with Securitizations, (f) Indebtedness
occurring in connection with Permitted Liens, (g) Indebtedness occurring in
connection with letters of credit supporting deposits on real estate leases (h)
Indebtedness secured by notes, certificates or other securities issued pursuant
to a Securitization or (i) in the event the Transaction hereunder is deemed to
be a loan, Indebtedness arising in connection with the Transaction.
(t) LIENS. Neither Sellers nor Guarantor will create, incur,
assume or permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues or rights in
respect of any thereof other than, in each case, Permitted Liens.
(u) MERGER, CONSOLIDATION, ETC., Without Buyer's prior written
consent, Sellers shall not consummate any merger or consolidation with any
Person or sell all or substantially all of its assets, unless the surviving
entity by law or by agreement in favor of Buyer assumes Sellers' obligations
under this Repurchase Agreement and such transaction would not result in or
cause a Default or an Event of Default.
(v) FURTHER ASSURANCES. At the request of Buyers and from time
to time, Sellers and Guarantor shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Purchased Securities and to otherwise
effectuate the provisions of this Agreement.
SECTION 8. EVENTS OF DEFAULT
If any of the following events (each an "EVENT OF DEFAULT")
occurs, Buyer shall have the rights set forth in Section 9 hereof: (a) Sellers
shall fail to pay in full to Buyer on any Payment Date, the accrued and unpaid
Price Differential owing hereunder on such Payment Date which failure shall
continue for more than two (2) Business Days after receipt of notice of such
default; or
(b) Sellers shall fail to pay in full to Buyer the Repurchase
Price on the Repurchase Date or at such other date as the same shall become due
and payable in accordance with the terms hereof, whether at the due date
thereof, or by acceleration or otherwise; or
(c) Sellers shall default in the payment of any other
Obligations not covered by clause (a) above, when the same shall become due and
payable, whether at the due date thereof, or by acceleration or otherwise, and
such payment shall remain unpaid for more than five (5) Business Days after
receipt of notice of such default; or
-19-
(d) any representation, warranty or certification made or
deemed made herein by Sellers or any certificate furnished to Buyer pursuant to
the provisions hereof or thereof or any information with respect to the
Purchased Securities furnished in writing by or on behalf of the Sellers shall
prove to have been materially incorrect when made or deemed made; or
(e) Sellers shall fail to observe or perform any other term,
covenant, condition or agreement contained in this Repurchase Agreement, and if
such default shall be capable of being remedied, such failure to observe or
perform shall continue unremedied for a period of thirty (30) calendar days; or
(f) any Seller or Guarantor shall default under, or fail to
perform as requested under, or shall otherwise breach the material terms of, in
each case beyond any applicable cure period, any instrument, agreement or
contract relating to Indebtedness aggregating in excess of $3,000,000 the effect
of which such default, failure or breach shall entitle any counterparty to
declare such Indebtedness to be due and payable prior to the maturity thereof;
or
(g) Sellers shall fail to provide all commercially reasonable
cooperation (which shall not be deemed a guarantee of success) to allow Buyer to
assign or novate this Repurchase Agreement to a "financial participant" as such
term as defined in the Bankruptcy Code; or
(h) an Event of Insolvency shall have occurred with respect to
Sellers or the Guarantor; or (i) Sellers shall grant, or suffer to exist, any
Lien on any Repurchase Asset (except any Lien in favor of Buyer); or the Liens
contemplated hereby shall cease or fail to be first priority perfected Liens on
any Purchased Security in favor of Buyer or shall be Liens in favor of any
Person other than Buyer; or
(j) any final, nonappealable judgment or order for the payment
of money in excess of $3,000,000 is rendered in the aggregate (to the extent
that it is, in the reasonable determination of Buyer, uninsured and provided
that any insurance or other credit posted in connection with an appeal shall not
be deemed insurance for these purposes) against any Seller or Guarantor by one
or more courts, administrative tribunals or other bodies having jurisdiction
over them and the same shall not be discharged (or provisions shall not be made
for such discharge), bonded, or a stay of execution thereof shall not be
procured, within sixty (60) days from the date of entry thereof and Sellers or
Guarantor, as applicable, shall not, within said period of sixty (60) days, or
such longer period during which execution of the same shall have been stayed or
bonded, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(k) Sellers, the Guarantor or any Person acting on their
behalf shall challenge the enforceability of this Repurchase Agreement or shall
assert in writing, or take any action or fail to take any action based on the
assertion that any provision of this
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Repurchase Agreement has ceased to be or is otherwise not valid, binding or
enforceable in accordance with its terms; or
(l) A Change of Control shall have occurred.
SECTION 9. REMEDIES
(a) If an Event of Default has occurred and is continuing with
respect to Sellers, the following rights and remedies are available to Buyer;
provided, that an Event of Default that has not been cured shall be deemed to be
continuing unless expressly waived by Buyer in writing.
(i) At the option of Buyer, exercised by written notice to Sellers
(which option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Event of Insolvency of the
Sellers), the Repurchase Date, if it has not already occurred, shall be deemed
immediately to occur. Buyer shall (except upon the occurrence of an Act of
Insolvency of the Sellers) give notice to Sellers of the exercise of such option
as promptly as practicable.
(ii) If Buyer exercises or is deemed to have exercised the option
referred to in subsection (a)(i) of this Section,
(A) Sellers' obligations in such Transactions to repurchase
all Purchased Securities, at the Repurchase Price plus the accrued and
unpaid Price Differential therefor on the Repurchase Date determined in
accordance with subsection (a)(i) of this Section, (1) shall thereupon
become immediately due and payable and (2) all Income paid after such
exercise or deemed exercise shall be retained by Buyer and applied to
the aggregate unpaid Repurchase Price and any other amounts owed by
Sellers hereunder;
(B) to the extent permitted by applicable law, the Price
Differential with respect to each such Transaction shall be increased
by the aggregate amount obtained by daily application of, on a 360 day
per year basis for the actual number of days during the period from and
including the date of the exercise or deemed exercise of such option to
but excluding the date of payment of the Repurchase Price, (x) the
Pricing Rate in effect following an Event of Default to (y) the
Repurchase Price for such Transaction as of the Repurchase Date as
determined pursuant to subsection (a)(i) of this Section (decreased as
of any day by (i) any amounts actually in the possession of Buyer
pursuant to clause (C) of this subsection, and (ii) any proceeds from
the sale of Purchased Securities applied to the Repurchase Price
pursuant to subsection (a)(iv) of this Section; and
(C) all Income actually received by Buyer pursuant to Section
3 shall be applied to the aggregate unpaid Repurchase Price owed by
Sellers.
(iii) At any time on the Business Day following notice to Sellers
(which notice may be the notice given under subsection (a)(i) of this Section),
in the event Sellers have
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not repurchased all Purchased Securities, Buyer may, subject to compliance with
Section 26(b) and the Governing Agreements, (A) immediately sell, without demand
or further notice of any kind, at a public or private sale and at such price or
prices as Buyer may in good ▇▇▇▇▇ ▇▇▇▇ satisfactory any or all Purchased
Securities subject to such Transactions hereunder and apply the proceeds thereof
to the aggregate unpaid Repurchase Price and any other amounts owing by Sellers
hereunder or (B) in its sole discretion elect, in lieu of selling all or a
portion of such Purchased Securities, to give Sellers credit for such Purchased
Securities in an amount equal to the market value of the Purchased Securities
against the aggregate unpaid Repurchase Price and any other amounts owing by
Sellers hereunder. The proceeds of any disposition of Purchased Securities shall
be applied first to the costs and expenses incurred by Buyer in connection with
Sellers' default; second to costs of cover and/or related hedging transactions;
third to the Repurchase Price; and fourth to any other outstanding obligation of
the Sellers to Buyer or its Affiliates.
(iv) Sellers shall be liable to Buyer for (i) the amount of all
reasonable legal or other expenses (including, without limitation, all costs and
expenses of Buyer in connection with the enforcement of this Repurchase
Agreement or any other agreement evidencing a Transaction, whether in action,
suit or litigation or bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally, further including, without limitation,
the reasonable fees and expenses of counsel (including the costs of internal
counsel of Buyer) incurred in connection with or as a result of an Event of
Default, (ii) damages in an amount equal to the cost (including all fees,
expenses and commissions) of entering into replacement transactions and entering
into or terminating hedge transactions in connection with or as a result of an
Event of Default, and (iii) any other loss, damage, cost or expense directly
arising or resulting from the occurrence of an Event of Default in respect of a
Transaction.
(v) Buyer shall have, in addition to its rights hereunder, any rights
otherwise available to it under any other agreement or applicable law.
(b) Except to the extent provided in (a)(i) and (a)(iv) above, Buyer
may exercise one or more of the remedies available to Buyer immediately upon the
occurrence of an Event of Default and at any time thereafter without notice to
Sellers. All rights and remedies arising under this Repurchase Agreement as
amended from time to time hereunder are cumulative and not exclusive of any
other rights or remedies which Buyer may have.
(c) Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Sellers hereby expressly waives any defenses
Sellers might otherwise have to require Buyer to enforce its rights by judicial
process. Sellers also waives any defense (other than a defense of payment or
performance) Sellers might otherwise have arising from the use of nonjudicial
process, enforcement and sale of all or any portion of the Repurchase
Securities, or from any other election of remedies. Sellers recognizes that
nonjudicial remedies are consistent with the usages of the trade, are responsive
to commercial necessity and are the result of a bargain at arm's length.
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(d) To the extent permitted by applicable law, Sellers shall be liable
to Buyer for interest on any amounts owing by Sellers hereunder, from the date
Sellers becomes liable for such amounts hereunder until such amounts are (i)
paid in full by Sellers or (ii) satisfied in full by the exercise of Buyer's
rights hereunder. Interest on any sum payable by Sellers to Buyer under this
paragraph 14(d) shall be at a rate equal to the Pricing Rate in effect following
an Event of Default.
SECTION 10. JOINT AND SEVERAL OBLIGATIONS OF SELLERS
All obligations of the Sellers hereunder shall be obligations of each
of the Sellers on a joint and several basis. All Purchased Securities sold by
either Seller hereunder shall be available, pursuant to the terms hereof, to
satisfy all obligations of each of the Sellers hereunder. No specific Purchase
Price or Repurchase Price shall be assigned or attributed to any Purchased
Security or group of less than all of the Purchased Securities hereunder.
SECTION 11. GUARANTEE
(a) GUARANTEE. The Guarantor hereby, unconditionally and
irrevocably, guarantees to Buyer, for the benefit of Buyer and its respective
permitted successors, indorsees, transferees and assigns, the prompt and
complete payment by each Seller when due (whether at the stated maturity, by
acceleration or otherwise) of its respective Obligations under this Repurchase
Agreement (the "SELLER OBLIGATIONS").
(i) Anything herein to the contrary notwithstanding, the maximum
liability of the Guarantor hereunder shall in no event exceed the amount which
can be guaranteed by such Guarantor under applicable federal and state laws
relating to the insolvency of debtors. Guarantor agrees that Seller Obligations
may at any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 11
or affecting the rights and remedies of Buyer.
(ii) The guarantee contained in this Section 11 shall remain in full
force and effect until all Seller Obligations and the obligations of Guarantor
under the guarantee contained in this Section 11 shall have been satisfied by
payment in full and this Repurchase Agreement shall have terminated.
(iii) No payment made by Sellers, the Guarantor or any other Person, or
received or collected by Buyer from Sellers, the Guarantor or any other Person
by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of, or in payment of,
Seller Obligations, shall be deemed to release or otherwise affect the liability
of Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by Guarantor in respect of Seller Obligations or any payment
received or collected from Guarantor in respect of Seller Obligations), remain
liable for Seller Obligations (as reduced by such payment) up to the maximum
liability of Guarantor hereunder until Seller Obligations are paid in full and
this Repurchase Agreement is terminated in accordance with the terms hereof.
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(b) NO SUBROGATION. Notwithstanding any payment made by Guarantor
hereunder or any set-off or application of funds of Guarantor by Buyer,
Guarantor shall not be entitled to be subrogated to any of the rights of Buyer
against Sellers or any collateral security or guarantee or right of offset held
by Buyer for the payment of Seller Obligations, nor shall Guarantor seek or be
entitled to seek any contribution or reimbursement from Sellers in respect of
payments made by Guarantor hereunder, until all amounts owing to Buyer by
Sellers on account of Seller Obligations are paid in full and this Repurchase
Agreement has terminated. If any amount shall be paid to Guarantor on account of
such subrogation rights at any time when all of Seller Obligations shall not
have been paid in full, such amount shall be held by Guarantor in trust for
Buyer, segregated from other funds of Guarantor, and shall, forthwith upon
receipt by Guarantor, be turned over to Buyer in the exact form received by
Guarantor (duly indorsed by Guarantor to Buyer, if required), to be applied
against Seller Obligations.
(c) AMENDMENTS, ETC. WITH RESPECT TO SELLER OBLIGATIONS. Guarantor
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against Guarantor and without notice to or further assent by
Guarantor, (i) Buyer has rescinded any demand upon Sellers or any other Person
for payment of any Seller Obligations, (ii) any collateral security or guarantee
therefor or right of offset with respect thereto, has, from time to time, in
whole or in part, been renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by Buyer, (iii) this Repurchase
Agreement has been amended, modified, supplemented or terminated in accordance
with its terms, in whole or in part, as Buyer may deem advisable from time to
time, or (iv) any collateral security, guarantee or right of offset at any time
held by Buyer for the payment of Seller Obligations has been sold, exchanged,
waived, surrendered or released. Buyer shall not have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for Seller
Obligations or for the guarantee contained in this Section 11 or any property
subject thereto.
(d) GUARANTEE ABSOLUTE AND UNCONDITIONAL. Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of Seller
Obligations and notice of or proof of reliance by Buyer upon the guarantee
contained in this Section 11 or acceptance of the guarantee contained in this
Section 11; Seller Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon the guarantee contained in this Section 11; and all
dealings between the Borrower and any of the Guarantors, on the one hand, and
Buyer, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 11.
Guarantor waives, but only during the term of this Repurchase Agreement (except
with respect to such rights as are required by applicable law and cannot be
waived), presentment, protest, demand for payment and notice of default or
nonpayment to or upon Sellers or the Guarantor with respect to Seller
Obligations. Guarantor understands and agrees that the guarantee contained in
this Section 11 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (1) the validity or enforceability
against any Seller of this Repurchase Agreement, any Seller Obligations or any
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by Buyer, (2) any defense (other
than a defense of payment
-24-
or performance), set-off or counterclaim which may at any time be asserted by
Sellers or any other Person against Buyer, (3) an Event of Insolvency with
respect to any Seller or (4) any other circumstance whatsoever (other than the
payment in full of all of Seller Obligations) (with or without notice to or
knowledge of the Sellers or Guarantor) which constitutes, or might be construed
to constitute, an equitable or legal discharge of the Sellers for Seller
Obligations, or of Guarantor under the guarantee contained in this Section 11,
in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor,
Buyer may, but shall be under no obligation to, make a similar demand on or
otherwise pursue such rights and remedies as it may have against Sellers or any
other Person or against any collateral security or guarantee for Seller
Obligations or any right of offset with respect thereto, and any failure by
Buyer to make any such demand, to pursue such other rights or remedies or to
collect any payments from Sellers or any other Person or to realize upon any
such collateral security or guarantee or to exercise any such right of offset,
or any release of the Sellers or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of Buyer
against Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
(e) GUARANTEE OF PAYMENT. This Guarantee is a guaranty of payment and
not of collection. Guarantor agrees that Buyer need not attempt to collect any
Seller Obligations from any Seller or to realize upon any collateral, but may
require Guarantor to make immediate payment of all of the Seller Obligations to
Buyer following a default by a Seller of such Obligation when due, whether by
maturity, acceleration or otherwise, or at any time thereafter and beyond any
applicable grace period. Buyer may apply any amounts received in respect of the
Seller Obligations to any of the Seller Obligations, in whole or in part
(including reasonable attorneys' fees and legal expenses incurred by Buyer with
respect thereto or otherwise chargeable to Sellers or Guarantor) and in such
order as Buyer may elect.
(f) REINSTATEMENT. The guarantee contained in this Section 11 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of Seller Obligations is rescinded or must
otherwise be restored or returned by Buyer upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Sellers or the Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, Sellers or the Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
(g) PAYMENTS. Guarantor hereby guarantees that payments hereunder will
be paid to Buyer in Dollars, in immediately available funds, without deduction,
set-off or counterclaim, to Buyer at the following account maintained by Buyer:
Citibank N.A, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇, ABA#: 021 000 089, For Credit to
A/C Name: Bear ▇▇▇▇▇▇▇ Securities Corp., For Credit to: 092-53186, For further
credit to Sub A/C Name: Silver Oak Capital, LLC, For Further Credit to Sub A/C#:
102-74048.
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SECTION 12. INDEMNIFICATION
(a) Seller and the Guarantor (each, in such capacity, a
"SELLER INDEMNIFYING PARTY") each agrees to hold Buyer, and its
Affiliates and their officers, directors, employees, agents and
advisors (each, in such capacity, a "BUYER INDEMNIFIED PARTY") harmless
from and indemnify any Buyer Indemnified Party against all third party
liabilities, losses, damages, judgments, costs and expenses of any kind
which may be imposed on, incurred by or asserted against such Buyer
Indemnified Party, relating to or arising out of this Repurchase
Agreement, or any transaction contemplated hereby or thereby, or any
amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Repurchase Agreement, or any transaction
contemplated hereby or thereby, that, in each case, results from
anything other than the Buyer Indemnified Party's gross negligence or
willful misconduct. In any suit, proceeding or action brought by or
against a Buyer Indemnified Party in connection with any Purchased
Security, this Repurchase Agreement, or any transaction contemplated
hereby, each Seller Indemnifying Party will save, indemnify and hold
such Buyer Indemnified Party harmless from and against all expense,
loss or damage suffered by reason of any defense, set-off,
counterclaim, recoupment or reduction or liability whatsoever of the
Buyer Indemnified Party, arising out of a breach by a Seller
Indemnifying Party of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing to or in
favor of such Buyer Indemnified Party. Each Seller Indemnifying Party
also agrees to reimburse each Buyer Indemnified Party as and when
billed by such Buyer Indemnified Party for all such Buyer Indemnified
Party's costs and expenses incurred in connection with the enforcement
or the preservation of such Buyer Indemnified Party's rights under this
Repurchase Agreement or any transaction contemplated hereby or thereby,
including without limitation the reasonable fees and disbursements of
its counsel.
(b) Buyer agrees to hold each Delta Party, and its Affiliates
and their officers, directors, employees, agents and advisors (each, in
such capacity, a "SELLER INDEMNIFIED PARTY") harmless from and
indemnify any Seller Indemnified Party against all third party
liabilities, losses, damages, judgments, costs and expenses of any kind
which may be imposed on, incurred by or asserted against such Seller
Indemnified Party, relating to or arising out of a breach by Buyer of
Section 26(b) of this Repurchase Agreement. In any suit, proceeding or
action brought by or against a Seller Indemnified Party in connection
with this Section 12(b), Buyer will save, indemnify and hold such
Seller Indemnified Party harmless from and against all expense, loss or
damage suffered by such Seller Indemnified Party. Buyer also agrees to
reimburse each Seller Indemnified Party as and when billed by such
Seller Indemnified Party for all such Seller Indemnified Party's costs
and expenses incurred in connection with the enforcement of Seller
Indemnified Party's rights under this Section 12(b), including without
limitation the reasonable fees and disbursements of its counsel.
SECTION 13. NOTICES AND OTHER COMMUNICATIONS
Except as otherwise expressly permitted by this Repurchase
Agreement, all notices, requests and other communications provided for herein
(including without limitation any modifications of, or waivers, requests or
consents under, this Repurchase Agreement) shall be
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given or made in writing delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof or thereof); or,
as to any party, at such other address as shall be designated by such party in a
written notice to each other party. Except as otherwise provided in this
Repurchase Agreement and except for notices given under Section 2 (which shall
be effective only on receipt), all such communications shall be deemed to have
been duly given when transmitted by registered or certified mail with return
receipt requested or personally delivered or, in the case of a mailed notice,
upon receipt, in each case given or addressed as aforesaid.
SECTION 14. ENTIRE AGREEMENT; SEVERABILITY
This Repurchase Agreement constitutes the entire understanding between
Buyer and Sellers with respect to the subject matter they cover and shall
supersede any existing agreements between the parties containing general terms
and conditions for repurchase transactions involving Purchased Securities. By
acceptance of this Repurchase Agreement, Buyer and Sellers acknowledge that they
have not made, and are not relying upon, any statements, representations,
promises or undertakings not contained in this Repurchase Agreement. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
SECTION 15. ASSIGNMENTS
The rights and obligations of the parties under this Repurchase
Agreement shall not be assigned by either party without the prior written
consent of the other party, nor shall the Buyer transfer or otherwise dispose
of, or grant any option with respect to, or pledge, hypothecate or grant a
security interest in or lien on or otherwise encumber (except pursuant to the
this Repurchase Agreement), any of the Purchased Assets or any interest therein
and any such assignment, without the prior written consent of the other party
and any pledge, hypothecation or security interest shall be null and void.
Notwithstanding the foregoing, Buyer may assign its rights hereunder to a
"financial participant" as such term is defined in the Bankruptcy Code so long
as Buyer retains control over the actions of such assignee hereunder and such
financial participant (i) assumes all of the obligations of the Buyer hereunder
including without limitation those in Section 26(b), (c) and (d) and (ii) agrees
that no further assignment of this Repurchase Agreement other than to AG Delta
Holdings Corp. or AG Delta Holdings, LLC, without the prior written consent of
the other party, nor any pledge, hypothecation, grant of security interest, lien
on or other encumbrance on any Purchased Asset shall be permitted. This
Repurchase Agreement and any Transactions shall be binding upon and shall inure
to the benefit of the parties and their respective successors and assigns.
SECTION 16. TERMINABILITY
Each representation and warranty made or deemed to be made by entering
into a Transaction, herein or pursuant hereto shall survive the making of such
representation and warranty, and Buyer shall not be deemed to have waived any
Default that may arise because any such representation or warranty shall have
proved to be false or misleading, notwithstanding
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that Buyer may have had notice or knowledge or reason to believe that such
representation or warranty was false or misleading at the time the Transaction
was made. Notwithstanding any such termination or the occurrence of an Event of
Default, all of the representations and warranties and covenants hereunder shall
continue and survive. The obligations of the Sellers under Section 11 hereof
shall survive the termination of this Repurchase Agreement.
SECTION 17. GOVERNING LAW
This repurchase agreement shall be governed by the internal laws of the
State of New York without giving effect to the conflict of law principles
thereof.
SECTION 18. SUBMISSION TO JURISDICTION; WAIVERS
EACH OF BUYER, SELLER AND GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS REPURCHASE AGREEMENT OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE
PERSONAL GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(II) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
WITH RETURN RECEIPT REQUESTED (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT
SUCH OTHER ADDRESS OF WHICH BUYER SHALL HAVE BEEN NOTIFIED; AND
(IV) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
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(V) BUYER AND SELLER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS REPURCHASE AGREEMENT,
ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
SECTION 19. NO WAIVERS, ETC.
No failure on the part of Buyer to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power or privilege under
this Repurchase Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this
Repurchase Agreement preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law. An Event of
Default that has not been cured shall be deemed to be continuing unless
expressly waived by Buyer in writing.
SECTION 20. MISCELLANEOUS
(a) COUNTERPARTS. This Repurchase Agreement may be executed in
any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto
may execute this Repurchase Agreement by signing any such counterpart.
(b) CAPTIONS. The captions and headings appearing herein are
for included solely for convenience of reference and are not intended
to affect the interpretation of any provision of this Repurchase
Agreement.
(c) ACKNOWLEDGMENT. Sellers and Buyer each hereby acknowledges
that:
(i) it has been advised by counsel in the negotiation, execution and
delivery of this Repurchase Agreement;
(ii) Buyer has no fiduciary relationship to Sellers; and
(iii) no joint venture exists between Buyer and Sellers.
SECTION 21. CONFIDENTIALITY
Buyer and Sellers hereby acknowledge and agree that all written or
computer-readable information provided by one party to the other regarding the
terms set forth in this Repurchase Agreement or the Transactions contemplated
thereby (the "CONFIDENTIAL TERMS") shall be kept confidential and shall not be
divulged to any party without the prior written consent of such other party
except to the extent that (i) it is necessary to do so in working with legal
counsel, auditors, taxing authorities or other governmental agencies or
regulatory bodies or in order to comply with any applicable federal or state
laws, (ii) any of the Confidential Terms are
-29-
in the public domain other than due to a breach of this covenant, or (iii)
following the occurrence and during the continuance of an Event of Default Buyer
determines such information to be necessary or desirable to disclose in
connection with the marketing and sales of the Purchased Securities or otherwise
to enforce or exercise Buyer's rights hereunder. The provisions set forth in
this Section 21 shall survive the termination of this Repurchase Agreement.
Notwithstanding the foregoing or anything to the contrary contained herein, all
Persons hereto may disclose to any and all Persons, without limitation of any
kind, the U.S. federal income tax treatment of the Transactions, any fact that
may be relevant to understanding the U.S. federal tax treatment of the
Transactions, and all materials of any kind (including opinions or other tax
analyses) relating to such U.S. federal income tax treatment, other than the
name of the parties or any other Person named herein, or information that would
permit identification of the parties or such other Persons, and any pricing
terms or other nonpublic business or financial information that is unrelated to
the U.S. federal income tax treatment of the Transactions to the taxpayer and is
not relevant to understanding the U.S. federal income tax treatment of the
Transactions.
SECTION 22. INTENT
(a) The parties recognize that the Transaction hereunder is
intended to be a "repurchase agreement" as that term is defined in
Section 101 of Title 11 of the United States Code, as amended (except
insofar as the type of Securities subject to such Transaction or the
term of such Transaction would render such definition inapplicable),
and a "securities contract" as that term is defined in Section 741 of
Title 11 of the United States Code, as amended (except insofar as the
type of assets subject to such Transaction would render such definition
inapplicable).
(b) The parties agree and acknowledge that if a party hereto
is an "insured depository institution," as such term is defined in the
Federal Deposit Insurance Act, as amended ("FDIA"), then the
Transaction hereunder is intended to be a "qualified financial
contract," as that term is defined in FDIA and any rules, orders or
policy statements thereunder (except insofar as the type of assets
subject to such Transaction would render such definition inapplicable).
SECTION 23. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
Each party hereunder acknowledges that it has been advised that if any
other party is subject to the requirements of the Patriot Act, then pursuant to
the requirements of the Patriot Act, such other party may be required to obtain,
verify and record information that identifies each party hereunder, which
information includes name, address and other information that will allow such
party to identify each other party in accordance with the Patriot Act.
SECTION 24. CONFLICTS
In the event of any conflict between the terms of this
Repurchase Agreement and any Confirmation, the documents shall control in the
following order of priority: FIRST, the terms of the Confirmation shall prevail,
then the terms of this Repurchase Agreement shall prevail.
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SECTION 25. TAX TREATMENT
Each party to this Repurchase Agreement acknowledges that it is its
intent for purposes of U.S. federal, state and local income and franchise taxes,
to treat the Transaction as indebtedness of the Sellers that is secured by the
Purchased Securities and the Purchased Securities as owned by Sellers for
federal income tax purposes in the absence of a Default by Sellers. All parties
to this Repurchase Agreement agree to such treatment and agree to take no action
inconsistent with this treatment, unless required by law.
SECTION 26. BUYER OBLIGATIONS
(a) Buyer represents and warrants to Sellers that:
(i) Buyer (i) is a limited liability company, validly existing and
in good standing under the laws of Delaware, (ii) has full power and
authority to execute, deliver and perform its obligations under this
Repurchase Agreement.
(ii) The execution and delivery of, and the performance by Buyer
of its obligations under, this Repurchase Agreement to which it is a party
have been duly authorized by all requisite action.
(iii) This Repurchase Agreement and all of the other documents
executed and delivered by Buyer in connection herewith are legal, valid
and binding obligations of Buyer and are enforceable against Buyer in
accordance with their terms except as such enforceability may be limited
by (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors rights
generally and (ii) general principles of equity.
(b) Buyer covenants that, notwithstanding anything to the
contrary herein, it shall not take any action (through foreclosure or
otherwise) to become or seek to become the registered holder of any of the
REIT Securities unless the Person in whose name Buyer seeks to register
such REIT Securities is a REIT or a QRS.
(c) On the second Business Day following the LIBOR
Determination Date, the Buyer shall send notice to the Guarantor of the
LIBOR Rate for the Payment Accrual Period to which such LIBOR Rate
applies.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have entered into this
Repurchase Agreement as of the date set forth above.
BUYER:
AG DELTA HOLDINGS, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
ADDRESS FOR NOTICES:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
SELLERS:
RENAISSANCE REIT INVESTMENT CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
ADDRESS FOR NOTICES:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
DELTA FUNDING CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
ADDRESS FOR NOTICES:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
GUARANTOR:
DELTA FINANCIAL CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
ADDRESS FOR NOTICES:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
SCHEDULE I
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PURCHASED SECURITIES
1. Renaissance REIT Investment Corp. will transfer the following
certificates (the "REIT SECURITIES"):
Renaissance Home Equity Loan Trust 2005-1, Trust Certificate;
Renaissance Home Equity Loan Trust 2005-2, Trust Certificate;
Renaissance Home Equity Loan Trust 2005-3, Trust Certificate;
Renaissance Home Equity Loan Trust 2005-4, Trust Certificate;
Renaissance Home Equity Loan Trust 2006-1, Trust Certificate;
Renaissance Home Equity Loan Trust 2006-2, Trust Certificate;
Renaissance Home Equity Loan Trust 2006-3, Trust Certificate;
Renaissance Home Equity Loan Trust 2006-4, Trust Certificate;
Renaissance Home Equity Loan Trust 2007-1, Trust Certificate; and
Renaissance Home Equity Loan Trust 2007-2, Trust Certificate.
2. Delta Funding Corporation will transfer the following certificates (the
"REMIC SECURITIES"):
Renaissance Home Equity Loan Trust 2004-1, Class BIO and Class P
Certificates;
Renaissance Home Equity Loan Trust 2004-2, Class BIO and Class P
Certificates;
Renaissance Home Equity Loan Trust 2004-3, Class BIO and Class P
Certificates; and
Renaissance Home Equity Loan Trust 2004-4, Class BIO and Class P
Certificates.
SCHEDULE II
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BOND FILE DOCUMENTS
The following documents shall collectively constitute the "BOND FILE"
with respect to each Purchased Security:
(A) a copy of the executed Governing Agreements governing the Purchased
Bonds;
(B) an Instruction Letter executed by the Borrower; and
(C) copies of distribution statements delivered to Sellers for the two
month period prior to the month in which the related Purchase Date occurs.
SCHEDULE III
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A. Because the nature of the business of Guarantor and its subsidiaries
(sometimes hereinafter referred to as "we" or "us") involves the collection of
numerous accounts, the validity of liens and compliance with various state and
federal lending laws, we are subject, in the normal course of business, to
numerous claims and legal proceedings, including class actions. The current
status of the pending class actions and other material litigation is summarized
below:
o In or about November 1998, we received notice that we had been named in
a lawsuit filed in the United States District Court for the Eastern
District of New York. In December 1998, the plaintiffs filed an amended
complaint alleging that we had violated the Home Ownership and Equity
Protection Act of 1994, the federal Truth-in-Lending Act, and Section
349 of the New York State General Business Law, which relates to
consumer protection for deceptive practices. The complaint sought: (a)
certification of a class of plaintiffs, (b) declaratory judgment
permitting rescission, (c) unspecified actual, statutory, treble and
punitive damages, including attorneys' fees, (d) injunctive relief and
(e) declaratory judgment declaring the loan transactions as void and
unconscionable. On December 7, 1998, the plaintiffs filed a motion
seeking a temporary restraining order and preliminary injunction,
enjoining us from conducting foreclosure sales on 11 properties. The
District Court Judge ruled that in order to consider the motion,
plaintiff must move to intervene on behalf of these 11 borrowers.
Thereafter, plaintiff moved to intervene on behalf of three of these 11
borrowers and sought injunctive relief on their behalf. We opposed the
motions. On December 14, 1998, the District Court Judge granted the
motion to intervene and on December 23, 1998, the District Court Judge
issued a preliminary injunction that enjoined us from proceeding with
the foreclosure sales of the three interveners' properties. We filed a
motion for reconsideration of the December 23, 1998 order. In January
1999, we filed an answer to plaintiffs' first amended complaint. In July
1999, the plaintiffs were granted leave, on consent, to file a second
amended complaint. In August 1999, the plaintiffs filed a second amended
complaint that, among other things, added additional parties but
contained the same causes of action alleged in the first amended
complaint. In September 1999, we filed a motion to dismiss the
complaint, which was opposed by plaintiffs and, in June 2000, was denied
in part and granted in part by the District Court. In or about October
1999, plaintiffs filed a motion seeking an order preventing us, our
attorneys and/or the New York State Banking Department ("NYSBD") from
issuing notices to a number of our borrowers, in accordance with the
settlement agreement entered into by and between the NYSBD and us. In
the fourth quarter of 1999, we and the NYSBD submitted opposition to the
plaintiffs' motion. In March 2000, the District Court issued an order
that permitted us to issue an approved form of the notice. In September
1999, the plaintiffs filed a motion for class certification, which we
opposed in February 2000, and which was ultimately withdrawn without
prejudice by the plaintiffs in January 2001. In February 2002, we
executed a settlement agreement with the plaintiffs, under which we
denied all wrongdoing, but agreed to resolve the litigation on a
class-wide basis. The District Court preliminarily approved the
settlement and a fairness hearing was held in May 2002. We submitted
supplemental briefing at the District Court's request in or about April
2004. In August 2004, the District Court conditionally approved the
settlement, subject to our submitting supplemental documentation
regarding a change in the settlement agreement and proposed supplemental
notices to be sent to those borrowers who either opted out or objected.
We, plaintiffs and certain objectors submitted our respective
supplemental submissions in August 2004 and the District Court granted
its final approval to the settlement in January 2005. In February 2005,
certain objectors filed a notice of appeal. The objectors filed their
appellate brief in July 2005. We filed our appellate papers in
opposition in September 2005, and the objectors filed their reply papers
in September 2005. In February 2006, the Appellate Court vacated the
District Court's decision to approve the settlement, not based on the
merits of the settlement, but because a motion to intervene was decided
by the District Court Magistrate Judge and not the District Court Judge.
The Appellate Court instructed the District Court Judge to rule on the
motion to intervene and, until then, it cannot be determined if the
District Court Judge will also have to rule on the fairness of the
settlement, or if that issue will have to return to the Appellate Court.
Briefing on the
intervention motion was re-submitted to the District Court Judge in July
2006, and the motion was denied in November 2006. In January 2007, we
executed a proposed amendment to the settlement with the plaintiffs
which did not increase the settlement amount. In March 2007, the
plaintiffs filed a motion for preliminary approval of the amended
settlement and the proposed notice to the class. In April 2007, certain
objectors filed an opposition to the motion for preliminary approval. We
filed our reply to the objectors' opposition in May 2007. The plaintiffs
also filed their reply to the objectors' opposition in May 2007. If the
District Court preliminarily approves the settlement, as amended, a new
fairness hearing date will be scheduled. If the settlement is not
approved, we believe we have meritorious defenses and intend to
vigorously defend this suit, but cannot estimate with any certainty our
ultimate legal or financial liability, if any, with respect to the
alleged claims.
o In July 2003, we commenced a lawsuit in the Supreme Court of the State
of New York, Nassau County, against Delta Funding Residual Exchange
Company LLC (the "LLC"), an unaffiliated limited liability company,
Delta Funding Residual Management, Inc. ("DFRM"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President of the LLC and DFRM, alleging that (1) the LLC breached its
contractual duties by failing to pay approximately $142,000 due to us in
June 2003, and (2) that ▇▇. ▇▇▇▇▇▇▇▇ and DFRM knowingly and
intentionally caused the default, thereby breaching their respective
fiduciary duties to the LLC. The complaint seeks: (a) payment of amounts
past due under our agreement with the LLC, plus interest, (b) specific
performance of the LLC's obligations to us in the future, and (c)
monetary damages for breach of fiduciary duty, in an amount to be
determined by the Court. In September 2003, ▇▇. ▇▇▇▇▇▇▇▇, the LLC and
DFRM filed a motion to dismiss our complaint and the LLC and DFRM filed
a countersuit in the Supreme Court of the State of New York, New York
County, against several of our directors and officers and us seeking,
among other things, damages of not less than $110 million. The
countersuit alleges misrepresentation, negligence and/or fraud by
defendants in that case relating to our August 2001 exchange offer. In
October 2003, we filed our opposition to the motion to dismiss and
cross-moved to consolidate the two actions in Nassau County. In November
2003, we answered the New York County action. In February 2004, the
Nassau County Supreme Court denied ▇▇. ▇▇▇▇▇▇▇▇'▇ motion to dismiss our
causes of action seeking (a) payment of amounts due under our agreements
with the LLC and (b) monetary damages for breach of fiduciary duty, and
granted ▇▇. ▇▇▇▇▇▇▇▇'▇ motion to dismiss our cause of action seeking
specific performance to preclude future defaults by ▇▇▇▇▇▇▇▇ and the
LLC. The Supreme Court also granted our motion to consolidate the cases
in Nassau County. In April 2004, we filed a motion to dismiss ▇▇.
▇▇▇▇▇▇▇▇'▇ countersuit, which the Supreme Court denied in September
2004. In or about October 2004, the LLC commenced an action against KPMG
LLP, our independent public accountants at that time, based upon similar
allegations as asserted in this action. In September 2005, it was agreed
that the action against KPMG LLP would be joined with this action. In
the countersuit, the LLC was granted permission to serve an amended
complaint, which it did in November 2005. The amended complaint included
two additional causes of action alleging breach of fiduciary duty owed
to the LLC, one against us and the other against several of our officers
and directors. In December 2005, we filed a motion to amend our
complaint to add claims (both individually and as a member of the LLC)
against ▇▇. ▇▇▇▇▇▇▇▇ arising from the same and/or similar facts and
circumstances, seeking recovery for waste, for improper personal
benefit, for breach of fiduciary duty (beyond those already alleged in
the complaint) and for a material misstatement in the LLC's financial
statements. In April 2006, the Supreme Court dismissed our motion to
amend and granted us permission to revise the motion and re-file it. In
July 2006, we re-filed our motion to amend our complaint, which motion
was opposed. In November 2006, the Court denied our motion. Discovery is
proceeding. We believe we have meritorious claims in our lawsuit and
meritorious defenses in the countersuit. We intend to vigorously
prosecute our claims and vigorously defend ourselves against the
countersuit. We cannot estimate with any certainty our ultimate legal or
financial recovery and/or liability, if any, with respect to the alleged
claims in the countersuit.
o In or about November 2004, we received notice that we have been named in
a lawsuit styled as a collective action filed in the United States
District Court of the Western District of Pennsylvania, alleging that
our subsidiary, Fidelity Mortgage Inc. ("Fidelity", now a division of
our other subsidiary, Delta Funding Corporation), did not pay its loan
officers overtime compensation and/or minimum wage in violation of the
Federal Fair Labor Standards Act ("FLSA"). The complaint seeks: (1) an
amount equal to the unpaid wages at the applicable overtime rate, (2) an
amount equal to the minimum wages at the applicable minimum wage, (3) an
equal amount as liquidated damages, (4) costs and attorneys' fees, (5)
leave to add additional plaintiffs, and (6) leave to amend to add claims
under applicable state laws. We filed an answer and discovery has
commenced. In April 2005, the plaintiff filed his motion for conditional
class certification and in May 2005, Fidelity filed its opposition to
that motion. In June 2005, the Magistrate Judge issued a Report and
Recommendation, recommending that the plaintiff's motion for conditional
class certification be granted, and that plaintiff's motion to authorize
judicial notice be granted (subject to revision and final approval by
the District Court). In July 2005, Fidelity filed with the District
Court its objections to the Magistrate Judge's Report and Recommendation
and the plaintiff filed its opposition to our objections. In July 2005,
the District Court upheld the Magistrate Judge's Report and
Recommendation. Any potential class members who desired to join the
collective action were provided an opportunity to do so during an
"opt-in" period that ended in October 2005. Approximately 180
individuals, virtually all of whom are former employees, are plaintiffs
in the collective action. In April 2006, the plaintiffs filed a motion
for summary judgment. By agreement in June 2006, the Court stayed the
action while the parties engaged in non-binding mediation, and
plaintiffs' motion for summary judgment was withdrawn without prejudice
to it being re-filed. The matter was not resolved through mediation, the
stay was lifted in August 2006, the plaintiffs' motion was re-filed and
we filed our opposition to the motion and a cross-motion for partial
summary judgment. In September 2006, the plaintiffs filed their papers
in response to our opposition to their motion and replied to our
cross-motion. In October 2006, we filed our reply papers to the
plaintiffs' opposition to our cross-motion. In March 2007, the
Magistrate Judge rendered a report and recommendation that the
plaintiffs' motion for summary judgment be granted, and our motion
denied, as to our entitlement to a retail or service establishment
exemption under the FLSA; that plaintiffs' motion be denied as to; (a)
our entitlement to an administrative employee exemption under the FLSA,
and (b) plaintiffs' entitlement to liquidated damages; and our motion be
granted as to the sufficiency of the employees' compensation under the
salary basis test, but denied as to the remaining two conditions of an
administrative employee exemption. In April 2007, we filed our
objections to the Magistrate Judge's report and recommendation, insofar
as it did not recommend the granting of our cross-motion for partial
summary judgment, and the plaintiffs filed their opposition to our
objections. In May 2007, we filed our reply to the plaintiffs'
opposition to our objections. In May 2007, the District Court issued an
order adopting the Magistrate Judge's report and recommendation. In July
2007, we filed a motion for certification of an interlocutory appeal
from the District Court's May 2007 order and the plaintiffs filed their
opposition papers in July 2007. We believe that we have meritorious
defenses and intend to vigorously defend this suit, but cannot estimate
with any certainty our ultimate legal or financial liability, if any,
with respect to the alleged claims.
o In or about February 2007, we received notice that we had been named in
a lawsuit filed in the United States District Court for the Northern
District of Illinois, Eastern Division, alleging that we had accessed
certain consumers' credit reports without a permissible purpose under
the Fair Credit Reporting Act of 1970, as amended ("FCRA"), and sent
improper prescreening offers in Illinois. The complaint seeks: (a)
certification of a class of plaintiffs, (b) injunctive relief against
further violations, (c) statutory damages and general and other damages,
and (d) attorneys' fees, costs and litigation expenses, based upon
alleged (i) violations of the FCRA, (ii) common law invasion of privacy
and (iii) consumer fraud/unfair acts and practices. In March 2007, we
filed a motion for a stay of the action pending certain decisions
expected to be rendered by other courts in actions pending against other
companies, which decisions we expect may impact the legal issues
involved in our case. In March 2007, the Court stayed the
action until June 2007. In June, the plaintiff stipulated, without
prejudice, to dismissing the common law invasion of privacy claim and
the consumer fraud/unfair acts and practices claim, and dismissed only
that part of the relief seeking injunctive relief on the FCRA claim. In
June 2007, we filed an answer to complaint and discovery is proceeding.
In July 2007, plaintiff filed a motion for class certification and our
opposition papers are due in August 2007. We believe that we have
meritorious defenses and intend to vigorously defend this suit, but at
this early stage of the litigation, we cannot estimate with any
certainty our ultimate legal or financial liability, if any, with
respect to the alleged claims.
B. See Section 4.5 and Section 4.11 of the Disclosure Schedule furnished
by the Guarantor to the Buyer on the date hereof pursuant to the Warrant
Acquisition Agreement.