The Loans will be serviced pursuant to the terms of the Sale and Servicing Agreement. The Servicer may delegate servicing responsibilities to other persons and will enlist the affiliates of the Company that originated the Loans to act as subservicers. The Sale and Servicing Agreement contains customary servicer defaults (subject to materiality thresholds and cure periods), including (i) failure by the Servicer to make any required payment, transfer, or deposit or to give instructions or notice to Wells Fargo Bank, National Association, as indenture trustee (the “Indenture Trustee”) to make such payment, transfer, or deposit, in an aggregate amount exceeding $50,000, (ii) non-compliance with covenants, (iii) breach of a representation, warranty, or certification, or (iv) an insolvency event involving the Servicer. If the Company, as servicer, defaults in its obligations under the Sale and Servicing Agreement, the Indenture Trustee may (and upon the written direction of the required noteholders shall) terminate and replace the Servicer.
The Notes were issued by the Issuer pursuant to an indenture, dated as of the Closing Date, by and among the Issuer, the Indenture Trustee, Wells Fargo National Bank, National Association, as the account bank, and the Servicer (the “Indenture”). The stated maturity of the Notes is October 17, 2033 (the “Stated Maturity”). Prior to maturity, the Issuer may redeem the Notes in full, but not in part, at its option (an “Optional Call”) on any business day on or after the Note payment date occurring in October 2024 (as applicable, the “Redemption Date”). The amount at which the Notes may be redeemed must equal at least the sum of (i) the product of (a) the aggregate principal balance of the Notes on the record date preceding the Redemption Date, multiplied by (b) the applicable redemption price percentage plus (ii) accrued and unpaid interest on the Notes, plus (iii) any accrued and unpaid other contractual expenses, indemnification amounts, or other amounts owed by the Issuer, minus (iv) all amounts then on deposit in the collection account, principal distribution account, and reserve account (the “Note Accounts”) and available to be distributed pursuant to the priority of payments on the Redemption Date. With respect to any Note subject to an Optional Call, the redemption price percentage shall mean (i) on any business day on or after the payment date occurring in October 2024, 102%, (ii) on any business day on or after the payment date occurring in October 2025, 101% or (iii) on any business day on or after the payment date occurring in October 2026, 100%.
The Indenture also permits the Issuer or the required noteholders to redeem the Notes in the event certain regulatory events occur which seek to limit the origination of loans with an APR of greater than 36%, provided that at least 40% of the underlying eligible loans that are held by the Issuer as of the most recent monthly determination date, based on the aggregate loan principal balance of such eligible loans, were originated in one or more states where such cap on interest is applicable.
No payments of principal of the Notes will be made during the Revolving Period. The Company may indirectly sell and convey additional Loans to the Issuer during the Revolving Period until the earlier of the close of business on September 30, 2026 and the close of business immediately preceding the day on which an early amortization event or event of default (as described below) is deemed to have occurred, provided that, after the Revolving Period is terminated, it may be reinstated in certain limited circumstances. Under the Indenture, an early amortization event includes a Servicer default.
The Indenture also contains customary events of default (subject to materiality thresholds and cure periods), including (i) failure of the Indenture Trustee to maintain a first priority perfected security interest in all or a material portion of the trust estate, (ii) the Issuer or the Depositor becoming taxable as an association or a publicly traded partnership taxable as a corporation under the Internal Revenue Code, (iii) failure to pay the principal balance of all outstanding Notes, together with all accrued and unpaid interest thereon, in full on the Stated Maturity, (iv) non-compliance with covenants on the part of the Issuer or the Depositor, or (v) a breach of a representation, warranty, or certification by the Issuer, the Depositor, or the Servicer.
In the case of an event of default under the Indenture (except for an event of default relating to an insolvency event with respect to the Issuer or the Depositor), the Indenture Trustee shall, at the written direction of the required noteholders, declare all Notes immediately due and payable by notice to the Issuer, and upon such declaration, the unpaid principal amount of the Notes, together with any accrued and unpaid interest, will become immediately due and payable. In the case of an event of default that relates to an insolvency event with respect to the Issuer or the Depositor, the unpaid principal of the Notes, together with any accrued and unpaid interest, will become automatically due and payable.
Pursuant to the Sale and Servicing Agreement and in accordance with the Indenture, the Servicer may, on any business day occurring on or after the date on which the aggregate principal balance of the outstanding Notes is reduced to 10% or less of the initial principal balance of the Notes, at its option, purchase all of the Loans and related assets at a redemption price equal to the then aggregate fair market value of the Loans and related assets as of the date which is five (5) business days prior to the business day on which such option is exercised. The Issuer will redeem and retire the Notes in the event that the Servicer exercises the optional purchase right, and the Servicer may only exercise the optional purchase right if the redemption price equals or exceeds the sum of (i) the amount necessary for the Issuer to redeem all of the Notes in full on the applicable date of final payment on the Notes in accordance with the priority of payments (taking into account all amounts of available funds and any other amounts then on deposit in the Note Accounts and available to be distributed pursuant to the priority of payments on the applicable date of final payment on the Notes) and (ii) any accrued and unpaid other expenses, indemnification amounts, or other amounts owed by the Issuer.
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