Exhibit 10.1
EXECUTION COPY
================================================================================
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT
among
HERCULES FUNDING TRUST I,
as Issuer
and
HERCULES FUNDING I LLC,
as Depositor
and
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.,
as Originator and Servicer
and
U.S. BANK NATIONAL
ASSOCIATION, as Indenture
Trustee, Paying Agent and
Collateral Custodian
and
LYON FINANCIAL SERVICES, INC.,
d/b/a U.S. Bank Portfolio Services,
as Backup Servicer
and
CITIGROUP GLOBAL MARKETS REALTY CORP.,
as a Noteholder and as Administrative Agent
and
DEUTSCHE BANK AG, NEW YORK BRANCH,
as a Noteholder
ASSET BACKED NOTES
================================================================================
Dated as of May 2, 2007
Page
ARTICLE I DEFINITIONS................................................................................1
Section 1.01. Definitions..........................................................1
Section 1.02. Other Definitional Provisions.......................................31
ARTICLE II CONVEYANCE OF THE PURCHASED ASSETS; BORROWINGS............................................32
Section 2.01. Conveyance of the Purchased Assets; Borrowings......................32
Section 2.02. Ownership and Possession of Loan Files..............................33
Section 2.03. Books and Records; Intention of the Parties.........................34
Section 2.04. Delivery of Loan Files..............................................34
Section 2.05. Acceptance by the Indenture Trustee of the Loan Files;
Certification by the Collateral Custodian...........................34
Section 2.06. Conditions Precedent to Closing.....................................36
Section 2.07. Conditions to Borrowings............................................36
Section 2.08. Conditions to Transfers of Loans....................................37
Section 2.09. Extension of Amortization Date; Commencement of Amortization
Period; Permitted Securitization Transactions.......................38
ARTICLE III REPRESENTATIONS AND WARRANTIES............................................................39
Section 3.01. Representations and Warranties of the Depositor.....................39
Section 3.02. Representations and Warranties of the Originator....................41
Section 3.03. Representations and Warranties Regarding the Loans..................43
Section 3.04. Notice of Breach of Representations and Warranties..................47
Section 3.05. Substitution of Loans; Repurchase or Substitutions of
Ineligible Loans....................................................47
Section 3.06. Optional Sales......................................................50
Section 3.07. RIC/BDC Sales.......................................................52
Section 3.08. Deemed Collections..................................................54
ARTICLE IV ADMINISTRATION AND SERVICING OF LOANS.....................................................55
Section 4.01. Appointment of the Servicer.........................................55
Section 4.02. Duties and Responsibilities of the Servicer.........................55
Section 4.03. Authorization of the Servicer.......................................57
Section 4.04. Collection of Payments..............................................57
Section 4.05. Servicer Advances...................................................59
Section 4.06. Realization Upon Defaulted Loans or Charged-Off Loans...............59
Section 4.07. Maintenance of Insurance Policies...................................60
Section 4.08. Representations and Warranties of the Servicer......................60
Section 4.09. Covenants of the Servicer...........................................62
-i-
TABLE OF CONTENTS
(continued)
Section 4.10. The Collateral Custodian............................................64
Section 4.11. Representations and Warranties of the Collateral Custodian..........67
Section 4.12. Covenants of the Collateral Custodian...............................68
Section 4.13. The Backup Servicer.................................................69
Section 4.14. Representations and Warranties of the Backup Servicer...............71
Section 4.15. Covenants of the Backup Servicer....................................72
Section 4.16. Payment of Certain Expenses by the Servicer and the Issuer..........73
Section 4.17. Reports.............................................................73
Section 4.18. Annual Statement as to Compliance...................................74
Section 4.19. Annual Independent Public Accountant's Servicer Reports.............74
Section 4.20. Limitation on Liability.............................................74
Section 4.21. The Servicer, the Backup Servicer and the Collateral
Custodian Not to Resign.............................................75
Section 4.22. Access to Certain Documentation and Information Regarding
the Transferred Loans...............................................75
Section 4.23. Identification of Records...........................................76
ARTICLE V ESTABLISHMENT OF TRUST ACCOUNTS...........................................................76
Section 5.01. Collection Account, Principal Collections Account and
Distribution Account................................................76
Section 5.02. Payments to Securityholders.........................................81
Section 5.03. Trust Accounts; Trust Account Property..............................81
ARTICLE VI SPECIFICATION OF TAX MATTERS..............................................................83
Section 6.01. Specification of Certain Tax Matters................................83
ARTICLE VII COVENANTS.................................................................................84
Section 7.01. Financial Covenants of Hercules.....................................84
Section 7.02. Hedge Covenants.....................................................84
Section 7.03. Covenants Regarding Purchased Assets................................84
ARTICLE VIII THE SERVICER AND THE COLLATERAL CUSTODIAN.................................................85
Section 8.01. Indemnification; Third Party Claims.................................85
Section 8.02. Relationship of Servicer to Issuer, Owner Trustee and
Indenture Trustee...................................................87
Section 8.03. Servicer May Own Securities.........................................87
Section 8.04. Indemnification of the Indenture Trustee, the Owner Trustee
and Administrative Agent............................................88
-ii-
TABLE OF CONTENTS
(continued)
ARTICLE IX SERVICER DEFAULT..........................................................................88
Section 9.01. Servicer Default....................................................88
Section 9.02. Appointment of Successor............................................90
Section 9.03. Waiver of Defaults..................................................93
Section 9.04. Accounting Upon Termination of Servicer.............................93
ARTICLE X TERMINATION...............................................................................94
Section 10.01. Termination.........................................................94
Section 10.02. Optional Termination................................................94
Section 10.03. Notice of Termination Date; Amounts Due and Payable.................94
ARTICLE XI MISCELLANEOUS PROVISIONS..................................................................95
Section 11.01. Acts of Securityholders.............................................95
Section 11.02. Amendment...........................................................95
Section 11.03. Duration of Agreement...............................................96
Section 11.04. GOVERNING LAW; JURISDICTION.........................................96
Section 11.05. Notices.............................................................96
Section 11.06. Severability of Provisions..........................................97
Section 11.07. No Partnership......................................................97
Section 11.08. Counterparts........................................................97
Section 11.09. Successors and Assigns..............................................97
Section 11.10. Headings............................................................97
Section 11.11. Actions of Securityholders..........................................98
Section 11.12. Non-Petition Agreement..............................................98
Section 11.13. Due Diligence.......................................................98
Section 11.14. No Reliance.........................................................99
Section 11.15. Conflicts...........................................................99
Section 11.16. Limitation on Liability.............................................99
Section 11.17. No Agency..........................................................100
Section 11.18. Third Party Beneficiaries..........................................100
Section 11.19. Performance by U.S. Bank...........................................100
-iii-
EXHIBIT A Form of Borrowing Notice
EXHIBIT B Form of Servicer Report
EXHIBIT C Form of S&SA Assignment
EXHIBIT D Form of Loan Schedule
EXHIBIT E-1 Form of Initial Collateral Certification
EXHIBIT E-2 Form of Final Collateral Certification
EXHIBIT F Form of Borrowing Base Certificate
EXHIBIT G Form of Agent and Intercreditor Provisions for Agented Notes
EXHIBIT H Form of Assignment of Mortgage
EXHIBIT I Section 7.01 Certification
EXHIBIT J Form of Request for Release of Documents and Receipt
EXHIBIT K Form of Servicer's Certificate
EXHIBIT L Credit and Collection Policy
EXHIBIT M Canadian Loan Criteria
EXHIBIT L Quebec Loan Criteria
i
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT
This Amended and Restated Sale and Servicing Agreement is
entered into as of May 2, 2007, among Hercules Funding Trust I, a Delaware
statutory trust, as Issuer (in such capacity, the "Issuer"), Hercules Funding I
LLC, a Delaware limited liability company, as Depositor (in such capacity, the
"Depositor"), Hercules Technology Growth Capital, Inc., a Maryland corporation
("Hercules"), as Originator (in such capacity, the "Originator") and as Servicer
(in such capacity, the "Servicer"), Citigroup Global Markets Realty Corp., a New
York corporation, as a Noteholder and as Administrative Agent (in such capacity,
the "Administrative Agent"), Deutsche Bank AG, New York Branch, a duly licensed
branch of Deutsche Bank AG, a German corporation, as Managing Agent for the DB
Ownership Group (as defined in the Note Purchase Agreement) and a Noteholder,
and U.S. Bank National Association, a national banking association, as Indenture
Trustee (in such capacity, the "Indenture Trustee"), as Paying Agent (in such
capacity, the "Paying Agent") and as Collateral Custodian (in such capacity, the
"Collateral Custodian"), and Lyon Financial Services, Inc., a Minnesota
corporation, doing business as U.S. Bank Portfolio Services, as Backup Servicer
(in such capacity, the "Backup Servicer"), amending and restating the sale and
servicing agreement dated August 1, 2005, as amended, among the Issuer, the
Depositor, Hercules, the Servicer, the Indenture Trustee, the Initial
Noteholder, the Collateral Custodian and the Backup Servicer.
W I T N E S S E T H:
In consideration of the mutual agreements herein contained,
the parties hereto hereby agree as follows for the benefit of each of them and
for the benefit of the holders of the Securities:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations of
interest with respect to the Notes described herein shall be made on the basis
of a 360-day year and the actual number of days elapsed in each Accrual Period.
"1940 Act": The Investment Company Act of 1940, as amended,
and the rules and regulations promulgated thereunder.
"Accepted Servicing Practices": The servicing practices and
collection procedures of the Servicer that are in accordance with the applicable
Loan Documents and Applicable Law and which are consistent with the higher
standard of (i) customary servicing practices of prudent institutions which
service loans or other financial assets similar to the Transferred Loans for
their own account or for the account of others and (ii) the same care, skill,
prudence and diligence with which the Servicer services and administers loans or
other financial assets which are similar to the Transferred Loans serviced or
administered pursuant to this Agreement, for its own account or for the account
of others.
"Account Control Agreement": The securities account control
agreement, dated as of the date hereof, among the Issuer, as the debtor, the
Servicer and U.S. Bank, as the account bank and as the Collateral Custodian, as
the same may be amended, modified, waived, supplemented or restated from time to
time.
"Accreted Interest": The accrued interest on a PIK Loan that
is added to the principal amount of such PIK Loan instead of being paid as it
accrues.
"Accrual Period": With respect to any Payment Date of the
Notes, the period from the day after the preceding Record Date (or, in the case
of the first Payment Date, the period from and including the Closing Date to
November 10, 2005) to and including such Record Date; provided, however, that
the Accrual Period for the final Payment Date shall be the period from the day
after the preceding Record Date to but excluding such final Payment Date.
"Administration Agreement": The Administration Agreement,
dated as of August 1, 2005, between the Issuer and the Administrator, as the
same may be amended, modified, waived, supplemented or restated from time to
time.
"Administrator": Hercules, in its capacity as Administrator
under the Administration Agreement.
"Advance Rate: On any date (a) prior to April 3, 2006, a
percentage equal to 60%, and (b) on and after April 3, 2006, a percentage equal
to 55%.
"Advances Outstanding: As of any date of determination, the
aggregate principal amount of Borrowings outstanding on such date, after giving
effect to all repayments of Borrowings and makings of new Borrowings on such
date.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing; provided, that in the
case of the Servicer or any Subsidiary, "Affiliate" shall not include any Person
that is a Portfolio Investment.
"Agented Notes": One or more promissory notes issued by an
Obligor wherein (a) the note(s) are originated in accordance with the Credit and
Collection Policy as a part of a syndicated loan transaction, (b) the Issuer, as
assignee of the note, will have all of the rights (but none of the obligations)
of the Originator with respect to such note and the Related Property, the right
to receive and collect payments whether directly in its own name or through the
Originator as agent for the noteholders of such Obligor, and to enforce its
rights against the Obligor thereof, (c) the note is secured by an undivided
interest in the Related Property that also secures and is shared by, on a pro
rata basis, all other holders of such Obligor's notes of equal priority and (d)
the Originator is the agent for all noteholders of such Obligor.
2
"Aggregate Net Mark to Market Amount": As of each Record Date,
the sum of all Net Mark to Market Amounts for such date for all Hedge
Counterparties.
"Aggregate Outstanding Loan Balance": As of any date of
determination, the sum of the Outstanding Loan Balances of all Eligible Loans
included as part of the Collateral on such date minus the Outstanding Loan
Balance of all Charged-Off Loans included as part of the Collateral (and
specifically excluding all Ineligible Loans) on such date.
"Aggregate Unpaids": At any time, an amount equal to the sum
of all unpaid Advances Outstanding, Interest Payment Amounts and Interest
Carry-Forward Amounts, Hedge Breakage Costs and all other amounts owed to the
Depositor, the Noteholders, the Servicer, the Backup Servicer, each Hedge
Counterparty and the Indenture Trustee hereunder and the Indenture (including,
without limitation, all amounts in respect of indemnities hereunder, other
amounts payable under Section 8.01, Section 8.03, and amounts required to be
paid under Section 5.01(c)(4) and Section 5.01(c)(5)) or under any Hedging
Agreement (including, without limitation, payments in respect of the termination
of any such Hedging Agreement) or by the Depositor or the Issuer or any other
Person under any fee letter delivered in connection with the transactions
contemplated by this Agreement, in each case whether due or accrued.
"Agreement": This Amended and Restated Sale and Servicing
Agreement, as it may be amended and supplemented from time to time.
"Amendment Date": May 2, 2007
"Amortization Date": The date that occurs 364 days after the
Amendment Date (or, if such date is not a Business Day, the preceding Business
Day), as such date may be extended pursuant to Section 2.03 of the Note Purchase
Agreement.
"Amortization Period": The period commencing on the
Amortization Date and ending on the Termination Date.
"Applicable Law": For any Person or property of such Person,
all existing and future applicable laws, rules, regulations (including proposed,
temporary and final income tax regulations), statutes, treaties, codes
ordinances, permits, certificates, orders and licenses of and interpretations by
any Governmental Authority (including, without limitation, usury laws, predatory
lending laws, the Federal Truth in Lending Act, and Regulation Z and Regulation
B of the Federal Reserve Board), and applicable judgments, decrees, injunctions,
writs, orders, or line action of any court, arbitrator or other administrative,
judicial, or quasi-judicial tribunal or agency of competent jurisdiction.
"Assigned Assets": Has the meaning provided in the Loan Sale
Agreement.
"Assignment of Mortgage": As to each Loan secured by an
interest in real property, one or more assignments, notices of transfer or
equivalent instruments, each in recordable form and sufficient under the laws of
the relevant jurisdiction to reflect the transfer of the related mortgage, deed
of trust, security deed, immovable hypothec, deed of hypothec or similar
security instrument and all other documents related to such Loan to the Issuer
and to Grant a perfected Lien thereon by the Issuer in favor of the Indenture
Trustee, on behalf of the Noteholders, each such Assignment of Mortgage to be
substantially in the form of Exhibit H hereto; provided, that with respect to
Agented Notes, Assignment of Mortgage shall mean such documents, including
assignments, notices of transfer or equivalent instruments, each in recordable
form as necessary, as are sufficient under the laws of the relevant jurisdiction
to reflect the transfer to the Originator, as collateral agent for all
noteholders of the Obligor, of the related mortgage, deed of trust, security
deed, immovable hypothec, deed of hypothec or other similar instrument securing
such notes and all other documents relating to such notes and to grant a
perfected Lien thereon by the Obligor in favor of the Originator, as collateral
agent for all such noteholders.
3
"Availability": At any time during the Revolving Period, an
amount equal to the excess, if any, of (i) the lesser of (a) the Facility Amount
and (b) the Maximum Availability over (ii) the sum of (a) the Advances
Outstanding on such day plus (b) the Aggregate Net Mark to Market Amount;
provided, that on any date after the last day of the Revolving Period, the
Availability shall be zero.
"Average Obligor Amount": As of any date of determination, the
Aggregate Outstanding Loan Balance minus all amounts in excess of Concentration
Limits (a) through (j) and (m), divided by the number of Obligors represented in
the Aggregate Outstanding Loan Balance as of such date.
"Backup Servicer": Lyon Financial Services, Inc., a Minnesota
corporation, doing business as U.S. Bank Portfolio Services, as Backup Servicer
under this Agreement, or any successor backup servicer under this Agreement.
"Backup Servicer Expenses": The reasonable out-of-pocket
expenses to be paid to the Backup Servicer under and in accordance with the
Collateral Custodian and Backup Servicer Fee Letter.
"Backup Servicer Fee": The fee to be paid to the Backup
Servicer under the terms of the Collateral Custodian and Backup Servicer Fee
Letter.
"Bankruptcy Code": Title 11 of the United States Code.
"Bankruptcy Event": With respect to a Person, shall be deemed
to have occurred if either:
(a) a case or other proceeding shall be commenced, without
the application or consent of such Person, in any court seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up, or composition or
readjustment of debts of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or for
all or substantially all of its assets, or any similar action with respect to
such Person under any law relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, and such case or proceeding
shall continue undismissed or unstayed, and in effect, for a period of 60
consecutive days; or an order for relief in respect of such Person shall be
entered in an involuntary case or proceeding under any such law now or hereafter
in effect; or
4
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect, or
shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) for such Person or for any substantial part of its assets, or shall
make any general assignment for the benefit of creditors, or shall fail to, or
admit in writing its inability to, pay its debts generally as they become due,
or, if a corporation or similar entity, its board of directors shall vote to
implement any of the foregoing.
"Bankruptcy Laws": The Bankruptcy Code and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, composition or
adjustment of debts or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"Bankruptcy Proceeding": Any case, action or proceeding before
any Governmental Authority relating to a Bankruptcy Event.
"Basic Documents": This Agreement, the Indenture, the Loan
Sale Agreement, the Note Purchase Agreement, the Trust Agreement, the
Administration Agreement, each LSA Assignment, each S&SA Assignment, all Hedging
Agreements, the Intercreditor Agreement, the Account Control Agreement, the
Notes, the Citigroup Fee Letter, the DB Fee Letter, the Collateral Custodian and
Backup Servicer Fee Letter, the Warrant Pledge and Security Agreement, the
Warrant Participation Agreement, any UCC financing statements (or their
equivalents in any Canadian jurisdiction) filed pursuant to the terms of this
Agreement, the Loan Sale Agreement or the Indenture, and any additional
document, letter, fee letter, certificate, opinion, agreement or writing the
execution of which is necessary or incidental to carrying out the terms of the
foregoing documents.
"Borrowing": Has the meaning set forth in Section 2.01(b)
hereof.
"Borrowing Base": On any date of determination, an amount
equal to (i) the Aggregate Outstanding Loan Balance on such date plus (ii) the
Outstanding Loan Balance of all Eligible Loans to become included as part of the
Collateral on such date minus (iii) the amount (calculated without duplication)
by which the Eligible Loans in clauses (i) and (ii) together exceed any
applicable Concentration Limits minus (iv) the Outstanding Loan Balance of any
Defaulted Loans.
"Borrowing Base Certificate": The certificate in the form
attached hereto as Exhibit F.
"Borrowing Date": The date identified as such in a Borrowing
Notice.
"Borrowing Notice": The notice in the form attached hereto as
Exhibit A.
"Business Day": Any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York City, Palo Alto,
California, Florence, South Carolina or in the city in which the Corporate Trust
Office (as defined in the Indenture) of the Indenture Trustee or the Paying
Agent is located or the city in which the Servicer's servicing operations are
located, are authorized or obligated by law or executive order to be closed.
5
"Certificateholder": A holder of a Trust Certificate.
"Change-in-Control": The date on which (a) any Person or
"group" acquires any "beneficial ownership" (as such terms are defined under
Rule 13d-3 of, and Regulation 13D under the Exchange Act), either directly or
indirectly, of stock or other equity interests or any interest convertible into
any such interest in the Originator or Servicer having more than 50% of the
voting power for the election of directors of the Originator or Servicer, if
any, under ordinary circumstances, or (b) (except in connection with any
Permitted Securitization) the Originator or Servicer sells, transfers, conveys,
assigns or otherwise disposes of all or substantially all of the assets of the
Originator or Servicer.
"Charged-Off Loan": Any Transferred Loan (i) that is 180 days
or more past due (without giving effect to any Servicer Advance thereon) with
respect to any interest or principal payment, (ii) as to which a Bankruptcy
Event has occurred with respect to the related Obligor, (iii) as to which the
related Obligor has suffered any Material Adverse Change, (iv) that is or should
be written off as uncollectible by the Servicer in accordance with the Credit
and Collection Policy, (v) that has been placed on non-accrual status by the
Servicer in accordance with the Credit and Collection Policy, (vi) all or any
portion of which has been converted into or exchanged for an Equity Security or
(vii) has been sold for less than its Outstanding Loan Balance upon foreclosure
or upon exercise of remedies, provided, that only the portion of the Transferred
Loan not recouped in such sale shall be deemed to be "charged-off" for purposes
of clause (vii).
"Charged-Off Ratio": With respect to any Collection Period,
the percentage equivalent of a fraction, calculated as of the Record Date for
the Payment Date with respect to such Collection Period, (a) the numerator of
which is equal to the aggregate Outstanding Loan Balance of all Charged-Off
Loans and (b) the denominator of which is equal to the decimal equivalent of a
fraction (x) the numerator of which is equal to the sum of (i) the Aggregate
Outstanding Loan Balance as of the first day of such Collection Period plus (ii)
the Aggregate Outstanding Loan Balance as of the last day of such Collection
Period and (y) the denominator of which is 2.
"Citigroup Fee Letter": The fee letter dated as of the date
hereof between Hercules and Citigroup Global Markets Realty Corp., as amended,
supplemented, modified restated or replaced from time to time.
"Clean-up Call Date": The first Payment Date during the
Amortization Period on which the Note Principal Balance declines to 10% or less
of the aggregate Note Principal Balance as of the Amortization Date.
"Closing Date": August 1, 2005.
"Code": The Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated by the United States Treasury
thereunder.
6
"Collateral": Has the meaning provided in the Indenture.
"Collateral Custodian": U.S. Bank National Association, a
national banking association, as Collateral Custodian under this Agreement, or
any successor collateral custodian under this Agreement.
"Collateral Custodian Fee": Means the fee identified as such
in the Collateral Custodian and Backup Servicer Fee Letter.
"Collateral Custodian and Backup Servicer Fee Letter": Means
the fee letter, dated as of the date hereof, among the Originator, U.S. Bank
National Association as Indenture Trustee and as Collateral Custodian, the
Backup Servicer and Citigroup Global Markets Realty Corp.
"Collection Account": The account (#790456-200) designated as
such, established and maintained by the Servicer in accordance with Section
5.01(a) hereof.
"Collection Date": The date following the Termination Date on
which the Note Principal Balance has been reduced to zero and paid in full.
"Collection Period": With respect to any Payment Date, the
period from and including the day following the Record Date for the preceding
Payment Date (or, in the case of the initial Payment Date, from and including
the Closing Date) to and including the Record Date with respect to the current
Payment Date.
"Collections": (a) All cash collections or other cash proceeds
received by the Issuer or by the Servicer, the Depositor or the Originator on
behalf of the Issuer from any source in payment of any amounts owed in respect
of a Transferred Loan, including, without limitation, Interest Collections,
Principal Collections, Insurance Proceeds, interest earnings in the Collection
Account and the Principal Collections Account and all Recoveries, (b) all
amounts received by the Depositor or the Issuer, as applicable, in connection
with the removal of a Transferred Loan from the Collateral pursuant to Section
3.05, Section 3.06, Section 3.07 or Section 3.08, (c) any other funds received
by or on behalf of the Issuer with respect to any Transferred Loan or Related
Property, and (d) all payments received pursuant to any Hedging Agreement or
Hedge Transaction, but excluding, in the case of (a), (b) or (c), as applicable,
amounts in respect of any Retained Interest and Excluded Amounts.
"Commission": The Securities and Exchange Commission.
"Committed Purchaser": Has the meaning provided in the Note
Purchase Agreement.
"Concentration Account": The account (#790456-700) maintained
in the name of the Originator for the purpose of receiving Collections at the
Concentration Account Bank.
"Concentration Account Bank": U.S. Bank National Association,
a national banking association, as Concentration Account Bank under the related
account agreement, or any successor concentration account bank under such
account agreement.
7
"Concentration Limits": On any day, each of the following
(calculated and expressed in each case as a percentage of the Aggregate
Outstanding Loan Balance):
(a) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral to Obligors whose chief executive office is in any
one state shall not exceed 70%;
(b) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral to Obligors which are in the same Industry shall not
exceed 55%;
(c) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral to any one Obligor shall not exceed the Large Obligor
Limit;
(d) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral the Obligors of which are Grade 3 Obligors shall not
exceed 30%;
(e) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral that have interest due and payable monthly shall not
be less than 75%, and not less than 100% of the Eligible Loans included in the
Collateral shall have interest due and payable no less frequently than
quarterly;
(f) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral that are secured by a security interest in all assets
of the related Obligor shall not be less than 70%;
(g) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral that have at least a portion of the monthly or
quarterly interest that is due under such Loans payable in cash on a current
basis by the Obligors thereof shall not be less than 100%;
(h) the sum of the Outstanding Loan Balances of each Eligible
Loan included in the Collateral which is a PIK Loan and which is either (a) a
Fixed Rate Loan having a Loan Rate of less than 7.0% per annum or (b) a Floating
Rate Loan having a Loan Rate of less than 7.0% per annum shall not exceed 0%;
(i) the sum of the Outstanding Loan Balances of Eligible Loans
included in the Collateral principally secured by real property shall not exceed
40%;
(j) the sum of the Outstanding Loan Balances of all Eligible
Loans included in the Collateral which have been included as part of the
Collateral for 15 months or more shall not exceed 60% (provided, that, if a
portion of a Loan has been transferred, sold, contributed or otherwise conveyed
to the Originator or any Affiliate thereof as part of a Permitted Securitization
that is a private placement collateralized loan or collateralized debt
obligation transaction, such sum shall be calculated by treating the portion of
the applicable Loan remaining in the Collateral as if such Loan was first
included in the Collateral as of the closing date of such Permitted
Securitization);
8
(k) if the Aggregate Outstanding Loan Balance is less than
$150,000,000, the Average Obligor Amount shall not exceed $15,000,000;
(l) if the Aggregate Outstanding Loan Balance is greater than
or equal to $150,000,000, (i) the Outstanding Loan Balance of the largest
Eligible Loan included in the Collateral may not exceed $25,000,000, (ii) the
Outstanding Loan Balance of each of the next three largest Eligible Loans
included in the Collateral may not exceed $20,000,000, (iii) the Outstanding
Loan Balance of each of the next five largest Eligible Loans included in the
Collateral may not exceed $15,000,000 and (iv) the Average Obligor Amount
(calculated without regard to the nine largest Eligible Loans) for all remaining
loans shall not exceed $10,000,000; and
(m) the sum of the Outstanding Loan Balances of all Eligible
Loans included in the Collateral that are Loans to Obligors organized or
continued under the federal, territorial or provincial laws of, or principally
located in Canada, or the Related Property by which such Loans are principally
secured is located in or arises under the federal or provincial laws of, Canada
shall not exceed the greater of 10% or $10,000,000.
"Conduit Purchaser": Has the meaning provided in the Note
Purchase Agreement.
"Continued Errors": Has the meaning set forth in Section
9.02(d) hereof.
"Credit and Collection Policy": Means the written credit and
collection policies and procedures of the Originator and Servicer in effect as
of the Closing Date and attached hereto as Exhibit L, as such policies and
procedures may be amended or supplemented from time to time in compliance with
Section 4.09(f).
"Daily Interest Accrual Amount": With respect to each day
during an Accrual Period, an amount equal to the interest accrued at the Note
Interest Rate on an amount equal to the Note Principal Balance, as determined as
of the preceding Business Day after giving effect to all changes to the Note
Principal Balance on or prior to such preceding Business Day.
"DB Fee Letter": The fee letter dated as of the date hereof
between Hercules and Deutsche Bank AG, New York Branch, as amended,
supplemented, modified restated or replaced from time to time.
"Deemed Collection": Defined in Section 3.08.
"Default": Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"Defaulted Loan": Any Transferred Loan (that is not a
Charged-Off Loan) (a) that is 90 days or more past due with respect to any
interest or principal payments or (b) that is or otherwise should be considered
a Defaulted Loan by the Servicer in accordance with the Credit and Collection
Policy.
9
"Default Ratio": With respect to any Collection Period, the
percentage equivalent of a fraction, calculated as of the Record Date for the
Payment Date with respect to such Collection Period, (a) the numerator of which
is equal to the aggregate Outstanding Loan Balance of all Defaulted Loans and
(b) the denominator of which is equal to the decimal equivalent of a fraction
(x) the numerator of which is equal to the sum of (i) the Aggregate Outstanding
Loan Balance as of the first day of such Collection Period and (ii) the
Aggregate Outstanding Loan Balance as of the last day of such Collection Period
and (y) the denominator of which is 2.
"Delinquent": On any day with respect to any Transferred Loan,
(i) any payment, or portion thereof, due with respect thereto, has not been made
by the Obligor of such Transferred Loan on the due date of such payment or (ii)
the related Obligor is not paying any of the accrued and unpaid interest thereon
in cash on a current basis in violation of the terms of such Transferred Loan.
"Delivery": When used with respect to Trust Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(l)(i) of the UCC and are
susceptible of physical delivery (except with respect to Trust Account Property
consisting of certificated securities (as defined in Section 8-102(a)(4) of the
UCC)), physical delivery to the Indenture Trustee or its custodian (or the
related Securities Intermediary) endorsed to the Indenture Trustee or its
custodian (or the related Securities Intermediary) or endorsed in blank (and if
delivered and endorsed to the Securities Intermediary, by continuous credit
thereof by book-entry to the related Trust Account);
(b) with respect to a certificated security (i) delivery of
such certificated security endorsed to, or registered in the name of, the
Indenture Trustee or endorsed in blank to its custodian or the related
Securities Intermediary and the making by such Securities Intermediary of
appropriate entries in its records identifying such certificated securities as
credited to the related Trust Account, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(5) of the UCC) and the
making by such clearing corporation of appropriate entries in its records
crediting the securities account of the related Securities Intermediary by the
amount of such certificated security and the making by such Securities
Intermediary of appropriate entries in its records identifying such certificated
securities as credited to the related Trust Account (all of the Trust Account
Property described in Subsections (a) and (b), "Physical Property"); and, in any
event, any such Physical Property in registered form shall be in the name of the
Indenture Trustee or its nominee or custodian (or the related Securities
Intermediary); and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any such
Trust Account Property to the Indenture Trustee or its nominee or custodian,
consistent with changes in applicable law or regulations or the interpretation
thereof;
(c) with respect to any security issued by the U.S. Treasury,
Fannie Mae or Freddie Mac that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: the making by a Federal Reserve
Bank of an appropriate entry crediting such Trust Account Property to an account
of the related Securities Intermediary or the securities intermediary that is
(x) also a "participant" pursuant to applicable federal regulations and (y) is
acting as securities intermediary on behalf of the Securities Intermediary with
respect to such Trust Account Property; the making by such Securities
Intermediary of appropriate entries in its records crediting such book-entry
security held through the Federal Reserve System pursuant to federal book-entry
regulations and Articles 8 and 9 of the UCC to the related Trust Account; and
such additional or alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Trust Account Property to the
Indenture Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof; and
10
(d) with respect to any item of Trust Account Property that is
an uncertificated security (as defined in Section 8-102(a)(18) of the UCC) and
that is not governed by clause (c) above, registration in the records of the
issuer thereof in the name of the related Securities Intermediary, and the
making by such Securities Intermediary of appropriate entries in its records
crediting such uncertificated security to the related Trust Account.
"Depositor": Hercules Funding I LLC, a Delaware limited
liability company.
"Designated Depository Institution": With respect to an
Eligible Account, an institution whose deposits are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
long-term deposits of which shall be rated "A" or better by S&P or "A2" or
better by Moody's and the short-term deposits of which shall be rated "P-1" or
better by Moody's and "A-1" or better by S&P, unless otherwise approved in
writing by the Majority Noteholders and which is any of the following: (A) a
federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (B) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (C) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, (D) a principal subsidiary of a
bank holding company or (E) approved in writing by the Majority Noteholders and,
in each case acting or designated by the Servicer as the depository institution
for the Eligible Account; provided, that any such institution or association
shall have combined capital, surplus and undivided profits of at least
$50,000,000.
"Distribution Account": The account established and maintained
pursuant to Section 5.01(a)(2) hereof.
"Dollars" or "$" refers to lawful money of the United States
of America.
"Eligible Account": At any time, an account which is: (i)
maintained with a Designated Depository Institution; (ii) fully insured by
either the Bank Insurance Fund or the Savings Association Insurance Fund of the
FDIC; (iii) a trust account (which shall be a segregated trust account)
maintained with the corporate trust department of a federal or state chartered
depository institution or trust company with trust powers and acting in its
fiduciary capacity for the benefit of the Indenture Trustee and the Issuer,
which depository institution or trust company shall have capital and surplus of
not less than $50,000,000; or (iv) with the prior written consent of the
Majority Noteholders, any other account.
11
"Eligible Loan": On any date of determination, any Transferred
Loan which complies with the representations and warranties set forth in Section
3.03.
"Eligible Obligor": On any day, any Obligor that satisfies
each of the following requirements:
(i) such Obligor is not in the gaming, nuclear waste, oil and
gas or real estate industries;
(ii) such Obligor is not a natural person and is a legal
operating entity, duly organized and validly existing under the laws of its
jurisdiction of organization;
(iii) the business being financed by such Obligor has an
Operating History of at least 9 months from the date of its incorporation or
formation;
(iv) such Obligor is not the subject of any Bankruptcy Event
(and, as of the Transfer Date on which such Transferred Loan became part of the
Collateral, such Obligor has not experienced a Material Adverse Change);
(v) such Obligor is not an Affiliate of any other Obligor
hereto (other than as a result of being an Affiliate of the Originator);
(vi) no other Loan of such Obligor is Delinquent for more than
30 days;
(vii) such Obligor is not a Governmental Authority;
(viii) such Obligor is in compliance with all material terms
and conditions of the Loan Documents related to the applicable Transferred Loan;
(ix) except as the Majority Noteholders shall otherwise agree
in writing, such Obligor's principal office shall be located in the United
States and any Related Property shall be located in the United States or Canada
or any other country or territory of the United States (approved by the Majority
Noteholders upon receipt and review of satisfactory legal due diligence, Rating
Agency discussions and credit approval);
(x) such Obligor has an Eligible Risk Rating.
"Eligible Risk Rating": As of any date of determination, with
respect to a designated Obligor, a risk rating of "Grade 1," "Grade 2," or
"Grade 3."
"Eligible Servicer": (x) Hercules or (y) any other Person to
which the Noteholders may consent in writing.
12
"Equity Security": Any equity security or other obligation or
security that does not entitle the holder thereof to receive periodic payments
of interest and one or more installments of principal.
"Errors": Has the meaning set forth in Section 9.02(d) hereof.
"Event of Default": Either a Servicer Default or an "Event of
Default" under the Indenture.
"Exchange Act": The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Amounts": Any Collections received with respect to
Loans which have been removed from the Collateral pursuant to Section 3.05,
Section 3.06, Section 3.07 or Section 3.08, to the extent such Collections are
attributable to a time after the effective date of the applicable substitution,
repurchase or release.
"Exit Fee": An amount equal to $1,500,000.
"Facility Amount": On any date of determination (i) during the
Revolving Period, an amount equal to $250,000,000 and (ii) after the end of the
Revolving Period, an amount equal to $0.
"Fair Market Value": With respect to a Transferred Loan
included in the Collateral if such Transferred Loan has been reduced in value on
such date of determination below the original principal amount (other than as a
result of the allocation of a portion of the original principal amount to
warrants or other equity entitlements), the fair market value of such
Transferred Loan as required by, and in accordance with, the 1940 Act and any
orders of the Commission issued to the Originator, to be determined by the Board
of Directors of the Originator and reviewed by its auditors and communicated to
the Servicer.
"Fannie Mae": The Federal National Mortgage Association and
any successor thereto.
"FDIC": The Federal Deposit Insurance Corporation and any
successor thereto.
"Final Collateral Certification": The certification in the
form of Exhibit E-2 hereto prepared by the Collateral Custodian.
"Fitch": Fitch Ratings or any successor in interest.
"Fixed Rate Loan": A Transferred Loan other than a Floating
Rate Loan.
"Fixed Rate Loan Percentage": As of any date of determination,
the percentage equivalent of a fraction (i) the numerator of which is equal to
the sum of the Outstanding Loan Balances of all Fixed Rate Loans as of such date
and (ii) the denominator of which is equal to the Aggregate Outstanding Loan
Balance as of such date.
13
"Floating Rate Loan": A Transferred Loan where the interest
rate payable by the Obligor thereof is based on the prime interest rate (daily
rate) or the London interbank offered rate (one-month, two-month, three-month,
six-month or twelve-month rate), plus some specified interest percentage in
addition thereto, and such Transferred Loan provides that such interest rate
will reset immediately upon any change in the related prime interest rate or
London interbank offered rate.
"Freddie Mac": The Federal Home Loan Mortgage Corporation and
any successor thereto.
"GAAP": Generally Accepted Accounting Principles as in effect
in the United States.
"Governmental Authority": With respect to any Person, any
national, government, state, province or other political division thereof, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government, and any court or arbitrator having
jurisdiction over such Person.
"Grade 1 Obligor": As of any date of determination, an Obligor
of any Loan that the Servicer determines to be or, in accordance with the Credit
and Collection Policy, should have determined to be, classified as "Grade 1."
"Grade 2 Obligor": As of any date of determination, an Obligor
of any Loan that the Servicer determines to be or, in accordance with the Credit
and Collection Policy, should have determined to be, classified as "Grade 2."
"Grade 3 Obligor": As of any date of determination, any
Obligor of any Loan that the Servicer determines to be or, in accordance with
the Credit and Collection Policy, should have determined to be, classified as
"Grade 3."
"Grade 4 Obligor": As of any date of determination, an Obligor
of any Loan that the Servicer determines to be or, in accordance with the Credit
and Collection Policy, should have determined to be, classified as "Grade 4."
"Grade 5 Obligor": As of any date of determination, an Obligor
of any Loan that the Servicer determines to be or, in accordance with the Credit
and Collection Policy, should have determined to be, classified as "Grade 5."
"Grant": Shall have the meaning provided in the Indenture.
"Group Noteholder": Shall have the meaning provided in the
Note Purchase Agreement.
"Hedge Breakage Costs": With respect to each Hedge
Counterparty upon the early termination of any Hedge Transaction with such Hedge
Counterparty, the net amount, if any, payable by the Issuer to such Hedge
Counterparty for the early termination of that Hedge Transaction or any portion
thereof.
14
"Hedge Collateral": Defined in Section 7.02(b).
"Hedge Counterparty": Means (a) Citibank N.A., New York and
(b) any other entity that (i) on the date of entering into any Hedge Transaction
(x) is an interest rate swap dealer that has been approved in writing by (I) at
any time when there are two or fewer Noteholders party hereto, each Noteholder,
and (II) at any time when there are more than two Noteholders party hereto, the
Majority Noteholders (which approval shall not, in the case of either clause (I)
or clause (II), be unreasonably withheld), and (y) has a long-term unsecured
debt rating of not less than "A" by S&P, not less than "A2" by Moody's and not
less than "A" by Fitch (if such entity is rated by Fitch) (the "Long-term Rating
Requirement") and a short-term unsecured debt rating of not less than "A-1" by
S&P, not less than "P-1" by Moody's and not less than "F1" by Fitch (if such
entity is rated by Fitch) (the "Short-term Rating Requirement"), and (ii) in a
Hedging Agreement (x) consents to the assignment of the Issuer's rights under
the Hedging Agreement to the Indenture Trustee on behalf of the Noteholders
pursuant to Section 7.02(b) and (y) agrees that in the event that Moody's, S&P
or Fitch reduces its long-term unsecured debt rating below the Long-term Rating
Requirement or reduces it short-term debt rating below the Short-Term Rating
Requirement, it shall either collateralize its obligations in a manner
satisfactory to (I) at any time when there are two or fewer Lenders party
hereto, each Noteholder, and (II) at any time when there are more than two
Noteholders party hereto, the Majority Noteholders, or transfer its rights and
obligations under each Hedging Agreement (excluding, however, any right to net
payments or Hedge Breakage Costs under any Hedge Transaction, to the extent
accrued to such date or to accrue thereafter and owing to the transferring Hedge
Counterparty as of the date of such transfer) to another entity that meets the
requirements of clauses (b)(i) and (b)(ii) hereof and has entered into a Hedging
Agreement with the Issuer on or prior to the date of such transfer.
"Hedge Transaction": Each interest rate swap, index rate swap
or interest rate cap transaction or comparable derivative arrangements between
the Issuer and a Hedge Counterparty that is entered into pursuant to Section
7.02(a) and is governed by a Hedging Agreement.
"Hedging Agreement": The agreement between the Issuer and a
Hedge Counterparty that governs one or more Hedge Transactions entered into by
the Issuer and such Hedge Counterparty pursuant to Section 7.02(a), which
agreement shall consist of a "Master Agreement" in a form published by the
International Swaps and Derivatives Association, Inc., together with a
"Schedule" thereto, and each "Confirmation" thereunder confirming the specific
terms of each such Hedge Transaction.
"Indemnified Parties": Has the meaning set forth in Section
8.01(c) hereof.
"Indenture": The Indenture dated as of August 1, 2005, between
the Issuer and the Indenture Trustee, as it may be amended or supplemented from
time to time.
"Indenture Trustee": U.S. Bank National Association, a
national banking association, as indenture trustee under the Indenture, or any
successor indenture trustee under the Indenture.
15
"Indenture Trustee Fee": Shall have the meaning given such
term in the Collateral Custodian and Backup Servicer Fee Letter.
"Independent": When used with respect to any specified Person,
such Person (i) is in fact independent of the Originator, the Servicer, the
Depositor or any of their respective Affiliates, (ii) does not have any direct
financial interest in, or any material indirect financial interest in, the
Originator, the Servicer, the Depositor or any of their respective Affiliates
and (iii) is not connected with the Originator, the Depositor, the Servicer or
any of their respective Affiliates, as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the
Originator, the Depositor, the Servicer or any of their respective Affiliates
merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Originator, the Depositor, the Servicer or any of their
respective Affiliates, as the case may be.
"Industry": The industry of an Obligor as determined, in the
discretion of the Originator, by reference to either (a) the four digit standard
industry classification (SIC) codes or (b) the Dow Jones VentureOne Industry
Segments.
"Ineligible Loan": Shall have the meaning given such term in
Section 3.05(b)(i).
"Initial Collateral Certification": The certification in the
form of Exhibit E-1 hereto prepared by the Collateral Custodian.
"Insurance Policy": With respect to any Transferred Loan
included in the Collateral, an insurance policy covering physical damage to or
loss to any assets or Related Property of the Obligor securing such Transferred
Loan.
"Insurance Proceeds": Any amounts payable or any payments made
to the Depositor or to the Servicer on its behalf under any Insurance Policy.
"Intercreditor Agreement": The Intercreditor and Concentration
Account Administration Agreement, dated as of the date hereof, by and among U.S.
Bank National Association, as the Indenture Trustee, Hercules Technology Growth
Capital, Inc., as the originator and as the original servicer, Hercules Funding
Trust I, as the issuer and each other Person that from time to time executes a
joinder thereto, as amended, modified, waived, supplemented, restated or
replaced from time to time.
"Interest Carry-Forward Amount": With respect to any Payment
Date, an amount equal to the excess, if any, of the Interest Payment Amount for
the immediately preceding Payment Date over the amount that was actually paid
from the Distribution Account in respect of interest on the immediately
preceding Payment Date, together with any Interest Carry-Forward Amount
remaining unpaid from any previous Payment Date, with interest on any such
unpaid amounts at the Note Interest Rate.
"Interest Collections": Any and all amounts received with
respect to a Transferred Loan from or on behalf of the related Obligor that are
deposited into the Collection Account, or received by the Issuer or by the
Servicer or Originator on behalf of the Depositor in respect of Transferred
Loans, not constituting Principal Collections, and, solely for the purposes of
calculating the Portfolio Yield, any and all amounts accrued in respect of any
fees (but only to the extent such fees are not part of the Retained Interest or
were not received during such Collection Period) owed by any Obligor in respect
of any Transferred Loan (net of any payment owed by the Issuer to, and including
any receipts from, any Hedge Counterparties).
16
"Interest Payment Amount": With respect to any Payment Date
and each Ownership Group, the sum of the applicable Daily Interest Accrual
Amounts for all days in the related Accrual Period.
"ISDA Definitions": The 2000 ISDA Definitions, as published by
the International Swaps and Derivatives Association, Inc.
"Issuer": Hercules Funding Trust I, a Delaware statutory
trust.
"Large Obligor Limit": As of any date of determination, an
amount equal to the greater of (i) 10% of the Aggregate Outstanding Loan Balance
(not to exceed $25,000,000) as of such date and (ii) $10,000,000.
"LIBOR Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.
"LIBOR Determination Date": With respect to each Accrual
Period, the second LIBOR Business Day prior to the end of the month immediately
preceding the month in which such Accrual Period commenced.
"LIBOR Margin": Has the meaning set forth in the Note Purchase
Agreement.
"Lien": With respect to any asset, (a) any mortgage, lien,
pledge, charge, security interest, hypothecation, option or encumbrance of any
kind in respect of such asset or (b) the interest of a vendor or lessor under
any conditional sale agreement, financing lease or other title retention
agreement relating to such asset.
"Loan": Any senior or subordinate loan arising from the
extension of credit to an Obligor in the ordinary course of the Originator's
business including, without limitation, all Revolving Loans, PIK Loans and
Agented Notes, and including monies due and owing and all Interest Collections,
Principal Collections and other amounts received from time to time with respect
to such loan or note receivable and all Proceeds thereof.
"Loan Checklist" means the list delivered to the Indenture
Trustee and Collateral Custodian pursuant to Section 2.04 of this Agreement that
identifies the documents contained in the related Loan File.
"Loan Documents": With respect to any Loan, each related
promissory note and any related loan agreement, security agreement, mortgage,
moveable or immoveable hypothec, deed of hypothec, assignments, guarantees, note
purchase agreement, intercreditor and/or subordination agreement, and UCC
financing statements and continuation statements (including amendments or
modifications thereof) executed by the Obligor thereof or by another Person on
the Obligor's behalf in respect of such Loan and each related promissory note,
including, without limitation, general or limited guaranties and, for each Loan
secured by real property an Assignment of Mortgage, and for each promissory
note, an assignment (which may be by allonge), in blank, signed by an officer of
the Originator.
17
"Loan File": With respect to any Loan, each of the Loan
Documents related thereto as reflected on the Loan Checklist accompanying such
File..
"Loan Rate": For each Transferred Loan in a Collection Period,
the current cash pay interest rate for such Transferred Loan in such period, as
specified in the related Loan Documents.
"Loan Sale Agreement": The Loan Sale Agreement, between
Hercules, as seller, and the Depositor, as purchaser, dated as of August 1,
2005, as it may be supplemented and amended from time to time.
"Loan Schedule": The schedule of Loans conveyed to the Issuer
on each Transfer Date and delivered to the Administrative Agent (with a copy to
each Purchaser, the Indenture Trustee and the Collateral Custodian) in
connection with each Borrowing or as new Loans are contributed to the Depositor,
initially as set forth in Exhibit D hereto.
"Loan Tape": Has the meaning set forth in the Section
4.13(b)(ii).
"LSA Assignment": The assignment of Assigned Assets from the
Originator to the Depositor under the Loan Sale Agreement.
"Lyon Financial": Lyon Financial Services, Inc., a Minnesota
company, d/b/a U.S. Bank Portfolio Services.
"Majority Certificateholders": Has the meaning set forth in
the Trust Agreement.
"Majority Noteholders": The holder or holders of in excess of
50% of the Note Principal Balance; provided that at any time when there are less
than three unaffiliated Group Noteholders, Majority Noteholders shall mean each
Group Noteholder. In the event of the release of the Lien of the Indenture in
accordance with the terms thereof, the Majority Noteholders shall mean the
Majority Certificateholders.
"Material Adverse Change": With respect to any Person, any
material adverse change in the business, condition (financial or otherwise),
operations, performance, properties or prospects of such Person.
"Material Adverse Effect": With respect to any event or
circumstance, means a material adverse effect on, as applicable, (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Servicer, the Depositor, the Backup Servicer or
the Collateral Custodian, (b) the validity, enforceability or collectibility of
this Agreement, any other Basic Document or the Purchased Assets, (c) the rights
and remedies of any Purchaser or the Indenture Trustee on behalf of the
Noteholders under this Agreement or any Basic Document or (d) the ability of any
of the Servicer, the Depositor, the Issuer, the Backup Servicer or the
Collateral Custodian to perform its obligations under this Agreement or any
other Basic Document, or (e) the status, existence, perfection, priority, or
enforceability of the interest of the Issuer in the Purchased Assets or of the
Indenture Trustee on behalf of the Noteholders in the Collateral.
18
"Maximum Availability": On any date of determination (a)
during the Revolving Period, an amount equal to the sum of (i) the lesser of (x)
the Borrowing Base minus the Required Equity Contribution and (y) the product of
the Borrowing Base times the Advance Rate plus (ii) the amount of Principal
Collections on deposit in the Collection Account and the Principal Collections
Account received in reduction of the Outstanding Loan Balance of any Transferred
Loan, and (b) after the Revolving Period, an amount equal to the Advances
Outstanding.
"Moody's": Moody's Investors Service, Inc., or any successor
thereto.
"Net Mark to Market Amount": With respect to each Hedge
Counterparty, as set forth on each Servicer Report for each Record Date, the
excess, if any, of (a) the amount that would be payable by the Issuer to such
Hedge Counterparty over (b) the amount that would be payable by such Hedge
Counterparty to the Issuer, if all Hedge Transactions of the Issuer with such
Hedge Counterparty were being terminated as of such date, which amount (i) shall
have been provided to the Servicer by such Hedge Counterparty for inclusion in
each Servicer Report and (ii) shall have been determined by such Hedge
Counterparty in good faith and in accordance with its usual business practices;
provided, that such valuation will be based on a mid-market valuation of each
such Hedge Transaction and as such will be an indicative valuation calculation,
it being understood that the amount that would be payable by either party in the
event of any termination of any Hedge Transaction would be determined in
accordance with the provisions of the applicable Hedging Agreement governing a
termination due to an event of default or termination event and would be subject
to market conditions at the time the applicable Hedge Transaction is terminated.
"Net Worth": With respect to any Person, the excess of total
assets of such Person, over total liabilities of such Person, determined in
accordance with GAAP.
"Nonutilization Fee": Has the meaning set forth in the Note
Purchase Agreement.
"Note": Has the meaning set forth in the Indenture.
"Noteholder": Has the meaning set forth in the Indenture.
"Note Interest Rate": With respect to each Accrual Period, (a)
with respect to the Note Principal Balance funded by each Committed Purchaser at
any time or funded by each Conduit Purchaser following the Revolving Period or
the occurrence of an Event of Default or Trigger Event, a per annum interest
rate equal to One-Month LIBOR for the related LIBOR Determination Date plus the
LIBOR Margin and (b) with respect to the Note Principal Balance funded by the
Conduit Purchaser in the DB Ownership Group during the Revolving Period, the DB
Cost of Funds Rate as identified in the Note Purchase Agreement.
19
"Note Majority": With respect to Agented Notes, the holders of
the notes evidencing not less than 66?% of the outstanding amount of all such
notes issued by the Obligor.
"Note Principal Balance": With respect to the Notes, as of any
date of determination (a) the aggregate of all Borrowings consummated on or
prior to such date of determination minus (b) the aggregate of all amounts
previously distributed in respect of principal of the Notes on or prior to such
date of determination.
"Note Purchase Agreement": The Amended and Restated Note
Purchase Agreement among the Administrative Agent, the Issuer, the Originator,
the Conduit Purchasers, the DB Managing Agent, the Committed Purchasers and the
Depositor, dated as of May 2, 2007, as it may be amended or supplemented from
time to time.
"Obligor": With respect to any Loan, the Person or Persons
obligated to make payments pursuant to such Loan, including any guarantor
thereof. For purposes of calculating any of the Concentration Limits, all Loans
included in the Collateral or to become part of the Collateral the Obligor of
which is an Affiliate of another Obligor shall be aggregated with all Loans of
such other Obligor, for example, if Corporation A is an Affiliate of Corporation
B; and the aggregate Outstanding Loan Balance of all of Corporation A's Loans in
the Collateral constitutes 10% of the Aggregate Outstanding Loan Balance and the
aggregate Outstanding Loan Balance of all Corporation B's Loans in the
Collateral constitute 10% of the Aggregate Outstanding Loan Balance, the Obligor
concentration for Corporation A would be 20% and the Obligor concentration for
Corporation B would be 20%.
"Officer's Certificate": A certificate signed by a Responsible
Officer of the Person delivering such certificate, in each case as required by
this Agreement.
"One-Month LIBOR": For any Accrual Period and any Borrowing,
the rate determined by the Administrative Agent on the related Borrowing Date on
the basis of the offered rate for one-month U.S. dollar deposits, as such rate
appears on Telerate Page 3750 as of 11:00 a.m. (London time) on such date
(rounded up to the nearest whole multiple of 1/16%); provided, that if such rate
does not appear on Telerate Page 3750, the rate for such date will be the rate
determined by reference to such other comparable publicly available service
publishing such rates as may be selected by the Administrative Agent in its sole
reasonable discretion and communicated to the Servicer. The Administrative Agent
shall have the sole discretion to reset One-Month LIBOR daily.
"Operating History": With respect to any specified Person, the
time since the date of such Person's incorporation or formation that it has
continuously operated its business; provided, that the Operating History of any
Person, newly formed as a result of a merger of two or more Persons or as a
result of the acquisition of one or more Persons by a newly formed Person
("Merged Parties") shall be based on the weighted average (by relative sales) of
the Operating Histories of the Merged Parties (excluding for such purposes,
entities that are created only for the purpose of being acquisition entities),
for example, if Corporation A with sales of $10 million has an Operating History
of four years and Corporation B with sales of $20 million has an Operating
History of eight years, merge to form NEWCO, the Operating History of NEWCO will
be 6.67 years.
20
"Opinion of Counsel": A written opinion of counsel who may be
employed by the Servicer, the Depositor, the Originator or any of their
respective Affiliates, in form and substance satisfactory to the Majority
Noteholders.
"Optional Sale Date": Any Business Day during the Revolving
Period, provided 30 days' prior written notice is given in accordance with
Section 3.06(a)(i).
"Originator": Hercules and its permitted successors and
assigns.
"Originator Indemnified Party": Has the meaning set forth in
Section 8.01(c) hereof.
"Outstanding Loan Balance": With respect to any Loan, as of
any date of determination, the lesser of (i) the Fair Market Value of such Loan
and (ii) the total remaining amounts of principal payable by the Obligor
thereof, excluding principal payments in respect of Accreted Interest (it being
understood that any principal amount previously covered by a Servicer Advance
will be excluded from the principal amounts payable for purposes of this
definition).
"Ownership Group": Has the meaning provided in the Note
Purchase Agreement.
"Owner Trustee": Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement, and any successor owner trustee under the Trust Agreement.
"Owner Trustee Fee": Means the fee identified as such in the
Owner Trustee Fee Letter.
"Owner Trustee Fee Letter": Means the fee letter, dated as of
the date hereof, among the Originator, the Depositor and the Owner Trustee.
"Paying Agent": A Person that meets the eligibility standards
for the Indenture Trustee specified in Section 3.03 of the Indenture and
authorized by the Issuer to make payments to and distributions from the
Distribution Account, including payment of principal of or interest on the Notes
on behalf of the Issuer. The initial Paying Agent for all purposes under the
Basic Documents shall be the Indenture Trustee.
"Payment Date": The 15th day of each calendar month, or if any
such day is not a Business Day, the first Business Day following such day,
commencing on September 15, 2005.
"Percentage Interest": Has the meaning set forth in the Trust
Agreement and the Indenture, as applicable.
"Permitted Investments": Each of the following:
21
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States;
(b) Federal Housing Administration debentures rated "Aa2" or
higher by Moody's and "AA" or better by S&P;
(c) Freddie Mac senior debt obligations rated "Aa2" or higher
by Moody's and "AA" or better by S&P;
(d) Federal Home Loan Banks' consolidated senior debt
obligations rated "Aa2" or higher by Moody's and "AA" or better by S&P;
(e) Fannie Mae senior debt obligations rated "Aa2" or higher
by Moody's;
(f) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated "A-1" or better by S&P and "P-1" or better by Moody's;
(g) Investment agreements approved by the Majority
Noteholders; provided:
1. the agreement is with a bank or insurance
company which has an unsecured, uninsured
and unguaranteed obligation (or
claims-paying ability) rated "Aa2" or better
by Moody's and "AA" or better by S&P; and
2. monies invested thereunder may be withdrawn
without any penalty, premium or charge upon
not more than one day's notice (provided
such notice may be amended or canceled at
any time prior to the withdrawal date); and
3. the agreement is not subordinated to any
other obligations of such insurance company
or bank; and
4. the same guaranteed interest rate will be
paid on any future deposits made pursuant to
such agreement; and
5. the Indenture Trustee and each Purchaser
receive an Opinion of Counsel that such
agreement is an enforceable obligation of
such insurance company or bank;
(h) Commercial paper (having original maturities of not more
than 365 days) rated "A-1" or better by S&P and "P-1" or better by Moody's;
(i) Investments in money market funds rated "AAAM" or "AAAM-G"
by S&P and "Aaa" or "P-1" by Moody's;
22
(j) Investments approved in writing by the Majority
Noteholders;
provided that no instrument described above is permitted to evidence either the
right to receive (i) only interest with respect to obligations underlying such
instrument or (ii) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
Each of the Permitted Investments may be purchased by the
Indenture Trustee or through an Affiliate of the Indenture Trustee.
"Permitted Liens": (a) With respect to the Transferred Loans,
Liens in favor of the Issuer created pursuant to this Agreement and Liens in
favor of the Indenture Trustee, on behalf of the Noteholders, created pursuant
to the Indenture; and
(b) with respect to the Issuer's interest in the Related
Property, any of the following as to which no enforcement, collection,
execution, levy, foreclosure or realization proceedings shall have been
commenced:
(i) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being
contested in good faith by appropriate proceedings; provided,
that such Liens do not have priority over any of the
Originator's Liens and the related Obligor maintains adequate
reserves therefor in accordance with GAAP;
(ii) Liens securing claims or demands of materialmen,
artisans, mechanics, carriers, warehousemen, landlords and
other like Persons arising in the ordinary course of the
related Obligor's business and imposed without action of such
parties; provided, that the payment thereof is not yet
required;
(iii) Liens arising from judgments, decrees or
attachments in circumstances which do not constitute an "event
of default" under the related Loan Documents;
(iv) the following deposits, to the extent made in
the ordinary course of business: deposits under worker's
compensation, unemployment insurance, social security and
other similar laws, or to secure the performance of bids,
tenders or contracts (other than for the repayment of borrowed
money) or to secure indemnity, performance or other similar
bonds for the performance of bids, tenders or contracts (other
than for the repayment of borrowed money) or to secure
statutory obligations (other than liens arising under ERISA or
environmental liens) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds;
(v) purchase money liens on equipment (to the extent
permitted under the related Loan Documents) which has been
acquired or held by the related Obligor and such Liens are
incurred for financing the acquisition of the equipment, if,
the Liens are confined to the equipment and proceeds of the
equipment;
23
(vi) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of
the type described in clauses (i) through (iv) above;
provided, that any extension, renewal or replacement Lien
shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being
extended, renewed or refinanced (as may have been reduced by
any payment thereon) does not increase;
(vii) Liens held by senior lenders with respect to
subordinated Transferred Loans; and
(viii) with respect to Agented Notes, Liens in favor
of the collateral agent on behalf of all noteholders of the
related Obligor.
"Permitted Securitization": Any financing transaction
undertaken by the Originator, the Depositor or an Affiliate of the Originator or
the Depositor that is secured, directly or indirectly, by any Loan currently or
formerly included in the Collateral or any portion thereof or interest therein,
including any sale, lease, whole loan sale, asset securitization, secured loan
or other transfer.
"Person": Any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
national banking association, unincorporated organization or government or any
agency or political subdivision thereof.
"Physical Property": Has the meaning set forth in clause (b)
of the definition of "Delivery" above.
"PIK Loan": A Loan which provides for a portion of the
interest that accrues thereon to be added to the principal amount of such Loan
for some period of time prior to such Loan requiring the current cash payment of
such interest on a monthly or quarterly basis, which cash payment shall be
treated as Interest Collections at the time it is received.
"Portfolio Investment": Any investment made by the Originator
in the ordinary course of business in a Person that is accounted for under GAAP
as a portfolio investment of the Originator.
"Portfolio Yield": As of each Record Date, the annualized
percentage equivalent of a fraction (a) the numerator of which is equal to all
Interest Collections deposited in the Collection Account during the related
Collection Period minus the sum of (i) the Interest Payment Amount and any
Interest Carry-Forward Amount, (ii) the Servicing Fee and (iii) any Trust Fees
and Expenses and (b) denominator of which is equal to the Aggregate Outstanding
Loan Balance as of the first day of the related Collection Period.
"Prepaid Loan": Any Transferred Loan (other than a Charged-Off
Loan) that was terminated or has been prepaid in full or in part prior to its
scheduled maturity date.
24
"Predecessor Servicer Work Product": Has the meaning set forth
in Section 9.02(d) hereof.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
"Proceeds": With respect to any Collateral, whatever is
receivable or received when such Collateral is sold, collected, liquidated,
foreclosed, exchanged, or otherwise disposed of, whether such disposition is
voluntary or involuntary, and includes all rights to payment with respect to any
Insurance Policy relating to such Collateral.
"Purchased Assets": All right, title and interest, whether now
owned or hereafter acquired or arising, and wherever located, of the Depositor
in and to the property described in clauses (i) through (xi) below and all
accounts, cash and currency, chattel paper, tangible chattel paper, electronic
chattel paper, copyrights, copyright licenses, other intellectual property
rights, equipment, fixtures, contract rights, general intangibles, instruments,
certificates of deposit, certificated securities, uncertificated securities,
financial assets, securities entitlements, commercial tort claims, deposit
accounts, inventory, investment property, letter-of-credit rights, software,
supporting obligations, accessions, and other property consisting of, arising
out of, or related to any of the following (in each case excluding the Retained
Interest and the Excluded Amounts):
(i) the Transferred Loans, and all monies due or to become due
in payment of such Transferred Loans on and after the related Transfer Date,
including but not limited to all Collections and all obligations owed to the
Originator in connection with the Transferred Loans;
(ii) any Related Property securing or purporting to secure the
Transferred Loans (to the extent the Originator, other than solely in its
capacity as collateral agent under any loan agreement with an Obligor, has been
granted a Lien thereon) including the related security interest granted by the
Obligor under the Transferred Loans, all proceeds from any sale or other
disposition of such Related Property;
(iii) all security interests, Liens, guaranties, warranties,
letters of credit, accounts, bank accounts, mortgages or other encumbrances and
property subject thereto from time to time purporting to secure payment of any
Transferred Loan, together with all UCC financing statements or similar filings
relating thereto;
(iv) all claims (including "claims" as defined in Bankruptcy
Code ss. 101(5)), suits, causes of action, and any other right of the
Originator, whether known or unknown, against the related Obligors, if any, or
any of their respective Affiliates, agents, representatives, contractors,
advisors, or any other Person that in any way is based upon, arises out of or is
related to any of the foregoing, including, to the extent permitted to be
assigned under applicable law, all claims (including contract claims, tort
claims, malpractice claims, and claims under any law governing the purchase and
sale of, or indentures for, securities), suits, causes of action, and any other
right of the Originator against any attorney, accountant, financial advisor, or
other Person arising under or in connection with the related Loan Documents;
25
(v) all cash, securities, or other property, and all setoffs
and recoupments, received or effected by or for the account of the Originator
under such Transferred Loans (whether for principal, interest, fees,
reimbursement obligations, or otherwise) after the related Transfer Date,
including all distributions obtained by or through redemption, consummation of a
plan of reorganization, restructuring, liquidation, or otherwise of any related
Obligor or the related Loan Documents, and all cash, securities, interest,
dividends, and other property that may be exchanged for, or distributed or
collected with respect to, any of the foregoing;
(vi) all Insurance Policies;
(vii) the Loan Documents with respect to such Transferred
Loans;
(viii) the Collection Account, the Principal Collections
Account, the Distribution Account, the Concentration Account (to the extent that
amounts on deposit in or credited to the Concentration Account relate to the
Collateral), together with all funds held in or credited to such accounts (to
the extent that amounts on deposit in or credited to the Concentration Account
relate to the Collateral), and all certificates and instruments, if any, from
time to time representing or evidencing each of the foregoing or such funds;
(ix) any Hedging Agreement and any payment from time to time
due thereunder;
(x) the Loan Sale Agreement and the assignment to the
Indenture Trustee of all UCC financing statements filed by the Depositor against
the Originator under or in connection with the Loan Sale Agreement; and
(xi) the proceeds of each of the foregoing.
"Rating Agencies": S&P, Moody's and Fitch or such other
nationally recognized credit rating agencies as may from time to time be
designated in writing by the Majority Noteholders in their sole discretion.
"Record Date": With respect to each Payment Date, the 10th day
of each calendar month occurring during the calendar month of such Payment Date,
or if any such day is not a Business Day, the first Business Day following such
day, commencing November 11, 2005.
"Recoveries": With respect to any Defaulted Loan or
Charged-Off Loan, proceeds of the sale of any Related Property, proceeds of any
related Insurance Policy, and any other recoveries with respect to such
Transferred Loan and Related Property, and amounts representing late fees and
penalties, net of Liquidation Expenses and amounts, if any, received that are
required to be refunded to the Obligor on such Transferred Loan.
26
"Reference Bank": Any bank that provides information for
purposes of determining One-Month LIBOR.
"Related Property": With respect to any Loan, any property or
other assets of the Obligor thereunder pledged or purported to be pledged as
collateral or in which a Lien has been granted or purported to be granted to
secure the repayment of such Loan and including, without limitation,
intellectual property rights. In no event shall Related Property include any
Warrant Assets.
"Released Amounts": With respect to any payment or Collection
received with respect to any Transferred Loan on any Business Day (whether such
payment or Collection is received by the Servicer, the Originator or the
Depositor), an amount equal to that portion of such payment or collection
constituting Excluded Amounts or Retained Interest.
"Renewal Fee": A fee payable by the Issuer in connection with
any extension of the Amortization Date pursuant to Section 2.03 of the Note
Purchase Agreement, in an amount equal to the product of (a) 0.25% times (b) the
Borrowing Base as determined as of the Business Day prior to the effective date
of such extension of the Amortization Date.
"Replaced Loan": Defined in Section 3.05(a).
"Required Equity Contribution": As of any date of
determination, an amount equal to $25,000,000.
"Required Opinions": One reliance letter from Pepper Hamilton
LLP regarding four opinions, one security interest opinion from Pepper Hamilton
LLP, one reliance letter from Nixon Peabody LLP, one reliance letter from Lyon
Financial, three bring-down letters or opinions from Winston & Strawn LLP and
one bring-down letter or opinion from Venable LLP, all dated as of the Amendment
Date and addressed to each Group Noteholder and in form and substance acceptable
to each Group Noteholder.
"Reserve Interest Rate": With respect to any LIBOR
Determination Date, the rate per annum that the Administrative Agent determines
to be either (i) the arithmetic mean (rounded to the nearest whole multiple of
1/16%) of the one-month U.S. dollar lending rates which New York City banks
selected by the Administrative Agent are quoting on the relevant LIBOR
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Administrative Agent can
determine no such arithmetic mean, the lowest one-month U.S. dollar lending rate
which New York City banks selected by the Administrative Agent are quoting on
such LIBOR Determination Date to leading European banks.
"Responsible Officer": When used with respect to:
(a) the Indenture Trustee, the Collateral Custodian or the
Paying Agent, any officer within the Corporate Trust Office of such Person,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of such Person customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject;
27
(b) the Issuer, any officer of the Owner Trustee who is
authorized to act for the Owner Trustee in matters relating to the Issuer and
any officer of the Administrator who is identified on the list of Responsible
Officers delivered by the Administrator on the date hereof (as such list may be
modified or supplemented from time to time thereafter) to the Indenture Trustee
and the Owner Trustee; and
(c) the Depositor, the Servicer, the Originator or any
Affiliate of any of them, the Controller, the President, any Vice President or
the Treasurer of such Person.
"Retained Interest": With respect to each Transferred Loan,
the following interests, rights and obligations in such Transferred Loan and
under the associated Loan Documents, which are being retained by the Originator:
(a) all of the obligations, if any, to provide additional funding with respect
to such Transferred Loan, (b) all of the rights and obligations, if any, of the
agent(s) under the documentation evidencing such Transferred Loan, (c) the
applicable portion of the interests, rights and obligations under the
documentation evidencing such Transferred Loan that relate to such portion(s) of
the indebtedness that is owned by another lender or is being retained by the
Originator, (d) any unused, commitment or similar fees associated with the
additional funding obligations that are not being transferred in accordance with
clause (a) of this definition, (e) any agency or similar fees associated with
the rights and obligations of the agent that are not being transferred in
accordance with clause (b) of this definition, (f) any advisory, consulting or
similar fees due from the Obligor associated with services provided by the agent
that are not being transferred in accordance with clause (b) of this definition,
and (g) any origination or underwriting fee paid to the Originator in connection
with the origination or acquisition of such Transferred Loan.
"Retransfer Price": Defined in Section 3.05(b).
"Review Criteria": Defined in Section 2.05(b)(ii).
"Revolving Loan": Any Loan that is a line of credit or other
similar extension of credit by the Originator where the Originator's commitment
under such Loan is not fully funded and/or the proceeds of such Loan may be
repaid and reborrowed.
"Revolving Period": The period commencing on the Closing Date
and ending on the Business Day preceding the earlier of (i) the Amortization
Date and (ii) the Termination Date.
"RIC/BDC Requirements": The requirements (including, without
limitation, requirements pertaining to asset diversification) Hercules
Technology Growth Capital, Inc. must satisfy to maintain its status as a
"business development company," within the meaning of the Small Business
Incentive Act of 1980, and its election to be treated as a "registered
investment company" under the Code.
"RIC/BDC Sale": Defined in Section 3.07(a).
28
"RIC/BDC Sale Date": The Business Day identified by the
Borrower to each Noteholder and the Trustee in a RIC/BDC Sale Notice as the
proposed date of a RIC/BDC Sale.
"RIC/BDC Sale Notice": Defined in Section 3.07(a)(i).
"Rolling Three-Month Charged-Off Ratio": As of any date, the
percentage equivalent of a fraction (a) the numerator of which equals the sum of
the Charged-Off Ratios for the three Collection Periods immediately preceding
such date (or such lesser number of Collection Periods as shall have elapsed as
of such date), and (b) the denominator of which equals three (or such lesser
number described in clause (a)).
"Rolling Three-Month Default Ratio": As of any date, the
percentage equivalent of a fraction (a) the numerator of which equals the sum of
the Default Ratios for the three Collection Periods immediately preceding such
date (or such lesser number of Collection Periods as shall have elapsed as of
such date), and (b) the denominator of which equals three (or such lesser number
described in clause (a)).
"Rolling Three-Month Yield": As of any date, the percentage
equivalent of a fraction (a) the numerator of which equals the sum of the
Portfolio Yields for the three Collection Periods immediately preceding such
date (or such lesser number of Collection Periods as shall have elapsed as of
such date), and (b) the denominator of which equals three (or such lesser number
described in clause (a)).
"Rolling Twelve-Month Charged-Off Ratio": As of any Record
Date, the percentage equivalent of a fraction (a) the numerator of which is
equal to the sum of the Charged-Off Ratios for the Collection Period related to
such Record Date and each of 11 preceding Record Dates (or such lesser number of
Collection Periods as shall have elapsed as of such date), and (b) the
denominator of which is 12 (or such lesser number described in clause (a)).
"S&P": Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc.
"S&SA Assignment": An assignment of Purchased Assets from the
Depositor to the Issuer pursuant to this Agreement, in the form of Exhibit C
hereto.
"Sales Price": With respect to any Transferred Loan and all
Related Property and other Collateral constituting part of the Purchased Assets
with respect to such Transferred Loan, an amount determined by multiplying the
Advance Rate times the Outstanding Loan Balance of such Transferred Loan.
"Scheduled Payment": On any Record Date, with respect to any
Transferred Loan, each monthly or quarterly payment (whether principal, interest
or principal and interest) scheduled to be made by the related Obligor after
such Record Date under the terms of such Transferred Loan.
"Securities": The Notes and the Trust Certificates.
29
"Securities Act": The Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Securities Intermediary": A "securities intermediary" as
defined in Section 8-102(a)(14) of the UCC that is holding a Trust Account for
the Indenture Trustee as the sole "entitlement holder" with respect thereto as
defined in Section 8-102(a)(7) of the UCC.
"Securityholder": Any Noteholder or Certificateholder.
"Servicer": Hercules, in its capacity as the servicer
hereunder, or any successor appointed as herein provided.
"Servicer Advance": Defined in Section 4.05 hereof.
"Servicer Default": Has the meaning set forth in Section 9.01
hereof.
"Servicer Indemnified Party": Has the meaning set forth in
Section 8.01(a) hereof.
"Servicer Report": A report substantially in the form of
Exhibit B hereto, to be delivered as contemplated by Section 4.17(a).
"Servicing Fee": For each Payment Date, an amount equal to the
sum of the products, for each day during the related Collection Period, of (a) a
fraction, the numerator of which is the sum of (i) the Aggregate Outstanding
Loan Balance as of the first day of such Collection Period plus (ii) the
Aggregate Outstanding Loan Balance as of the last day of such Collection Period,
and the denominator of which is two, (b) the Servicing Fee Rate, and (c) a
fraction, the numerator of which is 1 and the denominator of which is 360.
"Servicing Fee Rate": A rate equal to 1.0% per annum.
"Servicing Records": All documents, books, records and other
information (including, without limitation, computer programs, tapes, disks,
data processing software and related property rights) prepared and maintained by
the Servicer with respect to the Loans, any item of Related Property and the
related Obligors, other than the Loan Documents.
"Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of the Loans whose name and
specimen signature appears on a list of servicing officers annexed to an
Officer's Certificate furnished by the Servicer on the date hereof to the Issuer
and the Indenture Trustee, on behalf of the Noteholders, as such list may from
time to time be amended.
"Solvent": As to any Person at any time, having a state of
affairs such that all of the following conditions are met: (a) the fair value of
the property owned by such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(32) of the Bankruptcy Code; (b) the present fair salable value of the
property owned by such Person in an orderly liquidation of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person is able
to realize upon its property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in
business or a transaction, and is not about to engage in a business or a
transaction, for which such Person's property would constitute unreasonably
small capital.
30
"State": Any one of the states of the United States of America
or the District of Columbia.
"Subsidiary": 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.
"Successor Engagement Fee": The "One-Time Successor Engagement
Fee," as defined in the Collateral Custodian and Backup Servicer Fee Letter.
"Successor Servicer": Defined in Section 9.02(a).
"Tangible Net Worth": With respect to any Person, as of any
date of determination, the consolidated Net Worth of such Person and its
Subsidiaries, less the consolidated net book value of all assets of such Person
and its Subsidiaries (to the extent reflected as an asset in the balance sheet
of such Person or any Subsidiary at such date) which will be treated as
intangibles under GAAP, including, without limitation, such items as deferred
financing expenses, net leasehold improvements, good will, trademarks, trade
names, service marks, copyrights, patents, licenses and unamortized debt
discount and expense; provided, that residual securities issued by such Person
or its Subsidiaries shall not be treated as intangibles for purposes of this
definition.
"Termination Date": The earliest of (i) the date designated as
such by either the Citigroup Group Noteholder or the DB Group Noteholder in its
sole discretion by written notice to the Servicer and the Indenture Trustee
following the occurrence of an Event of Default or a Trigger Event, (ii) the
date upon which this Agreement terminates pursuant to Section 10.01 or is
optionally terminated by the Servicer pursuant to Section 10.02, (iii) the date
of the occurrence of a Bankruptcy Event with respect to the Servicer, the
Depositor or the Issuer and (iv) the date that is six months following the
Amortization Date.
"Termination Price": Has the meaning set forth in Section
10.02 hereof.
"Third Party Claim": Has the meaning set forth in Section
8.01(d) hereof.
31
"Transfer Date": With respect to each Transferred Loan, the
date specified as the "Transfer Date" in the related S&SA Assignment, on and
after which Collections on such Transferred Loan shall be included as part of
the Collateral.
"Transferred Loans": Each Loan that is purchased by the
Depositor or received by the Depositor as a contribution to the capital of the
Depositor under the Loan Sale Agreement, and sold or contributed to the Issuer
hereunder; provided, that the term Transferred Loan shall not include any
Retained Interests.
"Transition Costs": Has the meaning set forth in Section
9.02(a) hereof.
"Trigger Event": Shall exist, as of any date of determination,
if any of the following events shall have occurred and be continuing:
(i) the Rolling Three-Month Yield is less than 8.0%;
(ii) the weighted average Risk Rating of Obligors with respect
to the Transferred Loans included in the Collateral is less than 3.0;
(iii) the Rolling Three-Month Charged-Off Ratio as of any
Record Date is greater than 4.0%;
(iv) the Rolling Three-Month Default Ratio as of any Record
Date is greater than 6.0%;
(v) Rolling Twelve-Month Charged-Off Ratio as of any Record
Date is greater than 12.0%; or
(vi) The amount described in clause (ii) of the definition of
"Availability" shall exceed the amount described in clause (i) of the definition
of "Availability" and such condition shall not be cured within three Business
Days of the occurrence thereof.
"Trust Account Property": The Trust Accounts, all amounts and
investments held from time to time in the Trust Accounts and all proceeds of the
foregoing.
"Trust Accounts": The Distribution Account, the Collection
Account and the Principal Collections Account.
"Trust Agreement": The Trust Agreement dated as of August 1,
2005 between the Depositor and the Owner Trustee, as it may be amended and
supplemented from time to time.
"Trust Certificate": Has the meaning set forth in the Trust
Agreement.
"Trust Fees and Expenses": As of each Payment Date, an amount
equal to the Owner Trustee Fee, if applicable, and the Indenture Trustee Fee,
the Collateral Custodian Fee, the Backup Servicer Fee, the Backup Servicer
Expenses, and any expenses of the Servicer, the Owner Trustee, the Indenture
Trustee, the Collateral Custodian and the Backup Servicer under any Basic
Documents.
32
"UCC": The Uniform Commercial Code as in effect in the State
of New York.
"UCC Assignment": A financing statement meeting the
requirements of the UCC of the relevant jurisdiction to reflect an assignment of
a secured party's interest in collateral.
"UCC Financing Statement": A financing statement meeting the
requirements of the UCC of the relevant jurisdiction.
"Underlying Note": Each promissory note of an Obligor
evidencing a Loan.
"Unreimbursed Servicer Advances": As of any Payment Date, the
amount of all previous Servicer Advances (or portions thereof) as to which the
Servicer has not been reimbursed as of such time pursuant to Section 5.01(c) on
a prior Payment Date.
"U.S. Bank": U.S. Bank National Association, a national
banking association.
"Warrant Asset": Means any equity purchase warrants or similar
rights convertible into or exchangeable or exercisable for any equity interests
received by Hercules as an "equity kicker" from the Obligor in connection with
such Transferred Loan; provided that the term Warrant shall in no event include
the right of Hercules to participate as an investor in future equity financings
by an Obligor.
"Warrant Participation Agreement": The warrant participation
agreement relating to the Warrant Assets, dated as of August 1, 2005, by and
among the Originator and Citigroup Global Markets Realty Corp., as initial
noteholder, as amended, supplemented, modified, restated or replaced from time
to time.
"Warrant Pledge and Security Agreement": The second amended
and restated warrant pledge and security agreement relating to the Warrant
Assets and certain other equity purchase warrants or similar rights convertible
into or exchangeable or exercisable for any equity interests received by
Hercules in connection with its origination activities, dated as of May 2, 2007,
by and among the Originator, Citigroup Global Markets Realty Corp., as a
security holder, Deutsche Bank AG, New York Branch, as a security holder, and
U.S. Bank, as the escrow agent thereunder, as amended, supplemented, modified,
restated or replaced from time to time.
"Weighted Average Life": At any date of determination, with
respect to any Loan, is determined by: (a) multiplying the number of months from
and including the month in which such date of determination falls to but
excluding the month when each Scheduled Payment is to be received under such
Loan by the amount of each such Scheduled Payment, (b) summing said products,
(c) dividing the sum total by the total amount of all Scheduled Payments to be
received under the Loan, and (d) dividing the total by 12.
Section 1.02. Other Definitional Provisions.
(a) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
33
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under GAAP. To the extent that the definitions of accounting terms
in this Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under GAAP, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
ARTICLE II
CONVEYANCE OF THE PURCHASED ASSETS;
BORROWINGS
Section 2.01. Conveyance of the Purchased Assets; Borrowings.
(a) Conveyance of the Purchased Assets. (i) On each Transfer
Date during the Revolving Period, in consideration of the payment of the Sales
Price therefor and subject to the satisfaction of the conditions to each
Transfer set forth in Section 2.08 hereof, the Depositor hereby sells and
assigns to the Issuer, without recourse, but subject to the other terms and
provisions of this Agreement, all of the right, title and interest of the
Depositor in and to the Purchased Assets identified in the applicable S&SA
Assignment and the related Loan Schedule, together with all of the Depositor's
right, title and interest in and to (but none of its obligations under) the Loan
Sale Agreement and all proceeds of the foregoing.
(ii) On each Transfer Date, the Issuer hereby purchases, and
acknowledges the conveyance to it, of the Purchased Assets identified in the
applicable S&SA Assignment and the related Loan Schedule, receipt of which is
hereby acknowledged by the Issuer. Concurrently with such delivery, as of the
applicable Transfer Date, the Issuer Grants the Purchased Assets identified in
the applicable S&SA Assignment and the related Loan Schedule (a copy of which
has or will concurrently therewith be delivered to the Indenture Trustee) to the
Indenture Trustee pursuant to the Indenture as security for the Issuer's
obligations under the Indenture and the other Basic Documents.
34
(iii) On the Closing Date, and in exchange for the conveyances
of Purchased Assets contemplated hereby, the Owner Trustee, pursuant to the
instructions of the Depositor, has executed (not in its individual capacity, but
solely as Owner Trustee on behalf of the Issuer) and caused the Trust
Certificates to be authenticated and delivered (which may be by facsimile
transmission or in an electronic format) to or at the direction of the
Depositor.
(iv) Notwithstanding anything to the contrary herein, in no
event shall the Issuer be required to purchase the Purchased Assets identified
in any S&SA Assignment and the related Loan Schedule on any Transfer Date if the
conditions precedent to the applicable Transfer set forth in Section 2.08 have
not been fulfilled.
(v) The Servicer shall, at its own expense, within one
Business Day following each Transfer Date, indicate in its computer files that
the Purchased Assets identified in the applicable S&SA Assignment and the
related Loan Schedule have been sold to the Issuer pursuant to this Agreement.
(vi) Subject to Section 3.01(o), the parties hereto intend
that the conveyances contemplated hereby be sales from the Depositor to the
Issuer of the Purchased Assets identified in each S&SA Assignment and related
Loan Schedule. In the event the transactions with respect to the Purchased
Assets set forth herein are deemed not to be a sale, the Depositor hereby grants
to the Issuer a security interest in all of the Depositor's right, title and
interest in, to and under such Purchased Assets, to secure all of the
Depositor's obligations hereunder, and this Agreement shall constitute a
security agreement under Applicable Law.
(b) Borrowings. (i) Pursuant to the Note Purchase Agreement,
the Issuer may, at its sole option, from time to time request by delivery to the
Administrative Agent and each Group Noteholder (with a copy to the Indenture
Trustee) of a Borrowing Notice, that the Noteholders make an advance of funds to
the Issuer (each, a "Borrowing") on any Borrowing Date and, upon satisfaction of
the conditions precedent to such Borrowing in Section 2.07 and Section 2.10(b)
hereof and Section 3.01 of the Note Purchase Agreement, the Noteholders shall
remit on such Borrowing Date, to or at the direction of the Depositor, an amount
equal to the requested Borrowing. The amount of any Borrowing shall be at least
equal to $1,000,000.
(ii) The Servicer shall appropriately note each Borrowing (and
the increased Note Principal Balance) in each Servicer Report; provided, that
the failure to make any such notation or any error in such notation shall not
adversely affect any Noteholder's rights with respect to its Note Principal
Balance and its right to receive interest and principal payments in respect of
the Note Principal Balance held by such Noteholder. Each Group Noteholder shall
record on the schedule attached to such Noteholder's Note, the date and amount
of any Borrowing advanced by it; provided, that failure to make such recordation
on such schedule or any error in such schedule shall not adversely affect any
Noteholder's rights with respect to its Note Principal Balance and its right to
receive interest and principal payments in respect of the Note Principal Balance
held by such Noteholder.
35
(iii) Absent manifest error, the Note Principal Balance of
each Note as set forth in each such Group Noteholder's records shall be binding
upon the Indenture Trustee, the Noteholders and the Issuer, notwithstanding any
notation made by the Servicer in its Servicer Report pursuant to the preceding
paragraph.
(iv) Notwithstanding anything to the contrary herein, in no
event shall the Noteholders be required to advance Borrowings if the conditions
precedent to the making of Borrowings set forth in Section 2.07 hereof and
Section 3.01 of the Note Purchase Agreement have not been fulfilled.
Section 2.02. Ownership and Possession of Loan Files.
With respect to each Loan, as of the related Transfer Date,
the ownership of the related Loan Documents shall be vested in the Issuer as
part of the Collateral for the benefit of the Noteholders, and the related Loan
Documents shall be Granted and pledged to the Indenture Trustee on behalf of the
Noteholders, and the Collateral Custodian shall take possession of the Loan
Files as contemplated in Section 2.04 hereof.
Section 2.03. Books and Records; Intention of the Parties.
On the Closing Date, the Depositor shall, at such party's sole
expense, cause to be filed UCC Financing Statements naming the Issuer as
"secured party" and describing the Purchased Assets being sold by the Depositor
to the Issuer with the office of the Secretary of State of the state in which
the Depositor is "located" for purpose of the applicable UCC and in any other
jurisdictions as shall be necessary to perfect a security interest in the
Purchased Assets. In addition, on the Closing Date, the Originator shall, at its
expense, cause to be filed UCC Financing Statements naming the Depositor as
"secured party" and describing the Assigned Assets being sold by the Originator
to the Depositor with the office of the Secretary of the State in which the
Originator is "located" for purpose of the applicable UCC and in such other
jurisdictions as shall be necessary to perfect a security interest in the
Assigned Assets.
Section 2.04. Delivery of Loan Files.
(a) The Originator shall, with respect to each Loan subject to
a Transfer, as of the related Transfer Date, (i) no later than 12:00 p.m. New
York City time on the related Transfer Date, deliver or cause to be delivered to
the Collateral Custodian, as the designated agent of the Indenture Trustee, by
facsimile transmission or in an electronic format mutually agreed to by the
Originator, the Noteholders and the Indenture Trustee, the Loan Schedule and a
copy of each executed Underlying Note endorsed in blank and (ii) within two
Business Days after such Transfer Date, deliver (or caused to be delivered) to
the Collateral Custodian each original and duly executed Underlying Note and
Assignment of Mortgage (if any), in each case endorsed in blank, any security
agreement related to each such Loan, and all other Loan Documents for each such
Loan, including a Loan Checklist for such Loan being transferred (on which List
the Collateral Custodian shall rely).
36
(b) The Indenture Trustee shall cause the Collateral Custodian
to take and maintain continuous physical possession of the Loan Files delivered
to it by the Originator in the State of South Carolina and, in connection
therewith, shall act solely as agent for the Indenture Trustee on behalf of the
Noteholders in accordance with the terms hereof and not as agent for the
Originator, the Servicer or any other party.
Section 2.05. Acceptance by the Indenture Trustee of the Loan
Files; Certification by the Collateral Custodian.
(a) Based on the Final Collateral Certification received by it
from the Collateral Custodian and as of the date of delivery thereof, the
Indenture Trustee acknowledges receipt of the Loan Files delivered to the
Collateral Custodian on behalf of the Indenture Trustee pursuant to Section 2.04
and declares that it holds and will continue to hold directly the Loan Documents
and any amendments, replacements or supplements thereto and all other assets
constituting the Collateral delivered to it in trust for the use and benefit of
all present and future Noteholders.
(b) (i) On or before 3:00 p.m. New York City time on the
related Transfer Date, the Collateral Custodian will deliver to the Noteholders,
with a copy to the Indenture Trustee, the Backup Servicer, the Collateral
Custodian and the Originator, an Initial Collateral Certification, confirming
whether or not it has received a copy of each executed Underlying Note endorsed
in blank, for each Loan identified on the Loan Schedule to the S&SA Assignment
with respect to such Transfer Date.
(ii) Within five Business Days after its receipt of the
remaining Loan Documents for each such Transferred Loan, the Collateral
Custodian shall review the related Loan Documents to confirm that: (A) each
related Underlying Note has been properly executed and has no missing or
mutilated pages, (B) UCC Financing Statements and other filings required by the
related Loan Documents have been made, (C) other than in the case of a
Transferred Loan secured by receivables only (as identified on the Loan
Checklist), an Insurance Policy is contained in such Loan Documents with respect
to any real or personal property constituting the Related Property for such
Transferred Loan, (D) the related Outstanding Loan Balance, and Obligor name
with respect to such Transferred Loan is accurately reflected on the related
Loan Schedule and (E) based on the Loan Documents received, such Transferred
Loan is not already included in the Collateral (collectively, the "Review
Criteria"). Upon completion of such review the Collateral Custodian will deliver
a Final Collateral Certification to the Noteholders, with a copy to the
Indenture Trustee, the Backup Servicer, the Collateral Custodian and the
Originator, confirming its receipt of the Loan Documents. Such certification
will also contain an exception report attached as Attachment A thereto which
will identify any Transferred Loans for which (i) the Collateral Custodian has
not received a Loan Document or (ii) any Review Criteria is not satisfied.
(iii) The Originator shall have ten Business Days to deliver
any missing Loan Documents or correct any non-compliance with any Review
Criteria. If after the conclusion of such time period the Originator has not
delivered such missing Loan Document or cured any non-compliance by a
Transferred Loan with any Review Criteria and such failure has a material
adverse effect on the value or enforceability of any Transferred Loan or the
interests of the Noteholders in any Transferred Loan, such Transferred Loan
shall be deemed to be an Ineligible Loan and the Depositor shall repurchase such
Transferred Loan pursuant to Section 3.05(b) within one Business Day after
notice thereof at the Retransfer Price thereof by depositing such Retransfer
Price in the Collection Account; provided that the Originator shall not be
required to pay the Retransfer Price with respect to any such Transferred Loan
to the extent that, after giving effect to the removal of such Loan from the
Collateral, the Availability shall exceed $0. In lieu of such a repurchase, the
Depositor and Originator may comply with the substitution provisions of Section
3.05(a). On or prior to the date of such substitution or repurchase, the
Originator shall deliver to the Noteholders, with a copy to the Indenture
Trustee, the Backup Servicer and the Collateral Custodian, a certification of a
Responsible Officer indicating that the Originator intends to cause the Issuer
to repurchase or substitute such Transferred Loan.
37
(iv) It is understood and agreed that the obligation of the
Originator to repurchase or substitute any such Transferred Loan pursuant to
this Section 2.05(b) and Section 3.05 shall constitute the sole remedy with
respect to such failure to comply with the foregoing delivery requirements.
(c) In performing its reviews of the Loan Documents, the
Collateral Custodian shall have no responsibility to determine the genuineness
of any document contained therein and any signature thereon. The Collateral
Custodian shall not have any responsibility for determining whether any document
is valid and binding, whether the text of any assignment or endorsement is in
proper or recordable form, whether any document has been recorded in accordance
with the requirements of any applicable jurisdiction or whether a blanket
assignment is permitted in any applicable jurisdiction.
Section 2.06. Conditions Precedent to Closing. The
effectiveness of this Agreement shall be subject to the satisfaction of the
following conditions precedent as of the Closing Date:
(a) all conditions precedent to closing under Section 4.01 of
the Note Purchase Agreement shall have been fulfilled;
(b) all conditions precedent to the Depositor's purchase and
contribution of any Purchased Assets to be transferred on the Closing Date
pursuant to the Loan Sale Agreement shall have been fulfilled;
(c) the Originator and Citigroup Global Markets Realty Corp.,
as initial noteholder, shall have executed and delivered the Warrant
Participation Agreement;
(d) the Originator shall have delivered to Citigroup Global
Markets Realty Corp., as initial noteholder, a copy of the Credit and Collection
Policy;
(e) the Originator, Citigroup Global Markets Realty Corp., as
initial noteholder, and the Indenture Trustee shall have executed and delivered
the Warrant Pledge and Security Agreement;
38
(f) the Originator shall have delivered to Citigroup Global
Markets Realty Corp., as initial noteholder, evidence of the amendment or
partial termination, as the case may be, in form and substance reasonably
satisfactory to Citigroup Global Markets Realty Corp., as initial noteholder, of
the UCC-1 financing statement previously filed with the Maryland Department of
Assessments and Taxation naming Hercules Technology Growth Capital, Inc. as
debtor and Alcmene Funding, L.L.C. as the secured party;
(g) the Originator shall have delivered to Citigroup Global
Markets Realty Corp., as initial noteholder, copies of fully-executed
amendments, in form and substance reasonably satisfactory to Citigroup Global
Markets Realty Corp., as initial noteholder, to (i) that certain Credit
Agreement, dated as of April 12, 2005, among Hercules, Alcmene Funding, L.L.C.
and the other lenders party thereto, and (ii) that certain Pledge and Security
Agreement, dated as of April 12, 2005, by Hercules in favor of Alcmene Funding,
L.L.C., together with such other amendments or terminations of security
documents or other ancillary documents related to such credit agreement as
Citigroup Global Markets Realty Corp., as initial noteholder, may reasonably
require;
(h) the Depositor shall have taken any action reasonably
requested by the Indenture Trustee, the Issuer or Citigroup Global Markets
Realty Corp., as initial noteholder, required to maintain or evidence the
ownership interest of the Issuer in the Purchased Assets and the security
interest of the Indenture Trustee in the Collateral.
Section 2.07. Conditions to Borrowings. On the Closing Date
and on any Business Day during the Revolving Period, the Issuer may, upon two
Business Days' notice to the Administrative Agent and each Group Noteholder
(with a copy to the Indenture Trustee), request a Borrowing from the
Noteholders. Any Borrowing (including any Borrowing made on the Closing Date)
shall be subject to the following conditions:
(a) the Servicer shall have delivered on behalf of the Issuer
a Borrowing Notice and a Borrowing Base Certificate;
(b) all conditions precedent to the Noteholders' advance of
the Borrowing under Section 3.01 of the Note Purchase Agreement shall have been
fulfilled as of such Borrowing Date.
(c) as of such date, neither the Originator nor the Depositor
shall have reason to believe that its insolvency is imminent;
(d) on and as of such date, after giving effect to such
Borrowing, the Availability shall exceed zero;
(e) the Depositor shall have taken any action reasonably
requested by the Indenture Trustee, the Issuer or any Purchaser required to
maintain or evidence the ownership interest of the Issuer in the Purchased
Assets and the security interest of the Indenture Trustee in the Collateral;
39
(f) the Depositor shall have deposited, or caused to be
deposited, in the Collection Account all Collections received with respect to
each of the Loans Transferred on and after the Closing Date;
(g) neither the Termination Date nor the Amortization Date
shall have occurred;
(h) each of the representations and warranties made by the
Originator contained in Section 3.03 with respect to the Loans on the Closing
Date shall be true and correct as of the applicable Borrowing Date (in the case
of a Borrowing other than on the Closing Date, with the same effect as if then
made) and each of the Depositor and the Originator shall have performed all
obligations to be performed by it under the Basic Documents on or prior to such
Borrowing Date; provided that, if any representation or warranty made by the
Originator pursuant to Section 3.03 shall be incorrect as of any Transfer Date
with respect to any Loan to be purchased on such date, the Issuer shall only be
relieved of its obligation to purchase such Loan affected by such breach and,
assuming satisfaction or waiver of the other conditions set forth in this clause
(h), the Issuer shall nonetheless be obligated to purchase all Loans to be
purchased on such date that are unaffected by such breach;
(i) it shall be a condition to the initial Borrowing that the
Servicer shall have delivered the form of Servicer Report, to be attached hereto
as Exhibit B, to the Backup Servicer, the Indenture Trustee and each Purchaser;
(j) the Required Opinions shall have been delivered to each
Group Noteholder; and
(k) any fees due and owing pursuant to the DB Fee Letter shall
have been paid.
Section 2.08. Conditions to Transfers of Loans. On the Closing
Date and on any Business Day during the Revolving Period, the Depositor may
convey Loans to the Issuer (each such conveyance, a "Transfer"). Any Transfer
(including any Transfer made on the Closing Date) shall be subject to the
following conditions:
(a) At least two Business Days prior to the proposed Transfer
Date, the Servicer shall give notice to the Noteholders and the Indenture
Trustee (with a copy to the Collateral Custodian and the Backup Servicer) of
such proposed Transfer Date and provide an estimate of the number of Loans and
aggregate Outstanding Loan Balance of such Loans proposed to be conveyed to the
Issuer on such Transfer Date.
(b) On the Business Day prior to the proposed Transfer Date,
the Issuer shall deliver to the Noteholders and the Indenture Trustee (with a
copy to the Collateral Custodian and the Backup Servicer) a final Loan Schedule
setting forth the Loans proposed to be transferred on such Transfer Date.
(c) On the applicable Transfer Date, the Issuer shall deliver
to the Noteholders and the Indenture Trustee (with a copy to the Collateral
Custodian and the Backup Servicer) a fully-executed S&SA Assignment and a final
Loan Schedule setting forth the Loans Transferred on such Transfer Date.
40
(d) If the Issuer will consummate a Borrowing on such Date in
connection with the applicable Transfer, the conditions precedent to such
Borrowing set forth in Section 2.07 hereof and Section 3.01 of the Note Purchase
Agreement shall be satisfied.
(e) As of the applicable Transfer Date, neither the Originator
nor the Depositor shall have reason to believe that its insolvency is imminent.
(f) The Depositor shall have taken any action reasonably
requested by the Indenture Trustee, the Issuer or any Group Noteholder required
to maintain or evidence the ownership interest of the Issuer in the Purchased
Assets and the security interest of the Indenture Trustee in the Collateral.
(g) Neither the Termination Date nor the Amortization Date
shall have occurred.
(h) Each of the representations and warranties made by the
Originator contained in Section 3.03 with respect to the Loans made on the
Closing Date shall be true and correct as of the applicable Transfer Date, with
the same effect as if then made, and each of the Depositor and the Originator
shall have performed all obligations to be performed by it under the Basic
Documents on or prior to such Transfer Date; provided that, if any
representation or warranty made by the Originator pursuant to Section 3.03 shall
be incorrect as of any Transfer Date with respect to any Loan to be purchased on
such date, the Issuer shall only be relieved of its obligation to purchase such
Loan affected by such breach and, assuming satisfaction or waiver of the other
conditions set forth in this clause (h), the Issuer shall nonetheless be
obligated to purchase all Loans to be purchased on such date that are unaffected
by such breach.
Section 2.09. Extension of Amortization Date; Commencement of
Amortization Period; Permitted Securitization Transactions.
(a) If the Issuer shall decline to extend the then-current
Amortization Date in accordance with the provisions of Section 2.03 of the Note
Purchase Agreement, the Exit Fee shall become due and payable by Hercules to
Citigroup Global Markets Realty Corp. on the next Payment Date unless (x)
Hercules and Citigroup Global Markets Realty Corp. shall have entered into a
binding commitment letter pursuant to which all or substantially all of the
Transferred Loans then included in the Collateral shall be refinanced pursuant
to either (i) a Permitted Securitization in which an Affiliate of Citigroup
Global Markets Realty Corp. shall act as sole lead manager or (ii) another
financing transaction in a form to be agreed between Hercules and the
Administrative Agent pursuant to such Commitment Letter, under which Citigroup
Global Markets Realty Corp. or an Affiliate of Citigroup Global Markets Realty
Corp. will arrange or provide financing for such Transferred Loans, or (y)
Citigroup Global Markets Realty Corp. shall have declined to offer to enter into
a binding commitment letter with Hercules with respect to a refinancing
transaction of the type contemplated by clauses (x)(i) or (ii) above on terms
not materially less favorable to Hercules and substantially similar to terms
generally available to Hercules in the securitization market (as evidenced by
not less than two binding commitment letters from investment banks and/or
commercial banks of national or international standing proposing such a
refinancing transaction).
41
(b) In the event that the Amortization Date is not extended
pursuant to Section 2.03 of the Note Purchase Agreement, the Amortization Period
shall automatically commence on the Amortization Date. The Servicer shall
deliver notice of any extension or non-extension pursuant to this Section 2.03
of the Note Purchase Agreement to the Indenture Trustee promptly, and in no
event later than the Business Day following such extension or non-extension.
Section 2.10. Conditions Precedent to Amending. The
effectiveness of the amendments contained in this Agreement shall be subject to
the satisfaction of the following conditions precedent as of the Amendment Date:
(a) The Note Purchase Agreement shall have been executed by
each party thereto and delivered;
(b) The Fourth Amendment to the Warrant Participation
Agreement shall have been executed by each party thereto and delivered;
(c) The First Amendment to Joinder in Intercreditor and
Concentration Account Administration Agreement shall have been executed by each
party thereto and delivered;
(d) The Second Amended and Restated Warrant Pledge and
Security Agreement shall have been executed by each party thereto and delivered;
(e) The First Supplemental Indenture shall have been executed
by each party thereto and delivered;
(f) The First Amendment to Securities Account Control
Agreement shall have been executed by each party thereto and delivered;
(g) The First Amendment to Loan Sale Agreement shall have been
executed by each party thereto and delivered;
(h) Notes in the names of each Group Noteholder shall have
been executed and delivered to each Group Noteholder; and
(i) Neither the Termination Date nor an Event of Default shall
have occurred.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the
other parties hereto and the Noteholders that as of the Amendment Date and as of
each Transfer Date:
42
(a) The Depositor is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has, and had at all relevant times, full
power to own its property, to carry on its business as currently conducted and
to enter into and perform its obligations under each Basic Document to which it
is a party;
(b) The execution and delivery by the Depositor of each Basic
Document to which the Depositor is a party and its performance of and compliance
with all of the terms thereof will not violate the Depositor's organizational
documents or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to which
the Depositor is a party or which are applicable to the Depositor or any of its
assets;
(c) The Depositor has the full power and authority to enter
into and consummate the transactions contemplated by each Basic Document to
which the Depositor is a party, has duly authorized the execution, delivery and
performance of each Basic Document to which it is a party and has duly executed
and delivered each Basic Document to which it is a party; each Basic Document to
which it is a party, assuming due authorization, execution and delivery by the
other party or parties thereto, constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the terms
thereof, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);
(d) The Depositor is not in violation of, and the execution
and delivery by the Depositor of each Basic Document to which the Depositor is a
party and its performance and compliance with the terms of each Basic Document
to which the Depositor is a party will not constitute a violation with respect
to any order or decree of any court or any order or regulation of any federal,
state, municipal or governmental agency having jurisdiction over it or its
business, which violation would materially and adversely affect the financial
condition or operations of the Depositor or any of its properties or materially
and adversely affect the performance of any of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Depositor currently pending with regard to which the
Depositor has received service of process, and no action or proceeding against,
or investigation of, the Depositor is, to the knowledge of the Depositor,
threatened or otherwise pending before any court, administrative agency or other
tribunal that (A) would prohibit its entering into any of the Basic Documents to
which it is a party or render the Securities invalid, (B) seeks to prevent the
issuance of the Securities or the consummation of any of the transactions
contemplated by any of the Basic Documents to which it is a party or (C) would
prohibit or materially and adversely affect the performance by the Depositor of
its obligations under, or the validity or enforceability of, any of the Basic
Documents to which it is a party or the Securities;
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, any of the
Basic Documents to which the Depositor is a party or the Securities, or for the
consummation of the transactions contemplated by any of the Basic Documents to
which the Depositor is a party, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to such date;
43
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution and
delivery of any of the Basic Documents to which it is a party or the assumption
of any of its obligations thereunder; no petition of bankruptcy (or similar
Bankruptcy Proceeding) has been filed by or against the Depositor;
(h) The Depositor did not transfer the Purchased Assets sold
to the Issuer with any intent to hinder, delay or defraud any of its creditors;
nor will the Depositor be rendered insolvent as a result of such sale or pledge;
(i) The Depositor had good and valid title to, and was the
sole owner of the Purchased Assets sold by the Depositor to the Issuer, free and
clear of any Lien other than Permitted Liens and any such Lien released
simultaneously with the sale contemplated herein, and, immediately upon each
transfer and assignment herein contemplated, the Depositor will have delivered
to the Issuer good and valid title to, and the Issuer will be the sole owner of,
each item in the Purchased Assets transferred by the Depositor and, subject to
the Indenture, the Indenture Trustee will have a first priority perfected
security interest in each item of Collateral, in each case free and clear of any
Lien;
(j) The Depositor acquired title to the Purchased Assets in
good faith, without notice of any adverse claim;
(k) None of the Basic Documents to which the Depositor is a
party, nor any Officer's Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it pursuant to any
of the Basic Documents to which it is a party or in connection with the
transactions contemplated thereby contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading;
(l) The Depositor is not required to be registered as an
"investment company," under the 1940 Act;
(m) The Depositor's principal place of business and chief
executive offices are located at 400 Hamilton Avenue, Suite 310, Palo Alto,
California 94301, or at such other address as shall be designated by such party
in a written notice to the other parties hereto;
(n) The Depositor covenants that during the continuance of
this Agreement it will comply in all respects with the provisions of its
organizational documents in effect from time to time; and
(o) The transfer of the Purchased Assets by the Depositor to
the Issuer pursuant to the Basic Documents upon completion pursuant to the Basic
Documents of the sale of the Notes by the Issuer to the Noteholders, was
intended to constitute a financing of such Purchased Assets for tax and
consolidated accounting purposes (with a notation that it is treating the
transfers as a sale for legal and all other purposes on its books, records and
financial statements, in each case, consistent with GAAP).
44
Section 3.02. Representations and Warranties of the
Originator.
The Originator hereby represents and warrants to the other
parties hereto and the Noteholders that as of the Closing Date and as of each
Transfer Date:
(a) The Originator is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, is duly qualified, in good standing and licensed to carry on its
business in each state where the conduct of its business requires it to be so
qualified and licensed and has full corporate power and authority to own its
property, to carry on its business as currently conducted and to enter into and
perform its obligations under each Basic Document to which it is a party;
(b) The execution and delivery by the Originator of each Basic
Document to which it is a party and its performance of and compliance with the
terms thereof will not violate the Originator's organizational documents or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach or acceleration of,
any material contract, agreement or other instrument to which the Originator is
a party or which may be applicable to the Originator or any of its assets in
each case that is likely to affect materially and adversely its ability to carry
out the transactions contemplated hereby;
(c) The Originator has the full power and authority to enter
into and consummate all transactions contemplated by the Basic Documents to be
consummated by it, has duly authorized the execution, delivery and performance
of each Basic Document to which it is a party and has duly executed and
delivered each Basic Document to which it is a party; each Basic Document to
which it is a party, assuming due authorization, execution and delivery by each
of the other parties thereto, constitutes a valid, legal and binding obligation
of the Originator, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);
(d) The Originator is not in violation of, and the execution
and delivery of each Basic Document to which it is a party by the Originator and
its performance and compliance with the terms of each Basic Document to which it
is a party will not constitute a violation with respect to, any order or decree
of any court or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction over it or its business, which violation
would materially and adversely affect the financial condition, business or
operations of the Originator or its properties or materially and adversely
affect the performance of its duties under any Basic Document to which it is a
party;
(e) There are no actions or proceedings against, or
investigations of, the Originator currently pending with regard to which the
Originator has received service of process, and no action or proceeding against,
or investigation of, the Originator is, to the Originator's knowledge,
threatened or otherwise pending before any court, administrative agency or other
tribunal that (A) would prohibit its entering into any Basic Document to which
it is a party or render the Securities invalid, (B) seeks to prevent the
issuance of the Securities or the consummation of any of the transactions
contemplated by any Basic Document to which it is a party or (C) would prohibit
or materially and adversely affect the sale and contribution of the Assigned
Assets to the Depositor, the performance by the Originator of its obligations
under, or the validity or enforceability of, any Basic Document to which it is a
party or the Securities;
45
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for: (1) the execution, delivery and
performance by the Originator of, or compliance by the Originator with, any
Basic Document to which it is a party, (2) the sale and contribution of the
Assigned Assets to the Depositor, or (3) the consummation of the transactions
required of it by any Basic Document to which it is a party, except such as
shall have been obtained before such date, other than: (A) the filing or
recording of financing statements, instruments of assignment and other similar
documents necessary in connection with the sale of the Purchased Assets to the
Issuer, (B) such consents, approvals, authorizations, qualifications,
registrations, filings or notices as have been obtained or made and (C) where
the lack of such consent, approval, authorization, qualification, registration,
filing or notice is unlikely to have a material adverse effect on its
performance hereunder;
(g) Immediately prior to the sale of the Assigned Assets to
the Depositor, the Originator had good and valid title to the Assigned Assets
sold by it on such date free and clear of all Liens other than Permitted Liens;
(h) The Originator is solvent, is able to pay its debts as
they become due and has capital sufficient to carry on its business and its
obligations under each Basic Document to which it is a party; it will not be
rendered insolvent by the execution and delivery of this Agreement or by the
performance of its obligations under each Basic Document to which it is a party;
no petition of bankruptcy (or similar Bankruptcy Proceeding) has been filed by
or against the Originator prior to the date hereof;
(i) The Originator has transferred the Assigned Assets
transferred by it on each Transfer Date without any intent to hinder, delay or
defraud any of its creditors;
(j) The Originator has received fair consideration and
reasonably equivalent value in exchange for the Assigned Assets sold and
contributed by it on each Transfer Date to the Depositor;
(k) The Originator has not dealt with any broker or agent or
other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement;
(l) The Originator's principal place of business and chief
executive offices are located at 400 Hamilton Avenue, Suite 310, Palo Alto,
California 94301 or at such other address as shall be designated by such party
in a written notice to the other parties hereto;
46
(m) The Originator and the Servicer acknowledge and agree that
the Servicing Fee represents reasonable compensation for the performance of the
servicing duties hereunder and that the entire Servicing Fee shall be treated by
the Servicer and the Originator, for accounting purposes, as compensation for
the servicing and administration of the Transferred Loans pursuant to this
Agreement; and
(n) The Originator is in compliance with the financial
covenants set forth in Section 7.01.
It is understood and agreed that the representations and
warranties set forth in this Section 3.02 shall survive delivery of the
respective Loan Files to the Collateral Custodian, as the agent of the Indenture
Trustee, and shall inure to the benefit of the Noteholders, the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee and the Issuer. Upon
discovery by the Originator, the Servicer, the Indenture Trustee or the Issuer
of a breach of any of the foregoing representations and warranties that
materially and adversely affects the value of any item of Collateral or the
interests of the Noteholders in any item of Collateral or in the Securities, the
party discovering such breach shall give prompt written notice to the other
parties. The fact that the Noteholders have conducted or have failed to conduct
any partial or complete due diligence investigation of the Loan Files shall not
affect any rights of the Securityholders' under this Agreement.
Section 3.03. Representations and Warranties Regarding the
Loans.
The Originator hereby represents and warrants, to the
Indenture Trustee, for the benefit of the Noteholders, that as of the Closing
Date with respect to each Loan sold to the Issuer on the Closing Date, if any,
and as of each Transfer Date with respect to each Loan sold to the Issuer on
each Transfer Date:
(a) the Loan is evidenced by a promissory note that has been
duly authorized and that, together with the related Loan Documents, is in full
force and effect and constitutes the legal, valid and binding obligation of the
Obligor of such Loan to pay the stated amount of the Loan and interest thereon,
and the related Loan Documents are enforceable against such Obligor in
accordance with their respective terms;
(b) the Loan was originated in accordance with the terms of
the Credit and Collection Policy and arose in the ordinary course of the
Originator's business from the lending of money to the related Obligor;
(c) the Loan is not a Defaulted Loan or a Charged-Off Loan,
and no payment or portion thereof is more than 30 days Delinquent;
(d) the Obligor of such Loan has executed all appropriate
documentation required by the Originator, as required by, and in accordance
with, the Credit and Collection Policy;
(e) the Loan, together with the Loan Documents related
thereto, is a "general intangible," an "instrument," a "payment intangible," an
"account," or "chattel paper" within the meaning of the UCC of all jurisdictions
that govern the perfection of the security interest granted therein;
47
(f) all material consents, licenses, approvals or
authorizations of, or registrations or declarations with, any Governmental
Authority required to be obtained, effected or given in connection with the
making of such Loan have been duly obtained, effected or given and are in full
force and effect;
(g) any applicable taxes in connection with the transfer of
such Loan have been paid and the Obligor has been given any assurances
(including with respect to the payment of transfer taxes and compliance with
securities laws) required by the Loan Documents in connection with the transfer
of the Loan;
(h) the Loan is denominated and payable only in Dollars in the
United States;
(i) the Loan bears some current cash interest, which is due
and payable monthly or quarterly;
(j) the Loan, together with the related Loan Documents, was
originated in accordance with, and does not contravene in any material respect
any Applicable Laws (including, without limitation, laws, rules and regulations
relating to usury, predatory lending, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy);
(k) the Loan, together with the related Loan Documents, is
fully assignable without consent of the applicable Obligor or any agent with
respect to the Loan (except for such consents which have been obtained prior to
the related Transfer Date), (and, if such Loan is secured by an interest in real
property, an Assignment of Mortgage, in a form reasonably approved by the Group
Noteholders and attached hereto as Exhibit H prior to the first Borrowing
pursuant to which a Loan secured by an interest in real property shall become
part of the Collateral, has been delivered to the Collateral Custodian);
(l) the Loan was documented and closed in accordance with the
Credit and Collection Policy, and there is only one current original of each
promissory note representing all or a portion of the Outstanding Loan Balance of
any Loan that is included in the Collateral, and each such note has been
delivered to the Collateral Custodian on behalf of the Indenture Trustee, duly
endorsed as Collateral;
(m) the Loan and the Depositor's interest in all related
Collateral and Related Property are free of any Liens, except for Permitted
Liens and all filings and other actions required to perfect the security
interest of (a) the Indenture Trustee, on behalf of the Noteholders, in the
Collateral have been made or taken and (b) in the case of Agented Notes, the
collateral agent, as agent for all noteholders of the related Obligor, in the
Related Property, have been made or taken;
(n) the Loan has an original term to maturity of no more than
60 months, and is either fully amortizing in installments (which installments
need not be in identical amounts) over such term or the principal amount thereof
is due in a single installment at the end of such term (and with respect to
Loans to Obligors located in Canada, in which case the original term to maturity
of such Loan shall be such as to permit compliance with the representations and
warranties in Item 1 of Exhibit M);
48
(o) no right of rescission, set off, counterclaim, defense or
other material dispute has been asserted with respect to such Loan;
(p) any Related Property with respect to such Loan is insured
to the extent consistent with the Credit and Collection Policy;
(q) the Loan Documents with respect to such Loan are complete
in accordance with the Credit and Collection Policy;
(r) the Obligor with respect to such Loan is an Eligible
Obligor;
(s) such Loan does not contain any confidentiality provision
which would purport to restrict disclosure of data or other information related
to such Loan or the related Obligor to any Rating Agency, investment bank or
independent accounting firm in connection with a Permitted Securitization if
such Rating Agency, investment bank or independent accounting firm is otherwise
subject to confidentiality restrictions that reasonably protect against the
disclosure of such data or other information;
(t) the Loan does not by its terms permit the payment
obligation of the Obligor thereunder to be converted into or exchanged for
equity capital of such Obligor;
(u) if such Loan was originated after August 1, 2005, the
Obligor of such Loan has waived all rights of set-off and/or counterclaim
against the Originator of the Loan and all assignees thereof;
(v) with respect to Agented Notes, the related Loan Documents
(a) shall include a note purchase agreement containing provisions relating to
the appointment and duties of a payment agent and a collateral agent and
intercreditor and (if applicable) subordination provisions substantially similar
to the forms provided to and approved by the Group Noteholders and attached
hereto as Exhibit G prior to the first Borrowing pursuant to which an Agented
Note shall become part of the Collateral, and (b) are duly authorized, fully and
properly executed and are the valid, binding and unconditional payment
obligation of the Obligor thereof;
(w) with respect to Agented Notes, the Originator has been
appointed the collateral agent of the security and the payment agent for all
such notes prior to such Agented Note becoming a part of the Collateral;
(x) with respect to Agented Notes, if the entity serving as
the collateral agent of the security for all syndicated notes of the Obligor has
or will change from the time of the origination of the notes, all appropriate
assignments of the collateral agent's rights in and to the collateral on behalf
of the noteholders have been executed and filed or recorded as appropriate prior
to such Agented Note becoming a part of the Collateral;
49
(y) with respect to Agented Notes, all required notifications,
if any, have been given to the collateral agent, the payment agent and any other
parties required by the Loan Documents, and all required consents, if any, have
been obtained with respect to, the Originator's assignment of the Agented Notes
and the Originator's right, title and interest in the Related Property to the
Depositor and the security interest therein of the Issuer and of the Indenture
Trustee for the benefit of the Noteholders;
(z) with respect to Agented Notes, the right to control the
actions of and to replace the collateral agent and/or the paying agent of the
syndicated notes is by the Note Majority;
(aa) with respect to Agented Notes, all syndicated notes of
the Obligor of the same priority are cross-defaulted, the Related Property
securing such notes is held by the collateral agent for the benefit of all holds
of the syndicated notes and all holders of such notes (a) have an undivided
interest in the collateral securing such notes, (b) share in the proceeds of the
sale or other disposition of such collateral on a pro rata basis and (c) may
transfer or assign their right, title and interest in the Related Property;
(bb) all information on the Loan Schedule delivered to the
Collateral Custodian on behalf of the Indenture Trustee with respect to such
Loan is true and correct;
(cc) if the Obligor with respect to such Loan is organized or
continued under the federal, territorial or provincial laws of, or principally
located in Canada, or the Related Property by which such Loan is principally
secured is located in or arises under the federal, territorial or provincial
laws of, Canada, the Loan complies with the additional criteria attached hereto
as Exhibit M; and
(dd) if the Obligor with respect to such Loan is organized or
continued under the provincial laws of, or principally located in the Province
of Quebec, or the Related Property by which such Loan is principally secured is
located in or arises under the provincial laws of, the Province of Quebec, the
Loan complies with the additional criteria attached hereto as Exhibit N.
It is understood and agreed that the representations and
warranties set forth herein shall survive delivery of the respective Loan Files
to the Issuer and/or the Collateral Custodian and shall inure to the benefit of
the Issuer or Depositor, as applicable, and their successors and assigns,
notwithstanding any restrictive or qualified endorsement or assignment.
Section 3.04. Notice of Breach of Representations and
Warranties. It is understood and agreed that the representations and warranties
set forth in Section 3.03 shall survive the conveyance of the Purchased Assets
to the Issuer and the Grant by the Issuer of an interest in the Collateral to
the Indenture Trustee, as applicable, and the delivery of the Notes to the
Noteholders. Upon discovery by the Depositor, the Servicer, the Originator, the
Collateral Custodian, the Issuer, the Indenture Trustee or any Securityholder of
a breach of any of such representations and warranties or the representations
and warranties of the Originator set forth in Section 3.02 or 3.03, which breach
materially and adversely affects the value or enforceability of all or any
portion of the Purchaser Assets or the interests of the Noteholders in all or
any portion of the Collateral, any party discovering such breach shall give
prompt written notice to the others.
50
Section 3.05. Substitution of Loans; Repurchase or
Substitutions of Ineligible Loans.
(a) Substitution of Loans. On any Business Day during the
Revolving Period (and after the Revolving Period at the discretion of the
Majority Noteholders), the Depositor may, subject to the conditions set forth in
this Section 3.05 and subject to the other restrictions contained herein,
replace any Transferred Loan with one or more Eligible Loans (each, a
"Substitute Loan"), provided that no such replacement shall occur unless each of
the following conditions is satisfied as of the date of such replacement and
substitution:
(i) the Depositor has recommended to the Majority Noteholders
(with a copy to the Indenture Trustee and the Collateral Custodian) in writing
that the Transferred Loan to be replaced should be replaced (each a "Replaced
Loan");
(ii) each Substitute Loan is an Eligible Loan on the date of
substitution;
(iii) the aggregate Outstanding Loan Balance of such
Substitute Loans shall be equal to or greater than the aggregate Outstanding
Loan Balance of the Replaced Loans;
(iv) all representations and warranties contained in Section
3.03 shall be true and correct as of the date of substitution of any such
Substitute Loan;
(v) the substitution of any Substitute Loan does not cause a
Default, a Trigger Event or an Event of Default to occur;
(vi) after giving effect to the proposed substitution, the sum
of the Outstanding Loan Balances of all Substitute Loans does not exceed 15% of
the highest Aggregate Outstanding Loan Balance for any month during the 12 month
period immediately preceding the applicable date of determination (or such
lesser number of months as shall have elapsed as of such date of determination);
(vii) after giving effect to the proposed substitution, the
sum of the Outstanding Loan Balances of all Substitute Loans substituted for
Defaulted Loans and Charged-Off Loans shall not exceed 10% of the highest
Aggregate Outstanding Loan Balance for any month during the 12 month period
immediately preceding the applicable date of determination (or such lesser
number of months as shall have elapsed as of such date of determination);
(viii) the remaining maturity of the Substitute Loan is less
than or equal to the remaining maturity of the Replaced Loan;
(ix) the Weighted Average Life of such Substitute Loan is less
than or equal to that of the Replaced Loan;
(x) no adverse selection procedures shall have been employed
in the selection of such Substitute Loan from the Originator's portfolio;
51
(xi) all actions or additional actions (if any) necessary to
perfect the security interest and assignment of such Substitute Loan and Related
Property constituting part of the Purchased Assets related to such Substitute
Loan to the Issuer and the Grant of a security interest therein to the Indenture
Trustee shall have been taken as of or prior to the Substitution Date;
(xii) the Eligible Risk Rating of the Obligor relating to the
Substitute Loan is equal to or better than that of the Obligor relating to the
Replaced Loan;
(xiii) the Loan Rate on the Substitute Loan is not less than
the Loan Rate on the Replaced Loan;
(xiv) the total interest rate (inclusive of any deferred
interest component) of the Substitute Loan is greater than or equal to the total
interest rate on the Transferred Loan to be replaced and reconveyed to the
Depositor in exchange for such Substitute Loan; and
(xv) the Depositor shall deliver to each Purchaser (with a
copy to the Indenture Trustee) on the date of such substitution (i) a
certificate of a Responsible Officer certifying that each of the foregoing is
true and correct as of such date and (ii) a Borrowing Base Certificate
(including a calculation of the Availability after giving effect to such
substitution).
In addition, the Depositor shall in connection with such substitution deliver to
the Collateral Custodian the related Loan Documents and shall pay to each Hedge
Counterparty, as applicable, all Hedge Breakage Costs, if any, incurred in
connection with the substitution of such Transferred Loan pursuant to this
Section 3.05 and the termination of any Hedge Transactions, in whole or in part,
in connection therewith. In connection with any such substitution, the Indenture
Trustee, on behalf of Noteholders, shall, automatically and without further
action (unless otherwise necessary or requested by the Issuer or the Servicer),
be deemed to transfer to the Issuer (for transfer to the Depositor), free and
clear of any Lien created by the Indenture, all of the right, title and interest
of the Indenture Trustee, on behalf of the Noteholders, in, to and under such
Replaced Loan, but without any representation and warranty of any kind, express
or implied.
(b) Repurchase or Substitution of Ineligible Loans.
(i) Subject to Section 3.05(b)(ii), in the event of a breach
of (A) any representation or warranty set forth in Section 3.03 with respect to
a Transferred Loan (or the Related Property and other related collateral
constituting part of the Purchased Assets related to such Transferred Loan)
(each such Transferred Loan, an "Ineligible Loan"), no later than 30 days after
the earlier of (x) knowledge of such breach on the part of the Depositor or the
Servicer and (y) receipt by the Depositor or the Servicer of written notice
thereof given by any Purchaser or the Indenture Trustee on its behalf, or (B)
the applicable Transferred Loan is identified for repurchase pursuant to Section
2.05(b)(ii), the Issuer shall either (1) repay Advances Outstanding in an amount
equal to the aggregate Retransfer Price of such Ineligible Loan(s) to which such
breach relates on the terms and conditions set forth below, or (2) substitute
for such Ineligible Loan a Substitute Loan; provided, that no such repayment
shall be required to be made with respect to any Ineligible Loan (and such
Transferred Loan shall cease to be an Ineligible Loan) if, on or before the
expiration of such 30 day period, the representations and warranties in Section
3.03 with respect to such Ineligible Loan shall be made true and correct in all
material respects with respect to such Ineligible Loan as if such Ineligible
Loan had become part of the Collateral on such day. If the Issuer will repay
Advances Outstanding pursuant to clause (1) above, the Depositor shall make a
contemporaneous deposit to the Collection Account of the related Retransfer
Price, as contemplated by Section 3.05(b)(iii).
52
(ii) Notwithstanding anything contained in this Section
3.05(b) to the contrary, in the event that a Transferred Loan is determined to
be an Ineligible Loan by reason of a breach of any representation and warranty
set forth in Section 3.03 with respect to each Transferred Loan, the Related
Property and other related collateral constituting part of the Purchased Assets
related to such Transferred Loan having been (A) conveyed to the Issuer or
Granted to the Indenture Trustee, on behalf of the Noteholders, free and clear
of any Lien of any Person claiming through or under the Originator or the
Depositor and their respective Affiliates and (B) in compliance, in all material
respects, with all Applicable Law, immediately upon the earlier to occur of the
discovery of such breach by the Issuer or receipt by the Issuer of written
notice of such breach given by any Purchaser (or the Indenture Trustee on its
behalf), the Depositor shall make a contemporaneous deposit to the Collection
Account as contemplated by Section 3.05(b)(iii) to enable the Issuer to repay,
and the Issuer shall repay, Advances Outstanding in an amount equal to the sum
of (I) the aggregate Outstanding Loan Balance of such Ineligible Loan(s), (II)
any accrued and unpaid interest thereon, (III) any outstanding Servicer Advances
thereon and (IV) all Hedge Breakage Costs owed to any relevant Hedge
Counterparty for any termination of one or more Hedge Transactions, in whole or
in part, as required by the terms of any Hedge Agreement incurred in connection
with the retransfer of such Transferred Loan pursuant to this Section 3.05(b)
and the termination of any Hedge Transactions in whole or in part in connection
therewith, (collectively, the "Retransfer Price"), and the Indenture Trustee on
behalf of the Noteholders shall release to Issuer (for release to the Depositor)
any such Ineligible Loan(s) and relinquish any Lien created pursuant to the
Indenture, this Agreement or otherwise. On and after the date of payment of the
Retransfer Price, the applicable Ineligible Loan and the Related Property and
other related collateral constituting part of the Purchased Assets with respect
to such Ineligible Loan shall not be included in the Collateral.
(iii) In consideration of any such release by the Issuer (and
by the Indenture Trustee on behalf of the Noteholders), the Depositor shall, on
the date of such repayment, deposit to the Collection Account, in immediately
available funds, an amount equal to the Retransfer Price therefor. Upon each
such repayment, the Indenture Trustee, on behalf of the Noteholders, shall
automatically and without further action be deemed to release to the Issuer
(which shall release to the Depositor) all the right, title and interest of the
Indenture Trustee on behalf of the Noteholders (and all right, title and
interest of the Issuer) in, to and under such Ineligible Loan(s) and all monies
due or to become due with respect thereto, all proceeds thereof and all rights
to security for any such Ineligible Loan, and all proceeds and products of the
foregoing. The Issuer and the Indenture Trustee shall, at the sole expense of
the Issuer, execute such documents and instruments of transfer as may be
prepared by the Issuer and the Depositor (or the Servicer on their behalf) and
take such other actions as shall reasonably be requested by the Issuer to effect
the transfer of such Ineligible Loan pursuant to this Section 3.05.
53
(iv) The Issuer hereby agrees that if any real property
collateral securing any Transferred Loan becomes the subject of any claims,
proceedings, Liens or encumbrances with respect to any material violation or
claimed material violation of any Environmental Law, such Transferred Loan shall
for all purposes hereunder be deemed an Ineligible Loan at and following the
time of discovery of such fact by the Servicer, the Issuer, any Noteholder, the
Collateral Custodian or the Indenture Trustee, and the Depositor shall either
deposit to the Collection Account an amount equal to the Retransfer Price of
such Ineligible Loan or replace such Ineligible Loan with a Substitute Loan.
Such Ineligible Loan shall otherwise be treated in accordance with this Section
3.05.
Section 3.06. Optional Sales.
(a) During the Revolving Period and prior to the occurrence of
a Trigger Event, a Default or an Event of Default, on any Optional Sale Date,
the Issuer shall have the right to prepay all or a portion of the Advances
Outstanding in connection with the sale and assignment to the Depositor by the
Issuer, and the release from the Lien of the Indenture by the Indenture Trustee
on behalf of the Noteholders, of all or a portion of the Transferred Loans in
connection with a Permitted Securitization (each, an "Optional Sale"), subject
to the following terms and conditions:
(i) The Servicer on behalf of the Depositor and the Issuer
shall have given the Noteholders (with a copy to the Indenture Trustee) at least
30 Business Days' prior written notice of its intent to effect an Optional Sale,
unless such notice requirement is waived or reduced by the Noteholders;
(ii) Any Optional Sale shall be in connection with, and funded
by, a Permitted Securitization;
(iii) Unless an Optional Sale is to be effected on a Payment
Date (in which case the relevant calculations with respect to such Optional Sale
shall be reflected on the applicable Servicer Report), the Servicer shall
deliver to the Noteholders (with a copy to the Indenture Trustee) a certificate
and evidence to the reasonable satisfaction of the Noteholders (which evidence
may consist solely of an Officer's Certificate from the Servicer) that the
Issuer shall have sufficient funds on the related Optional Sale Date to effect
the contemplated Optional Sale in accordance with this Agreement. In effecting
an Optional Sale, the Issuer may use the Proceeds of sales of the Transferred
Loans to repay all or a portion of the Aggregate Unpaids;
(iv) After giving effect to the Optional Sale and the
assignment to the Issuer of all or a portion of the Transferred Loans, as the
case may be, on any Optional Sale Date, (a) the Availability shall be greater
than or equal to zero, (b) the representations and warranties contained in
Section 3.03 hereof shall continue to be correct and (c) none of a Trigger
Event, a Default or an Event of Default shall have resulted from the Optional
Sale;
54
(v) On the related Optional Sale Date, the Noteholders, the
Hedge Counterparties, the Indenture Trustee, the Collateral Custodian and the
Backup Servicer, as applicable, shall have received, as applicable, in
immediately available funds, an amount equal to the sum of (a) the portion of
the Advances Outstanding to be repaid (that are attributable to the Purchased
Assets to be sold by the Issuer in connection with such Optional Sale) plus (b)
an amount equal to all unpaid Interest Payment Amounts and Interest
Carry-Forward Amounts to the extent reasonably determined by the Noteholders to
be attributable to that portion of the Advances Outstanding to be repaid in
connection with the Optional Sale plus (c) an aggregate amount equal to the sum
of all other amounts due and owing to the Noteholders, the Indenture Trustee,
the Backup Servicer, the Collateral Custodian, the Indemnified Parties and the
Hedge Counterparties, as applicable, under this Agreement and the other Basic
Documents, to the extent accrued to such date and to accrue thereafter to the
next Payment Date and attributed to that portion of the Advances Outstanding to
be repaid in connection with the Optional Sale; provided that the Noteholders
shall have the right in connection with a Permitted Securitization to determine
whether the amount paid (or proposed to be paid) by the Issuer on the Optional
Sale Date is sufficient to satisfy the requirements of clauses (a) through (c)
and is sufficient to reduce the Advances Outstanding to the extent requested by
the Issuer in connection with the Optional Sale;
(vi) On or prior to each Optional Sale Date, the Servicer on
behalf of the Issuer shall have delivered to the Noteholders (with a copy to the
Indenture Trustee and the Collateral Custodian) a list specifying all
Transferred Loans to be sold and assigned pursuant to such Optional Sale; and
(vii) No selection procedure adverse to the interests of the
Noteholders shall have been employed in the selection of the Transferred Loans
to be sold and assigned pursuant to such Optional Sale.
(b) In connection with any Optional Sale, upon receipt by the
Noteholders, the Hedge Counterparties, the Indenture Trustee, the Collateral
Custodian and the Backup Servicer, as applicable, of the amounts referred to in
clause (a)(v) above (receipt of which by the Noteholders and the Hedge
Counterparties shall be confirmed to the Collateral Custodian and Trustee),
there shall be sold and assigned to the Depositor without recourse,
representation or warranty all of the right, title and interest of the Issuer,
in, to and under the portion of the Purchased Assets so retransferred and such
portion of the Purchased Assets so retransferred shall be released from the Lien
of this Agreement and the Lien of the Indenture and shall no longer be a part of
the Collateral under the Indenture.
(c) The Originator hereby agrees to pay the reasonable legal
fees and expenses of the Noteholders and each party hereto in connection with
any Optional Sale (including, but not limited to, expenses incurred in
connection with the release of the Lien of the Indenture Trustee on behalf of
the Noteholders and any other party having an interest in the Collateral in
connection with such Optional Sale).
55
(d) In connection with any Optional Sale, on the related
Optional Sale Date, the Indenture Trustee, on behalf of the Noteholders, shall,
at the expense of the Issuer, and the Issuer shall, at the request of the
Depositor, as the case may be, (i) execute such instruments of release in favor
of the Issuer or the Depositor, as applicable, with respect to the portion of
the Collateral to be retransferred to the Issuer and the portion of the
Purchased Assets to be retransferred to the Depositor, as applicable, as the
Issuer, the Depositor or the Noteholders, as applicable, may reasonably request
(in recordable form if necessary and, in each case, without recourse), (ii)
deliver any portion of the Collateral to be retransferred to the Issuer and the
portion of the Purchased Assets to be retransferred to the Depositor, as
applicable, in its possession to the Issuer or the Depositor, as applicable, and
(iii) otherwise take such actions, and cause or permit the Issuer or the
Indenture Trustee to take such actions, as are necessary and appropriate to
release the Lien of the Indenture Trustee on the portion of the Collateral to be
retransferred to the Issuer (and the Depositor) and release and deliver to the
Depositor such portion of the Purchased Assets to be retransferred to the
Depositor.
(e) Notwithstanding anything in this Section 3.06 the Issuer
shall not, and the Servicer shall not on the Issuer's behalf, purchase, sell or
substitute any Transferred Loan with the primary purpose of recognizing gain or
decreasing losses on such Transferred Loan or in any manner that would cause the
Issuer not to be in compliance with the requirements of Rule 3a-7 under the 1940
Act.
Section 3.07. RIC/BDC Sales.
(a) During the Revolving Period, and prior to the occurrence
of a Trigger Event, a Default or an Event of Default, on any RIC/BDC Sale Date,
the Issuer shall have the right to prepay all or a portion of the Advances
Outstanding in connection with the sale and assignment to a third party by the
Issuer, and the release from the Lien of the Indenture by the Indenture Trustee
of one or more Transferred Loans (each, a "RIC/BDC Sale"), subject to the
following terms and conditions:
(i) At least five Business Days prior to such RIC/BDC Sale
Date, the Servicer on behalf of the Issuer shall have recommended to the
Noteholders in writing that the related Transferred Loan should be sold and
shall have given the Noteholders (with a copy to the Indenture Trustee and the
Collateral Custodian) written notice of its intent to effect a RIC/BDC Sale
(each such notice, a "RIC/BDC Sale Notice"), specifying the RIC/BDC Sale Date,
including a list of all Transferred Loans to be sold and assigned pursuant to
such RIC/BDC Sale and demonstrating that after such RIC/BDC Sale, the RIC/BDC
Requirements shall be satisfied;
(ii) Any RIC/BDC Sale shall be made by the Issuer to an
unaffiliated third party purchaser in a transaction (x) in accordance with
Accepted Servicing Practices, (y) reflecting arms-length market terms and (z) in
which the Issuer makes no representations, warranties or covenants and provides
no indemnification for the benefit of any other party to the RIC/BDC Sale (other
than any representations, warranties or covenants relating to the Issuer's
ownership of or title to the Transferred Loan that is the subject of the RIC/BDC
Sale that are standard and customary in connection with such a sale or for which
the Originator has agreed to fully indemnify the Issuer);
56
(iii) The Servicer shall deliver to the Noteholders (with a
copy to the Indenture Trustee and the Collateral Custodian) a completed
Borrowing Base Certificate and other evidence to the reasonable satisfaction of
the Noteholders that (w) the RIC/BDC Requirements are not satisfied prior to the
related RIC/BDC Sale and after such sale the RIC/BDC Requirements shall be
satisfied or the extent of compliance with the RIC/BDC Requirements will be
improved, (x) the requirements of Section 3.07(a)(v) will be satisfied on the
related RIC/BDC Sale Date after giving effect to the contemplated RIC/BDC Sale,
(y) the sum of the Outstanding Loan Balances of all Transferred Loans that have
been sold pursuant to RIC/BDC Sales does not exceed 10% of the highest Aggregate
Outstanding Loan Balance for any month during the 12 month period immediately
preceding the applicable date of determination (or such lesser number of months
as shall have elapsed as of such date of determination);
(iv) After giving effect to the RIC/BDC Sale and the release
to the Issuer of the related Collateral on any RIC/BDC Sale Date, (a) the
Availability shall be equal to or greater than zero, (b) the representations and
warranties contained in Section 3.03 hereof shall continue to be correct, and
(c) none of a Trigger Event, a Default or an Event of Default shall have
resulted;
(v) On the related RIC/BDC Sale Date, the Indenture Trustee on
behalf of the Noteholders shall have received, into the Collection Account, in
immediately available funds, an amount equal to the sum of (a) the portion of
the Advances Outstanding to be prepaid that are attributable to the Collateral
to be sold by the Issuer pursuant to this Section 3.07 plus (b) an amount equal
to all unpaid Interest Payment Amounts and Interest Carry-Forward Amounts to the
extent reasonably determined by the Noteholders to be attributable to that
portion of the Advances Outstanding to be paid in connection with the RIC/BDC
Sale plus (c) an aggregate amount equal to the sum of all other amounts due and
owing to the Noteholders, the Indenture Trustee, the Collateral Custodian and
the Backup Servicer, the Indemnified Parties and the Hedge Counterparties, as
applicable, under this Agreement and the other Basic Documents, to the extent
accrued to such date and to accrue to the next Payment Date (including, without
limitation, Hedge Breakage Costs and any other payments owing to the Hedge
Counterparties in respect of the termination of any Hedge Transaction) in each
case, to the extent attributable to the Collateral to be sold by the Issuer
pursuant to this Section 3.07; provided that the Noteholders shall have the
right to determine whether the amount paid (or proposed to be paid) by the
Issuer on the RIC/BDC Sale Date is sufficient to satisfy the requirements in
clauses (a) through (c) and is sufficient to reduce the Advances Outstanding to
the extent requested by the Issuer in connection with the RIC/BDC Sale;
provided, further, that any proceeds of such RIC/BDC Sale in excess of the
amount so deposited into the Collection Account also shall be deposited into the
Collection Account and used to prepay Advances Outstanding on such RIC/BDC Sale
Date; and
57
(vi) Any RIC/BDC Sale shall be made only to the extent such
sale is necessary (as certified by a Responsible Officer of the Servicer in the
related RIC/BDC Sale Notice) to satisfy the RIC/BDC Requirements.
(b) In connection with any RIC/BDC Sale, following receipt by
the Noteholders of the amounts referred to in clause (v) above (receipt of which
shall be confirmed to the Collateral Custodian and Indenture Trustee), there
shall be released to the Issuer (for further sale to a third-party unaffiliated
with the Issuer, the Originator or the Servicer) without recourse,
representation or warranty all of the right, title and interest of the Indenture
Trustee and the Noteholders in, to and under the portion of the Collateral so
released and such portion of the Collateral so released shall be released from
the Lien of the Indenture and this Agreement (subject to the requirements of
clauses (iii) and (iv) above).
(c) The Originator hereby agrees to pay the reasonable legal
fees and expenses of the Noteholders and each party hereto in connection with
any RIC/BDC Sale (including, but not limited to, expenses incurred in connection
with the release of the Lien of the Indenture Trustee on behalf of the
Noteholders and any other party having an interest in the portion of the
Collateral to be released in connection with such RIC/BDC Sale).
(d) In connection with any RIC/BDC Sale, on the related
RIC/BDC Sale Date, the Indenture Trustee on behalf of the Noteholders shall, at
the expense of the Issuer (i) execute such instruments of release with respect
to the portion of the Collateral to be released to the Issuer, in recordable
form if necessary, in favor of the Issuer as the Servicer on behalf of the
Issuer may reasonably request, (ii) deliver any portion of the Collateral to be
released to the Issuer in its possession to the Issuer and (iii) otherwise take
such actions, and cause or permit the Indenture Trustee to take such actions, as
are determined by the Issuer or Servicer to be reasonably necessary and
appropriate to release the Lien of the Indenture on the portion of the
Collateral to be released to the Issuer and release and deliver to the Issuer
such portion of the Collateral to be released to the Issuer.
(e) Notwithstanding anything in this Section 3.07 the Issuer
shall not, and the Servicer shall not on the Issuer's behalf, purchase, sell or
substitute any Transferred Loan with the primary purpose of recognizing gain or
decreasing losses on such Transferred Loan or in any manner that would cause the
Issuer not to be in compliance with the requirements of Rule 3a-7 under the 1940
Act.
Section 3.08. Deemed Collections.
(a) If on any day the Indenture Trustee, on behalf of the
Noteholders, does not own or have a valid and perfected first priority security
interest in any Transferred Loan and Related Property (subject to Permitted
Liens), if within 30 days after the earlier of the Servicer's receipt of notice
from the Indenture Trustee or the Servicer becoming aware thereof the Servicer
has failed to cure such breach (if cure is reasonably possible and otherwise
immediately upon receipt of such notice or upon the Servicer becoming aware),
the Depositor shall be deemed to have received on such 30th day (or such earlier
day, as applicable) a collection (a "Deemed Collection") of such Transferred
Loan in full and shall on such day pay to the Issuer for payment to the
Noteholders (by deposit in the Collection Account), an amount equal to (x) the
Retransfer Price with respect to such Transferred Loan, plus (y) any other costs
and expenses related to the retransfer of such Transferred Loan and any Related
Property contemplated by this Section 3.08.
58
(b) In connection with any such Deemed Collection, the
Indenture Trustee, on behalf of the Noteholders, shall automatically and without
further action (unless otherwise necessary or requested by the Noteholders, the
Issuer, the Depositor or the Servicer), be deemed to release the Lien on such
Transferred Loan and any Related Property created by this Agreement and the
Indenture and transfer to the Issuer, for transfer to the Depositor, free and
clear of any Lien created by the Indenture or this Agreement, all of the right,
title and interest of the Indenture Trustee, on behalf of the Noteholders, in,
to, and under the Transferred Loan and any Related Property with respect to
which the Depositor has received such Deemed Collection, but without any
recourse, representation and warranty of any kind, express or implied.
ARTICLE IV
ADMINISTRATION AND SERVICING OF LOANS
Section 4.01. Appointment of the Servicer.
The Issuer hereby appoints Hercules Technology Growth Capital, Inc. as
the Servicer hereunder to service the Transferred Loans and enforce its
respective rights and interests in and under each Transferred Loan in accordance
with the terms and conditions of this Article IV and to serve in such capacity
until the termination of its responsibilities pursuant to Section 9.01. Hercules
Technology Growth Capital, Inc. hereby accepts such appointment and agrees to
perform the duties and obligations with respect thereto set forth herein. The
Servicer and the Issuer hereby acknowledge that the Indenture Trustee, the
Purchasers and the other Noteholders are third party beneficiaries of the
obligations undertaken by the Servicer hereunder.
Section 4.02. Duties and Responsibilities of the Servicer.
(a) The Servicer shall conduct the servicing, administration
and collection of the Transferred Loans and shall take, or cause to be taken,
all such actions as may be necessary or advisable to service, administer and
collect Transferred Loans from time to time on behalf of the Issuer and as the
Issuer's agent. The Servicer will service, administer and make collections on
the Transferred Loans with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to all comparable loans that
it services for itself or others and in accordance with the Accepted Servicing
Practices.
(b) The duties of the Servicer, as the Issuer's agent, shall
include, without limitation:
(i) preparing and submitting of claims to, and post-billing
liaison with, Obligors on Transferred Loans;
(ii) maintaining all necessary Servicing Records with respect
to the Transferred Loans and providing such reports to the Issuer, the Indenture
Trustee and the Noteholders in respect of the servicing of the Transferred Loans
(including information relating to its performance under this Agreement) as may
be required hereunder or as the Issuer, the Noteholders or the Indenture Trustee
may reasonably request;
59
(iii) maintaining and implementing administrative and
operating procedures (including, without limitation, an ability to re-create
Servicing Records evidencing the Transferred Loans in the event of the
destruction of the originals thereof) and keeping and maintaining all documents,
books, records and other information reasonably necessary or advisable for the
collection of the Transferred Loans (including, without limitation, records
adequate to permit the identification of each new Transferred Loan and all
Collections of and adjustments to each existing Transferred Loan); provided,
that any successor Servicer shall only be required to re-create the Servicing
Records of each prior Servicer to the extent such records have been delivered to
it in a format reasonably acceptable to such successor Servicer;
(iv) promptly delivering to the Issuer, the Indenture Trustee,
the Noteholders and the Collateral Custodian, from time to time, such
information and Servicing Records (including information relating to its
performance under this Agreement) as the Issuer, the Indenture Trustee, the
Noteholders or the Collateral Custodian may from time to time reasonably
request;
(v) identifying each Transferred Loan clearly and
unambiguously in its Servicing Records to reflect that such Transferred Loan is
owned by the Issuer and pledged to the Indenture Trustee, for the benefit of the
Noteholders;
(vi) complying in all material respects with the Credit and
Collection Policy in regard to each Transferred Loan;
(vii) complying in all material respects with all Applicable
Laws with respect to it, its business and properties and all Transferred Loans
and Collections with respect thereto;
(viii) preserving and maintaining its existence, rights,
licenses, franchises and privileges as a corporation in the jurisdiction of its
organization, and qualifying and remaining qualified in good standing as a
foreign corporation and qualifying to and remaining authorized and licensed to
perform obligations as Servicer (including enforcement of collection of
Transferred Loans on behalf of the Issuer, the Indenture Trustee and the
Noteholders) in each jurisdiction where the failure to preserve and maintain
such existence, rights, franchises, privileges and qualification would
materially adversely affect (A) the rights or interests of the Issuer, the
Indenture Trustee and the Noteholders in the Transferred Loans, (B) the
collectibility of any Transferred Loan, or (C) the ability of the Servicer to
perform its obligations hereunder;
(ix) notifying the Issuer, the Noteholders and the Indenture
Trustee of any material action, suit, proceeding, dispute, offset deduction,
defense or counterclaim that (1) is or is threatened to be asserted by an
Obligor with respect to any Transferred Loan; or (2) would reasonably be
expected to have a Material Adverse Effect; and
60
(c) The Issuer and Servicer hereby acknowledge that none of
the Indenture Trustee, the Administrative Agent, any other Noteholder nor the
Collateral Custodian shall have any obligation or liability with respect to any
Transferred Loans, nor shall any of them be obligated to perform any of the
obligations of the Servicer hereunder.
Section 4.03. Authorization of the Servicer.
(a) Each of the Issuer and the Indenture Trustee, on behalf of
the Noteholders, hereby authorizes the Servicer (including any successor
thereto) to take any and all reasonable steps in its name and on its behalf
necessary or desirable and not inconsistent with the pledge of the Transferred
Loans pursuant to the Indenture, in the determination of the Servicer, to
collect all amounts due under any and all Transferred Loans, including, without
limitation, endorsing any of their names on checks and other instruments
representing Collections, executing and delivering any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Transferred Loans and,
after the delinquency of any Transferred Loan and to the extent permitted under
and in compliance with Applicable Law, to commence proceedings with respect to
enforcing payment thereof, to the same extent as the Originator could have done
if it had continued to own such Loan. The Issuer shall furnish the Servicer (and
any successors thereto) with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder, and shall cooperate with the Servicer to the
fullest extent in order to ensure the collectibility of the Transferred Loans.
In no event shall the Servicer be entitled to make the Issuer, the Collateral
Custodian, the Indenture Trustee or any Noteholder a party to any litigation
without such party's express prior written consent, or to make the Issuer a
party to any litigation (other than any routine foreclosure or similar
collection procedure) without the Indenture Trustee's consent.
(b) After a Trigger Event or an Event of Default has occurred
and is continuing, at the Majority Noteholders' direction, the Servicer shall
take such action as the Majority Noteholders or the Indenture Trustee may deem
necessary or advisable to enforce collection of the Transferred Loans; provided,
that the Majority Noteholders or the Indenture Trustee may, at any time after a
Trigger Event or an Event of Default has occurred and is continuing, notify any
Obligor with respect to any Transferred Loans of the pledge of such Transferred
Loans to the Indenture Trustee and direct that payments of all amounts due or to
become due to the Issuer thereunder be made directly to the Indenture Trustee or
any servicer, collection agent or lock-box or other account designated by the
Majority Noteholders or the Indenture Trustee and, upon such notification and at
the expense of the Issuer, the Indenture Trustee may enforce collection of any
such Transferred Loans and adjust, settle or compromise the amount or payment
thereof. The Indenture Trustee shall give written notice to any successor
Servicer of the Indenture Trustee's actions or directions pursuant to this
Section 4.3(b).
Section 4.04. Collection of Payments.
(a) Collection Efforts, Modification of Loans. The Servicer
will make reasonable efforts to collect all payments called for under the terms
and provisions of the Transferred Loans as and when the same become due, and
will follow those collection procedures as are consistent with Accepted
Servicing Practices. The Servicer may not waive, modify or otherwise vary any
provision of a Transferred Loan, except as may be in accordance with the Credit
and Collection Policy. Notwithstanding anything to the contrary contained
herein, if after giving effect to any sale (1) the amount described in clause
(ii) of the definition of Availability shall exceed the amount described in
clause (i) of the definition of Availability or (2) a Trigger Event, a Default
or an Event of Default would occur then the Servicer prior to any such sale
which would result in a loss to the Noteholders based on the Outstanding Loan
Balance plus accrued interest and other fees due and payable shall obtain the
prior written consent of the Noteholders.
61
(b) Taxes and other Amounts. To the extent provided for in any
Transferred Loan, the Servicer will use its best efforts to collect all payments
with respect to amounts due for taxes, assessments and insurance premiums
relating to such Transferred Loans or the Related Property and remit such
amounts to the appropriate Governmental Authority or insurer on or prior to the
date such payments are due.
(c) Payments to Concentration Account. On or before the
Transfer Date with respect to each Transferred Loan, the Servicer shall have
instructed all Obligors to make all payments in respect of all Transferred Loans
included in the Collateral directly to the Concentration Account. All proceeds
in the Concentration Account shall be distributed into the Collection Account
within two Business Days as provided in the Intercreditor Agreement.
(d) Control. In order to provide the Indenture Trustee with
control over the Collection Account, the Principal Collections Account and the
Distribution Account within the meaning of Section 9-104(a) of the UCC and any
other applicable law, the Issuer and the Servicer hereby agree that the
Indenture Trustee may at any time provide U.S. Bank or any successor Person that
maintains the Collection Account, the Principal Collections Account and the
Distribution Account with instructions as to the disposition of funds in the
Collection Account, the Principal Collections Account and the Distribution
Account or as to any other matters relating to the Collection Account, the
Principal Collections Account and the Distribution Account without any further
consent from the Issuer or the Servicer. U.S. Bank agrees with the Issuer, the
Servicer and the Indenture Trustee to comply with any and all orders, notices,
requests and other instructions originated by the Indenture Trustee directing
disposition of the funds in the Collection Account, the Principal Collections
Account and the Distribution Account without any further consent from the Issuer
or the Servicer.
(e) Adjustments. If (i) the Servicer makes a deposit into the
Collection Account in respect of a Collection of a Transferred Loan included in
the Collateral and such Collection was received by the Servicer in the form of a
check that is not honored for any reason or (ii) the Servicer makes a mistake
with respect to the amount of any Collection and deposits an amount that is less
than or more than the actual amount of such Collection, the Servicer shall
appropriately adjust the amount subsequently deposited into the Collection
Account to reflect such dishonored check or mistake. Any Scheduled Payment in
respect of which a dishonored check is received shall be deemed not to have been
paid.
(f) Released Amounts. The Indenture Trustee hereby agrees that
it shall, at the direction of any Noteholder, release to the Issuer from the
Collateral, and the Issuer hereby agrees to release to the Depositor, an amount
equal to the Released Amounts promptly upon receipt of an Officer's Certificate
of the Servicer setting forth the calculation thereof, which release shall be
automatic and shall require no further act by the Indenture Trustee or the
Noteholders; provided, that, the Indenture Trustee and the Issuer, as
applicable, shall execute and deliver such instruments of release and
assignment, or otherwise confirm the foregoing release, as may reasonably be
requested by the Servicer on behalf of the Issuer or the Depositor, as
applicable, in writing. Upon such release, such Released Amounts shall not
constitute and shall not be included in the Collateral. Immediately upon the
release to the Issuer by the Indenture Trustee of the Released Amounts, the
Issuer hereby irrevocably agrees to release to the Originator such Released
Amounts, which release shall be automatic and shall require no further act by
the Issuer; provided, that, the Issuer shall execute and deliver such
instruments of release and assignment, or otherwise confirming the foregoing
release of any Released Amounts, as may be reasonably requested by the
Originator.
62
Section 4.05. Servicer Advances.
(a) For each Collection Period, if the Servicer determines
that any Scheduled Payment (or portion thereof) that was due and payable
pursuant to a Transferred Loan included in the Collateral during such Collection
Period was not received prior to the end of such Collection Period, the Servicer
may, but shall not be obligated to, make an advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof) if the Servicer
reasonably believes that the advance will be reimbursed by the related Obligor;
in addition, if on any day there are not sufficient funds on deposit in the
Collection Account to pay accrued Interest Payment Amounts and any Interest
Carry-Forward Amounts and Trust Fees and Expenses on any Borrowing the
Collection Period of which ends on such day, the Servicer may make an advance in
the amount necessary to pay such Interest Payment Amounts and any Interest
Carry-Forward Amounts and Trust Fees and Expenses if the Servicer reasonably
believes that the advance will be reimbursed by the related Obligor (in either
case, any such advance, a "Servicer Advance"). Notwithstanding the preceding
sentence, any successor Servicer will not be obligated to make any Servicer
Advances.
(b) The Servicer will deposit any Servicer Advances into the
Collection Account on or prior to 11:00 a.m. (New York City time) on the related
Payment Date, in immediately available funds. A Servicer Advance for a
delinquent payment on a Transferred Loan will not result in a reclassification
of the delinquency status of such Transferred Loan for reporting purposes and
the Delinquent payment with respect to such Transferred Loan will continue to
age as if no payment has been made.
Section 4.06. Realization Upon Defaulted Loans or Charged-Off
Loans.
The Servicer will use its reasonable efforts to repossess or otherwise
comparably convert the ownership of any Related Property with respect to a
Defaulted Loan or Charged-Off Loan and will act as sales and processing agent
for Related Property that it repossesses. The Servicer will follow the practices
and procedures set forth in the Credit and Collection Policy in order to realize
upon such Related Property. Without limiting the foregoing, the Servicer may
sell any such Related Property with respect any Defaulted Loan or Charged-Off
Loan to the Servicer or its Affiliates for a purchase price equal to the then
fair market value thereof; any such sale to be evidenced by a certificate of a
Responsible Officer of the Servicer delivered to the Indenture Trustee
identifying the Defaulted Loan or Charged-Off Loan and the Related Property,
setting forth the sale price of the Related Property and certifying that such
sale price is the fair market value of such Related Property; provided, that if
after giving effect to such sale (a) the Availability would not be greater than
or equal to zero or (b) a Trigger Event, a Default or an Event of Default would
exist, then the Servicer prior to selling any Related Property with respect a
Defaulted Loan or Charged-Off Loan shall obtain the prior written consent of the
initial Noteholder. In any case in which any such Related Property has suffered
damage, the Servicer will not expend funds in connection with any repair or
toward the repossession of such Related Property unless it reasonably determines
that such repair and/or repossession will increase the Recoveries by an amount
greater than the amount of such expenses. The Servicer will remit to the
Collection Account the Recoveries received in connection with the sale or
disposition of Related Property with respect to a Defaulted Loan or Charged-Off
Loan.
63
Section 4.07. Maintenance of Insurance Policies.
The Servicer will require that each Obligor with respect to a
Transferred Loan maintain an Insurance Policy with respect to each Transferred
Loan and the Related Property, to the extent consistent with the Credit and
Collection Policy. In connection with its activities as Servicer, the Servicer
agrees to present, on behalf of the Issuer and the Indenture Trustee, on behalf
of the Noteholders, with respect to the respective interests, claims to the
insurer under each Insurance Policy and any such liability policy, and to
settle, adjust and compromise such claims, in each case, consistent with the
terms of each related Transferred Loan.
Section 4.08. Representations and Warranties of the Servicer.
The Servicer hereby represents and warrants as follows:
(a) Organization and Good Standing; Power and Authority. The
Servicer is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation with all requisite
corporate power and authority to own its properties and to conduct its business
as presently conducted and to enter into and perform its obligations pursuant to
this Agreement and each other Basic Document to which it is a party.
(b) Due Qualification. The Servicer is qualified to do
business as a corporation, is in good standing, and has obtained all licenses
and approvals as required under the laws of all jurisdictions in which the
ownership or lease of its property and or the conduct of its business (other
than the performance of its obligations hereunder) requires such qualification,
standing, license or approval, except to the extent that the failure to so
qualify, maintain such standing or be so licensed or approved would not have an
adverse effect on the interests of the Issuer or of the Noteholders. The
Servicer is qualified to do business as a corporation, is in good standing, and
has obtained all licenses and approvals as required under the laws of all states
in which the performance of its obligations pursuant to this Agreement requires
such qualification, standing, license or approval, except where the failure to
qualify or obtain such license or approval would not reasonably be expected to
have a Material Adverse Effect on its ability to perform hereunder.
64
(c) Due Authorization. The Servicer has duly authorized the
execution, delivery and performance of this Agreement by all requisite corporate
action.
(d) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by the
Servicer (with or without notice or lapse of time) will not (i) conflict with,
result in any breach of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws of the Servicer, or any
material Contractual Obligation to which the Servicer is a party or by which it
or any of its property is bound, (ii) result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
Contractual Obligation (other than this Agreement or the Loan Sale Agreement),
or (iii) violate in any material respect any Applicable Law.
(e) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Servicer or any of its
properties is required to be obtained by or with respect to the Servicer in
order for the Servicer to enter into this Agreement or perform its obligations
hereunder.
(f) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable against the Servicer
in accordance with its terms, except as such enforceability may be limited by
(i) applicable Bankruptcy Laws and (ii) general principles of equity (whether
considered in a suit at law or in equity).
(g) No Proceedings. Except as previously disclosed to the
Purchasers in writing, there are no proceedings or investigations (formal or
informal) pending or threatened against the Servicer, before any Governmental
Authority (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that would (in the
reasonable judgment of the Servicer) be expected to have a Material Adverse
Effect.
(h) Reports Accurate. All Servicer Certificates, information,
exhibits, financial statements, documents, books, Servicing Records or reports
furnished or to be furnished by the Servicer to the Purchasers, the Indenture
Trustee or any other party in connection with this Agreement are and will be
accurate, true and correct in all material respects.
(i) No Servicer Default. No event has occurred and is
continuing and no condition exists, or would result from a Borrowing or from the
application of the proceeds therefrom, which constitutes or may reasonably be
expected to constitute a Servicer Default.
(j) Material Adverse Change. Since December 31, 2004, there
has been no Material Adverse Change with respect to the initial Servicer.
(k) Credit and Collection Policy. It has at all times, since
the adoption of the Credit and Collection Policy, complied with the Credit and
Collection Policy with respect to each Transferred Loan.
65
Section 4.09. Covenants of the Servicer.
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply in all
material respects with all Applicable Laws, including those with respect to the
Transferred Loans, the Related Property and Loan Documents or any part thereof.
(b) Preservation of Corporate Existence. The Servicer will
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its formation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
maintain such existence, rights, franchises, privileges and qualification could
reasonably be expected to have, a Material Adverse Effect.
(c) Obligations with Respect to Transferred Loans. The
Servicer will duly fulfill and comply with all obligations on the part of the
Issuer to be fulfilled or complied with under or in connection with each
Transferred Loan and will do nothing to impair the rights of the Issuer or the
Indenture Trustee, on behalf of the Noteholders, or of the Noteholders in, to
and under the Collateral.
(d) Preservation of Security Interest. The Issuer or the
Servicer on behalf of the Issuer will execute and file (or cause the execution
and filing of) such financing and continuation statements and any other
documents and take such other actions that may be required by any law or
regulation of any Governmental Authority to preserve and protect fully the
interest of the Indenture Trustee, on behalf of the Noteholders, in, to and
under the Collateral.
(e) Change of Name or Location; Records. The Servicer (i)
shall not change its name, move the location of its principal executive office
or change its jurisdiction of incorporation, without 30 days' prior written
notice to the Issuer, the Administrative Agent, each Group Noteholder and the
Indenture Trustee, and (ii) shall not move, or consent to the Collateral
Custodian moving the Loan Documents without 45 days' prior written notice to the
Issuer, the Administrative Agent, each Group Noteholder and the Indenture
Trustee and (iii) will promptly take all actions required of each relevant
jurisdiction in order to continue the first priority perfected security interest
of the Indenture Trustee, on behalf of the Noteholders, in all Collateral,
including delivery of an Opinion of Counsel.
(f) Credit and Collection Policy. The initial Servicer will
(i) comply in all material respects with the Credit and Collection Policy in
regard to each Transferred Loan and the Related Property included in the
Collateral, including, without limitation, performing the loan grading and asset
valuation functions specified in the Credit and Collection Policy on a quarterly
basis, and (ii) furnish to the Noteholders, prior to its effective date, prompt
notice of any change in the Credit and Collection Policy. The initial Servicer
will not agree or otherwise permit (x) any change in the Credit and Collection
Policy which would materially and adversely affect or impair the collectibility
of any Transferred Loan, or (y) to occur any material change in the Credit and
Collection Policy, without the prior written consent of the Noteholders.
(g) Notice of Certain Events. The Servicer will furnish to the
Noteholders, as soon as possible and in any event within one Business Day after
the Servicer shall have knowledge of the occurrence of any Trigger Event,
Default or Event of Default, a written statement setting forth the details of
such event and the action that the Servicer proposes to take with respect
thereto.
66
(h) Extension or Amendment of Transferred Loans. The Servicer
will not, except as otherwise permitted in Section 4.04(a), extend, amend or
otherwise modify the terms of any Transferred Loan.
(i) Other. The Servicer will furnish to the Issuer, the
Indenture Trustee and the Noteholders such other information, documents records
or reports respecting the Transferred Loans or the condition or operations,
financial or otherwise of the Servicer as the Issuer, the Indenture Trustee or
the Noteholders may from time to time reasonably request in order to protect the
respective interests of the Issuer, the Indenture Trustee and the Noteholders
under or as contemplated by this Agreement or any other Basic Document.
(j) Agented Notes. Except as provided in Section 4.04(a), the
Servicer and the Originator covenant that they shall not without the prior
written consent of the Noteholders (i) make or consent to any amendment or
alteration of the terms of any Agented Note or related Loan Documents, including
without limitation the payments due thereunder, (ii) undertake to release or
authorize or consent to the release of any collateral or security for the
Agented Notes, (iii) accelerate or extend the maturity of any Agented Note or
(iv) waive any claim against the Obligor or any applicable guarantor thereof,
where the effect of any of the foregoing would have a material adverse effect on
the Collateral, any Noteholder or the interest of the Indenture Trustee on
behalf of the Noteholders in any Collateral.
(k) Inspection of Records. The Servicer will, at any time and
from time to time during regular business hours, as requested by the Indenture
Trustee or the Noteholders, permit the Indenture Trustee or the Noteholders, or
their respective agents or representatives, (i) to examine and make copies of
and take abstracts from all books, records and documents (including computer
tapes and disks) relating to the Transferred Loans and the related Loan
Documents and (ii) to visit the offices and properties of the Issuer, the
Originator or the Servicer, as applicable, for the purpose of examining such
materials described in clause (i), and to discuss matters relating to the
Transferred Loans or the Issuer's, the Originator's or the Servicer's
performance hereunder, under the Loan Documents and under the other Basic
Documents to which such Person is a party with such officers, directors,
employees or independent public accountants of the Issuer, the Originator or the
Servicer, as applicable, as might reasonably be determined to have knowledge of
such matters. Prior to the occurrence of an Event of Default or a Trigger Event,
the Servicer shall bear the expense of up to two such inspections in any
12-month period, subject to a maximum of $40,000 of such expenses in the
aggregate, and any additional inspections or expenses in excess of $40,000 shall
be for the account of the Noteholders. Upon and after the occurrence of an Event
of Default or a Trigger Event, the Servicer shall be required to bear the
expense of all such inspections.
(l) Keeping of Records. The Servicer will maintain and
implement administrative and operating procedures (including an ability to
recreate records evidencing Transferred Loans and the related Loan Documents in
the event of the destruction of the originals thereof), and keep and maintain,
all documents, books, computer tapes, disks, records and other information
reasonably necessary or advisable for the collection of all Transferred Loans
(including records adequate to permit the daily identification of each new
Transferred Loan and all Collections of and adjustments to each existing
Transferred Loan). The Servicer shall give the Noteholders (with a copy to
Indenture Trustee and the Collateral Custodian) prompt notice of any material
change in its administrative and operating procedures referred to in the
previous sentence.
67
(m) Compliance with Transferred Loans. The Servicer will (i)
at its own expense, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it under the
Transferred Loans and the related Loan Documents; and (ii) timely and fully
comply in all material respects with the Credit and Collection Policy with
respect to each Transferred Loan and the related Loan Documents.
(n) Consolidation or Merger of the Servicer. The initial
Servicer shall not consolidate or merge with or into, or sell, lease or transfer
all or substantially all of its assets to, any other Person, unless, in the case
of any such action (i) no Trigger Event, Event of Default or Material Adverse
Effect would occur or be reasonably likely to occur as a result of such
transaction, (ii) each Noteholder provides its prior written consent to such
transaction and (iii) such Person executes and delivers to the Noteholders (with
a copy to the Indenture Trustee) an agreement by which such Person assumes the
obligations of the Servicer hereunder and under the other Basic Documents to
which it is a party, or confirms that such obligations remain enforceable
against it, together with such certificates and opinions of counsel as any
Noteholder may reasonably request.
(o) RIC/BDC Requirements. The initial Servicer shall at all
times maintain compliance with the RIC/BDC Requirements.
Section 4.10. The Collateral Custodian.
(a) Appointment; Custodial Duties. The Issuer and the
Administrative Agent each hereby appoints U.S. Bank to act as Collateral
Custodian hereunder, for the benefit of the Issuer, the Indenture Trustee and
the Noteholders, as provided herein. U.S. Bank hereby accepts such appointment
and agrees to perform the duties and responsibilities with respect thereto set
forth herein.
The Collateral Custodian shall take and retain custody of the
Loan Files delivered by the Issuer or on its behalf pursuant to Section 2.04
hereof in accordance with the terms and conditions of this Agreement, all for
the benefit of the Noteholders and subject to the Lien thereon in favor of the
Indenture Trustee, on behalf of the Noteholders. Upon receipt of any such Loan
File, the Collateral Custodian shall perform the review and certification
functions with respect thereto specified in Section 2.05.
In taking and retaining custody of the Loan Files, the
Collateral Custodian shall be acting as the agent of the Indenture Trustee on
behalf of the Noteholders; provided, that the Collateral Custodian makes no
representations as to the existence, perfection or priority of any Lien on the
Loan Files or the instruments therein; provided, further, that, the Collateral
Custodian's duties as agent shall be limited to those expressly contemplated
herein. All Loan Files shall be kept in fire-resistant vaults or cabinets at the
location specified in Section 11.05 hereof, or at such other office as shall be
specified to the Indenture Trustee and the Issuer (with a copy to the
Administrative Agent) by the Collateral Custodian in a written notice delivered
at least 45 days prior to such change. All Loan Files shall be segregated with
an appropriate identifying label and maintained in such a manner so as to permit
retrieval and access. All Loan Files shall be clearly segregated from any other
documents or instruments maintained by the Collateral Custodian. The Collateral
Custodian shall clearly indicate that such Loan Files are the sole property of
Issuer, subject to the security interest of the Indenture Trustee, on behalf of
the Noteholders. In performing its duties, the Collateral Custodian shall use
the same degree of care and attention as it employs with respect to similar loan
files that it holds as collateral custodian for others.
68
(b) Concerning the Collateral Custodian.
(i) Except for its willful misconduct, gross negligence or bad
faith, the Collateral Custodian may conclusively rely on and shall be fully
protected in acting upon any certificate, instrument, opinion, notice, letter,
telegram or other document delivered to it and that in good faith it reasonably
believes to be genuine and that has been signed by the proper party or parties.
Except for its willful misconduct, gross negligence or bad faith, the Collateral
Custodian may rely conclusively on and shall be fully protected in acting upon
the written instructions of any designated officer of any Purchaser. In no event
shall the Collateral Custodian be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits).
(ii) The Collateral Custodian may consult counsel satisfactory
to it and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(iii) The Collateral Custodian shall not be liable for any
error of judgment, or for any act done or step taken or omitted by it, in good
faith, or for any mistakes of fact or law, or for anything that it may do or
refrain from doing in connection herewith except in the case of its willful
misconduct, gross negligence or bad faith.
(iv) The Collateral Custodian makes no warranty or
representation and shall have no responsibility (except as expressly set forth
in this Agreement) as to the content, enforceability, completeness, validity,
sufficiency, value, genuineness, ownership or transferability of the Loans or
the Loan Documents, and will not be required to and will not make any
representations as to the validity or value of any of the Loans. The Collateral
Custodian shall not be obligated to take any legal action hereunder that might
in its judgment involve any expense or liability unless it has been furnished
with an indemnity reasonably satisfactory to it.
(v) The Collateral Custodian shall have no duties or
responsibilities except such duties and responsibilities as are specifically set
forth in this Agreement and no covenants or obligations shall be implied in this
Agreement against the Collateral Custodian.
69
(vi) The Collateral Custodian shall not be required to expend
or risk its own funds in the performance of its duties hereunder.
(vii) It is expressly agreed and acknowledged that the
Collateral Custodian is not guaranteeing performance of or assuming any
liability for the obligations of the other parties hereto or any parties to the
Transferred Loans.
(viii) The parties hereto hereby acknowledge and agree that
the Collateral Custodian's execution of this Agreement shall constitute the
Collateral Custodian's written acknowledgment and agreement that the Collateral
Custodian is holding any Collateral it receives that may be perfected by
possession under the UCC on behalf of and for the benefit of the Indenture
Trustee and the Noteholders.
(c) Release for Servicing. From time to time and as
appropriate for the enforcement or servicing of any of the Transferred Loans,
the Collateral Custodian is hereby authorized, upon receipt from the Servicer on
behalf of the Issuer, of a written request for release of documents and receipt
in the form annexed hereto as Exhibit J and upon receipt from the Majority
Noteholders of their written consent to such request and receipt, to release to
the Servicer the related Loan File or the documents set forth in such request
and receipt to the Servicer; provided, however, notwithstanding the foregoing or
any other provision of this Agreement, upon its receipt of written instructions
from the Majority Noteholders, the Collateral Custodian shall cease releasing
documents to the Servicer. All documents so released to the Servicer on behalf
of the Issuer shall be held by the Servicer in trust for the benefit of the
Issuer, the Indenture Trustee and the Noteholders, with respect to their
respective interests, in accordance with the terms of this Agreement. The
Servicer, on behalf of the Issuer, shall return to the Collateral Custodian the
Loan File or other such documents when the Servicer's need therefor in
connection with such foreclosure or servicing no longer exists, unless the
Transferred Loan shall be liquidated, in which case, upon receipt of an
additional request for release of documents and receipt certifying such
liquidation from the Servicer to the Collateral Custodian in the form annexed
hereto as Exhibit J, the Servicer's request and receipt submitted pursuant to
the first sentence of this Section 4.10(c) shall be released by the Collateral
Custodian to the Servicer. Notwithstanding anything in this Section 4.10(c) to
the contrary, in no event shall the Collateral Custodian release any Loan File
or part thereof to the Servicer for any reason without the Majority Noteholders'
prior written consent.
(d) Release for Payment. Upon receipt by the Collateral
Custodian of the Servicer's request for release of documents and receipt in the
form annexed hereto as Exhibit J (which certification shall include a statement
to the effect that all amounts received in connection with such payment or
repurchase have been credited to the Collection Account as provided in this
Agreement), the Collateral Custodian shall promptly release the related Loan
File to the Servicer, on behalf of the Issuer.
(e) Collateral Custodian Compensation. As compensation for its
activities hereunder, the Collateral Custodian shall be entitled to a Collateral
Custodian Fee from the Servicer. To the extent that such Collateral Custodian
Fee is not paid by the Servicer, the Collateral Custodian shall be entitled to
receive the unpaid balance of such Collateral Custodian Fee to the extent of
funds available therefor pursuant to the provision of Sections 5.01(c)(4) and
(5). The Collateral Custodian's entitlement to receive the Collateral Custodian
Fee (other than due and unpaid Collateral Custodian Fees owed through such date)
shall cease on the earlier to occur of: (i) its removal as Collateral Custodian
or (ii) the termination of this Agreement.
70
(f) Replacement of the Collateral Custodian. The Collateral
Custodian may be replaced by the Issuer with the prior consent of the
Noteholders; provided that no such replacement shall be effective until a
replacement Collateral Custodian has been appointed, has agreed to act as
Collateral Custodian hereunder and has received all Loan Files held by the
previous Collateral Custodian.
(g) Release of Loan Documents Following Optional Sale or
RIC/BDC Sale. To the extent that portions of Transferred Loans are transferred
pursuant to an Optional Sale or RIC/BDC Sale under Sections 3.06 or 3.07 and
such portions of Transferred Loans are part of a Permitted Securitization or
have been sold in a RIC/BDC Sale, the Collateral Custodian may, but only with
the Noteholders' prior written consent, and upon terms and conditions
satisfactory to the Noteholders, including without limitation the execution by
the Servicer of all such documents as the Noteholders or the Indenture Trustee
may require, release original Loan Documents (excluding the related original
Underlying Note(s) evidencing the portion of the Transferred Loan, if any,
remaining as part of the Collateral) to the servicer of such sold Loans for the
purposes of enforcing or servicing such Loans in connection with a Permitted
Securitization.
Section 4.11. Representations and Warranties of the Collateral
Custodian.
The Collateral Custodian represents and warrants as follows:
(a) Organization and Good Standing. It is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States with all requisite power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.
(b) Due Qualification. It is duly qualified to do business as
a national banking association and is in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification, licenses or approval except where the failure to so qualify or
have such licenses or approvals has not had, and would not be reasonably
expected to have, a Material Adverse Effect.
(c) Power and Authority. It has the power and authority to
execute and deliver this Agreement and each other Basic Document to which it is
a party and to carry out their respective terms. It has duly authorized the
execution, delivery and performance of this Agreement and each other Basic
Document to which it is a party by all requisite action.
(d) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement and each
other Basic Document to which it is a party by it will not (i) conflict with,
result in any breach of any of the terms or provisions of, or constitute a
default under, its articles of association, or any Contractual Obligation to
which it is a party or by which it or any of its property is bound, (ii) result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any Contractual Obligation, or (iii) violate any Applicable Law.
71
(e) No Consents. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over it or any of its respective
properties is required to be obtained in order for it to enter into this
Agreement or perform its obligations hereunder.
(f) Binding Obligation. This Agreement constitutes its legal,
valid and binding obligation, enforceable in accordance with its terms, except
as such enforceability may be limited by (i) applicable Bankruptcy Laws and (ii)
general principles of equity (whether considered in a suit at law or in equity).
(g) No Proceedings. There are no proceedings or investigations
pending or, to the best of its knowledge, threatened, against it before any
Governmental Authority (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement or (iii) seeking any determination or ruling that might (in its
reasonable judgment) have a Material Adverse Effect.
Section 4.12. Covenants of the Collateral Custodian.
The Collateral Custodian hereby covenants that:
(a) Compliance with Law. The Collateral Custodian will comply
in all material respects with all Applicable Laws.
(b) Preservation of Existence. The Collateral Custodian will
preserve and maintain its existence, rights, franchises and privileges as a
national banking association in good standing under the laws of the United
States.
(c) No Bankruptcy Petition. Prior to the date that is one year
and one day (or such longer preference period as shall then be in effect) after
the Collection Date, it will not institute against the Issuer, or join any other
Person in instituting against the Issuer, any Bankruptcy Proceedings or other
similar proceedings under the laws of the United States or any state of the
United States. This Section 4.12(c) will survive the termination of this
Agreement.
(d) Loan Files. The Collateral Custodian will not dispose of
any documents constituting the Loan Files in any manner that is inconsistent
with the performance of its obligations as the Collateral Custodian pursuant to
this Agreement and will not dispose of any Transferred Loan except as
contemplated by this Agreement.
(e) Location of Loan Files. The Loan Files shall remain at all
times in the possession of the Collateral Custodian at the address set forth on
Annex 1 hereto unless notice of a different address is given in accordance with
the terms hereof.
(f) No Changes in Collateral Custodian Fee. The Collateral
Custodian will not make any changes to the Collateral Custodian Fee set forth in
the Collateral Custodian and Backup Servicer Fee Letter without the prior
written approval of the Noteholders.
72
Section 4.13. The Backup Servicer.
(a) Appointment. The Issuer and the Administrative Agent
hereby appoint Lyon Financial to act as Backup Servicer for the benefit of the
Issuer, the Indenture Trustee and the Noteholders in accordance with the terms
of this Agreement. Lyon Financial hereby accepts such appointment and agrees to
perform the duties and responsibilities with respect thereto set forth herein.
(b) Duties. On or before the initial Borrowing Date, and until
the receipt by the Servicer of a notice of termination pursuant to Section 9.01
hereof, the Backup Servicer shall perform, on behalf of the Issuer and the
Indenture Trustee for the benefit of the Noteholders, the following duties and
obligations:
(i) On or before the Closing Date, the Backup Servicer shall
accept from the Servicer delivery of the information required to be set forth in
the Servicer Reports in hard copy and in an agreed upon electronic format.
(ii) Not later than 12:00 noon (New York City time) on each
Record Date (or with respect to the initial Payment Date, the fourth Business
Day preceding the Payment Date), the Servicer shall provide to the Backup
Servicer and the Backup Servicer shall accept delivery of tape in an agreed upon
electronic format (the "Loan Tape") from the Servicer, which shall include but
not be limited to the following information: (x) for each Transferred Loan, the
name and number of the related Obligor, the collection status, the loan status,
the date of each Scheduled Payment and the Outstanding Loan Balance and (y) the
Aggregate Outstanding Loan Balance.
(iii) Prior to the related Payment Date, the Backup Servicer
shall review the Servicer Report to ensure that it is complete on its face and
that the following items in such Servicer Report have been accurately
calculated, if applicable, and reported: (A) the Availability, (B) the Aggregate
Outstanding Loan Balance, (C) the Backup Servicer Fee, (D) the Transferred Loans
that are 30 or more days Delinquent (other than Defaulted Loans and Charged-Off
Loans), (E) the Defaulted Loans (other than Charged-Off Loans), (F) the
Charged-Off Loans, (G) the Portfolio Yield, (H) the Rolling Three-Month
Portfolio Yield, (I) the Rolling Three-Month Default Ratio, (J) the Rolling
Three-Month Charged-Off Ratio and (K) the Rolling Twelve-Month Portfolio
Charged-Off Ratio. The Backup Servicer shall notify each Purchaser, the
Indenture Trustee and the Servicer of any disagreements with the Servicer Report
based on such review not later than the Business Day preceding such Payment
Date.
(iv) If the Issuer or the Servicer disagrees with the report
provided under Section 4.13(b)(iii) by the Backup Servicer or if the Issuer or
the Servicer or any subservicer has not reconciled such discrepancy, the Backup
Servicer agrees to confer with the Issuer or the Servicer to resolve such
disagreement on or prior to the next succeeding Record Date and shall settle
such discrepancy with the Issuer or the Servicer if possible, and notify each
Purchaser and the Indenture Trustee of the resolution thereof. The Issuer or the
Servicer hereby agree to cooperate at their own expense, with the Backup
Servicer in reconciling any discrepancies herein. If within 20 days after the
delivery of the report provided under Section 3.13(b)(iii) by the Backup
Servicer, such discrepancy is not resolved, the Backup Servicer shall promptly
notify each Purchaser, the Indenture Trustee and the Servicer of the continued
existence of such discrepancy. Following receipt of such notice by the Servicer,
the Servicer shall deliver to the Issuer, the Indenture Trustee, each Purchaser
and the Backup Servicer no later than the related Payment Date a certificate
describing the nature and amount of such discrepancies and the actions the
Servicer proposes to take with respect thereto.
73
With respect to the duties described in this Section 4.13(b),
in the absence of bad faith or gross negligence, the Backup Servicer, in the
performance of its duties and obligations hereunder, is entitled to rely
conclusively, and shall be fully protected in so relying, on the contents of
each Loan Tape, including, but not limited to, the completeness and accuracy
thereof, provided by the Servicer.
(c) Transition to Servicer Role. After the receipt by the
Servicer of an effective notice of termination pursuant to Section 9.01, all
authority, power, rights and responsibilities of the Servicer, under this
Agreement, whether with respect to the Transferred Loans or otherwise, shall
pass to and be vested in the Backup Servicer, subject to and in accordance with
the provisions of Section 4.26, as long as the Backup Servicer is not prohibited
by Applicable Law from fulfilling the same, as evidenced by an Opinion of
Counsel.
(d) Merger or Consolidation. Any Person (i) into which the
Backup Servicer may be merged or consolidated, (ii) that may result from any
merger or consolidation to which the Backup Servicer shall be a party, or (iii)
that may succeed to the properties and assets of the Backup Servicer
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Backup Servicer
hereunder, shall be the successor to the Backup Servicer under this Agreement
without further act on the part of any of the parties to this Agreement.
(e) Backup Servicing Compensation. As compensation for its
backup servicing activities hereunder, the Backup Servicer shall be entitled to
receive the Backup Servicer Fee from the Servicer. To the extent such Backup
Servicer Fee is not paid by the Servicer, the Backup Servicer shall be entitled
to receive the unpaid balance of its Backup Servicer Fee to the extent of funds
available therefor pursuant to the provision of Sections 5.01(c)(4) and (5). The
Backup Servicer's entitlement to receive the Backup Servicer Fee (other than due
and unpaid Backup Servicer Fees owed through such date) shall cease on the
earliest to occur of: (i) it becoming the successor Servicer, (ii) its removal
as Backup Servicer, or (iii) the Termination Date.
(f) Backup Servicer Removal. The Backup Servicer may be
removed with or without cause by the Noteholders, or by the Issuer with the
prior written approval of the Noteholders by notice given in writing to the
Backup Servicer. In the event of any such removal, a replacement Backup Servicer
may be appointed by (i) the Issuer, acting with the written consent of the
Noteholders or (ii) if no such replacement is appointed within 30 days following
such removal, by the Noteholders.
74
(g) Scope of Backup Servicing Duties. The Backup Servicer
undertakes to perform only such duties and obligations as are specifically set
forth in this Agreement, it being expressly understood by all parties hereto
that there are no implied duties or obligations of the Backup Servicer
hereunder. Without limiting the generality of the foregoing, the Backup
Servicer, except as expressly set forth herein, shall have no obligation to
supervise, verify, monitor or administer the performance of the Servicer. The
Backup Servicer may act through its agents, attorneys and custodians in
performing any of its duties and obligations under this Agreement, it being
understood by the parties hereto that the Backup Servicer will be responsible
for any misconduct or negligence on the part of such agents, attorneys or
custodians acting on the routine and ordinary day-to-day operations for and on
behalf of the Backup Servicer. Neither the Backup Servicer nor any of its
officers, directors, employees or agents shall be liable, directly or
indirectly, for any damages or expenses arising out of the services performed
under this Agreement other than damages or expenses that result from the gross
negligence or bad faith of it or them or the failure to perform materially in
accordance with this Agreement.
(h) Limitation on Liability. Except for its willful
misconduct, gross negligence or bad faith, the Backup Servicer shall not be
liable for any obligation of the Servicer contained in this Agreement or for any
errors of the Servicer contained in any computer tape, certificate or other data
or document delivered to the Backup Servicer hereunder or on which the Backup
Servicer must rely in order to perform its obligations hereunder, and the
Issuer, the Indenture Trustee, the Collateral Custodian, the Backup Servicer and
the Noteholders each agree to look only to the Servicer to perform such
obligations. Except for its willful misconduct, gross negligence or bad faith,
the Backup Servicer shall have no responsibility and shall not be in default
hereunder or incur any liability for any failure, error, malfunction or any
delay in carrying out any of their respective duties under this Agreement if
such failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer or
the failure of any such other Person to prepare or provide such information.
Except for its gross negligence or bad faith, the Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability for (i) any
act or failure to act of any third party, including the Servicer (ii) any
inaccuracy or omission in a notice or communication received by the Backup
Servicer from any third party, (iii) the invalidity or unenforceability of any
Transferred Loan or Loan Document under Applicable Law, (iv) the breach or
inaccuracy of any representation or warranty made with respect to any
Transferred Loan, or (v) the acts or omissions of any successor Backup Servicer.
Section 4.14. Representations and Warranties of the Backup
Servicer.
The Backup Servicer hereby represents and warrants as follows:
(a) Organization and Good Standing. It is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States with all requisite power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.
(b) Due Qualification. The Backup Servicer is duly qualified
to do business as a national banking association and is in good standing, and
have obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of its property and the conduct of its business requires
such qualification, licenses or approvals except where the failure to so qualify
or have such licenses or approvals has not had, and would not be reasonably
expected to have, a Material Adverse Effect.
75
(c) Power and Authority. It has the power and authority to
execute and deliver this Agreement and to carry out its terms. It has duly
authorized the execution, delivery and performance of this Agreement by all
requisite action.
(d) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by it will
not (i) conflict with, result in any breach of any of the terms or provisions
of, or constitute a default under, its articles of association or any
Contractual Obligation by which it or any of its property is bound, (ii) result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any Contractual Obligation (other than the Agreement), or (iii)
violate any Applicable Law.
(e) No Consents. No Consents of or with any Governmental
Authority having jurisdiction over it or any of its respective properties is
required to be obtained in order for it to enter into this Agreement or perform
its obligations hereunder.
(f) Binding Obligation. This Agreement constitutes its legal,
valid and binding obligation, enforceable in accordance with its terms, except
as such enforceability may be limited by (i) applicable Bankruptcy Laws and (ii)
general principles of equity (whether considered in a suit at law or in equity).
(g) No Proceedings. There are no proceedings or investigations
pending or, to the best of its knowledge, threatened, against it before any
Governmental Authority (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement or (iii) seeking any determination or ruling that might (in its
reasonable judgment) have a Material Adverse Effect.
Section 4.15. Covenants of the Backup Servicer.
The Backup Servicer hereby covenants that:
(a) Compliance with Law. The Backup Servicer will comply in
all material respects with all Applicable Laws.
(b) Preservation of Existence. The Backup Servicer will
preserve and maintain its existence, rights, franchises and privileges as a
national banking association in good standing under the laws of the United
States.
(c) No Bankruptcy Petition. Prior to the date that is one year
and one day (or such longer preference period as shall then be in effect) after
the Collection Date, the Backup Servicer will not institute against the Issuer,
or join any other Person in instituting against the Issuer, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States. This Section 4.15(c) will survive the termination of this
Agreement.
76
(d) No Changes in Backup Servicer Fee. The Backup Servicer
will not make any changes to Backup Servicer Fee set forth in the Collateral
Custodian and Backup Servicer Fee Letter without the prior written approval of
the Noteholders.
Section 4.16. Payment of Certain Expenses by the Servicer and
the Issuer.
(a) The Servicer will be required to pay all fees and expenses
incurred by it in connection with the transactions and activities contemplated
by this Agreement, including fees and disbursements of legal counsel and
independent accountants, taxes imposed on the Servicer, expenses incurred in
connection with payments and reports pursuant to this Agreement, and all other
fees and expenses not expressly stated under this Agreement for the account of
the Issuer. In consideration for the payment by the Issuer of the Servicing Fee,
the Servicer will be required to pay all reasonable fees and expenses owing to
any bank or trust company in connection with the maintenance of the Trust
Accounts and the Backup Servicer Fee and the Collateral Custodian Fee pursuant
to the Collateral Custodian and Backup Servicer Fee Letter. The Servicer shall
be required to pay such expenses for its own account and shall not be entitled
to any payment therefor other than the Servicing Fee.
(b) The Issuer will be required to pay all fees and expenses
incurred by the Indenture Trustee and the Noteholders in connection with the
transactions and activities contemplated by this Agreement, including reasonable
fees and disbursements of legal counsel and independent accountants.
Section 4.17. Reports.
(a) Servicer Report. With respect to each Record Date and the
related Collection Period, the Servicer will provide to the Issuer, the Backup
Servicer, the Indenture Trustee and each Purchaser, on the related Record Date,
a monthly statement (a "Servicer Report"), signed by a Responsible Officer of
the Servicer and substantially in the form of Exhibit B. Except as otherwise set
forth herein, the Backup Servicer shall have no obligation to review any
information in the Servicer Report.
(b) Servicer's Certificate. Together with each Servicer
Report, the Servicer shall submit to the Issuer, the Backup Servicer, the
Indenture Trustee and each Purchaser a certificate substantially in the form of
Exhibit K (a "Servicer's Certificate"), signed by a Responsible Officer of the
Servicer, which shall include a certification by such Responsible Officer that
no Trigger Event, Default or Event of Default has occurred and is continuing.
Except as otherwise set forth herein, the Backup Servicer shall have no duty to
review any information set forth in the Servicer's Certificate.
(c) Financial Statements. The Servicer will submit to the
Issuer, the Backup Servicer, the Indenture Trustee and each Purchaser, within 45
days following the end of each of the Servicer's fiscal quarters (other than the
final fiscal quarter), commencing for the fiscal quarter ending on June 30,
2005, unaudited financial statements of the Servicer (including an analysis of
delinquencies and losses for each fiscal quarter) as of the end of each such
fiscal quarter. The Servicer shall submit to the Issuer, the Indenture Trustee
and each Purchaser, within 90 days following the end of the Servicer's fiscal
year, commencing with the fiscal year ending on December 31, 2005, annual
audited financial statements as of the end of such fiscal year. Except as
otherwise set forth herein, the Backup Servicer shall have no duty to review any
of the financial information set forth in such financial statements.
77
Section 4.18. Annual Statement as to Compliance.
The Servicer will provide to the Issuer, the Backup Servicer,
the Indenture Trustee, the Collateral Custodian and each Purchaser, within 90
days following the end of each fiscal year of the Servicer, commencing with the
fiscal year ending on December 31, 2005, an annual report signed by a
Responsible Officer of the Servicer certifying that (a) a review of the
activities of the Servicer, and the Servicer's performance pursuant to this
Agreement, for the period ending on the last day of such fiscal year has been
made under such Responsible Officer's supervision and (b) the Servicer has
performed or has caused to be performed in all material respects all of its
obligations under this Agreement throughout such year and no Servicer Default
has occurred and is continuing (or if a Servicer Default has occurred and is
continuing, specifying each such event, the nature and status thereof and the
steps necessary to remedy such event, and, if a Servicer Default occurred during
such year and no notice thereof has been given to each Purchaser (with a copy to
the Indenture Trustee), specifying such Servicer Default and the steps taken to
remedy such event).
Section 4.19. Annual Independent Public Accountant's Servicer
Reports.
The Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer) to furnish to the Issuer, the Indenture Trustee, the Collateral
Custodian and each Purchaser (with a copy to the Backup Servicer), within 90
days following the end of each fiscal year of the Servicer, commencing with the
fiscal year ending on December 31, 2005, (i) a report relating to such fiscal
year to the effect that (A) such firm has reviewed certain documents and records
relating to the servicing of the Transferred Loans, and (B) based on such
examination, such firm is of the opinion that the Servicer Reports for such year
were prepared in compliance with this Agreement, except for such exceptions as
it believes to be immaterial and such other exceptions as will be set forth in
such firm's report and (ii) a report covering such fiscal year to the effect
that such accountants have applied certain agreed-upon procedures (which
procedures shall not be amended from those procedures in effect as of the
Closing Date without the prior approval of the Issuer and each Purchaser) to
certain documents and records relating to the servicing of Transferred Loans
under this Agreement, compared the information contained in the Servicer Reports
and the Servicer's Certificates delivered during the period covered by such
report with such documents and records and that no matters came to the attention
of such accountants that caused them to believe that such servicing was not
conducted in compliance with this Article IV of this Agreement, except for such
exceptions as such accountants shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.
Section 4.20. Limitation on Liability.
Except as provided herein, none of the directors or officers
or employees or agents of the Servicer shall be under any liability to the
Issuer, the Administrative Agent, the other Noteholders or any other Person for
any action taken or for refraining from the taking of any action as expressly
provided for in this Agreement; provided, that this provision shall not protect
any such Person against any liability that would otherwise be imposed by reason
of its willful misfeasance, bad faith or negligence (except with regard to the
Backup Servicer when acting as successor servicer, gross negligence and not
negligence shall apply) in the performance of duties or by reason of its failure
to perform materially in accordance with this Agreement.
78
The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its duties to
service the Transferred Loans in accordance with this Agreement that in its
reasonable opinion may involve it in any expense or liability. The Servicer may,
in its sole discretion, undertake any legal action relating to the servicing,
collection or administration of Transferred Loans and the Related Property that
it may reasonably deem necessary or appropriate for the benefit of the Issuer
and the Noteholders with respect to this Agreement and the rights and duties of
the parties hereto and the respective interests of the Issuer and the
Noteholders hereunder.
Section 4.21. The Servicer, the Backup Servicer and the
Collateral Custodian Not to Resign.
None of the Servicer, the Backup Servicer or the Collateral
Custodian shall resign from the obligations and duties hereby imposed on such
Person except upon such Person's determination that (i) the performance of its
duties hereunder is or becomes impermissible under Applicable Law and (ii) there
is no reasonable action that such Person could take to make the performance of
its duties hereunder permissible under Applicable Law. Any such determination
permitting the resignation of the Servicer, the Backup Servicer, the Collateral
Custodian shall be evidenced as to clause (i) above by an Opinion of Counsel to
such effect delivered to the Issuer and each Noteholder. No such resignation
shall become effective until a successor shall have assumed the responsibilities
and obligations of such Person in according with the terms of this Agreement.
Section 4.22. Access to Certain Documentation and Information
Regarding the Transferred Loans.
The Issuer, the Servicer or the Collateral Custodian, as
applicable, shall provide to the Indenture Trustee, Backup Servicer, the
Administrative Agent and the Noteholders access to the Loan Documents and all
other documentation regarding the Transferred Loans included as part of the
Collateral and the Related Property in such cases where the Indenture Trustee
and the Administrative Agent is required in connection with the enforcement of
the rights or interests of the Administrative Agent or the other Noteholders, or
by applicable statutes or regulations, to review such documentation, such access
being afforded without charge but only (i) upon two Business Days' prior written
request, (ii) during normal business hours and (iii) subject to the Servicer's
and the Collateral Custodian's normal security and confidentiality procedures.
From and after the Closing Date and periodically thereafter at the discretion of
the Administrative Agent or the applicable Noteholder, the Administrative Agent,
such Noteholder or its agents may review the Issuer's and the Servicer's
collection and administration of the Transferred Loans in order to assess
compliance by the Servicer with the Servicer's written policies and procedures,
as well as with this Agreement and may conduct an audit of the Transferred
Loans, Loan Documents and Records in conjunction with such a review. Such review
shall be reasonable in scope and shall be completed in a reasonable period of
time. The Issuer shall bear the cost of such audits.
79
Section 4.23. Identification of Records.
The Servicer shall clearly and unambiguously identify each
Transferred Loan that is part of the Collateral and the Related Property in its
computer or other records to reflect that the interest in such Transferred Loans
and Related Property have been transferred to and are owned by the Issuer and
that the Indenture Trustee, on behalf of the Noteholders, has the interest
therein Granted by Issuer pursuant to the Indenture.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account, Principal Collections
Account and Distribution Account.
(a) (1) Establishment of Collection Account. The Servicer, for
the benefit of the Indenture Trustee and the Noteholders, shall cause to be
established and maintained one Collection Account (the "Collection Account"),
which shall be a separate Eligible Account entitled "Hercules Funding Trust I
Collection Account, Hercules Technology Growth Capital, Inc., as Servicer, for
the benefit of the Indenture Trustee and the holders of the Asset Backed Notes."
Funds in the Collection Account shall be invested in accordance with Section
5.03(b).
(2) Establishment of Principal Collections Account. The
Servicer, for the benefit of the Indenture Trustee and the Noteholders, shall
cause to be established and maintained one Principal Collections Account (the
"Principal Collections Account"), which shall be a separate Eligible Account
entitled "Hercules Funding Trust I Principal Collections Account, Hercules
Technology Growth Capital, Inc., as Servicer, for the benefit of the Indenture
Trustee and the holders of the Asset Backed Notes." Funds in the Principal
Collections Account shall be invested in accordance with Section 5.03(b).
(3) Establishment of Distribution Account. The Indenture
Trustee, for the benefit of the Noteholders, shall cause to be established and
maintained, one or more Distribution Accounts (collectively, the "Distribution
Account"), which shall be a separate Eligible Account, entitled "Hercules
Funding Trust I Distribution Account." Funds in the Distribution Account shall
remain uninvested.
(4) Notice of Change in Trust Accounts. The Servicer will
deliver prior written notice to the Indenture Trustee of any change in the
location of any Trust Account, which notice shall include the name of the
Designated Depository Institution to which any such account has been
transferred, complete wire transfer instructions for such account, and such
notice shall be deemed a representation and warranty by the Servicer that each
such new account is an Eligible Account.
80
(b) Deposits to Collection Account. The Servicer shall deposit
or cause to be deposited (without duplication):
(1) all Collections on or in respect of each Transferred Loan
collected on or after the related Transfer Date (to the extent received by the
Servicer, including, without limitation, amounts received in or credited to
account number 4720029656 maintained at Union Bank of California, N.A.) within
two Business Days after receipt thereof;
(2) in the event of an early termination of this Agreement,
the Termination Price in accordance with Section 10.02; and
(3) any amount required to be remitted by Hercules pursuant to
Section 11.01 of the Note Purchase Agreement within one (1) Business Day after
receipt of notice thereof.
The Servicer agrees that it will cause the Originator,
Depositor or other appropriate Person paying such amounts, as the case may be,
to remit directly to the Collection Account, within two Business Days after
receipt thereof, all amounts referenced in clauses (1) and (2) to the extent
such amounts are received by such Person.
(c) Withdrawals From Collection Account; Deposits to the
Distribution Account.
(1) Withdrawals From Collection Account -- Reimbursement
Items. The Servicer shall periodically but in any event on each Payment Date,
make the following withdrawals from the Collection Account prior to any other
withdrawals, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error,
(ii) to withdraw amounts and remit to the Indenture Trustee
for deposit in the Distribution Account for payments required pursuant to
Section 5.01(c)(4) and Section 5.01(c)(5); and
(iii) [Reserved].
(iv) to clear and terminate the Collection Account in
connection with the termination of this Agreement.
(2) [Reserved].
(3) [Reserved].
(4) Withdrawals From Distribution Account During the Revolving
Period -- Payment Dates. On each Payment Date occurring during the Revolving
Period, to the extent funds are available in the Distribution Account, the
Paying Agent (based on the information provided by the Servicer contained in the
Servicer Report for such Payment Date) shall make withdrawals therefrom for
application in the following order of priority:
81
(i) the following amounts in the following
order: (a) pro rata, based on the amounts
owed to such Persons under this clause (a),
to the Hedge Counterparties, any amounts for
the current and any prior Payment Dates
owing to the Hedge Counterparties under
Hedging Agreements (other than Hedge
Breakage Costs), together with interest
accrued thereon; (b) to the Indenture
Trustee, an amount equal to the Indenture
Trustee Fee and all unpaid Indenture Trustee
Fees from prior Payment Dates and all
amounts owing to the Indenture Trustee
pursuant to Section 6.07 of the Indenture;
(c) to the Servicer, to the extent of
Collections received with respect to the
specific Transferred Loans for which such
Servicer Advances were made, an amount equal
to any Unreimbursed Servicer Advances on
such Transferred Loans, and, if Hercules is
not the Servicer, an amount equal to the
Servicing Fee; (d) upon the appointment of
the Back-up Servicer as successor servicer
hereunder, the Successor Engagement Fee and
to the reimbursement or payment of any
expenses incurred by the Indenture Trustee
or Backup Servicer in connection with the
appointment of a successor Servicer pursuant
to Section 9.02; (e) to the Backup Servicer,
to the extent not paid by the Servicer, an
amount equal to the Backup Servicer Fee and
any unpaid Backup Servicer Expenses; (f) to
the Collateral Custodian, an amount equal to
the Collateral Custodian Fee; and (g) on the
Payment Date preceding each anniversary of
the Closing Date, to the Owner Trustee, an
amount equal to the Owner Trustee Fee;
(ii) to the holders of the Notes pro rata, the
sum of the Interest Payment Amount with
respect to each holders' Notes for such
Payment Date and the Interest Carry-Forward
Amount;
(iii) to the Noteholders, pro rata based on the
proportion of the Note Principal Balance
held by each Noteholder, the Nonutilization
Fee for such Payment Date, together with any
Nonutilization Fees remaining unpaid from
any prior Payment Dates;
(iv) to the holders of the Notes pro rata, the
amount required to cause the Availability to
exceed zero as of such Payment Date;
provided that if (a) a Trigger Event shall
have occurred and be continuing or (b) an
Event of Default shall have occurred and be
continuing, the holders of the Notes shall
receive, all remaining amounts on deposit in
the Distribution Account, until the Advances
Outstanding and all other amounts due to the
Noteholders are reduced to zero;
82
(v) to the Servicer, an amount equal to all
Unreimbursed Servicer Advances, to the
extent not reimbursed pursuant to Section
5.01(c)(4)(i) and, if Hercules is the
Servicer, to the Servicer, an amount equal
to the Servicing Fee and all unpaid
Servicing Fee from prior Payment Dates;
(vi) to the appropriate Person, amounts in
respect of Issuer/Depositor Indemnities (as
defined in the Trust Agreement) until such
amounts are paid in full;
(vii) to the Owner Trustee, all amounts owing to
the Owner Trustee pursuant to the Trust
Agreement and the Owner Trustee Fee Letter
and not otherwise paid, other than the Owner
Trustee Fee if the applicable Payment Date
is not the Payment Date described in Section
5.01(c)(4)(i)(g);
(viii) pro rata, to each Group Noteholder (as
identified in the Note Purchase Agreement),
all amounts due and owing pursuant to
Article X of the Note Purchase Agreement;
(ix) pro rata, based on the amounts owed to such
Persons under this clause (viii), to the
Hedge Counterparties, any unpaid Hedge
Breakage Costs, together with interest
accrued thereon
(x) to any Successor Servicer, any accrued and
unpaid Transition Costs; and
(xi) to the Paying Agent, for distribution to the
holders of the Trust Certificates, in
accordance with Section 5.2(b) of the Trust
Agreement, all amounts remaining in the
Distribution Account.
Pro rata payments to the Noteholders shall be paid in
accordance with Section 5.02.
(5) Withdrawals From Distribution Account After the Revolving
Period. Notwithstanding anything herein to the contrary, on each Payment Date
after the Revolving Period, to the extent funds are available in the
Distribution Account, the Paying Agent (based on the information provided by the
Servicer contained in the Servicer Report for such Payment Date) shall make
withdrawals therefrom for application in the following order of priority:
(i) the following amounts in the following
order: (a) pro rata, based on the amounts
owed to such Persons under this clause (a),
to the Hedge Counterparties, any amounts for
the current and any prior Payment Dates
owing to the Hedge Counterparties under
Hedging Agreements (other than Hedge
Breakage Costs), together with interest
accrued thereon; (b) the Indenture Trustee,
an amount equal to the Indenture Trustee Fee
and all unpaid Indenture Trustee Fees from
prior Payment Dates and all amounts owing to
the Indenture Trustee pursuant to Section
6.07 of the Indenture; (c) to the Servicer,
to the extent of Collections received with
respect to the specific Transferred Loans
for which such Servicer Advances were made,
an amount equal to any Unreimbursed Servicer
Advances on such Transferred Loans, and, if
Hercules is not the Servicer, an amount
equal to the Servicing Fee; (d) upon the
appointment of the Back-up Servicer as
successor servicer hereunder, the Successor
Engagement Fee and the reimbursement or
payment of any expenses incurred by the
Indenture Trustee and the Backup Servicer in
connection with the appointment of a
successor Servicer pursuant to Section 9.02;
(e) to the Backup Servicer, to the extent
not paid by the Servicer, an amount equal to
the Backup Servicer Fee and any unpaid
Backup Servicer Expenses; (f) to the
Collateral Custodian, an amount equal to the
Collateral Custodian Fee; and (g) on the
Payment Date preceding each anniversary of
the Closing Date, to the Owner Trustee, an
amount equal to the Owner Trustee Fee;
83
(ii) to the holders of the Notes pro rata, the
sum of the Interest Payment Amount with
respect to each holders' Notes for such
Payment Date and the Interest Carry-Forward
Amount;
(iii) to the holders of the Notes pro rata, until
the Advances Outstanding and all other
amounts due to the Noteholders are reduced
to zero;
(iv) to the Servicer, an amount equal to all
Unreimbursed Servicer Advances, to the
extent not reimbursed pursuant to Section
5.01(c)(5)(i) and, if Hercules is the
Servicer, to the Servicer, an amount equal
to the Servicing Fee and all unpaid
Servicing Fee from prior Payment Dates;
(v) to the appropriate Person, amounts in
respect of Issuer/Depositor Indemnities (as
defined in the Trust Agreement) until such
amounts are paid in full;
(vi) to the Owner Trustee, all amounts owing to
the Owner Trustee pursuant to the Trust
Agreement and the Owner Trustee Fee Letter
and not otherwise paid, other than the Owner
Trustee Fee if the applicable Payment Date
is not the Payment Date described in Section
5.01(c)(5)(i)(g)
(vii) pro rata, to each Group Noteholder (as
identified in the Note Purchase Agreement),
all amounts due and owing pursuant to
Article X of the Note Purchase Agreement;
84
(viii) pro rata, based on the amounts owed to such
Persons under this clause (viii), to the
Hedge Counterparties, any unpaid Hedge
Breakage Costs, together with interest
accrued thereon;
(ix) to any Successor Servicer, any accrued and
unpaid Transition Costs; and
(x) to the Paying Agent, for distribution to the
holders of the Trust Certificates, in
accordance with Section 5.2(b) of the Trust
Agreement, all amounts remaining in the
Distribution Account.
Pro rata payments to the Noteholders shall be paid in
accordance with Section 5.02.
Notwithstanding that the Notes have been paid in full, the
Paying Agent and the Servicer shall continue to maintain the Distribution
Account, the Collection Account and the Principal Collections Account hereunder
until this Agreement has been terminated.
Section 5.02. Payments to Securityholders.
(a) All distributions made on the Notes on each Payment Date
or pursuant to Section 5.04(b) of the Indenture will be made on a pro rata basis
among the Noteholders of record of the Notes on the related Record Date based on
the Percentage Interest represented by their respective Notes, without
preference or priority of any kind, and, except as otherwise provided in the
next succeeding sentence, shall be made by wire transfer of immediately
available funds to the account such Noteholder shall have so notified the Paying
Agent five Business Days prior to the related Record Date, and otherwise by
check mailed to the address of such Noteholder appearing in the Notes Register.
The final distribution on each Note will be made in like manner, but only upon
presentment and surrender of such Note at the location specified in the notice
to Noteholders of such final distribution.
(b) All distributions made on the Trust Certificates on each
Payment Date or pursuant to Section 5.04(b) of the Indenture will be made in
accordance with the Percentage Interest among the holders of the Trust
Certificates of record on the related Record Date based on their Percentage
Interests on the date of distribution, without preference or priority of any
kind, and, except as otherwise provided in the next succeeding sentence, shall
be made by wire transfer of immediately available funds to the account of each
such holder, if such holder shall own of record a Trust Certificate in an
original denomination aggregating at least 25% of the Percentage Interests and
shall have so notified the Paying Agent and the Indenture Trustee five Business
Days prior to the related Record Date, and otherwise by check mailed to the
address of such Certificateholder appearing in the Certificate Register. The
final distribution on each Trust Certificate will be made in like manner, but
only upon presentment and surrender of such Trust Certificate at the location
specified in the notice to holders of the Trust Certificates of such final
distribution. Any amount distributed to the holders of the Trust Certificates on
any Payment Date shall not be subject to any claim or interest of the
Noteholders.
Section 5.03. Trust Accounts; Trust Account Property.
85
(a) Control of Trust Accounts. Each of the Trust Accounts
established hereunder has been pledged by the Issuer to the Indenture Trustee
under the Indenture and shall be subject to the Lien of the Indenture. Amounts
distributed from each Trust Account in accordance with the terms of this
Agreement shall be released for the benefit of the Securityholders from the
Collateral upon such distribution thereunder or hereunder. The Indenture Trustee
on behalf of the Noteholders shall possess all right, title and interest in and
to all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof (including all income thereon), and all such funds,
investments, proceeds and income shall be part of the Trust Account Property and
the Collateral. If, at any time, any Trust Account ceases to be an Eligible
Account, the Servicer shall, within ten Business Days (i) establish a new Trust
Account as an Eligible Account, (ii) terminate the ineligible Trust Account, and
(iii) transfer any cash and investments from such ineligible Trust Account to
such new Trust Account.
With respect to the Trust Accounts, the Issuer, the Indenture
Trustee, the Depositor and the Originator and Servicer agree that the
Distribution Account, the Collection Account and the Principal Collections
Account shall be subject to the sole and exclusive dominion, custody and control
of the Paying Agent on behalf of the Indenture Trustee, for the benefit of the
Noteholders, and, except as expressly provided in this Agreement with respect to
the Servicer's rights to withdraw funds from the Trust Accounts but subject in
all events to Section 4.04(d), the Indenture Trustee and the Paying Agent on
behalf of the Indenture Trustee, as applicable, shall have sole signature and
withdrawal authority with respect thereto.
(b) (1) Investment of Funds. Funds held in the Collection
Account and the Principal Collections Account may be invested (to the extent
practicable and consistent with any requirements of the Code) in Permitted
Investments by or at the direction of the Servicer. In any case, funds in the
Collection Account and the Principal Collections Account must be available for
withdrawal without penalty, and any Permitted Investments must mature or
otherwise be available for withdrawal, one Business Days prior to the next
Payment Date and shall not be sold or disposed of prior to its maturity subject
to Subsection (b)(2) of this Section. All interest and any other investment
earnings on amounts or investments held in the Collection Account and the
Principal Collections Account shall be retained by the Servicer.
(2) Insufficiency and Losses in Trust Accounts. If any amounts
are needed for disbursement from the Collection Account or the Principal
Collections Account and sufficient uninvested funds are not available to make
such disbursement, the Servicer shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in the Collection Account and the
Principal Collections Account. The Servicer shall be liable for any investment
loss or other charge resulting therefrom.
If any losses are realized in connection with any investment
in the Collection Account or the Principal Collections Account pursuant to this
Agreement, then the Servicer shall deposit the amount of such losses (to the
extent not offset by income from other investments in the Collection Account or
the Principal Collections Account) into the Collection Account or the Principal
Collections Account promptly upon the realization of such loss.
86
(c) Subject to Section 6.01 of the Indenture, the Indenture
Trustee shall not in any way be held liable by reason of any insufficiency in
any Trust Account held by the Indenture Trustee resulting from any investment
loss on any Permitted Investment included therein.
(d) With respect to the Trust Account Property, each of the
Servicer and the Indenture Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts, subject to the last
sentence of Subsection (a) of this Section 5.03; and each such Eligible Account
shall be subject to the sole and exclusive dominion, custody and control of the
Paying Agent on behalf of the Indenture Trustee; and, without limitation on the
foregoing, the Paying Agent on behalf of the Indenture Trustee shall have sole
signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee or the Paying Agent on
behalf of the Indenture Trustee in accordance with paragraphs (a) and (b) of the
definition of "Delivery" in Section 1.01 and shall be held, pending maturity or
disposition, solely by the Paying Agent on behalf of the Indenture Trustee or
the Indenture Trustee or a securities intermediary (as such term is defined in
Section 8-102(a)(14) of the UCC) acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (c) of the
definition of "Delivery" in Section 1.01 and shall be maintained by the Paying
Agent on behalf of the Indenture Trustee or the Indenture Trustee, pending
maturity or disposition, through continued book-entry registration of such Trust
Account Property as described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause (3)
above shall be delivered to the Paying Agent on behalf of the Indenture Trustee
or the Indenture Trustee in accordance with paragraph (d) of the definition of
"Delivery" in Section 1.01 and shall be maintained by the Paying Agent on behalf
of the Indenture Trustee or the Indenture Trustee, pending maturity or
disposition, through continued registration of the Paying Agent on behalf of the
Indenture Trustee or the Indenture Trustee's (or its nominee's) ownership of
such security.
ARTICLE VI
SPECIFICATION OF TAX MATTERS
Section 6.01. Specification of Certain Tax Matters.
The Paying Agent shall comply with all requirements of the
Code and applicable state and local law with respect to the withholding from any
distributions made to any Securityholder of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting requirements in
connection therewith, giving due effect to any applicable exemptions from such
withholding and effective certifications or forms provided by the recipient. Any
amounts withheld pursuant to this Section 6.02 shall be deemed to have been
distributed to the Securityholders, as the case may be, for all purposes of this
Agreement. Neither the Paying Agent nor the Indenture Trustee shall have any
responsibility for preparing or filing any tax returns.
87
ARTICLE VII
COVENANTS
Section 7.01. Financial Covenants of Hercules.
(a) At all times during the term of this Agreement, Hercules
shall maintain a minimum consolidated Tangible Net Worth of $90,000,000 plus
seventy-five (75%) percent of any new equity and subordinated debt issued after
June 13, 2005.
(b) Hercules may not exceed a maximum leverage ratio (the
ratio of total consolidated liabilities (exclusive of non-recourse debt but
including, without limitation, any convertible debt), determined in accordance
with GAAP, to its consolidated Tangible Net Worth) of 3.0:1, but in any event
not greater than permitted by the applicable requirements of the Investment
Company Act and any applicable exemption thereunder, as of any date of
determination.
Section 7.02. Hedge Covenants.
(a) The Issuer shall, prior to entering into any Hedge
Transaction, provide each Purchaser written notice of its intent to do so and
shall deliver a summary of the material terms of such Hedge Transaction with
such notice.
(b) The Originator, the Servicer and the Depositor hereby
acknowledge that the Issuer will Grant to the Indenture Trustee pursuant to the
Indenture, all right, title and interest of the Issuer in any Hedging Agreement,
Hedge Transaction, and all present and future amounts payable by a Hedge
Counterparty to the Issuer under or in connection with the any such Hedging
Agreement and Hedge Transaction(s) with the applicable Hedge Counterparty (the
"Hedge Collateral"), and the Issuer hereby Grants a security interest to the
Indenture Trustee, on behalf of the Noteholders, in any Hedge Collateral. The
Issuer acknowledges that, as a result of that assignment, the Issuer may not,
without the prior written consent of the Majority Noteholders, exercise any
rights under any Hedging Agreement or Hedge Transaction, except for Issuer's
right under any Hedging Agreement to enter into Hedge Transactions in order to
meet the Issuer's obligations under Section 7.02(a) hereof. Nothing herein shall
have the effect of releasing the Issuer from any of its obligations under any
Hedging Agreement or any Hedge Transaction, nor be construed as requiring the
consent of the Indenture Trustee or any Noteholder for the performance by Issuer
of any such obligations.
(c) Any Hedge Transaction shall be entered into with a Hedge
Counterparty and governed by a Hedging Agreement. The Issuer shall, promptly
upon execution thereof, provide to the Indenture Trustee and each Purchaser, a
copy of each Hedging Agreement entered into in connection with this Agreement.
88
Section 7.03. Covenants Regarding Purchased Assets.
(a) Protect Collateral. Each of the Depositor and the
Originator agrees that it shall not sell, assign, transfer, pledge or encumber
in any other manner the Purchased Assets (except for the assignment and pledge
to the Issuer hereunder and the Grant of a security interest in the Collateral
to the Indenture Trustee under the Indenture). Each of the Depositor and the
Originator shall warrant and defend the right and title herein granted unto the
Issuer in and to the Purchased Assets (and all right, title and interest
represented by the Collateral) against the claims and demands of all Persons
whomsoever.
(b) Further Assurances. The Depositor and the Originator
shall, at their own expense, promptly execute and deliver all further
instruments (including financing statements, stock powers, other powers and
other instruments of transfer or control) requested by the Noteholders to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Issuer and/or the Indenture Trustee, as applicable, to
exercise and enforce its rights and remedies hereunder with respect to the
Purchased Assets or under the Indenture with respect to any Collateral,
including the rights and remedies under Article V of the Indenture. In addition,
the Depositor and the Originator shall, at their own expense, promptly take all
further action that any Noteholder may request in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Issuer and/or the Indenture Trustee, as applicable, to exercise and enforce its
rights and remedies hereunder with respect to the Purchased Assets or under the
Indenture with respect to any Collateral, including the rights and remedies
under Article V of the Indenture.
(c) Collections Held in Trust. If Depositor or the Originator
receives any Collections, each of the Depositor and the Originator, as
applicable, shall hold such Collections separate and apart from its other
property in trust for the Issuer and shall, within two Business Days after
receipt thereof, deposit such Collections to the Collection Account.
(d) Consents. The Depositor and the Originator shall execute
and deliver to the Issuer and/or the Indenture Trustee, as applicable, upon
request and at the time the Issuer and/or the Indenture Trustee, as applicable,
exercises its remedies, any document deemed necessary by the Issuer and/or the
Indenture Trustee, as applicable, in order to evidence the Depositor and the
Originator's consent to the Issuer and/or the Indenture Trustee exercising their
respective remedies hereunder with respect to the Purchased Assets or under the
Indenture with respect to any Collateral, including the rights and remedies
under Article V of the Indenture.
ARTICLE VIII
THE SERVICER AND THE COLLATERAL CUSTODIAN
Section 8.01. Indemnification; Third Party Claims.
89
(a) The Servicer shall indemnify the Originator, the Owner
Trustee, the Issuer, the Paying Agent, the Depositor, the Indenture Trustee, the
Collateral Custodian, the Backup Servicer and the Noteholders, their respective
officers, directors, employees, agents and "control persons," as such term is
used under the Securities Act and under the Exchange Act (each a "Servicer
Indemnified Party") and hold harmless each of them against any and all claims,
losses, damages, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, a
breach of any of the Servicer's representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the
Servicer to perform its duties and service the Transferred Loans in compliance
with the terms of this Agreement except to the extent such loss arises out of
such Servicer Indemnified Party's fraud, gross negligence or willful misconduct;
provided, however, that if the Servicer is not liable pursuant to the provisions
of Section 8.01(b) hereof for its failure to perform its duties and service the
Transferred Loans in compliance with the terms of this Agreement, then the
provisions of this Section 8.01 shall have no force and effect with respect to
such failure; provided, further that (i) no successor Servicer shall be liable
for the actions or omissions of a predecessor Servicer; and (ii) the Servicer
shall not be so required to indemnify a Servicer Indemnified Party or to
otherwise be liable to an Servicer Indemnified Party for any losses in respect
of the non-performance of the Transferred Loans, the creditworthiness of the
Obligors with respect to the Transferred Loans, changes in the market value of
the Transferred Loans or other similar investment risks associated with the
Transferred Loans arising from a breach of any representation or warranty set
forth in Section 3.03 hereto if the effect of such indemnity would be to provide
credit recourse to the Originator for the performance of the Transferred Loans.
(b) None of the Depositor or the Servicer or any of their
respective Affiliates, directors, officers, employees or agents shall be under
any liability to the Owner Trustee, the Issuer, the Indenture Trustee or the
Securityholders for any action taken, or for refraining from the taking of any
action, in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Depositor, the
Servicer or any of their respective Affiliates, directors, officers, employees,
agents against the remedies provided herein for the breach of any warranties,
representations or covenants made herein, or against any expense or liability
specifically required to be borne by such party without right of reimbursement
pursuant to the terms hereof, or against any expense or liability which would
otherwise be imposed by reason of misfeasance, bad faith or negligence in the
performance of the respective duties of the Servicer, the Depositor or the
Originator, as the case may be. The Originator, the Depositor, the Servicer and
any of their respective Affiliates, directors, officers, employees, agents may
rely in good faith on any document of any kind which, prima facie, is properly
executed and submitted by any Person respecting any matters arising hereunder.
(c) The Originator agrees to indemnify and hold harmless the
Depositor, the Indenture Trustee and the Noteholders, as the ultimate assignees
from the Depositor (each an "Originator Indemnified Party," together with the
Servicer Indemnified Parties, the "Indemnified Parties"), from and against any
loss, liability, expense, damage, claim or injury arising out of or based on (i)
any breach of any representation, warranty or covenant of the Originator, the
Servicer or their Affiliates, in any Basic Document, including, without
limitation, by reason of any acts, omissions, or alleged acts or omissions
arising out of activities of the Originator, the Servicer or their Affiliates,
and (ii) any untrue statement by the Originator, the Servicer or its Affiliates
of any material fact, including, without limitation, any Officer's Certificate,
statement, report or other document or information prepared by any such Person
and furnished or to be furnished by it pursuant to or in connection with the
transactions contemplated thereby and not corrected prior to completion of the
relevant transaction including, without limitation, such written information as
may have been and may be furnished in connection with any due diligence
investigation with respect to the Transferred Loans or any such Person's
business, operations or financial condition, including reasonable attorneys'
fees and other costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; provided that the Originator
shall not indemnify an Originator Indemnified Party to the extent such loss,
liability, expense, damage or injury is due to either an Originator Indemnified
Party's willful misfeasance, bad faith or gross negligence or by reason of an
Originator Indemnified Party's reckless disregard of its obligations hereunder;
provided, further, that the Originator shall not be so required to indemnify an
Originator Indemnified Party or to otherwise be liable to an Originator
Indemnified Party for any losses in respect of the non-performance of the
Transferred Loans, the creditworthiness of the Obligors with respect to the
Transferred Loans, changes in the market value of the Transferred Loans or other
similar investment risks associated with the Transferred Loans arising from a
breach of any representation or warranty set forth in Section 3.03 hereto if the
effect of such indemnity would be to provide credit recourse to the Originator
for the performance of the Transferred Loans. The provisions of this indemnity
shall run directly to and be enforceable by an Originator Indemnified Party
subject to the limitations hereof.
90
(d) With respect to a claim subject to indemnity hereunder
made by any Person against an Indemnified Party (a "Third Party Claim"), such
Indemnified Party shall notify the related indemnifying parties (each an
"Indemnifying Party") in writing of the Third Party Claim within a reasonable
time after receipt by such Indemnified Party of written notice of the Third
Party Claim unless the Indemnifying Parties shall have previously obtained
actual knowledge thereof. Thereafter, the Indemnified Party shall deliver to the
Indemnifying Parties, within a reasonable time after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim. No failure
to give such notice or deliver such documents shall effect the rights to
indemnity hereunder. Each Indemnifying Party shall promptly notify the Indenture
Trustee and the Indemnified Party (if other than the Indenture Trustee) of any
claim of which it has been notified and shall promptly notify the Indenture
Trustee and the Indemnified Party (if applicable) of its intended course of
action with respect to any claim.
(e) If a Third Party Claim is made against an Indemnified
Party, while maintaining control over its own defense, the Indemnified Party
shall cooperate and consult fully with the Indemnifying Party in preparing such
defense, and the Indemnified Party may defend the same in such manner as it may
deem appropriate, including settling such claim or litigation after giving
notice to the Indemnifying Party of such terms and the Indemnifying Party will
promptly reimburse the Indemnified Party upon written request; provided,
however, that the Indemnified Party may not settle any claim or litigation
without the consent of the Indemnifying Party; provided, further, that the
Indemnifying Party shall have the right to reject the selection of counsel by
the Indemnified Party if the Indemnifying Party reasonably determines that such
counsel is inappropriate in light of the nature of the claim or litigation and
shall have the right to assume the defense of such claim or litigation if the
Indemnifying Party determines that the manner of defense of such claim or
litigation is unreasonable.
91
Section 8.02. Relationship of Servicer to Issuer, Owner
Trustee and Indenture Trustee.
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Issuer, the Owner Trustee and
the Indenture Trustee under this Agreement is intended by the parties hereto to
be that of an independent contractor and not of a joint venturer, agent or
partner of the Issuer, the Owner Trustee or the Indenture Trustee.
Section 8.03. Servicer May Own Securities.
Each of the Servicer and any Affiliate of the Servicer may in
its individual or any other capacity become the owner or pledgee of Securities
with the same rights as it would have if it were not the Servicer or an
Affiliate thereof except as otherwise specifically provided herein; provided,
however, that at any time that Hercules or any of its Affiliates is the
Servicer, neither the Servicer nor any of its Affiliates (other than an
Affiliate which is a corporation whose purpose is limited to holding securities
and related activities and which cannot incur recourse debt) may be a
Noteholder. Securities so owned by or pledged to the Servicer or such Affiliate
shall have an equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among all of the
Securities; provided, that any Securities owned by the Servicer or any Affiliate
thereof, during the time such Securities are owned by them, shall be without
voting rights for any purpose set forth in this Agreement or the Indenture
unless the Servicer or such Affiliate owns all outstanding Securities of the
related class. The Servicer shall notify the Indenture Trustee promptly after it
or any of its Affiliates becomes the owner or pledgee of a Security.
Section 8.04. Indemnification of the Indenture Trustee, the
Owner Trustee and Administrative Agent.
Hercules agrees to indemnify the Indenture Trustee, Collateral
Custodian, Backup Servicer, and their respective employees, officers, directors
and agents, and reimburse its reasonable out-of-pocket expenses in accordance
with Section 6.07 of the Indenture as if it was a signatory thereto. Hercules
agrees to indemnify the Purchasers in accordance with Section 10.01 of the Note
Purchase Agreement as if it were a signatory thereto. Hercules agrees to
indemnify the Owner Trustee in accordance with Section 8.2 of the Trust
Agreement as if it were a signatory thereto. This Section 8.04 shall survive the
termination of this Agreement.
ARTICLE IX
SERVICER DEFAULT
Section 9.01. Servicer Default.
(a) The occurrence of any of the following events shall
constitute a "Servicer Default":
(1) any failure by the Servicer to make any payment, transfer
or deposit or to give instructions or notice to the Issuer, the Indenture
Trustee or any Purchaser or Noteholder as required by this Agreement, or to
deliver any Servicer Report or other report required hereunder on or before the
date occurring two Business Days after the date such payment, transfer, deposit,
instruction of notice or report is required to be made or given, as the case may
be, under the terms of this Agreement;
92
(2) any failure on the part of the Servicer duly to observe or
perform in any material respect any of the other covenants or agreements on the
part of the Servicer contained in any Basic Document to which it is a party,
which continues unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by any other party hereto or thereto or to the
Servicer (with copy to each other party hereto), by Holders of 25% of the
Percentage Interests of the Notes or the Trust Certificates;
(3) any breach on the part of the Servicer of any
representation or warranty contained in any Basic Document to which it is a
party that has a material adverse affect on the interests of any of the parties
hereto or thereto or any Securityholder and which continues unremedied for a
period of 30 days after the date on which notice of such breach, requiring the
same to be remedied, shall have been given to the Servicer by any other party
hereto or to the Servicer (with copy to each other party hereto) by any
Purchaser or Holders of 25% of the Percentage Interests of the Notes;
(4) a Bankruptcy Event shall occur with respect to the
Servicer;
(5) so long as the Servicer or the Originator is an Affiliate
of either of the Depositor or the Issuer, any "event of default" by the Servicer
or the Originator occurs under any of the Basic Documents;
(6) Hercules fails to comply with the financial covenants set
forth in Section 7.01;
(7) the Servicer shall fail in any material respect to service
the Transferred Loans in accordance with the Credit and Collection Policy;
(8) the Servicer agrees to or otherwise permits (x) any change
in the Credit and Collection Policy which would materially and adversely affect
or impair the collectibility of any Transferred Loan, or (y) any material change
in the Credit and Collection Policy without the prior written consent of the
Majority Noteholder;
(9) any financial or asset information reasonably requested by
any Noteholder as provided herein is not provided as requested within five
Business Days of the receipt by the Servicer of such request;
(10) the rendering against the Servicer of a final judgment,
decree or order for the payment of money in excess of $7,000,000 (individually
or in the aggregate) and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 61 or more consecutive days without
a stay of execution;
93
(11) the failure of the Servicer to make any payment due with
respect to aggregate recourse debt or other obligations with an aggregate
principal amount exceeding $5,000,000 or the occurrence of any event or
condition that would permit acceleration of such recourse debt or other
obligations if such event or condition has not been waived;
(12) the Servicer fails to maintain a minimum Net Worth of at
least $90,000,000 plus seventy-five (75%) percent of any new equity and
subordinated debt issued after June 13, 2005;
(13) any Change-in-Control of the Servicer is made without the
prior written consent of the Issuer and the Indenture Trustee;
(14) the Servicer shall fail to satisfy the RIC/BDC
Requirements or otherwise fail to maintain its status as a business development
company or as a registered investment company under the 1940 Act;
(15) any change in the management of the Servicer (whether by
resignation, termination, disability, death or lack of day to day management)
relating to either of Manuel A. Henriquez or H. Scott Harvey, or any failure by
either of the aforementioned Persons to provide active and material
participation in the Servicer's daily activities including, but not limited to,
general management, underwriting, and the credit approval process and credit
monitoring activities, which no later than 30 days after the occurrence of any
event specified above is not (x) cured by the Servicer hiring a reputable,
experienced individual satisfactory to the Majority Noteholders to replace the
Person who is no longer actively participating in the management of the Servicer
or (y) waived in writing by the Majority Noteholders;
(16) as of any date prior to September 1, 2005, Citigroup
Global Markets Realty Corp., as initial noteholder, in its sole discretion, is
not satisfied with the results of its July 2005 investigations into the
respective backgrounds of any of Manuel A. Henriquez, Glen C. Howard, H. Scott
Harvey, Dave Lund, Samir Bhaumik, Kathleen Conte or Roy Y. Liu; or
(17) the Servicer shall have failed to deliver the Required
Opinions as of the first Borrowing Date after the Amendment Date.
(b) Upon the occurrence of (i) an Event of Default, (ii) a
Trigger Event or (iii) any event, condition or circumstance shall occur or exist
as shall have a Material Adverse Effect on the Servicer, the Indenture Trustee
or any Purchaser, by notice in writing to the Servicer (with a copy to the
Backup Servicer and the Collateral Custodian) may, in addition to whatever
rights such Person may have at law or in equity to damages, including injunctive
relief and specific performance, on thirty days' notice, terminate all the
rights and obligations of the Servicer under this Agreement and in and to the
Transferred Loans and the proceeds thereof, as servicer under this Agreement.
Within a commercially reasonable time following receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Transferred Loans or otherwise, shall, subject to
Section 9.02, pass to and be vested in a successor servicer, and the successor
servicer is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and do or cause to be done all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, including, but
not limited to, the transfer and endorsement or assignment of the Transferred
Loans and related documents. The Servicer agrees to cooperate with the successor
servicer in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the successor
servicer for administration by it of all amounts which shall at the time be
credited by the Servicer to the Collection Account or the Principal Collections
Account or thereafter received with respect to the Purchased Assets.
94
Section 9.02. Appointment of Successor.
(a) On and after the date the Servicer receives a notice of
termination pursuant to Section 9.01 hereof, or the Owner Trustee receives the
resignation of the Servicer evidenced by an Opinion of Counsel or accompanied by
the consents required by Section 8.04 hereof then the Backup Servicer shall
automatically succeed and assume all obligations of the Servicer hereunder, and
all authority and power of the Servicer under this Agreement shall pass to and
be vested in the Backup Servicer. As compensation therefor, the Backup Servicer
shall be entitled to the Servicing Fee and the Successor Engagement Fee in
addition to reimbursement of expenses incurred by the Backup Servicer in
connection with the transition of the servicing obligations ("Transition
Costs"); provided, however, in no event shall such Transition Costs exceed
$50,000.00 in the aggregate. In the event that there is no Backup Servicer or
the Backup Servicer is unable to assume such obligations on such date, the
Indenture Trustee shall submit to Hercules the name of a proposed successor
servicer (the "Successor Servicer"). Hercules shall have the right to reject one
proposed Successor Servicer within two (2) Business Days of the Indenture
Trustee's submission and, upon such rejection Hercules shall have no further
consent rights with respect to the appointment of any Successor Servicer. If
Hercules shall not have rejected such proposed Successor Servicer within such
two (2) Business Day period, the Indenture Trustee shall, as promptly as
possible, appoint such Successor Servicer as servicer hereunder so long as such
proposed Successor Servicer is acceptable to each Noteholder. The Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Indenture Trustee and the Majority Noteholders. In the event
that a Successor Servicer has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Indenture Trustee shall petition a court
of competent jurisdiction to appoint any established financial institution,
having a net worth of not less than United States $50,000,000 and whose regular
business includes the servicing of assets similar to the Transferred Loans, as
the Successor Servicer hereunder.
(b) Upon its appointment, the Backup Servicer or the Successor
Servicer, as applicable, shall be the successor in all respects to the Servicer
with respect to servicing functions under this Agreement and shall be subject to
all the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the Backup Servicer or the
Successor Servicer, as applicable; provided, however, that the Backup Servicer
or Successor Servicer, as applicable, shall have (i) no liability with respect
to any action performed by the terminated Servicer prior to the date that the
Backup Servicer or Successor Servicer, as applicable, becomes the successor to
the Servicer or any claim of a third party based on any alleged action or
inaction of the terminated Servicer, (ii) no obligation to perform any advancing
obligations, if any, of the Servicer unless it elects to in its sole discretion,
(iii) no obligation to pay any taxes required to be paid by the Servicer
(provided that the Backup Servicer or Successor Servicer, as applicable, shall
pay any income taxes for which it is liable), (iv) no obligation to pay any of
the fees and expenses of any other party to the transactions contemplated
hereby, and (v) no liability or obligation with respect to any indemnification
obligations of any prior Servicer, including the original Servicer. The
indemnification obligations of the Backup Servicer or the Successor Servicer, as
applicable, upon becoming a successor servicer, are expressly limited to those
instances of negligence or willful misconduct of the Backup Servicer or
Successor Servicer, as applicable.
95
(c) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of this
Agreement and shall pass to and be vested in the Issuer and, without limitation,
the Issuer is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights. The
Servicer agrees to cooperate with the Seller in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing of the
Transferred Loans.
(d) Upon the Backup Servicer receiving notice that it is
required to serve as the Servicer hereunder pursuant to the foregoing provisions
of this Section 9.02, the Backup Servicer will promptly begin the transition to
its role as Servicer. Notwithstanding the foregoing, the Backup Servicer may, in
its discretion, appoint, or petition a court of competent jurisdiction to
appoint, any established servicing institution as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder. As compensation, any Successor
Servicer so appointed shall be entitled to receive the Servicing Fee, together
with any other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided herein that accrued prior thereto, as
well as Transition Costs. In the event the Backup Servicer is required to
solicit bids as provided herein, the Backup Servicer shall solicit, by public
announcement, bids from banks meeting the qualifications set forth in this
Section 9.02. Such public announcement shall specify that the Successor Servicer
shall be entitled to the full amount of the Servicing Fee as servicing
compensation, together with any other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided herein that
accrued prior thereto, in addition to Transition Costs. Within 30 days after any
such public announcement, the Backup Servicer shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest qualifying bid. The
Backup Servicer shall deduct from any sum received by the Backup Servicer from
the successor to the Servicer in respect of such sale, transfer and assignment
all costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the amount
of any Unreimbursed Servicer Advances. After such deductions, the remainder of
such sum shall be paid by the Backup Servicer to the Servicer at the time of
such sale, transfer and assignment to the Servicer's successor. The Backup
Servicer and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. No
appointment of a successor to the Servicer hereunder shall be effective until
written notice of such proposed appointment shall have been provided by the
Backup Servicer to the Indenture Trustee and the Noteholders and the Backup
Servicer shall have consented thereto. The Backup Servicer shall not resign as
servicer until a Successor Servicer has been appointed and accepted such
appointment. Notwithstanding anything to the contrary contained herein, in no
event shall Lyon Financial or the Indenture Trustee, in any capacity, be liable
for any Servicing Fee or for any differential in the amount of the Servicing Fee
paid hereunder and the amount necessary to induce any Successor Servicer under
this Agreement and the transactions set forth or provided for by this Agreement.
96
If Lyon Financial becomes the Successor Servicer, Lyon
Financial shall be required to service the Transferred Loans in accordance with
the Loan Documents and Accepted Servicing Practices.
Notwithstanding anything contained in this Agreement to the
contrary, Lyon Financial as successor Servicer, and any other successor
servicer, is authorized to accept and rely on all of the accounting, records
(including computer records) and work of the prior Servicer relating to the
Transferred Loans (collectively, the "Predecessor Servicer Work Product")
without any audit or other examination thereof, except where, in the exercise of
reasonable care, such audit or examination would be advisable, and Lyon
Financial shall have no duty, responsibility, obligation or liability for the
acts and omissions of the prior Servicer. If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, "Errors") exist
in any Predecessor Servicer Work Product and such Errors make it materially more
difficult to service or should cause or materially contribute to Lyon Financial
making or continuing any Errors (collectively, "Continued Errors"), Lyon
Financial shall have no duty, responsibility, obligation or liability to perform
servicing or for such Continued Errors; provided, however, that Lyon Financial
agrees to use commercially reasonable efforts to prevent further Continued
Errors. In the event that Lyon Financial becomes aware of Errors or Continued
Errors, Lyon Financial shall, with the prior consent of the Noteholders, use its
best efforts to reconstruct and reconcile such data as is commercially
reasonable to correct such Errors and Continued Errors and to prevent future
Continued Errors. Lyon Financial shall be entitled to recover its costs thereby
expended in accordance with Section 5.01(c)(4)(i) of this Agreement or Section
5.04(b) of the Indenture, as applicable.
Section 9.03. Waiver of Defaults.
The Noteholders may waive any events permitting removal of the
Servicer as servicer pursuant to Section 9.01. Upon any waiver of a past
default, such default shall cease to exist and any Servicer Default or Trigger
Event arising therefrom shall be deemed to have been remedied for every purpose
of this Agreement. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereto except to the extent expressly so
waived.
Section 9.04. Accounting Upon Termination of Servicer.
97
Upon termination of the Servicer under this Article IX, the
Servicer shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Paying Agent, the funds in the Collection Account, the
Principal Collections Account and, if any, the Distribution Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Collateral Custodian all Loan Files and related documents and
statements held by it hereunder and a copy of the Loan Tape;
(c) deliver to its successor, the Indenture Trustee, the
Issuer and the Securityholders a full accounting of all funds, including a
statement showing the Scheduled Payments with respect to the Transferred Loans
collected by it and a statement of monies held in trust by it for payments or
charges with respect to the Transferred Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Transferred Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
ARTICLE X
TERMINATION
Section 10.01. Termination.
(a) This Agreement shall terminate upon either: (A) the later
of (i) the satisfaction and discharge of the Indenture and the provisions
thereof, and payment to the Noteholders of all amounts due and owing in
accordance with the provisions hereof or (ii) the disposition of all funds with
respect to the last Transferred Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable, including, in both
cases, without limitation, indemnification payments payable pursuant to any
Basic Document to the Indenture Trustee, the Owner Trustee, the Issuer, the
Servicer and the Collateral Custodian, written notice of the occurrence of
either of which shall be provided to the Indenture Trustee by the Servicer; or
(B) the mutual consent of the Servicer, the Depositor and all Noteholders in
writing and delivered to the Indenture Trustee by the Servicer.
(b) The Securities shall be subject to an early redemption or
termination at the option of the Servicer and the Noteholders in the manner and
subject to the provisions of Section 10.02 of this Agreement.
(c) Except as provided in this Article X, none of the
Depositor, the Servicer nor any Certificateholder or Noteholder shall be
entitled to revoke or terminate the Issuer.
Section 10.02. Optional Termination.
98
(a) The Servicer may, at its option, effect an early
termination of this Agreement on any Business Day on or after the Clean-up Call
Date. The Servicer shall effect such early termination by providing at least ten
Business Days' notice thereof to the Noteholders, the Indenture Trustee and the
Owner Trustee and paying all amounts due the Indenture Trustee, the Backup
Servicer, the Owner Trustee, the Hedge Counterparties and the Noteholders
hereunder (the "Termination Price").
(b) Any such early termination by the Servicer shall be
accomplished by depositing into the Collection Account on the third Business Day
prior to the Payment Date on which the purchase is to occur the amount of the
Termination Price to be paid. The Termination Price and any amounts then on
deposit in the Collection Account and the Principal Collections Account (other
than any amounts withdrawable pursuant to Section 5.01(c)(1) hereof) shall be
deposited in the Distribution Account and distributed by the Paying Agent in
accordance with the priority of payments set forth in Section 5.01(c)(5) of this
Agreement and Section 9.1 of the Trust Agreement on the next succeeding Payment
Date; and any Collections received with respect to the Purchased Assets
subsequent to the final Payment Date shall belong to the purchaser thereof
(which may be the Originator).
Section 10.03. Notice of Termination Date; Amounts Due and
Payable.
On the Termination Date, the Indenture Trustee shall, by
notice to the Issuer, the Servicer and the Noteholders (in accordance with
Section 11.05 of the Indenture), declare the Termination Date to have occurred
and all amounts due the Noteholders, the Indenture Trustee, the Backup Servicer,
the Owner Trustee, the Hedge Counterparties shall be immediately due and
payable. Such amounts due and payable as of the Termination Date shall be
distributed by the Paying Agent in accordance with the priority of payments set
forth in Section 5.01(c)(5) of this Agreement and Section 9.1 of the Trust
Agreement on the next succeeding Payment Date.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Acts of Securityholders.
Except as otherwise specifically provided herein and except
with respect to Section 11.02(b), whenever action, consent or approval of the
Securityholders is required under this Agreement, such action, consent or
approval shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all Securityholders if the Majority Noteholders agree to take such
action or give such consent or approval.
Section 11.02. Amendment.
(a) This Agreement may be amended from time to time by the
Depositor, the Servicer, the Paying Agent, the Originator, the Collateral
Custodian, the Backup Servicer, the Indenture Trustee and the Issuer by written
agreement with notice thereof to the Securityholders, without the consent of any
of the Securityholders, to cure any error or ambiguity, to correct or supplement
any provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action will
not adversely affect in any material respect the interests of the
Securityholders, as evidenced by an Opinion of Counsel to such effect provided
at the expense of the party requesting such amendment.
99
(b) This Agreement may also be amended from time to time by
the Depositor, the Servicer, the Paying Agent, the Originator, the Collateral
Custodian, the Backup Servicer, the Indenture Trustee and the Issuer by written
agreement, with the prior written consent of the Majority Noteholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Securityholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
the Transferred Loans or distributions which are required to be made on any
Security, without the consent of the holders of 100% of the Securities, (ii)
adversely affect in any material respect the interests of any of the holders of
the Securities in any manner other than as described in clause (i), without the
consent of the holders of 100% of the Securities, or (iii) reduce the percentage
of the Securities the consent of which is required for any such amendment
without the consent of the holders of 100% of the Securities.
(c) It shall not be necessary for the consent of
Securityholders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof.
Prior to the execution of any amendment to this Agreement, the
Issuer and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Issuer and the Indenture Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Issuer's
own rights, duties or immunities of the Issuer or the Indenture Trustee, as the
case may be, under this Agreement.
Any amendment to this Agreement which affects the rights or
duties of the Owner Trustee shall require the prior written consent of the Owner
Trustee.
Section 11.03. Duration of Agreement.
This Agreement shall continue in existence and effect until
terminated as herein provided.
Section 11.04. GOVERNING LAW; JURISDICTION.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO
THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK AND ANY APPELLATE COURT HAVING JURISDICTION TO REVIEW THE JUDGMENTS
THEREOF. EACH OF THE PARTIES HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY
OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
100
Section 11.05. Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if (i) delivered personally,
mailed by overnight mail, certified mail or registered mail, postage prepaid, or
(ii) transmitted by telecopy, upon telephone confirmation of receipt thereof, as
follows: (A) in the case of the Depositor, to Hercules Funding I LLC, 525
University Avenue, Suite 700, Palo Alto, California 94301, Attention: Manuel A.
Henriquez, telecopy number 650-473-9194, with a copy to Scott Harvey, Chief
Legal Officer, Hercules Funding I LLC Capital, Inc., 3702 River Road, Franklin
Park, Illinois 60131, telecopy number: 866-828-6687 or such other addresses or
telecopy or telephone numbers as may hereafter be furnished to the Noteholders
and the other parties hereto in writing by the Depositor; (B) in the case of the
Issuer, to Hercules Funding Trust I, c/o Wilmington Trust Company, as Owner
Trustee, 1100 North Market Street, Wilmington, Delaware 19801, telecopy (302)
636-4140, telephone (302) 651-1000, or such other address or telecopy or
telephone numbers as may hereafter be furnished to the Noteholders and the other
parties hereto in writing by the Issuer; (C) in the case of the Originator, to
Hercules Technology Growth Capital, Inc., 525 University Avenue, Suite 700, Palo
Alto, California 94301, Attention: Manuel A. Henriquez, telecopy number
650-473-9194, with a copy to Scott Harvey, Chief Legal Officer, Hercules
Technology Growth Capital, Inc., 3702 River Road, Franklin Park, Illinois 60131,
telecopy number: 866-828-6687, or such other addresses or telecopy or telephone
numbers as may hereafter be furnished to the Noteholders and the other parties
hereto in writing by the Originator, (D) in the case of the Servicer, to
Hercules Technology Growth Capital, Inc., 525 University Avenue, Suite 700, Palo
Alto, California 94301, Attention: Manuel A. Henriquez, telecopy number
650-473-9194, with a copy to Scott Harvey, Chief Legal Officer, Hercules
Technology Growth Capital, Inc., 3702 River Road, Franklin Park, Illinois 60131,
telecopy number: 866-828-6687, or such other addresses or telecopy or telephone
numbers as may hereafter be furnished to the Noteholders and the other parties
hereto in writing by the Servicer; (E) in the case of the Collateral Custodian,
to its Corporate Trust Office, with a copy to the Indenture Trustee or such
other addresses or telecopy or telephone numbers as may hereafter be furnished
to the Noteholders and the other parties hereto in writing by the Indenture
Trustee; (F) in the case of the Backup Servicer to Lyon Financial Services,
Inc., d/b/a U.S. Bank Portfolio Services, 1310 Madrid, Suite 103, Marshall MN
56258, Attention: Joseph Andries, Ref: Hercules Funding Trust I, phone: (507)
532-7129, fax: (507) 537-5201, or such other addresses or telecopy or telephone
numbers as may hereafter be furnished to the Noteholders and the other parties
hereto in writing by the Backup Servicer; (G) in the case of the Indenture
Trustee, at the Corporate Trust Office, as defined in the Indenture; and (H) in
the case of the Administrative Agent, to Citigroup Global Markets Realty Corp.,
390 Greenwich Street, 6th Floor, New York, NY 10013, Attention: Monitoring Group
- - Doug Lipton and John Pawlowski, telecopy number (212) 723-8591; any such
notices shall be deemed to be effective with respect to any party hereto upon
the receipt of such notice or telephone confirmation thereof by such party.
101
Section 11.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 11.07. No Partnership.
Nothing herein contained shall be deemed or construed to
create any partnership or joint venture between the parties hereto.
Section 11.08. Counterparts.
This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts (including by fax or
other electronic means), each of which, when so executed, shall be deemed to be
an original and such counterparts, together, shall constitute one and the same
Agreement.
Section 11.09. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the Servicer, the Originator, the Depositor, the Indenture Trustee, the
Issuer and the Securityholders and their respective successors and permitted
assigns.
Section 11.10. Headings.
The headings of the various Sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
Section 11.11. Actions of Securityholders.
(a) Subject to Section 11.01, any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Securityholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Securityholders in person or by an agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Depositor,
the Servicer or the Issuer. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Depositor, the Servicer and the Issuer
if made in the manner provided in this Section 11.11.
(b) The fact and date of the execution by any Securityholder
of any such instrument or writing may be proved in any reasonable manner which
the Depositor, the Servicer or the Issuer may deem sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Securityholder shall bind every holder of
every Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
102
(d) The Depositor, the Servicer or the Issuer may require
additional proof of any matter referred to in this Section 11.11 as it shall
deem necessary.
Section 11.12. Non-Petition Agreement.
Notwithstanding any prior termination of any Basic Document,
the Originator, the Paying Agent, the Servicer, the Depositor, the Collateral
Custodian, the Backup Servicer and the Indenture Trustee each severally and not
jointly covenants that it shall not, prior to the date which is one year and one
day, or, if longer, the applicable preference period then in effect, after the
Collection Date, acquiesce, petition or otherwise, directly or indirectly,
invoke or cause the Issuer or the Depositor to invoke the process of any
governmental authority for the purpose of commencing or sustaining a case
against the Issuer or Depositor under any Bankruptcy Law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or Depositor or any substantial part of their
respective property or ordering the winding up or liquidation of the affairs of
the Issuer or the Depositor.
Section 11.13. Due Diligence.
The Originator acknowledges that the Noteholders may purchase
Notes and advance Borrowings and may enter into transactions based solely upon
the information provided by the Originator to the Noteholders in the Loan
Schedule and the representations, warranties and covenants contained herein, and
that the Noteholders, at their option, have the right prior to such purchase of
the Notes or the advance of any Borrowing therein or such Transactions to
conduct a partial or complete due diligence review on some or all of the
Transferred Loans securing such purchase, including, without limitation,
re-generating the information used to originate each such Transferred Loan. The
Noteholders may underwrite such Transferred Loans itself or engage a mutually
agreed upon third party underwriter to perform such underwriting. The Originator
agrees to cooperate with the Noteholders and any third party underwriter in
connection with such underwriting, including, but not limited to, providing the
Noteholders and any third party underwriter with access to any and all
documents, records, agreements, instruments or information relating to such
Transferred Loans in the possession, or under the control, of the Servicer. The
Originator also shall make available to the Noteholders a knowledgeable
financial or accounting officer for the purpose of answering questions
respecting the Loan Files and the Transferred Loans. Each Noteholder agrees (on
behalf of itself and its Affiliates, directors, officers, employees and
representatives) to use reasonable precaution to keep confidential, in
accordance with its customary procedures for handling confidential information
and in accordance with safe and sound practices, and not to disclose to any
third party, any non-public information supplied to it or otherwise obtained by
it hereunder with respect to the Originator or any of its Affiliates; provided,
however, that nothing herein shall prohibit the disclosure of any such
information to the extent required by statute, rule, regulation or judicial
process; provided, further that, unless specifically prohibited by applicable
law or court order, the Noteholder shall, prior to disclosure thereof, notify
the Originator of any request for disclosure of any such non-public information.
The Noteholder further agrees not to use any such non-public information for any
purpose unrelated to this Agreement and that each such Noteholder shall not
disclose such non public information to any third party underwriter without
obtaining a written agreement from such third party underwriter to comply with
the confidentiality provisions of this Section 11.13.
103
Section 11.14. No Reliance.
Each of the Originator, the Depositor and the Issuer hereby
acknowledges that it has not relied on the Noteholders or any of their officers,
directors, employees, agents and "control persons" as such term is used under
the Securities Act and under the Exchange Act, for any tax, accounting, legal or
other professional advice in connection with the transactions contemplated by
the Basic Documents, that each of the Originator, the Depositor and the Issuer
has retained and been advised by such tax, accounting, legal and other
professionals as it has deemed necessary in connection with the transactions
contemplated by the Basic Documents and that the Noteholders make no
representation or warranty, and shall have no liability with respect to, the
tax, accounting or legal treatment or implications relating to the transactions
contemplated by the Basic Documents.
Section 11.15. Conflicts.
Notwithstanding anything contained in the Basic Documents to
the contrary, in the event of the conflict between the terms of this Agreement
and any other Basic Document, the terms of this Agreement shall control.
Section 11.16. Limitation on Liability.
It is expressly understood and agreed by the parties hereto
that (a) this Agreement is executed and delivered by Wilmington Trust Company,
not individually or personally, but solely as Owner Trustee of Hercules Funding
Trust I, in the exercise of the powers and authority conferred and vested in it,
(b) each of the representations, undertakings and agreements herein made on the
part of the Issuer is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Issuer, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Agreement or any other related documents.
Section 11.17. No Agency.
Nothing contained herein or in the Basic Documents shall be
construed to create an agency or fiduciary relationship between the
Administrative Agent, the Noteholders or any of their Affiliates and the Issuer,
the Depositor, the Originator or the Servicer. None of the Administrative Agent,
any Noteholders or any of their Affiliates shall be liable for any acts or
actions affected in connection with an Optional Sale in connection with any
Permitted Securitization.
104
Section 11.18. Third Party Beneficiaries.
The Owner Trustee is an intended third party beneficiary of
this Agreement.
Section 11.19. Performance by U.S. Bank.
The parties expressly acknowledge and consent to U.S. Bank
acting in the capacities of successor Servicer and in the capacity as Indenture
Trustee and the Collateral Custodian. U.S. Bank may, in such dual capacity,
discharge its separate functions fully, without hindrance or regard to conflict
of interest principles, duty of loyalty principles or other breach of fiduciary
duties to the extent that any such conflict or breach arises from the
performance by U.S. Bank of express duties set forth in this Agreement in any of
such capacities, all of which defenses, claims or assertions are hereby
expressly waived by the other parties hereto except in the case of negligence
(other than errors in judgment) and willful misconduct by U.S. Bank.
[Remainder of Page Intentionally Left Blank]
105
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed by their respective officers thereunto duly authorized, as of the day and
year first above written, to this Agreement.
HERCULES FUNDING TRUST I, as Issuer
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee
By: ____________________________________
Name:_______________________________
Title:______________________________
HERCULES FUNDING I LLC, as Depositor
By: ____________________________________
Name:_______________________________
Title:______________________________
HERCULES TECHNOLOGY GROWTH CAPITAL, INC., as
Originator and Servicer
By: _____________________________________
Name:________________________________
Title:_______________________________
U.S. BANK NATIONAL
ASSOCIATION, as Indenture
Trustee, Paying Agent and
Collateral Custodian
By: _____________________________________
Name:_______________________________
Title:______________________________
LYON FINANCIAL SERVICES, INC., d/b/a U.S.
BANK PORTFOLIO SERVICES, as Backup Servicer
By: ____________________________________
Name:_______________________________
Title:______________________________
Hercules Funding Trust I
Sale and Servicing Agreement
CITIGROUP GLOBAL MARKETS REALTY CORP., as a
Noteholder and as Administrative Agent
By: _____________________________________
Name:________________________________
Title:_______________________________
DEUTSCHE BANK AG, NEW YORK BRANCH, as DB
Managing Agent and a Noteholder
By: _____________________________________
Name:________________________________
Title:_______________________________
By: _____________________________________
Name:________________________________
Title:_______________________________
Hercules Funding Trust I
Sale and Servicing Agreement
EXHIBIT A
FORM OF BORROWING NOTICE
[Date]
Citigroup Global Markets Realty Corp.
390 Greenwich Street
6th Floor
New York, NY 10013
Attention: Monitoring Group -
Doug Lipton and John Pawlowski
Fax: (212) 723-8591
U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Services
Ref: Hercules Funding Trust I
Re: Hercules Funding Trust I Asset Backed Notes
Reference is made to the Amended and Restated Sale and Servicing
Agreement, dated as of May 2, 2007 (the "Sale and Servicing Agreement"), among
Hercules Funding Trust I, as Issuer, Hercules Funding I LLC, as Depositor,
Hercules Technology Growth Capital, Inc., as Originator and Servicer, Citigroup
Global Markets Realty Corp., as a Noteholder and as Administrative Agent,
Deutsche Bank AG, New York Branch, as a Noteholder and U.S. Bank National
Association, as Indenture Trustee, Paying Agent and Collateral Custodian, and
Lyon Financial Services, Inc. doing business as U.S. Bank Portfolio Services, as
Backup Servicer. Capitalized terms not defined herein shall have the meanings
assigned to such terms in the Sale and Servicing Agreement.
The undersigned ____________, a duly appointed ____________
of_____________________, acting in such capacity, hereby requests a Borrowing in
an amount of $________, such amount to be advanced on _______, 200__, a Business
Day not later than the next Business Day after the date hereof (such date, the
"Borrowing Date").
Very truly yours,
HERCULES FUNDING TRUST I
By: _______________________________________________
Name:__________________________________________
Title:_________________________________________
A-1
EXHIBIT B
FORM OF SERVICER REPORT
HERCULES FUNDING TRUST I
AMENDED AND RESTATED
SALE AND SERVICING AGREEMENT DATED MAY 2, 2007
RECORD DATE: MM/DD/YY
[TO BE PROVIDED]
B-1
EXHIBIT C
FORM OF S&SA ASSIGNMENT
ASSIGNMENT NO. __ OF LOANS ("S&SA Assignment"), dated as of
[_________] [__], [ ] (the "Transfer Date"), by Hercules Funding I LLC, (the
"Depositor") to Hercules Funding Trust I (the "Issuer") pursuant to the Sale and
Servicing Agreement referred to below.
WITNESSETH:
WHEREAS, the Depositor and the Issuer are parties to the
Amended and Restated Sale and Servicing Agreement dated as of May 2, 2007 (the
"Sale and Servicing Agreement"), by and among Hercules Funding Trust I as
Issuer, Hercules Funding I LLC, as Depositor, Hercules Technology Growth
Capital, Inc. as the Originator and Servicer, Citigroup Global Markets Realty
Corp., as a Noteholder and Administrative Agent, Deutsche Bank AG, New York
Branch, as a Noteholder, Lyon Financial Services, Inc. d/b/a U.S. Bank Portfolio
Services, as Backup Servicer and U.S. Bank National Association, as Indenture
Trustee, as Paying Agent and as Collateral Custodian, hereinafter as such
agreement may have been, or may from time to time be, amended, supplemented or
otherwise modified;
WHEREAS, pursuant to the Sale and Servicing Agreement, the
Depositor wishes to sell, convey, transfer and assign Purchased Assets to the
Issuer in exchange for cash consideration, the Trust Certificates and other good
and valid consideration the receipt and sufficiency of which is hereby
acknowledged; and
WHEREAS, the Issuer is willing to acquire such Purchased
Assets subject to the terms and conditions hereof and of the Sale and Servicing
Agreement;
NOW THEREFORE, the Depositor and the Issuer hereby agree as
follows:
1. Defined Terms. All capitalized terms defined in the Sale
and Servicing Agreement and used herein shall have such defined meanings when
used herein, unless otherwise defined herein.
2. Designation of Loans. The Depositor does hereby deliver
herewith a Loan Schedule containing a true and complete list of each Loan to be
conveyed on the Transfer Date. Such list is marked as Schedule A to this S&SA
Assignment and is hereby incorporated into and made a part of this S&SA
Assignment.
3. Conveyance of Purchased Assets. The Depositor hereby sells,
transfers, assigns and conveys to the Issuer, without recourse, all of the
right, title and interest of the Depositor in and to the Loans listed on the
Loan Schedule attached hereto and all Related Property and other related
collateral constituting part of the Purchased Assets related to such Loan,
including, without limitation, all Collections on or with respect to the Loans,
in each case arising on or after the related Transfer Date.
4. Issuer Acknowledges Assignment. As of the Transfer Date,
pursuant to this S&SA Assignment and Section 2.01(a) of the Sale and Servicing
Agreement, the Issuer acknowledges its receipt of the Loans listed on the
attached Loan Schedule and all Related Property and other related collateral
constituting part of the Purchased Assets related to such Loan.
C-1
5. Acceptance of Rights But Not Obligations. The foregoing
sale, transfer, assignment, set over and conveyance does not, and is not
intended to, result in a creation or an assumption by the Issuer of any
obligation of the Depositor, the Originator or any other Person in connection
with this S&SA Assignment or under any agreement or instrument relating thereto
except as specifically set forth herein.
6. Depositor Acknowledges Receipt of Sales Price. The
Depositor hereby acknowledges receipt of the Sales Price or that is otherwise
distributed at its direction.
7. Conditions Precedent. The conditions precedent in Section
2.08 of the Sale and Servicing Agreement have been satisfied.
8. Amendment of the Sale and Servicing Agreement. The Sale and
Servicing Agreement is hereby amended by providing that all references to the
"Sale and Servicing Agreement," "this Agreement" and "herein" shall be deemed
from and after the Transfer Date to which this S&SA relates to be a dual
reference to the Sale and Servicing Agreement as supplemented by this S&SA
Assignment. Except as expressly amended hereby, all of the representations,
warranties, terms, covenants and conditions of the Sale and Servicing Agreement
shall remain unamended and the Sale and Servicing Agreement shall continue to
be, and shall remain, in full force and effect in accordance with its terms and
except as expressly provided herein, this S&SA Assignment shall not constitute
or be deemed to constitute a waiver of compliance with or consent to
noncompliance with any term or provision of the Sale and Servicing Agreement.
9. Counterparts. This S&SA Assignment may be executed in any
number of counterparts all of which taken together shall constitute one and the
same instrument.
C-2
IN WITNESS WHEREOF, the undersigned have caused this S&SA
Assignment to be duly executed and delivered by their respective duly authorized
officers on the day and year first above written.
HERCULES FUNDING I LLC,
as Depositor
By: _________________________________________
Name:____________________________________
Title:___________________________________
HERCULES FUNDING TRUST I, as Issuer
By: Hercules Technology Growth Capital, Inc.,
as Servicer and Administrator
By: _________________________________________
Name:____________________________________
Title:___________________________________
C-3
EXHIBIT D
FORM OF LOAN SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------
TRANSFERRED LOANS
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Obligor Servicer Loan No. Outstanding Loan Balance Origination Final
------- --------- ------------------------ Maturity
Date Date
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
D-1
EXHIBIT E-1
FORM OF INITIAL COLLATERAL CERTIFICATION
BY FACSIMILE:
- -------------
Citigroup Global Markets Realty Corp.
390 Greenwich Street
6th Floor
New York, NY 10013
Attention: Monitoring Group -
Doug Lipton and John Pawlowski
Fax: (212) 723-8591
Ellen Simone
Citigroup Global Markets Realty Corp
Mortgage Products Group
333 West 34th Street, 4th Floor
NY, NY 10001
Phone: 212-615-7725
Fax: 212-615-9236
Re: Amended and Restated Sale and Servicing Agreement dated as of May 2,
2007 (the "Agreement"), by and among Hercules Funding Trust I as
Issuer, Hercules Funding I LLC, as Depositor, Hercules Technology
Growth Capital, Inc. as the Originator and Servicer, Citigroup Global
Markets Realty Corp., as a Noteholder and Administrative Agent,
Deutsche Bank AG, New York Branch, as a Noteholder and U.S. Bank
National Association, as Indenture Trustee, as Paying Agent and as
Collateral Custodian.
Ladies and Gentlemen:
In accordance with the provisions of Section 2.05(b)(i) of the
above-referenced Agreement, the undersigned, as the Collateral Custodian, hereby
certifies as to each Loan in the Loan Schedule attached hereto that it has
received a copy of each executed Underlying Note endorsed in blank. The
Collateral Custodian makes no representations as to (i) the validity, legality,
enforceability, sufficiency, due authorization or genuineness of any of the
Underlying Notes or (ii) the collectibility, insurability, effectiveness or
suitability of any such Loan.
The Collateral Custodian hereby confirms that it is holding
each such Underlying Note with respect to each Loan as agent and bailee of, and
custodian for the exclusive use and benefit, and subject to the sole direction,
of the Indenture Trustee pursuant to the terms and conditions of the Agreement.
E-1
The Collateral Custodian will accept and act on instructions with respect to the
Loans subject hereto upon surrender of this Trust Receipt and Collateral
Certification at its office at U.S. Bank National Association, 1719 Range Way,
Florence, South Carolina 29501.
Capitalized terms used herein shall have the meaning ascribed
to them in the Agreement.
U.S. Bank National
Association, as Collateral Custodian
By: _______________________________
Name:__________________________
Title:_________________________
E-2
EXHIBIT E-2
FORM OF FINAL COLLATERAL CERTIFICATION
BY FACSIMILE:
- -------------
Citigroup Global Markets Realty Corp.
390 Greenwich Street
6th Floor
New York, NY 10013
Attention: Monitoring Group -
Doug Lipton and John Pawlowski
Fax: (212) 723-8591
Ellen Simone
Citigroup Global Markets Realty Corp
Mortgage Products Group
333 West 34th Street, 4th Floor
NY, NY 10001
Phone: 212-615-7725
Fax: 212-615-9236
Re: Amended and Restated Sale and Servicing Agreement dated as of May 2,
2007 (the "Agreement"), by and among Hercules Funding Trust I as
Issuer, Hercules Funding I LLC, as Depositor, Hercules Technology
Growth Capital, Inc. as the Originator and Servicer, Citigroup Global
Markets Realty Corp., as a Noteholder and Administrative Agent,
Deutsche Bank AG, New York Branch, as a Noteholder and U.S. Bank
National Association, as Indenture Trustee, as Paying Agent and as
Collateral Custodian.
Ladies and Gentlemen:
In accordance with the provisions of Section 2.05(b) of the
above-referenced Agreement, the undersigned, as the Collateral Custodian, hereby
certifies as to each Loan in the Loan Schedule attached hereto that it has
received the Loan Files with respect to each Loan, with the exception of the
missing items listed on Attachment A hereto. The Collateral Custodian makes no
representations as to (i) the validity, legality, enforceability, sufficiency,
due authorization or genuineness of any of the documents constituting the Loan
Documents or (ii) the collectability, insurability, effectiveness or suitability
of any such Loan.
The Collateral Custodian hereby confirms that it is holding
each such Loan Document with respect to each Loan as agent and bailee of, and
custodian for the exclusive use and benefit, and subject to the sole direction,
of the Indenture Trustee pursuant to the terms and conditions of the Agreement.
E-1
The Collateral Custodian will accept and act on instructions
with respect to the Loans subject hereto upon surrender of this Trust Receipt
and Collateral Certification at its office at U.S. Bank National Association,
1719 Range Way, Florence, South Carolina 29501.
Capitalized terms used herein shall have the meaning ascribed
to them in the Agreement.
U.S. Bank National
Association, as Collateral Custodian
By: _________________________________
Name:____________________________
Title:___________________________
E-2
EXHIBIT F
FORM OF BORROWING BASE CERTIFICATE
[DATE]
Citigroup Global Markets Realty Corp.
390 Greenwich Street
6th Floor
New York, NY 10013
Attention: Monitoring Group -
Doug Lipton and John Pawlowski
Fax: (212) 723-8591
Deutsche Bank Securities Inc.
Securitized Products Group
60 Wall Street, 19th Floor
New York, NY 10005
Attention: Amit Patel
Fax: (212) 797-5160
Ladies and Gentlemen:
This Borrowing Base Certificate is delivered to you pursuant
to (i) Section 2.02 of the Amended and Restated Note Purchase Agreement (the
"Note Purchase Agreement"), dated as of May 2, 2007, among Hercules Funding
Trust I, as Issuer, Hercules Funding I LLC, as Depositor, Hercules Technology
Growth Capital, Inc., as Originator ("Hercules") and Citigroup Global Markets
Realty Corp., as Purchaser and (ii) Section 2.07 of the Amended and Restated
Sale and Servicing Agreement, dated as of May 2, 2007 (the "Sale and Servicing
Agreement"; and together with the Loan Sale Agreement, dated as of August 1,
2005, as amended, the "Agreements"), among the Issuer, the Depositor, Hercules,
as Originator and Servicer, U.S. Bank National Association, as Indenture
Trustee, Paying Agent and Collateral Custodian, Citigroup Global Markets Realty
Corp., as a Noteholder and as Administrative Agent, Deutsche Bank AG, New York
Branch, as a Noteholder, and Lyon Financial Services, Inc., doing business as
U.S. Bank Portfolio Services, as Backup Servicer. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in the Agreements.
As of the date hereof, Hercules hereby makes the following
representations and warranties:
(1) Attached hereto as Schedule 1 is a true, correct and
complete copy of the borrowing base report, which sets forth the calculation of
the Borrowing Base and all components thereof;
(2) All conditions precedent to the related Borrowing Date set
forth in Section 2.07 of the Sale and Servicing Agreement have been satisfied as
of the date hereof and will remain satisfied on the related Borrowing Date;
F-1
(3) All of the representations and warranties set forth in
Article III of the Sale and Servicing Agreement are true and correct as of the
date hereof and as of the related Borrowing Date;
(4) All of the conditions precedent set forth in Section 3.01
of the Note Purchase Agreement have been satisfied as of the date hereof and
will remain satisfied on the related Borrowing Date;
(5) All of the representations and warranties set forth in
Article V of the Note Purchase Agreement are true and correct as of the date
hereof and as of the related Borrowing Date;
(6) Neither the Amortization Date nor the Termination Date has
occurred; and
(7) Each of the Originator, the Servicer, the Issuer and the
Depositor is in compliance with the covenants set forth in the Basic Documents.
F-2
IN WITNESS WHEREOF, the undersigned have executed this
Borrowing Base Certificate this ___ day of _____, 200_.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC., as Servicer
By:
--------------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
F-3
Schedule 1
BORROWING BASE REPORT
Calculation of Availability: the excess, if any of (A over B)
- ----------- ---------------------------------------------------------------------------------------------------------
A. The lesser of:
(i) Facility Amount: $ ____________
and
(ii) Maximum Availability (a + b):
the sum of:
(a) the lesser of:
(I) the difference of ((1) - (2))
(1) Borrowing Base (w + x - y-z):
the balance of:
(w) Aggregate
Outstanding Loan Balance:
$ ------------
plus
(x) Outstanding Loan
Balance of all Eligible
Loans to become included
a part of the Collateral
on such date:
minus
$ ------------
(y) The amount
(calculated without
duplication) by which
the Eligible Loans in
clauses (w) and (x)
exceed any applicable
Concentration Limits:
minus
(z) Outstanding Loan Balance
of any Defaulted Loans:
F-1
(1) = (w) + (x) - (y) -(z) = $ ____________
minus
(2) Required Equity
Contribution:
$ ------------
(I) = (1) - (2) =
$ ------------
and
(II) the product of ((1) X (2))
$ ------------
(1) Borrowing Base:
$ ------------
multiplied by
(2) 55%
$ ------------
(II) = (1) x (2) =
$ ------------
(a) = the lesser of (I) and (II) =
plus
$ ------------
(b) the amount of Principal Collections
on deposit in the Collection Account and
the Principal Collections Account
received in the reduction of the
Outstanding $ ____________ Loan Balance
of any Loan:
$ ------------
(ii) = (a) + (b) =
$ ------------
$ ------------
(A) = lesser of (i) and (ii) = $ ____________
B. The sum of:
(i) Advances Outstanding: $ ____________
plus
(ii) Aggregate Net Mark to Market Amount: $ ____________
(B) = (i) + (ii) = $ ____________
Availability: the excess, if any, of (A over B) = $ ____________
C. After the Revolving Period:
Availability = $0
Maximum Availability = Advances Outstanding
- ----------- --------------------------------------------------------------------------------------------------------------
EXHIBIT G
FORM OF AGENT AND INTERCREDITOR PROVISIONS FOR AGENTED NOTES
[TO BE PROVIDED BY HERCULES]
G-1
EXHIBIT H
FORM OF ASSIGNMENT OF MORTGAGE
[TO BE PROVIDED BY HERCULES]
H-1
EXHIBIT I
SECTION 7.01 CERTIFICATION
I, __________________, ___________________ of Hercules
Technology Growth Capital, Inc., a Maryland corporation (the "Company"), do
hereby certify that: -------
(i) the Company is in compliance with all provisions and terms
of the Amended and Restated Sale and Servicing Agreement, dated as of May 2,
2007 (the "Sale and Servicing Agreement"), among the Issuer, the Depositor,
Hercules, as Originator and Servicer, U.S. Bank National Association, as
Indenture Trustee, Paying Agent and Collateral Custodian, Citigroup Global
Markets Realty Corp., as a Noteholder and as Administrative Agent, Deutsche Bank
AG, New York Branch, as a Noteholder, and Lyon Financial Services, Inc., doing
business as U.S. Bank Portfolio Services, as Backup Servicer;
(ii) no Default has occurred under the Sale and Servicing
Agreement;
(iii) the consolidated Tangible Net Worth of the Company is
not less than $90,000,000;
(iv) the leverage ratio (the ratio of the Company's total
consolidated liabilities (exclusive of non recourse debt but including, without
limitation, any convertible debt), determined in accordance with GAAP, to its
consolidated Tangible Net Worth) of the Company does not exceed 3.0:1; and
(v) calculations of the Company's consolidated Tangible Net
Worth and leverage ratio are set forth on Schedule I attached hereto.
Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Sale and Servicing Agreement.
IN WITNESS WHEREOF, I have signed this certificate.
Date: _________, 200__
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
I-1
SCHEDULE I TO SECTION 7.01 CERTIFICATION
Consolidated Tangible Net Worth Calculation:
- ----------------- --------------------------------------------------------------------------------------------------------
Line Item Total (in US$)
- ----------------- --------------------------------------------------------------------------------------------------------
1 Total Consolidated Assets
- ----------------- --------------------------------------------------------------------------------------------------------
2 Total Consolidated Liabilities
- ----------------- --------------------------------------------------------------------------------------------------------
3 Consolidated Net Worth (Line 1 minus Line 2)
- ----------------- --------------------------------------------------------------------------------------------------------
4 Consolidated Net Book Value of Intangibles
- ----------------- --------------------------------------------------------------------------------------------------------
5 Consolidated Tangible Net Worth (Line 3 minus Line 4)
- ----------------- --------------------------------------------------------------------------------------------------------
Leverage Ratio Calculation:
- ----------------- ---------------------------------------------------------------------------------------------------------
Line Item Total
- ----------------- ---------------------------------------------------------------------------------------------------------
1 Total Consolidated Liabilities (exclusive of non
recourse debt but including, without $
limitation, any convertible debt)
- ----------------- ---------------------------------------------------------------------------------------------------------
2 Consolidated Tangible Net Worth (from above) $
- ----------------- ---------------------------------------------------------------------------------------------------------
3 Leverage Ratio (Line 1 divided by Line 2) __:1
- ----------------- ---------------------------------------------------------------------------------------------------------
I-2
EXHIBIT J
FORM OF REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
[Delivery Date]
BY FACSIMILE: (___) [___]-[____]
U.S. Bank National Association 1719 Range Way Florence, South Carolina 29501
Attn: Sandra Farrow Ref: Hercules Funding I LLC Mail Code: Ex - SC - FLOR
Re: Amended and Restated Sale and Servicing Agreement, dated as of
May 2, 2007 (the "Sale and Servicing Agreement"), among the
Issuer, the Depositor, Hercules, as Originator and Servicer,
U.S. Bank National Association, as Indenture Trustee, Paying
Agent and Collateral Custodian, Citigroup Global Markets
Realty Corp., as a Noteholder and as Administrative Agent,
Deutsche Bank AG, New York Branch, as a Noteholder, and Lyon
Financial Services, Inc., doing business as U.S. Bank
Portfolio Services, as Backup Servicer.
Ladies and Gentlemen:
In connection with the administration of the Transferred Loans held by you as
the Collateral Custodian on behalf of the Indenture Trustee under the Agreement,
we request the release, and acknowledge receipt, of the Loan File for the
Transferred Loan described below, for the reason indicated.
Obligor's Name, Address & Zip Code:
Loan Number:
Reason for Requesting Documents (check one)
____ 1._______Transferred Loan Paid in Full. (The Servicer hereby
certifies that all amounts received in connection therewith
have been credited to the account of the Deal Agent.)
____ 2._______Transferred Loan Liquidated By
____________________________ (The Servicer hereby certifies
that all proceeds of foreclosure, insurance, condemnation or
other liquidation have been finally received and credited to
the account of the Deal Agent.)
____ 3._______Transferred Loan in Foreclosure.
____ 4._______Other (explain).
J-1
If box 1 or 2 above is checked, and if all or part of the Loan File was
previously released to us, please release to us our previous request and receipt
on file with you, as well as any additional documents in your possession
relating to the specified Loan.
If box 3 or 4 above is checked, upon our return of all of the above documents to
you as the Collateral Custodian, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
Capitalized terms used but not defined herein have the meanings provided in the
Agreement.
[SIGNATURES FOLLOW ON NEXT PAGE]
J-2
HERCULES TECHNOLOGY GROWTH CAPITAL, INC., as the
Servicer
By: ________________________________________________
Name:___________________________________________
Title:__________________________________________
Date:___________________________________________
Acknowledgment of Documents returned to the Collateral Custodian:
U.S. BANK NATIONAL
ASSOCIATION, as the
Collateral Custodian
By: _______________________________________________
Name:__________________________________________
Title:_________________________________________
The Administrative Agent and the Indenture Trustee, at the direction of the
Administrative Agent, hereby consents to the Collateral Custodian's releasing
the Loan File or a part thereof to the Servicer designated above:
CITIGROUP GLOBAL MARKETS REALTY CORP., as the
Administrative Agent
By: _______________________________________________
Name:__________________________________________
Title:_________________________________________
U.S. BANK NATIONAL
ASSOCIATION, as the
Indenture Trustee
By: _______________________________________________
Name:__________________________________________
Title:_________________________________________
J-3
EXHIBIT K
FORM OF SERVICER'S CERTIFICATE
This Servicer's Certificate is delivered pursuant to the provisions of Section
4.17(b) of the Amended and Restated Sale and Servicing Agreement, dated as of
May 2, 2007, among the Hercules Funding Trust I, as issuer, Hercules Funding I
LLC, as depositor, Hercules Technology Growth Capital Inc., as originator and
servicer (the "Servicer"), U.S. Bank National Association, as indenture trustee,
paying agent and collateral custodian, Citigroup Global Markets Realty Corp., as
a noteholder and as administrative agent, Deutsche Bank AG, New York Branch, as
a noteholder, and Lyon Financial Services, Inc., doing business as U.S. Bank
Portfolio Services, as backup servicer. (as such agreement may have been, or may
from time to time be amended, supplemented or otherwise modified, the
"Agreement"). This Servicer's Certificate relates to the Collection Period and
related Payment Date, to which the Servicer Report attached hereto relates.
1. Capitalized terms used and not otherwise
defined herein have the meanings assigned
them in the Agreement. References herein and
in the attached Servicer Report to certain
sections are to the applicable subsections
of the Agreement.
2. The Servicer is the Servicer under the
Agreement.
3. The undersigned hereby certifies to the
Issuer, the Backup Servicer, the Indenture
Trustee and each Purchaser that:
1) all of the foregoing
information and all of the
information set forth on
attached Servicer Report
is true and accurate in
all material respects of
the date hereof; and
2) as of the date hereof, no
Trigger Event, Default or
Event of Default has
occurred and is
continuing.
IN WITNESS WHEREOF, the undersigned has caused this Servicer's
Certificate to be duly executed this [____] day of [_________], [____].
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.,
as the Servicer
By: _______________________________________________
Name:__________________________________________
Title:_________________________________________
K-1
EXHIBIT L
CREDIT AND COLLECTION POLICY
[TO BE PROVIDED BY HERCULES]
L-1
EXHIBIT M
CANADIAN LOAN CRITERIA
1. All amounts payable pursuant to or in connection with the
Loan Documents related to the Loan will be exempt from withholding tax imposed
under the Income Tax Act (Canada) and the Loan Documents will provide that
payments of amounts owing thereunder shall be made free and clear of and without
deduction for any such tax unless the applicable Obligor is required to deduct
any such tax from such payments, in which case (i) the sum payable shall be
increased as necessary so that, after making all required deductions, the payee
receives an amount equal to the sum it would have received had no such deduction
been made, (ii) the Obligor shall make such deduction and (iii) the Obligor
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with Applicable Law.
2. The Loan Documents related to the Loan will provide that,
for the purposes of the Interest Act (Canada) and disclosure thereunder,
whenever any interest or any fee to be paid under or in connection with the Loan
Documents is to be calculated on the basis of a 360 or 365-day year (or any
other period less than a calendar year), the yearly rate of interest to which
the rate used in such calculation is equivalent is the rate so used multiplied
by the actual number of days in the calendar year in which the same is to be
ascertained and divided by 360, 365 or such other period as the case may be.
3. The Loan Documents related to the Loan will provide that
if, for the purposes of obtaining judgment in any court in any jurisdiction with
respect to any amount owing under or in connection with the Loan Documents, it
becomes necessary to convert into the currency of such jurisdiction (the
"Judgment Currency") any such amount due in Dollars, and the amount of Dollars
which can be purchased by the obligee with the amount of the Judgment Currency
obtained pursuant to the judgment is less than the amount of Dollars originally
due to it, then the Obligor shall indemnify and save the obligee harmless from
and against all loss or damage arising as a result of such deficiency.
M-1
EXHIBIT N
QUEBEC LOAN CRITERIA
1. The Loan Documents related to the Loan are not governed by the laws of the
Province of Quebec.
2. The amounts payable under the Loan Documents related to the Loan are not
payable in the Province of Quebec.
N-1