Document:

Exhibit 10.1

EXECUTION COPY

 

 

 

 

ACAS TRANSFER AGREEMENT

 

 

between

 

 

AMERICAN CAPITAL STRATEGIES, LTD.,

as the Originator,

 

 

and

 

 

ACAS BUSINESS LOAN LLC, 2002–2,

as the Trust Depositor

 

 

Dated

as of August 8, 2002

 

 

 

 

ACAS

Business Loan Trust Notes, Series 2002–2

Class A, Class B and Class C Notes

 

 

TRANSFER

AGREEMENT

 

THIS  ACAS

TRANSFER AGREEMENT, dated as of August 8, 2002, is between AMERICAN

CAPITAL STRATEGIES, LTD., a Delaware corporation (together with its successors

and assigns, “ACAS”), as the originator (together with its successor and

assigns, the “Originator”) and ACAS BUSINESS LOAN LLC, 2002–2, a

Delaware limited liability company, as the trust depositor (together with its

successor and assigns, the “Trust Depositor”).

 

WHEREAS, in the

regular course of its business, the Originator originates, purchases or

otherwise acquires Loans (as defined in the Transfer and Servicing Agreement);

 

WHEREAS, the Trust

Depositor desires to acquire the Initial Loans from the Originator and may

acquire from time to time thereafter certain Substitute Loans (such Initial

Loans and Substitute Loans, together with certain related property as more

fully described in the Transfer and Servicing Agreement, being the Loan Assets

as defined herein);

 

WHEREAS, it is a

condition to the Trust Depositor’s acquisition of the Initial Loans from the

Originator that the Originator make certain representations and warranties

regarding the Loan Assets for the benefit of the Trust Depositor as well as the

Issuer;

 

WHEREAS, the Trust

Depositor is willing to purchase and accept assignment of the Loan Assets from

the Originator pursuant to the terms hereof; and

 

WHEREAS, on the

Closing Date, the Trust Depositor will sell, convey and assign all its right,

title and interest in the Loan Assets to ACAS Business Loan Trust 2002–2, a

Delaware business trust (together with its successors and assigns, the “Issuer”),

pursuant to a Transfer and Servicing Agreement, dated as of the date hereof (as

amended, modified, restated, replaced, waived, substituted, supplemented or

extended from time to time, the “Transfer and Servicing Agreement”)

among ACAS, as the originator, the servicer and the swap guarantor, the Trust

Depositor, as the trust depositor, the Issuer, as the issuer, and Wells Fargo

Bank Minnesota, National Association, as the indenture trustee and the backup

servicer.

 

NOW, THEREFORE,

based upon the above recitals, the mutual promises and agreements contained

herein, and other good and valuable consideration, the receipt and sufficiency

of which are hereby acknowledged, the parties hereto, intending to be legally

bound, hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01                            Definitions.

 

Whenever

capitalized terms are used but not defined in this Agreement, such terms shall

have the meanings attributed to such terms in the Transfer and Servicing

Agreement, unless the context otherwise requires.

 

 

Section 1.02                            Other

Terms.

 

All accounting

terms used but not specifically defined herein shall be construed in accordance

with generally accepted accounting principles. 

The symbol “$” shall mean the lawful currency of the United States.  All terms used in Article 9 of the UCC in

the State of New York, and not specifically defined herein, are used herein as

defined in such Article 9.

 

Section 1.03                            Computation

of Time Periods.

 

Unless otherwise

stated in this Agreement, in the computation of a period of time from a

specified date to a later specified date, the word “from” means “from and

including”, the words “to” and “until” each mean “to but excluding”, and the

word “within” means “from and excluding a specified date and to and including a

later specified date”.

 

Section 1.04                            Interpretation.

 

In this Agreement,

unless a contrary intention appears:

 

(i)            the

singular number includes the plural number and vice versa;

 

(ii)           reference

to any Person includes such Person’s successors and assigns but, if applicable,

only if such successors and assigns are permitted by the Transaction Documents;

 

(iii)          reference

to any gender includes each other gender;

 

(iv)          reference

to day or days without further qualification means calendar days;

 

(v)           unless

otherwise stated, reference to any time means New York, New York time;

 

(vi)          references

to “writing” include printing, typing, lithography, electronic or other means

of reproducing words in a visible form;

 

(vii)         reference

to any agreement (including any Transaction Document), document or instrument

means such agreement, document or instrument as amended, modified,

supplemented, replaced, restated, waived or extended and in effect from time to

time in accordance with the terms thereof and, if applicable, the terms of the

other Transaction Documents, and reference to any promissory note includes any

promissory note that is an extension or renewal thereof or a substitute or

replacement therefor; and

 

(viii)        reference

to any Requirement of Law means such Requirement of Law as amended, modified,

codified, replaced or reenacted, in whole or in part, and in effect from time

to time, including rules and regulations promulgated thereunder and reference

to any Section or other provision of any Requirement of Law means that

provision of such Requirement of Law from time to time in effect and

constituting the substantive amendment, modification, codification, replacement

or reenactment of such Section or other provision.

 

2

 

Section

1.05                            References.

 

All section

references (including references to the Preamble), unless otherwise

indicated, shall be to Sections (and the Preamble) in this

Agreement.

 

Section

1.06                            Calculations.

 

Except as

otherwise provided herein, all interest rate and basis point calculations

hereunder will be made on the basis of a 360–day year and the actual days

elapsed in the relevant period and will be carried out to at least three

decimal places.

 

ARTICLE II

 

TRANSFER OF LOAN ASSETS

 

Section 2.01                            Transfer

of Loan Assets.

 

(a)           The Originator shall sell, assign and

convey assets to the Trust Depositor pursuant to the terms and provisions

hereof.

 

(b)           Subject to and upon the terms and

conditions set forth herein, the Originator hereby sells, transfers, assigns,

sets over and otherwise conveys to the Trust Depositor, for a purchase price of

$128,750,250 in cash, all of the right, title and interest of the Originator in

and to the following (the items in (i) – (vi) below, but in each case excluding

the Retained Interest and Excluded Amounts, being collectively referred to

herein as the “Loan Assets”):

 

(i)            the Initial Loans

and all Collections and other monies due or to become due in payment of such

Loans on and after the Initial Cut–Off Date, including any Prepayment amounts,

any Prepayment Premiums, any Late Charges, any payments in respect of a

casualty or early termination, any Insurance Proceeds and any Liquidation

Proceeds received with respect to the foregoing;

 

(ii)           the Collateral

related to such 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 such Loans, all proceeds from any sale or other disposition of

such Collateral, and all Insurance Policies;

 

(iii)          the Loan Files and

all documents and records (including computer records) relating thereto;

 

(iv)          all guarantees,

indemnities, warranties and other agreements or arrangements of whatever

character from time to time supporting or securing payment of such Loans;

 

(v)           the Trust Accounts

and all Trust Account Property (to the extent of the Originator’s interest if

any therein); and

 

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(vi)          all income,

payments, products, proceeds and other benefits of any and all of the

foregoing.

 

To the extent the

purchase price paid to the Originator for any Loan is less than the fair market

value of such Loan, the difference between such fair market value and the

purchase price shall be deemed to be a capital contribution made by the

Originator to the Trust Depositor on the applicable purchase date.

 

(c)           The Originator and the Trust

Depositor acknowledge that the representations and warranties of the Originator

in Section 3.01, 3.02, 3.03, 3.04 and 3.05

will run to and be for the benefit of the Issuer, the Trustees and the Swap

Counterparties, and the Issuer and the Trustees may enforce, directly without

joinder of the Trust Depositor, the repurchase obligations of the Originator

with respect to breaches of such representations and warranties as set forth

herein and in Section 6.01.

 

(d)           The sale, transfer, assignment,

set–over and conveyance of the Loan Assets by the Originator to the Trust

Depositor pursuant to this Agreement does not constitute and is not intended to

result in a creation or an assumption by the Trust Depositor or the Issuer of

any obligation of the Originator in connection with the Loan Assets, or any

agreement or instrument relating thereto, including, without limitation,

(i) any obligation to any Obligor, if any, not financed by the Originator,

(ii) any taxes, fees, or other charges imposed by any Governmental Authority

and (iii) any insurance premiums that remain owing with respect to any

Loan at the time such Loan is sold hereunder. 

Without limiting the foregoing, the Trust Depositor does not assume any

obligation to purchase any additional notes or loans under agreements governing

the Loan Assets.

 

(e)           The Originator and the Trust

Depositor intend and agree that (i) the transfer of the Loan Assets from the

Originator to the Trust Depositor and the transfer of the Loan Assets from the

Trust Depositor to the Issuer are intended to be a sale, conveyance and

transfer of ownership of the Loan Assets rather than the mere granting of a

security interest to secure a borrowing and (ii) such Loan Assets shall

not be part of the Originator’s or the Trust Depositor’s estate in the event of

a filing of a bankruptcy petition or other action by or against such Person

under any Insolvency Law.  In the event,

however, that notwithstanding such intent and agreement, such transfers are

deemed to be a grant of a mere security interest to secure indebtedness, the

Originator shall be deemed to have granted (and hereby does grant) to the Trust

Depositor a perfected first priority security interest in such Loan Assets, and

this Agreement shall constitute a security agreement under Requirements of Law,

securing the repayment of the purchase price paid hereunder, and the

obligations and/or interests represented by the Securities and the obligations

of the Issuer under the Swap Transactions and the Swaps, in the order and

priorities, and subject to the other terms and conditions of, this Agreement,

the Transfer and Servicing Agreement, the Indenture, the Trust Agreement and

the Swaps, together with such other obligations or interests as may arise

hereunder and thereunder in favor of the parties hereto and thereto.

 

(f)            If any such transfer of the Loan

Assets is deemed to be the mere granting of a security interest to secure a

borrowing, the Trust Depositor may, to secure the Trust Depositor’s obligations

under the Transfer and Servicing Agreement (to the extent that the transfer of

the

 

4

 

Loan Assets thereunder is deemed to be a mere granting

of a security interest to secure a borrowing) repledge and reassign (i) all or

a portion of the Loan Assets pledged to the Trust Depositor by the Originator

and with respect to which the Trust Depositor has not released its security

interest at the time of such pledge and assignment, and (ii) all proceeds

thereof.  Such repledge and reassignment

may be made by the Trust Depositor with or without a repledge and reassignment

by the Trust Depositor of its rights under any agreement with the Originator,

and without further notice to or acknowledgment from the Originator.  The Originator waives, to the extent

permitted by Requirements of Law, all claims, causes of action and remedies,

whether legal or equitable (including any right of setoff), against the Trust

Depositor or any assignee of the Trust Depositor relating to such action by the

Trust Depositor in connection with the transactions contemplated by this

Agreement and the Transaction Documents.

 

Section 2.02                            Conditions

to Transfer of Loan Assets to the Trust Depositor.

 

On or before the

Closing Date, the Originator shall deliver or cause to be delivered to the

Trust Depositor, the Owner Trustee and the Indenture Trustee each of the

following documents, certificates and other items:

 

(i)            a certificate of an

officer of the Originator substantially in the form of Exhibit C to

the Transfer and Servicing Agreement;

 

(ii)           copies of

resolutions of the Board of Directors of the Originator and the Servicer or of

the Executive Committee of the Board of Directors of the Originator and the

Servicer approving the execution, delivery and performance of this Agreement

and the transactions contemplated hereunder, certified in each case by the

Secretary or an Assistant Secretary of the Originator, the Servicer and the

member of the Trust Depositor;

 

(iii)          officially

certified recent evidence of due incorporation and good standing of the

Originator, the Servicer and the Trust Depositor under the laws of the State of

Delaware;

 

(iv)          the initial List of

Loans, certified by an officer of the Trust Depositor, together with an

Assignment substantially in the form of Exhibit A (along with the

delivery of any instruments and Loan Documents as required under Section 2.06

of the Transfer and Servicing Agreement);

 

(v)           a letter from each

Rating Agency assigning to each of the Offered Notes the ratings disclosed in

the Private Placement Memorandum;

 

(vi)          a letter from Ernst

& Young, or another nationally recognized accounting firm, addressed to the

Originator and the Trust Depositor, (a) stating that such firm has

reviewed a sample of the Initial Loans and performed specific procedures for

such sample with respect to certain loan terms and (b) identifying those

Initial Loans that do not conform to the procedures;

 

(vii)         [Reserved];

 

5

 

(viii)        evidence of proper

filing with appropriate offices in the UCC Filing Locations of UCC financing

statements delivered by the Originator, as debtor, naming the Trust Depositor

as secured party (and the Issuer as assignee) and identifying the Loan Assets

as collateral;

 

(ix)           an Officer’s

Certificate listing the Servicer’s Servicing Officers;

 

(x)            evidence of deposit

in the Collection Account of all funds received with respect to the Initial

Loans on and after the Initial Cut–Off Date to the date two (2) days preceding

the Closing Date, together with an Officer’s Certificate from the Servicer to

the effect that such amount is correct;

 

(xi)           evidence of deposit

in the Reserve Fund of the Reserve Fund Initial Deposit by the Issuer;

 

(xii)          a fully executed

copy of each Transaction Document;

 

(xiii)         opinions of counsel

for the Originator, in form and substance satisfactory to the Initial Purchaser

(and including as an addressee thereof each Rating Agency);

 

(xiv)        an opinion of Winston

& Strawn to the effect that, for federal income tax purposes, the

Class A Notes and Class B Notes will be characterized as debt and the

Issuer will not be characterized as an association, taxable mortgage pool, or

publicly traded partnership taxable as a corporation; and

 

(xv)         an opinion of Winston

& Strawn to the effect that, for Maryland tax purposes, the Issuer will not

be subject to income tax imposed by the State of Maryland, and holders of the

Class A Notes and Class B Notes that are not otherwise subject to State of

Maryland income tax jurisdiction will not become subject to income taxation by

the State of Maryland solely as a result of their ownership of the Class A

Notes and Class B Notes.

 

Section 2.03                            Acceptance

by the Trust Depositor.

 

On the Closing

Date, if the conditions set forth in Section 2.02 have been satisfied or

waived in writing, the Originator shall deliver, on behalf of the Trust

Depositor, to the Issuer the Loan Assets and such delivery to and acceptance by

the Issuer shall be deemed to be delivery to and acceptance by the Trust Depositor.

 

Section 2.04                            Conveyance

of Substitute Loans.

 

(a)           Subject to subsections 2.01(d)

and (e) and the satisfaction of the conditions set forth in paragraph

(c) of this Section 2.04, the Originator may at its option (but

shall not be obligated to) sell, transfer, assign, set over and otherwise

convey to the Trust Depositor (by delivery of an executed Subsequent Purchase

Agreement substantially in the form attached as Exhibit J to the

Transfer and Servicing Agreement), without recourse other than as expressly

provided herein and therein (and the Trust Depositor shall be required to

purchase through cash payment or by exchange of one or more related Loans

released by the Issuer to the Trust

 

6

 

Depositor on the Subsequent Transfer Date), all of the

right, title and interest of the Originator in and to the following (the

property in clauses (i)–(vi) below, but in each case excluding the

Retained Interest and the Excluded Amounts, upon such transfer, becoming part

of the “Loan Assets”):

 

(i)            the Substitute

Loans identified in the related Addition Notice and all Collections and other

monies received in payment of such Substitute Loans on and after the related

Subsequent Cut–Off Date, including any Prepayment amounts, any Prepayment

Premiums, any Late Charges, any payments in respect of a casualty or early

termination, any Insurance Proceeds and any Liquidation Proceeds received with

respect to the foregoing;

 

(ii)           the Collateral

related to such 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 such Loans, all proceeds from any sale or other disposition of

such Collateral and all Insurance Policies;

 

(iii)          the Loan Files and

all documents and records (including computer records) relating thereto;

 

(iv)          all guarantees,

indemnities, warranties and other agreements or arrangements of whatever

character from time to time supporting or securing payment of such Loans;

 

(v)           the Trust Accounts

and all Trust Account Property (to the extent of the Originator’s interest if

any therein); and

 

(vi)          all income,

payments, products, proceeds and other benefits of any and all of the

foregoing.

 

(b)           Subject to subsections 2.01(d)

and (e) and the conditions set forth in subsection 2.04(c),

the Originator shall sell, transfer, assign, set over and otherwise convey to

the Trust Depositor, without recourse other than as expressly provided in this

Agreement, (i) all the right, title and interest of the Originator in and to

the Substitute Loans sold pursuant to subsection 2.04(a) and (ii)

all other rights and property interests consisting of Loan Assets related to

such Substitute Loans (the property in clauses (i)–(ii) above, upon such

transfer, shall be included in the term “Loan Assets”).

 

(c)           The Originator shall transfer to the

Trust Depositor and the Trust Depositor shall transfer to the Issuer the

Substitute Loans and the other property and rights related thereto described in

subsection 2.04(a), in the case of the Originator, or subsection

2.04(b), in the case of the Trust Depositor, above only upon the

satisfaction of each of the following conditions on or prior to the related

Subsequent Transfer Date (and the delivery of a related Addition Notice by the

Trust Depositor shall be deemed a representation and warranty by the Trust

Depositor and of the Originator that such conditions have been or will be, as of

the related Subsequent Transfer Date, satisfied):

 

7

 

(i)            the Trust Depositor

shall have provided the Issuer and the Indenture Trustee with a timely Addition

Notice complying with the definition thereof contained herein, which notice

shall in any event be no later than five (5) days prior to the date of

addition;

 

(ii)           there shall have

occurred, with respect to each such Substitute Loan, a corresponding

Substitution Event with respect to one or more Loans then in the Loan Pool;

 

(iii)          the Substitute

Loan(s) being conveyed to the Issuer satisfy the Substitute Loan Qualification

Conditions;

 

(iv)          the Originator shall

have delivered to the Trust Depositor a duly executed written Subsequent

Purchase Agreement, which shall include a Subsequent List of Loans listing the

Substitute Loans;

 

(v)           the Trust Depositor

shall have delivered to the Issuer a duly executed written Subsequent Transfer

Agreement, which shall include a Subsequent List of Loans listing the Substitute

Loans;

 

(vi)          the Trust Depositor

shall have deposited or caused to be deposited in the Collection Account all

Collections received with respect to the Substitute Loans on and after the

related Subsequent Cut–Off Date;

 

(vii)         as of each

Subsequent Transfer Date, neither the Originator nor the Trust Depositor was

insolvent nor will either of them have been made insolvent by such transfer nor

is either of them aware of any pending insolvency;

 

(viii)        no selection

procedures believed by the Originator or the Trust Depositor to be adverse to

the interests of the Securityholders or the Swap Counterparties shall have been

utilized in selecting the Substitute Loans;

 

(ix)           each of the

representations and warranties made by the Originator and the Trust Depositor pursuant

to subsections 3.02 (including without limitation that such

Substitute Loan is an Eligible Loan), 3.03(b)(i), (ii) and (iv),

3.04 and 3.05 of the Transfer and Servicing Agreement and, with

respect to the Originator only, this Agreement, and applicable to the

Substitute Loans shall be true and correct as of the related Subsequent

Transfer Date; provided, however, that, (a) with respect to

the representation and warranty made by the Originator and Trust Depositor in subsection 3.05(a)

of the Transfer and Servicing Agreement and, with respect to the Originator

only, this Agreement, such representation and warranty shall only apply to a

Loan that is being substituted for a Loan that is not an Eligible Loan,

(b) the representations and warranties made by the Originator and Trust

Depositor in subsections 3.03(b)(iv) and 3.05 of the

Transfer and Servicing Agreement and, with respect to the Originator only, this

Agreement, shall be determined as if such Substitute Loan were included in the

Loan Pool as of the Initial Cut–Off Date and (c) the representation in

clause 38 of the definition of Eligible Loan shall not apply to Substitute

Loans that are not fully funded Loans;

 

8

 

(x)            the Originator

shall, at its own expense, on or prior to the Subsequent Transfer Date,

indicate in its Computer Records that ownership of the Substitute Loans

identified on the Subsequent List of Loans in the Subsequent Transfer Agreement

has been sold to the Issuer through the Trust Depositor pursuant to this

Agreement; and

 

(xi)           prior to such

substitution the Originator has received written confirmation from the Rating

Agencies (which shall respond to the Originator within five (5) Business Days

after receiving written notice from the Originator of its intention to

substitute a Loan) that the proposed substitution will not result in a Ratings

Effect; provided,

however,

that any failure by each of the Rating Agencies to respond to the Originator

shall be deemed to be a non–approval by the Rating Agencies; provided,

further,

however,

with respect to the substitution of a Prepaid Loan, only notice to, and not

confirmation from, Fitch shall be required.

 

Section 2.05                            Delivery

of Loan Files.

 

The Originator

shall deliver, on behalf of the Trust Depositor, possession of all

“instruments” (within the meaning of Article 9 of the UCC) not

constituting part of “chattel paper” (within the meaning of such

Article 9) that evidence any Loan, including all Underlying Notes, and all

other portions of the Loan Files, to the Indenture Trustee on behalf of the

Issuer and the Swap Counterparties five (5) Business Days prior to the

applicable Assignment Date, in each case endorsed in blank without

recourse.  Pursuant to Section 3.06

of the Indenture, the Issuer is required to deliver such instruments and Loan

Files to the Indenture Trustee as pledgee under the Indenture for the benefit

of the Noteholders and the Swap Counterparties.  Accordingly, the Trust Depositor hereby authorizes and directs

the Originator to deliver possession of all such instruments and the Loan Files

to the Indenture Trustee on behalf of and for the account of the Issuer, as

assignee of the Trust Depositor, and agrees that such delivery shall satisfy

the condition set forth in the first sentence of this Section 2.05.  The Originator shall also identify on the

List of Loans (including any deemed amendment thereof associated with any

Substitute Loans), whether by attached schedule or marking or other effective

identifying designation, all Loans that are or are evidenced by such

instruments.

 

Section 2.06                            Release

of Released Amounts.

 

Immediately upon

the release to the Trust Depositor by the Indenture Trustee of the Released

Amounts, the Trust Depositor hereby irrevocably agrees to release to the

Originator such Released Amounts, which release shall be automatic and shall

require no further act by the Trust Depositor; provided,  that,

the Trust Depositor 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.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

The Originator

makes, and upon execution of each Subsequent Purchase Agreement is deemed to

make, the following representations and warranties, on which the Trust

Depositor will

 

9

 

rely in conveying the Loan Assets on the applicable Assignment Date to

the Issuer, and on which the Issuer, the Securityholders and the Swap

Counterparties will rely.  The Trust

Depositor acknowledges that such representations and warranties are being made

by the Originator for the benefit of the Issuer, the Securityholders and the

Swap Counterparties.

 

Such

representations and warranties speak as of the execution and delivery of this

Agreement and as of the applicable Assignment Date, but shall survive the sale,

transfer and assignment of the Loan Assets to the Issuer.  The repurchase obligation or substitution

obligation of the Originator set forth in Section 6.01 constitutes the

sole remedy available for a breach of a representation or warranty of the

Originator set forth in Sections 3.01, 3.02, 3.03, 3.04

or 3.05 of this Agreement. 

Notwithstanding the foregoing, the Originator shall not be deemed to be

remaking any of the representations set forth in Section 3.03 or 3.05

on a Subsequent Transfer Date with respect to the Substitute Loans, as such

representations relate solely to the composition of the Initial Loans conveyed

on the Closing Date; provided, that, any inaccurate

representation as to concentrations contained in any Addition Notice shall be

subject to the same remedies hereunder as if such representation were made

under Section 3.05 on the Closing Date with respect to an Initial Loan.

 

Section

3.01                            Representations

and Warranties Regarding the Originator.

 

By its execution

of this Agreement and each Subsequent Purchase Agreement, the Originator

represents and warrants that:

 

(a)           Organization and Good Standing.  The Originator is a corporation duly

organized, validly existing and in good standing under the laws of the

jurisdiction of its organization and has the requisite corporate power to own

or lease its assets and to transact the business in which it is currently

engaged.  The Originator is duly

qualified to do business as a foreign corporation and is in good standing in

each jurisdiction in which the character of the business transacted by it or

properties owned or leased by it requires such qualification and in which the

failure so to qualify would not reasonably be expected to have a material

adverse effect on the business, properties, assets, or condition (financial or

otherwise) of the Originator or Trust Depositor.  The Originator is properly licensed in each jurisdiction to the

extent required by the laws of such jurisdiction in order to originate, and (if

the Originator is to be the Servicer) service the Loans in accordance with the

terms of the Transfer and Servicing Agreement.

 

(b)           Authorization.  The Originator has the power and authority

to make, execute, deliver and perform this Agreement and the other Transaction

Documents to which the Originator is a party and all of the transactions

contemplated under this Agreement and the other Transaction Documents to which

the Originator is a party, and has taken all necessary corporate action to

authorize the execution, delivery and performance of this Agreement and the

other Transaction Documents to which the Originator is a party.

 

(c)           Valid Sale.  This Agreement and each Subsequent Purchase

Agreement, if any, shall effect a valid sale, transfer and assignment of the

Loan Assets from the Originator to the Trust Depositor, enforceable against the

Originator in accordance with their terms.

 

10

 

 

(d)           Binding Agreements.  This Agreement and the other Transaction

Documents to which the Originator is a party constitute the legal, valid and

binding obligation of the Originator enforceable in accordance with their

terms, except as enforcement of such terms may be limited by bankruptcy,

insolvency or similar laws affecting the enforcement of creditors’ rights

generally and by the availability of equitable remedies.

 

(e)           No Consent Required.  The Originator is not required to obtain the

consent of any other party or any consent, license, approval or authorization

from, or registration or declaration with, any Governmental Authority in

connection with the execution, delivery, performance, validity or

enforceability of this Agreement and the other Transaction Documents to which

the Originator is a party except (i) for the filing of the UCC financing

statements and (ii) such consents, licenses, approvals, authorizations,

registrations and declarations which have been obtained and are in full force

and effect.

 

(f)            No Violations.  The Originator’s execution, delivery and

performance of this Agreement and the other Transaction Documents to which the

Originator is a party will not violate any provision of any Requirements of Law

or any order or decree of any court or the Certificate of Incorporation or

Bylaws of the Originator, or constitute (with or without notice or lapse of

time or both) a material breach of any mortgage, indenture, contract or other

agreement to which the Originator is a party or by which the Originator or any

of the Originator’s properties may be bound.

 

(g)           Litigation.  No litigation or administrative proceeding

of or before any court, tribunal or governmental body is currently pending, or,

to the knowledge of the Originator, threatened, against the Originator or any

of its respective properties or with respect to this Agreement or any other

Transaction Document to which the Originator is a party that, if adversely

determined, would, in the reasonable opinion of the Originator, be expected to

have a material adverse effect on the business, properties, assets or condition

(financial or other) of the Originator or the transactions contemplated by this

Agreement or any other Transaction Document to which the Originator is a party.

 

(h)           Name and Location; No Changes.  The Originator’s name and location (within

the meaning of Article 9 of the UCC) are as set forth in Section 8.03.  The Originator has not changed its name,

identity, structure, existence or state of incorporation, whether by amendment

of its certificate of incorporation, by reorganization or otherwise, and has

not changed its location (within the meaning of Article 9 of the UCC)

within the four (4) months preceding the Closing Date.

 

(i)            No Bulk Sales.  The execution, delivery and performance of

this Agreement by the Originator do not require compliance with any “bulk

sales” laws by the Originator.

 

(j)            Solvency.  The Originator on each date of, and after

giving effect to, the transfer of the Loans and any Substitute Loans, as the

case may be, to the Trust Depositor pursuant to this Agreement is and will be

Solvent.

 

(k)           Use of Proceeds.  No proceeds of the sale of any Initial Loan

or Substitute Loan hereunder received by the Originator will be used by the

Originator to purchase or carry any

 

11

 

“margin stock” as such term is defined in

Regulation T, U or X of the Board of Governors of the Federal Reserve

System.

 

(l)            An Investment Company.  The Originator is properly registered as an

“investment company” within the meaning, and is, and after consummation of the

transactions contemplated by this Agreement and the other Transaction Documents

will be, in compliance with all requirements, of the Investment Company Act of

1940, as amended.

 

(m)          Taxes.  To the best of the Originator’s knowledge,

(i) the Originator has filed all tax returns required to be filed in the

normal course of its business and has paid or made adequate provisions for the

payment of all taxes, assessments and other governmental charges due from the

Originator or is contesting any such tax, assessment or other governmental

charge in good faith through appropriate proceedings, (ii) no tax Lien has

been filed with respect thereto, and (iii) no claim is being asserted with

respect to any such tax, fee or other charge.

 

(n)           Sale Treatment.  The Originator has treated the transfer of

Loan Assets to the Trust Depositor for all purposes (other than sale treatment

for financial accounting purposes) as a sale and purchase on all of its

relevant books, records, financial statements and other applicable documents,

except to the extent applicable tax laws require otherwise.

 

(o)           Marking of Files.  The Originator will have, at its own

expense, prior to the close of business on the Closing Date, (i) indicated

in its Computer Records that ownership of the Loans transferred by it to the

Trust Depositor and identified on the List of Loans have been sold to the Trust

Depositor and (ii) cause to be affixed to the original of each Underlying

Note and a copy of each loan agreement the following legend:

 

This loan agreement/note is subject to a security interest granted to

Wells Fargo Bank Minnesota, National Association, as Indenture Trustee on

behalf of the Noteholders and the Swap Counterparties.  UCC–1 Financing Statements covering this

loan agreement/note have been filed with the Secretary of State of the State of

Delaware.  Such Lien will be released

only in connection with appropriate filings in such offices. Consequently,

potential purchasers of this loan agreement/note must refer to such filings to

determine whether such Lien has been released.

 

(p)           Security Interest.

 

(i)            This Agreement

creates a valid, continuing and enforceable security interest (as defined in

the applicable UCC) in the Loan Assets in favor of the Trust Depositor, which

security interest is prior to all other Liens (except for Permitted Liens), and

is enforceable as such against creditors of and purchasers from the Originator;

 

(ii)           such Loans, along

with the related Loan Files, constitute either a “general intangible,” an

“instrument,” an “account,” “investment property,” or “chattel paper,” within

the meaning of the applicable UCC;

 

12

 

(iii)          the Originator owns

and has good and marketable title to such Loan Assets free and clear of any

Lien, claim or encumbrance of any Person (other than Permitted Liens);

 

(iv)          the Originator has

received all consents and approvals required by the terms of the Loan Assets to

the sale of the Loan Assets hereunder to the Trust Depositor;

 

(v)           the Originator has

caused the filing of all appropriate financing statements in the proper filing

office in the appropriate jurisdictions under Requirements of Law in order to

perfect the security interest in such Loan Assets granted to the Trust

Depositor under this Agreement;

 

(vi)          other than the

security interest granted to the Trust Depositor pursuant to this Agreement and

the Transfer and Servicing Agreement, the Originator has not pledged, assigned,

sold, granted a security interest in or otherwise conveyed any of such Loan

Assets;

 

(vii)         the Originator has

not authorized the filing of and is not aware of any financing statements

against the Originator that include a description of collateral covering such

Loan Assets other than any financing statement (A) relating to the

security interest granted to the Trust Depositor under this Agreement and the

Transfer and Servicing Agreement, or (B) that has been terminated;

 

(viii)        the Originator is

not aware of the filing of any judgment or tax Lien filings against the

Originator;

 

(ix)           all original

executed copies of each Underlying Note that constitute or evidence the Loan

Assets have been delivered to the Indenture Trustee;

 

(x)            the Originator has

received a written acknowledgment from the Indenture Trustee that the Indenture

Trustee or its bailee is holding the Underlying Notes that constitute or

evidence the Loan Assets solely on behalf of and for the benefit of the

Noteholders and the Swap Counterparties; and

 

(xi)           none of the

Underlying Notes that constitute or evidence the Loan Assets has any marks or

notations indicating that they have been pledged, assigned or otherwise

conveyed to any Person other than the Issuer and the Indenture Trustee, as assignees

of the Trust Depositor.

 

(q)           Value Given.  The cash payments received by the Originator

in respect of the purchase price of each Loan sold hereunder constitutes the

face value of such Loan and reasonably equivalent value in consideration for

the transfer to the Trust Depositor of such Loan under this Agreement, such

transfer was not made for or on account of an antecedent debt owed by the

Originator to the Trust Depositor, and such transfer was not and is not

voidable or subject to avoidance under any Insolvency Law.

 

(r)            Mortgages.  Other than the Loan to Cycle Gear, if a Loan

is secured by real property and the Originator, other than solely in its

capacity as collateral agent under any Loan

 

13

 

Document with an Obligor, is the mortgagee, the

mortgage has been assigned by the Originator to the Trust Depositor and by the

Trust Depositor to the Issuer and the Assignment of Mortgage has been delivered

to the Indenture Trustee.

 

(s)           Selection Procedures.  No selection procedures determined by the

Originator to be materially adverse to the interests of the Trust Depositor

were utilized by the Originator in selecting the Loans to be sold, assigned,

transferred, set–over and otherwise conveyed hereunder.

 

(t)            Environmental.  At the

time of origination of each Loan where real property that is material to the

operations of the related Obligor serves as Collateral for such Loan, the

related mortgaged property was free of contamination from toxic substances or

hazardous wastes requiring action under Requirements of Law or is subject to

ongoing environmental rehabilitation approved by the Servicer, and, as of the

Closing Date, the Originator has no knowledge of any such contamination from

toxic substances or hazardous waste material on any such real property unless

such items are below action levels.

 

The

representations and warranties in subsection 3.01(p) shall survive the

termination of this Agreement and such representations and warranties may not

be waived by any party hereto.

 

Section

3.02                            Representations

and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate.

 

The Originator

represents and warrants (x) with respect to subsections (a)–(b) below,

as to each Loan as of the applicable Cut–Off Date, and (y) with respect to subsections

(c)–(d) below, as to the Loan Pool in the aggregate as of the applicable

Cut–Off Date (after giving effect to the addition of any Substitute Loans to

the Loan Pool), that:

 

(a)           List of Loans.  The information set forth in the List of

Loans (as the same may be amended or deemed amended in respect of a conveyance

of Substitute Loans on a Subsequent Transfer Date) is true, complete and

correct as of the applicable Cut–Off Date.

 

(b)           Eligible Loan.  Such Loan satisfies the criteria for the

definition of Eligible Loan set forth in the Transfer and Servicing Agreement

as of the date of its conveyance hereunder (or, with respect to clause 38 of

the definition of Eligible Loan, as of the Cut–Off Date).

 

(c)           No Fraud.  Each Loan was originated without any fraud

or material misrepresentation by the Originator or, to the best of the

Originator’s knowledge, on the part of the Obligor or the Vendor.

 

(d)           Loans Secured by Real Property.  Less than 40% of the Aggregate Outstanding

Balance of the Loan Pool consists of Loans principally secured by real

property.

 

Section

3.03                            Representations

and Warranties Regarding the Initial Loans in the Aggregate.

 

The Originator

represents and warrants, as of the Closing Date, that:

 

14

 

(a)           Amounts.  The Aggregate Outstanding Loan Balance of

the Loans as of the Initial Cut–Off Date equals the sum of the principal

balance of the Class A Notes, the Class B Notes, the Class C

Notes and the Certificate on the Closing Date.

 

(b)           Characteristics.  The Initial Loans as of the Initial Cut–Off

Date have the following additional characteristics: (i) no Loan has a

remaining maturity of more than 118 months; (ii) the final Scheduled

Payment on the Loan with the latest maturity is not later than May 20, 2012;

(iii) no Loan was originated after the Initial Cut–Off Date; (iv) not

more than 32.6% of the Initial Loans (as measured by the Aggregate Outstanding

Loan Balance) provide for Scheduled Payments due on a basis other than monthly.

 

Section

3.04                            Representations

and Warranties Regarding the Loan Files.

 

The Originator

represents and warrants as of the applicable Assignment Date that (i) to

the extent that any Loans were pledged as collateral for the CP Transaction,

immediately prior to such date (as applicable), a collateral custodian under

the CP Transaction had possession of each such original Underlying Note and a

copy of the Loan and the related complete Loan File, and there were no other

custodial agreements relating to the same in effect except for a custodial

agreement between ACAS and ACS Funding Trust I under the CP Transaction;

(ii) each of such documents which is required to be signed by the Obligor

has been signed by the Obligor in the appropriate spaces; (iii) all blanks

on any form have been properly filled in and each form has otherwise been

correctly prepared; and (iv) the complete Loan File for each Loan is in

the possession of the Indenture Trustee.

 

Section

3.05                            Representations

and Warranties Regarding Concentrations of Initial Loans.

 

The Originator

represents and warrants as of the Closing Date, as to the composition of the

Initial Loans in the Loan Pool as of the Initial Cut–Off Date, that:

 

(a)           the sum of the Outstanding Loan

Balances of Loans in respect of Obligors that are in the same industry (by SIC

code) shall not exceed 3.8%;

 

(b)           [Reserved]; and

 

(c)           the sum of the Outstanding Loan

Balances of Loans in respect of Obligors that have their principal executive

offices in the same State of the United States shall not exceed 14.3%.

 

Section

3.06                            Representations

and Warranties By the Trust Depositor.

 

By its execution

of this Agreement and each Subsequent Purchase Agreement, the Trust Depositor

represents and warrants to the Originator that:

 

(a)           Organization and Good Standing.  The Trust Depositor is a limited liability

company duly organized, validly existing and in good standing under the laws of

Delaware and has the power to own its assets and to transact the business in

which it is currently engaged.  The

Trust Depositor is duly qualified to do business as a foreign entity and is in

good standing in

 

15

 

each jurisdiction in which the character of the

business transacted by it or properties owned or leased by it requires such

qualification and in which the failure so to qualify would not reasonably be

expected to have a material adverse effect on the business, properties, assets,

or condition (financial or other) of the Trust Depositor or the Issuer.

 

(b)           Authorization.  The Trust Depositor has the power and

authority to make, execute, deliver and perform this Agreement and the other

Transaction Documents to which it is a party and all of the transactions

contemplated under this Agreement and the other Transaction Documents to which

it is a party, and to create the Issuer and cause it to make, execute, deliver

and perform its obligations under this Agreement and the other Transaction

Documents to which it is a party, and has taken all necessary corporate action

to authorize the execution, delivery and performance of this Agreement and the

other Transaction Documents to which it is a party and to cause the Issuer to

be created.

 

(c)           Valid Sale.  This Agreement and each Subsequent Transfer

Agreement, if any, shall effect a valid sale, transfer and assignment of the

Loan Assets, enforceable against the Trust Depositor and creditors of and

purchasers from the Trust Depositor.

 

(d)           Binding Agreements.  This Agreement and the other Transaction

Documents to which the Trust Depositor is a party constitute the legal, valid

and binding obligation of the Trust Depositor enforceable in accordance with

their terms, except as enforcement of such terms may be limited by applicable

Insolvency Laws and general principles of equity, whether considered in a suit

at law or in equity.

 

(e)           No Consent Required.  The Trust Depositor is not required to

obtain the consent of any other party or any consent, license, approval or

authorization from, or registration or declaration with, any Governmental

Authority in connection with the execution, delivery, performance, validity or

enforceability of this Agreement or the other Transaction Documents to which it

is a party except (i) for the filing of the UCC financing statements and (ii) such

consent, licenses, approvals, authorization registrations and declarations

which have been obtained and are in full force and effect.

 

(f)            No Violations.  The execution, delivery and performance of

this Agreement and the other Transaction Documents to which it is a party by

the Trust Depositor, and the consummation of the transactions contemplated

hereby and thereby, will not violate any Requirement of Law applicable to the

Trust Depositor, or constitute a material breach of any mortgage, indenture,

contract or other agreement to which the Trust Depositor is a party or by which

the Trust Depositor or any of the Trust Depositor’s properties may be bound, or

result in the creation or imposition of any security interest, Lien, charge,

pledge, preference, equity or encumbrance of any kind upon any of its

properties pursuant to the terms of any such mortgage, indenture, contract or

other agreement, other than as contemplated by the Transaction Documents.

 

(g)           Litigation.  No litigation or administrative proceeding

of or before any court, tribunal or governmental body is currently pending, or

to the knowledge of the Trust Depositor threatened, against the Trust Depositor

or any of its properties or with respect to this Agreement, the other

Transaction Documents to which it is a party or the Securities (1) that, if

adversely

 

16

 

determined, would in the reasonable judgment of the

Trust Depositor be expected to have a material adverse effect on the business,

properties, assets or condition (financial or otherwise) of the Trust Depositor

or the Issuer or the transactions contemplated by this Agreement or the other

Transaction Documents to which the Trust Depositor is a party or (2) seeking to

adversely affect the federal income tax or other federal, state or local tax

attributes of the Certificate or Notes.

 

(h)           Bulk Sales.  The execution, delivery and performance of

this Agreement do not require compliance with any “bulk sales” laws by the

Trust Depositor.

 

(i)            Solvency.  The Trust Depositor, at the time of and

after giving effect to each conveyance of Loan Assets under the Transfer and

Servicing Agreement is and will be Solvent.

 

(j)            Taxes.  The Trust Depositor has filed or caused to

be filed all tax returns that, to its knowledge, are required to be filed and

has paid all taxes shown to be due and payable on such returns or on any

assessments made against it or any of its property and all other taxes, fees or

other charges imposed on it or any of its property by any Governmental

Authority (other than any amount of tax due, the validity of which is currently

being contested in good faith by appropriate proceedings and with respect to

which reserves in accordance with generally accepted accounting principles have

been provided on the books of the Trust Depositor); no tax Lien has been filed

and, to the Trust Depositor’s knowledge, no claim is being asserted, with

respect to any such tax, fee or other charge.

 

(k)           Name and Location; No Changes.  The Trust Depositor’s name and location

(within the meaning of Article 9 of the UCC) are as set forth in Section 13.04.  The Trust Depositor has not changed its

name, identity, structure, existence or state of formation, whether by

amendment of its certificate of formation, by reorganization or otherwise, and

has not changed its location within the four (4) months preceding the Closing

Date.

 

(l)            Not an Investment Company.  The Trust Depositor is not required to be

registered as an “investment company” within the meaning of the Investment

Company Act of 1940, as amended (or the Trust Depositor is exempt from all

provisions of such act).

 

(m)          Sale Treatment.  The Trust Depositor has treated the transfer

of Loan Assets to the Trust Depositor for all purposes (other than for financial

accounting purposes) as a sale and purchase on all of its relevant books,

records, financial statements and other applicable documents, except to the

extent applicable tax laws require otherwise.

 

Such

representations speak as of the execution and delivery of this Agreement and as

of the Closing Date in the case of the Initial Loans, and as of the applicable

Subsequent Transfer Date in the case of the Substitute Loans, but shall survive

the sale, transfer and assignment of the Loans to the Issuer.

 

17

 

ARTICLE IV

 

PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS

 

Section

4.01                            Custody

of Loans.

 

The contents of

each Loan File shall be held in the custody of the Indenture Trustee under the

terms of the Transfer and Servicing Agreement and the Indenture for the benefit

of, and as agent for, the Securityholders and the Swap Counterparties.

 

Section 4.02                            Filing.

 

On or prior to the

Closing Date, the Originator shall cause the UCC financing statement(s)

referred to in subsection 2.02(viii) hereof to be filed.

 

Section

4.03                            Name

Change or Relocation.

 

(a)           During the term of this Agreement,

the Originator shall not change its name, identity, structure, existence or

location (as defined in Article 9 of the UCC) without first giving at least

thirty (30) days’ prior written notice to the Owner Trustee, the Indenture

Trustee and each Swap Counterparty.

 

(b)           If any change in the Originator’s

name, identity, structure, existence, location (as defined in Article 9 of the

UCC) or other action would make any financing or continuation statement or

notice of ownership interest or Lien relating to any Loan Asset seriously

misleading within the meaning of applicable provisions of the UCC or any title

statute, the Originator, no later than five (5) Business Days after the

effective date of such change, shall file such amendments as may be required to

preserve and protect the Trust Depositor’s, the Issuer’s and the Indenture

Trustee’s interests in the Loan Assets and the proceeds thereof.

 

Section

4.04                            Chief

Executive Office.

 

During the term of

this Agreement, and subject to the other terms and provisions herein relating

to changes in location, the Originator will maintain its chief executive office

in one of the States of the United States.

 

Section

4.05                            Costs

and Expenses.

 

The Originator

hereby confirms that the Servicer will pay all reasonable costs and

disbursements in connection with the perfection and the maintenance of

perfection, as against all third parties, of the Indenture Trustee’s and the

Issuer’s right, title and interest in and to the Loan Assets (including,

without limitation, the security interest in the Collateral related thereto and

the security interests provided for in the Indenture).

 

18

 

Section

4.06                            Sale

Treatment.

 

The Originator

shall treat the transfer of Loan Assets made hereunder for all purposes (other

than for federal income tax and financial accounting purposes) as a sale and

purchase on all of its relevant books, records, financial statements and other

applicable documents.

 

Section

4.07                            Separateness

from Trust Depositor.

 

The Originator

agrees to take or refrain from taking or engaging in with respect to the Trust

Depositor each of the actions or activities specified in the “substantive

consolidation” opinion of Winston & Strawn (including any certificates of

the Originator attached thereto), delivered on the Closing Date, upon which the

conclusions therein are based.

 

ARTICLE V

 

COVENANTS OF THE ORIGINATOR

 

Section

5.01                            Corporate

Existence.

 

During the term of

this Agreement, the Originator will keep in full force and effect its

existence, rights and franchises as a corporation under the laws of the

jurisdiction of its incorporation and will obtain and preserve its

qualification to do business in each jurisdiction in which such qualification

is or shall be necessary to protect the validity and enforceability of this

Agreement, the other Transaction Documents and each other instrument or

agreement necessary or appropriate to the proper administration of this

Agreement and the transactions contemplated hereby.  In addition, all transactions and dealings between the

Originator, the Trust Depositor and the Issuer will be conducted on an

arm’s–length basis.

 

Section

5.02                            Loans

Not to Be Evidenced by Promissory Notes.

 

The Originator

will take no action to cause any Loan not originally evidenced by an instrument

as described in Section 2.05 hereof, to be evidenced by an instrument

(as defined in the UCC), except in connection with the enforcement or

collection of such Loan.

 

Section

5.03                            Security

Interests.

 

The Originator

will not sell, pledge, assign or transfer to any other Person, or grant,

create, incur, assume or suffer to exist any Lien on any Loan in the Loan Pool

or related Collateral, whether now existing or hereafter transferred to the

Trust Depositor, or any interest therein. 

The Originator will immediately notify the Trust Depositor, the Issuer

and the Indenture Trustee of the existence of any Lien on any Loan in the Loan

Pool or related Collateral, and the Originator shall defend the right, title

and interest of the Trust Depositor, the Issuer and the Indenture Trustee in,

to and under the Loans in the Loan Pool and the related Collateral against all

claims of third parties; provided, however, that nothing

in this Section 5.03 shall prevent or be deemed to prohibit the

Originator from suffering to exist Permitted Liens upon any of the Loans in the

Loan Pool or any related Collateral.

 

19

 

Section

5.04                            Compliance

with Law.

 

The Originator

hereby agrees to comply in all material respects with all Requirements of Law

applicable to the Originator.

 

Section

5.05                            Liability

of Originator; Indemnities.

 

(a)           The Originator shall be liable in

accordance herewith only to the extent of the obligations specifically

undertaken by the Originator under this Agreement.

 

(b)           The Originator shall indemnify,

defend and hold harmless the Trust Depositor from and against any taxes that

may at any time be asserted against the Trust Depositor with respect to the

transactions contemplated herein and in the other Transaction Documents,

including any sales, gross receipts, general corporation, tangible personal

property, Maryland personal property replacement privilege or license taxes

(but not including any taxes asserted with respect to, and as of the date of,

the sale of the Loans to the Issuer or the issuance and original sale of the

Securities, or asserted with respect to ownership of the Loans, or federal or

other income taxes arising out of distributions on the Certificate or the

Notes) and costs and expenses in defending against the same.

 

(c)           The Originator shall indemnify,

defend and hold harmless the Trust Depositor from and against any loss,

liability or expense incurred by reason of the Originator’s willful

misfeasance, bad faith or gross negligence (other than errors in judgment) in

the performance of its duties under this Agreement, or by reason of reckless

disregard of its obligations and duties under this Agreement.

 

(d)           Indemnification under this Section

shall include, without limitation, reasonable fees and expenses of counsel and

expenses of litigation.  If the

Originator shall have made any indemnity payments pursuant to this Section

5.05, and the Trust Depositor thereafter shall collect any of such amounts

from others, the Trust Depositor shall promptly repay such amounts to the

Originator, without interest.

 

Section

5.06                            Limitation

on Liability of Originator and Others.

 

The Originator and

any director or officer or employee or agent of the Originator may rely in good

faith on any document of any kind, prima facie properly executed and submitted

by any Person respecting any matters arising hereunder.  The Originator and any director or officer

or employee or agent of the Originator shall be reimbursed by the Trust

Depositor for any liability or expense incurred by reason of the Trust

Depositor’s willful misfeasance, bad faith or negligence (except errors in judgment)

in the performance of their respective duties hereunder, or by reason of the

reckless disregard of their respective obligations and duties hereunder.  The Originator shall not be under any

obligation to appear in, prosecute or defend any legal action that shall not be

incidental to its obligations under this Agreement, and that in its opinion may

involve it in any expense or liability.

 

20

 

ARTICLE VI

 

REMEDIES UPON MISREPRESENTATION;

REPURCHASE OPTION

 

Section 6.01                            Repurchases

of, or Substitution for, Loans for Breach of Representations and Warranties.

 

Upon a discovery

by the Servicer, the Trust Depositor or the Trustees of a breach of a

representation or warranty of the Originator as set forth in Section 3.01,

Section 3.02, Section 3.03, Section 3.04, and Section

3.05, or as made or deemed made in any Addition Notice or any Subsequent

Purchase Agreement relating to Substitute Loans, that materially and adversely

affects the interests of the Noteholders or any Swap Counterparty in such Loan

(in either case without regard to the benefits of the Reserve Fund) (an “Ineligible

Loan”), or of an inaccuracy with respect to the representations as to

concentrations of the Initial Loans made under Section 3.05, the

party discovering the breach shall give prompt written notice to the other

parties (and the Servicer shall, pursuant to Section 11.01 of the

Transfer and Servicing Agreement, with respect to an inaccuracy concerning

concentrations, select one or more Loans, without employing adverse selection,

to be the related Excess Loan for purposes of this Section); provided,

that,

the Trustees shall have no duty or obligation to inquire or to investigate the

breach by the Originator of any of such representations or warranties.  The Originator shall repurchase each such

Ineligible Loan or Excess Loan, at a repurchase price equal to the Transfer

Deposit Amount, not later than the next succeeding Determination Date following

the date the Originator becomes aware of, or receives written notice from any

Trustee, the Servicer or the Trust Depositor of, any such breach or inaccuracy

and which breach or inaccuracy has not otherwise been cured; provided,

however,

that if the Originator is able to effect a substitution for any such Ineligible

Loan or Excess Loan in compliance with Section 2.04, the Originator may,

in lieu of repurchasing such Loan, effect a substitution for such affected Loan

with a Substitute Loan not later than the date a repurchase of such affected

Loan would be required hereunder; provided  further  that,

with respect to a breach of representation or warranty relating to the Loans in

the aggregate and not to any particular Loan, the Originator may select Loans

(without adverse selection) to repurchase (or substitute for) such that, had

such Loans not been included as part of the Loan Assets (and, in the case of a

substitution, had such Substitute Loan been included as part of the Loan Assets

instead of the selected Loan), there would have been no breach of such

representation or warranty. 

Notwithstanding any other provision of this Agreement, the obligation of

the Originator described in this Section 6.01 shall not (a) terminate or

be deemed released by any party hereto upon a Servicer Transfer pursuant to Article

VIII of the Transfer and Servicing Agreement or (b) include any

obligation to make payment on account of a breach of a Loan by an Obligor

subsequent to the date on which such Loan was transferred to the Issuer.  The repurchase obligation described in this Section

6.01 is in no way to be satisfied with monies in the Reserve Fund.

 

Section

6.02                            Reassignment

of Repurchased or Substituted Loans.

 

Upon receipt by

the Indenture Trustee for deposit in the Collection Account of the amounts

described in Section 6.01 (or upon the Subsequent Transfer Date related

to a Substitute Loan described in Section 6.01), and upon receipt of a

certificate of a Servicing Officer in the form attached as Exhibit F to

the Transfer and Servicing Agreement, the Indenture Trustee is

 

21

 

required under the Transfer and Servicing Agreement to assign to the

Trust Depositor, and the Trust Depositor shall assign to the Originator, all of

the Issuer’s (or Trust Depositor’s, as applicable) right, title and interest in

the repurchased or substituted Loan and related Loan Assets without recourse,

representation or warranty.  Such

reassigned Loan shall no longer thereafter be included in any calculations of

Outstanding Loan Balances required to be made hereunder or otherwise be deemed

a part of the Loan Pool.

 

ARTICLE VII

 

ORIGINATOR INDEMNITIES

 

Section

7.01                            Originator’s

Indemnification.

 

The Originator

will defend and indemnify the Trust Depositor, the Issuer, the Trustees, any

agents of the Trustees and the Securityholders and the Swap Counterparties (any

of which, an “Indemnified Party”) against any and all costs, expenses,

losses, damages, claims and liabilities, joint or several, including reasonable

fees and expenses of counsel and expenses of litigation (collectively, “Costs”)

arising out of or resulting from (i) this Agreement or the use, ownership or

operation of any Collateral by the Originator or the Servicer or any Affiliate

of either, (ii) any representation or warranty or covenant made by the

Originator in this Agreement being untrue or incorrect (subject to the

limitations described in the Preamble to Article III of this

Agreement), and (iii) any untrue statement or alleged untrue statement of a

material fact contained in the Private Placement Memorandum or in any amendment

thereto or the omission or alleged omission to state therein a material fact

necessary to make the statements therein, in light of the circumstances in

which they were made, not misleading, in each case to the extent, but only to

the extent, that such untrue statement or alleged untrue statement was made in

conformity with information furnished to the Trust Depositor by the Originator

specifically for use therein; provided,  however, that the

Originator shall not be required to so indemnify any such Indemnified Party for

such Costs to the extent that such Cost shall be due to or arise from the

willful misfeasance, bad faith or negligence of such Indemnified Party, or the

failure of such Indemnified Party to comply with any express undertaking,

agreement or covenant made by such Indemnified Party in a Transaction Document

to which it is a party or the breach subsequent to the Closing Date by an

Obligor under a Loan.  Notwithstanding

any other provision of this Agreement, the obligation of the Originator under

this Section 7.01 shall not terminate upon a Servicer Transfer pursuant

to Article VIII of the Transfer and Servicing Agreement and shall

survive any termination of that agreement or this Agreement.

 

Section

7.02                            Liabilities

to Obligors.

 

No obligation or

liability to any Obligor under any of the Loans is intended to be assumed by

the Trustees, the Issuer, the Securityholders and the Swap Counterparties under

or as a result of this Agreement and the transactions contemplated hereby.

 

Section

7.03                            Tax

Indemnification.

 

(a)           The Originator agrees to pay, and to

indemnify, defend and hold harmless the Trust Depositor, the Issuer, the

Trustees, the Securityholders and the Swap Counterparties from

 

22

 

any taxes that may at any time be asserted with

respect to, and as of the date of, the transfer of the Loans to the Trust

Depositor and the transfer by the Trust Depositor of the Loans to the Issuer

and the further pledge by the Issuer to the Indenture Trustee, including,

without limitation, any sales, gross receipts, general corporation, personal

property, privilege or license taxes (but not including any federal, state or

other taxes arising out of the creation of the Issuer and the issuance of the

Notes and Certificates) and costs, expenses and reasonable counsel fees in

defending against the same, whether arising by reason of the acts to be

performed by the Originator or the Servicer under this Agreement or imposed

against the Issuer, any Securityholder, any Swap Counterparty or

otherwise.  Notwithstanding any other

provision of this Agreement, the obligation of the Originator under this Section

7.03 shall not terminate upon a Servicer Transfer pursuant to Article

VIII of the Transfer and Servicing Agreement and shall survive any

termination of this Agreement.

 

(b)           The Originator agrees to pay and to

indemnify, defend and hold harmless the Issuer, the Trust Depositor, the

Trustees, the Securityholders and the Swap Counterparties, on an after–tax

basis (as hereinafter defined), from any state or local personal property

taxes, gross rent taxes, leasehold taxes or similar taxes that may at any time

be asserted with respect to the ownership of the Loans (including security

interests therein) and the receipt of rentals therefrom by the Issuer, and

costs, expenses and reasonable counsel fees in defending against the same,

excluding, however, taxes based upon or measured by gross or net income or

receipts (other than taxes imposed specifically with respect to rentals).  As used in this Section, the term “after–tax

basis” shall mean, with respect to any payment to be received by an indemnified

person, that the amount to be paid by the Originator shall be equal to the sum

of (i) the amount to be received without regard to this sentence, plus

(ii) any additional amount that may be required so that after reduction by all

taxes imposed under any federal, state and local law, and taking into account

any current credits or deductions arising therefrom, resulting either from the

receipt of the payments described in both clauses (i) and (ii)

hereof, such sum shall be equal to the amount described in clause (i)

above.

 

Section

7.04                            Adjustments.

 

(a)           The Originator agrees that, with

respect to each Loan that provides for a Prepayment Amount less than the amount

calculated in accordance with the definition thereof, the Originator shall

indemnify the Trust Depositor or the Issuer as assignee thereof in an amount at

least equal to the excess of the “Prepayment Amount” as calculated in

accordance with the definition thereof over the amount otherwise payable upon

prepayment of such Loan.

 

(b)           The Originator hereby further agrees

that if any real property collateral securing any Loan described in subsection

3.02(d) hereof becomes the subject of any claims, proceedings, Liens or

encumbrances with respect to any material violation or claimed material

violation of any federal or state environmental laws or regulations, such Loan

shall for all purposes hereunder be, at and following the time of discovery by

the Originator, the Trust Depositor, the Servicer or any Trustee of such fact,

deemed an Ineligible Loan subject to the same remedial and recourse provisions

hereunder as other Loans determined to be Ineligible Loans hereunder.

 

23

 

Section

7.05                            Operation

of Indemnities.

 

Indemnification

under this Article VII shall include, without limitation, reasonable

fees and expenses of counsel and expenses of litigation.  If the Originator has made any indemnity

payments to the Trust Depositor or the Trustees pursuant to this Article VII

and the Trust Depositor or the Trustees thereafter collects any of such amounts

from others, the Trust Depositor or the Trustees will repay such amounts

collected to the Originator, except that any payments received by the Trust

Depositor or the Trustees from an insurance provider as a result of the events

under which the Originator’s indemnity payments arose shall be repaid prior to

any repayment of the Originator’s indemnity payment.

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section

8.01                            Amendment.

 

(a)           This Agreement may be amended by the

Originator and the Trust Depositor, without the consent of any Securityholders,

to cure any ambiguity, to correct or supplement any provisions in this

Agreement that are inconsistent with the provisions herein, or to add any other

provisions with respect to matters or questions arising under this Agreement

that shall not be inconsistent with the provisions of this Agreement; provided,

however, (i) that the consent of the Noteholders will be required

unless the Issuer obtains an Opinion of Counsel stating that the amendment does

not adversely affect in any material respect the interests of any Holder of the

Class A Notes or Class B Notes and (ii) that the consent of each Swap

Counterparty will be required unless the Issuer obtains an Opinion of Counsel

stating that the amendment does not adversely affect in any material respect

the interests of the Swap Counterparties.

 

(b)           This Agreement may also be amended

from time to time by the Originator and the Trust Depositor, with the consent

of the Servicer, the Indenture Trustee, the Owner Trustee on behalf of the

Issuer, each Swap Counterparty and the Required Holders, 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) increase or reduce in any manner the amount of, or

accelerate or delay the timing of or change the method of calculating

Collections of payments on the Loans (including by way of amendment of related

definitions), or (ii) change in any manner (including through amendment of related

definitions) the Holders that are required to consent to any such amendment,

without the consent of the Holders of all Notes and Certificates of the

relevant affected Class then outstanding.

 

(c)           Prior to the execution of any such

amendment or consent, the Originator shall cause the Indenture Trustee to

furnish written notification of the substance of such amendment or consent,

together with a copy thereof, to each Rating Agency.

 

(d)           Promptly after the execution of any

such amendment or consent, the Originator shall cause the Owner Trustee and the

Indenture Trustee, as the case may be, to furnish written notification of the

substance of such amendment or consent to each Securityholder and each

 

24

 

Swap Counterparty, respectively.  It shall not be necessary for the consent of

the Securityholders or the Swap Counterparties pursuant to subsection

8.01(b) to approve the particular form of any proposed amendment or

consent, but it shall be sufficient if such consent shall approve the substance

thereof.  The manner of obtaining such

consents and of evidencing the authorization by the Securityholders and the

Swap Counterparties of the execution thereof shall be subject to such

reasonable requirements as the Owner Trustee or the Indenture Trustee may

prescribe.

 

(e)           Prior to the execution of any

amendment to this Agreement, the Owner Trustee 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.  Such Trustee may, but shall not be obligated

to, consent to any such amendment that affects such Trustee’s own rights,

duties or immunities under this Agreement or otherwise.

 

Section

8.02                            Governing

Law.

 

(a)           This Agreement shall be construed in

accordance with the laws of the State of New York and the obligations, rights,

and remedies of the parties under the Agreement shall be determined in

accordance with such laws.

 

(b)           EACH PARTY HERETO HEREBY WAIVES, TO

THE FULLEST EXTENT PERMITTED BY REQUIREMENTS OF LAW, ANY RIGHT IT MAY HAVE TO A

TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT

OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  Each party hereto (i) certifies that no representative,

agent or attorney of any other party has represented, expressly or otherwise,

that such other party would not, in the event of litigation, seek to enforce

the foregoing waiver and (ii) acknowledges that it and the other parties hereto

have been induced to enter into this Agreement by, among other things, the

mutual waivers and certifications in this subsection 8.02(b).

 

Section 8.03                            Notices.

 

All notices,

demands, certificates, requests and communications hereunder (“notices”) shall

be in writing and shall be effective (a) upon receipt when sent through the

U.S. mails, registered or certified mail, return receipt requested, postage

prepaid, with such receipt to be effective the date of delivery indicated on

the return receipt, or (b) one Business Day after delivery to an overnight

courier, or (c) on the date personally delivered to an Authorized Officer of

the party to which sent, or (d) on the date transmitted by legible telecopier

transmission with a confirmation of receipt, in all cases addressed to the

recipient as follows:

 

(i)            If to the

Originator:

 

American Capital Strategies, Ltd.

2 Bethesda Metro Center

14th Floor

Bethesda, Maryland  20814

Attention:           Compliance Officer

Facsimile No.:     (301) 654–6714

 

25

 

(ii)           If to the Trust

Depositor:

 

ACAS Business Loan LLC, 2002–2

2 Bethesda Metro Center

14th Floor

Bethesda, Maryland  20814

Attention:           Compliance Officer

Facsimile No.:     (301) 654–6714

 

(iii)          If to S&P:

 

Standard & Poor’s Ratings Services

55 Water Street

41st Floor

New York, New York  10041

Attention:           Surveillance: Asset–Backed Services

Facsimile No.:     (212) 438–2662

 

(iv)          If to Moody’s:

 

Moody’s Investors Service, Inc.

99 Church Street

4th Floor

New York, New York  10007

Attention:           ABS Monitoring Department

Facsimile No.:     (212) 553–0344

 

(v)           If to Fitch:

 

Fitch, Inc.

One State Street Plaza

New York, New York 10004

Attention:           CDO Surveillance

Facsimile No.:     (212) 514–6501

 

(vi)          If to the Initial

Purchaser:

 

Wachovia Securities, Inc.

One Wachovia Center, Mail Code: NC0610

301 South College Street

Charlotte, North Carolina  28288–0610

Attention:           Asset Securitization Division

Facsimile No.:     (704) 383–4012

 

(vii)         If to a Swap

Counterparty:

 

At the address set forth for such party in

the applicable Swap.

 

26

 

Each party hereto

may, by notice given in accordance herewith to each of the other parties

hereto, designate any further or different address to which subsequent notices

shall be sent.

 

Section

8.04                            Severability

of Provisions.

 

If one or more of

the covenants, agreements, provisions or terms of this Agreement shall be for

any reason whatsoever held invalid, 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 provisions of this Agreement, the Notes, the

Certificates or the rights of the Holders thereof, and any such prohibition,

invalidity or unenforceability in any jurisdiction shall not invalidate or

render unenforceable such covenants, agreements, provisions or terms in any

other jurisdiction.

 

Section

8.05                            Third

Party Beneficiaries.

 

Except as

otherwise specifically provided herein, the parties hereto hereby manifest

their intent that no third party, other than each Trustee, each Securityholder

and each Swap Counterparty, shall be deemed a third party beneficiary of this

Agreement, and specifically that the Obligors are not third party beneficiaries

of this Agreement.

 

Section

8.06                            Counterparts.

 

This Agreement may

be executed by facsimile signature and in several counterparts, each of which

shall be an original and all of which shall together constitute but one and the

same instrument.

 

Section

8.07                            Headings.

 

The headings of

the various Articles and Sections herein are for convenience of reference only

and shall not define or limit any of the terms or provisions hereof.

 

Section

8.08                            No

Bankruptcy Petition; Disclaimer.

 

(a)           Each of the Originator and the Trust

Depositor covenants and agrees that, prior to the date that is one (1) year and

one (1) day after the payment in full of all amounts owing in respect of all

outstanding Classes of Notes rated by any Rating Agency, it will not institute

against the Trust Depositor (in the case of the Originator) or the Issuer, or

join any other Person in instituting against the Trust Depositor or 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

8.08 will survive the termination of this Agreement.

 

(b)           The provisions of this Section

8.08 shall be for the third party benefit of those entitled to rely

thereon, including the Securityholders and the Swap Counterparties, and shall

survive the termination of this Agreement.

 

27

 

Section

8.09                            Jurisdiction.

 

Any legal action

or proceeding with respect to this Agreement may be brought in the courts of

the United States for the Southern District of New York, and by execution and

delivery of this Agreement, each party hereto consents, for itself and in

respect of its property, to the non–exclusive jurisdiction of those

courts.  Each such party irrevocably

waives any objection, including any objection to the laying of venue or based

on the grounds of forum non conveniens, which it may now or hereafter have to

the bringing of any action or proceeding in such jurisdiction in respect of

this Agreement or any document related hereto.

 

Section

8.10                            Prohibited

Transactions with Respect to the Issuer.

 

The Originator

shall not:

 

(a)           Provide credit to any Securityholder

for the purpose of enabling such Securityholder to purchase Notes or

Certificates, respectively;

 

(b)           Purchase any Notes or Certificates in

an agency or trustee capacity; or

 

(c)           Except in its capacity as Servicer as

provided in the Transfer and Servicing Agreement, lend any money to the Issuer.

 

Section

8.11                            Merger

or Consolidation of Originator.

 

(a)           The Originator will keep in full

force and effect its existence, rights and franchise as a Delaware corporation,

and the Originator will obtain and preserve its qualification to do business as

a foreign corporation in each jurisdiction in which such qualification is or

shall be necessary to protect the validity and enforceability of this Agreement

and of any of the Loans and to perform its duties under this Agreement.

 

(b)           Any person into which the Originator

may be merged or consolidated, or any corporation resulting from such merger or

consolidation to which the Originator is a party, or any person succeeding by

acquisition or transfer to substantially all of the assets and to the business

of the Originator, shall be the successor to the Originator hereunder, without

execution or filing of any paper or any further act on the part of any of the

parties hereto, notwithstanding anything herein to the contrary.

 

(c)           Upon the merger or consolidation of

the Originator or transfer of substantially all of its assets and its business

as described in this Section 8.11, the Originator shall provide the

Indenture Trustee, each Swap Counterparty and the Rating Agencies notice of

such merger or consolidation within thirty (30) days after completion of the

same.

 

Section

8.12                            Assignment

or Delegation by the Originator.

 

Except as

specifically authorized hereunder, the Originator may not convey and assign or

delegate any of its rights or obligations hereunder absent the prior written

consent of the Trust Depositor, the Trustees and the Swap Counterparties, and

any attempt to do so without such consent shall be void.

 

28

 

Section 8.13                            Limited Recourse.

 

The obligations of

the Trust Depositor and the Originator under this Agreement are solely the

obligations of the Trust Depositor and the Originator.  No recourse shall be had for the payment of

any amount owing by the Trust Depositor or the Originator under this Agreement

or for the payment by the Trust Depositor or the Originator of any fee in

respect hereof or any other obligation or claim of or against the Trust

Depositor or the Originator arising out of or based upon this Agreement,

against any employee, officer, director, Affiliate, shareholder, partner or

member of the Trust Depositor or the Originator or against the employee,

officer, director, shareholder, partner or member or any Affiliate of such

Person.  The provisions of this

Section 8.13 shall survive termination of this Agreement

 

[Remainder

of Page Intentionally Left Blank]

 

29

 

IN WITNESS WHEREOF,

the parties hereto have caused this Agreement to be duly executed by their

respective officers as of the day and year first above written.

 

	

   

  	

  AMERICAN CAPITAL STRATEGIES, LTD.,

  as the Originator

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Name:

  	

   

  
	

   

  	

  Title:

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  ACAS BUSINESS LOAN LLC, 2002–2,

  as the

  Trust Depositor

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name:

  	

   

  
	

   

  	

  Title:

  	

   

  
	

   

  	

   

  
							

 

 

 

Exhibit

A

 

Form of Assignment

 

In accordance with

the ACAS Transfer Agreement (the “ACAS Transfer Agreement”), dated as of

August 8, 2002, made by and between the undersigned, American Capital

Strategies, Ltd., as Originator, and ACAS Business Loan LLC, 2002–2 (the “Trust

Depositor”), as assignee thereunder, the undersigned does hereby sell,

transfer, assign, set over and otherwise convey to the Issuer, on behalf of the

Trust Depositor, (i) the Initial Loans and all Collections and other

monies due or to become due in payment of such Loans on and after the Initial

Cut–Off Date, including any Prepayment amounts, any Prepayment Premiums, any

Late Charges, any payments in respect of a casualty or early termination, any

Insurance Proceeds and any Liquidation Proceeds received with respect to the

foregoing; (ii) the Collateral related to such 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 such Loans, all proceeds

from any sale or other disposition of such Collateral, and all Insurance

Policies; (iii) the Loan Files and all documents and records (including

computer records) relating thereto; (iv) all guarantees, indemnities,

warranties and other agreements or arrangements of whatever character from time

to time supporting or securing payment of such Loans; (v) the Trust

Accounts and all Trust Account Property (to the extent of the Originator’s

interest if any therein); and (vi) all income, payments, products,

proceeds and other benefits of any and all of the foregoing.

 

Capitalized terms

used herein have the meanings given such terms in the ACAS Transfer Agreement.

 

This Assignment is

made pursuant to and in reliance upon the representation and warranties on the

part of the undersigned contained in Article III of the ACAS Transfer

Agreement and no others.

 

IN WITNESS

WHEREOF, the undersigned has caused this Assignment to be duly executed this

8th day of  August, 2002.

 

	

   

  	

  AMERICAN CAPITAL STRATEGIES, LTD.

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Name:

  	

   

  
	

   

  	

  Title:

  	

   

  
						

 

A-1

 

TABLE OF CONTENTS

 

	

  ARTICLE

  I

  	

  DEFINITIONS

  
	

   

  	

   

  
	

  Section 1.01

  	

  Definitions

  
	

  Section 1.02

  	

  Other Terms

  
	

  Section 1.03

  	

  Computation

  of Time Periods

  
	

  Section 1.04

  	

  Interpretation

  
	

  Section 1.05

  	

  References

  
	

  Section 1.06

  	

  Calculations

  
	

   

  	

   

  
	

  ARTICLE II

  	

  TRANSFER OF LOAN

  ASSETS

  
	

   

  	

   

  
	

  Section 2.01

  	

  Transfer of Loan

  Assets

  
	

  Section

  2.02

  	

  Conditions

  to Transfer of Loan Assets to the Trust Depositor

  
	

  Section

  2.03

  	

  Acceptance

  by the Trust Depositor

  
	

  Section

  2.04

  	

  Conveyance

  of Substitute Loans

  
	

  Section 2.05

  	

  Delivery of Loan

  Files

  
	

  Section 2.06

  	

  Release of

  Released Amounts

  
	

   

  	

   

  
	

  ARTICLE III

  	

  REPRESENTATIONS

  AND WARRANTIES

  
	

   

  	

   

  
	

  Section

  3.01

  	

  Representations

  and Warranties Regarding the Originator

  
	

  Section

  3.02

  	

  Representations

  and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate

  
	

  Section

  3.03

  	

  Representations

  and Warranties Regarding the Initial Loans in the Aggregate

  
	

  Section

  3.04

  	

  Representations

  and Warranties Regarding the Loan Files

  
	

  Section

  3.05

  	

  Representations

  and Warranties Regarding Concentrations of Initial Loans

  
	

  Section

  3.06

  	

  Representations

  and Warranties By the Trust Depositor

  
	

   

  	

   

  
	

  ARTICLE

  IV

  	

  PERFECTION

  OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

  
	

   

  	

   

  
	

  Section 4.01

  	

  Custody of Loans

  
	

  Section 4.02

  	

  Filing

  
	

  Section 4.03

  	

  Name Change or

  Relocation

  
	

  Section 4.04

  	

  Chief Executive

  Office

  
	

  Section 4.05

  	

  Costs and Expenses

  
	

  Section 4.06

  	

  Sale Treatment

  
	

  Section

  4.07

  	

  Separateness

  from Trust Depositor

  
	

   

  	

   

  
	

  ARTICLE V

  	

  COVENANTS OF

  THE ORIGINATOR

  
	

   

  	

   

  
	

  Section 5.01

  	

  Corporate Existence

  
	

  Section

  5.02

  	

  Loans

  Not to Be Evidenced by Promissory Notes

  
	

  Section 5.03

  	

  Security Interests

  
	

  Section 5.04

  	

  Compliance with Law

  
	

  Section

  5.05

  	

  Liability

  of Originator; Indemnities

  

 

i

 

	

  Section

  5.06

  	

  Limitation

  on Liability of Originator and Others

  
	

   

  	

   

  
	

  ARTICLE

  VI

  	

  REMEDIES

  UPON MISREPRESENTATION; REPURCHASE OPTION

  
	

   

  	

   

  
	

  Section 6.01

  	

  Repurchases of, or Substitution for, Loans

  for Breach of Representations and Warranties

  
	

  Section

  6.02

  	

  Reassignment

  of Repurchased or Substituted Loans

  
	

   

  	

   

  
	

  ARTICLE VII

  	

  ORIGINATOR

  INDEMNITIES

  
	

   

  	

   

  
	

  Section

  7.01

  	

  Originator’s

  Indemnification

  
	

  Section 7.02

  	

  Liabilities to

  Obligors

  
	

  Section 7.03

  	

  Tax Indemnification

  
	

  Section 7.04

  	

  Adjustments

  
	

  Section 7.05

  	

  Operation of

  Indemnities

  
	

   

  	

   

  
	

  ARTICLE VIII

  	

  MISCELLANEOUS

  
	

   

  	

   

  
	

  Section 8.01

  	

  Amendment

  
	

  Section 8.02

  	

  Governing Law

  
	

  Section 8.03

  	

  Notices

  
	

  Section 8.04

  	

  Severability

  of Provisions

  
	

  Section 8.05

  	

  Third Party

  Beneficiaries

  
	

  Section 8.06

  	

  Counterparts

  
	

  Section 8.07

  	

  Headings

  
	

  Section

  8.08

  	

  No

  Bankruptcy Petition; Disclaimer

  
	

  Section 8.09

  	

  Jurisdiction

  
	

  Section

  8.10

  	

  Prohibited

  Transactions with Respect to the Issuer

  
	

  Section

  8.11

  	

  Merger

  or Consolidation of Originator

  
	

  Section

  8.12

  	

  Assignment

  or Delegation by the Originator

  
	

  Section 8.13

  	

  Limited Recourse

  
	

   

  	

   

  
	

   

  	

   

  
	

  EXHIBITS

  
	

   

  	

   

  
	

  Exhibit A

  	

  Form of Assignment

  

 

iiExhibit 10.2

EXECUTION

COPY

 

 

TRANSFER AND SERVICING AGREEMENT

 

by and among

 

ACAS BUSINESS LOAN

TRUST 2002–2,

as the Issuer,

 

ACAS BUSINESS LOAN

LLC, 2002–2,

as the Trust Depositor,

 

AMERICAN CAPITAL

STRATEGIES, LTD.,

as the Originator and as

the Servicer,

 

and

 

WELLS FARGO BANK

MINNESOTA, NATIONAL ASSOCIATION,

as the Indenture Trustee

and as the Backup Servicer

 

 

Dated as of August 8,

2002

 

 

ACAS Business Loan Trust Notes Series 2002–2

Class A, Class B and Class C Notes

 

 

TRANSFER AND SERVICING AGREEMENT

 

THIS TRANSFER AND

SERVICING AGREEMENT, dated as of August 8, 2002,

is by and among:

 

(1)                                  ACAS BUSINESS LOAN TRUST

2002–2, a business trust created and existing under the laws of the

State of Delaware, as the issuer (together with its successors and assigns, in

such capacity, the “Issuer”);

 

(2)                                  ACAS BUSINESS LOAN LLC,

2002–2, a Delaware limited liability company, as the trust depositor

(together with its successor and assigns, in such capacity, the “Trust Depositor”);

 

(3)                                  AMERICAN CAPITAL

STRATEGIES, LTD., a Delaware corporation (together with its

successors and assigns, “ACAS”), as the

servicer (together with its successors and assigns, in such capacity, the “Servicer”), and as the originator (together

with its wholly–owned subsidiaries, successors and assigns, in such capacity,

the “Originator”); and

 

(4)                                  WELLS FARGO BANK

MINNESOTA, NATIONAL ASSOCIATION (together with its successors and

assigns, “Wells Fargo”), not in its

individual capacity but as the indenture trustee (together with its successors

and assigns, in such capacity, the “Indenture

Trustee”), and not in its individual capacity but as the backup

servicer (together with its successors and assigns, in such capacity, the “Backup Servicer”).

 

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WHEREAS,

in the regular course of its business, the Originator originates, purchases

and/or acquires Loans (as defined herein);

 

WHEREAS,

the Trust Depositor acquired the Initial Loans from the Originator and may

acquire from time to time thereafter certain Substitute Loans (such Initial Loans

and Substitute Loans, together with certain related property as more fully

described herein, being the Loan Assets as defined herein);

 

WHEREAS,

it was a condition to the Trust Depositor’s acquisition of the Initial Loans

from the Originator that the Originator make certain representations and

warranties regarding the Loan Assets for the benefit of the Trust Depositor as

well as the Issuer;

 

WHEREAS,

on the Closing Date (defined herein) the Trust Depositor will fund the Issuer

by selling, conveying and assigning all its right, title and interest in such

Loan Assets and certain other assets to the Issuer;

 

WHEREAS,

the Issuer is willing to purchase and accept assignment of the Loan Assets from

the Trust Depositor pursuant to the terms hereof; and

 

1

 

WHEREAS,

the Servicer is willing to service the Loan Assets for the benefit and account

of the Issuer pursuant to the terms hereof;

 

NOW, THEREFORE,

based upon the above recitals, the mutual premises and agreements contained

herein, and other good and valuable consideration, the receipt and sufficiency

of which are hereby acknowledged, the parties hereto, intending to be legally

bound, hereby agree as follows:

 

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 following

meanings:

 

“ACAS” has the meaning given to such term in

the Preamble.

 

“ACAS Transfer Agreement” means the ACAS

Transfer Agreement, dated as of the date hereof, between ACAS and the Trust

Depositor, as amended, modified, restated, replaced, waived, substituted,

supplemented or extended from time to time.

 

“Accelerated Amortization Event” means the Aggregate Outstanding

Loan Balance is less than the Aggregate Outstanding Principal Balance of the

Notes for a period greater than sixty (60) calendar days.

 

“Addition Notice” means, with

respect to any transfer of Substitute Loans to the Issuer pursuant to Section 2.04 (and the Trust Depositor’s

corresponding prior purchase of such Loans from the Originator), a notice,

which shall be given at least five (5) days prior to the related Subsequent

Transfer Date, identifying the Substitute Loans to be transferred, the

Outstanding Loan Balance of such Substitute Loans and the related Substitution

Event (with respect to an identified Loan or Loans then in the Loan Pool) to

which such Substitute Loan relates, with such notice to be signed both by the

Trust Depositor and the Originator.

 

“Additional Principal Amount”

means, with respect to any Payment Date, an amount equal to, but in no event

less than zero, the excess of the Aggregate Outstanding Principal Balance prior

to any distribution on such day over the sum of (i) the Aggregate

Outstanding Loan Balance as of the last Business Day of the related Collection

Period plus (ii) all Principal Collections on deposit in the Collection

Account as of the last Business Day of the related Collection Period.

 

“Additional Servicing Fee”

means an amount, in addition to the Servicing Fee, necessary to induce a

Successor Servicer to serve as Servicer hereunder.

 

“Affiliate” of any specified

Person means any other Person controlling or controlled by, or under common

control with, such specified Person. 

For the purposes of this definition, “control” (including the terms

“controlling”, “controlled by” and “under common control with”), when used with

respect to any specified Person means the possession, direct or indirect, of

the power 

 

2

 

to vote 5% or more of the voting securities of such

Person or to direct or cause the direction of the management and policies of

such Person whether through the ownership of voting securities, by contract or

otherwise.

 

“Agented Notes” means one or

more promissory notes issued by an Eligible 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) upon an assignment of the note to

the Trust Depositor under the ACAS Transfer Agreement and in turn to the Issuer

under this Agreement, the original note will be endorsed to the Indenture

Trustee, and held by the Indenture Trustee, on behalf of the Noteholders and

the Swap Counterparties, (c) 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 Collateral, including the right to receive and collect

payments directly in its own name and to enforce its rights directly against

the Obligor thereof, (d) the note is secured by an undivided interest in the

Collateral which also secures and is shared by, on a pro-rata basis, all other

holders of such Obligor’s notes of equal priority and (e) other than with

respect to the Loan to Marcal which will be sold to the Trust Depositor and the

Issuer, respectively, on the Closing Date, the Originator (or American Capital

Financial Services, Inc., a wholly-owned subsidiary of the Originator) is the

collateral agent and payment agent for all noteholders of such Obligor; provided,

however,

Agented Notes shall not include (1) the obligations, if any, of any agents

under the Loan Documents evidencing such Agented Loans, and (2) the interests,

rights and obligations under the Loan Documents evidencing such Agented Notes

that are retained by the Originator or are owned or owed by other noteholders.

 

“Aggregate Notional Amount”

shall have the meaning given to such term in the Indenture.

 

“Aggregate Outstanding Loan Balance”

means, with respect to any Payment Date, an amount equal to the aggregate

remaining Outstanding Loan Balance of the Loans as of the last day of the

related Collection Period after giving effect to Defaulted Loans, Prepaid

Loans, Ineligible Loans and Excess Loans.

 

“Aggregate Outstanding Principal Balance”

means, as of any date of determination, the sum of the Outstanding Principal

Balances of each Class of Notes outstanding on such date.

 

“Agreement” means this Transfer

and Servicing Agreement, as amended, modified, restated, replaced, waived,

substituted, supplemented or extended from time to time.

 

“Assignment” means each

Assignment, substantially in the form of Exhibit A,

relating to an assignment, transfer and conveyance of Loans and related

property by the Trust Depositor to the Issuer.

 

“Assignment Date” means each

date on which the Trust Depositor transfers Loans, or portions thereof, to the

Issuer, which date shall be (i) the Closing Date, in the case of the

Initial Loans and (ii) the applicable Subsequent Transfer Date, in the

case of the Subsequent Loans.

 

“Assignment of Mortgage” means,

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 an undivided interest in the related mortgage, deed of trust,

security deed or similar security instrument and all

 

3

 

other documents related to such Loan to the Issuer as assignee of the

Trust Depositor and to grant a perfected Lien thereon in favor of the Indenture

Trustee on behalf of the Noteholders and the Swap Counterparties; provided,

however,

with respect to Agented Notes and all other Loans where a collateral agent has

been appointed under the related Loan Documents to hold the collateral securing

the Loan, 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 (or American Capital

Financial Services, Inc., a wholly-owned subsidiary of the Originator), as

collateral agent for all noteholders of the Obligor, of the related mortgage,

deed of trust, security deed 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 (or American Capital

Financial Services, Inc., a wholly-owned subsidiary of the Originator), as

collateral agent for all such noteholders.

 

“Backup Servicer” has the

meaning given to such term in the Preamble

and includes any successor backup servicer hereunder.

 

“Backup Servicer Termination Notice”

has the meaning given to such term in subsection 5.25(a).

 

“Backup Servicer Transfer” has

the meaning given to such term in subsection 5.25(b).

 

“Backup Servicing Fee” has the

meaning given to such term in the fee letter, dated as of the date hereof,

among the Originator, the Trust Depositor, the Issuer and the Backup Servicer,

as amended, modified, restated, replaced, waived, substituted, supplemented or

extended from time to time.

 

“Business Day” means any day

which is neither a Saturday or a Sunday, nor another day on which banking

institutions in the cities of New York, New York or Minneapolis, Minnesota are

authorized or obligated by law, executive order, or governmental decree to be

closed.

 

“Business Trust Statute” means

Chapter 38 of Title 12 of the Delaware Code, 12 Del Code 3801 et. seq.,

as the same may be amended from time to time, or any successor legislation

thereto.

 

“Case Logic” means Case Logic,

Inc. and CL Holdings, Inc.

 

“Casualty Loss” means, with respect

to any item of Collateral, the loss, theft, damage beyond repair or

governmental condemnation or seizure of such item of Collateral.

 

“Certificate” means each ACAS

Business Loan Trust 2002–2 Certificate representing a beneficial equity

interest in the Issuer and issued pursuant to the Trust Agreement.

 

“Certificate Distribution Account”

has the meaning given to such term in the Trust Agreement.

 

“Certificate Register” has the

meaning given to such term in the Trust Agreement.

 

“Certificateholder” has the

meaning given to such term in the Trust Agreement.

 

4

 

“Class” means any of the group

of Notes identified herein as, as applicable, the Class A Notes, the

Class B Notes or the Class C Note.

 

“Class A Interest Amount”

means, with respect to each Interest Accrual Period, an amount equal to the

product of (i) the Outstanding Principal Balance of the Class A Notes as of the

first day of such Interest Accrual Period (after giving effect to all

distributions made on such day) and (ii) the applicable Class A Note

Interest Rate for such Interest Accrual Period.

 

“Class A Expected Maturity Date”

means July 20, 2006.

 

“Class A Noteholder” means

each Person in whose name a Class A Note is registered in the Note Register.

 

“Class A Note Interest Rate”

means the annual rate of interest payable with respect to the Class A Notes,

which shall be equal to 2.288750% for the first Payment Date and, thereafter,

shall be equal to LIBOR plus 0.50% per annum (in each case calculated on the

basis of a year of 360 days and actual days elapsed in the Interest Accrual

Period).

 

“Class A Notes” means the

ACAS Business Loan Trust 2002–2, Class A Loan–Backed Notes, Series 2002–2,

issued pursuant to the Indenture.

 

“Class A Trigger” means any

Payment Date on or after July 20, 2006 on which any of the Class A Notes

shall be outstanding.

 

“Class B Accrued Payable”

means, with respect to any Payment Date, the sum of, for each preceding Payment

Date, the excess, if any, of (i) the amount that would have been calculated as

the Class B Interest Amount on each such preceding Payment Date if the

calculation was made using clause (ii)(a)

of the definition of “Class B Interest Amount” only and clause (ii)(b) of the definition was not used

over (ii) the amount calculated as the Class B Interest Amount on each such

preceding Payment Date, together with interest thereon at the then applicable

Class B Note Interest Rate.

 

“Class B Interest Amount”

means, with respect to each Interest Accrual Period, an amount equal to the

product of (i) the applicable Class B Note Interest Rate for such Interest

Accrual Period and (ii) the lesser of (a) the Outstanding Principal

Balance of the Class B Notes as of the first day of such Interest Accrual

Period (after giving effect to all distributions on such day) and (b) the

excess, if any, of (x) the Aggregate Outstanding Loan Balance as of the last

day of the related Collection Period over (y) the Outstanding Principal Balance

of the Class A Notes as of the first day of such Interest Accrual Period (after

giving effect to all distributions on such day); provided,

however,

that for purposes of this definition, in no event will the amount determined

pursuant to clause (b) hereof be less

than zero.

 

“Class B Expected Maturity Date”

means January 20, 2008.

 

“Class B Noteholder” means

each Person in whose name a Class B Note is registered in the Note

Register.

 

5

 

“Class B Note Interest Rate”

means the annual rate of interest payable with respect to the Class B

Notes, which shall be equal to 3.388750% for the first Payment Date and,

thereafter, shall be equal to LIBOR plus 1.60% per annum (in each case

calculated on the basis of a year of 360 days and actual days elapsed in the

Interest Accrual Period).

 

“Class B Notes” means the

ACAS Business Loan Trust 2002–2, Class B Loan–Backed Notes, Series 2002–2,

issued pursuant to the Indenture.

 

“Class B Trigger” means any

Payment Date on or after January 20, 2008 on which any of the Class B Notes

shall be outstanding.

 

“Class C Expected Maturity Date”

means May 20, 2012.

 

“Class C Note” means ACAS Business Loan Trust 2002-2,

Class C Loan-Backed Note, Series 2002-2, issued pursuant to the Indenture.

 

“Class C Noteholder” means each Person in whose name a

Class C Note is registered in the Note Register.

 

“Closing Date” means August 8,

2002.

 

“Code” means the Internal

Revenue Code of 1986, as amended from time to time, or any successor

legislation thereto.

 

“Collateral” means the assets

of each Obligor that have been pledged as security for each Loan, including but

not limited to real and personal property, accounts receivable, inventory,

equipment and intellectual property rights.

 

“Collection Account” means the

Trust Account so designated and established pursuant to Section 7.01.

 

“Collection Period” means (a)

with respect to the first Payment Date, the period from and including the

Initial Cut–Off Date to but excluding the 10th day of the calendar month in

which such Payment Date occurs, and (b) with respect to any subsequent Payment

Date, the period from and including the 10th day of the previous calendar month

to but excluding the 10th day of the calendar month in which such Payment Date

occurs.

 

“Collections” means all

payments received on or after the related Cut-Off Date for a Loan on account of

(i) interest on the Loans including payments of capitalized interest with

respect to Deferred Interest Loans and all Late Charges and default and waiver

charges, (ii) principal on the Loans, (iii) Scheduled Payments and

Prepayments, (iv) Liquidation Proceeds on Defaulted Loans,

(v) Insurance Proceeds, (vi) Servicer Advances, (vii) the

purchase or repurchase of any Loan, (viii) the amount of any losses

incurred in connection with the investment of funds in the Trust Accounts, and

(ix) Net Trust Swap Receipts and Swap Breakage Receipts, all as related to

amounts attributable to the Loans in the Loan Pool or the related Collateral,

but excluding any Excluded Amounts and Retained Interest.

 

6

 

“Commission” means the United

States Securities and Exchange Commission or any successor thereto.

 

“Computer Records” means the

computer records generated by the Servicer or any subservicer that provide

information relating to the Loans and that were used by the Originator in

selecting the Loans conveyed to the Trust Depositor pursuant to Section 2.01 (and any Substitute Loans

conveyed to the Trust Depositor pursuant to Section 2.04).

 

“Contractual Obligation” means,

with respect to any Person, any provision of any securities issued by such

Person or any indenture, mortgage, deed of trust, contract, undertaking,

agreement, instrument or other document to which such Person is a party or by

which it or any of its property is bound or is subject.

 

“Corporate Trust Office” means,

with respect to the Indenture Trustee or Owner Trustee, as applicable, the

office of the Indenture Trustee or Owner Trustee at which at any particular

time its corporate trust business shall be principally administered, which

offices at the date of the execution of this Agreement are located at the

addresses set forth in Section 13.04.

 

“CP Transaction” means the Loan

Funding and Servicing Agreement, dated as of March 31, 1999, among ACS

Funding Trust I, the Servicer, the Investors named therein, Variable Funding

Capital Corporation, Wachovia Securities, Inc. (f/k/a First Union Securities,

Inc. successor-in-interest to First Union Capital Markets Corp.), Wachovia

Bank, National Association (f/k/a First Union National Bank) and Wells Fargo

Bank Minnesota, National Association (f/k/a Norwest Bank Minnesota, National

Association), as amended, modified, restated, replaced, waived, substituted,

supplemented or extended from time to time, and all documents executed in

connection therewith and all transactions contemplated thereby.

 

“Credit and Collection Policy”

means those credit, collection, customer relation and service policies relating

to the Loans and related Loan Files described in Exhibit

K, as the same may be amended or modified from time to time in

accordance with subsection 5.17(g);

and, with respect to any Successor Servicer, the collection procedures and

policies of such Person at the time such Person becomes Successor Servicer.

 

“Cut–Off Date” means either or

both (as the context may require) the Initial Cut-Off Date and any Subsequent

Cut-Off Date, as applicable to the Loan or Loans in question.

 

“Cycle Gear” means Cycle Gear,

Inc.

 

“Date of Processing” means,

with respect to any transaction or Collection, the date on which such

transaction or Collection is first recorded (and, in the case of a transaction

or Collection related to a particular Loan, identified as to such particular

Loan) on the Originator’s or Servicer’s computer master file of Loans (without

regard to the effective date of such recordation).

 

“Deal Agent” means Wachovia

Securities, Inc., as deal agent and/or administrative agent under the CP

Transaction.

 

7

 

“Defaulted Loan” means a Loan

in the Loan Pool with respect to which there has occurred one or more of the

following: (i) the occurrence of both (a) any portion of a payment of

interest on or principal of such Loan is not paid when due (without giving

effect to any grace period) and (b) within one hundred twenty (120) days

of when such delinquent payment was first due, all delinquencies have not been

cured, (ii) an Insolvency Event has occurred with respect to the related

Obligor, (iii) the related Obligor has suffered any material adverse change

(determined in accordance with the underlying note purchase agreement),

(iv) the Servicer has determined in its sole discretion, in accordance

with its Credit and Collection Policy, that such Loan is not collectible or

(v) if on a quarterly mark–to–market the value is written down due to a

credit event, then that portion of the Loan is defaulted.

 

“Deferred Interest Loans” means a Loan that requires the Obligor to pay

only a portion of the accrued and unpaid interest on a current basis, the remainder

of which is deferred and paid later together with interest thereon as a lump

sum and is treated as Interest Collections at the time it is received.

 

“Definitive Notes” shall have

the meaning specified in the Indenture.

 

“Delinquent” means, with respect

to a Loan, (i) both (a) any

portion of a payment of interest or principal on such Loan is not paid when due

(without giving effect to any grace period or Servicer Advance) and

(b) within sixty (60) days of when such delinquent payment was first due

all delinquencies have not been cured, (ii) the Loan is modified, waived

or varied by the Servicer or any subservicer due to an Obligor’s inability to

pay principal or interest, (iii) the related Obligor is not paying any of

the accrued and unpaid interest on a current basis, or (iv) any portion of

a payment of principal or interest on such Loan comes from the proceeds of

another loan made by the Originator or its Affiliates to such Obligor.

 

“Determination Date” means,

with respect to any Payment Date, the third (3rd) Business Day prior to such

Payment Date.

 

“Eligible Deposit Account”

means either (a) a segregated account with a Qualified Institution, or

(b) a segregated trust account with the corporate trust department of a

depository institution organized under the laws of the United States or any one

of the states thereof, including the District of Columbia (or any domestic

branch of a foreign bank), and acting as a trustee for funds deposited in such

account, so long as any of the securities of such depository institution shall

have a (i) in the case of Moody’s, a short-term credit rating of at least

“A-2” and “P-1”, (ii) in the case of Fitch, a short–term credit rating of

at least “F-1+”, and (iii) in the case of S&P, a commercial paper,

short–term debt rating of “A-1+” and a long-term unsecured debt rating of

“AA-”.

 

“Eligible Investments” means,

with respect to any Payment Date, negotiable instruments or securities or other

investments maturing on or before such Payment Date (a) which, except in

the case of demand or time deposits, investments in money market funds and

Eligible Repurchase Obligations, are represented by instruments in bearer or

registered form or ownership of which is represented by book entries by a

clearing agency or by a Federal Reserve Bank in favor of depository

institutions eligible to have an account with such Federal Reserve Bank who

hold such investments on behalf of their customers, (b) that, as of any

date of determination, mature 

 

8

 

by their terms on or prior to the Payment Date immediately following

such date of determination, and (c) that evidence:

 

(i)            direct obligations of, and

obligations fully guaranteed as to full and timely payment by, the United

States (or by any agency thereof to the extent such obligations are backed by

the full faith and credit of the United States);

 

(ii)           demand deposits, time deposits or

certificates of deposit of depository institutions or trust companies

incorporated under the laws of the United States or any state thereof and

subject to supervision and examination by federal or state banking or

depository institution authorities; provided, however,

that at the time of the Issuer’s investment or contractual commitment to invest

therein, the commercial paper, if any, and short–term unsecured debt

obligations (other than such obligation whose rating is based on the credit of

a Person other than such institution or trust company) of such depository

institution or trust company shall have a credit rating from each Rating Agency

in the Highest Required Investment Category granted by such Rating Agency,

which, in the case of Fitch, shall be “F–1+”;

 

(iii)          commercial paper, or other short term

obligations, having, at the time of the Issuer’s investment or contractual

commitment to invest therein, a rating in the Highest Required Investment

Category granted by each Rating Agency, which, in the case of Fitch, shall be

“F-1+”;

 

(iv)          demand deposits, time deposits or

certificates of deposit that are fully insured by the FDIC and either have a

rating on their certificates of deposit or short–term deposits from Moody’s and

S&P of “P-1” and “A-1+”, respectively, and, if rated by Fitch, from Fitch

of “F-1+”;

 

(v)           notes that are payable on demand or

bankers’ acceptances issued by any depository institution or trust company

referred to in clause (ii) above;

 

(vi)          investments in taxable money market

funds or other regulated investment companies having, at the time of the

Issuer’s investment or contractual commitment to invest therein, a rating of

the Highest Required Investment Category from Moody’s, S&P and Fitch (if

rated by Fitch) or otherwise subject to satisfaction of the Rating Agency

Condition;

 

(vii)         time deposits (having maturities of not

more than ninety (90) days) by an entity the commercial paper of which has, at

the time of the Issuer’s investment or contractual commitment to invest

therein, a rating of the Highest Required Investment Category granted by each

Rating Agency;

 

(viii)        Eligible Repurchase Obligations with a

rating acceptable to the Rating Agencies, which, in the case of Fitch, shall be

“F-1+” and in the case of S&P shall be “A-1+”; or

 

(ix)           any negotiable instruments or

securities or other investments subject to satisfaction of the Rating Agency Condition.

 

9

 

The Indenture Trustee may purchase or sell to itself

or an Affiliate, as principal or agent, the Eligible Investments described

above.

 

“Eligible Loan” means, as of any date of

determination, each Loan with respect to which each of the following is true:

 

(1)           the Loan and the pledge of Collateral

thereunder is valid, binding and enforceable, except the enforcement may be

limited by insolvency, bankruptcy, moratorium, reorganization or other similar

laws affecting enforceability of creditors’ rights and the availability of

equitable remedies, and the Loan contains a clause substantially to the effect

that the related Obligor agrees to make payments without any deduction, offset,

netting, recoupment, defenses, reservation of rights or counterclaim;

 

(2)           the Loan is evidenced by an

Underlying Note that has been duly authorized and that 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;

 

(3)           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 loaning of money to the Obligor

thereof;

 

(4)           the Loan is not a Defaulted Loan and

is not Delinquent;

 

(5)           the Obligor of such Loan has executed

all appropriate documentation required by the Originator;

 

(6)           the Loan, together with the Loan File

related thereto, is a “general intangible”, “payment intangible”, an

“instrument”, an “account”, or “chattel paper” within the meaning of the UCC of

all jurisdictions that govern the perfection of a security interest granted

therein;

 

(7)           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;

 

(8)           any applicable taxes in connection

with the transfer of the Loan have been paid and the Obligor has been given any

assurances (including with respect to payment of transfer taxes and compliance

with securities laws) required by the note purchase agreement in connection

with the transfer of such Loan;

 

(9)           the Loan is denominated and payable

only in United States dollars in the United States;

 

(10)         the Loan bears some current interest,

which is due and payable monthly or quarterly;

 

10

 

(11)         the Loan, together with the Loan File

related thereto, does not contravene in any material respect any Requirements

of Law (including, without limitation, laws, rules and regulations relating to

usury, truth in lending, fair credit billing, fair credit reporting, equal

credit opportunity, fair debt collection practices and privacy) and with

respect to which no party to the Loan File related thereto is in material

violation of any such Requirements of Law;

 

(12)         no consent or waiver is required in

connection with the transfer of the Loan or the Loans File, or, if such consent

or waiver is required, such consent or waiver has been obtained, and, if such

Loan is secured by an interest in real property, an Assignment of Mortgage has

been delivered to the Indenture Trustee (excluding the Loan to Cycle Gear);

 

(13)         the Loan was documented and closed in

accordance with the Credit and Collection Policy, and there is only one current

original Underlying Note with respect to such Loan and such Underlying Note has

been delivered to the Indenture Trustee and is duly endorsed;

 

(14)         the Loan and the Originator’s, Trust

Depositor’s and Issuer’s interest in all related Collateral are free of any

Liens except for Permitted Liens, and all filings and other actions required to

perfect the security interest of (i) the Indenture Trustee in the

Originator’s, the Trust Depositor’s and the Issuer’s interest in the Collateral

have been made or taken and (ii) in the case of Agented Notes, the

collateral agent, as agent for all noteholders of the related Obligor, in the

Collateral;

 

(15)         the Loan has an original term to

maturity of no more than one hundred twenty-one (121) 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;

 

(16)         no right of rescission, set off,

counterclaim, defense or other material dispute has been asserted with respect

to such Loan;

 

(17)         any related Collateral with respect to

such Loan is insured under an Insurance Policy in accordance with the Credit

and Collection Policy;

 

(18)         the Obligor with respect to such Loan

is an Eligible Obligor;

 

(19)         such Loan does not represent payment

obligations relating to “put” rights;

 

(20)         the Loan is not a loan or extension of

credit made by the Originator or one of its subsidiaries to an Obligor for the

purpose of making any principal, interest (other than deferred interest) or

other payment on a loan to the same Obligor necessary in order to keep such

loan from becoming delinquent and such Loan is not being kept current by the

Originator or one of its Affiliates making any other loans to this Obligor;

 

(21)         no provision of the Loan has been

waived, altered or modified in any way, except by instruments or documents

contained in the Loan File relating to the Loan;

 

11

 

(22)         the Loan has an Eligible Risk Rating;

 

(23)         the Loan is an “eligible asset” as

defined in Rule 3a–7 of the Investment Company Act of 1940, as amended;

 

(24)         if such Loan was originated on or after

December 1, 2000, the Obligor of such Loan has waived all rights of set-off,

counterclaim, rescission and/or defense to payment against the Originator of

the Loan and all assignees thereof;

 

(25)         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 Deal Agent

in the CP Transaction, and (b) are duly authorized, fully and properly executed

and are the valid, binding and unconditional payment obligation of the Obligor

thereof;

 

(26)         with respect to Agented Notes, the

Originator (or American Capital Financial Services, Inc., a wholly-owned

subsidiary of 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 Loan Assets;

 

(27)         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 Loan

Assets;

 

(28)         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 of, 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 Collateral to the Issuer as assignee of the Trust Depositor and the

Indenture Trustee’s security interest therein on behalf of the Securityholders

and the Swap Counterparties;

 

(29)         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;

 

(30)         with respect to Agented Notes, all

syndicated notes of the Obligor of the same priority are cross-defaulted, the

Collateral securing such notes is held by the collateral agent for the benefit

of all holders 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 Collateral securing such notes;

 

12

 

(31)         with regard to the Loan to Case Logic,

the Underlying Note evidencing the Loan has been issued in the name of the

Issuer and received by the Indenture Trustee within fifteen (15) Business Days

after the Closing Date;

 

(32)         all information in the List of Loans is

true and correct;

 

(33)         all original or certified

documentation, including but not limited to the original Underlying Notes,

required to be delivered to the Indenture Trustee with respect to such Loans

has been or will be delivered on the related Assignment Date (or, in the case

of the Loan to Case Logic, within fifteen (15) Business Days after the Closing

Date);

 

(34)         immediately prior to the transfer of

the Loan, the Originator held good and indefeasible title to and was the sole

owner of the Loan being transferred to the Trust Depositor and the Issuer,

subject to no Liens or rights of others except for Permitted Liens, and upon

such transfer, the Issuer will hold good and indefeasible title to and be the

sole owner of such Loans;

 

(35)         to the actual knowledge of the

Originator, the documents signed by a Responsible Officer of the Originator

contained in the Loan Files do not (taken as a whole together with the other

components of the Loan File) contain any untrue statement of material fact or

omit to state a material fact necessary to make the statements contained

therein not misleading in light of the circumstances under which they were

made;

 

(36)         as of the related assignment date, no

payment related default, breach or violation has occurred under the Underlying

Note, and no event which, with the passage of time or with notice and the

expiration of any grace or cure period, would constitute a payment related

default, breach or violation;

 

(37)         all parties executing the Underlying

Note had a legal capacity to execute the Underlying Note at the time it was

executed; and

 

(38)         as of the Initial-Cut Off Date, no Loan

contained a provision obligating the Originator to make additional fundings

with respect to the Underlying Note.

 

“Eligible Obligor” means, as of any date of

determination, any Obligor that satisfies each of the following requirements at

all times:

 

(1)           such

Obligor is not in the gaming, nuclear waste, bio–tech, oil and gas or (except for

Biddeford Real Estate Holdings, Inc.) real estate industries;

 

(2)           such

Obligor is a legal operating entity, duly organized, validly existing and in

good standing under the laws of its jurisdiction of organization;

 

(3)           the

business being financed by such Obligor (except for Biddeford Real Estate

Holdings, Inc.) has an Operating History of at least sixty (60) months from the

date of its incorporation;

 

13

 

(4)           such

Obligor is not the subject of any Insolvency Event;

 

(5)           such

Obligor is not an Affiliate of any other Obligor hereto (other than as a result

of being an Affiliate of the Originator);

 

(6)           no

other Loan of such Obligor is delinquent for more than thirty (30) days;

 

(7)           such

Obligor is not a Governmental Authority;

 

(8)           such

Obligor is in compliance with all material terms and conditions of its Loan

Documents;

 

(9)           such

Obligor’s principal office and any related Collateral are located in the United

States; and

 

(10)         such

Obligor has an Eligible Risk Rating.

 

“Eligible Repurchase Obligations”

means repurchase obligations with respect to any security that is a direct

obligation of, or fully guaranteed by, the United States or any agency or

instrumentality thereof, the obligations of which are backed by the full faith

and credit of the United States, in either case entered into with a depository

institution or trust company (acting as principal) described in clauses (c)(ii) and (c)(iv) of the definition of Eligible

Investments.

 

“Eligible Risk Rating” means,

on any date of determination, with respect to a designated Obligor, a risk

rating of “Grade 3” or “Grade 4.”

 

“Event of Default” shall have

the meaning specified in Section 5.01

of the Indenture.

 

“Excess Loan” means, as of any

date of determination, each Loan selected by the Servicer in accordance with Section 11.01 at such time as there

shall have been discovered a breach of any of the representations and

warranties set forth in Section 3.05,

the removal of which pursuant to Section 11.01

and the Originator’s repurchase thereof or substitution of a Substitute Loan

therefor pursuant to Section 11.01

shall remedy such breach.

 

“Exchange Act” means the

Securities Exchange Act of 1934, as amended from time to time, or any successor

legislation thereto.

 

“Excluded Amounts” means any

collections with respect to repurchased or substituted Loans.

 

“FDIC” shall mean the Federal

Deposit Insurance Corporation, or any successor thereto.

 

“Fee Event” shall have the

meaning given to such term in the Indenture.

 

“Fitch” means Fitch, Inc. or

any successor thereto.

 

“Fixed Rate Loans” means Loans

with a fixed interest rate.

 

“Fixed Rate Permitted Excess Amount”

shall have the meaning given to such term in the Indenture.

 

14

 

“Floating Rate Loans” means Loans with a

floating interest rate based on the prime interest rate plus a spread.

 

“Floating Rate Permitted Excess Amount” shall

have the meaning given to such term in the Indenture.

 

“Governmental Authority” means, with respect

to any Person, any nation or government, any state or other political

subdivision 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 government, and any

court or arbitrator having jurisdiction over such Person.

 

“Grade 3” means that, under the Originator’s

loan grading system, which ranks loans based on its analysis of credit quality

of the underlying assets, the Obligor is performing as expected, the risk

factors are neutral to favorable and the Loan risk is at an acceptable level

that is similar to the risk at the time of origination.

 

“Grade 4” means that, under the Originator’s

loan grading system, which ranks loans based on its analysis of credit quality

of the underlying assets, the Obligor is performing above expectations, the

trends and risk factors are generally favorable and the Loan involves the least

amount of risk in the Originator’s portfolio.

 

“Highest Required Investment Category” means

(i) with respect to ratings assigned by Fitch (if such investment is rated

by Fitch), “F-1+” for short–term instruments and “AAA” for long–term

instruments, (ii) with respect to ratings assigned by Moody’s, “A2” and

“P-1” for one (1) month instruments, “A1” and “P-1” for three (3) month

instruments, “Aa3” and “P-1” for six (6) month instruments and “Aaa” and “P-1”

for instruments with a term in excess of six (6) months, and (iii) with

respect to ratings assigned by S&P, “A-1+” for short–term instruments and

“AAA” for long-term instruments.

 

“Holder” means (i) with respect to a

Certificate, the Person in whose name such Certificate is registered in the

Certificate Register, and (ii) with respect to a Note, the Person in whose

name such Note is registered in the Note Register.

 

“Indebtedness” means, with respect to any

Person at any date, (a) all indebtedness of such Person for borrowed money

or for the deferred purchase price of property or services (other than current

liabilities incurred in the ordinary course of business and payable in

accordance with customary trade practices) or which is evidenced by a note,

bond, debenture or similar instrument, (b) all obligations of such Person

under capital leases, (c) all obligations of such Person in respect of

acceptances issued or created for the account of such Person, and (d) all

liabilities secured by any Lien on any property owned by such Person even

though such Person has not assumed or otherwise become liable for the payment

thereof.

 

“Indenture” means the Indenture, dated as of

the date hereof, between the Issuer and the Indenture Trustee, as amended,

modified, restated, replaced, waived, substituted, supplemented or extended

from time to time.

 

15

 

“Indenture Collateral” has the

meaning given to such term in the “granting clause” of the Indenture.

 

“Indenture Trustee” means the

Person acting as Indenture Trustee under the Indenture, its successors in

interest and any successor trustee under the Indenture.

 

“Indenture Trustee Fee” has the

meaning given to such term in the fee letter, dated as of the date hereof,

among the Originator, the Trust Depositor, the Issuer and the Indenture

Trustee, as amended, modified, restated, replaced, waived, substituted,

supplemented or extended from time to time.

 

“Independent” means, when used

with respect to any specified Person, a Person who (i) is in fact

independent of each of the Issuer, the Trust Depositor or ACAS, (ii) is

not a director, officer or employee of any Affiliate of any of the Issuer, the

Trust Depositor or ACAS, (iii) is not a Person related to any officer or

director of any of the Issuer, the Trust Depositor or ACAS or any of their

respective Affiliates, (iv) is not a holder (directly or indirectly) of

more than 10% of any voting securities of any of the Issuer, the Trust

Depositor or ACAS or any of their respective Affiliates, and (v) is not

connected with any of the Issuer, the Trust Depositor or ACAS as an officer,

employee, promoter, underwriter, trustee, partner, director or Person

performing similar functions; provided, however,

a Person that otherwise satisfies the requirements of clauses (i) through (v), but is a director, officer or manager of

a bankruptcy remote special purpose Affiliate of ACAS, will be deemed to be

Independent for purposes hereof.

 

“Independent Accountants” has the meaning

given to such term in subsection 9.04(a).

 

“Ineligible Loan” has the meaning given to

such term in Section 11.01 and includes

such Loans described in subsection 12.05(b).

 

“Initial Aggregate Outstanding Loan Balance”

means the Aggregate Outstanding Loan Balance as of the Initial Cut-Off Date of

the Loans transferred to the Issuer as of the Closing Date.

 

“Initial Aggregate Outstanding Principal Balance”

means, when used in the context of a reference to an individual Class of

Notes, the initial class principal balance applicable to such Class, and

otherwise means, collectively, the sum of the Initial Class A Principal

Balance, the Initial Class B Principal Balance and the Initial

Class C Principal Balance, i.e., $210,500,000.

 

“Initial Class A Principal Balance” means

$105,250,000.

 

“Initial Class B Principal Balance” means

$52,625,000.

 

“Initial Class C Principal Balance” means

$52,625,000.

 

“Initial Cut–Off Date” means (a) for Interest

Collections, the close of business on July 10, 2002, and (b) for Principal

Collections and all other purposes, the close of business on June 28,

2002.

 

“Initial Loans” means those Loans conveyed to

the Issuer on the Closing Date and identified on the initial List of Loans

required to be delivered pursuant to subsection 2.02(iv).

 

16

 

“Initial Purchaser” means Wachovia Securities,

Inc.

 

“Insolvency Event” means, with respect to a

specified Person, (a) the filing of a decree or order for relief by a

court having jurisdiction in the premises in respect of such Person or any

substantial part of its property in an involuntary case under any applicable Insolvency

Law now or hereafter in effect, or appointing a receiver, liquidator, assignee,

custodian, trustee, sequestrator or similar official for such Person or for any

substantial part of its property, or ordering the winding-up or liquidation of

such Person’s affairs, and such decree or order shall remain unstayed or

undismissed and in effect for a period of sixty (60) consecutive days; or

(b) the commencement by such Person of a voluntary case under any

applicable Insolvency Law now or hereafter in effect, or the consent by such

Person to the entry of an order for relief in an involuntary case under such

law, taking possession by a receiver, liquidator, assignee, custodian, trustee,

sequestrator or similar official for such Person or for any substantial part of

this property, or the making by such Person of any general assignment for the

benefit of creditors, or the failure by such Person generally to pay its debts

as such debts become due, or the taking of action by such Person in furtherance

of any of the foregoing.

 

“Insolvency Laws” means the Bankruptcy Code of

the United States and all other applicable liquidation, conservatorship,

bankruptcy, moratorium, rearrangement, receivership, insolvency,

reorganization, suspension of payments or similar debtor relief laws from time

to time in effect affecting the rights of creditors generally.

 

“Insolvency Proceeds” has the meaning given to

such term in Section 10.01.

 

“Insurance Policy” means, with respect to any

Loan, an insurance policy covering physical damage to or loss of the related

Collateral, and any other insurance policies relating to such Loan, including

but not limited to title, property, hazard, liability, life and/or accident

insurance policies.

 

“Insurance Proceeds” means, depending on the

context, any amounts payable or any payments made under any Insurance Policy

covering a Loan or the Collateral.

 

“Interest Accrual Period” means the period

from and including the most recent Payment Date to but excluding the following

Payment Date; provided, that, the initial Interest

Accrual Period following the Closing Date shall be the period from and

including the Closing Date to but excluding the first Payment Date following

the Closing Date.

 

“Interest Collection Account” means a

sub–account of the Collection Account established pursuant to Section 7.01.

 

“Interest Shortfall”

means, with respect to the Class A Notes or the Class B Notes, as applicable,

the amount by which the interest paid to such Class on a Payment Date is less

than the amount due to such Class, together with accrued interest on such

amount at the then applicable Note Interest Rate for such Class.

 

“Interest Collections” means (A) amounts

deposited into the Collection Account pursuant to clauses (i), (iv), (v),

(viii) and (ix) of the definition of Collections, as well as the interest

portion

 

17

 

of any amounts received

pursuant to clauses (iii), (vi) and (vii) of the definition of Collections and

(B) investment earnings on funds held in the Trust Accounts.

 

“Internal Revenue Code” means the Internal

Revenue Code of 1986, as amended from time to time, or any successor

legislation thereto.

 

“Investment Earnings” means the investment

earnings (net of losses and investment expenses) on amounts on deposit in the

Trust Accounts to be credited to the Collection Account on the applicable

Payment Date pursuant to Section 7.03.

 

“Issuer” means the trust created by the Trust

Agreement and funded pursuant to this Agreement, consisting primarily of the

Loan Assets.

 

“Late Charges” means any late payment fees

paid by Obligors in accordance with the Servicer’s Credit and Collection

Policy.

 

“Legal Final Maturity Date” has the meaning

given to such term in the Indenture.

 

“LIBOR” means, as to any Payment Date, the

London interbank offered rate for one (1) month Eurodollar deposits, as

determined by the Indenture Trustee on the related Determination Date, in

accordance with Section 7.06.

 

“Lien” means any mortgage, deed of trust,

pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien

(statutory or other), equity interest, participation interest, preference,

priority or other security agreement or preferential arrangement of any kind or

nature whatsoever, including, without limitation, any conditional sale or other

title retention agreement, and any financing lease having substantially the

same economic effect as any of the foregoing.

 

“Liquidation Expenses” means, with respect to

any Loan, the aggregate amount of all out–of–pocket expenses reasonably

incurred by the Servicer (including amounts paid to any subservicer) and any

reasonably allocated costs of internal counsel, in each case in accordance with

the Servicer’s Credit and Collection Policy in connection with the foreclosure

and disposition of any related Collateral or the bankruptcy of an Obligor upon

or after the expiration or earlier termination or acceleration of such Loan,

and other out-of-pocket costs related to the liquidation of any such

Collateral, including the attempted collection of any amount owing pursuant to

such Loan if it is a Defaulted Loan, but only to the extent gross recoveries

with respect to such Loan provide funds sufficient, after payment of all

principal and accrued finance charges due with respect to such Loan, to cover

such expenses and costs; provided, however,

to the extent any such “Liquidation Expenses” relate to any Loan with a

Retained Interest, such expenses shall be allocated pro-rata to such Loan based

on the Outstanding Loan Balance of such Loan included in the Loan Pool and the

outstanding loan balance of the Retained Interest.

 

“Liquidation Proceeds” means, with respect to

a Defaulted Loan, proceeds from the sale of the Collateral, Insurance Proceeds

and any other recoveries with respect to such Defaulted Loan and the related

Collateral, net of Liquidation Expenses and amounts, if any, so received that

are required either to be refunded to the Obligor on such Loan or paid to a

third party.

 

18

 

“List of Loans” means the list identifying

each Loan constituting part of the Loan Assets, which list shall consist of the

initial List of Loans reflecting the Initial Loans transferred to the Issuer on

the Closing Date, together with any Subsequent List of Loans amending the most

current List of Loans reflecting the Substitute Loans transferred to the Issuer

on the related Subsequent Transfer Date (together with a deletion from such

list of the related Loan or Loans identified on the corresponding Addition

Notice with respect to which a Substitution Event has occurred), and

(1) which list in each case (a) identifies by account number and

Obligor name each Loan included in the Loan Pool, and (b) sets forth as to

each such Loan (i) the Outstanding Loan Balance as of the applicable

Cut-Off Date, and (ii) the maturity date, and (2) which list (as in

effect on the Closing Date) is attached to this Agreement as Exhibit G.

 

“Loan” means the payment obligations of each

Obligor to the Originator under senior or subordinated loans created under the

related Loan Documents and evidenced by an Underlying Note, transferred by the

Originator to the Trust Depositor and by the Trust Depositor to the Issuer, and

including both Initial Loans and Substitute Loans.

 

“Loan Assets” has the meaning given to such

term in subsection 2.01(b) hereof

(and in subsection 2.04(a) hereof

in respect of Substitute Loans and related assets transferred to the Issuer

pursuant to Subsequent Transfer Agreements).

 

“Loan Documents” means, with respect to any

Loan, the related Underlying Note and any related loan agreement, security

agreement, note purchase agreement (if applicable), intercreditor and/or

subordination agreement (if applicable), mortgage, assignment of Loans, all

guarantees 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 the related

Underlying Note, and for each Loan secured by real property, an Assignment of

Mortgage (excluding the Loan to Cycle Gear), and for all Loans secured by an

Underlying Note, an assignment in blank signed by an officer of the Originator.

 

“Loan File” means, with respect to each Loan,

the Loan Documents, and such other documents, if any, that the Servicer keeps

on file in accordance with its Credit and Collection Policy and all other

documents originally delivered to the Originator or held by the Servicer with

respect to any Loan; provided, that, all documents, other

than the Underlying Note along with any assignment (which may be by allonge),

constituting the Loan File may be copies of such documents.

 

“Loan Pool” means, as of any date of

determination, the Initial Loans and the Substitute Loans (if any), other than

any such Loans that (i) have been reconveyed by the Issuer to the Trust

Depositor, and concurrently by the Trust Depositor to the Originator, pursuant

to Section 11.02 hereof, or

(ii) have been paid (or prepaid) in full.

 

“London Banking Day” means any day on which

dealings in deposits in United States dollars are transacted in the London

interbank market.

 

“Marcal” means Marcal Paper Mills, Inc.

 

“Materially Modified Loan” means a Loan that

has been terminated, released (including pursuant to prepayment), amended,

modified, waived or subject to an equivalent similar undertaking or

 

19

 

agreement by the Servicer

which is not permitted under the standards and criteria set forth in Sections 5.08 and/or 5.09 hereof, as applicable.

 

“Maturity Date” means, as applicable, the

Class A Expected Maturity Date, the Class B Expected Maturity Date or

the Class C Expected Maturity Date.

 

“Monthly Report” has the meaning given to such

term in Section 9.01.

 

“Moody’s” means Moody’s Investors Service,

Inc. or any successor thereto.

 

“Net Trust Swap Payments” means, with respect

to each Payment Date, the excess, if any, of (i) the payments required to

be made on such date by the Issuer to the Swap Counterparties under Section 2(a) of each Swap over (ii) the

payments required to be made on such date by the Swap Counterparties to the

Issuer under Section 2(a) of each Swap,

together with any interest thereon.

 

“Net Trust Swap Receipts” means, with respect

to each Payment Date, the excess, if any, of (i) the payments required to

be made on such date by the Swap Counterparties to the Issuer under Section 2(a) of each Swap over (ii) the

payments required to be made on such date by the Issuer to the Swap

Counterparties under Section 2(a) of

each Swap, together with any interest thereon.

 

“New York Business Day” means any Business Day

in the city of New York, New York.

 

“Note” means any one of the notes of the

Issuer of any Class executed and authenticated in accordance with the

Indenture.

 

“Note Distribution Account” means the account

established and maintained as such pursuant to Section 7.01.

 

“Note Register” has the meaning given to such

term in Section 2.04 of the

Indenture.

 

“Note Majority” means, with respect to Agented

Notes, the holders of the notes evidencing not less than 66 2/3% of the

outstanding amount of all such notes of the Obligor.

 

“Obligor” means, with respect to any Loan, the

Person or Persons obligated to make payments with respect to such Loan,

including any guarantor thereof.

 

“Officer’s Certificate” shall mean a

certificate signed by any officer of the Trust Depositor or the Servicer and

delivered to the Owner Trustee or the Indenture Trustee, as the case may be.

 

“One-Month Index Maturity” has the meaning

given to such term in Section 7.06.

 

“Operating History” means, with respect to any

specified Person, the time since the date of such Person’s incorporation that

it has continuously operated its business; provided, however,

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

 

20

 

Operating History of 4 years,

and Corporation B, with sales of $20 million, has an Operating History of 8

years, merge to form “NEWCO”, the Operating History of NEWCO will be 6.67

years.

 

“Opinion of Counsel” means a written opinion

of counsel, who may be outside counsel, or internal counsel (except with

respect to federal securities law (including the Trust Indenture Act) or tax

law matters), for the Trust Depositor or the Servicer and who shall be

reasonably acceptable to the Owner Trustee or the Indenture Trustee, as the

case may be.

 

“Originator” has the meaning given to such

term in the Preamble.

 

“Other Assets” has the meaning given to such

term in subsection 13.09(b).

 

“Outstanding” has the meaning given to such

term in the Indenture.

 

“Outstanding Loan Balance” means, with respect

to a Loan, as of any date of determination, the sum of the total remaining

amounts of principal payable as of such time by the Obligor thereunder,

exclusive of (a) interest payments and (b) capitalized interest amounts, it

being understood that any principal previously covered by a Servicer Advance

will be excluded from principal amounts payable for purposes of this

definition.

 

“Outstanding Principal Balance” means, with

respect to any Class of Notes, as of any date of determination, the aggregate initial

principal amount thereof, plus, in the case of the Class B Notes only, the

capitalized interest from the Class B Accrued Payable, as reduced by the

aggregate amount of any distributions applied in reduction of such principal

amount.

 

“Owner Trustee” means the Person acting, not

in its individual capacity, but solely as Owner Trustee, under the Trust

Agreement, its successors in interest and any successor owner trustee under the

Trust Agreement.

 

“Owner Trustee Fee” has the meaning given to

such term in the fee letter, dated as of the date hereof, among the Owner

Trustee, the Trust Depositor, the Originator and the Issuer, as amended,

modified, restated, replaced, waived, substituted, supplemented or extended

from time to time.

 

“Paying Agent” has the meaning given to such

term in Section 3.03 of the

Indenture and Section 3.10 of the

Trust Agreement.

 

“Payment Date” shall mean the 20th day of each

calendar month or, if such 20th day is not a Business Day, the next succeeding

Business Day, with the first such Payment Date hereunder occurring in August,

2002.

 

“Permitted Liens” means:

 

(a)           with

respect to Loans in the Loan Pool:

 

(i)            Liens in favor of the Trust

Depositor created pursuant to the ACAS Transfer Agreement and transferred to

the Issuer pursuant hereto;

 

21

 

(ii)           Liens in favor of the Issuer created

pursuant to this Agreement; and

 

(iii)          Liens in favor of the Indenture

Trustee created pursuant to the Indenture and/or this Agreement; and

 

(b)           with

respect to the interest of the Originator, the Trust Depositor and the Issuer

in the related Collateral:

 

(i)            materialmen’s, warehousemen’s,

mechanics’ and other Liens arising by operation of law in the ordinary course

of business for sums not due or sums that are being contested in good faith;

 

(ii)           Liens for state, municipal and other

local taxes if such taxes shall not at the time be due and payable or if the

Trust Depositor shall currently be contesting the validity thereof in good

faith by appropriate proceedings;

 

(iii)          Liens in favor of the Trust Depositor

created, and transferred by the Trust Depositor to the Issuer, pursuant to the

ACAS Transfer Agreement and this Agreement;

 

(iv)          Liens in favor of the Issuer created

pursuant to this Agreement;

 

(v)           Liens in favor of the Indenture

Trustee created pursuant to the Indenture and/or this Agreement;

 

(vi)          purchase money security interests in

equipment and Liens held by senior lenders with respect to any subordinated

Loans listed on Exhibit L; and

 

(vii)         with respect to Agented Notes, Liens in

favor of the collateral agent on behalf of all noteholders of the related

Obligor.

 

“Person” means any individual, corporation,

estate, partnership, business trust, limited liability company, sole

proprietorship, joint venture, association, joint stock company, trust

(including any beneficiary thereof), unincorporated organization, government,

agency or political subdivision thereof, or any other entity.

 

“Prepaid Loan” means any Loan that has

terminated or been prepaid in full prior to its scheduled expiration date,

other than a Defaulted Loan.

 

“Piper Aircraft” means New Piper Aircraft,

Inc.

 

“Prepayment” means any and all

(i) partial and full prepayments, including any Prepayment Premiums, on a

Loan (including, with respect to any Loan and any Collection Period),

(ii) any Scheduled Payment (or portion thereof) that is due in a

subsequent Collection Period that the Servicer has received (and to the extent

permission therefor was necessary, expressly permitted the related Obligor to

make) in advance of its scheduled due date, (iii) Liquidation Proceeds and

(iv) amounts received in respect of Transfer Deposit Amounts.

 

“Prepayment Amount” has the meaning given to

such term in Section 5.09.

 

22

 

“Prepayment Premiums” means any prepayment

premiums paid by an Obligor in connection with any Prepayment.

 

“Principal Collection Account” means a

sub-account of the Collection Account established pursuant to Section 7.01.

 

“Principal Collections” means amounts

deposited into the Collection Account pursuant to clause (ii) of the

definition of Collections, as well as the principal portion of any amounts

received pursuant to clauses (iii), (vi) and (vii) of the definition of

Collections, together with, on or after an Event of Default, an Accelerated

Amortization Event or the occurrence and continuance of a Class A Trigger

or a Class B Trigger, all amounts payable pursuant to clause SEVENTH of

subsection 7.05(b).

 

“Private Placement Memorandum” has the meaning

given to such term in the Purchase Agreement.

 

“Purchase Agreement” means the Purchase

Agreement, dated as of August 5, 2002, among the Initial Purchaser, the Trust

Depositor, the Issuer and ACAS, as amended, modified, restated, replaced,

waived, substituted, supplemented or extended from time to time.

 

“Qualified Eligible Investments” means

Eligible Investments acquired by the Indenture Trustee in its name and in its

capacity as Indenture Trustee at the written direction of the Issuer, which are

held by the Indenture Trustee in the Collection Account or the Reserve Fund and

with respect to which (a) the Indenture Trustee has noted its interest

therein on its books and records, and (b) the Indenture Trustee has

purchased such investments at the written direction of the Issuer for value

without notice of any adverse claim thereto (and, if such investments are

securities or other financial assets or interests therein, within the meaning

of Section 8–102 of the UCC as enacted in Minnesota, without acting in

collusion with a securities intermediary in violating such securities

intermediary’s obligations to entitlement holders in such assets, under

Section 8–504 of such UCC, to maintain a sufficient quantity of such

assets in favor of such entitlement holders), and (c) either (i) such

investments are in the possession of the Indenture Trustee, or (ii) such

investments, (A) if certificated securities and in bearer form, have been

delivered to the Indenture Trustee, or in registered form, have been delivered

to the Indenture Trustee and either registered by the issuer in the name of the

Indenture Trustee or endorsed by effective endorsement to the Indenture Trustee

or in blank; (B) if uncertificated securities, the ownership of which has been

registered to the Indenture Trustee on the books of the issuer thereof (or

another Person, other than a securities intermediary, either becomes the

registered owner of the uncertified security on behalf of the Indenture Trustee

or, having previously become the registered owner, acknowledges that it holds

for the Indenture Trustee); or (C) if securities entitlements (within the

meaning of Section 8–102 of the UCC as enacted in Minnesota) representing

interests in securities or other financial assets (or interests therein) held

by a securities intermediary (within the meaning of said Section 8-102), a

securities intermediary indicates by book entry that a security or other

financial asset has been credited to the Indenture Trustee’s securities account

with such securities intermediary.  Any

such Qualified Eligible Investment may be purchased by or through the Indenture

Trustee or any of its Affiliates acting at the written direction of the Issuer.

 

23

 

“Qualified Institution” means (a) the

corporate trust department of the Indenture Trustee, or (b) a depository

institution organized under the laws of the United States or any one of the

states thereof or the District of Columbia (or any domestic branch of a foreign

bank), (i) (A) that has either (1) a long-term unsecured debt rating

acceptable to the Rating Agencies, which, in the case of S&P, shall be

“AA-”, and in the case of Fitch, shall be “AAA” or (2) a short–term

unsecured debt rating or certificate of deposit rating acceptable to the Rating

Agencies, which, in the case of S&P, shall be “A-1+”, and in the case of

Fitch, shall be “F-1+”, (B) the parent corporation, if such parent

corporation guarantees the obligations of the depository institution, of which

has either (1) a long–term unsecured debt rating acceptable to the Rating

Agencies, which, in the case of S&P, shall be “AA-”, and in the case of

Fitch, shall be “AAA” or (2) a short-term unsecured debt rating or certificate

of deposit rating acceptable to the Rating Agencies, which, in the case of

S&P, shall be “A-1+”, and in the case of Fitch, shall be “F-1+” or

(C) otherwise satisfies the Rating Agency Condition, and (ii) whose

deposits are insured by the FDIC and satisfies the Rating Agency Condition.

 

“Qualified Swap Counterparty” has the meaning

given to such term in the Indenture.

 

“Rating Agency” means each of S&P, Moody’s

and Fitch, so long as such Persons maintain a rating on the Class A Notes

and the Class B Notes; and if any of S&P, Moody’s or Fitch no longer

maintains a rating on the Class A Notes and the Class B Notes, such

other nationally recognized statistical rating organization selected by the

Trust Depositor.

 

“Rating Agency Condition” means, with respect

to any action or series of related actions or proposed transaction or series of

related proposed transactions, that each Rating Agency shall have notified the

Trust Depositor, the Owner Trustee and the Indenture Trustee in writing that

such action or series of related actions or the consummation of such proposed

transaction or series of related transactions will not result in a Ratings

Effect.

 

“Ratings Effect” means, with respect to any

action or series of related actions or proposed transaction or series of

related proposed transactions, a reduction or withdrawal of the rating of any

outstanding Class with respect to which a Rating Agency has previously

issued a rating as a result of such action or series of related actions or the

consummation of such proposed transaction or series of related transactions.

 

“Record Date” means, with respect to a Payment

Date, (i) for book–entry Notes, the calendar day immediately preceding a

Payment Date and (ii) for definitive Notes, the last Business Day of the

preceding calendar month.

 

“Reference Banks” means leading banks selected

by the Indenture Trustee and engaged in transactions in Eurodollar deposits in

the international Eurocurrency market.

 

“Released Amounts” means, with respect to any

payment or collection received with respect to any Loan on any Business Day

(whether such payment or collection is received by the Servicer, the Owner

Trustee or the Trust Depositor), an amount equal to that portion of such

payment or collection constituting Excluded Amounts or Retained Interest.

 

“Representative Amount” means an amount that

is representative for a single transaction in the relevant market at the

relevant time.

 

24

 

“Required Holders” means (a) prior to the

payment in full of the Class A Notes and the Class B Notes, the

Class A Noteholders and Class B Noteholders evidencing more than

66 2/3% of the Aggregate Outstanding Principal Balance of all Class A

Notes and Class B Notes outstanding and (b) from and after the payment in

full of the Class A Notes and the Class B Notes, Class C Noteholders

evidencing more than 66 2/3% of the Aggregate Outstanding Principal

Balance of the Class C Note.

 

“Required Reserve Amount” means, with respect

to any Payment Date, an amount equal to the sum of (i) the Outstanding

Loan Balance of all Delinquent Loans and (ii) three (3) times the sum of

the Class A Interest Amount and Class B Interest Amount due on the

next Payment Date.

 

“Requirements of Law” for any Person or

property of such Person means the certificate of incorporation or articles of

association and by-laws or other organizational or governing documents of such

Person, and any law, treaty, rule, regulation, or order or determination of an

arbitrator or Governmental Authority, in each case applicable to or binding

upon such Person or to which such Person is subject, whether Federal, state or

local (including, without limitation, usury laws, the Federal Truth in Lending

Act, the Investment Company Act of 1940, as amended, and Regulation Z and

Regulation B of the Board of Governors of the Federal Reserve System).

 

“Reserve Fund” means the Reserve Fund

established and maintained pursuant to Section 7.01

hereof.

 

“Reserve Fund Initial Deposit” means the

product of (a) the sum of the Outstanding Principal Balance of the Class A Notes

and Class B Notes as of the Closing Date, (b) the weighted average interest

rate of the Class A Note Interest Rate and the Class B Note Interest Rate in

effect for the initial Interest Accrual Period (weighted by the Outstanding

Principal Balance of each of the Class A Notes and Class B Notes) and

(c) the quotient of 90 divided by 360.

 

“Responsible Officer” means, with respect to

the Owner Trustee, any officer in its Corporate Trust Administration Department

(or any similar group of a successor Owner Trustee), and with respect to the

Indenture Trustee, has the meaning given to such term in the Indenture.

 

“Retained Interest” means, for each Loan, the

following interests, rights and obligations in such Loan and under the

associated Loan Documents, which are being retained by the Originator:  (i) all of the obligations, if any, to

provide additional funding with respect to such Loan, (ii) all of the

rights and obligations, if any, of the agent(s) under the documentation

evidencing such Loan, (iii) the applicable portion of the interests, rights and

obligations under the documentation evidencing such Loan that relate to such

portion(s) of the indebtedness that is owned by another lender or is being

retained by the Originator, (iv) any unused, commitment or similar fees

associated with the additional funding obligations that are not being

transferred in accordance with clause (i)

of this definition, (v) any agency or similar fees associated with the rights

and obligations of the agent that are not being transferred in accordance with clause (ii) of this definition, (vi) 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 (ii) of this definition,

and (vii) any and all warrants, options, and other equity instruments issued in

the name of the Originator or its Affiliates in connection with or relating to

any Loan.

 

25

 

“S&P” means Standard & Poor’s Ratings

Services, a division of The McGraw-Hill Companies, Inc.

 

“Scheduled Payment” means, with respect to any

Loan, the monthly, quarterly, semi-annual or annual financing (whether

interest, principal or principal and interest) payment scheduled to be made by

the related Obligor under the terms of such Loan on and after the related

Cut-Off Date and any such payment received after the related Cut-Off Date, it

being understood that Scheduled Payments do not include any Excluded Amounts.

 

“Securities” means the Notes and the

Certificate, or any of them.

 

“Securities Act” means the Securities Act of

1933, as amended from time to time, or any successor legislation thereto.

 

“Securityholders” means the Holders of the

Notes or the Certificate.

 

“Servicer” means initially ACAS, or its

successor; after any Servicer Transfer hereunder, means the Successor Servicer

appointed pursuant to Article VIII

with respect to the duties and obligations required of the Servicer under this

Agreement.

 

“Servicer Advance” means, with respect to any

Payment Date, the amounts, if any, deposited by the Servicer in the Collection

Account for such Payment Date in respect of Scheduled Payments pursuant to Section 5.14.

 

“Servicer Default” shall have the meaning

given to such term in Section 8.01.

 

“Servicing Fee” has the meaning given to such

term in Section 5.18.

 

“Servicing Fee Percentage” means 1.00%.

 

“Servicer Transfer” has the meaning given to

such term in subsection 8.02(b).

 

“Servicing Officer” means any officer of the

Servicer involved in, or responsible for, the administration and servicing of

Loans whose name appears on a list of servicing officers appearing in an

Officer’s Certificate furnished to the Indenture Trustee by the Servicer, as

the same may be amended from time to time.

 

“Solvent” means, as to any Person at any time,

that (a) the fair value of the property of 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) 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; (c) 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

(d) 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.

 

26

 

“Subsequent Cut-Off Date” means the date

specified as such for Substitute Loans in the related Subsequent Transfer

Agreement.

 

“Subsequent List of Loans” means a list, in

the form of the initial List of Loans delivered on the Closing Date, but

listing each Substitute Loan transferred to the Issuer pursuant to the related

Subsequent Transfer Agreement.

 

“Subsequent Purchase Agreement” means, with

respect to any Substitute Loans, the agreement between the Originator and the

Trust Depositor pursuant to which the Originator will transfer the Substitute

Loans to the Trust Depositor, the form of which is attached to hereto as Exhibit J.

 

“Subsequent Transfer Agreement” means the

agreement described in Section 2.04

hereof, the form of which is attached hereto as Exhibit I.

 

“Subsequent Transfer Date” means any date on

which Substitute Loans are transferred to the Issuer.

 

“Substitute Loan” means a Loan that is

(a) transferred to the Issuer under Section 2.04

with respect to which a related Substitution Event has occurred with respect to

a Loan or Loans then held in the Loan Pool and identified in the related

Addition Notice and (b) becomes part of the Loan Pool.

 

“Substitute Loan Qualification Conditions”

means, with respect to any Substitute Loan being transferred to the Issuer

pursuant to Section 2.04, the

accuracy of each of the following statements as of the related Cut-Off Date for

such Loan:

 

(a)           the

Outstanding Loan Balance of such Substitute Loan is not less than that of the

Loan identified on the related Addition Notice as the Loan to be reassigned by

the Issuer to the Trust Depositor and reconveyed to the Originator in exchange

for such Substitute Loan;

 

(b)           the

remaining maturity of the Substitute Loan is less than or equal to the

remaining maturity of the Loan identified on the related Addition Notice as the

Loan to be reassigned by the Issuer to the Trust Depositor and reconveyed to

the Originator in exchange for such Substitute Loan;

 

(c)           the

current interest rate on such Substitute Loan is not less than the current

interest rate on the Loan identified on the related Addition Notice as the Loan

to be reassigned by the Issuer to the Trust Depositor and reconveyed to the

Originator in exchange for such Substitute Loan;

 

(d)           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 Loan

identified on the related Addition Notice as the Loan to be reassigned by the

Issuer to the Trust Depositor and reconveyed to the Originator in exchange for

such Substitute Loan;

 

(e)           the

Obligor of such Substitute Loan is not already an Obligor of any Loan owned by

the Issuer;

 

27

 

(f)            no

adverse selection procedure shall have been employed in the selection of such

Substitute Loan from the Originator’s portfolio;

 

(g)           all

actions or additional actions (if any) necessary to perfect the security

interest and assignment of such Substitute Loan and related Collateral to the

Trust Depositor, the Issuer, and the Indenture Trustee shall have been taken as

of or prior to the Subsequent Transfer Date;

 

(h)           the

maturity date for the last Scheduled Payment due under such Substitute Loan is

not later than May 20, 2015;

 

(i)            the

weighted average life of such Loan is less than or equal to the Loan being

replaced;

 

(j)            prior

to such substitution the Originator has received written confirmation from the

Rating Agencies (which shall respond to the Originator within five (5) Business

Days after receiving written confirmation from the Originator of its intention

to substitute a Loan) that the proposed substitution will not result in a

Ratings Effect; provided, however, that any failure

by each of the Rating Agencies to respond to the Originator shall be deemed to

be non-approval by the Rating Agencies; provided, further,

however,

(i) in the case of a Prepaid Loan, only notice to, and not confirmation from,

Fitch shall be required, and (ii) in the case of a Defaulted Loan, only notice

to, and not confirmation from, Moody’s shall be required; and

 

(k)           the

Eligible Risk Rating of the Substitute Loan is equal to or higher than the Loan

being replaced.

 

“Substitution Event” shall have occurred if a

Loan then held by the Issuer and identified in the related Addition Notice is

either (a) a Prepaid Loan, (b) a Defaulted Loan, (c) a Loan that

has a covenant default, (d) a Materially Modified Loan, (e) an Excess

Loan or (f) the subject of a breach of a representation or warranty under

this Agreement or other provision, which breach or other provision, in the

absence of the substitution of a Substitute Loan for such Loan pursuant to Section 2.04, would require the payment

of the Transfer Deposit Amount to the Issuer in respect of such Loan pursuant

to Section 11.01; provided,

however,

that no Substitution Event shall be permitted under clauses

(a)-(d) to the extent Substitute Loans having an aggregate

Outstanding Loan Balance as of the date of substitution of greater than 20% of

the Initial Aggregate Outstanding Loan Balance have previously been substituted

under such clauses and of that 20% limit, in no event may the sum of the

Outstanding Loan Balances of all Prepaid Loans that have previously been

substituted under clause (a) exceed 10%

of the Initial Aggregate Outstanding Loan Balance.

 

“Successor Backup Servicer” has the meaning

given to such term in subsection 5.25(a).

 

“Successor Servicer” has the meaning given to

such term in subsection 8.02(b).

 

“Swap” has the meaning given to such term in

the Indenture.

 

“Swap Breakage Costs” means, for any Swap

Transaction, any amount (other than Net Trust Swap Payments applicable thereto)

payable by the Issuer for the early termination of that Swap Transaction or any

portion thereof.

 

28

 

“Swap Breakage Receipts” means, for any Swap

Transaction, any amount (other than Net Trust Swap Receipts applicable thereto)

payable to the Issuer for the early termination of that Swap Transaction or any

portion thereof.

 

“Swap Counterparty” has the meaning given to

such term in the Indenture.

 

“Swap Counterparty Collateral

Account” means, with respect to each Swap, the single, segregated trust

account established by the Indenture Trustee in accordance with the terms of

such Swap.

 

“Swap Guaranty” means the Swap Guaranty, dated

as of August 8, 2002 between ACAS and Wachovia Bank, National Association, as

amended, modified, restated, replaced, waived, substituted, supplemented or

extended from time to time.

 

“Swap Transaction” means each interest rate

swap transaction between the Issuer and a Swap Counterparty that is governed by

a Swap.

 

“Tape” has the meaning given to such term in subsection 5.22(b)(ii).

 

“Tax Opinion” means, with respect to any

action, an Opinion of Counsel to the effect that, for federal income tax

purposes, (i) following such action the Issuer will not be deemed to be an

association, taxable mortgage pool, or publicly traded partnership taxable as a

corporation, and (ii) such action will not affect the tax characterization

as debt of the Class A Notes and the Class B Notes or any outstanding Class issued

by the Issuer for which an Opinion of Counsel has been provided that such Notes

are debt.

 

“Telerate Page 3750” means the display page

currently so designated on the Dow Jones Telerate Service (or such other page

as may replace that page on that service for the purpose of displaying

comparable rates or prices).

 

“Transaction Documents” means this Agreement,

the Indenture, the Trust Agreement, the ACAS Transfer Agreement, the Swap

Guaranty, any Subsequent Transfer Agreement, any Subsequent Purchase Agreement,

the Purchase Agreement, any Swap, and all documents executed in connection

with, or identified as “Transaction Documents” in, any of the foregoing

documents, all as the same are amended, modified, restated, replaced, waived,

substituted, supplemented or extended from time to time.

 

“Transfer Date” means the Business Day

immediately preceding each Payment Date.

 

“Transfer Deposit Amount” means, with respect

to each Ineligible Loan or Excess Loan, on any date of determination, the sum

of the Outstanding Loan Balance of such Loan, together with accrued interest

thereon through such date of determination at the interest rate provided for

thereunder, and any outstanding Servicer Advances thereon reimbursement of

which has not been waived by the Servicer entitled thereto.

 

“Trust Account Property” means the Trust

Accounts, all amounts and investments held from time to time in any Trust

Account (whether in the form of deposit accounts, physical property,

 

29

 

book-entry securities,

uncertificated securities or otherwise), including, without limitation, the

Reserve Fund Initial Deposit, and all proceeds of the foregoing.

 

“Trust Accounts” means, collectively, the

Collection Account (including the Interest Collection Account and Principal

Collection Account), the Reserve Fund, the Note Distribution Account, the

Certificate Distribution Account and the Swap Counterparty Collateral Account,

or any of them.

 

“Trust Agreement” means the Trust Agreement,

dated as of August 1, 2002, between the Trust Depositor and the Owner Trustee,

as amended, modified, restated, replaced, waived, substituted, supplemented or

extended from time to time.

 

“Trust Depositor” has the meaning given to

such term in the Preamble, or any successor entity thereto.

 

“Trust Estate” shall have the meaning given to

such term in the Trust Agreement.

 

“Trustees” means the Owner Trustee and the

Indenture Trustee, or any of them individually as the context may require.

 

“UCC” means the Uniform Commercial Code, as

amended from time to time, as in effect in the applicable jurisdiction.

 

“UCC Filing Locations” means the State of

Delaware.

 

“Uncollectible Advance” means, with respect to

any Determination Date and any Loan, the amount, if any, advanced by the

Servicer pursuant to Section 5.14

which the Servicer has, as of such Determination Date, determined in good faith

will not be ultimately recoverable by the Servicer.

 

“Underlying Note” means the promissory note of

an Obligor evidencing a Loan.

 

“United States” means the United States of

America.

 

“Unreimbursed Servicer Advances” means, at any

time, the amount of all previous Servicer Advances (or portions thereof) as to

which the Servicer has not been reimbursed as of such time pursuant to Sections 7.01 or 7.05 and which the Servicer has determined in

its sole discretion are Uncollectible Advances, and with respect to which the

Servicer has given a written certification to such effect to each Trustee.

 

“USD-LIBOR-Reference Banks” has the meaning

given to such term in subsection 7.06(a).

 

“Vice President” of any Person means any vice

president of such Person, whether or not designated by a number or words before

or after the title “Vice President,” who is a duly elected officer of such

Person in such capacity.

 

30

 

Section

1.02                            Other

Terms.

 

All accounting terms used but not specifically defined

herein shall be construed in accordance with generally accepted accounting

principles.  The symbol “$” shall mean

the lawful currency of the United States. 

All terms used in Article 9 of the UCC in the State of New York, and not

specifically defined herein, are used herein as defined in such Article 9.

 

Section 1.03                            Computation

of Time Periods.

 

Unless otherwise stated in this Agreement, in the

computation of a period of time from a specified date to a later specified

date, the word “from” means “from and including”, the words “to” and “until”

each mean “to but excluding”, and the word “within” means “from and excluding a

specified date and to and including a later specified date”.

 

Section

1.04                            Interpretation.

 

In this Agreement, unless a contrary intention

appears:

 

(i)            the singular number includes the

plural number and vice

versa;

 

(ii)           reference to any Person includes such

Person’s successors and assigns but, if applicable, only if such successors and

assigns are permitted by the Transaction Documents;

 

(iii)          reference to any gender includes each

other gender;

 

(iv)          reference to day or days without

further qualification means calendar days;

 

(v)           unless otherwise stated, reference to

any time means New York, New York time;

 

(vi)          references to “writing” include

printing, typing, lithography, electronic or other means of reproducing words

in a visible form;

 

(vii)         reference to any agreement (including

any Transaction Document), document or instrument means such agreement,

document or instrument as amended, modified, supplemented, replaced, restated,

waived or extended and in effect from time to time in accordance with the terms

thereof and, if applicable, the terms of the other Transaction Documents, and

reference to any promissory note includes any promissory note that is an

extension or renewal thereof or a substitute or replacement therefor; and

 

(viii)        reference to any Requirement of Law

means such Requirement of Law as amended, modified, codified, replaced or

reenacted, in whole or in part, and in effect from time to time, including

rules and regulations promulgated thereunder and reference to any

Section or other provision of any Requirement of Law means that provision

of such Requirement of Law from time to time in effect and constituting the

substantive amendment, modification, codification, replacement or reenactment

of such Section or other provision.

 

31

 

Section

1.05                            Section References.

 

All Section references (including in the Preamble), unless otherwise indicated, shall

be to Sections (and the Preamble)

in this Agreement.

 

Section

1.06                            Calculations.

 

Except as otherwise provided herein, all interest rate

and basis point calculations hereunder will be made on the basis of a 360-day

year and the actual days elapsed in the relevant period and will be carried out

to at least three decimal places.

 

ARTICLE II

 

ESTABLISHMENT OF ISSUER; TRANSFER

OF LOAN ASSETS

 

Section 2.01                            Creation

and Funding of Issuer; Transfer of Loan Assets.

 

(a)           The

Issuer shall be created pursuant to the terms and conditions of the Trust

Agreement upon the execution and delivery of the Trust Agreement and the filing

by the Owner Trustee of an appropriately completed Certificate of Trust (as

defined in the Trust Agreement) under the Business Trust Statute.  The Trust Depositor, as settlor of the

Issuer, shall fund and convey assets to the Issuer pursuant to the terms and

provisions hereof.  The Issuer shall be

administered pursuant to the provisions of this Agreement, the Administration

Agreement and the Trust Agreement for the benefit of the Securityholders and the

Swap Counterparties.  The Owner Trustee

is hereby specifically recognized by the parties hereto as empowered to conduct

business dealings on behalf of the Issuer in accordance with the terms hereof

and of the Trust Agreement.

 

(b)           Subject

to and upon the terms and conditions set forth herein, the Trust Depositor

hereby sells, transfers, assigns, sets over and otherwise conveys to the

Issuer, for a purchase price consisting of $128,750,250 in cash (less placement

expenses and certain other expenses associated with the initial offer and sale

of the Notes, the proceeds of which represent the consideration paid by the

Issuer herein) and the Certificate of the Issuer in the original certificate

balance of $10.00, all of the right, title and interest of the Trust Depositor

in and to the following (the items in (i)-(vi) below, but in each case

excluding the Retained Interest and Excluded Amounts, being collectively

referred to herein as the “Loan Assets”):

 

(i)            the Initial Loans and all

Collections and other monies due or to become due in payment of such Loans on

and after the Initial Cut-Off Date, including any Prepayment amounts, any

Prepayment Premiums, any Late Charges, any payments in respect of a casualty or

early termination, any Insurance Proceeds and any Liquidation Proceeds received

with respect to the foregoing;

 

(ii)           the Collateral related to such 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 security interest of the Trust Depositor in such

Collateral, all proceeds from any sale or other disposition of such Collateral

and all Insurance Policies;

 

32

 

(iii)          the Loan Files and all documents and

records (including computer records) relating thereto;

 

(iv)          all guarantees, indemnities,

warranties and other agreements or arrangements of whatever character from time

to time supporting or securing payment of such Loans;

 

(v)           the Trust Accounts and all Trust

Account Property (to the extent of the Trust Depositor’s interest if any

therein); and

 

(vi)          all income, payments, products,

proceeds and other benefits of any and all of the foregoing.

 

(c)           The

Originator and the Trust Depositor acknowledge that the representations and warranties

of the Originator and Trust Depositor in Sections 3.01,

3.02, 3.03,

3.04 and 3.05

will run to and be for the benefit of the Issuer, the Trustees and the Swap

Counterparties, and the Issuer and the Trustees may enforce, directly without

joinder of Trust Depositor, the repurchase obligations of the Originator with

respect to breaches of such representations and warranties as set forth herein

and in Section 11.01.

 

(d)           The

sale, transfer, assignment, set-over and conveyance of the Loan Assets by the

Trust Depositor to the Issuer pursuant to this Agreement does not constitute

and is not intended to result in a creation or an assumption by the Trust

Depositor or the Issuer of any obligation of the Originator in connection with

the Loan Assets, or any agreement or instrument relating thereto, including,

without limitation, (i) any obligation to any Obligor, if any, not financed by

the Originator, (ii) any taxes, fees, or other charges imposed by any

Governmental Authority and (iii) any insurance premiums that remain owing

with respect to any Loan at the time such Loan is sold hereunder.  The Trust Depositor also hereby assigns to

the Issuer all of the Trust Depositor’s right, title and interest (but none of

its obligations) under the ACAS Transfer Agreement, including but not limited

to the Trust Depositor’s right to exercise the remedies created by the ACAS

Transfer Agreement.

 

(e)           The

Originator, the Trust Depositor and the Issuer intend and agree that

(i) the transfer of the Loan Assets to the Trust Depositor and the

transfer of the Loan Assets to the Issuer are intended to be a sale, conveyance

and transfer of ownership of the Loan Assets rather than the mere granting of a

security interest to secure a borrowing and (ii) such Loan Assets shall not

be part of the Originator’s or the Trust Depositor’s estate in the event of a

filing of a bankruptcy petition or other action by or against such Person under

any Insolvency Law.  In the event,

however, that notwithstanding such intent and agreement, such transfers are

deemed to be a grant of a mere security interest to secure indebtedness, the

Originator shall be deemed to have granted (and hereby does grant) the Trust

Depositor and the Trust Depositor shall be deemed to have granted (and hereby

does grant) the Issuer, as the case may be, a perfected first priority security

interest in such Loan Assets, and this Agreement shall constitute a security

agreement under Requirements of Law securing the repayment of the purchase

price paid hereunder, the obligations and/or interests represented by the

Securities and the obligations of the Issuer under the Swap Transactions and

the Swaps, in the order and priorities, and subject to the other terms and

conditions of, this Agreement, the Indenture, the Trust Agreement and the

Swaps, together

 

33

 

with such other obligations or interests as may arise hereunder and

thereunder in favor of the parties hereto and thereto.

 

(f)            If

any such transfer of the Loan Assets is deemed to be the mere granting of a

security interest to secure a borrowing, the Trust Depositor may, to secure the

Trust Depositor’s own borrowing under this Agreement (to the extent that the

transfer of the Loan Assets hereunder is deemed to be a mere granting of a

security interest to secure a borrowing) repledge and reassign (i) all or a

portion of the Loan Assets pledged to the Trust Depositor by the Originator and

with respect to which the Trust Depositor has not released its security

interest at the time of such pledge and assignment, and (ii) all proceeds

thereof.  Such repledge and reassignment

may be made by the Trust Depositor with or without a repledge and reassignment

by the Trust Depositor of its rights under any agreement with the Originator,

and without further notice to or acknowledgment from the Originator.  The Originator waives, to the extent

permitted by Requirements of Law, all claims, causes of action and remedies,

whether legal or equitable (including any right of setoff), against the Trust

Depositor or any assignee of the Trust Depositor relating to such action by the

Trust Depositor in connection with the transactions contemplated by this

Agreement.

 

Section 2.02                            Conditions

to Transfer of Loan Assets to Issuer.

 

On or before the Closing Date, the Originator or the

Trust Depositor, as applicable, shall deliver or cause to be delivered to the

Owner Trustee and the Indenture Trustee each of the following documents,

certificates and other items:

 

(i)            a certificate of an officer of the

Originator substantially in the form of Exhibit C

hereto;

 

(ii)           copies of resolutions of the Board of

Directors of the Originator and the Servicer of the Executive Committee of the

Board of Directors of the Originator and the Servicer approving the execution,

delivery and performance of this Agreement and the transactions contemplated

hereunder, certified in each case by the Secretary or an Assistant Secretary of

the Originator, the Servicer and the member of the Trust Depositor;

 

(iii)          officially certified recent evidence

of due incorporation and good standing of the Originator, the Servicer and the

Trust Depositor under the laws of the State of Delaware;

 

(iv)          the initial List of Loans, certified

by an officer of the Trust Depositor, together with an Assignment substantially

in the form of Exhibit A (along

with the delivery of any instruments and Loan Documents as required under Section 2.06 below);

 

(v)           a certificate of an officer of the

Trust Depositor substantially in the form of Exhibit B

hereto;

 

(vi)          a letter from Ernst & Young, or

another nationally recognized accounting firm, addressed to the Originator and

the Trust Depositor, (a) stating that such firm has reviewed a sample of

the Initial Loans and performed specific procedures for such

 

34

 

sample with respect to certain loan terms and

(b) identifying those Initial Loans that do not conform to the procedures;

 

(vii)         a letter from each Rating Agency

assigning to each of the Offered Notes the ratings disclosed in the Private

Placement Memorandum;

 

(viii)        copies of resolutions of the Board of

Directors of the Trust Depositor approving the execution, delivery and

performance of this Agreement and the transactions contemplated hereunder,

certified in each case by the Secretary or an Assistant Secretary of the Trust

Depositor;

 

(ix)           evidence of proper filing with

appropriate offices in the UCC Filing Locations of UCC financing statements

executed by the Originator, as debtor, naming the Trust Depositor as secured

party (and the Issuer as assignee) and identifying the Loan Assets as

collateral; and evidence of proper filing with appropriate officers in the UCC

Filing Locations of UCC financing statements delivered by the Trust Depositor,

as debtor, naming the Issuer as secured party (and the Indenture Trustee as

assignee) and identifying the Loan Assets as collateral; and evidence of proper

filing with appropriate officers in the UCC Filing Locations of UCC financing

statements delivered by the Issuer and naming the Indenture Trustee as secured

party and identifying the Indenture Collateral, as collateral;

 

(x)            an Officer’s Certificate listing the

Servicer’s Servicing Officers;

 

(xi)           evidence of deposit in the Collection

Account of all funds received with respect to the Initial Loans on and after

the Initial Cut-Off Date to the date two (2) days preceding the Closing Date,

together with an Officer’s Certificate from the Servicer to the effect that

such amount is correct;

 

(xii)          evidence of deposit in the Reserve

Fund of the Reserve Fund Initial Deposit by the Issuer;

 

(xiii)         a fully executed copy of each

Transaction Document;

 

(xiv)        opinions of counsel for the Originator

and the Trust Depositor, in form and substance satisfactory to the Initial

Purchaser (and including as an addressee thereof each Rating Agency);

 

(xv)         an opinion of Winston & Strawn to

the effect that, for federal income tax purposes, the Class A Notes and

the Class B Notes will be characterized as debt and the Issuer will not be

characterized as an association, taxable mortgage pool, or publicly traded

partnership taxable as a corporation; and

 

(xvi)        an opinion of Winston & Strawn to

the effect that the Issuer will not be subject to income tax imposed by the

State of Maryland, and holders of the Class A Notes and the Class B Notes that

are not otherwise subject to State of Maryland income tax jurisdiction will not

become subject to income taxation by the State of Maryland solely as a result

of their ownership of the Class A Notes and the Class B Notes.

 

35

 

Section

2.03                            Acceptance

by Issuer.

 

On the Closing Date, if the conditions set forth in Section 2.02 have been satisfied or

waived, the Issuer shall issue to, or upon the order of, the Trust Depositor

the Certificate representing ownership of a beneficial interest in 100% of the

Issuer and the Issuer shall issue, and the Indenture Trustee shall

authenticate, to, or upon the order of, the Trust Depositor the Notes secured

by the Indenture Collateral.  The Owner

Trustee hereby acknowledges its acceptance, on behalf of the Issuer, of the

Loan Assets, and declares that it shall maintain such right, title and interest

in accordance with the terms of this Agreement and the Trust Agreement upon the

terms herein and therein set forth.

 

Section 2.04                            Conveyance

of Substitute Loans.

 

(a)           Subject

to subsections 2.01(d) and (e) above and the satisfaction of the

conditions set forth in subsection 2.04(c),

the Originator may at its option (but shall not be obligated to) sell, transfer,

assign, set over and otherwise convey to the Trust Depositor (by delivery of an

executed Subsequent Purchase Agreement substantially in the form attached as Exhibit J hereto), without recourse

other than as expressly provided herein and therein (and the Trust Depositor

shall be required to purchase through cash payment or by exchange of one or

more related Loans released by the Issuer to the Trust Depositor on the

Subsequent Transfer Date), all of the right, title and interest of the

Originator in and to the following (the items in clauses

(i)-(vi) below, but in each case excluding the Retained Interest and

the Excluded Amounts, upon such transfer, becoming part of the “Loan Assets”):

 

(i)            the Substitute Loans identified in

the related Addition Notice and all Collections and other monies received in

payment of such Substitute Loans on and after the related Subsequent Cut-Off

Date, including any Prepayment amounts, any Prepayment Premiums, any Late

Charges, any payments in respect of a casualty or early termination, any

Insurance Proceeds and any Liquidation Proceeds received with respect to the

foregoing;

 

(ii)           the Collateral related to such 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 security interest of the Trust Depositor in such

Collateral, all proceeds from any sale or other disposition of such Collateral

and all Insurance Policies;

 

(iii)          the Loan Files and all documents and

records (including computer records) relating thereto;

 

(iv)          all guarantees, indemnities,

warranties and other agreements or arrangements of whatever character from time

to time supporting or securing payment of such Loans;

 

(v)           the Trust Accounts and all Trust

Account Property (to the extent of the Trust Depositor’s interest if any

therein); and

 

36

 

(vi)          all income, payments, products,

proceeds and other benefits of any and all of the foregoing.

 

(b)           Subject

to subsections 2.01(d) and (e) and the conditions set forth in subsection 2.04(c), the Trust Depositor

shall sell, transfer, assign, set over and otherwise convey to the Issuer,

without recourse other than as expressly provided herein and therein,

(i) all the right, title and interest of the Trust Depositor in and to the

Substitute Loans purchased pursuant to subsection 2.04(a),

and (ii) all other rights and property interests consisting of Loan Assets

related to such Substitute Loans (the property in clauses

(i)-(ii) above, upon such transfer, shall then be included in the

term “Loan Assets”).

 

(c)           The

Originator shall transfer to the Trust Depositor and the Trust Depositor shall

transfer to the Issuer the Substitute Loans and the other property and rights

related thereto described in subsection 2.04(a),

in the case of the Originator, or subsection 2.04(b),

in the case of the Trust Depositor, only upon the satisfaction of each of the

following conditions on or prior to the related Subsequent Transfer Date (and

the delivery of a related Addition Notice by the Trust Depositor shall be

deemed a representation and warranty by the Trust Depositor and of the

Originator that such conditions have been or will be, as of the related

Subsequent Transfer Date, satisfied):

 

(i)            the Trust Depositor shall have

provided the Issuer and the Indenture Trustee with a timely Addition Notice

complying with the definition thereof contained herein, which notice shall in

any event be no later than five (5) days prior to the date of addition;

 

(ii)           there shall have occurred, with

respect to each such Substitute Loan, a corresponding Substitution Event with

respect to one or more Loans then in the Loan Pool;

 

(iii)          the Substitute Loan(s) being conveyed

to the Issuer satisfy the Substitute Loan Qualification Conditions;

 

(iv)          the Originator shall have delivered to

the Trust Depositor a duly executed written Subsequent Purchase Agreement,

which shall include a Subsequent List of Loans listing the Substitute Loans;

 

(v)           the Trust Depositor shall have

delivered to the Issuer a duly executed written Subsequent Transfer Agreement,

which shall include a Subsequent List of Loans listing the Substitute Loans;

 

(vi)          the Trust Depositor shall have

deposited or caused to be deposited in the Collection Account all Collections

received with respect to the Substitute Loans on and after the related

Subsequent Cut-Off Date;

 

(vii)         as of each Subsequent Transfer Date,

neither the Originator nor the Trust Depositor was insolvent nor will either of

them have been made insolvent by such transfer nor is either of them aware of

any pending insolvency;

 

37

 

(viii)        no selection procedures believed by the

Originator or the Trust Depositor to be adverse to the interests of the

Securityholders or the Swap Counterparties shall have been utilized in

selecting the Substitute Loans;

 

(ix)           each of the representations and

warranties made by the Originator and Trust Depositor pursuant to subsections 3.02 (including without

limitation that such Substitute Loan is an Eligible Loan), 3.03(b)(i), (ii)

and (iv), 3.04,

and 3.05 applicable to the Substitute

Loans shall be true and correct as of the related Subsequent Transfer Date; provided, however, that,

(a) with respect to the representation and warranty made by the Originator

and Trust Depositor in subsection 3.05(a),

such representation and warranty shall only apply to a Loan that is being

substituted for a Loan that is not an Eligible Loan, (b) the

representations and warranties made by the Originator and Trust Depositor in subsections 3.03(b)(iv) and 3.05 shall be determined as if such

Substitute Loan were included in the Loan Pool as of the Initial Cut-Off Date

and (c) the representation in clause 37 of the definition of Eligible Loan

shall not apply to Substitute Loans that are not fully funded Loans;

 

(x)            the Originator shall, at its own

expense, on or prior to the Subsequent Transfer Date, indicate in its Computer

Records that ownership of the Substitute Loans identified on the Subsequent

List of Loans in the Subsequent Transfer Agreement has been sold to the Issuer

through the Trust Depositor pursuant to this Agreement; and

 

(xi)           prior to such substitution the

Originator has received written confirmation from the Rating Agencies (which

shall respond to the Originator within five (5) Business Days after receiving

written notice from the Originator of its intention to substitute a Loan) that

the proposed substitution will not result in a Ratings Effect; provided,

however,

that any failure by each of the Rating Agencies to respond to the Originator

shall be deemed to be a non-approval by the Rating Agencies; provided, further, however, with respect to

the substitution of a Prepaid Loan, only notice to, and not confirmation from,

Fitch shall be required.

 

Section 2.05                            Release

of Released Amounts.

 

(a)           The

Indenture Trustee hereby agrees to release to the Issuer from the Loan Assets,

and the Issuer hereby agrees to release to the Trust Depositor, an amount equal

to the Released Amounts immediately upon identification thereof and upon

receipt of an Officer’s Certificate of the Servicer, which release shall be

automatic and shall require no further act by the Indenture Trustee or the

Issuer; provided,  that, the Indenture Trustee

or Issuer shall execute and deliver such instruments of release and assignment,

or otherwise confirm the foregoing release, as may reasonably be requested by

the Trust Depositor in writing.  Upon

such release, such Released Amounts shall not constitute and shall not be

included in the Loan Assets.

 

(b)           Immediately

upon the release to the Trust Depositor by the Indenture Trustee of the

Released Amounts, the Trust Depositor hereby irrevocably agrees to release to

the Originator such Released Amounts, which release shall be automatic and

shall require no further act by the Trust Depositor; provided,  that, the Trust Depositor

shall execute and deliver such instruments of

 

38

 

release and assignment, or otherwise confirming the foregoing release

of any Released Amounts, as may be reasonably requested by the Originator.

 

Section 2.06                            Delivery

of Loan Files.

 

(a)           The Originator and the Trust Depositor shall

deliver possession of all “instruments” (within the meaning of Article 9

of the UCC) not constituting part of “chattel paper” (within the meaning of

such Article 9) that evidence any Loan, including all Underlying Notes,

and all other portions of the Loan Files to the Indenture Trustee on behalf of

the Issuer and the Swap Counterparties five (5) Business Days prior to the

applicable Assignment Date, in each case endorsed in blank without

recourse.  Pursuant to Section 3.06 of the Indenture, the

Issuer is required to deliver such instruments and Loan Files to the Indenture

Trustee as pledgee under the Indenture for the benefit of the Noteholders and

the Swap Counterparties.  Accordingly,

the Issuer hereby authorizes and directs the Originator and the Trust Depositor

to deliver possession of all such instruments and the Loan Files to the

Indenture Trustee on behalf of and for the account of the Issuer, and agrees

that such delivery shall satisfy the condition set forth in the first sentence

of this Section 2.06.  The Originator and the Trust Depositor shall

also identify on the List of Loans (including any deemed amendment thereof

associated with any Substitute Loans), whether by attached schedule or marking

or other effective identifying designation, all Loans that are or are evidenced

by such instruments.

 

(b)           Prior

to the occurrence of an Event of Default or a Servicer Default, the Indenture

Trustee shall not record the Assignments of Mortgage delivered pursuant to subsection 2.06(a) and the definition of

Loan Documents.  Upon the occurrence of

an Event of Default or a Servicer Default, the Indenture Trustee shall cause to

be recorded in the appropriate offices each Assignment of Mortgage delivered to

it with respect to all Loans except those Loans covered by the proviso to the

definition of Assignment of Mortgage. 

Each such recording shall be at the expense of the Servicer; provided,

however,

to the extent the Servicer does not pay such expense, then the Indenture

Trustee shall be reimbursed pursuant to the provisions of Section 7.05.

 

(c)           If

the Indenture Trustee does not receive the Underlying Note for the Loan to Case

Logic issued in the name of the Issuer within fifteen (15) Business Days after

the Closing Date, the Indenture Trustee shall promptly notify the Originator,

the Trust Depositor and the Issuer of same and such Loan shall be deemed to be

an Ineligible Loan.

 

Section 2.07                            Certification

by Indenture Trustee; Possession of Loan Files.

 

(a)           On

or prior to the applicable Assignment Date, the Indenture Trustee shall review

the Loan Files required to be delivered pursuant to subsection 2.06(a)

on the applicable Assignment Date and shall deliver to the Originator, the

Trust Depositor, the Swap Counterparties and the Servicer a certification in

the form attached hereto as Exhibit D-1

on or prior to such Assignment Date. 

Within 360 days after each Assignment Date, the Indenture Trustee shall

deliver to the Originator, the Servicer, the Trust Depositor, the Swap

Counterparties and any Noteholder who requests a copy from the Indenture

Trustee a final certification in the form attached hereto as Exhibit D-2 evidencing the completeness

of the Loan Files with respect to the Loans being transferred on such

Assignment Date.

 

39

 

(b)           If

the Indenture Trustee during the process of reviewing the Loan Files finds any

document constituting a part of a Loan File which is not properly executed, has

not been received, is unrelated to a Loan identified in the List of Loans, or

does not conform in a material respect to the requirements of the definition of

Loan File, or the description thereof as set forth in the List of Loans, the

Indenture Trustee shall promptly so notify the Originator, the Trust Depositor

and the Servicer.  In performing any such

review, the Indenture Trustee may conclusively rely on the Originator as to the

purported genuineness of any such document and any signature thereon.  It is understood that the scope of the

Indenture Trustee’s review of the Loan Files is limited solely to confirming

that the documents listed in the definition of Loan File have been executed and

received and relate to the Loans identified in the List of Loans; provided,

however,

with respect to the UCC financing statements referenced in the definition of

Loan File, the Indenture Trustee’s sole responsibility will be to confirm that

the Loan File contains UCC financing statements and not to make determinations

about the materiality of such UCC financing statements.  The Originator agrees to use reasonable efforts

to remedy a material defect in a document constituting part of a Loan File of

which it is so notified by the Indenture Trustee.  If, however, within thirty (30) days after the Indenture

Trustee’s notice to it respecting such material defect the Originator has not

remedied the defect and such defect materially and adversely affects the value

of the related Loan, such Loan will be treated as an “Ineligible Loan” and the

Originator will (i) substitute in lieu of such Loan a Substitute Loan in

the manner and subject to the conditions set forth in Section 11.01 or (ii) repurchase

such Loan at a purchase price equal to the Transfer Deposit Amount, which

purchase price shall be deposited in the Collection Account within such thirty

(30) day period.

 

(c)           Release of Entire Loan File Upon Substitution.  Subject to subsection 5.08(c),

upon receipt by the Indenture Trustee of a certification of a Servicing Officer

of the Servicer of such substitution or of such purchase and the deposit of the

amounts described in subsection 2.07(b)

in the Collection Account (which certification shall be in the form of Exhibit E hereto), the Indenture Trustee

shall release to the Servicer for release to the Originator the related Loan

File and the Indenture Trustee and the Issuer shall execute, without recourse,

and deliver such instruments of transfer prepared by the Servicer necessary to

transfer all right, title and interest in such Loan to the Originator free and

clear of any Liens created by the Transaction Documents.  All costs of any such transfer shall be

borne by the Servicer.

 

(d)           Partial Release of Loan File and/or Collateral.  Subject to subsection 5.08(d),

if in connection with taking any action in connection with a Loan (including,

without limitation, the amendment to documents in the Loan File and/or a revision

to Collateral), the Servicer requires any item constituting part of the Loan

File, or the release from the Lien of the related Loan of all or part of any

Collateral, the Servicer shall deliver to the Indenture Trustee a certificate

to such effect in the form attached as Exhibit E

hereto.  Upon receipt of such

certification, the Indenture Trustee shall deliver to the Servicer within two

(2) Business Days of such request (if such request was received by 2:00 p.m.,

central time), the requested documentation, and the Indenture Trustee shall

execute, without recourse, and deliver such instruments of transfer necessary

to release all or the requested part of the Collateral from the Lien of the

related Loan and/or the Lien under the Transaction Documents.

 

(e)           Annual Certification.  On the Payment Date in August of each year,

commencing August 2003, the Indenture Trustee shall deliver to the Originator,

the Trust Depositor, each

 

40

 

Swap Counterparty and the Servicer a certification detailing all

transactions with respect to the Loans for which the Indenture Trustee holds

the Loan Files pursuant to this Agreement during the prior calendar year.  Such certification shall list all Loan Files

which were released by or returned to the Indenture Trustee during the prior

calendar year, the date of such release or return and the reason for such

release or return.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

The Originator makes, and upon execution of each

Subsequent Purchase Agreement is deemed to make, the following representations

and warranties, on which the Trust Depositor will rely in conveying the Loan

Assets on the applicable Assignment Date to the Issuer, and on which the

Issuer, the Securityholders and the Swap Counterparties will rely.  The Trust Depositor acknowledges that such

representations and warranties are being made by the Originator for the benefit

of the Issuer, the Securityholders and the Swap Counterparties.

 

Such representations and warranties speak as of the

execution and delivery of this Agreement and as of the applicable Assignment

Date, but shall survive the sale, transfer and assignment of the Loan Assets to

the Issuer.  The repurchase obligation

or substitution obligation of the Originator set forth in Section 11.01 constitutes the sole

remedy available for a breach of a representation or warranty of the Originator

set forth in Sections 3.01, 3.02, 3.03,

3.04 or 3.05

of this Agreement.  Notwithstanding the

foregoing, the Originator shall not be deemed to be remaking any of the

representations set forth in Section 3.03

on a Subsequent Transfer Date with respect to the Substitute Loans, as such

representations relate solely to the composition of the Initial Loans conveyed

on the Closing Date.

 

Section 3.01                            Representations

and Warranties Regarding the Originator.

 

By its execution of this Agreement and each Subsequent

Purchase Agreement, the Originator represents and warrants that:

 

(a)           Organization and Good Standing.  The Originator is a corporation duly

organized, validly existing and in good standing under the laws of the

jurisdiction of its organization and has the requisite corporate power to own

or lease its assets and to transact the business in which it is currently

engaged.  The Originator is duly

qualified to do business as a foreign corporation and is in good standing in

each jurisdiction in which the character of the business transacted by it or

properties owned or leased by it requires such qualification and in which the

failure so to qualify would not reasonably be expected have a material adverse

effect on the business, properties, assets, or condition (financial or

otherwise) of the Originator or Trust Depositor.  The Originator is properly licensed in each jurisdiction to the

extent required by the laws of such jurisdiction in order to originate, and (if

the Originator is to be the Servicer) service the Loans in accordance with the

terms of this Agreement.

 

(b)           Authorization.  The Originator has the power and authority to make, execute, deliver

and perform this Agreement and the other Transaction Documents to which the

Originator is a party and all of the transactions contemplated under this

Agreement and the other

 

41

 

Transaction Documents to which the Originator is a party, and has taken

all necessary corporate action to authorize the execution, delivery and

performance of this Agreement and the other Transaction Documents to which the

Originator is a party.

 

(c)           Valid Sale. 

This Agreement and each Subsequent Purchase Agreement, if any, shall

effect a valid sale, transfer and assignment of the Loan Assets from the

Originator to the Trust Depositor, enforceable against the Originator in

accordance with their terms, except as enforcement of such terms may be limited

by bankruptcy, insolvency or similar laws affecting the enforcement of

creditors’ rights generally and by the availability of equitable remedies.

 

(d)           Binding Agreements.  This Agreement and the other Transaction Documents to which the

Originator is a party constitute the legal, valid and binding obligation of the

Originator enforceable in accordance with their terms, except as enforcement of

such terms may be limited by bankruptcy, insolvency or similar laws affecting

the enforcement of creditors’ rights generally and by the availability of

equitable remedies.

 

(e)           No Consent Required.  The Originator is not required to obtain the

consent of any other party or any consent, license, approval or authorization

from, or registration or declaration with, any Governmental Authority in

connection with the execution, delivery, performance, validity or

enforceability of this Agreement and the other Transaction Documents to which

the Originator is a party except (i) for the filing of the UCC financing

statements and (ii) such consents, licenses, approvals, authorizations,

registrations and declarations which have been obtained and are in full force

and effect.

 

(f)            No Violations.  The Originator’s execution, delivery and performance of this Agreement

and the other Transaction Documents to which the Originator is a party will not

violate any provision of any Requirements of Law or any order or decree of any

court or the Certificate of Incorporation or Bylaws of the Originator, or

constitute (with or without notice or lapse of time or both) a material breach

of any mortgage, indenture, contract or other agreement to which the Originator

is a party or by which the Originator or any of the Originator’s properties may

be bound.

 

(g)           Litigation. 

No litigation or administrative proceeding of or before any court,

tribunal or governmental body is currently pending, or, to the knowledge of the

Originator, threatened, against the Originator or any of its respective

properties or with respect to this Agreement or any other Transaction Document

to which the Originator is a party that, if adversely determined, would, in the

reasonable opinion of the Originator, be expected to have a material adverse

effect on the business, properties, assets or condition (financial or other) of

the Originator or the transactions contemplated by this Agreement or any other

Transaction Document to which the Originator is a party.

 

(h)           Name and Location; No Changes.  The Originator’s name and location (within

the meaning of Article 9 of the UCC) are as set forth in Section 13.04.  The Originator has not changed its name, identity, structure,

existence or state of incorporation, whether by amendment of its certificate of

incorporation, by reorganization or otherwise, and has not changed its location

(within the meaning of Article 9 of the UCC) within the four (4) months

preceding the Closing Date.

 

42

 

(i)            No Bulk Sales.  The execution, delivery and performance of this Agreement by the Originator

do not require compliance with any “bulk sales” laws by the Originator.

 

(j)            Solvency. 

The Originator on each date of, and after giving effect to, the transfer

of the Loans and any Substitute Loans, as the case may be, to the Trust

Depositor pursuant to the ACAS Transfer Agreement is and will be Solvent.

 

(k)           Use of Proceeds.  No proceeds of the sale of any Initial Loan or Substitute Loan

hereunder received by the Originator will be used by the Originator to purchase

or carry any “margin stock” as such term is defined in Regulation T, U or

X of the Board of Governors of the Federal Reserve System.

 

(l)            An Investment Company.  The Originator is properly registered as an

“investment company” within the meaning, and is, and after completion of the transactions

contemplated by the Transaction Documents will be, in compliance with all

requirements, of the Investment Company Act of 1940, as amended.

 

(m)          Taxes. 

To the best of the Originator’s knowledge, (i) the Originator has

filed all tax returns required to be filed in the normal course of its business

and has paid or made adequate provisions for the payment of all taxes,

assessments and other governmental charges due from the Originator or is

contesting any such tax, assessment or other governmental charge in good faith

through appropriate proceedings, (ii) no tax Lien has been filed with

respect thereto, and (iii) no claim is being asserted with respect to any

such tax, fee or other charge.

 

(n)           Sale Treatment.  The Originator has treated the transfer of Loan Assets to the

Trust Depositor for all purposes (other than for financial accounting purposes)

as a sale and purchase on all of its relevant books, records, financial

statements and other applicable documents, except to the extent applicable tax

laws require otherwise.

 

(o)           Marking of Files.  The Originator will have, at its own expense, prior to the close

of business on the Closing Date, (i) indicated in its Computer Records

that ownership of the Loans transferred by it to the Trust Depositor and identified

on the List of Loans have been sold to the Trust Depositor and (ii) caused

to be affixed to the original of each Underlying Note and the copy of each loan

agreement the following legend:

 

This loan agreement/note

is subject to a security interest granted to Wells Fargo Bank Minnesota,

National Association, as Indenture Trustee on behalf of the Noteholders and the

Swap Counterparties.  UCC–1 Financing

Statements covering this loan agreement/note have been filed with the Secretary

of State of the State of Delaware.  Such

Lien will be released only in connection with appropriate filings in such

offices.  Consequently, potential

purchasers of this loan agreement/note must refer to such filings to determine

whether such Lien has been released.

 

43

 

(p)           Security Interest.

 

(i)            This Agreement creates a valid,

continuing and enforceable security interest (as defined in the applicable UCC)

in the Loan Assets in favor of the Trust Depositor, which security interest is

prior to all other Liens (except for Permitted Liens), and is enforceable as

such against creditors of and purchasers from the Originator;

 

(ii)           such Loans, along with the related

Loan Files, constitute either a “general intangible,” an “instrument,” an

“account,” “investment property,” or “chattel paper,” within the meaning of the

applicable UCC;

 

(iii)          the Originator owns and has good and

marketable title to such Loan Assets free and clear of any Lien, claim or

encumbrance of any Person (other than Permitted Liens);

 

(iv)          the Originator has received all

consents and approvals required by the terms of the Loan Assets to the sale of

the Loan Assets under the ACAS Transfer Agreement to the Trust Depositor;

 

(v)           the Originator has caused the filing

of all appropriate financing statements in the proper filing office in the

appropriate jurisdictions under Requirements of Law in order to perfect the

security interest in such Loan Assets granted to the Trust Depositor under the

ACAS Transfer Agreement;

 

(vi)          other than the security interest

granted to the Trust Depositor pursuant to the ACAS Transfer Agreement and this

Agreement, the Originator has not pledged, assigned, sold, granted a security

interest in or otherwise conveyed any of such Loan Assets.  The Originator has not authorized the filing

of and is not aware of any financing statements against the Originator that

include a description of collateral covering such Loan Assets other than any

financing statement (A) relating to the security interest granted to the

Trust Depositor under the ACAS Transfer Agreement and this Agreement, or

(B) that has been terminated.  The

Originator is not aware of the filing of any judgment or tax Lien filings

against the Originator;

 

(vii)         all original executed copies of each

Underlying Note that constitute or evidence the Loan Assets have been delivered

to the Indenture Trustee;

 

(viii)        the Originator has received a written

acknowledgment from the Indenture Trustee that the Indenture Trustee or its

bailee is holding the Underlying Notes that constitute or evidence the Loan

Assets solely on behalf of and for the benefit of the Noteholders and the Swap

Counterparties; and

 

(ix)           none of the Underlying Notes that

constitute or evidence the Loan Assets has any marks or notations indicating

that they have been pledged, assigned or otherwise conveyed to any Person other

than the Issuer and the Indenture Trustee, as assignees of the Trust Depositor.

 

44

 

(q)           Value Given. 

The cash payments received by the Originator in respect of the purchase

price of each Loan sold under the ACAS Transfer Agreement constitutes the face

value of such Loan and reasonably equivalent value in consideration for the

transfer to the Trust Depositor of such Loan under the ACAS Transfer Agreement,

such transfer was not made for or on account of an antecedent debt owed by the

Originator to the Trust Depositor, and such transfer was not and is not

voidable or subject to avoidance under any Insolvency Law.

 

(r)            Mortgages. 

Other than the Loan to Cycle Gear, if a Loan is secured by real property

and the Originator, other than solely in its capacity as collateral agent under

any Loan Document with an Obligor, is the mortgagee, the mortgage has been

assigned by the Originator to the Trust Depositor and by the Trust Depositor to

the Issuer and the Assignment of Mortgage has been delivered to the Indenture

Trustee.

 

(s)           Selection Procedures.  No selection procedures determined by the

Originator to be materially adverse to the interests of the Trust Depositor

were utilized by the Originator in selecting the Loans to be sold, assigned,

transferred, set–over and otherwise conveyed hereunder.

 

(t)            Environmental.  At the time of origination of

each Loan where real property that is material to the operations of the related

business serves as Collateral for such Loan, the related mortgaged property was

free of contamination from toxic substances or hazardous wastes requiring

action under Requirements of Law or is subject to ongoing environmental

rehabilitation approved by the Servicer, and, as of the Closing Date, the

Originator has no knowledge of any such contamination from toxic substances or

hazardous waste material on any such real property unless such items are below

action levels.

 

The representations and warranties in subsection 3.01(p) shall survive the

termination of this Agreement and such representations and warranties may not

be waived by any party hereto.

 

Section 3.02                            Representations

and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate.

 

The Originator represents and warrants (x) with

respect to subsections (a)-(b)

below, as to each Loan to be transferred on the related Assignment Date as of

the applicable Cut-Off Date, and (y) with respect to subsections (c)-(d)

below, as to the Loan Pool in the aggregate as of the applicable Cut-Off Date

(after giving effect to the addition of any Substitute Loans to the Loan Pool),

that:

 

(a)           List of Loans.  The information set forth in the List of Loans (as the same may

be amended or deemed amended in respect of a conveyance of Substitute Loans on

a Subsequent Transfer Date) is true, complete and correct as of the applicable

Cut-Off Date.

 

(b)           Eligible Loan.  Such Loan satisfies the criteria for the definition of Eligible

Loan set forth in this Agreement as of the date of its conveyance hereunder

(or, with respect to clause 38 of the definition of Eligible Loan, as of

the Initial Cut-Off Date).

 

(c)           No Fraud. 

Each Loan was originated without any fraud or material misrepresentation

by the Originator or, to the best of the Originator’s knowledge, on the part of

the Obligor.

 

45

 

(d)           Loans Secured by Real Property.  Less than 40% of the Aggregate Outstanding

Loan Balance of the Loan Pool consists of Loans principally secured by real

property.

 

Section 3.03                            Representations

and Warranties Regarding the Initial Loans in the Aggregate.

 

The Originator represents and warrants, as of the

Closing Date, that:

 

(a)           Amounts. 

The Aggregate Outstanding Loan Balance of the Loans as of the Initial

Cut-Off Date equals the sum of the principal balance of the Class A Notes,

the Class B Notes, the Class C Note and the Certificate on the Closing

Date.

 

(b)           Characteristics.  The Initial Loans as of the Initial Cut–Off Date have the

following additional characteristics: (i) no Loan has a remaining maturity

of more than 118 months; (ii) the final Scheduled Payment on the Loan with

the latest maturity is not later than May 20, 2012; (iii) no Loan was

originated after the Initial Cut-Off Date; (iv) not more than 32.6% of the

Initial Loans (as measured by the Aggregate Outstanding Loan Balance) provide

for Scheduled Payments due on a basis other than monthly.

 

Section 3.04                            Representations

and Warranties Regarding the Loan Files.

 

The Originator represents and warrants as of the

applicable Assignment Date that (i) to the extent that any Loans were

pledged as collateral for the CP Transaction, immediately prior to such date

(as applicable), a collateral custodian under the CP Transaction had possession

of each such original Underlying Note and a copy of the Loan and the related

complete Loan File, and there were no other custodial agreements relating to

the same in effect except for a custodial agreement between ACAS and ACS

Funding Trust I with respect to the CP Transaction; (ii) each of such

documents which is required to be signed by the Obligor has been signed by the

Obligor in the appropriate spaces; (iii) all blanks on any form have been

properly filled in and each form has otherwise been correctly prepared; and

(iv) the complete Loan File for each Loan is in the possession of the

Indenture Trustee.

 

Section 3.05                            Representations

and Warranties Regarding Concentrations of Initial Loans.

 

The Originator represents and warrants as of the

Closing Date, as to the composition of the Initial Loans in the Loan Pool as of

the Initial Cut-Off Date, that:

 

(a)           the

sum of the Outstanding Loan Balances of Loans in respect of Obligors that are

in the same industry (by SIC code) shall not exceed 3.8% of the Aggregate

Outstanding Loan Balance;

 

(b)           [Reserved]; and

 

(c)           the

sum of the Outstanding Loan Balances of Loans in respect of Obligors that have

their principal executive offices in the same State of the United States shall

not exceed 14.3% of the Aggregate Outstanding Loan Balance.

 

46

 

Section 3.06                            Representations

and Warranties Regarding the Trust Depositor.

 

By its execution of this Agreement and each Subsequent

Transfer Agreement, the Trust Depositor represents and warrants to the Issuer,

the Indenture Trustee, the Securityholders and the Swap Counterparties that:

 

(a)           Confirmation of the Originator’s Representations and

Warranties.  The

representations and warranties set forth in Section 3.01,

Section 3.02, Section 3.03, Section 3.04

and Section 3.05 of this Agreement

and in the ACAS Transfer Agreement are true and correct.

 

(b)           Organization and Good Standing.  The Trust Depositor is a limited liability

company duly organized, validly existing and in good standing under the laws of

Delaware and has the power to own its assets and to transact the business in

which it is currently engaged.  The

Trust Depositor is duly qualified to do business as a foreign entity and is in

good standing in each jurisdiction in which the character of the business

transacted by it or properties owned or leased by it requires such

qualification and in which the failure so to qualify would not reasonably be

expected have a material adverse effect on the business, properties, assets, or

condition (financial or other) of the Trust Depositor or the Issuer.

 

(c)           Authorization.  The Trust Depositor has the power and authority to make, execute,

deliver and perform this Agreement and the other Transaction Documents to which

it is a party and all of the transactions contemplated under this Agreement and

the other Transaction Documents to which it is a party, and to create the

Issuer and cause it to make, execute, deliver and perform its obligations under

this Agreement and the other Transaction Documents to which it is a party, and

has taken all necessary corporate action to authorize the execution, delivery

and performance of this Agreement and the other Transaction Documents to which

it is a party and to cause the Issuer to be created.

 

(d)           Valid Sale. 

This Agreement and each Subsequent Transfer Agreement, if any, shall

effect a valid sale, transfer and assignment of the Loan Assets from the Trust

Depositor to the Issuer, enforceable against the Trust Depositor and creditors

of and purchasers from the Trust Depositor, except as enforcement of such terms

may be limited by applicable Insolvency Laws and general principles of equity,

whether considered in a suit at law or in equity.

 

(e)           Binding Agreements.  This Agreement and the other Transaction Documents to which the

Trust Depositor is a party constitute the legal, valid and binding obligation

of the Trust Depositor enforceable in accordance with their terms, except as

enforcement of such terms may be limited by applicable Insolvency Laws and

general principles of equity, whether considered in a suit at law or in equity.

 

(f)            No Consent Required.  The Trust Depositor is not required to

obtain the consent of any other party or any consent, license, approval or

authorization from, or registration or declaration with, any Governmental

Authority in connection with the execution, delivery, performance, validity or

enforceability of this Agreement or the other Transaction Documents to which it

is a party except (i) for the filing of the UCC financing statements and

(ii) such consents, licenses, approvals, authorizations, registrations and

declarations which have been obtained and are in full force and effect.

 

47

 

(g)           No Violations.  The execution, delivery and performance of this Agreement and the

other Transaction Documents to which it is a party by the Trust Depositor, and

the consummation of the transactions contemplated hereby and thereby, will not

violate any Requirement of Law applicable to the Trust Depositor, or constitute

a material breach of any mortgage, indenture, contract or other agreement to

which the Trust Depositor is a party or by which the Trust Depositor or any of

the Trust Depositor’s properties may be bound, or result in the creation or

imposition of any security interest, Lien, charge, pledge, preference, equity

or encumbrance of any kind upon any of its properties pursuant to the terms of

any such mortgage, indenture, contract or other agreement, other than as

contemplated by the Transaction Documents.

 

(h)           Litigation. 

No litigation or administrative proceeding of or before any court,

tribunal or governmental body is currently pending, or to the knowledge of the

Trust Depositor threatened, against the Trust Depositor or any of its

properties or with respect to this Agreement, the other Transaction Documents

to which it is a party or the Securities (1) that, if adversely determined,

would in the reasonable judgment of the Trust Depositor be expected to have a

material adverse effect on the business, properties, assets or condition

(financial or otherwise) of the Trust Depositor or the Issuer or the

transactions contemplated by this Agreement or the other Transaction Documents

to which the Trust Depositor is a party or (2) seeking to adversely affect the

federal income tax or other federal, state or local tax attributes of the

Certificate or Notes.

 

(i)            Bulk Sales. 

The execution, delivery and performance of this Agreement do not require

compliance with any “bulk sales” laws by the Trust Depositor.

 

(j)            Solvency. 

The Trust Depositor, at the time of and after giving effect to each

conveyance of Loan Assets hereunder, is and will be Solvent.

 

(k)           Taxes. 

The Trust Depositor has filed or caused to be filed all tax returns

that, to its knowledge, are required to be filed and has paid all taxes shown

to be due and payable on such returns or on any assessments made against it or

any of its property and all other taxes, fees or other charges imposed on it or

any of its property by any Governmental Authority (other than any amount of tax

due, the validity of which is currently being contested in good faith by

appropriate proceedings and with respect to which reserves in accordance with

generally accepted accounting principles have been provided on the books of the

Trust Depositor); no tax Lien has been filed and, to the Trust Depositor’s

knowledge, no claim is being asserted, with respect to any such tax, fee or

other charge.

 

(l)            Name and Location; No Changes.  The Trust Depositor’s name and location

(within the meaning of Article 9 of the UCC) are as set forth in Section 13.04.  The Trust Depositor has not changed its name, identity,

structure, existence or state of formation, whether by amendment of its

certificate of formation, by reorganization or otherwise, and has not changed

its location (within the meaning of Article 9 of the UCC) within the four (4)

months preceding the Closing Date.

 

(m)          Not an Investment Company.  The Trust Depositor is not required to be

registered as an “investment company” within the meaning of the Investment

Company Act of 1940, as amended (or the Trust Depositor is exempt from all

provisions of such act).

 

48

 

(n)           Sale Treatment.  The Trust Depositor has treated the transfer of Loan Assets to

the Trust Depositor for all purposes (other than for financial accounting

purposes) as a sale and purchase on all of its relevant books, records, financial

statements and other applicable documents, except to the extent applicable tax

laws require otherwise.

 

(o)           Security Interest.

 

(i)            This Agreement creates a valid,

continuing and enforceable security interest (as defined in the applicable UCC)

in the Loan Assets in favor of the Issuer, which security interest is prior to

all other Liens (except for Permitted Liens), and is enforceable as such

against creditors of and purchasers from the Trust Depositor;

 

(ii)           such Loans, along with the related

Loan Files, constitute either a “general intangible,” an “instrument,” an

“account,” “investment property,” or “chattel paper,” within the meaning of the

applicable UCC;

 

(iii)          the Trust Depositor owns and has good

and marketable title to such Loan Assets free and clear of any Lien, claim or

encumbrance of any Person (other than Permitted Liens);

 

(iv)          the Trust Depositor has received all

consents and approvals required by the terms of the Loan Assets to the sale of

the Loan Assets hereunder to the Issuer;

 

(v)           the Trust Depositor has caused the

filing of all appropriate financing statements in the proper filing office in

the appropriate jurisdictions under Requirements of Law in order to perfect the

security interest in such Loan Assets granted to the Issuer under this

Agreement;

 

(vi)          other than the security interest

granted to the Issuer pursuant to this Agreement, the Trust Depositor has not

pledged, assigned, sold, granted a security interest in or otherwise conveyed

any of such Loan Assets;

 

(vii)         the Trust Depositor has not authorized

the filing of and is not aware of any financing statements against the Trust

Depositor that include a description of collateral covering such Loan Assets

other than any financing statement (A) relating to the security interest

granted to the Issuer under this Agreement, or (B) that has been

terminated;

 

(viii)        the Trust Depositor is not aware of the

filing of any judgment or tax Lien filings against the Trust Depositor;

 

(ix)           all original executed copies of each

Underlying Note that constitute or evidence the Loan Assets have been delivered

to the Indenture Trustee;

 

(x)            the Trust Depositor has received a

written acknowledgment from the Indenture Trustee that the Indenture Trustee or

its bailee is holding the Underlying Notes that constitute or evidence the Loan

Assets solely on behalf of and for the benefit of the Securityholders and the

Swap Counterparties; and

 

49

 

(xi)           none of the Underlying Notes that

constitute or evidence the Loan Assets has any marks or notations indicating

that it has been pledged, assigned or otherwise conveyed to any Person other

than the Issuer and the Indenture Trustee.

 

(p)           No Liens. 

The Trust Depositor owns each Loan Asset to be sold by it hereunder free

and clear of any Liens except as provided herein, and upon the sale, transfer

or assignment hereunder, the Issuer shall (i) become the owner of each

Loan Asset then existing or thereafter arising, free and clear of any Lien

except as provided herein or (ii) acquire a first priority perfected

security interest in such Loan Asset. 

No effective financing statement or other instrument similar in effect

covering any Loan Asset or the Collections with respect thereto shall at any

time be on file in any recording office except such as may be filed in favor of

the Issuer relating to this Agreement or otherwise as provided under this

Agreement.

 

(q)           Value Given. 

The cash payments received by the Trust Depositor in respect of the

purchase price of each Loan sold hereunder constitutes the face value of such

Loan and reasonably equivalent value in consideration for the transfer to the

Issuer of such Loan under this Agreement, such transfer was not made for or on

account of an antecedent debt owed by the Trust Depositor to the Issuer, and such

transfer was not and is not voidable or subject to avoidance under any

Insolvency Law.

 

The representations and warranties in subsection 3.01(o) shall survive the

termination of this Agreement and such representations and warranties may not

be waived by any party hereto.

 

Section 3.07                            Representations

and Warranties Regarding the Servicer.

 

The Servicer represents and warrants to the Owner

Trustee, the Indenture Trustee, the Securityholders and the Swap Counterparties

that:

 

(a)           Organization and Good Standing.  The Servicer is a corporation duly

organized, validly existing and in good standing under the laws of the

jurisdiction of its organization and has the corporate power to own its assets

and to transact the business in which it is currently engaged.  The Servicer is duly qualified to do

business as a foreign corporation and is in good standing in each jurisdiction

in which the character of the business transacted by it or properties owned or

leased by it requires such qualification and in which the failure so to qualify

would not reasonably be expected to have a material adverse effect on the

business, properties, assets, or condition (financial or otherwise) of the

Servicer or the Issuer.  The Servicer is

properly licensed in each jurisdiction to the extent required by the laws of

such jurisdiction to service the Loans in accordance with the terms hereof.

 

(b)           Authorization.  The Servicer has the power and authority to make, execute,

deliver and perform this Agreement and the other Transaction Documents to which

the Servicer is a party and all of the transactions contemplated under this

Agreement and the other Transaction Documents to which the Servicer is a party,

and has taken all necessary corporate action to authorize the execution,

delivery and performance of this Agreement and the other Transaction Documents

to which the Servicer is a party.

 

(c)           Binding Obligations.  This Agreement and the other Transaction

Documents to which the Servicer is a party constitute the legal, valid and

binding obligation of the Servicer

 

50

 

enforceable in accordance with their terms, except as enforcement of

such terms may be limited by Insolvency Laws and general principles of equity,

whether considered in a suit at law or in equity.

 

(d)           No Consent Required.  The Servicer is not required to obtain the

consent of any other party or any consent, license, approval or authorization

from, or registration or declaration with, any Governmental Authority in

connection with the execution, delivery, performance, validity or

enforceability of this Agreement and the other Transaction Documents to which

the Servicer is a party except (i) for the filing of the UCC financing

statements and (ii) such consents, licenses, approvals, authorizations,

registrations and declarations which have been obtained and are in full force

and effect.

 

(e)           No Violations.  The execution, delivery and performance of this Agreement and the

other Transaction Documents to which the Servicer is a party by the Servicer

will not violate any Requirements of Law applicable to the Servicer, or

constitute a material breach of any mortgage, indenture, contract or other

agreement to which the Servicer is a party or by which the Servicer or any of

the Servicer’s properties may be bound, or result in the creation of or

imposition of any security interest, Lien, pledge, preference, equity or

encumbrance of any kind upon any of its properties pursuant to the terms of any

such mortgage, indenture, contract or other agreement, other than as

contemplated by the Transaction Documents.

 

(f)            Litigation. 

No litigation or administrative proceeding of or before any court,

tribunal or governmental body is currently pending, or to the knowledge of the

Servicer threatened, against the Servicer or any of its properties or with

respect to this Agreement or any other Transaction Document to which the

Servicer is a party that, if adversely determined, would, in the reasonable

judgment of the Servicer, be expected to have a material adverse effect on the

business, properties, assets or condition (financial or otherwise) of the

Servicer or the Issuer or the transactions contemplated by this Agreement or

any other Transaction Document to which the Servicer is a party.

 

(g)           Reports. 

All reports, certificates and other written information furnished by the

Servicer with respect to the Loans are correct in all material respects.

 

Section 3.08                            Representations

and Warranties of the Backup Servicer and the Indenture Trustee.

 

Each of the Backup Servicer and Indenture Trustee

hereby represents and warrants to the Issuer, the Originator, the Servicer, the

Trust Depositor, the Owner Trustee, the Securityholders and the Swap

Counterparties, as follows:

 

(a)           Organization.  It is a national banking association duly organized, validly

existing and in good standing under the federal 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)           Good Standing.  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 and the conduct of its business

 

51

 

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 on the interests

of the Securityholders or the Swap Counterparties.

 

(c)           Authorization.  It has the power and authority to execute and deliver this

Agreement and to carry out its terms, and it has duly authorized the execution,

delivery and performance of this Agreement by all requisite action.

 

(d)           No Violations.  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, bylaws 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 Requirements of Law.

 

(e)           No Consent Required.  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 Insolvency Laws and

(ii) general principles of equity (whether considered in a suit at law or

in equity).

 

(g)           Litigation. 

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 on the interests of the

Securityholders or the Swap Counterparties.

 

ARTICLE IV

 

PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS

 

Section

4.01                            Custody

of Loans.

 

The contents of each Loan File shall be held in the

custody of the Indenture Trustee under the terms of this Agreement and the

Indenture for the benefit of, and as agent for, the Securityholders and the

Swap Counterparties.

 

Section

4.02                            Filing.

 

On or prior to the Closing Date, the Originator, Trust

Depositor and Servicer shall cause the UCC financing statement(s) referred to

in subsection 2.02(ix) hereof to

be filed, and from time to time the Servicer shall take and cause to be taken

such actions and execute such

 

52

 

documents as are necessary or desirable or as the

Owner Trustee or Indenture Trustee (acting at the direction of the Required

Holders) may reasonably request to perfect and protect the Indenture Trustee’s

first priority perfected security interest in the Loan Assets against all other

Persons, including, without limitation, the filing of financing statements,

amendments thereto and continuation statements, the execution of transfer

instruments and the making of notations on or taking possession of all records

or documents of title.  Notwithstanding

the obligations of the Originator, the Trust Depositor and the Servicer set

forth in the preceding sentence, the Originator, the Trust Depositor and the

Servicer hereby authorize the Owner Trustee to prepare and file, at the expense

of the Servicer, UCC financing statements (including but not limited to

renewal, continuation or in lieu statements) and amendments or supplements

thereto or other instruments as the Owner Trustee may from time to time deem

necessary or appropriate in order to perfect and maintain the security interest

granted hereunder in accordance with the UCC.

 

Section 4.03                            Changes

in Name, Corporate Structure or Location.

 

(a)           During

the term of this Agreement, none of the Originator, the Servicer, the Trust

Depositor or the Issuer shall change its name, identity, structure, existence or

location (as defined in Article 9 of the UCC) without first giving at least

thirty (30) days’ prior written notice to the Owner Trustee, the Indenture

Trustee and each Swap Counterparty.

 

(b)           If

any change in either the Servicer’s, the Originator’s, the Trust Depositor’s or

the Issuer’s name, identity, structure, existence, location (as defined in

Article 9 of the UCC) or other action would make any financing or continuation

statement or notice of ownership interest or Lien relating to any Loan Asset seriously

misleading within the meaning of applicable provisions of the UCC, the

Servicer, no later than five (5) Business Days after the effective date of such

change, shall file such amendments as may be required to preserve and protect

the Indenture Trustee’s security interest in the Loan Assets and the proceeds

thereof.  Promptly after taking any of

the foregoing actions, the Servicer shall deliver to the Owner Trustee and the

Indenture Trustee an Opinion of Counsel reasonably acceptable to the Owner

Trustee and the Indenture Trustee stating that, in the opinion of such counsel,

all financing statements or amendments necessary to preserve and protect the

Indenture Trustee’s security interest in the Loan Assets have been filed, and

reciting the details of such filing.

 

Section 4.04                            Chief

Executive Office.

 

During the term of this Agreement, and subject to the

other terms and provisions herein relating to changes in location, the

Originator will maintain its chief executive office in one of the States of the

United States.

 

Section

4.05                            Costs

and Expenses.

 

The Servicer agrees to pay all reasonable costs and

disbursements in connection with the perfection and the maintenance of

perfection, as against all third parties, of the Issuer’s and the Indenture

Trustee’s right, title and interest in and to the Loan Assets (including,

without limitation, the security interest in the Collateral related thereto and

the security interests provided for in the Indenture).

 

53

 

Section

4.06                            Sale

Treatment.

 

The Trust Depositor shall treat the transfer of Loan

Assets made hereunder for all purposes (other than for financial accounting

purposes) as a sale and purchase on all of its relevant books, records,

financial statements and other applicable documents.  Notwithstanding the preceding sentence, for federal income tax

purposes, the transfer of Loan Assets by the Trust Depositor hereunder shall

not be treated as a sale and purchase for federal income tax purposes so long

as (i) the Issuer is disregarded as a separate entity pursuant to Treasury

Regulations Section 301.7701-3(b)(1)(ii), or (ii) the Issuer is

treated as a partnership pursuant to Treasury Regulations

Section 301.7701-3(b)(1)(i).

 

Section 4.07                            Separateness

from Trust Depositor.

 

The Originator agrees to take or refrain from taking

or engaging in with respect to the Trust Depositor each of the actions or

activities specified in the “substantive consolidation” opinion of Winston

& Strawn (including any certificates of the Originator attached thereto),

delivered on the Closing Date, upon which the conclusions therein are based.

 

ARTICLE V

 

SERVICING OF LOANS

 

Section 5.01                            Appointment

and Acceptance; Responsibility for Loan Administration.

 

(a)           ACAS

is hereby appointed as Servicer pursuant to this Agreement.  ACAS accepts the appointment and agrees to

act as the Servicer pursuant to this Agreement.

 

(b)           The

Servicer will have the sole obligation to manage, administer, service and make

collections on the Loans and perform or cause to be performed all contractual

and customary undertakings of the holder of the Loans to the Obligor.  The Owner Trustee, at the written request of

a Servicing Officer, shall furnish the Servicer with any powers of attorney or

other documents necessary or appropriate in the opinion of the Owner Trustee to

enable the Servicer to carry out its servicing and administrative duties

hereunder.  The Servicer is hereby

appointed the Servicer hereunder until such time as any Servicer Transfer may

be effected under Article VIII.

 

Section

5.02                            General

Duties.

 

(a)           The

Servicer will service, administer and enforce the Loans in the Loan Pool on

behalf of the Issuer and will have full power and authority to do any and all

things in connection with such servicing and administration which it deems

necessary or desirable and as shall not contravene the provisions of this

Agreement.  The Servicer will manage,

service, administer, and make collections on the Loans in the Loan Pool 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.  The Servicer’s duties will

include collection and posting of all payments, responding to inquiries of

Obligors regarding the Loans in the Loan Pool, investigating delinquencies,

accounting for collections, furnishing monthly and annual statements with

respect

 

54

 

to collections and payments in accordance with Article IX hereof and with its customary

standards, policies and procedures, and using its best efforts to maintain the

perfected first priority security interest of the Indenture Trustee in the Loan

Assets.  The Servicer will follow its

customary standards, policies, and procedures and will have full power and

authority, acting alone (and consistent with its customary standards, policies

and procedures, in its own name), to do any and all things in connection with

such managing, servicing, administration and collection, including, without

limitation, litigation, that it deems necessary or desirable.

 

(b)           If

the Servicer commences a legal proceeding to enforce a Defaulted Loan pursuant

to Section 5.15 or commences or

participates in a legal proceeding (including a bankruptcy proceeding) relating

to or involving a Loan in the Loan Pool, the Issuer will be deemed to have

automatically assigned such Loan to the Servicer immediately prior to the

commencement of any such legal proceeding, for purposes of commencing or

participating in any such proceeding as a party or claimant, and the Servicer

is authorized and empowered by the Issuer, pursuant to this subsection 5.02(b), to execute and

deliver, on behalf of itself and the Issuer, any and all instruments of

satisfaction or cancellation, or partial or full release or discharge, and all

other notices, demands, claims, complaints, responses, affidavits or other

documents or instruments in connection with any such proceedings.  If in any enforcement suit or legal

proceeding it is held that the Servicer may not enforce a Loan on the grounds

that it is not a real party in interest or a holder entitled to enforce the

Loan, then the Owner Trustee will, at the Servicer’s expense and direction,

take steps on behalf of the Issuer to enforce the Loan, including bringing suit

in the Issuer’s name.

 

Section

5.03                            Administration.

 

The Servicer will act as administrator for the Issuer

and the Owner Trustee under the Transaction Documents and will provide the

notices and perform other administration obligations required to be provided or

performed by the Issuer and/or the Owner Trustee under the Transaction

Documents.  The Servicer shall monitor

the performance of the Issuer and the Owner Trustee and shall advise the Owner

Trustee when action is necessary to comply with the Issuer’s or the Owner

Trustee’s duties under the Transaction Documents.  The Servicer shall prepare for execution by the Owner Trustee or

Issuer or shall cause the preparation by other appropriate Persons of all such

documents, reports, filings, instruments, certificates and opinions as it shall

be the duty of the Issuer or the Owner Trustee to prepare, file or deliver

pursuant to the Transaction Documents. 

The Servicer will also perform the accounting functions of the Issuer

which the Owner Trustee is required to perform under the Trust Agreement,

including but not limited to maintaining the books of the Issuer, filing tax

returns for the Issuer and delivering tax related reports to Noteholders,

except Form 1099s and Schedule K-1s, which shall be the

responsibility of the Indenture Trustee and Owner Trustee, respectively.

 

Section 5.04                            Disposition

upon Termination of Loan.

 

Upon the termination of a Loan included in the Loan

Pool as a result of a default by the Obligor thereunder, and upon any such Loan

becoming a Defaulted Loan, the Servicer will use commercially reasonable

efforts to dispose of any related Collateral for a purchase price equal to the

fair market value thereof as reasonably determined by the Servicer.

 

55

 

Section

5.05                            Subservicers.

 

The Servicer may enter into servicing agreements with

one or more subservicers (including any Affiliate of the Servicer) to perform

all or a portion of the servicing functions on behalf of the Servicer; provided,  that, the Servicer shall

remain obligated and be liable to the Issuer for servicing and administering

the Loans in the Loan Pool in accordance with the provisions of this Agreement

without diminution of such obligation and liability by virtue of the

appointment of such subservicer, to the same extent and under the same terms

and conditions as if the Servicer alone were servicing and administering such

Loans.  The fees and expenses of the

subservicer (if any) will be as agreed between the Servicer and its subservicer

and neither the Owner Trustee, the Issuer, the Indenture Trustee, the Swap

Counterparties nor the Securityholders will have any responsibility

therefor.  All actions of a subservicer

taken pursuant to such a subservicer agreement will be taken as an agent of the

Servicer with the same force and effect as though performed by the Servicer.

 

Section

5.06                            Further

Assurance.

 

The Owner Trustee and the Indenture Trustee will, at

the written request of the Servicer, furnish the Servicer, and the Servicer

will furnish any subservicer, with any powers of attorney and other documents

necessary or appropriate to enable the Servicer or a subservicer, as

applicable, to carry out its servicing and administrative duties under this

Agreement, the forms of which documents shall be prepared by the Servicer and

submitted for execution to the Owner Trustee or the Indenture Trustee, as the

case may be.  The Servicer shall not,

nor shall the Servicer permit any sub–servicer to, initiate any action in the

Indenture Trustee’s name if such action were to require the Indenture Trustee

to become registered to do business in any state in which it was not already

registered and without both obtaining the Indenture Trustee’s written consent

and indicating the Servicer’s or such sub–servicer’s representative capacity.

 

Section

5.07                            Notice

to Obligors.

 

The Servicer will not be required to notify any

Obligor that such Obligor’s Loan, or any security interest in such Loan or

related Collateral, has been sold, transferred, assigned, or conveyed pursuant

to this Agreement; provided,  that,

in the event that the Servicer is replaced, then if the place for payment

pursuant to any Loan is changed, the Successor Servicer must give each related

Obligor prompt written notice of the appointment of the Successor Servicer and

the place to which such Obligor should make payments pursuant to each such

Loan.

 

Section 5.08                            Collection

Efforts; Modification of Loans; Release of Loan Files.

 

(a)           The

Servicer will make reasonable efforts to collect all payments called for under

the terms and provisions of the Loans in the Loan Pool as and when the same

become due, and will follow those collection procedures which it follows with

respect to all comparable loans that it services for itself or others.

 

(b)           The

Servicer may, subject to Sections 5.09

and 5.10, at the request of an Obligor

and at the Servicer’s option, waive, modify or otherwise vary any provision of

a Loan in accordance with its Credit and Collection Policy; provided,

that,

(i) no such waiver, modification or variance shall be used to circumvent

the Required Reserve Amount, (ii) except as provided in

 

56

 

Sections 5.09,

5.10 and 5.15,

no such waiver, modification or variance shall have a material adverse effect

on the Noteholders or the Swap Counterparties, and (iii) if any Loan is

waived, modified or varied due to an Obligor’s inability to pay principal or

interest, then the Loan shall be treated as a Delinquent Loan as of the payment

date that would have been missed had such Loan not been so waived, modified or

varied.

 

(c)           Upon

the payment in full of any Loan and the receipt by the Servicer of a

notification that payment in full will be escrowed in a manner customary for

such purposes or the deposit into the Collection Account of the purchase price

of any Loan acquired by the Trust Depositor, the Servicer or another Person

pursuant to this Agreement, or any other Transaction Document, the Servicer

will immediately notify the Indenture Trustee by a certification in the form of

Exhibit E attached hereto (which

certification shall include a statement to the effect that all amounts received

or to be received in connection with such payment which are required to be

deposited in the Collection Account have been or will be so deposited) of a

Servicing Officer and shall request delivery to it of the Loan File.  Upon receipt of such certification and

request, the Indenture Trustee shall in accordance with subsection 2.07(c) release, within two (2)

Business Days (if such request was received by 2:00 p.m. central time), the

related Loan File to the Servicer. 

Expenses incurred in connection with any instrument of satisfaction or

deed of reconveyance shall be payable by the Servicer and shall not be

chargeable to the Collection Account or the Note Distribution Account.

 

(d)           From

time to time and as appropriate for the servicing or foreclosure of any Loan,

the Indenture Trustee shall, upon request of the Servicer and delivery to the

Indenture Trustee of a certification in the form of Exhibit E

attached hereto signed by a Servicing Officer, release the related Loan File to

the Servicer within two (2) Business Days (if such request was received by 2:00

p.m. central time), and the Indenture Trustee shall execute such documents as

shall be necessary to the prosecution of any such proceedings.  The Servicer shall return the Loan File to

the Indenture Trustee when the need therefor by the Servicer no longer exists,

unless the Loan has been liquidated and the Liquidation Proceeds relating to

the Loan have been deposited in the Collection Account or the Loan File or such

document has been delivered to an attorney, or to a public trustee or other

public official as required by the Requirements of Law, for purposes of

initiating or pursuing legal action or other proceedings for the foreclosure or

repossession of Collateral either judicially or non-judicially, and the

Servicer has delivered to the Indenture Trustee a certificate of a Servicing

Officer certifying as to the name and address of the Person to whom such Loan

File or such document was delivered and the purpose or purposes of such

delivery.  Upon receipt of a certificate

of a Servicing Officer stating that such Loan was liquidated, the servicing

receipt relating to such Loan shall be released by the Indenture Trustee to the

Servicer.

 

(e)           The

Indenture Trustee shall execute and deliver to the Servicer any court

pleadings, requests for trustee’s sale or other documents provided to it

necessary to the foreclosure or trustee’s sale in respect of Collateral or to

any legal action brought to obtain judgment against any Obligor on the

Underlying Note or other agreement securing Collateral or to obtain a

deficiency judgment, or to enforce any other remedies or rights provided by the

Underlying Note or other agreement securing Collateral or otherwise available

at law or in equity.  Together with such

documents or pleadings, the Servicer shall deliver to the Indenture Trustee a certificate

of a Servicing Officer requesting that such pleadings or documents be

 

57

 

executed by the Indenture Trustee and certifying as to the reason such

documents or pleadings are required and that the execution and delivery thereof

by the Indenture Trustee will not invalidate or otherwise adversely affect the

Lien of the agreement securing Collateral, except for the termination of such a

Lien upon completion of the foreclosure or trustee’s sale.  The Indenture Trustee shall, upon receipt of

a written request from a Servicing Officer, execute any document provided to

the Indenture Trustee by the Servicer or take any other action requested in

such request that is, in the opinion of the Servicer as evidenced by such

request, required or appropriate by any state or other jurisdiction to

discharge the Lien securing Collateral upon the satisfaction thereof and the

Indenture Trustee will sign and post, but will not guarantee receipt of, any

such documents to the Servicer, or such other party as the Servicer may direct,

within five (5) Business Days of the Indenture Trustee’s receipt of such

certificate or documents.  Such

certificate or documents shall establish to the Indenture Trustee’s

satisfaction that the related Loan has been paid in full by or on behalf of the

Obligor (or subject to a deficiency claim against such Obligor) and that such

payment has been deposited in the Collection Account.

 

(f)            Notwithstanding

anything contained in this Section 5.08

to the contrary, in no event may the Servicer possess in excess of fifteen (15)

Loan Files (excluding Loan Files for Loans which have been paid in full or

repurchased) at any given time.

 

Section

5.09                            Prepaid

Loan.

 

The Servicer may, at its option and in accordance with

its Credit and Collection Policy, agree to permit a Loan in the Loan Pool that

is not otherwise contractually prepayable by its terms to (a) prepay in

part or (b) become a Prepaid Loan; provided,  that, if the Originator is

acting as the Servicer hereunder, the Servicer will not permit the early

termination or full prepayment of such a Loan unless (i) such early

termination or full prepayment would not result in the Issuer receiving an

amount (the “Prepayment Amount”) less

than the sum of (A) the Outstanding Loan Balance on the date of such

prepayment, plus any accrued and unpaid interest payments thereon and (B) any

Unreimbursed Servicer Advances thereon (unless effectively waived and released

by the Servicer) or (ii) if such early termination or full prepayment

would result in the Issuer receiving a Prepayment Amount less than the amount

set forth in clause (i), the

Originator shall have agreed to pay the Issuer the difference between the

Prepayment Amount actually paid and the amount set forth in clause (i) (such payment by the

Originator also to be considered a “Prepayment

Amount”).

 

Section

5.10                            Acceleration.

 

The Servicer, at its option and consistent with its

Credit and Collection Policy, may accelerate (or elect not to accelerate) the

maturity of all or any Scheduled Payments under any Loan in the Loan Pool under

which a default under the terms thereof has occurred and is continuing (after

the lapse of any applicable grace period); provided,  that, promptly after such

Loan becomes a Defaulted Loan, the Servicer shall either accelerate the

Scheduled Payments due under the Loan or take other action in accordance with

the Originator’s past practice, including foreclosing on the related

Collateral, to realize upon the value of such Loan and the related Collateral

to the fullest extent permitted by the terms of such Loan.

 

58

 

Section

5.11                            Taxes.

 

To the extent provided for in any Loan in the Loan

Pool, the Servicer will make reasonable efforts to collect (or cause to be

collected) all payments with respect to amounts due for taxes and assessments

relating to such Loans and remit such amounts to the appropriate Governmental

Authority on or prior to the date such payments are due.

 

Section

5.12                            Insurance

Premiums.

 

To the extent provided for in any Loan in the Loan

Pool, the Servicer will make reasonable efforts to collect (or cause to be

collected) all payments with respect to amounts due for insurance premiums

relating to such Loans or the Collateral and remit such amounts to the

appropriate insurer on or prior to the date such payments are due.

 

Section

5.13                            Remittances.

 

The Servicer will service all Collections in

accordance with Section 7.01

hereof.

 

Section

5.14                            Servicer

Advances.

 

For each Collection Period, if the Servicer determines

that any Scheduled Payment (or portion thereof) that was due and payable

pursuant to a Loan in the Loan Pool during such Collection Period was not

received prior to the end of such Collection Period, the Servicer has the right

to elect, but is not obligated, to make a Servicer 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.  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 Transfer Date, in immediately available

funds.  The Servicer will be entitled to

be reimbursed for Servicer Advances pursuant to subsections 7.05(a)

and 7.05(b).

 

Section 5.15                            Realization

upon Defaulted Loan.

 

The Servicer will use its reasonable best efforts

consistent with its Credit and Collection Policy in its servicing of Loans to

repossess or otherwise comparably convert the ownership of any Collateral

relating to a Defaulted Loan and will retain a sales agent to sell such

Collateral consistent with its current practices.  The Servicer will follow such other practices and procedures as

it deems necessary or advisable and as are customary and usual in its servicing

of loans and other actions by the Servicer in order to realize upon such

Collateral, which practices and procedures may include reasonable efforts to

enforce all obligations of Obligors and foreclosing upon and selling such

Collateral at a public or private sale in circumstances.  Without limiting the generality of the

foregoing, the Servicer may sell any such Collateral to the Servicer or its

Affiliates for a purchase price equal to the then fair market value thereof.  The Servicer will remit to the Collection

Account the Liquidation Proceeds received in connection with the sale or

disposition of Collateral relating to a Defaulted Loan in accordance with Section 7.01.

 

59

 

Section 5.16                            Maintenance

of Insurance Policies.

 

(a)           The

Servicer will use its reasonable best efforts to ensure that each Obligor

maintains an Insurance Policy with respect to the related Collateral in an

amount at least equal to the original Outstanding Loan Balance of the related

Loan in the Loan Pool; provided,  that,

the Servicer, in accordance with its Credit and Collection Policy, may allow

Obligors to self-insure.

 

(b)           Additionally,

the Servicer will require that each Obligor maintain property damage insurance

during the term of each Loan in the Loan Pool in amounts and against risks

customarily insured against.  If an

Obligor fails to maintain property damage insurance, the Servicer may, but is

under no obligation to, purchase and maintain such insurance on behalf of, and

at the expense of, the Obligor in accordance with the Servicer’s Credit and

Collection Policy.  In connection with

its activities as Servicer of the Loans, the Servicer agrees to present, on

behalf of itself, the Issuer, the Indenture Trustee, the Swap Counterparties and

the Securityholders, claims to the insurer under each Insurance Policy, and to

settle, adjust and compromise such claims, in each case, consistent with the

terms of each Loan and the Servicer’s Credit and Collection Policy.

 

Section 5.17                            Other

Servicer Covenants.

 

The Servicer hereby covenants that:

 

(a)           Loan Files. 

The Servicer will, at its own cost and expense, maintain copies of all

Loan Files in its possession in accordance with its customary procedures.  Without limiting the generality of the preceding

sentence, the Servicer will not dispose of any documents constituting the Loan

Files in any manner that is inconsistent with the performance of its

obligations as the Servicer pursuant to this Agreement and will not dispose of

any Loan except as contemplated by this Agreement.

 

(b)           Compliance with Law.  The Servicer will comply, in all material

respects, with all Requirements of Law applicable to the Servicer or the Loans

in the Loan Pool; provided,  that,

the Servicer may contest any such Requirements of Law in any reasonable manner

that will not materially and adversely affect the value of (or the rights of

the Indenture Trustee, the Securityholders or the Swap Counterparties with

respect to) the Loan Assets.

 

(c)           Obligations with Respect to Loans; Modifications.  The Servicer will duly fulfill and comply

with, in all material respects, all obligations on the part of the Trust

Depositor to be fulfilled or complied with under or in connection with each

Loan in the Loan Pool and will do nothing to impair the rights of the Indenture

Trustee, the Securityholders or the Swap Counterparties in, to and under the

Loan Assets.  The Servicer will perform

such obligations under the Loans in the Loan Pool and will not modify, waive or

vary the Loans, except as otherwise permitted hereby.

 

(d)           No Bankruptcy Petition.  Prior to the date that is one (1) year and

one (1) day after the payment in full of all amounts owing in respect of all

outstanding Securities, the Servicer will not institute against the Trust

Depositor, or the Issuer, or join any other Person in instituting against the

Trust Depositor or the Issuer, any bankruptcy, reorganization, arrangement,

insolvency or liquidation proceedings or other similar proceedings under the

laws of the United

 

60

 

States or any state of the United States.  This subsection 5.17(d)

will survive the termination of this Agreement.

 

(e)           Location of Loan Files.  The Loan Files shall remain at all times in

the possession of the Indenture Trustee unless the Servicer requests that a

Loan File be delivered to it in order to enforce the rights of the Issuer

thereunder or for other purposes related to the servicing of the Loans, to the

extent provided in Section 5.08.

 

(f)            Regulatory Filings.  The Servicer, on behalf of the Trust Depositor, shall make any

filings, reports, notices, applications and registrations with, and seek any

consents or authorizations from, the Commission and any state securities

authority as may be necessary or that the Trust Depositor deems advisable to

comply with any federal or state securities or reporting requirements laws.

 

(g)           Modification of Credit and Collection Policy.  The Servicer shall not amend or modify its

Credit and Collection Policy in a manner that would have a material adverse

effect on the Securityholders or the Swap Counterparties.

 

(h)           Swap Covenants.

 

(1)           So

long as any of the Notes are outstanding, with the exception of the initial

Interest Accrual Period, if on any date either:

 

(i)            the then current Aggregate Notional

Amount of all Swap Transactions hedging the Fixed Rate Loans exceeds the

Outstanding Loan Balance of the Fixed Rate Loans for the corresponding

Collection Period by more than the Fixed Rate Permitted Excess Amount; or

 

(ii)           the Aggregate Notional Amount for any

future calculation period of all Swap Transactions hedging the Fixed Rate Loans

exceeds the projected Outstanding Loan Balance of the Fixed Rate Loans for the

corresponding Collection Period by more than the Fixed Rate Permitted Excess

Amount.

 

then, not later than 1:00

p.m. (New York City time) on the date that is the second (2nd) New York

Business Day prior to the Determination Date preceding the next Payment Date,

the Servicer will notify the Indenture Trustee, the Swap Counterparties and the

Rating Agencies of such event and with effect on such next Payment Date one or

more of the Swap Transactions hedging the Fixed Rate Loans will be reduced or

amended in accordance with the terms of the applicable Swaps so that the Aggregate

Notional Amount for each calculation period of the Swap Transactions hedging

the Fixed Rate Loans will not exceed the Outstanding Loan Balance of the Fixed

Rate Loans at the end of the corresponding Collection Period or as projected to

be outstanding at the end of the corresponding Collection Period.

 

(2)           So

long as any of the Notes are outstanding, with the exception of the initial

Interest Accrual Period, if on any date either:

 

(i)            the then current Aggregate Notional

Amount of all Swap Transactions hedging the Floating Rate Loans exceeds the

then Outstanding Loan

 

61

 

Balance of the Floating Rate Loans for the

corresponding Collection Period by more than the Floating Rate Permitted Excess

Amount; or

 

(ii)           the Aggregate Notional Amount for any

future calculation period of all Swap Transactions hedging the Floating Rate

Loans exceeds the projected Outstanding Loan Balance of the Floating Rate Loans

for the corresponding Collection Period by more than the Floating Rate

Permitted Excess Amount;

 

then, not later than 1:00

p.m. (New York City time) on the date that is the second (2nd) New York

Business Day prior to the Determination Date preceding the next Payment Date,

the Servicer will notify the Indenture Trustee, the Swap Counterparties and the

Rating Agencies of such event and with effect on such next Payment Date one or

more of the Swap Transactions hedging the Floating Rate Loans will be reduced

or amended in accordance with the terms of the applicable Swaps so that the

Aggregate Notional Amount of the Swap Transactions hedging the Floating Rate

Loans will not exceed the Outstanding Loan Balance of the Floating Rate Loans

at the end of the corresponding Collection Period or as projected to be

outstanding at the end of the corresponding Collection Period.

 

(3)           After

the Offered Notes are no longer outstanding, if on any date either:

 

(i)            the then current Aggregate Notional

Amount of all Swap Transactions under all Swaps then in effect exceeds the then

Outstanding Principal Balance of the Class C Notes for the corresponding

Interest Accrual Period; or

 

(ii)           the Aggregate Notional Amount of all

Swap Transactions for any future calculation period under all Swaps then in

effect exceeds the projected Outstanding Principal Balance of the Class C Notes

for the corresponding Interest Accrual Period;

 

then, not later than 1:00

p.m. (New York City time) on the date that is the second (2nd) New York

Business Day prior to the Determination Date preceding the next Payment Date,

the Servicer will notify the Indenture Trustee, the Swap Counterparties and the

Rating Agencies of such event and with effect on such next Payment Date one or

more of the Swap Transactions will be reduced or amended in accordance with the

terms of the applicable Swaps so that the Aggregate Notional Amount of the Swap

Transactions for any future calculation period will not exceed the Aggregate

Outstanding Principal Balance of the Notes for the corresponding Interest

Accrual Period.

 

Section 5.18                            Servicing

Compensation.

 

As compensation for its servicing activities hereunder

and reimbursement for its expenses as set forth in Section 5.19,

the Servicer shall be entitled to receive a monthly servicing fee in respect of

any Collection Period (or portion thereof) prior to the termination of the

Issuer (with respect to each Collection Period, the “Servicing

Fee”) equal to one-twelfth of the product of (A) the Servicing

Fee Percentage and (B) the Aggregate Outstanding Loan Balance of the Loans

 

62

 

as of the first day of such Collection Period.  The Servicing Fee is payable out of Interest

Collections.

 

Section 5.19                            Payment

of Certain Expenses by Servicer.

 

The Servicer will be required to pay all expenses

incurred by it in connection with its activities under this Agreement,

including fees and disbursements of independent accountants, the Owner Trustee

(including with respect to an administrator acting on behalf of the Owner

Trustee and the Issuer), the Indenture Trustee, 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 to be for the account of the Issuer or the Trust Depositor.  The Servicer will be required to pay all

reasonable fees and expenses (including, without limitation, legal fees and

expenses) owing to the Owner Trustee or the Indenture Trustee in connection

with the maintenance of the Trust Accounts. 

The Servicer shall be required to pay such expenses for its own account

and shall not be entitled to any payment or reimbursement therefor other than

(i) the Servicing Fee, and (ii) the reimbursement for Liquidation

Expenses to the extent gross recoveries with respect to a Loan are sufficient,

after payment of all principal and finance charges due with respect to such

Loan, to cover such expenses.

 

Section

5.20                            Records.

 

The Servicer shall, during the period it is Servicer

hereunder, maintain such books of account and other records as will enable the

Owner Trustee and the Indenture Trustee to determine the status of each Loan.

 

Section

5.21                            Inspection.

 

(a)           At

all times during the term hereof, the Servicer shall afford the Owner Trustee

and the Indenture Trustee and their respective authorized agents reasonable

access during normal business hours to the Servicer’s or any subservicer’s

records relating to the Loans and the Servicer’s performance or observance of

the terms of this Agreement.  The

Servicer and any subservicer will cause its personnel to assist in any

examination of such records by the Owner Trustee or the Indenture Trustee, or

such authorized agents, and allow copies of the same to be made.  The examination referred to in this subsection 5.21(a) will be conducted

in a manner that does not unreasonably interfere with the Servicer’s or

subservicer’s normal operations or customer or employee relations.  Without otherwise limiting the scope of the

examination, the Owner Trustee or the Indenture Trustee may, using generally

accepted audit procedures, verify the status of each Loan and review the

Computer Records and other records relating thereto for conformity to Monthly

Reports prepared pursuant to Article IX

and compliance with the standards represented to exist as to each Loan in this

Agreement.

 

(b)           At

all times during the term hereof, the Servicer shall keep available a copy of

the List of Loans at its principal executive office for inspection by

Securityholders and Swap Counterparties.

 

(c)           The

Servicer shall, if given reasonable notice by the Indenture Trustee after the

end of any Collection Period, provide the Indenture Trustee with a copy of the

Computer Record.

 

63

 

(d)           For

so long as any of the Notes are outstanding and are “restricted securities”

within the meaning of Rule 144(a)(3) of the Securities Act, (1) the

Servicer will provide or cause to be provided to any holder of such Notes and

any prospective purchaser thereof designated by such holder, upon the request

of such a holder or prospective purchaser, the information required to be

provided to such holder or prospective purchaser by Rule 144A(d)(4) under

the Securities Act; and (2) the Servicer shall update such information

from time to time in order to prevent such information from becoming false and

misleading and will take such other actions as are necessary to ensure that the

safe harbor exemption from the registration requirements of the Securities Act

under Rule 144A is and will be available for resales of such Notes

conducted in accordance with Rule 144A.

 

Section

5.22                            The

Backup Servicer.

 

(a)           The

Issuer, the Indenture Trustee and the Trust Depositor hereby appoint Wells

Fargo Bank Minnesota, National Association to act as Backup Servicer in accordance

with the terms of this Agreement.  Wells

Fargo Bank Minnesota, National Association hereby accepts such appointment and

agrees to perform the duties and responsibilities with respect thereto set

forth herein.

 

(b)           The

Backup Servicer shall perform the following duties and obligations:

 

(i)            On or before the Closing Date, the

Backup Servicer shall accept from the Servicer delivery of the information

required to be set forth in the Monthly Reports in hard copy and in an agreed

upon electronic format.

 

(ii)           Not later than 12:00 noon New York

time two (2) Business Days prior to each Determination 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 “Tape”)

from the Servicer, which shall include but not be limited to the following

information:  (x) for each Loan, the

(1) Loan number, (2) legal name of the related Obligor,

(3) state of the Obligor’s chief executive office, (4) SIC Code,

(5) outstandings at cost, (6) type of Loan (i.e., term Loan or

Revolving Loan), (7) type of security interest (i.e., senior or

subordinated), (8) term payment type (i.e., amortizing or balloon),

(9) origination date, (10) maturity date, (11) benchmark for the

Loan’s interest rate, (12) margin, (13) frequency of Scheduled

Payments, (14) controlling interest, (15) the collection status,

(16) the Loan status, and (17) the Outstanding Loan Balance, and

(y) the Aggregate Outstanding Loan Balance.

 

(iii)          Prior to the related Payment Date, the

Backup Servicer shall review the Monthly Report to ensure that it is complete

on its face and that the following items in such Monthly Report have been

accurately calculated, if applicable, and reported:  (A) the Aggregate Outstanding Loan Balance, (B) the Backup

Servicing Fee, (C) the Loans that are thirty (30) or more days Delinquent

(other than Defaulted Loans), (D) the Defaulted Loans, (E) the Portfolio Yield

and (F) the principal and interest payments due to Noteholders.  The Backup Servicer shall notify the

Indenture Trustee, the Initial Purchaser and the Servicer of any disagreements

with the Monthly Report based on such review not later than the Business Day

preceding such Payment Date.

 

64

 

(iv)          If the Servicer disagrees with the

report provided under subsection 5.22(b)(iii)

by the Backup Servicer or if the Servicer or any subservicer has not reconciled

such discrepancy, the Backup Servicer agrees to confer with the Servicer to

resolve such disagreement on or prior to the next succeeding Determination Date

and shall settle such discrepancy with the Servicer, if possible, and notify

the Indenture Trustee, the Swap Counterparties and the Initial Purchaser of the

resolution thereof.  The Servicer hereby

agrees to cooperate, at its own expense, with the Backup Servicer in

reconciling any discrepancies herein. 

If, within twenty (20) days after the delivery of the report provided

under subsection 5.22(b)(iii) by

the Backup Servicer, such discrepancy is not resolved, the Backup Servicer

shall promptly notify the Servicer, the Indenture Trustee, the Swap

Counterparties and the Initial Purchaser of the continued existence of such

discrepancy.  Following receipt of such

notice by the Indenture Trustee, the Swap Counterparties and the Initial

Purchaser, the Servicer shall deliver to the Indenture Trustee, the Swap

Counterparties, the Initial 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.

 

(c)           After

the Servicer’s and Backup Servicer’s receipt of an effective notice of

termination terminating the Servicer in accordance with this Agreement, all

authority, power, rights and responsibilities of the Servicer under this

Agreement, whether with respect to the Loans or otherwise, shall pass to and be

vested in the Backup Servicer, and the Backup Servicer shall be deemed the

successor Servicer, subject to and in accordance with the provisions of Section 8.03, as long as the Backup

Servicer is not prohibited by Requirements of Law from fulfilling the same, as

evidenced by an Opinion of Counsel.

 

(d)           Any

Person (i) into which the Backup Servicer may be merged or consolidated, (ii)

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)           As

compensation for its backup servicing activities hereunder, the Backup Servicer

shall be entitled to receive the Backup Servicing Fee from the Servicer.  The Backup Servicer’s entitlement to receive

the Backup Servicing 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 of this Agreement.

 

(f)            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

 

65

 

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 willful misconduct of it or them or the failure to

perform materially in accordance with this Agreement.

 

(g)           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

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 parties hereto each agree to look only to the

Servicer to perform such obligations. 

With respect to subsection 5.22(b),

the Backup Servicer, in the performance of its duties and obligations

hereunder, is entitled to rely conclusively, and shall be fully protected in so

relying, on the contents of each Tape, including, but not limited to, the

completeness and accuracy thereof, provided by the Servicer.  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 its

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. 

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 (other than any agent, attorney or custodian acting on behalf

of such Backup Servicer), including the Servicer (ii) any inaccuracy or

omission in a notice or communication received by the Backup Servicer from any

third party (other than any agent, attorney or custodian acting on behalf of

such Backup Servicer), (iii) the invalidity or unenforceability of any

Loan under Requirements of Law, (iv) the breach or inaccuracy of any

representation or warranty made with respect to any Loan, or (v) the acts

or omissions of any successor Backup Servicer.

 

 

                Section

5.23         [Reserved]

 

Section 5.24                            Covenants

of the Backup Servicer.

 

The Backup Servicer hereby covenants that:

 

(a)           The

Backup Servicer will comply in all material respects with all Requirements of

Law.

 

(b)           The

Backup Servicer will preserve and maintain its existence, rights, franchises

and privileges as a national banking association in good standing under the

federal laws of the United States.

 

(c)           The

Backup Servicer shall perform in all material respects all of its obligations

and duties under this Agreement.

 

66

 

Section 5.25                            Appointment

of Successor Backup Servicer; Successor Backup Servicer to Act.

 

(a)           The

Backup Servicer may be removed, with or without cause, by the Required Holders

or the Indenture Trustee, by notice given in writing to the Backup Servicer

(the “Backup Servicer Termination Notice”).  The Backup Servicer shall continue to

perform all backup servicing functions under this Agreement until the date

specified in the Backup Servicer Termination Notice or, if no such date is

specified, until a date mutually agreed by the Backup Servicer and the Indenture

Trustee.  The Indenture Trustee shall as

promptly as possible after the giving of a Backup Servicer Termination Notice

appoint a Successor Backup Servicer (the “Successor

Backup Servicer”), and such Successor Backup Servicer shall accept

its appointment by a written assumption in a form acceptable to the Indenture

Trustee and Owner Trustee.

 

(b)           In

the event that a Successor Backup Servicer has not been appointed and has not

accepted its appointment at the time when the then Backup Servicer has ceased

to act as Backup Servicer, the Indenture Trustee shall petition a court of

competent jurisdiction to appoint any established financial institution having

a net worth of at least $50,000,000 and whose regular business includes the

backup servicing of loans similar to the Loans as the Successor Backup Servicer

hereunder.  The Successor Backup

Servicer shall be the successor in all respects to the Backup Servicer in its

capacity as Backup Servicer under this Agreement and the transactions set forth

or provided for herein, shall be subject to all the responsibilities, duties

and liabilities relating thereto placed on the Backup Servicer by the terms and

provisions hereof, and the terminated Backup Servicer shall be relieved of such

responsibilities, duties and liabilities arising after such backup servicer

transfer (the “Backup Servicer Transfer”);

provided,

however,

that the Successor Backup Servicer shall not be liable for any acts or

omissions of the Backup Servicer occurring prior to such Backup Servicer

Transfer or for any breach by the Backup Servicer of any of its representations

and warranties contained herein or in any related document or agreement.  As compensation therefor, the Successor

Backup Servicer shall be entitled to receive reasonable compensation equal to

the monthly Backup Servicing Fee from the Servicer.  Notwithstanding anything else herein to the contrary, in no event

shall the Issuer or the Indenture Trustee be liable for any Backup Servicing

Fee or for any differential in the amount of the backup servicing fee paid

hereunder and the amount necessary to induce any Successor Backup Servicer to

act as Backup Servicer under this Agreement and the transactions set forth or

provided for herein.  The Issuer, the

Indenture Trustee and such successor shall take such action, consistent with

this Agreement, as shall be necessary to effectuate any such succession.

 

ARTICLE VI

 

COVENANTS OF THE TRUST DEPOSITOR

 

Section

6.01                            Legal

Existence.

 

During the term of this Agreement, the Trust Depositor

will keep in full force and effect its existence, rights and franchises as a

limited liability company under the laws of the jurisdiction of its

organization and will obtain and preserve its qualification to do business in

each jurisdiction in which such qualification is or shall be necessary to

protect the validity and enforceability of this Agreement, the other

Transaction Documents and each other instrument or

 

67

 

agreement necessary or appropriate to the proper administration

of this Agreement and the transactions contemplated hereby.  In addition, all transactions and dealings

between the Trust Depositor and its Affiliates will be conducted on an

arm’s-length basis.

 

Section 6.02                            Loans

Not to Be Evidenced by Promissory Notes.

 

The Trust Depositor will take no action to cause any

Loan not originally evidenced by an Underlying Note to be evidenced by an

instrument (as defined in the UCC), except in connection with the enforcement

or collection of such Loan.

 

Section

6.03                            Security

Interests.

 

The Trust Depositor will not sell, pledge, assign or

transfer to any other Person, or grant, create, incur, assume or suffer to

exist any Lien on any Loan in the Loan Pool or related Collateral, whether now

existing or hereafter transferred to the Issuer, or any interest therein.  The Trust Depositor will immediately notify

the Owner Trustee, each Swap Counterparty and the Indenture Trustee of the

existence of any Lien on any Loan in the Loan Pool or related Collateral, and

the Trust Depositor shall defend the right, title and interest of the Issuer

in, to and under the Loans in the Loan Pool and the related Collateral against

all claims of third parties; provided, however, that nothing in

this Section 6.03 shall prevent or

be deemed to prohibit the Trust Depositor from suffering to exist Permitted

Liens upon any of the Loans in the Loan Pool or any related Collateral.

 

Section 6.04                            Delivery

of Collections.

 

The Trust Depositor agrees to pay to the Servicer

promptly (but in no event later than two (2) Business Days after receipt)

all Collections received by the Trust Depositor in respect of the Loans, for

application in accordance with Section 7.05

hereof.

 

Section

6.05                            Regulatory

Filings.

 

The Trust Depositor shall make any filings, reports,

notices, applications and registrations with, and seek any consents or

authorizations from, the Commission and any state securities authority on

behalf of the Issuer as may be necessary or that the Trust Depositor deems

advisable to comply with any federal or state securities or reporting

requirements laws.

 

Section

6.06                            Compliance

with Law.

 

The Trust Depositor hereby agrees to comply in all

material respects with all Requirements of Law applicable to the Trust

Depositor.

 

Section

6.07                            Activities.

 

The Trust Depositor shall not engage in any business

or activity of any kind, or enter into any transaction or indenture, mortgage,

instrument, agreement, contract, lease or other undertaking, which is not

directly related to the transactions contemplated and authorized by this

Agreement or the other Transaction Documents; provided, however,

that the Trust Depositor may purchase and sell (or grant Liens in respect of)

assets similar to the Loan Assets to other

 

68

 

Persons in securitization or other non-recourse

financing transactions involving the Originator or any of its Affiliates on

terms and conditions (with respect to liabilities and restrictions on its

activities, as well as restrictions on its interactions with the Originator or

its Affiliates, relevant to the “bankruptcy remoteness” or “substantive

consolidation” analysis relating to the Trust Depositor) substantially similar

to the terms and conditions applicable to the Trust Depositor under the Transaction

Documents, so long as the Securityholders and the Swap Counterparties are not

materially and adversely affected thereby and the Rating Agency Condition is

satisfied.

 

Section

6.08                            Indebtedness.

 

The Trust Depositor shall not create, incur, assume or

suffer to exist any Indebtedness or other liability whatsoever, except

(i) obligations incurred under this Agreement and the other Transaction

Documents, (ii) liabilities incident to the maintenance of its corporate

existence in good standing or (iii) liabilities necessarily incurred to

facilitate securitizations referred to in the proviso in Section 6.07.

 

Section

6.09                            Guarantees.

 

The Trust Depositor shall not become or remain liable,

directly or contingently, in connection with any Indebtedness or other liability

of any other Person, whether by guarantee, endorsement (other than endorsements

of negotiable instruments for deposit or collection in the ordinary course of

business), agreement to purchase or repurchase, agreement to supply or advance

funds, or otherwise except in connection with the transactions described in Section 6.07.

 

Section

6.10                            Investments.

 

The Trust Depositor shall not make or suffer to exist

any loans or advances to, or extend any credit to, or make any investments (by

way of transfer of property, contributions to capital, purchase of stock or

securities or evidences of indebtedness, acquisition of the business or assets,

or otherwise) in, any Person except (i) for purchases of Loans from the

Originator or as otherwise contemplated by the Transaction Documents,

(ii) for investments in Eligible Investments in accordance with the terms

of this Agreement, (iii) as may be necessary to facilitate securitizations

referred to in the proviso in Section 6.07

or (iv) for acquisition of the Class B Notes, the Class C Note and

the Certificate.  Without limiting the

generality of the foregoing, the Trust Depositor shall not: (i) provide

credit to any Securityholder for the purpose of enabling such Securityholder to

purchase any Securities or (ii) lend any money to the Issuer.

 

Section

6.11                            Merger;

Sales.

 

The Trust Depositor shall not enter into any

transaction of merger or consolidation, liquidate or dissolve itself (or suffer

any liquidation or dissolution), acquire or be acquired by any Person, or

convey, sell, lease or otherwise dispose of all or substantially all of its

property or business, except as provided for in this Agreement.

 

Section

6.12                            Distributions.

 

The Trust Depositor shall not declare or pay, directly

or indirectly, any dividend or make any other distribution (whether in cash or

other property) with respect to the profits, assets or

 

69

 

capital of the Trust Depositor or any Person’s

interest therein, or purchase, redeem or otherwise acquire for value any of its

member interests now or hereafter outstanding, except that, so long as no Event

of Default has occurred and is continuing, no Event of Default would occur as a

result thereof or after giving effect thereto, and the Trust Depositor would

continue to be Solvent as a result thereof and after giving effect thereto, the

Trust Depositor may declare and pay distributions to its members.

 

Section

6.13                            Other

Agreements.

 

The Trust Depositor shall not become a party to, or

permit any of its properties to be bound by, any indenture, mortgage,

instrument, contract, agreement, lease or other undertaking, except this

Agreement, the other Transaction Documents to which it is a party, any

agreement relating to the Trust Depositor’s disposition of the Class B Notes

and any agreement relating to another securitization transaction permitted by Section 6.07; nor shall it amend or

modify the provisions of its Certificate of Formation or limited liability

company operating agreement, or issue any power of attorney other than to the

Owner Trustee, the Indenture Trustee or the Servicer, except in accordance with

the Transaction Documents.

 

Section 6.14                            Separate

Legal Existence.

 

The Trust Depositor shall:

 

(i)            Maintain its own deposit account or

accounts, separate from those of any Affiliate, with commercial banking

institutions.  The funds of the Trust

Depositor will not be diverted to any other Person or for other than authorized

uses of the Trust Depositor.

 

(ii)           Ensure that, to the extent that it

shares the same officers or other employees as any of its members or

Affiliates, the salaries of and the expenses related to providing benefits to

such officers and other employees shall be fairly allocated among such

entities, and each such entity shall bear its fair share of the salary and

benefit costs associated with all such common officers and employees.

 

(iii)          Ensure that, to the extent that it

jointly contracts with any of its members or Affiliates to do business with

vendors or service providers or to share overhead expenses, the costs incurred

in so doing shall be allocated fairly among such entities, and each such entity

shall bear its fair share of such costs. 

To the extent that the Trust Depositor contracts or does business with

vendors or service providers when the goods and services provided are partially

for the benefit of any other Person, the costs incurred in so doing shall be

fairly allocated to or among such entities for whose benefit the goods and

services are provided, and each such entity shall bear its fair share of such

costs.  All material transactions

between Trust Depositor and any of its Affiliates shall be only on an arm’s

length basis.

 

(iv)          To the extent that the Trust Depositor

and any of its members or Affiliates have offices in the same location, there

shall be a fair and appropriate allocation of overhead costs among them, and

each such entity shall bear its fair share of such expenses.

 

70

 

(v)           Conduct its affairs strictly in accordance

with its Certificate of Formation and limited liability company operating

agreement and observe all necessary, appropriate and customary limited

liability company formalities, including, but not limited to, holding all

regular and special members’ and managers’ meetings appropriate to authorize

all limited liability company action, keeping separate and accurate minutes of

its meetings, passing all resolutions or consents necessary to authorize

actions taken or to be taken, and maintaining accurate and separate books,

records and accounts, including, but not limited to, payroll and intercompany

transaction accounts.

 

(vi)          Take or refrain from taking, as

applicable, each of the activities specified in the “substantive consolidation”

opinion of Winston & Strawn, delivered on the Closing Date, upon which the

conclusions expressed therein are based.

 

                Section 6.15         [Reserved]

 

Section 6.16                            Liability

of Trust Depositor and Others.

 

The Trust Depositor shall be liable in accordance

herewith only to the extent of the obligations specifically undertaken by the

Trust Depositor under this Agreement. 

The Trust Depositor and any director, officer, employee or agent of the

Trust Depositor may rely in good faith on any document of any kind, prima facie

properly executed and submitted by any Person respecting any matters arising

hereunder.  The Trust Depositor and any

director, officer, employee or agent of the Trust Depositor shall be reimbursed

by the Indenture Trustee for any liability or expense incurred by reason of the

Indenture Trustee’s willful misfeasance, bad faith or gross negligence (except

errors in judgment) in the performance of its duties hereunder, or by reason of

the reckless disregard of its obligations and duties hereunder.  The Trust Depositor shall not be under any

obligation to appear in, prosecute or defend any legal action that shall not be

incidental to its obligations under this Agreement and that in its opinion may

involve it in any expense or liability.

 

Section 6.17                            Bankruptcy

Limitations.

 

The Trust Depositor shall not, without the affirmative

vote of a majority of the managers of the Trust Depositor (which must include

the affirmative vote of at least two duly appointed Independent managers) (A)

dissolve or liquidate, in whole or in part, or institute proceedings to be

adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy

or insolvency proceedings against it, (C) file a petition seeking or consent to

reorganization or relief under any applicable federal or state law relating to

bankruptcy, (D) consent to the appointment of a receiver, liquidator, assignee,

trustee, sequestrator (or other similar official) of the limited liability

company or a substantial part of its property, (E) make a general assignment

for the benefit of creditors, (F) admit in writing its inability to pay

its debts generally as they become due, or (G) take any limited liability

company action in furtherance of the actions set forth in clauses (A) through (F) above; provided,

however,

that no manager may be required by any member of the Trust Depositor to consent

to the institution of bankruptcy or insolvency proceedings against the Trust

Depositor so long as it is Solvent.

 

                Section 6.18         [Reserved]

 

 

71

 

Section 6.19                            Chief

Executive Office.

 

During the term of this Agreement, the Trust Depositor

will maintain its chief executive office in one of the States of the United

States.

 

ARTICLE VII

 

ESTABLISHMENT OF ACCOUNTS;

DISTRIBUTIONS; RESERVE FUND

 

Section 7.01                            Trust

Accounts; Collections.

 

(a)           On

or before the Closing Date, the Trust Depositor shall establish the Collection

Account (including two sub-accounts, the Interest Collection Account and the

Principal Collection Account), the Note Distribution Account and the Reserve

Fund, each with and in the name of the Indenture Trustee for the benefit of the

Securityholders and the Swap Counterparties. 

The Servicer and Indenture Trustee are hereby required to ensure that

each of the Trust Accounts is established and maintained as an Eligible Deposit

Account with a Qualified Institution. 

If any institution with which any of the accounts established pursuant

to this subsection 7.01(a) are

established ceases to be a Qualified Institution, the Servicer, or if the

Servicer fails to do so, the Indenture Trustee (as the case may be) shall

within ten (10) Business Days establish a replacement account at a Qualified

Institution after notice of such event. 

The Indenture Trustee and the Servicer shall insure that each Qualified

Institution maintaining an Eligible Deposit Account agrees in writing to comply

with all instructions originated by the Indenture Trustee directing disposition

of the funds in such account without the further consent of the Trust Depositor

or Issuer.  The Trust Depositor and the

Issuer agree and acknowledge that the Indenture Trustee is to have “control”

(within the meaning of the UCC) of collateral comprised of “Investment

Property” (within the meaning of the UCC) for all purposes of this Agreement.  For all purposes of this Agreement, the

Indenture Trustee’s “jurisdiction” in respect of matters governed by the UCC

shall be the State of Minnesota.

 

(b)           The

Servicer shall deposit or cause to be deposited, without deposit into any

intervening account, into the Collection Account not later than two (2)

Business Days following the actual receipt of such remittance by the Servicer,

all Collections on deposit with the Servicer in the form of available funds and

all Collections otherwise received by the Servicer.  Collections constituting Interest Collections shall be deposited

in the Interest Collection Account, and Collections constituting Principal

Collections shall be deposited in the Principal Collection Account.

 

(c)           Notwithstanding

subsection 7.01(b), the Servicer

shall deposit or cause to be deposited, on the applicable Assignment Date, in

immediately available funds into the Collection Account all Collections

received after the applicable Cut-Off Date and through and including the date

two (2) days preceding the applicable Assignment Date in respect of Loans being

transferred to the Issuer on such date. 

Such Collections constituting Interest Collections shall be deposited in

the Interest Collection Account, and those constituting Principal Collections

shall be deposited in the Principal Collection Account.

 

(d)           [Reserved].

 

72

 

(e)           Notwithstanding

subsections 7.01(b) and (c), if (i) the Servicer makes a deposit

into the Collection Account in respect of a Collection of a Loan in the Loan

Pool 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.

 

Section

7.02                            Reserve

Fund Deposit.

 

On the Closing Date, the Owner Trustee, on behalf of

the Issuer, shall deposit the Reserve Fund Initial Deposit into the Reserve

Fund from the net proceeds of the sale of Securities.

 

Section 7.03                            Trust

Account Procedures.

 

(a)           If

the Servicer so directs in writing, the Indenture Trustee shall accept such

directions as directions of the Issuer and shall invest the amounts in the

Trust Accounts in Qualified Eligible Investments of the type specified in such

written direction that mature or are withdrawable not later than one (1)

Business Day prior to the next succeeding Payment Date, except for investments

in subsection (vi) of the

definition of Eligible Investments. 

Once such funds are invested, the Indenture Trustee shall not change the

investment of such funds.  Funds in the

Trust Accounts not so invested must be insured to the extent permitted by law

by the Bank Insurance Fund or the Savings Association Insurance Fund of the

Federal Deposit Insurance Corporation. 

Subject to the restrictions herein, the Indenture Trustee may purchase a

Qualified Eligible Investment from itself or an Affiliate.  Subject to the other provisions hereof, the

Indenture Trustee shall have sole control over each such investment and the

income thereon, and any certificate or other instrument evidencing any such

investment, if any, shall be delivered directly to the Indenture Trustee or its

agent, together with each document of transfer, if any, necessary to transfer

title to such investment to the Indenture Trustee in a manner which complies

with this Section 7.03.  All Investment Earnings on investments of

funds in the Trust Accounts shall be deposited in the Collection Account

pursuant to Section 7.01 and

distributed on the next Payment Date pursuant to Section 7.05.  The Trust Depositor and the Issuer agree and

acknowledge that the Indenture Trustee is to have “control” (within the meaning

of Section 9-104 of the UCC as enacted in New York) of collateral

comprised of “Investment Property” (within the meaning of Section 9-102 of

the UCC as enacted in New York) for all purposes of this Agreement.  For all purposes of this Agreement, the

Indenture Trustee’s “jurisdiction” in respect of matters governed by the UCC

shall be the State of Minnesota.  In the

absence of timely written direction from the Servicer, the Indenture Trustee

shall invest amounts in the Trust Accounts in Qualified Eligible Investments of

the type specified in clause (vi)

of the definition of Eligible Investments herein.

 

(b)           On

each Determination Date, the Servicer shall instruct the Indenture Trustee to,

and on each Payment Date the Indenture Trustee shall, transfer to the Note

Distribution Account, for distribution as provided in Section 7.05, all Interest Collections

and Principal Collections on

 

73

 

deposit in the Collections Account, all funds on deposit in the Reserve

Fund and all Investment Earnings from the Trust Accounts.

 

Section 7.04                            Securityholder

Distributions.

 

(a)           Each

Noteholder and Certificateholder as of the related Record Date shall be paid on

the next succeeding Payment Date by check mailed to such Noteholder or

Certificateholder at the address for such Noteholder or Certificateholder

appearing on the Note Register or Certificate Register or by wire transfer if

such Noteholder or Certificateholder provides written instructions to the

Indenture Trustee, or Owner Trustee, respectively, at least ten (10) days prior

to such Payment Date.

 

(b)           The

Indenture Trustee shall serve as the Paying Agent hereunder and shall make the

payments to the Securityholders required hereunder.  The Indenture Trustee hereby agrees that all amounts held by it

for payment hereunder will be held in trust for the benefit of the

Securityholders.

 

Section 7.05                            Allocations

and Distributions.

 

(a)           On

each Determination Date prior to the occurrence of an Event of Default, an

Accelerated Amortization Event or the occurrence and continuance of a Class A

Trigger or a Class B Trigger, the Servicer shall instruct the Indenture Trustee

in writing to withdraw, and on the related Payment Date the Indenture Trustee

shall withdraw, from the Note Distribution Account the sum of (i) all

Interest Collections, (ii) all Investment Earnings on funds held in Trust

Accounts and (iii) all amounts from the Reserve Fund, to the extent there

are sufficient funds, to distribute to the following parties in the following

order of priority:

 

FIRST, pro-rata, based on the amounts owed to such

Persons under this clause FIRST, to the Swap Counterparties, any amounts,

including Net Trust Swap Payments for the current and any prior Payment Dates,

owing to the Swap Counterparties under the Swaps (other than Swap Breakage

Costs), together with interest accrued thereon;

 

SECOND, to the Indenture Trustee, the Backup Servicer

and the Owner Trustee, any amounts owed to such parties under the Transaction

Documents for fees and expenses, other than for fees, expenses and other

amounts related to indemnification; provided, however, that in no event

shall the amounts payable pursuant to this clause SECOND (i) to the Indenture

Trustee and the Backup Servicer, in the aggregate, exceed $5,000 for any twelve

(12) month period (excluding amounts paid as part of the Indenture Trustee Fee,

the Backup Servicer Fee and recording expenses incurred by the Indenture

Trustee in recording Assignments of Mortgages after an Event of Default or a

Servicer Default to the extent not paid by the Servicer under subsection 2.06(b)), (ii) to the

Owner Trustee, exceed $5,000 for any twelve (12) month period (excluding

amounts paid as part of the Owner Trustee Fee) and (iii) if a Successor

Servicer is being appointed, to the Indenture Trustee for costs and expenses

associated with that appointment, exceed $100,000 in the aggregate for any

given Servicer Transfer;

 

THIRD, to the Servicer, reimbursement for the amount

of any Servicer Advances, relating to interest on the Loans, which were

deposited in the Interest Collection Account;

 

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FOURTH, to the Servicer, the monthly Servicing Fee for

the preceding Collection Period, together with any amounts in respect of the

Servicing Fee that were due in respect of prior Collection Periods that remain

unpaid;

 

FIFTH, to the holders of the Class A Notes, the

Class A Interest Amount for the related Interest Accrual Period and any

related Class A Interest Shortfall together with interest on such amount;

 

SIXTH, to the holders of the Class B Notes, the

Class B Interest Amount for the related Interest Accrual Period and any

Class B Interest Shortfall together with interest on such amount;

 

SEVENTH, to the holders of the Class A Notes and

Class B Notes, sequentially and in reduction of their respective

Outstanding Principal Balance, until reduced to zero, an amount equal to the

Additional Principal Amount;

 

EIGHTH, to the Reserve Fund an amount, if any, which,

when so deposited, causes the balance of the Reserve Fund to equal the Required

Reserve Amount;

 

NINTH, to the holders of the Class B Notes, the Class

B Accrued Payable, to the extent not previously paid;

 

TENTH, pro-rata, based on amounts owed to such Persons

under this clause TENTH, to the Swap Counterparties, any unpaid Swap Breakage

Costs, together with interest accrued thereon;

 

ELEVENTH, pro-rata, based on the amount owed to such

Person under this clause ELEVENTH, to the Indenture Trustee, the Backup

Servicer and the Owner Trustee, to the extent not paid pursuant to clause

SECOND due to the limitations set forth therein, amounts owed to such parties

for fees and expenses and other amounts, including such amounts related to

indemnification and, to a Successor Servicer, any Additional Servicing Fee; and

 

TWELFTH, to the Owner Trustee for payment to the

Certificateholder, any remaining amounts.

 

(b)           On

each Determination Date after the occurrence of an Event of Default or

Accelerated Amortization Event or the occurrence and continuance of a Class A

Trigger or a Class B Trigger, the Servicer shall instruct the Indenture Trustee

in writing to withdraw, and on the related Payment Date the Indenture Trustee

shall withdraw, from the Note Distribution Account the sum of (i) all

Interest Collections, (ii) all Investment Earnings on funds held in Trust

Accounts and (iii) all amounts from the Reserve Fund, to the extent there

are sufficient funds, to distribute to the following parties in the following

order of priority:

 

FIRST, pro-rata, based on amounts owed to such Persons

under this clause FIRST, to the Swap Counterparties, (x) any amounts,

including Net Trust Swap Payments for the current and any prior Payment Date,

owing to the Swap Counterparties under the Swaps (other than Swap Breakage

Costs) together with interest accrued thereon, and (y) any Swap Breakage

Costs in an amount not to exceed, in the aggregate, $250,000, together with

interest accrued thereon;

 

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SECOND, (A) following the occurrence of an Event

of Default that is not a Fee Event, to the Indenture Trustee, the Backup

Servicer and the Owner Trustee, any amounts owed to such parties under the

Transaction Documents for fees and expenses, other than for fees, expenses and

other amounts related to indemnification; provided, however, that in no event

shall the amounts payable pursuant to this clause SECOND (i) to the Indenture

Trustee and the Backup Servicer, in the aggregate, exceed $5,000 for any twelve

(12) month period (excluding amounts paid as part of the Indenture Trustee Fee,

the Backup Servicer Fee and recording expenses incurred by the Indenture

Trustee in recording Assignments of Mortgages after an Event of Default or a

Servicer Default to the extent not paid by the Servicer under subsection 2.06(b)), (ii) to the

Owner Trustee, exceed $5,000 for any twelve (12) month period (excluding

amounts paid as part of the Owner Trustee Fee) and (iii) if a Successor

Servicer is being appointed, to the Indenture Trustee for costs and expenses

associated with that appointment, exceed $100,000 in the aggregate for any

given Servicer Transfer and (B) after the occurrence of a Fee Event, to

the Indenture Trustee, the Backup Servicer and the Owner Trustee, any amounts

owed to such parties under the Transaction Documents for fees and expenses,

other than for fees, expenses and other amounts related to indemnification;

 

THIRD, to the Servicer, reimbursement for the amount

of any Servicer Advances relating to interest on the Loans which were deposited

in the Interest Collection Account;

 

FOURTH, to the Servicer, the monthly Servicing Fee for

the preceding Collection Period together with any amounts in respect of the

Servicing Fee that were due in respect of prior Collection Periods that remain

unpaid;

 

FIFTH, to the holders of the Class A Notes, the

Class A Interest Amount for the related Interest Accrual Period and any

Class A Interest Shortfall Amount together with interest on such amount;

 

SIXTH, to the holders of the Class B Notes, the

Class B Interest Amount for the related Interest Accrual Period and any

Class B Interest Shortfall Amount together with interest on such amount;

and

 

SEVENTH, the remaining amounts shall be included as

Principal Collections on such Payment Date.

 

(c)           On

each Determination Date, the Servicer shall instruct the Indenture Trustee in

writing to withdraw, and on the Payment Date the Indenture Trustee shall

withdraw, from the Note Distribution Account all Principal Collections and all

funds remaining on deposit therein, to the extent there are sufficient funds,

to distribute to the following parties in the following order of priority:

 

FIRST, to the Servicer, reimbursement for the amount

of any Servicer Advances relating to principal on the Loans which were

deposited in the Principal Collection Account;

 

SECOND, to the holders of the Class A Notes until

the Outstanding Principal Balance of the Class A Notes equals zero;

 

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THIRD, to the holder of the Class B Notes, the Class B

Accrued Payable to the extent not previously paid;

 

FOURTH, to the holders of the Class B Notes,

until the Outstanding Principal Balance of the Class B Notes equals zero;

 

FIFTH, pro-rata, based on the amounts owed to such

Persons under this clause FIFTH, to the Swap Counterparties, any unpaid Swap

Breakage Costs, together with interest accrued thereon;

 

SIXTH, pro-rata, based on the amounts owed to such

Persons under this clause SIXTH, to the Indenture Trustee, the Backup Servicer

and the Owner Trustee, to the extent not paid pursuant to clause SECOND of subsection 7.05(b) due to the

limitations set forth therein, amounts owed to such parties for fees and

expenses and other amounts, including such amounts related to indemnification,

and, to a Successor Servicer, any Additional Servicing Fee;

 

SEVENTH, to the holder of the Class C Note until

the Outstanding Principal Balance of the Class C Note is reduced to zero;

and

 

EIGHTH, to the Owner Trustee for payment to the

Certificateholder, any remaining amounts.

 

(d)           If

on any Payment Date, the aggregate amounts on deposit in the Collection Account

and the Reserve Fund are greater than or equal to the sum of (i) the Aggregate

Outstanding Principal Balance, (ii) the interest accrued thereon, (iii) any

accrued and unpaid Servicing Fee, (iv) unreimbursed Servicer Advances and (v)

amounts owed to the Swap Counterparties, including Swap Breakage Costs, the

Indenture Trustee, the Backup Servicer and the Owner Trustee, the amounts on

deposit in the Reserve Fund will be deposited in the Collection Account and

used to redeem the Notes in full.  The

redemption price will be equal to the unpaid principal amount of the Notes plus

accrued and unpaid interest through the date of redemption.  It shall be a condition precedent to such

redemption that all Swap Transactions then outstanding under any Swaps then in

effect shall be terminated and all amounts payable to the Swap Counterparties,

including Swap Breakage Costs, upon such termination shall be paid in full.

 

Section 7.06                            Determination

of LIBOR.

 

(a)           The

Indenture Trustee will determine the interest rate for each Interest Accrual

Period by determining the rate for deposits in U.S. Dollars for a period of one

(1) month (the “One-Month Index Maturity”)

which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the day

that is three (3) London Banking Days preceding that Interest Accrual Period (“LIBOR”). 

If such rate does not appear on Telerate Page 3750 at such time, the

rate for that Interest Accrual Period will be determined as if the parties had

specified “USD–LIBOR–Reference Banks” as the applicable rate.  “USD–LIBOR–Reference Banks” means that the

interest rate for an Interest Accrual Period will be determined on the basis of

the rates at which deposits in U.S. Dollars are offered by the Reference Banks

at approximately 11:00 a.m., London time, on the day that is three (3)

London Banking Days preceding the beginning of that Interest Accrual Period to

prime banks in the London interbank market for the One–Month Index

 

77

 

Maturity commencing on the beginning of that Interest Accrual Period

and in a Representative Amount.  The

Indenture Trustee will request the principal London office of each of the

Reference Banks to provide a quotation of its rate.  If at least two (2) such quotations are provided, the rate for

that Interest Accrual Period will be the arithmetic mean of the

quotations.  If fewer than two (2)

quotations are provided as requested, the rate for that Interest Accrual Period

will be the arithmetic mean of the rates quoted by major banks in New York

City, selected by the Indenture Trustee, at approximately 11:00 a.m., New York

City time, on the beginning of that Interest Accrual Period for loans in U.S.

Dollars to leading European banks for the One-Month Index Maturity commencing

at the beginning of that Interest Accrual Period and in a Representative

Amount.

 

(b)           The

establishment of LIBOR by the Indenture Trustee and the Indenture Trustee’s

subsequent calculation of the rates of interest applicable to the Notes, in the

absence of manifest error, will be final and binding.

 

ARTICLE VIII

 

SERVICER DEFAULT; SERVICE TRANSFER

 

Section

8.01                            Servicer

Default.

 

“Servicer Default”

means the occurrence of any of the following:

 

(a)           any

failure by the Servicer to make any payment, transfer or deposit, or to give

any instructions, notice or report to the Owner Trustee or the Indenture

Trustee pursuant to this Agreement on or before the date occurring two (2)

Business Days after the date such payment, transfer or deposit, or such

instruction, notice or report, is required to be made or given, as the case may

be, under the terms of this Agreement;

 

(b)           any

failure on the part of the Servicer duly to observe or perform in any material

respect any other covenants or agreements of the Servicer set forth in this

Agreement that has a material adverse effect on the Noteholders or the Swap

Counterparties, which continues unremedied for a period of thirty (30) days

after the first to occur of (i) the date on which written notice of such

failure requiring the same to be remedied shall have been given to the Servicer

by the Indenture Trustee, or to the Servicer and the Indenture Trustee by the

Noteholders, or the Indenture Trustee on behalf of such Noteholders of Notes

aggregating not less than 25% of the Outstanding Principal Balance of any

Class adversely affected thereby and (ii) the date on which the

Servicer becomes aware thereof, and such failure continues to materially and

adversely affect the Noteholders or the Swap Counterparties for such period;

 

(c)           any

representation, warranty or certification made by the Servicer in this

Agreement or in any certificate delivered pursuant to this Agreement shall

prove to have been incorrect when made, which has a material adverse effect on

the Noteholders or the Swap Counterparties and which continues to be incorrect

in any material respect for a period of thirty (30) days after the first to

occur of (i) the date on which written notice of such incorrectness

requiring the same to be remedied shall have been given to the Servicer and the

Owner Trustee by the Indenture Trustee, or to the Servicer, the Owner Trustee

and the Indenture Trustee by

 

78

 

Noteholders, or by the Indenture Trustee on behalf of Noteholders of

Notes aggregating not less than 25% of the Outstanding Principal Balance of any

Class adversely affected thereby and (ii) the date on which the

Servicer becomes aware thereof, and such incorrectness continues to materially

and adversely affect the Noteholders or the Swap Counterparties for such

period;

 

(d)           an

Insolvency Event shall occur with respect to the Servicer;

 

(e)           the

Servicer shall fail in any material respect to service the Loans in accordance

with the Credit and Collection Policy;

 

(f)            the

Servicer alters or amends the Credit and Collection Policy in a manner that has

a material adverse effect on the Noteholders or the Swap Counterparties;

 

(g)           the

rendering against the Servicer of a final judgment, decree or order for the

payment of money in excess of U.S. $5,000,000 (individually or in the

aggregate) and the continuance of such judgment, decree or order unsatisfied

and in effect for any period of sixty–one (61) consecutive days without a stay

of execution; or

 

(h)           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

U.S. $2,500,000 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 or cured.

 

Notwithstanding the foregoing, a delay in or failure

of performance referred to under clause (a)

above for a period of five (5) Business Days or referred to under clause (b) or (c)

for a period of sixty (60) days (in addition to any period provided in clause (a), (b)

or (c)) shall not constitute a Servicer

Default until the expiration of such additional five (5) Business Days or sixty

(60) days, respectively, if such delay or failure could not be prevented by the

exercise of reasonable diligence by the Servicer and such delay or failure was

caused by an act of God or other events beyond the Servicer’s control.  Upon the occurrence of any such event, the

Servicer shall not be relieved from using its best efforts to perform its

obligations in a timely manner in accordance with the terms of this Agreement

and the Servicer shall provide the Owner Trustee, the Indenture Trustee, the

Trust Depositor and each Swap Counterparty prompt notice of such failure or

delay by it, together with a description of its efforts to so perform its

obligations.  The Servicer shall

immediately notify the Indenture Trustee and each Swap Counterparty in writing

of any Servicer Default.

 

Section

8.02                            Servicer

Transfer.

 

(a)           If

a Servicer Default has occurred and is continuing, (x) the Required

Holders, or (y) the Indenture Trustee, may, by written notice (a “Termination Notice”) delivered to the parties

hereto, terminate all (but not less than all) of the Servicer’s management,

administrative, servicing, custodial and collection functions.

 

(b)           Upon

delivery of the notice required by subsection 8.02(a)

(or, if later, on a date designated therein), and on the date that a successor

Servicer shall have been appointed pursuant to Section 8.03

(such appointment being herein called a “Servicer

Transfer”), all rights, benefits, fees, indemnities, authority and

power of the Servicer under this Agreement, whether with

 

79

 

respect to the Loans, the Loan Files or otherwise, shall pass to and be

vested in such successor (the “Successor Servicer”)

pursuant to and under this Section 8.02;

and, without limitation, the Successor Servicer is 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 to do any and all

acts or things necessary or appropriate to effect the purposes of such notice

of termination.  The Servicer agrees to

cooperate with the Successor Servicer in effecting the termination of the

responsibilities and rights of the Servicer hereunder, including, without

limitation, the transfer to the Successor Servicer for administration by it of

all cash amounts which shall at the time be held by the Servicer for deposit,

or have been deposited by the Servicer, in the Collection Account, or for its

own account in connection with its services hereafter or thereafter received

with respect to the Loans.  The Servicer

shall transfer to the Successor Servicer (i) all records held by the

Servicer relating to the Loans in such electronic form as the Successor

Servicer may reasonably request and (ii) any Loan Files in the Servicer’s

possession.  In addition, the Servicer

shall permit access to its premises (including all computer records and

programs) to the Successor Servicer or its designee, and shall pay the

reasonable transition expenses of the Successor Servicer.  Upon a Servicer Transfer, the Successor

Servicer shall also be entitled to receive the Servicing Fee for performing the

obligations of the Servicer.

 

Section 8.03                            Appointment

of Successor Servicer; Reconveyance; Successor Servicer to Act.

 

(a)           Upon

delivery of the notice required by subsection 8.02(a)

(or, if later, on a date designated therein), the Servicer shall continue to

perform all servicing functions under this Agreement until the date specified

in the Termination Notice or, if no such date is specified, until a date

mutually agreed by the Servicer and the Indenture Trustee.  The Indenture Trustee shall as promptly as

possible after the giving of or receipt of a Termination Notice, appoint a

Successor Servicer (which shall be the Backup Servicer, in accordance with subsection 5.22(c)), and such Successor

Servicer shall accept its appointment by a written assumption in a form

acceptable to the Indenture Trustee and Owner Trustee.  If within sixty (60) days of delivery of a

Termination Notice the Backup Servicer does not accept appointment as the Successor

Servicer, the Indenture Trustee is unable to obtain any bids from eligible

servicers and the Servicer shall have yet to cure the Servicer Default, then

the Indenture Trustee shall offer the Trust Depositor, and the Trust Depositor

shall offer the Originator, the right to accept retransfer of all the Loan

Assets, and such parties may accept retransfer of such Loan Assets in

consideration of the Trust Depositor’s delivery to the Collection Account on or

prior to the next upcoming Payment Date of a sum equal to the Aggregate

Outstanding Principal Balance of all Securities (other than the Certificate)

then outstanding, together with accrued and unpaid interest thereon through

such date of deposit and all other amounts due and owing to any Person under the

Transaction Documents, including amounts owing to each Swap Counterparty,

including Swap Breakage Costs, it being a condition precedent to such

retransfer that all Swap Transactions then outstanding under any Swaps then in

effect shall be terminated and all amounts payable to the Swap Counterparties,

including Swap Breakage Costs, upon such termination shall be paid in full; provided,  that, the Indenture

Trustee, if so directed by the Required Holders in writing, need not accept and

effect such reconveyance in the absence of evidence (which may include

valuations of an investment bank or similar entity) reasonably acceptable to

such Trustee or Required Holders that such retransfer would not constitute a

fraudulent conveyance of the Trust Depositor or the Originator.

 

80

 

(b)           In

the event that a Successor Servicer has not been appointed and has not accepted

its appointment at the time when the then Servicer has ceased to act as

Servicer, the Indenture Trustee, without further action, shall automatically be

appointed the Successor Servicer. Notwithstanding the foregoing, if the

Indenture Trustee is legally unable or prohibited from so acting, it shall

petition a court of competent jurisdiction to appoint any established financial

institution having a net worth of at least $50,000,000 and whose regular

business includes the servicing of loans similar to the Loans as the Successor

Servicer hereunder.  On or after a

Servicer Transfer, the Successor Servicer shall be the successor in all

respects to the Servicer in its capacity as servicer under this Agreement and

the transactions set forth or provided for herein and shall be subject to all

the responsibilities, duties and liabilities relating thereto placed on the Servicer

by the terms and provisions hereof, and the terminated Servicer shall be

relieved of such responsibilities, duties and liabilities arising after such

Servicer Transfer; provided, however,

that (i) the Successor Servicer will not assume any obligations of the

Servicer described in Section 8.02

(ii) the Successor Servicer shall not be liable for any acts or omissions

of the Servicer occurring prior to such Servicer Transfer or for any breach by

the Servicer of any of its representations and warranties contained herein or

in any related document or agreement and (iii) the terminated Servicer shall

not be liable for any acts or omission of any Successor Servicer occurring on

and after such Servicer Transfer or for any breach by any Successor Servicer of

any of its representations and warranties contained herein or in any related

document or agreement.  As compensation

therefor, the Successor Servicer shall be entitled to receive reasonable

compensation equal to the monthly Servicing Fee.  Notwithstanding anything else herein to the contrary, in no event

shall the Indenture Trustee or the Backup Servicer 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 to act as Successor

Servicer under this Agreement and the transactions set forth or provided for

herein.  The Owner Trustee,

Securityholders and the Indenture Trustee and such successor shall take such

action, consistent with this Agreement, as shall be necessary to effectuate any

such succession.  To the extent the

terminated Servicer has made Servicer Advances, it shall be entitled to

reimbursement of the same notwithstanding its termination hereunder, to the

same extent as if it had continued to service the Loans hereunder.

 

Section 8.04                            Notification

to Securityholders and Swap Counterparties.

 

(a)           Promptly

following the occurrence of any Servicer Default, the Servicer shall give

written notice thereof to the Trustees, the Trust Depositor and each Rating

Agency at the addresses described in Section 13.04

hereof, to each Swap Counterparty at its address as set forth in the applicable

Swap, and to the Securityholders at their respective addresses appearing on the

Note Register and the Certificate Register, respectively.

 

(b)           Within

ten (10) days following any termination of a Servicer or appointment of a

Successor Servicer pursuant to this Article VIII,

the Indenture Trustee shall give written notice thereof to each Rating Agency

and the Trust Depositor at the addresses described in Section 13.04 hereof, to each Swap

Counterparty at its address as set forth in the applicable Swap and to the

Securityholders at their respective addresses appearing on the Note Register

and the Certificate Register, respectively.

 

81

 

Section

8.05                            Effect

of Transfer.

 

(a)           After

a Servicer Transfer, the terminated Servicer shall have no further obligations

with respect to the management, administration, servicing, custody or

collection of the Loans and the Successor Servicer appointed pursuant to Section 8.03 shall have all of such

obligations, except that the terminated Servicer will transmit or cause to be

transmitted directly to the Successor Servicer for its own account, promptly on

receipt and in the same form in which received, any amounts (properly endorsed

where required for the Successor Servicer to collect them) received as payments

upon or otherwise in connection with the Loans.

 

(b)           A

Servicer Transfer shall not affect the rights and duties of the parties

hereunder (including but not limited to the indemnities of the Servicer) other

than those relating to the management, administration, servicing, custody or

collection of the Loans.

 

Section

8.06                            Database

File.

 

Upon reasonable request by the Indenture Trustee or

the Backup Servicer, the Servicer will provide the Successor Servicer with a

magnetic tape containing the database file for each Loan (i) as of the

applicable Cut–Off Date, (ii) thereafter, as of the last day of the

preceding Collection Period and on the Determination Date prior to a Servicer

Default and (iii) on and as of the Business Day before the actual

commencement of servicing functions by the Successor Servicer following the

occurrence of a Servicer Default.

 

Section 8.07                            Successor

Servicer Indemnification.

 

The original Servicer shall defend, indemnify and hold

the Successor Servicer and any officers, directors, employees or agents of the

Successor Servicer harmless against any and all claims, losses, penalties,

fines, forfeitures, legal fees and related costs, judgments and any other

costs, fees, and expenses that the Successor Servicer may sustain in connection

with the claims asserted at any time by third parties against the Successor

Servicer which result from (i) any willful or grossly negligent act taken

or omission by the Servicer or (ii) a breach of any representations of the

Servicer in Section 3.07

hereof.  The indemnification provided by

this Section 8.07 shall survive

the termination of this Agreement and the removal or resignation of the

Successor Servicer.

 

Section 8.08                            Responsibilities

of the Successor Servicer.

 

(a)           The

Successor Servicer will not be responsible for delays attributable to the

Servicer’s failure to deliver information, defects in the information supplied

by the Servicer or other circumstances beyond the control of the Successor

Servicer.

 

(b)           The

Successor Servicer will make arrangements with the Servicer for the prompt and

safe transfer of, and the Servicer shall provide to the Successor Servicer, all

necessary servicing files and records, including (as deemed necessary by the

Successor Servicer at such time): (i) microfiche loan documentation,

(ii) servicing system tapes, (iii) Loan payment history, (iv) collections

history and (v) the trial balances, as of the close of business on the day

immediately preceding conversion to the Successor Servicer, reflecting all

applicable Loan

 

82

 

information.  The current

Servicer shall be obligated to pay the costs associated with the transfer of

the servicing files and records to the Successor Servicer.

 

(c)           The

Successor Servicer shall have no responsibility and shall not be in default

hereunder nor incur any liability for any failure, error, malfunction or any

delay in carrying out any of its duties under this Agreement if any such

failure or delay results from the Successor Servicer acting in accordance with

information prepared or supplied by a Person other than the Successor Servicer or

the failure of any such Person to prepare or provide such information.  The Successor Servicer shall have no

responsibility, shall not be in default and shall incur no liability

(i) for any act or failure to act by any third party, including the

Servicer, the Trust Depositor or the Trustees or for any inaccuracy or omission

in a notice or communication received by the Successor Servicer from any third

party or (ii) which is due to or results from the invalidity,

unenforceability of any Loan under Requirements of Law or the breach or the

inaccuracy of any representation or warranty made with respect to any Loan.

 

(d)           If

the Indenture Trustee or any other Successor Servicer assumes the role of

Successor Servicer hereunder, such Successor Servicer shall be entitled to the

benefits of (and subject to the provisions of) Section 5.05

concerning delegation of duties to subservicers.

 

Section 8.09                            Rating

Agency Condition for Servicer Transfer.

 

Notwithstanding the foregoing provisions relating to a

Servicer Transfer, no Servicer Transfer shall be effective hereunder unless

prior written notice thereof shall have been given to the Rating Agencies, and

the Rating Agency Condition shall have been satisfied with respect thereto.

 

ARTICLE IX

 

REPORTS

 

Section

9.01                            Monthly

Reports.

 

With respect to each Payment Date and the related

Collection Period, the Servicer will provide to each Trustee, the Backup

Servicer, each Rating Agency and the Initial Purchaser on the related

Determination Date, a monthly statement (a “Monthly

Report”) substantially in the form of Exhibit H

hereto.  On each Payment Date, the

Indenture Trustee will forward or make available to each Noteholder and each

Swap Counterparty a copy of the Monthly Report.

 

Section

9.02                            Officer’s

Certificate.

 

Each Monthly Report delivered pursuant to Section 9.01 shall be accompanied by a

certificate of a Servicing Officer certifying the accuracy of the Monthly

Report and that no Servicer Default or event that with notice or lapse of time

or both would become a Servicer Default has occurred, or if such event has

occurred and is continuing, specifying the event and its status.

 

83

 

Section

9.03                            Other

Data.

 

In addition, the Servicer shall, upon the request of

any Trustee, the Backup Servicer or any Rating Agency, furnish such Trustee,

Rating Agency or the Backup Servicer, as the case may be, such underlying data

used to generate a Monthly Report as may be reasonably requested.  The Servicer will also forward to the

Indenture Trustee, the Owner Trustee, each Swap Counterparty, each Rating

Agency and the Initial Purchaser (a) within sixty (60) days after each

calendar quarter (except the fourth calendar quarter), commencing with the

quarter ending September 30, 2002, the unaudited quarterly financial statement

of the Servicer and (b) within ninety (90) days after each fiscal year of

the Servicer, commencing with the fiscal year ending December 31, 2002, the

audited annual financial statement of the Servicer, together with the related

report of the independent accountants to the Servicer.  On the Payment Date following the receipt of

each such financial statements and report, the Indenture Trustee will forward

to each Noteholder of record a copy of such financial statements and report.

 

Section 9.04                            Annual

Report of Accountants.

 

(a)           The

Servicer shall cause a firm of nationally recognized independent certified

public accountants (the “Independent Accountants”),

who may also render other services to the Servicer or its Affiliates, to

deliver to the Indenture Trustee, the Owner Trustee, each Swap Counterparty,

the Backup Servicer and each Rating Agency, on or before March 31 (ninety (90)

days after the end of the Servicer’s fiscal year) of each year, beginning on

March 31, 2003, a report addressed to the Board of Directors of the Servicer,

the Indenture Trustee and the Owner Trustee indicating that (i) with

respect to the twelve (12) months ended the immediately preceding

December 31, to the effect that such Independent Accountants have audited

the financial statements of the Servicer, that as part of that audit, nothing

came to the attention of such Independent Accountant that causes them to

believe that the Servicer was not in compliance with any of the terms,

covenants, provisions or conditions of the relevant sections of the Agreement,

insofar as they relate to accounting matters, except for such exceptions as

such Independent Accountants shall believe to be immaterial and such other

exceptions as shall be set forth in such report, (ii) in connection with

the Independent Accountant’s audit of the Servicer, there were no exceptions or

errors in records related to Loans serviced by the Servicer, except for such

exceptions as such Independent Accountants shall believe to be immaterial and

such other exceptions as shall be set forth in such report, and (iii) the

Independent Accountant has performed certain procedures as agreed by the

Servicer, the Indenture Trustee (subject to the provisions of this subsection 9.04(a)) and the Owner Trustee,

whereby the Independent Accountant will obtain the Monthly Report for four

months with respect to the twelve (12) months ended the immediately preceding

December 31 and, for each Monthly Report, the Independent Accountant will

agree all amounts in the Monthly Report to the Servicer’s computer, accounting

and other reports, which will include in such report any amounts which were not

in agreement.  In the event such firm of

Independent Accountants requires the Indenture Trustee to agree to the

procedures performed by such firm of Independent Accountants, the Servicer

shall direct the Indenture Trustee in writing to so agree; it being understood

and agreed that the Indenture Trustee will deliver such letter of agreement in

conclusive reliance upon the direction of the Servicer, and the Indenture

Trustee will not make any independent inquiry or investigation as to, and shall

have no obligation or liability in respect of, the sufficiency, validity or

correctness of such procedures.

 

84

 

(b)           The

Independent Accountant’s report shall also indicate that the firm is

independent of the Servicer within the meaning of the Code of Professional

Ethics of the American Institute of Certified Public Accountants.

 

Section 9.05                            Annual

Statement of Compliance from Servicer.

 

The Servicer will deliver to the Trustees, each Swap

Counterparty and each of the Rating Agencies, within ninety (90) days of the

end of each fiscal year commencing with the year ending December 31, 2002, an

Officer’s Certificate stating that (a) a review of the activities of the

Servicer during the prior calendar year and of its performance under this

Agreement was made under the supervision of the officer signing such

certificate and (b) to such officer’s knowledge, based on such review, the

Servicer has fully performed or caused to be performed in all material respects

all its obligations under this Agreement and no Servicer Default has occurred

or is continuing, or, if there has been a Servicer Default, specifying each

such default known to such officer and the nature and status thereof and the

steps being taken or necessary to be taken to remedy such event.  A copy of such certificate may be obtained

by any Securityholder by a request in writing to the Indenture Trustee, with

respect to any Noteholder, or the Owner Trustee, with respect to any

Certificateholder.

 

Section 9.06                            Annual

Summary Statement.

 

Within ninety (90) days of the end of each fiscal

year, commencing December 31, 2002, the Servicer shall prepare and provide to

each Trustee, each Swap Counterparty and each Rating Agency a cumulative

summary of the information required to be included in the Monthly Reports for

the Collection Periods ending during the immediately preceding calendar year.

 

Section 9.07                            Reports

of Foreclosure and Abandonment of Mortgaged Property.

 

Each year the Servicer shall make the reports of

foreclosures and abandonment of any mortgaged property included in the

Collateral as and to the extent required by § 6050J of the Code.  Promptly after filing any such report with

the Code, the Servicer shall provide the Indenture Trustee with an Officer’s

Certificate certifying that such report has been filed.

 

Section

9.08                            Notices.

 

(a)           The

Servicer shall furnish to the Indenture Trustee and each Swap Counterparty

(i) promptly, copies of any material and adverse notices (including,

without limitation, notices of defaults, breaches, potential defaults or

potential breaches) given to or received from its other lenders and (ii) immediately,

notice of the occurrence of any Event of Default or Servicer Default or of any

situation which the Servicer reasonably expects to develop into an Event of

Default or Servicer Default.

 

(b)           The

Servicer also agrees to make available on a reasonable basis to any Noteholder

or Swap Counterparty a knowledgeable financial or accounting officer for the

purpose of answering reasonable questions respecting recent developments

affecting the Servicer or the financial statements of the Servicer and to

permit any Noteholder or Swap Counterparty, at such Noteholder’s or Swap

Counterparty’s sole cost and expense, upon reasonable advance notice and

subject to reasonable confidentiality restrictions, to inspect the Servicer’s

servicing

 

85

 

facilities during normal business hours and in a manner that does not

unreasonably interfere with the Servicer’s normal operations or customer or

employee relations for the purpose of satisfying such Noteholder or Swap

Counterparty that the Servicer has the ability to service the Loans in

accordance with this Agreement.

 

ARTICLE X

 

TERMINATION

 

Section

10.01                     Sale of

Loan Assets.

 

(a)           Upon

any sale of the assets of the Issuer pursuant to Section 9.02

of the Trust Agreement, the Servicer shall instruct the Indenture Trustee in

writing to deposit the proceeds from such sale after all payments and reserves

therefrom have been made (the “Insolvency Proceeds”)

in the Collection Account.  On the

Payment Date on which the Insolvency Proceeds are deposited in the Collection

Account (or, if such proceeds are not so deposited on a Payment Date, on the

Payment Date immediately following such deposit), the Servicer shall instruct

the Indenture Trustee in writing to allocate and apply (after the application

on such Payment Date of Principal Collections and Interest Collections pursuant

to Section 7.05) the Insolvency

Proceeds as if (and in the same order of priority as) the Insolvency Proceeds

were Principal Collections and Interest Collections being allocated and

distributed on such date pursuant to subsection 7.05(c).

 

(b)           As

described in Article IX of the

Trust Agreement, notice of any termination of the Issuer shall be given by the

Servicer to the Owner Trustee, the Indenture Trustee and each Swap Counterparty

as soon as practicable after the Servicer has received notice thereof.

 

(c)           Following

the satisfaction and discharge of the Indenture, the payment in full of the

principal of and interest on the Notes, the termination of all Swap

Transactions then outstanding under all Swaps then in effect and the payment in

full of all amounts, including Swap Breakage Costs, payable to such Swap

Counterparties upon such terminations, the Certificateholders will succeed to

the rights of the Noteholders hereunder and the Owner Trustee will succeed to

the rights of the Indenture Trustee pursuant to this Agreement.

 

ARTICLE XI

 

REMEDIES UPON MISREPRESENTATION;

REPURCHASE OPTION

 

Section 11.01                     Repurchases

of, or Substitution for, Loans for Breach of Representations and Warranties.

 

Upon a discovery by the Servicer, the Trust Depositor

or the Trustees of a breach of a representation or warranty of the Originator

and the Trust Depositor as set forth in Section 3.01,

Section 3.02, Section 3.03, Section 3.04,

and Section 3.05, or as made or

deemed made in any Addition Notice or any Subsequent Purchase Agreement

relating to Substitute Loans, that materially and adversely affects the

interest of the Noteholders or any Swap Counterparty in a Loan (in either case

without regard to the benefits of the Reserve Fund) (an “Ineligible Loan”), or of an inaccuracy with

respect to the representations as to concentrations of the Initial Loans

 

86

 

made under Section 3.05,

the party discovering the breach shall give prompt written notice to the other

parties (and the Servicer shall, with respect to an inaccuracy concerning

concentrations, select one or more Loans, without employing adverse selection,

to be the related Excess Loan for purposes of this Section); provided,

that,

the Trustees shall have no duty or obligation to inquire or to investigate the

breach by the Originator of any of such representations or warranties.  The Trust Depositor and the Originator shall

repurchase each such Ineligible Loan or Excess Loan, at a repurchase price

equal to the Transfer Deposit Amount, not later than the next succeeding

Determination Date following the date the Trust Depositor or the Originator

becomes aware of, or receives written notice from any Trustee, the Servicer or

the Trust Depositor of, any such breach or inaccuracy and which breach or

inaccuracy has not otherwise been cured; provided, however, that if the Trust

Depositor and the Originator are able to effect a substitution for any such

Ineligible Loan or Excess Loan in compliance with Section 2.04,

the Trust Depositor and the Originator may, in lieu of repurchasing such Loan,

effect a substitution for such affected Loan with a Substitute Loan not later

than the date a repurchase of such affected Loan would be required hereunder;

and provided,

further,

that,

with respect to a breach of a representation or warranty relating to the Loans

in the aggregate and not to any particular Loan, the Trust Depositor and the

Originator may select Loans (without adverse selection) to repurchase (or

substitute for) such that, had such Loans not been included as part of the Loan

Assets (and, in the case of a substitution, had such Substitute Loan been

included as part of the Loan Assets instead of the selected Loan), there would

have been no breach of such representation or warranty.  Notwithstanding any other provision of this

Agreement, the obligation of the Trust Depositor and the Originator described

in this Section 11.01 shall not

(a) terminate or be deemed released by any party hereto upon a Servicer

Transfer pursuant to Article VIII

or (b) include any obligation to make payment on account of a breach of a

Loan by an Obligor subsequent to the date on which such Loan was transferred to

the Issuer.  The repurchase obligation

described in this Section 11.01 is

in no way to be satisfied with monies in the Reserve Fund.

 

Section 11.02                     Reassignment

of Repurchased or Substituted Loans.

 

Upon receipt by the Indenture Trustee for deposit in

the Collection Account of the amounts described in Section 11.01

(or upon the Subsequent Transfer Date related to a Substitute Loan described in

Section 11.01), and upon receipt

of an Officer’s Certificate of the Servicer in the form attached hereto as Exhibit F, the Indenture Trustee and the

Issuer shall assign to the Trust Depositor, and the Trust Depositor shall

assign to the Originator, all of the Issuer’s and the Indenture Trustee’s (or

Trust Depositor’s, as applicable) right, title and interest in the repurchased

or substituted Loan and related Loan Assets without recourse, representation or

warranty.  Such reassigned Loan shall no

longer thereafter be included in any calculations of Outstanding Loan Balances

required to be made hereunder or otherwise be deemed a part of the Loan Pool.

 

87

 

ARTICLE XII

 

INDEMNITIES

 

Section 12.01                     Indemnification

by Servicer.

 

The Servicer agrees to indemnify, defend and hold the

Indenture Trustee (as such and in its individual capacity), the Owner Trustee

(as such and in its individual capacity), the Backup Servicer (as such and in

its individual capacity), each Swap Counterparty (as such and in its individual

capacity) and each Noteholder and Certificateholder harmless from and against

any and all claims, losses, penalties, fines, forfeitures, reasonable legal

fees and related costs, judgments, and any other reasonable costs, fees and

expenses that such Person may sustain as a result of the material failure of

the Servicer to perform its duties and service the Loans in compliance with the

terms of this Agreement, except to the extent arising from (a) the gross

negligence, willful misconduct or fraud by the Person claiming indemnification

or (b) an Obligor’s financial difficulty. 

The Servicer shall immediately notify the Indenture Trustee and the

Owner Trustee if a claim is made by any party with respect to this Agreement,

and the Servicer shall assume (with the consent of the indemnified party) the

defense and any settlement of any such claim and pay all expenses in connection

therewith, including reasonable counsel fees, and promptly pay, discharge and

satisfy any judgment or decree which may be entered against the indemnified

party in respect of such claim.

 

Section 12.02                     Indemnification

by Trust Depositor.

 

(a)           The

Trust Depositor agrees to indemnify, defend, and hold the Indenture Trustee (as

such and in its individual capacity), the Owner Trustee (as such and in its

individual capacity), the Backup Servicer (as such and in its individual

capacity), each Swap Counterparty (as such and in its individual capacity) and

each Noteholder and Certificateholder harmless from and against any and all

claims, losses, penalties, fines, forfeitures, reasonable legal fees and

related costs, judgments, and any other reasonable costs, fees and expenses

that such Person may sustain as a result of the material failure of the Trust

Depositor to perform its duties in compliance with the terms of this Agreement

and in the best interests of the Securityholders and the Swap Counterparties,

except to the extent arising from (a) the gross negligence, willful

misconduct or fraud by the Person claiming indemnification or (b) an

Obligor’s financial difficulty.  The

Trust Depositor shall immediately notify the Indenture Trustee and the Owner

Trustee if a claim is made by a third party with respect to this Agreement, and

the Trust Depositor shall assume (with the consent of the indemnified party)

the defense and any settlement of any such claim and pay all expenses in

connection therewith, including reasonable counsel fees, and promptly pay,

discharge and satisfy any judgment or decree which may be entered against the

indemnified party in respect of such claim.

 

(b)           The

Trust Depositor agrees to indemnify, defend and hold harmless the Issuer, the

Owner Trustee, the Indenture Trustee and the Servicer from and against any

taxes that may at any time be asserted against any such Person with respect to

the transactions contemplated herein and in the other Transaction Documents,

including any sales, gross receipts, general corporation, tangible personal

property, Maryland personal property replacement privilege or license taxes

(but, in the case of the Issuer, not including any taxes asserted with respect

to, and as of the date

 

88

 

of, the sale of the Loans to the Issuer or the issuance and original

sale of the Securities, or asserted with respect to ownership of the Loans, or

federal or other income taxes arising out of distributions on the Certificate

or the Notes) and costs and expenses in defending against the same.

 

(c)           The

Trust Depositor shall indemnify, defend and hold harmless the Issuer, the Owner

Trustee, and the Indenture Trustee, their officers, directors, agents and

employees, from and against all costs, expenses, losses, claims, damages and

liabilities arising out of or incurred in connection with the acceptance or

performance of the trusts and duties herein and, in the case of the Owner

Trustee, in the Trust Agreement and, in the case of the Indenture Trustee, in

the Indenture, and any other document or transaction contemplated in connection

herewith or therewith, except to the extent that such cost, expense, loss,

claim, damage or liability in the case of (i) the Owner Trustee, shall be

due to the willful misfeasance, bad faith or gross negligence of the Owner

Trustee, or shall arise from the breach by the Owner Trustee of any of its

representations or warranties set forth in Section 7.03

of the Trust Agreement, or (ii) the Indenture Trustee, shall be due to the

willful misfeasance, bad faith or negligence of the Indenture Trustee.

 

(d)           The

Trust Depositor shall be liable directly to and will indemnify any injured

party or any other creditor of the Issuer for all losses, claims, damages,

liabilities and expenses of the Issuer to the extent that the Trust Depositor

would be liable if the Issuer were a partnership under the Delaware Revised

Uniform Limited Partnership Act in which the Trust Depositor were a general

partner; provided,

however,

that the Trust Depositor shall not be liable for any losses incurred by a

Certificateholder in the capacity of an investor in the Certificate or a

Noteholder in the capacity of an investor in the Notes.  In addition, any third party creditors of the

Issuer (other than in connection with the obligations described in the

immediately preceding sentence for which the Trust Depositor shall not be

liable) shall be deemed third party beneficiaries of this paragraph.  The obligations of the Trust Depositor under

this paragraph shall be evidenced by the Certificate described in the Trust

Agreement.

 

(e)           The

Trust Depositor shall indemnify, defend and hold harmless the Owner Trustee and

the Indenture Trustee, their officers, directors, agents and employees, from

and against any loss, liability or expense incurred by reason of the Trust

Depositor’s or Issuer’s violation of federal or state securities laws in

connection with the offering and sale of the Notes.

 

Section 12.03                     Liabilities

to Obligors.

 

No obligation or liability to any Obligor under any of

the Loans is intended to be assumed by the Trustees, the Issuer, the

Securityholders or the Swap Counterparties under or as a result of this

Agreement and the transactions contemplated hereby.

 

Section

12.04                     Tax Indemnification.

 

(a)           The

Originator agrees to pay, and to indemnify, defend and hold harmless the Trust

Depositor, the Issuer, the Trustees, the Backup Servicer, the Securityholders

and the Swap Counterparties from, any taxes that may at any time be asserted

with respect to, and as of the date of, the transfer of the Loans to the Trust

Depositor, the transfer by the Trust Depositor of the

 

89

 

Loans to the Issuer and the further pledge by the Issuer to the Indenture

Trustee, including, without limitation, any sales, gross receipts, general

corporation, personal property, privilege or license taxes (but not including

any federal, state or other taxes arising out of the creation of the Issuer and

the issuance of the Notes and Certificate), and costs, expenses and reasonable

counsel fees in defending against the same, whether arising by reason of the

acts to be performed by the Originator or the Servicer under this Agreement or

imposed against the Issuer, the Trustees, the Backup Servicer, a Noteholder, a

Certificateholder, a Swap Counterparty or otherwise.  Notwithstanding any other provision of this Agreement, the

obligation of the Originator under this Section 12.04

shall not terminate upon a Servicer Transfer pursuant to Article VIII of this Agreement and shall

survive any termination of this Agreement.

 

(b)           The

Originator agrees to pay and to indemnify, defend and hold harmless the Issuer,

the Trustees and the Swap Counterparties, on an after-tax basis (as hereinafter

defined), from any state or local personal property taxes, gross rent taxes,

leasehold taxes or similar taxes that may at any time be asserted with respect

to the ownership of the Loans (including security interests therein) and the

receipt of rentals therefrom by the Issuer, and costs, expenses and reasonable

counsel fees in defending against the same, excluding, however, taxes based

upon or measured by gross or net income or receipts (other than taxes imposed

specifically with respect to rentals). As used in this Section, the term

“after-tax basis” shall mean, with respect to any payment to be received by an

indemnified Person, that the amount to be paid by the Originator shall be equal

to the sum of (i) the amount to be received without regard to this

sentence, plus (ii) any additional amount that may be required so that,

after reduction by all taxes imposed under any federal, state and local law,

and taking into account any current credits or deductions arising therefrom,

resulting either from the receipt of the payments described in both clauses (i) and (ii)

hereof, such sum shall be equal to the amount described in clause (i) above.

 

Section

12.05                     Adjustments.

 

(a)           The

Originator agrees that, with respect to each Loan that provides for a prepayment

amount less than the amount calculated in accordance with the definition of

“Prepayment Amount”, the Originator shall indemnify the Trust Depositor or the

Issuer as assignee thereof in an amount at least equal to the excess of the

Prepayment Amount as calculated in accordance with the definition thereof over

the amount otherwise payable upon prepayment of such Loan.

 

(b)           The

Originator hereby further agrees that if any real property collateral securing

any Loan described in subsection 3.02(d)

hereof becomes the subject of any claims, proceedings, Liens or encumbrances

with respect to any material violation or claimed material violation of any

federal or state environmental laws or regulations, such Loan shall for all

purposes hereunder be, at and following the time of discovery by the

Originator, the Trust Depositor, the Servicer or any Trustee (it being

understood and agreed that such Trustee is under no duty of investigation) of

such fact, deemed an Ineligible Loan subject to the same remedial and recourse

provisions hereunder as other Loans determined to be Ineligible Loans

hereunder.

 

90

 

Section 12.06                     Operation

of Indemnities.

 

Indemnification under this Article XII

shall include, without limitation, reasonable fees and expenses of counsel and

expenses of litigation.  If the

Servicer, Trust Depositor or Originator has made any indemnity payments

pursuant to this Article XII and

the indemnified party thereafter collects any of such amounts from others, the

indemnified party will repay such amounts collected to the Servicer, the

Originator or the Trust Depositor, as applicable, except that any payments

received by the indemnified parties from an insurance provider as a result of

the events under which the Servicer’s, the Originator’s or the Trust

Depositor’s, as applicable, indemnity payments arose shall be repaid prior to

any repayment of the Servicer’s, the Originator’s or the Trust Depositor’s, as

applicable, indemnity payment.

 

ARTICLE XIII

 

MISCELLANEOUS

 

Section

13.01                     Amendment.

 

(a)           This

Agreement may be amended by the Originator, the Trust Depositor, the Servicer,

the Indenture Trustee and the Owner Trustee on behalf of the Issuer,

collectively, without the consent of any Securityholders, to cure any ambiguity,

to correct or supplement any provisions in this Agreement that are inconsistent

with the provisions herein, or to add any other provisions with respect to

matters or questions arising under this Agreement that shall not be

inconsistent with the provisions of this Agreement; provided,

however,

(i) that the consent of the Noteholders shall be required unless the

Issuer obtains an Opinion of Counsel stating that the amendment does not

adversely affect in any material respect the interests of any Holder of the

Class A Notes or Class B Notes, (ii) the consent of each Swap

Counterparty shall be required for any amendments to subsection

5.17(h), and (iii) for all other such amendments, the consent

of each Swap Counterparty shall be required unless the Issuer obtains an

Opinion of Counsel stating that the amendment does not adversely affect in any

material respect the interests of the Swap Counterparties.

 

(b)           This

Agreement may also be amended from time to time by the Originator, the Trust

Depositor, the Servicer, the Indenture Trustee and the Owner Trustee on behalf

of the Issuer, with the consent of the Required Holders and the Swap

Counterparties, 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 or the Swap Counterparties; provided, however, that no such

amendment shall,

 

(1)           increase

or reduce in any manner the amount of, or accelerate or delay the timing of, or

change the method of calculating distributions which are required to be made on

any Note or the Certificate or the principal amount of the Notes or the

Certificate without the consent of each Securityholder affected thereby; or

 

(2)           change

the manner in which the Reserve Fund is applied, without the consent of each

Noteholder affected thereby; or

 

91

 

(3)           reduce

the aforesaid percentage required to consent to any amendment (including

through amendment of related definitions) without the consent of each

Noteholder affected thereby; or

 

(4)           modify,

amend or supplement the provisions of this Agreement relating to the allocation

of collections on the Loans without the consent of each Noteholder affected

thereby; or

 

(5)           make

any security issued by the Issuer payable in money other than U.S. dollars

without the consent of each Noteholder affected thereby;

 

(c)           Prior

to the execution of any such amendment or consent, the Indenture Trustee shall

furnish written notification of the substance of such amendment or consent,

together with a copy thereof, to each Rating Agency.

 

(d)           Promptly

after the execution of any such amendment or consent, the Owner Trustee and the

Indenture Trustee, as the case may be, shall furnish written notification of

the substance of such amendment or consent to each Certificateholder and

Noteholder, respectively.  It shall not

be necessary for the consent of the Securityholders or the Swap Counterparties

pursuant to subsection 13.01(b) to

approve the particular form of any proposed amendment or consent, but it shall

be sufficient if such consent shall approve the substance thereof.  The manner of obtaining such consents and of

evidencing the authorization by the Securityholders and the Swap Counterparties

of the execution thereof shall be subject to such reasonable requirements as

the Owner Trustee or the Indenture Trustee may prescribe.

 

(e)           Prior

to the execution of any amendment to this Agreement, the Owner Trustee and the

Indenture Trustee shall be entitled to receive and conclusively rely upon an

Opinion of Counsel stating that the execution of such amendment is authorized

and permitted by this Agreement.  Such

Trustee may, but shall not be obligated to, enter into any such amendment that

affects such Trustee’s own rights, duties, indemnities or immunities under this

Agreement or otherwise.

 

Section 13.02                     Protection

of Title to Issuer.

 

(a)           The

Servicer shall execute and file such financing statements, and cause to be

executed and filed such amendments or continuation statements, all in such

manner and in such places as may be required by Requirements of Law fully to

preserve, maintain and protect the interest of the Issuer, the Securityholders,

the Swap Counterparties, the Indenture Trustee and the Owner Trustee in the

Loans and in the proceeds thereof.  The

Servicer shall deliver (or cause to be delivered) to the Owner Trustee and the

Indenture Trustee file-stamped copies of, or filing receipts for, any document

filed as provided above, as soon as available following such filing.

 

(b)           The

Servicer shall maintain or cause to be maintained accounts and records as to

each Loan accurately and in sufficient detail to permit (i) the reader

thereof to know at any time the status of such Loan, including payments and

recoveries made and payments owing (and the nature of each) and

(ii) reconciliation between payments or recoveries on (or with respect to)

each Loan and the amounts from time to time deposited in or credited to the

Collection Account,

 

92

 

including identifying amounts credited to the Interest Collection

Account and the Principal Collection Account in respect of each Loan.

 

(c)           The

Servicer shall maintain or cause to be maintained its computer systems so that,

from and after the time of sale under this Agreement of the Loans, the

Servicer’s master computer records (including any backup archives) that shall

refer to a Loan indicate clearly the interest of the Issuer and the Indenture

Trustee in such Loan and that such Loan is owned by the Issuer and has been

pledged to the Indenture Trustee. 

Indication of the Issuer’s ownership of and the Indenture Trustee’s

interest in a Loan shall be deleted from or modified on the Servicer’s computer

systems when, and only when, the related Loan shall have been paid in full or

repurchased or substituted for.

 

(d)           The

Servicer shall deliver to the Owner Trustee, the Indenture Trustee, each Swap

Counterparty and each Rating Agency promptly after the execution and delivery

of this Agreement and of each amendment hereto, an Opinion of Counsel either

(A) stating that, in the opinion of such counsel, all financing statements and

continuation statements have been executed and filed that are necessary fully

to preserve and protect the interest of the Issuer and the Indenture Trustee

and reciting the details of each filing or referring to prior Opinions of

Counsel in which such details are given, or (B) stating that, in the opinion of

such counsel, no such action shall be necessary to preserve and protect such

interest.

 

Section

13.03                     Governing

Law.

 

(a)           This

Agreement shall be construed in accordance with the laws of the State of New

York and the obligations, rights, and remedies of the parties under the

Agreement shall be determined in accordance with such laws.

 

(b)           EACH

PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY REQUIREMENTS OF

LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION

DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS

AGREEMENT.  Each party hereto

(i) certifies that no representative, agent or attorney of any other party

has represented, expressly or otherwise, that such other party would not, in

the event of litigation, seek to enforce the foregoing waiver and

(ii) acknowledges that it and the other parties hereto have been induced

to enter into this Agreement by, among other things, the mutual waivers and

certifications in this subsection 13.03(b).

 

Section

13.04                     Notices.

 

All notices, demands, certificates, requests and

communications hereunder (“notices”)

shall be in writing and shall be effective (a) upon receipt when sent

through the U.S. mails, registered or certified mail, return receipt requested,

postage prepaid, with such receipt to be effective the date of delivery

indicated on the return receipt, or (b) one (1) Business Day after

delivery to an overnight courier, or (c) on the date personally delivered

to an Authorized Officer of the party to which sent, or (d) on the date

transmitted by legible telecopier transmission with a confirmation of receipt,

in all cases addressed to the recipient as follows:

 

93

 

	

  (i)

  	

  If to the

  Servicer, the Originator or the Swap Guarantor:

  
	

   

  	

   

  	

   

  
	

   

  	

  American

  Capital Strategies, Ltd.

  
	

   

  	

  2

  Bethesda Metro Center

  
	

   

  	

  14th

  Floor

  
	

   

  	

  Bethesda,

  Maryland  20814

  
	

   

  	

  Attention:

  	

  Compliance

  Officer

  
	

   

  	

  Facsimile

  No.:

  	

  (301) 654–6714

  
	

   

  	

   

  
	

  (ii)

  	

  If to the Trust

  Depositor:

  
	

   

  	

   

  	

   

  
	

   

  	

  ACAS

  Business Loan LLC, 2002–2

  
	

   

  	

  2

  Bethesda Metro Center

  
	

   

  	

  14th

  Floor

  
	

   

  	

  Bethesda,

  Maryland  20814

  
	

   

  	

  Attention:

  	

  Compliance

  Officer

  
	

   

  	

  Facsimile

  No.:

  	

  (301) 654–6714

  
	

   

  	

   

  
	

  (iii)

  	

  If to the

  Indenture Trustee:

  
	

   

  	

   

  	

   

  
	

   

  	

  Wells

  Fargo Bank Minnesota, National Association

  
	

   

  	

  Sixth

  Street and Marquette Avenue

  
	

   

  	

  MAC

  N9311–161

  
	

   

  	

  Minneapolis,

  Minnesota  55479

  
	

   

  	

  Attention:

  	

  Corporate

  Trust Services/Asset Backed

  
	

   

  	

   

  	

  Administration

  
	

   

  	

  Facsimile

  No.:

  	

  (612)

  667–3464

  
	

   

  	

   

  
	

  (iv)

  	

  If to the Owner

  Trustee:

  
	

   

  	

   

  	

   

  
	

   

  	

  Wachovia

  Trust Company, National Association

  
	

   

  	

  One

  Rodney Square, 1st Floor

  
	

   

  	

  920

  King Street

  
	

   

  	

  Wilmington,

  Delaware  19801

  
	

   

  	

  Attention:

  	

  Corporate

  Trust Administration

  
	

   

  	

  Facsimile

  No.:

  	

  (302) 888–7544

  
	

   

  	

   

  
	

  (v)

  	

  If to the

  Issuer:

  
	

   

  	

   

  	

   

  
	

   

  	

  ACAS

  Business Loan Trust 2002–2

  
	

   

  	

  c/o

  Wachovia Trust Company, National Association

  
	

   

  	

  One

  Rodney Square, 1st Floor

  
	

   

  	

  920

  King Street

  
	

   

  	

  Wilmington,

  Delaware  19801

  
	

   

  	

  Attention:

  	

  Corporate

  Trust Administration

  
	

   

  	

  Facsimile

  No.:

  	

  (302) 888–7544

  
						

 

94

 

	

   

  	

   

  
	

  (vi)

  	

  If to S&P:

  
	

   

  	

   

  
	

   

  	

  Standard

  & Poor’s Ratings Service

  
	

   

  	

  55

  Water Street

  
	

   

  	

  41st

  Floor

  
	

   

  	

  New

  York, New York 10041

  
	

   

  	

  Attention:

  	

  Surveillance:  Asset–Backed Services

  
	

   

  	

  Facsimile

  No.:

  	

  (212)

  438–2662

  
	

   

  	

   

  
	

  (vii)

  	

  If to Moody’s:

  	

   

  
	

   

  	

   

  
	

   

  	

  Moody’s

  Investors Service, Inc.

  
	

   

  	

  99

  Church Street

  
	

   

  	

  4th

  Floor

  
	

   

  	

  New

  York, New York 10007

  
	

   

  	

  Attention:

  	

  ABS

  Monitoring Department

  
	

   

  	

  Facsimile

  No.:

  	

  (212)

  553–0344

  
	

   

  	

   

  
	

  (viii)

  	

  If to Fitch:

  	

   

  
	

   

  	

   

  
	

   

  	

  Fitch,

  Inc.

  
	

   

  	

  One

  State Street Plaza

  
	

   

  	

  New

  York, New York 10004

  
	

   

  	

  Attention:

  	

  CDO

  Surveillance

  
	

   

  	

  Facsimile

  No.:

  	

  (212)

  514–6501

  
	

   

  	

   

  
	

  (ix)

  	

  If to the

  Initial Purchaser:

  
	

   

  	

   

  
	

   

  	

  Wachovia

  Securities, Inc.

  
	

   

  	

  One

  Wachovia Center, Mail Code: NC0610

  
	

   

  	

  301

  South College Street

  
	

   

  	

  Charlotte,

  North Carolina  28288–0610

  
	

   

  	

  Attention:

  	

  Asset

  Securitization Division

  
	

   

  	

  Facsimile

  No.:

  	

  (704)

  383–4012

  
	

   

  	

   

  
	

  (x)

  	

  If to a Swap

  Counterparty:

  
	

   

  	

   

  	

   

  
	

   

  	

  At

  the address set forth for such party in the applicable Swap.

  
				

 

Each party hereto may, by notice given in accordance

herewith to each of the other parties hereto, designate any further or

different address to which subsequent notices shall be sent.

 

Section 13.05                     Severability

of Provisions.

 

If one or more of the covenants, agreements,

provisions or terms of this Agreement shall be for any reason whatsoever held

invalid, then such covenants, agreements, provisions or terms shall be deemed

severable from the remaining covenants, agreements, provisions or terms of this

 

95

 

Agreement and shall in no way affect the validity or

enforceability of the other provisions of this Agreement, the Notes, the

Certificate or the rights of the Holders thereof, and any such prohibition,

invalidity or unenforceability in any jurisdiction shall not invalidate or

render unenforceable such covenants, agreements, provisions or terms in any

other jurisdiction.

 

Section 13.06                     Third

Party Beneficiaries.

 

Except as otherwise specifically provided herein, the

parties hereto hereby manifest their intent that no third party, other than the

Swap Counterparties and the Owner Trustee, shall be deemed a third party

beneficiary of this Agreement, and specifically that the Obligors are not third

party beneficiaries of this Agreement.

 

Section

13.07                     Counterparts.

 

This Agreement may be executed by facsimile signature

and in several counterparts, each of which shall be an original and all of

which shall together constitute but one and the same instrument.

 

Section

13.08                     Headings.

 

The headings of the various Articles and

Sections herein are for convenience of reference only and shall not define

or limit any of the terms or provisions hereof.

 

Section 13.09                     No Bankruptcy

Petition; Disclaimer.

 

(a)           Each

of the Originator, the Indenture Trustee, the Servicer, the Issuer acting

through the Owner Trustee and each Holder (by acceptance of the applicable

Securities) covenants and agrees that, prior to the date that is one (1) year

and one (1) day after the payment in full of all amounts owing in respect of

all outstanding Classes of Notes rated by any Rating Agency, it will not

institute against the Trust Depositor, or the Issuer, or join any other Person

in instituting against the Trust Depositor or 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; provided, however, that nothing herein

shall prohibit the Indenture Trustee from filing proofs of claim or otherwise

participating in any such proceedings instituted by any other Person.  This Section 13.09

will survive the termination of this Agreement.

 

(b)           The

Issuer acknowledges and agrees that the Certificate represent a beneficial

interest in the Issuer and Loan Assets only and the Securities do not represent

an interest in any assets (other than the Loan Assets) of the Trust Depositor

(including by virtue of any deficiency claim in respect of obligations not paid

or otherwise satisfied from the Loan Assets and proceeds thereof).  In furtherance of and not in derogation of

the foregoing, to the extent that the Trust Depositor enters into other securitization

transactions as contemplated in Section 6.07,

the Issuer acknowledges and agrees that it shall have no right, title or

interest in or to any assets (or interests therein), other than the Loan

Assets, conveyed or purported to be conveyed (whether by way of a sale, capital

contribution or by the granting of a Lien) by the Trust Depositor to any Person

other than the Issuer (the “Other Assets”).

 

96

 

(c)           To

the extent that, notwithstanding the agreements contained in this subsection 13.09, the Issuer, any

Securityholder or any Swap Counterparty, either (i) asserts an interest in

or claim to, or benefit from any Other Assets, whether asserted against or

through the Trust Depositor or any other Person owned by the Trust Depositor,

or (ii) is deemed to have any interest, claim or benefit in or from any

Other Assets, whether by operation of law, legal process or pursuant to

applicable provisions of Insolvency Laws or otherwise (including without

limitation pursuant to Section 1111(b) of the federal Bankruptcy Code, as

amended), and whether deemed asserted against or through the Trust Depositor or

any other Person owned by the Trust Depositor, then the Issuer, each

Securityholder by accepting a Note or Certificate and each Swap Counterparty

further acknowledges and agrees that any such interest, claim or benefit in or

from the Other Assets is and shall be expressly subordinated to the

indefeasible payment in full of all obligations and liabilities of the Trust

Depositor that, under the terms of the documents relating to the securitization

of the Other Assets, are entitled to be paid from, entitled to the benefits of,

or otherwise secured by such Other Assets (whether or not any such entitlement

or security interest is legally perfected or otherwise entitled to a priority

of distribution under Requirements of Law, including Insolvency Laws, and

whether asserted against the Trust Depositor or any other Person owned by the

Trust Depositor), including, without limitation, the payment of post–petition interest

on such other obligations and liabilities. 

This subordination agreement shall be deemed a subordination agreement

within the meaning of Section 510(a) of the Bankruptcy Code.  Each of the Issuer, the Securityholders and

the Swap Counterparties is deemed to have acknowledged and agreed that no

adequate remedy at law exists for a breach of this Section 13.09

and that the terms and provisions of this Section 13.09

may be enforced by an action for specific performance.

 

(d)           The

provisions of this Section 13.09

shall be for the third party benefit of those entitled to rely thereon and

shall survive the termination of this Agreement.

 

Section

13.10                     Jurisdiction.

 

Any legal action or proceeding with respect to this

Agreement may be brought in the courts of the United States for the Southern

District of New York, and by execution and delivery of this Agreement, each

party hereto consents, for itself and in respect of its property, to the

non–exclusive jurisdiction of those courts. 

Each such party irrevocably waives any objection, including any

objection to the laying of venue or based on the grounds of forum non

conveniens, which it may now or hereafter have to the bringing of any action or

proceeding in such jurisdiction in respect of this Agreement or any document

related hereto.

 

Section

13.11                     Tax

Characterization.

 

Notwithstanding the provisions of Section 2.01 and Section 2.04 hereof, the Trust Depositor

and Owner Trustee agree that, for federal

and State of Maryland income tax purposes and pursuant to Treasury Regulations

Section 301.7701-3(b), in the event that the Certificate and the Class C Note

are owned by a single holder, the Issuer is to be disregarded as an entity

separate from the Trust Depositor, and in the event that the Certificate and

Class C Note are owned by more than one holder, the Issuer is to be treated as

a partnership the partners of which are the holders of the Certificate and

Class C Note.

 

97

 

Section 13.12                     Prohibited

Transactions with Respect to the Issuer.

 

The Originator shall not:

 

(a)           Provide

credit to any Noteholder or Certificateholder for the purpose of enabling such

Noteholder or Certificateholder to purchase Notes or Certificate, respectively;

 

(b)           Purchase

any Notes or Certificate in an agency or trustee capacity; or

 

(c)           Except

in its capacity as Servicer as provided in this Agreement, lend any money to

the Issuer.

 

Section 13.13                     Merger or

Consolidation of Originator or Servicer.

 

(a)           Each

of the Originator and the Servicer will keep in full force and effect its

existence, rights and franchise as a Delaware corporation, and each of the

Originator and the Servicer will obtain and preserve its qualification to do

business as a foreign corporation in each jurisdiction in which such

qualification is or shall be necessary to protect the validity and

enforceability of this Agreement and of any of the Loans and to perform its

duties under this Agreement.

 

(b)           Any

Person into which the Originator or the Servicer, as the case may be, may be

merged or consolidated, or any corporation resulting from such merger or

consolidation to which the Originator or the Servicer, as the case may be, is a

party, or any Person succeeding by acquisition or transfer to substantially all

of the assets and the business of the Originator or the Servicer, as the case

may be, shall be the successor to the Originator or the Servicer, as the case

may be, hereunder, without execution or filing of any paper or any further act

on the part of any of the parties hereto, notwithstanding anything herein to

the contrary.

 

(c)           Upon

the merger or consolidation of the Originator or the Servicer, as the case may

be, as described in this Section 13.13,

the Originator or the Servicer, as the case may be, shall provide the Indenture

Trustee, each Swap Counterparty and the Rating Agencies notice of such merger,

consolidation or transfer of substantially all of the assets and business

within thirty (30) days after completion of the same.

 

Section 13.14                     Assignment

or Delegation by the Originator.

 

Except as specifically authorized hereunder, the

Originator may not convey and assign or delegate any of its rights or

obligations hereunder absent the prior written consent of the Trust Depositor,

the Trustees and each Swap Counterparty, and any attempt to do so without such

consent shall be void.

 

Section 13.15                     Limitation

of Liability of Owner Trustee.

 

Wachovia Trust Company, National Association acts on

behalf of the Issuer solely as Owner Trustee hereunder and not in its

individual capacity, and all Persons having any claim against the Issuer by

reason of the transactions contemplated by this Agreement or any other

Transaction Document shall look only to the Trust Estate under the Trust

Agreement for

 

98

 

payment or satisfaction thereof.  The Owner Trustee makes no representations

as to the validity or sufficiency of this Agreement, any other Transaction

Document, the Notes, or of any Loan or related documents.  The Owner Trustee shall at no time have any

responsibility or liability for or with respect to the legality, validity and

enforceability of any Loan, the perfection and priority of any security

interest created by any Loan in any Collateral, the maintenance of any such

perfection and priority, or for or with respect to the sufficiency of the Trust

Estate under the Trust Agreement or its ability to generate the payments to be

distributed to the Certificateholders under the Trust Agreement or the

Noteholders under the Indenture, including, without limitation, (i) the

existence, condition and ownership of any Collateral; (ii) the existence

and enforceability of any insurance thereon; (iii) the existence and

contents of any Loan on any computer or other record thereof; (iv) the

validity of the assignment of any Loan to the Issuer or of any intervening

assignment; (v) the completeness of any Loan; (vi) the performance or

enforcement of any Loan; (vii) the compliance by the Issuer, the Trust

Depositor or the Servicer with any covenant, agreement or other obligation or

the accuracy of any warranty or representation made under any Transaction

Document or in any related document; or (viii) or any action of the

Administrator, the Indenture Trustee or the Servicer or any subservicer taken

in the name of the Owner Trustee or the Issuer.

 

Section

13.16                     No

Partnership.

 

Nothing herein contained shall be deemed or construed

to create a co-partnership or joint venture between the parties hereto, and the

services of the Servicer shall be rendered as an independent contractor and not

as agent for the Holders.

 

Section 13.17                     Successors

and Assigns.

 

This Agreement shall inure to the benefit of and be

binding upon the parties hereto and their respective successors and permitted

assigns.

 

Section

13.18                     Acts of

Holders.

 

Except as otherwise specifically provided herein,

whenever Holder action, consent or approval 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 Holders if the Required Holders agree

to take such action or give such consent or approval.

 

Section

13.19                     Duration

of Agreement.

 

This Agreement shall continue in existence and effect

until terminated as herein provided.

 

Section 13.20                     Servicer

Assignment and Resignation.

 

The Servicer shall not assign

its rights and duties under this Agreement (other than in connection with a

subservicing arrangement) nor resign from the obligations and duties hereby

imposed on it as Servicer except (i) by mutual consent of the Servicer, the

Indenture Trustee, the Swap Counterparties and the Required Holders, (ii) in connection with a merger, conversion or

consolidation permitted pursuant to Section

13.13 (in which case the Person

resulting from the

 

99

 

merger, conversion or

consolidation shall be the successor of the Servicer), (iii) in connection with

an assignment permitted pursuant to Section

13.13 (in which case the

Assignee shall be the successor of the Servicer), or (iv) upon the Servicer’s

determination that its duties hereunder are no longer permissible under

Requirements of Law or administrative determination and such incapacity cannot

be cured by the Servicer.  Any such

determination permitting the resignation of the Servicer shall be evidenced by

a written Opinion of Counsel to such effect delivered to the Indenture Trustee,

which Opinion of Counsel shall be in form and substance reasonably acceptable

to the Indenture Trustee.  No such

resignation shall become effective until a successor has assumed the Servicer’s

responsibilities and obligations hereunder in accordance with Section 8.03.

 

Section 13.21                     Limited Recourse.

 

The obligations of the Trust Depositor, the Originator

and the Servicer under this Agreement are solely the obligations of the Trust

Depositor, the Originator and the Servicer. 

No recourse shall be had for the payment of any amount owing by the

Trust Depositor, the Originator, and the Servicer under this Agreement or for

the payment by the Trust Depositor, the Originator and the Servicer of any fee

in respect hereof or any other obligation or claim of or against the Trust

Depositor, the Originator and the Servicer arising out of or based upon this

Agreement, against any employee, officer, director, Affiliate, shareholder,

partner or member of the Trust Depositor, the Originator and the Servicer or

against the employee, officer, director, shareholder, partner or member or any

Affiliate of such Person.  The

provisions of this Section 13.21 shall survive termination of this

Agreement.

 

[Remainder

of Page Intentionally Left Blank.]

 

100

 

IN WITNESS WHEREOF,

the parties hereto have caused this Agreement to be duly executed by their

respective officers as of the day and year first above written.

 

	

   

  	

  ACAS

  BUSINESS LOAN TRUST 2002–2

  
	

   

  	

   

  
	

   

  	

  By:

  	

  WACHOVIA TRUST COMPANY,

  NATIONAL ASSOCIATION, not in its

  individual capacity but solely as the Owner

  Trustee on behalf of the Issuer

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  ACAS

  BUSINESS LOAN LLC, 2002–2, as the

  Trust Depositor

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  AMERICAN

  CAPITAL STRATEGIES, LTD.,

  as the Servicer and as the Originator

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
							

 

[Signatures Continued on the Following Page]

 

S-1

 

	

   

  	

  WELLS

  FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION, as the Indenture

  Trustee and the Backup Servicer

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
						

 

S-2

 

TABLE

OF CONTENTS

 

	

  ARTICLE I

  	

  DEFINITIONS

  
	

   

  	

   

  
	

  Section 1.01

  	

  Definitions

  
	

  Section 1.02

  	

  Other Terms

  
	

  Section 1.03

  	

  Computation

  of Time Periods

  
	

  Section 1.04

  	

  Interpretation

  
	

  Section 1.05

  	

  Section References

  
	

  Section 1.06

  	

  Calculations

  
	

   

  	

   

  
	

  ARTICLE II

  	

  ESTABLISHMENT

  OF ISSUER; TRANSFER OF LOAN ASSETS

  
	

   

  	

   

  
	

  Section

  2.01

  	

  Creation

  and Funding of Issuer; Transfer of Loan Assets

  
	

  Section

  2.02

  	

  Conditions

  to Transfer of Loan Assets to Issuer

  
	

  Section 2.03

  	

  Acceptance by Issuer

  
	

  Section

  2.04

  	

  Conveyance

  of Substitute Loans

  
	

  Section 2.05

  	

  Release of

  Released Amounts

  
	

  Section 2.06

  	

  Delivery of Loan

  Files

  
	

  Section

  2.07

  	

  Certification

  by Indenture Trustee; Possession of Loan Files

  
	

   

  	

   

  
	

  ARTICLE III

  	

  REPRESENTATIONS AND

  WARRANTIES

  
	

   

  	

   

  
	

  Section

  3.01

  	

  Representations

  and Warranties Regarding the Originator

  
	

  Section

  3.02

  	

  Representations

  and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate

  
	

  Section

  3.03

  	

  Representations

  and Warranties Regarding the Initial Loans in the Aggregate

  
	

  Section

  3.04

  	

  Representations

  and Warranties Regarding the Loan Files

  
	

  Section

  3.05

  	

  Representations

  and Warranties Regarding Concentrations of Initial Loans

  
	

  Section

  3.06

  	

  Representations

  and Warranties Regarding the Trust Depositor

  
	

  Section

  3.07

  	

  Representations

  and Warranties Regarding the Servicer

  
	

  Section

  3.08

  	

  Representations

  and Warranties of the Backup Servicer and the Indenture Trustee

  
	

   

  	

   

  
	

  ARTICLE IV

  	

  PERFECTION

  OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

  
	

   

  	

   

  
	

  Section 4.01

  	

  Custody of Loans

  
	

  Section 4.02

  	

  Filing

  
	

  Section 4.03

  	

  Changes in Name, Corporate Structure or

  Location

  
	

  Section 4.04

  	

  Chief Executive

  Office

  
	

  Section 4.05

  	

  Costs and Expenses

  
	

  Section 4.06

  	

  Sale Treatment

  
	

  Section

  4.07

  	

  Separateness

  from Trust Depositor

  

 

i

 

	

  ARTICLE V

  	

  SERVICING OF LOANS

  
	

   

  	

   

  
	

  Section

  5.01

  	

  Appointment

  and Acceptance; Responsibility for Loan Administration

  
	

  Section 5.02

  	

  General Duties

  
	

  Section 5.03

  	

  Administration

  
	

  Section

  5.04

  	

  Disposition

  upon Termination of Loan

  
	

  Section 5.05

  	

  Subservicers

  
	

  Section 5.06

  	

  Further Assurance

  
	

  Section 5.07

  	

  Notice to Obligors

  
	

  Section

  5.08

  	

  Collection

  Efforts; Modification of Loans; Release of Loan Files

  
	

  Section 5.09

  	

  Prepaid Loan

  
	

  Section 5.10

  	

  Acceleration

  
	

  Section 5.11

  	

  Taxes

  
	

  Section 5.12

  	

  Insurance Premiums

  
	

  Section 5.13

  	

  Remittances

  
	

  Section 5.14

  	

  Servicer Advances

  
	

  Section

  5.15

  	

  Realization

  upon Defaulted Loan

  
	

  Section

  5.16

  	

  Maintenance

  of Insurance Policies

  
	

  Section 5.17

  	

  Other Servicer

  Covenants

  
	

  Section 5.18

  	

  Servicing

  Compensation

  
	

  Section

  5.19

  	

  Payment

  of Certain Expenses by Servicer

  
	

  Section 5.20

  	

  Records

  
	

  Section 5.21

  	

  Inspection

  
	

  Section 5.22

  	

  The Backup Servicer

  
	

  Section 5.23

  	

  [Reserved]

  
	

  Section

  5.24

  	

  Covenants

  of the Backup Servicer

  
	

  Section

  5.25

  	

  Appointment

  of Successor Backup Servicer; Successor Backup Servicer to Act

  
	

   

  	

   

  
	

  ARTICLE VI

  	

  COVENANTS OF THE TRUST

  DEPOSITOR

  
	

   

  	

   

  
	

  Section 6.01

  	

  Legal Existence

  
	

  Section

  6.02

  	

  Loans

  Not to Be Evidenced by Promissory Notes

  
	

  Section 6.03

  	

  Security Interests

  
	

  Section 6.04

  	

  Delivery of Collections

  
	

  Section 6.05

  	

  Regulatory Filings

  
	

  Section 6.06

  	

  Compliance with Law

  
	

  Section 6.07

  	

  Activities

  
	

  Section 6.08

  	

  Indebtedness

  
	

  Section 6.09

  	

  Guarantees

  
	

  Section 6.10

  	

  Investments

  
	

  Section 6.11

  	

  Merger; Sales

  
	

  Section 6.12

  	

  Distributions

  
	

  Section 6.13

  	

  Other Agreements

  

 

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  Section 6.14

  	

  Separate Legal

  Existence

  
	

  Section 6.15

  	

  [Reserved]

  
	

  Section

  6.16

  	

  Liability

  of Trust Depositor and Others

  
	

  Section 6.17

  	

  Bankruptcy

  Limitations

  
	

  Section 6.18

  	

  [Reserved]

  
	

  Section 6.19

  	

  Chief Executive

  Office

  
	

   

  	

   

  
	

  ARTICLE VII

  	

  ESTABLISHMENT

  OF ACCOUNTS; DISTRIBUTIONS; RESERVE FUND

  
	

   

  	

   

  
	

  Section 7.01

  	

  Trust

  Accounts; Collections

  
	

  Section 7.02

  	

  Reserve Fund Deposit

  
	

  Section 7.03

  	

  Trust Account

  Procedures

  
	

  Section 7.04

  	

  Securityholder

  Distributions

  
	

  Section

  7.05

  	

  Allocations

  and Distributions

  
	

  Section 7.06

  	

  Determination of

  LIBOR

  
	

   

  	

   

  
	

  ARTICLE VIII

  	

  SERVICER DEFAULT;

  SERVICE TRANSFER

  
	

   

  	

   

  
	

  Section 8.01

  	

  Servicer Default

  
	

  Section 8.02

  	

  Servicer Transfer

  
	

  Section

  8.03

  	

  Appointment

  of Successor Servicer; Reconveyance; Successor Servicer to Act

  
	

  Section

  8.04

  	

  Notification

  to Securityholders and Swap Counterparties

  
	

  Section 8.05

  	

  Effect of Transfer

  
	

  Section 8.06

  	

  Database File

  
	

  Section

  8.07

  	

  Successor

  Servicer Indemnification

  
	

  Section

  8.08

  	

  Responsibilities

  of the Successor Servicer

  
	

  Section

  8.09

  	

  Rating

  Agency Condition for Servicer Transfer

  
	

   

  	

   

  
	

  ARTICLE IX

  	

  REPORTS

  
	

   

  	

   

  
	

  Section 9.01

  	

  Monthly Reports

  
	

  Section 9.02

  	

  Officer’s

  Certificate

  
	

  Section 9.03

  	

  Other Data

  
	

  Section 9.04

  	

  Annual

  Report of Accountants

  
	

  Section

  9.05

  	

  Annual

  Statement of Compliance from Servicer

  
	

  Section 9.06

  	

  Annual Summary

  Statement

  
	

  Section

  9.07

  	

  Reports

  of Foreclosure and Abandonment of Mortgaged Property

  
	

  Section 9.08

  	

  Notices

  
	

   

  	

   

  
	

  ARTICLE X

  	

  TERMINATION

  
	

   

  	

   

  
	

  Section 10.01

  	

  Sale of Loan Assets

  

 

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  ARTICLE XI

  	

  REMEDIES

  UPON MISREPRESENTATION; REPURCHASE OPTION

  
	

   

  	

   

  
	

  Section 11.01

  	

  Repurchases of, or Substitution for,

  Loans for Breach of Representations and Warranties

  
	

  Section

  11.02

  	

  Reassignment

  of Repurchased or Substituted Loans

  
	

   

  	

   

  
	

  ARTICLE XII

  	

  INDEMNITIES

  
	

   

  	

   

  
	

  Section

  12.01

  	

  Indemnification

  by Servicer

  
	

  Section

  12.02

  	

  Indemnification

  by Trust Depositor

  
	

  Section 12.03

  	

  Liabilities to

  Obligors

  
	

  Section 12.04

  	

  Tax Indemnification

  
	

  Section 12.05

  	

  Adjustments

  
	

  Section 12.06

  	

  Operation of

  Indemnities

  
	

   

  	

   

  
	

  ARTICLE XIII

  	

  MISCELLANEOUS

  
	

   

  	

   

  
	

  Section 13.01

  	

  Amendment

  
	

  Section

  13.02

  	

  Protection

  of Title to Issuer

  
	

  Section 13.03

  	

  Governing Law

  
	

  Section 13.04

  	

  Notices

  
	

  Section 13.05

  	

  Severability

  of Provisions

  
	

  Section 13.06

  	

  Third Party

  Beneficiaries

  
	

  Section 13.07

  	

  Counterparts

  
	

  Section 13.08

  	

  Headings

  
	

  Section

  13.09

  	

  No

  Bankruptcy Petition; Disclaimer

  
	

  Section 13.10

  	

  Jurisdiction

  
	

  Section 13.11

  	

  Tax

  Characterization

  
	

  Section

  13.12

  	

  Prohibited

  Transactions with Respect to the Issuer

  
	

  Section

  13.13

  	

  Merger

  or Consolidation of Originator or Servicer

  
	

  Section

  13.14

  	

  Assignment

  or Delegation by the Originator

  
	

  Section

  13.15

  	

  Limitation

  of Liability of Owner Trustee

  
	

  Section 13.16

  	

  No Partnership

  
	

  Section 13.17

  	

  Successors and

  Assigns

  
	

  Section 13.18

  	

  Acts of Holders

  
	

  Section 13.19

  	

  Duration of

  Agreement

  
	

  Section

  13.20

  	

  Servicer

  Assignment and Resignation

  
	

  Section 13.21

  	

  Limited Recourse

  
	

   

  	

   

  
	

  EXHIBITS AND SCHEDULES

  
	

   

  	

   

  
	

  Exhibit A

  	

  Form of

  Assignment

  	

  A-1

  
	

  Exhibit B

  	

  Form of Closing

  Certificate of Trust Depositor

  	

  B-1

  
	

  Exhibit C

  	

  Form of Closing

  Certificate of Servicer/Originator

  	

  C-1

  
	

  Exhibit D-1

  	

  Form of Initial

  Certification

  	

  D-1

  	 

	

  Exhibit D-2

  	

  Form of Final

  Certification

  	

  D-2

  	 

	

  Exhibit E

  	

  Form of Request

  for Release of Documents

  	

  E-1

  
	

  Exhibit F

  	

  Form of

  Certificate Regarding Repurchased Loans

  	

  F-1

  
					

 

iv

 

	

   

  	

   

  
	

  Exhibit G

  	

  List of Loans

  	

  G-1

  
	

  Exhibit H

  	

  Form of Monthly

  Report to Securityholders and Swap Counterparties

  	

  H-1

  
	

  Exhibit I

  	

  Form of

  Subsequent Transfer Agreement

  	

  I-1

  
	

  Exhibit J

  	

  Form of

  Subsequent Purchase Agreement

  	

  J-1

  
	

  Exhibit K

  	

  Credit and Collection

  Policy

  	

  K-1

  
	

  Exhibit L

  	

  List of

  Subordinated Loans

  	

  L-1

  

 

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