Document:

efc10-303_101.htm

 

	 Exhibit 10.1

 

MERCEDES-BENZ AUTO RECEIVABLES TRUST 2010-1,

as Issuer,

 

DAIMLER RETAIL RECEIVABLES LLC,

as Depositor,

 

DCFS USA LLC,

as Seller,

 

and

 

DCFS USA LLC,

as Servicer

	 	 	 	 	 
	 	 	  

SALE AND SERVICING AGREEMENT

Dated as of April 1, 2010

 

	 	 

 

 

 

 

	 

 

TABLE OF CONTENTS

 

Page

	
ARTICLE ONE

	
DEFINITIONS

	 
	
Section 1.01. Capitalized Terms; Rules of Usage

	
1

	 
	
ARTICLE TWO

	
CONVEYANCE OF TRUST PROPERTY

	 
	
Section 2.01. Conveyance of Trust Property.

	
2

	
Section 2.02. Representations and Warranties of the Seller as to the Receivables

	
3

	
Section 2.03. Representations and Warranties of the Depositor as to the Receivables

	
4

	
Section 2.04. Representations and Warranties as to Security Interests

	
4

	
Section 2.05. Repurchase of Receivables Upon Breach

	
5

	
Section 2.06. Custody of Receivable Files.

	
6

	
Section 2.07. Duties of Servicer as Custodian.

	
6

	
Section 2.08. Instructions; Authority to Act

	
7

	
Section 2.09. Indemnification by Custodian

	
7

	
Section 2.10. Effective Period and Termination

	
8

	 
	
ARTICLE THREE

	
ADMINISTRATION AND SERVICING OF THE TRUST PROPERTY

	 
	
Section 3.01. Duties of Servicer

	
9

	
Section 3.02. Delegation of Duties; Subservicers.

	
10

	
Section 3.03. Collection of Receivable Payments; Modification of Receivables

	
10

	
Section 3.04. Realization Upon Receivables.

	
11

	
Section 3.05. Maintenance of Physical Damage Insurance Policies

	
12

	
Section 3.06. Maintenance of Security Interests in Financed Vehicles

	
12

	
Section 3.07. Covenants of Servicer

	
12

	
Section 3.08. Purchase of Receivables Upon Breach

	
13

	
Section 3.09. Servicing Compensation; Payment of Certain Expenses by Servicer

	
13

	
Section 3.10. Investor Report

	
13

	
Section 3.11. Annual Statement as to Compliance; Notice of Servicer Termination Events.

	
13

	
Section 3.12. Annual Accountants’ Report.

	
14

	
Section 3.13. Access to Certain Documentation and Information Regarding Receivables

	
15

	
Section 3.14. Reports to the Commission

	
15

 

 

  

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Section 3.15. Reports to Rating Agencies

	
15

	 
	
ARTICLE FOUR

	
DISTRIBUTIONS; RESERVE FUND;

	
STATEMENTS TO SECURITYHOLDERS

	 
	
Section 4.01. Establishment of Accounts.

	
16

	
Section 4.02. Reserve Fund.

	
17

	
Section 4.03. Monthly Remittance Condition.

	
18

	
Section 4.04. Collections

	
18

	
Section 4.05. Application of Collections

	
18

	
Section 4.06. Advances.

	
19

	
Section 4.07. Additional Deposits.

	
19

	
Section 4.08. Determination Date Calculations; Application of Available Funds.

	
20

	
Section 4.09. Statements to Securityholders

	
21

	 
	
ARTICLE FIVE

	
THE DEPOSITOR

	 
	
Section 5.01. Representations and Warranties of Depositor

	
22

	
Section 5.02. Liability of Depositor; Indemnities.

	
23

	
Section 5.03. Merger, Consolidation or Assumption of the Obligations of Depositor

	
25

	
Section 5.04. Limitation on Liability of Depositor and Others

	
25

	
Section 5.05. Depositor Not to Resign

	
25

	
Section 5.06. Depositor May Own Securities

	
25

	
Section 5.07. Covenants of Depositor

	
26

	 
	
ARTICLE SIX

	
THE SERVICER

	 
	
Section 6.01. Representations and Warranties of Servicer

	
27

	
Section 6.02. Liability of Servicer; Indemnities

	
28

	
Section 6.03. Merger or Consolidation of, or Assumption of the Obligations of Servicer

	
29

	
Section 6.04. Limitation on Liability of Servicer and Others.

	
30

	
Section 6.05. DCFS USA Not to Resign as Servicer

	
30

	
Section 6.06. Servicer May Own Securities

	
30

 

 

 

  

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ARTICLE SEVEN

	
SERVICER TERMINATION EVENTS

	 
	
Section 7.01. Servicer Termination Events

	
32

	
Section 7.02. Appointment of Successor Servicer

	
33

	
Section 7.03. Effect of Servicing Transfer.

	
34

	
Section 7.04. Notification to Noteholders and Rating Agencies

	
35

	
Section 7.05. Waiver of Past Servicer Termination Events

	
35

	
Section 7.06. Repayment of Advances

	
35

	 
	
ARTICLE EIGHT

	
TERMINATION

	 
	
Section 8.01. Optional Purchase of All Receivables.

	
36

	 
	
ARTICLE NINE

	
EXCHANGE ACT REPORTING

	 
	
Section 9.01. Further Assurances

	
37

	
Section 9.02. Form 10-D Filings

	
37

	
Section 9.03. Form 8-K Filings

	
37

	
Section 9.04. Form 10-K Filings

	
37

	
Section 9.05. Report on Assessment of Compliance and Attestation

	
38

	
Section 9.06. Back-up Sarbanes-Oxley Certification.

	
38

	
Section 9.07. Representations and Warranties

	
39

	
Section 9.08. Indemnification.

	
39

	 
	
ARTICLE TEN

	
MISCELLANEOUS

	 
	
Section 10.01. Amendment.

	
41

	
Section 10.02. Protection of Title to Issuer.

	
42

	
Section 10.03. Notices

	
44

	
Section 10.04. Assignment.

	
45

	
Section 10.05. Severability

	
45

	
Section 10.06. Further Assurances

	
45

	
Section 10.07. No Waiver; Cumulative Remedies

	
45

	
Section 10.08. Successors and Assigns; Third-Party Beneficiaries

	
45

	
Section 10.09. Actions by Securityholders.

	
45

 

 

 

  

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Section 10.10. Counterparts

	
46

	
Section 10.11. Table of Contents and Headings

	
46

	
Section 10.12. GOVERNING LAW

	
46

	
Section 10.13. No Petition

	
46

	
Section 10.14. No Recourse

	
46

	
Section 10.15. Servicer Payment Obligation

	
46

	
SCHEDULES

	  
	
Schedule A  Location of Receivable Files

	
SA-1

	
Schedule B  Item 1119 Parties

	
SB-1

	
Schedule C  Part I – Servicing Criteria

	
SC-1

	
Schedule D  Performance Certification (Servicer)

	
SD-1

	
EXHIBITS

	  
	
Exhibit A  Representations and Warranties as to the Receivables

	
A-1

	
Exhibit B  Form of Investor Report

	
B-1

	
APPENDICES

	  
	
Appendix A – Definitions

	
AA-1

 

 

  

iv

  

 

 

This SALE AND SERVICING AGREEMENT, dated as of April 1, 2010 (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), is among DAIMLER RETAIL RECEIVABLES LLC, a Delaware limited liability company (the “Depositor”), DCFS USA LLC, a Delaware limited liability company (the “Seller”), DCFS USA LLC, a Delaware limited liability company (“DCFS USA”), as servicer (in such capacity, the “Servicer”), and MERCEDES-BENZ AUTO RECEIVABLES TRUST 2010-1, a Delaware statutory trust, as issuer (the “Issuer”).

 

WHEREAS, the Issuer desires to purchase from the Depositor a pool of receivables arising in connection with motor vehicle installment sales contracts and installment loans (the “Receivables”) purchased or originated by the Seller in the ordinary course of its business and sold to the Depositor as of the Closing Date;

 

WHEREAS, the Depositor is willing to sell the Receivables to the Issuer pursuant to the terms hereof; and

 

WHEREAS, the Servicer is willing to service the Receivables pursuant to the terms hereof.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

ARTICLE ONE

 

DEFINITIONS

 

Section 1.01. Capitalized Terms; Rules of Usage.  Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A.  Appendix A also contains rules as to usage applicable to this Agreement.

 

 

  

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ARTICLE TWO

 

CONVEYANCE OF TRUST PROPERTY

 

Section 2.01. Conveyance of Trust Property.

 

(a) In consideration of the Issuer’s delivery to or upon the order of the Depositor on the Closing Date of authenticated Notes, in authorized denominations in an aggregate principal amount equal to the Initial Note Balance, and authenticated Certificates, the Depositor hereby irrevocably sells, transfers, assigns and otherwise conveys to the Issuer, without recourse (subject to the obligations of the Depositor set forth herein), all right, title and interest of the Depositor, whether now owned or existing or hereafter acquired or arising, and wheresoever located, in, to and under the following:

 

(i) the Receivables and all amounts due and collected on or in respect of the Receivables (including proceeds of the repurchase of Receivables by the Seller pursuant to Section 2.05 or Section 8.01 or the purchase of Receivables by the Servicer pursuant to Section 3.08) after the Cutoff Date;

 

(ii) the security interests in the Financed Vehicles granted by the Obligors pursuant to the Receivables and any other interest of the Depositor in such Financed Vehicles;

 

(iii) all proceeds from claims on any physical damage or theft insurance policies and extended warranties covering such Financed Vehicles and any proceeds of any credit life or credit disability insurance policies relating to the Receivables, the related Financed Vehicles or the related Obligors;

 

(iv) the Receivable Files that relate to the Receivables;

 

(v) any proceeds of Dealer Recourse that relate to the Receivables;

 

(vi) the Collection Account, the Note Payment Account, the Reserve Fund and all amounts, securities, Financial Assets, investments and other property deposited in or credited to any of the foregoing and all proceeds thereof;

 

(vii) all rights of the Depositor, but none of the obligations, under the Receivables Purchase Agreement and First-Tier Assignment, including the right to require the Seller to repurchase Receivables from the Issuer;

 

(viii) the right to realize upon any property (including the right to receive future Net Liquidation Proceeds and Recoveries) that shall have secured a Receivable and have been repossessed by or on behalf of the Issuer; and

 

(ix) all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing, and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or 

 

 

 

  

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other liquid property, all accounts, accounts receivable, general intangibles, chattel paper, documents, money, investment property, deposit accounts, letters of credit, letter of credit rights, insurance proceeds, condemnation awards, notes, drafts, acceptances, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitutes all or part of, or is included in, the proceeds of any of the foregoing.

 

(b) The Depositor and the Issuer intend that the transfer of Trust Property contemplated by Section 2.01(a) constitute a sale of the Trust Property from the Depositor to the Issuer, conveying good title to the Trust Property free and clear of any Liens and, in the event of the filing of a bankruptcy petition by or against the Depositor under any Insolvency Law, that the Trust Property shall not be part of the Depositor’s estate.  However, in the event that any such transfer is deemed to be a pledge, the Depositor hereby grants to the Issuer a first priority security interest in all of the Depositor’s right, title and interest in, to and under such Trust Property, and all proceeds thereof, to secure the payment of the Notes and accrued interest thereon and all other amounts owing under the Basic Documents and in such event, this Agreement shall constitute a security agreement under Applicable Law.

 

(c) The sales, transfers, assignments and conveyances of Trust Property made under this Section shall not constitute, and is not intended to result in, an assumption by the Issuer of any obligation of the Depositor or the Seller to the Obligors or any other Person in connection with the Receivables and the other Trust Property or any obligation of the Depositor or the Seller under any agreement, document or instrument related thereto.

 

Section 2.02. Representations and Warranties of the Seller as to the Receivables.  The Seller has made, under the Receivables Purchase Agreement, each of the representations and warranties as to the Receivables set forth in Exhibit A.  The Issuer shall be deemed to have relied on such representations and warranties in accepting the Receivables.  The representations and warranties set forth in Exhibit A speak as of the date of execution and delivery of this Agreement and as of the Closing Date, except to the extent otherwise provided, but shall survive the sale, transfer, assignment and conveyance of the Receivables to the Issuer pursuant to this Agreement and the pledge of the Receivables to the Indenture Trustee pursuant to the Indenture.  Pursuant to Section 2.01(a), the Depositor has sold, transferred, assigned and otherwise conveyed to the Issuer, as part of the Trust Property, its rights under the Receivables Purchase Agreement, including its right to require the Seller to repurchase Receivables in accordance with the Receivables Purchase Agreement upon a breach of the representations and warranties set forth in Exhibit A.

 

The Seller hereby agrees that the Issuer shall have the right to enforce any and all rights of the Depositor under the Receivables Purchase Agreement assigned to the Issuer under this Agreement, including the right to require the Seller to repurchase Receivables in accordance with the Receivables Purchase Agreement upon a breach of the representations and warranties set forth in Exhibit A, directly against the Seller as though the Issuer were a party to the Receivables Purchase Agreement and that the Issuer shall not be obligated to enforce any such right indirectly through the Depositor.

 

 

  

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Section 2.03. Representations and Warranties of the Depositor as to the Receivables.  The Depositor makes the following representations and warranties as to the Receivables on which the Issuer shall be deemed to have relied in accepting the Receivables.  The representations and warranties speak as of the date of execution and delivery of this Agreement and as of the Closing Date, except to the extent otherwise provided, but shall survive the sale, transfer, assignment and conveyance of the Receivables to the Issuer pursuant to this Agreement and the pledge of the Receivables to the Indenture Trustee pursuant to the Indenture.

 

(a) Title.  The Depositor has purchased the Receivables from the Seller.  The Depositor intends that the transfer of the Receivables contemplated by Section 2.01 constitute a sale of the Receivables from the Depositor to the Issuer and that the beneficial interest in, and title to, the Receivables not be part of the Depositor’s estate in the event of the filing of a bankruptcy petition by or against the Depositor under any bankruptcy law.

 

(b) Security Interest Matters.  The Depositor has caused or will cause prior to the Closing Date the filing of all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under Applicable Law necessary to perfect the security interest in the Receivables granted to the Issuer under this Agreement.  The security interest of the Seller in each Financed Vehicle has been validly assigned by the Depositor to the Issuer.

 

(c) Financing Statements.  All financing statements filed or to be filed against the Depositor in favor of the Indenture Trustee (as assignee of the Issuer) contain a statement substantially to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Indenture Trustee”.

 

(d) No Transfer Restrictions.  The Depositor has not created, incurred or suffered to exist any restriction on transferability of the Receivables except for the restrictions on transferability imposed by this Agreement.  The transfer of the Receivables and the Receivable Files by the Depositor to the Issuer pursuant to this Agreement is not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction.

 

Section 2.04. Representations and Warranties as to Security Interests.  The Depositor makes the following representations and warranties as to the Receivables on which the Issuer shall be deemed to have relied in accepting the Receivables.  The representations and warranties speak as of the date of execution and delivery of this Agreement and as of the Closing Date, except to the extent otherwise provided, but shall survive the sale, transfer, assignment and conveyance of the Receivables to the Issuer pursuant to this Agreement and the pledge of the Receivables to the Indenture Trustee pursuant to the Indenture.

 

(a) This Agreement creates a valid and continuing “security interest” (as defined in the applicable UCC) in the Receivables in favor of the Issuer, which security interest is prior to all other Liens, and is enforceable as such against creditors of and purchasers from the Depositor.

 

 

 

 

  

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(b) The Depositor has taken all steps necessary to perfect its security interest against the Obligor in the Financed Vehicles.

 

(c) The Receivables constitute “tangible chattel paper” within the meaning of the applicable UCC.

 

(d) The Depositor owns and has good and marketable title to the Receivables free and clear of any Lien, claim or encumbrance of any Person.

 

(e) All original executed copies of each loan agreement and installment sales contract that constitute or evidence the Receivables have been delivered to the Servicer, as custodian for the Issuer.

 

(f) The Depositor has received a written acknowledgment from the Servicer that the Servicer is holding the loan agreements and installment sales contracts that constitute or evidence the Receivables solely on behalf and for the benefit of the Issuer.

 

(g) Other than the security interest granted to the Issuer pursuant to this Agreement and the Indenture, the Depositor has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Receivables.  The Depositor has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Receivables other than any financing statement relating to the security interest granted to the Issuer hereunder or that has been terminated.  The Depositor is not aware of any judgment or tax lien filings against the Depositor.

 

(h) None of the loan agreements or installment sales contracts that constitute or evidence the Receivables has any marks or notations indicating that it has been pledged, assigned, or otherwise conveyed to any Person other than the Issuer.

 

Notwithstanding the foregoing, the representations and warranties set forth in this Section may not be waived.  The representations and warranties set forth in this Section will survive the termination of this Agreement until the Indenture has been discharged.

 

Section 2.05. Repurchase of Receivables Upon Breach.  The Depositor, the Seller, the Servicer or the Owner Trustee, as the case may be, shall inform the other parties to this Agreement and the Indenture Trustee promptly, in writing, upon the discovery of any breach or failure to be true of the representations and warranties set forth in Exhibit A.  If such breach or failure shall not have been cured by the close of business on the last day of the Collection Period which includes the 30th day after the date on which the Seller becomes aware of, or receives written notice from the Depositor, the Servicer or the Owner Trustee of, such breach or failure, and such breach or failure materially and adversely affects the interest of the Issuer in a Receivable, the Seller shall repurchase such Receivable from the Issuer as of the close of business on the last day of such Collection Period.  In consideration of the repurchase of a Receivable hereunder, the Seller shall remit the Purchase Amount of such Receivable on the Deposit Date immediately following such Collection Period in the manner specified in Section 4.07.  The sole remedy of the Issuer, the Trustees and the Securityholders with respect to a breach or failure to be true of the representations and warranties set forth in Exhibit A shall be to require the Seller to 

 

 

 

  

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repurchase Receivables pursuant to this Section and Section 3.03(c) of the Receivables Purchase Agreement.  Neither Trustee shall have any duty to conduct an affirmative investigation as to the occurrence of any condition requiring the repurchase of any Receivable pursuant to this Section or the eligibility of any Receivable for purposes of this Agreement.

 

Section 2.06. Custody of Receivable Files.

 

(a) To assure uniform quality in servicing the Receivables and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer as its agent, and the Servicer hereby accepts such appointment, to act as custodian, on behalf of the Issuer and the Indenture Trustee, of the following documents or instruments which are hereby constructively delivered to the Indenture Trustee, as pledgee of the Trust Property pursuant to the Indenture with respect to each Receivable (collectively, a “Receivable File”):

 

(i) the fully executed original of the Receivable;

 

(ii) the original certificate of title for the related Financed Vehicle (or evidence that such certificate of title has been applied for) or such other documents that the Seller or the Servicer shall keep on file, in accordance with its customary practices and procedures, evidencing the security interest of the Seller in such Financed Vehicle;

 

(iii) documents evidencing the commitment of the related Obligor to maintain physical damage insurance covering the related Financed Vehicle; and

 

(iv) any and all other documents (including any computer file or disc or microfiche) that the Seller or the Servicer shall keep on file, in accordance with its customary practices and procedures, relating to the Receivable, the related Obligor or the related Financed Vehicle.

 

(b) On the Closing Date, the Servicer shall deliver an Officer’s Certificate to the Issuer and the Indenture Trustee confirming that the Servicer has received, on behalf of the Issuer and the Indenture Trustee, all the documents and instruments necessary for the Servicer to act as the agent of the Issuer and the Indenture Trustee for the purposes set forth in this Section, including the documents referred to herein, and the Issuer and the Trustees are hereby authorized to rely on such Officer’s Certificate.

 

Section 2.07. Duties of Servicer as Custodian.

 

(a) Safekeeping.  The Servicer, in its capacity as custodian, shall hold the Receivable Files for the benefit of the Issuer and the Indenture Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to each Receivable File as shall enable the Servicer and the Issuer to comply with this Agreement and the Indenture Trustee to comply with the Indenture.  In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of skill and attention that it exercises with respect to the files of comparable motor vehicle installment sales contracts and installment loans that the Servicer services for itself or others.  The Servicer shall conduct, or cause to be conducted, in accordance with its customary practices and procedures, periodic examinations of the files of all receivables owned or serviced by it which shall include the Receivable Files held by it under this Agreement, 

 

 

 

  

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and of the related accounts, records and computer systems, in such a manner as shall enable the Issuer or the Indenture Trustee to verify the accuracy of the Servicer’s record keeping.  The Servicer shall promptly report to the Trustees any failure on its part to hold the Receivable Files and to maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure.  Nothing herein shall be deemed to require an initial review or any periodic review of the Receivable Files by the Issuer or the Trustees, and none of the Issuer or either Trustee shall be liable or responsible for any action or failure to act by the Servicer in its capacity as custodian hereunder.

 

(b) Maintenance of and Access to Records.  The Servicer shall maintain each Receivable File at one of the locations specified in Schedule A or at such other location as shall be specified to the Issuer and the Indenture Trustee by 30 days’ prior written notice.  The Servicer may temporarily move individual Receivable Files or any portion thereof without notice as necessary to conduct collection and other servicing activities in accordance with its customary practices and procedures.  The Servicer shall make available to the Issuer and the Indenture Trustee or its duly authorized representatives, attorneys or auditors a list of locations of the Receivable Files, the Receivable Files and the related accounts, records and computer systems maintained by the Servicer at such times during normal business hours as the Issuer and the Indenture Trustee shall reasonably request.

 

(c) Release of Documents.  As soon as practicable after receiving written instructions from the Indenture Trustee, the Servicer shall release any document in the Receivable Files to the Indenture Trustee or its agent or designee, as the case may be, at such place or places as the Indenture Trustee may reasonably designate.  The Servicer shall not be responsible for any loss occasioned by the failure of the Indenture Trustee to return any document or any delay in so doing.

 

(d) Title to Receivables.  The Servicer shall not at any time have, or in any way attempt to assert, any interest in any Receivable held by it as custodian hereunder or in the related Receivable File, other than for collecting or enforcing such Receivable for the benefit of the Issuer.  The entire equitable interest in such Receivable and the related Receivable File shall at all times be vested in the Issuer.

 

Section 2.08. Instructions; Authority to Act.  The Servicer shall be deemed to have received proper instructions with respect to the Receivable Files upon its receipt of written instructions signed by a Responsible Officer of the Indenture Trustee.  A certified copy of excerpts of authorizing resolutions of the board of directors of the Indenture Trustee shall constitute conclusive evidence of the authority of any such Responsible Officer to act and shall be considered in full force and effect until receipt by the Servicer of written notice to the contrary given by the Indenture Trustee.

 

Section 2.09. Indemnification by Custodian.  The Servicer, in its capacity as custodian of the Receivable Files, shall indemnify and hold harmless the Issuer, the Trustees and each of their respective officers, directors, employees and agents from and against any and all Expenses that may be imposed on, incurred or asserted against the Issuer, the Trustees and each of their respective officers, directors, employees and agents as the result of any improper act or omission in any way relating to the maintenance and custody of the Receivable Files by the Servicer, as 

 

 

  

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custodian; provided, however, that the Servicer shall not be liable for any portion of any such Expenses resulting from the willful misfeasance, bad faith or negligence of either Trustee.

 

Section 2.10. Effective Period and Termination.  The Servicer’s appointment as custodian shall become effective as of the Cutoff Date and shall continue in full force and effect until terminated pursuant to this Section.  If the Servicer shall resign as Servicer under Section 6.05, or if all of the rights and obligations of the Servicer shall have been terminated under Section 7.01, the appointment of the Servicer as custodian hereunder may be terminated by (i) the Issuer, with the consent of the Indenture Trustee, (ii) Holders of Notes evidencing not less than 25% of the Note Balance of the Controlling Class or, if the Notes have been paid in full, by Certificateholders evidencing not less than 25% of the aggregate Certificate Percentage Interests then outstanding or (iii) the Indenture Trustee, with the consent of Holders of Notes evidencing not less than 25% of the Note Balance of the Controlling Class, in each case by notice then given in writing to the Depositor and the Servicer (with a copy to the Trustees if given by the Noteholders or the Certificateholders).  As soon as practicable after any termination of such appointment, the Servicer shall deliver, or cause to be delivered, the Receivable Files and the related accounts and records maintained by the Servicer to the Indenture Trustee, the Indenture Trustee’s agent or the Indenture Trustee’s designee, as the case may be, at such place as the Indenture Trustee may reasonably designate or, if the Notes have been paid in full, at such place as the Owner Trustee may reasonably designate.

 

 

 

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ARTICLE THREE

 

ADMINISTRATION AND SERVICING OF THE TRUST PROPERTY

 

Section 3.01. Duties of Servicer.  The Servicer, acting alone or through one or more subservicers to the extent permitted hereunder, for the benefit of the Issuer, shall manage, service, administer and make collections on the Receivables with reasonable care but in no event less than the care that the Servicer exercises with respect to all comparable motor vehicle installment sales contracts and installment loans that it services for itself or others.  The Servicer’s duties shall include collection and posting of all payments, responding to inquiries of Obligors or by Governmental Authorities with respect to the Receivables, investigating delinquencies, sending payment coupons to Obligors, reporting tax information to Obligors in accordance with its customary practices, policing the collateral, accounting for collections and furnishing monthly and annual statements to the Trustees with respect to distributions, providing collection and repossession services in the event of an Obligor default, generating federal income tax information and performing the other duties specified herein.  The Servicer shall have full power and authority to do any and all things in connection with such managing, servicing, administration and collection that it may deem necessary or desirable, it being understood, however, that the Servicer shall at all times remain responsible to the Issuer and the Indenture Trustee for the performance of its duties and obligations hereunder.  Subject to the foregoing and to Section 3.02, the Servicer shall follow its customary standards, policies, practices and procedures in performing its duties hereunder as Servicer.  Without limiting the generality of the foregoing, the Servicer shall be authorized and empowered to execute and deliver, on behalf of itself, the Depositor, the Issuer, the Trustees, the Securityholders or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge and all other comparable instruments, with respect to the Receivables and the Financed Vehicles.

 

The Servicer is hereby authorized to commence, in its own name or in the name of the Issuer, a Proceeding to enforce a Receivable pursuant to Section 3.04 or to commence or participate in a Proceeding (including a bankruptcy Proceeding) relating to or involving a Receivable, including a Defaulted Receivable.  If the Servicer commences or participates in such a Proceeding in its own name, the Issuer shall thereupon be deemed to have automatically assigned, solely for the purpose of collection on behalf of the party retaining an interest in such Receivable, such Receivable and the other property conveyed to the Issuer pursuant to Section 2.01 with respect to such Receivable to the Servicer 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 to execute and deliver in the Servicer’s name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such Proceeding.  If in any enforcement suit or Proceeding it shall be held that the Servicer may not enforce a Receivable on the grounds that it shall not be a real party in interest or a holder entitled to enforce such Receivable, the Owner Trustee shall, at the Servicer’s expense and written direction, take steps to enforce such Receivable, including bringing suit in the Servicer’s or the Issuer’s name or the name of the Owner Trustee, the Indenture Trustee, the Noteholders, the Certificateholders or any of them.

 

The Owner Trustee, on behalf of the Issuer, shall furnish the Servicer with any powers of attorney and other documents and take any other steps which the Servicer may deem necessary

 

  

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or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder.  The Servicer, at its expense, shall obtain on behalf of the Issuer or the Owner Trustee all licenses, if any, required by the laws of any jurisdiction to be held by the Issuer or the Owner Trustee in connection with ownership of the Receivables and shall make all filings and pay all fees as may be required in connection therewith during the term of this Agreement.  The Servicer shall, or shall cause the Administrator to, prepare, execute and deliver all certificates or other documents required to be delivered by the Issuer pursuant to the Sarbanes-Oxley Act of 2002 or the rules and regulations promulgated thereunder.

 

Section 3.02. Delegation of Duties; Subservicers.

 

(a) So long as DCFS USA is the Servicer, the Servicer may without notice or consent delegate (i) any or all of its duties under this Agreement to any Affiliate of DCFS USA or (ii) specific duties to sub-contractors who are in the business of performing such duties.

 

(b) The Servicer may enter into subservicing or sub-contracting agreements in accordance with Section 3.02(a) with one or more subservicers for the servicing and administration of any or all of the Receivables.  References in this Agreement or any subservicing or sub-contracting agreement to actions taken, or to be taken, permitted to be taken or restrictions on actions permitted to be taken, by the Servicer in servicing the Receivables shall include actions taken, or to be taken, permitted to be taken or restrictions on actions permitted to be taken, by a subservicer on behalf of the Servicer.  Each subservicing or sub-contracting agreement will be upon such terms and conditions as are not inconsistent with this Agreement and the standard of care set forth herein and as the Servicer and the related subservicer have agreed.  All compensation payable to a subservicer under a subservicing or sub-contracting agreement shall be payable by the Servicer from its servicing compensation or otherwise from its own funds.

 

(c) Notwithstanding any subservicing or sub-contracting agreement or any of the provisions of this Agreement relating to agreements or any arrangements between the Servicer or a subservicer or any reference to actions taken through such entities or otherwise, the Servicer shall remain obligated and liable for the servicing and administering of the Receivables in accordance with this Agreement without diminution of such obligation or liability by virtue of such subservicing or sub-contracting agreements.

 

(d) Any subservicing or sub-contracting agreement that may be entered into and any other transactions or servicing arrangements relating to or involving a subservicer shall be deemed to be between the subservicer and the Servicer alone, and the other parties hereto and the Administrator shall not be deemed parties thereto and shall have no obligations, duties or liabilities with respect to the subservicer.

 

Section 3.03. Collection of Receivable Payments; Modification of Receivables.  The Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due and otherwise act with respect to the Receivables and the other Trust Property in such manner as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Issuer with respect thereto and in accordance with the standard of care required by Section 3.01.  The Servicer shall allocate

 

  

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collections on or in respect of the Receivables between principal and interest in accordance with the Simple Interest Method and the customary servicing practices and procedures it follows with respect to all comparable motor vehicle installment sales contracts and installment loans that it services for itself or others.  The Servicer shall not increase or decrease the number or amount of any Monthly Payment, except in response to a prepayment by the related Obligor, the Amount Financed under any Receivable or, except as may be required by Applicable Law, the APR of any Receivable, or extend, rewrite or otherwise modify the payment terms of any Receivable; provided, however, that the Servicer may extend the due date for one or more payments due on any Receivable for credit-related reasons that would be acceptable to the Servicer with respect to comparable motor vehicle installment sales contracts and installment loans that it services for itself or others and in accordance with its customary standards, policies, practices and procedures if the cumulative extensions with respect to any Receivable shall not cause the term of such Receivable to extend beyond the last day of the Collection Period immediately preceding the Class A-4 Final Scheduled Distribution Date.  If the Servicer fails to comply with the provisions of the preceding sentence, the Servicer shall be required to purchase each Receivable affected thereby for the related Purchase Amount as of the close of business on the last day of the Collection Period that includes the 30th day after the Servicer becomes aware of such failure, by making such deposit in the manner specified in Section 3.08 on the Deposit Date immediately following such Collection Period.  The Servicer may, in its discretion (but only in accordance with its customary standards, policies, practices and procedures), waive any late payment charge or any other fee that may be collected in the ordinary course of servicing a Receivable.  In addition, in the event that any such extension of a Receivable modifies the terms of such Receivable in such a manner as to constitute a cancellation of such Receivable and the creation of a new motor vehicle receivable that results in a deemed exchange thereof within the meaning of Section 1001 of the Code, the Servicer shall purchase such Receivable pursuant to Section 3.08, and the Receivable created shall not be included in the Trust Property.

 

Section 3.04. Realization Upon Receivables.

 

(a) The Servicer shall use commercially reasonable efforts on behalf of the Issuer, in accordance with the standard of care required under Section 3.01, to repossess or otherwise convert the ownership of each Financed Vehicle securing a Defaulted Receivable.  In taking such action, the Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of comparable motor vehicle installment sales contracts and installment loans, and as are otherwise consistent with the standard of care required under Section 3.01.  The Servicer shall be entitled to recover all reasonable expenses incurred by it with respect to realizing on a Defaulted Receivable, including such expenses incurred in the course of repossessing and liquidating a Financed Vehicle into cash proceeds.  The foregoing is subject to the proviso that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not expend funds in connection with any repair or towards the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair or repossession shall increase the Net Liquidation Proceeds or Recoveries of the related Receivable.

 

(b) If the Servicer elects to commence a Proceeding to enforce a Dealer Agreement, the act of commencement shall be deemed to be an automatic assignment from the Issuer to the Servicer of the rights of recourse under such Dealer Agreement.  If, however, in any Proceeding,

 

  

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it is held that the Servicer may not enforce a Dealer Agreement on the grounds that it is not a real party in interest or a Person entitled to enforce the Dealer Agreement, the Owner Trustee, at the Servicer’s expense and direction, shall take such steps as the Servicer deems necessary to enforce the Dealer Agreement, including bringing suit in its name or the names of the Indenture Trustee, the Securityholders or any of them.

 

Section 3.05. Maintenance of Physical Damage Insurance Policies.  The Servicer shall follow its customary standards, policies, practices and procedures to determine whether or not each Obligor shall have maintained physical damage insurance covering the related Financed Vehicle.  Each Receivable shall provide that the failure by the Obligor to obtain and maintain the required insurance is a default thereunder.  The Servicer shall not obtain force-placed insurance in respect of the Receivables.

 

Section 3.06. Maintenance of Security Interests in Financed Vehicles.  The Servicer shall take such steps, in accordance with the standard of care required under Section 3.01, as are necessary to maintain perfection of the security interest created by each Receivable in the related Financed Vehicle.  The Issuer hereby authorizes the Servicer, and the Servicer hereby agrees, to take such steps as are necessary to re-perfect such security interest on behalf of the Issuer and the Indenture Trustee in the event the Servicer receives notice of, or otherwise has actual knowledge of, the fact that such security interest is not perfected as a result of the relocation of a Financed Vehicle or for any other reason.  In the event that the assignment of a Receivable to the Issuer is insufficient, without a notation on the related Financed Vehicle’s certificate of title, to grant to the Issuer a first priority perfected security interest in the related Financed Vehicle, the Servicer hereby agrees to serve as the agent of the Issuer for the purpose of perfecting the security interest of the Issuer in such Financed Vehicle and agrees that the Servicer’s listing as the secured party on the certificate of title is solely in its capacity as agent of the Issuer.  The Servicer shall not release, in whole or in part, any security interest in a Financed Vehicle created by the related Receivable except as permitted herein or in accordance with its customary standards, policies, practices and procedures.

 

Section 3.07. Covenants of Servicer.  The Servicer makes the following covenants:

 

(a) Liens in Force.  Except upon the payment in full of a Receivable or as otherwise contemplated by this Agreement or Applicable Law, the Servicer shall not release in whole or in part any Financed Vehicle from the security interest securing the related Receivable.

 

(b) No Impairment.  The Servicer shall not impair in any material respect the rights of the Depositor, the Issuer, the Trustees or the Securityholders in the Receivables or, except as permitted under Section 3.03, otherwise amend or alter the terms of the Receivables and as a result of such amendment or modification or alteration, the interests of the Depositor, the Issuer, the Trustees or the Securityholders would be materially adversely affected.

 

(c) Schedule of Receivables to Indenture Trustee.  The Servicer shall on or before the Closing Date (and, at any time thereafter, upon the request of the Indenture

 

  

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Trustee) deliver to the Indenture Trustee a copy of the Schedule of Receivables, which may be delivered in electronic format.

 

Section 3.08. Purchase of Receivables Upon Breach.  The Depositor, the Seller, the Servicer or the Owner Trustee, as the case may be, shall inform the other parties to this Agreement and the Indenture Trustee promptly, in writing, upon the discovery of any breach of Section 3.03, 3.06 or 3.07.  If such breach shall not have been cured by the close of business on the last day of the Collection Period which includes the 30th day after the date on which the Servicer becomes aware of, or receives written notice from the Depositor, the Seller or the Owner Trustee of, such breach, and such breach materially and adversely affects the interest of the Issuer in a Receivable, the Servicer shall purchase such Receivable from the Issuer, as of the close of business on the last day of the related Collection Period, by remitting the Purchase Amount of such Receivable to the Collection Account in the manner specified in Section 4.07 on the related Deposit Date.  The sole remedy of the Issuer, the Trustees and the Securityholders with respect to a breach of Section 3.03, 3.06 or 3.07 shall be to require the Servicer to purchase Receivables pursuant to this Section.  Neither Trustee shall have any duty to conduct an affirmative investigation as to the occurrence of any condition requiring the purchase of any Receivable pursuant to this Section.

 

Section 3.09. Servicing Compensation; Payment of Certain Expenses by Servicer.  The Servicer shall receive the Monthly Servicing Fee for servicing the Receivables.  As additional servicing compensation, the Servicer shall be entitled to receive or retain the Supplemental Servicing Fee.  The Servicer shall pay all expenses incurred by it in connection with the activities under this Agreement (including the Independent accountants and any subservicer, taxes imposed on the Servicer, expenses incurred in connection with distributions and reports to Securityholders and all other fees and expenses not expressly stated under this Agreement to be for the account of the Securityholders), except expenses incurred in realizing upon Receivables under Section 3.04.

 

Section 3.10. Investor Report.  On or before each Determination Date, the Servicer shall deliver to the Depositor, the Seller and the Trustees, an Investor Report containing all information necessary to make the transfers and distributions required by Sections 4.01, 4.02, 4.06, 4.07 and 4.08 in respect of the related Collection Period and the related Distribution Date and all information necessary for the Trustees, as applicable, to send (or provide access to via the internet) statements to Securityholders pursuant to Section 6.06 of the Indenture and Section 5.01(b) of the Trust Agreement.  The Servicer shall also specify to the Trustees, no later than the Determination Date following the last day of a Collection Period as of which the Seller shall separately identify (by account number), in a written notice to the Depositor and the Trustees, the Receivables to be repurchased by the Seller or purchased by the Servicer, as the case may be, on the related Deposit Date.  Notwithstanding the foregoing, if the Class A-1 Event has occurred, the Servicer shall deliver the Investor Report for the April 2011 Collection Period and the May 2011 Distribution Dates to the Depositor, the Seller and the Trustees no later than May 10, 2011 and shall identify for the Trustees the Receivables to be repurchased by the Seller or purchased by the Servicer, as the case may be, no later than May 10, 2011.

 

Section 3.11. Annual Statement as to Compliance; Notice of Servicer Termination Events.

 

(a) The Servicer shall deliver to the Depositor, the Trustees and the Rating Agencies, within 90 days of the end of each calendar year, an Officer’s Certificate of the Servicer, stating that (i) a review of the activities of the Servicer during the preceding 12-month period ended December 31 (or, if applicable, such shorter period as shall have elapsed since the Closing Date in the case of the first such Officer’s Certificate) and of its performance under this Agreement

 

  

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has been made under such officer’s supervision and (ii) to the best of such officer’s knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement in all material respects throughout such period, or, if there has been a failure  to fulfill any such obligation in any material respect, specifying each such default known to such officer and the nature and status thereof.

 

(b) The Servicer shall deliver to the Depositor and the Trustees, promptly after having obtained knowledge thereof, but in no event later than five Business Days thereafter, an Officer’s Certificate specifying any event which constitutes or, with the giving of notice or lapse of time, or both, would become, a Servicer Termination Event.

 

Section 3.12. Annual Accountants’ Report.

 

(a) The Servicer shall cause a firm of independent certified public accountants (who may also render other services to the Servicer or to the Depositor or their respective Affiliates) to deliver to the Depositor and, if required or requested, to the Trustees within 90 days of the end of each calendar year, a report with respect to the preceding 12-month period ended December 31 (or, if applicable, such shorter period as shall have elapsed since the Closing Date in the case of the first such report) or other report to the effect that such accountants have examined, on a test basis, evidence of the Servicer’s compliance with the covenants and conditions set forth in this Agreement.  The report will express an opinion on the Servicer’s assertion that the Servicer complied in all material respects with the aforementioned covenants and conditions is fairly stated, in all material respects or the reason why such an opinion cannot be expressed.  Such report shall also indicate that the firm is Independent with respect to the Depositor and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants.  The requirement of this subparagraph shall apply only so long as the Depositor is required to file Exchange Act reports, or to the extent that Regulation AB otherwise requires, in each case with respect to the transaction contemplated by the Basic Documents.

 

(b) Notwithstanding Section 3.12(a), within 90 days of the end of each calendar year, the Servicer shall deliver the report and attestation set forth in Sections 3.12(c) and (d) and the delivery of a copy of such report and attestation to the Depositor and the Trustees shall be deemed to satisfy the provisions of this Section.

 

(c) As and when required pursuant to Section 3.12(b), the Servicer will deliver to the Depositor and the Trustees a report regarding the Servicer’s assessment of compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB during the immediately preceding calendar year (or, if applicable, such shorter period as shall have elapsed since the Closing Date in the case of the first such report), in accordance with paragraph (b) of Rule 13a-18 and Rule 15d-18 of the Exchange Act and Item 1122 of Regulation AB.  Such report shall be signed by an authorized officer of the Servicer and shall at a minimum address each of the servicing criteria specified in Part I of Schedule C hereto.

 

(d) The Servicer shall cause a firm of nationally recognized Independent public accountants to furnish to the Depositor and the Trustees, concurrently with the report delivered pursuant to Section 3.12(c), an attestation report providing its assessment of compliance with the

 

  

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servicing criteria covered in such report during the preceding fiscal year, including disclosure of any material  instance of non-compliance, as required by Rule 13a-18 or Rule 15d-18 under the Exchange Act and Item 1122(b) of Regulation AB.  Any such attestation report shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act, stating, among other things, that the Servicer’s assertion of compliance with the specified servicing criteria is fairly stated in all material respects, or the reason why such an opinion cannot be expressed.  Such report must be available for general use and not contain restricted use language.

 

Section 3.13. Access to Certain Documentation and Information Regarding Receivables.  Subject to Section 2.07(b), the Servicer shall provide the Depositor and the Trustees with access to the Receivables Files in the cases where the related Trustee or the Securityholders are required by Applicable Law to have access to such documentation.  Such access shall be afforded without charge but only upon reasonable request and during normal business hours which does not unreasonably interfere with the normal operations or customer or employee relations of the Servicer, at the offices of the Servicer.  Nothing in this Section shall affect the obligation of the Servicer to observe any Applicable Law prohibiting disclosure of information regarding the Obligors, and the failure of the Servicer to provide access to information as a result of such obligation shall not constitute a breach of this Section.

 

Section 3.14. Reports to the Commission.  The Servicer shall, on behalf of the Issuer, cause to be filed with the Commission any periodic reports required to be filed under the provisions of the Exchange Act, and the rules and regulations of the Commission thereunder.  The Depositor shall, at its expense, cooperate in any reasonable request made by the Servicer in connection with such filings.

 

Section 3.15. Reports to Rating Agencies.  The Servicer shall deliver to each Rating Agency, at such address as such Rating Agency may request, to the extent it is available to the Servicer, a copy of all reports or notices furnished or delivered pursuant to this Article and a copy of any amendments, supplements or modifications to this Agreement and any other information reasonably requested by such Rating Agency.

 

  

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ARTICLE FOUR

 

DISTRIBUTIONS; RESERVE FUND;

STATEMENTS TO SECURITYHOLDERS

 

Section 4.01. Establishment of Accounts.

 

(a) DCFS USA (as Servicer hereunder) shall establish the following Accounts, on or before the Closing Date, and maintain each as an Eligible Deposit Account in the name of the Indenture Trustee, at an Eligible Institution (which shall initially be the Indenture Trustee) for the benefit of:

 

(i) the Securityholders, designated as the “Mercedes-Benz Auto Receivables Trust 2010-1 Collection Account, U.S. Bank National Association, Indenture Trustee” (the “Collection Account”);

 

(ii) the Noteholders, designated as the “Mercedes-Benz Auto Receivables Trust 2010-1 Note Payment Account, U.S. Bank National Association, Indenture Trustee” (the “Note Payment Account”); and

 

(iii) the Noteholders, designated as the “Mercedes-Benz Auto Receivables Trust 2010-1 Reserve Fund, U.S. Bank National Association, Indenture Trustee” (the “Reserve Fund”);

 

in each case bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the related Persons.  The Accounts shall be under the control of the Indenture Trustee; provided, however, that the Servicer may direct the Indenture Trustee in writing to make (or cause to be made) deposits to and withdrawals from the applicable Accounts in accordance with this Agreement and the other Basic Documents.  All monies deposited from time to time in the Accounts shall be held by, or in the name of, the Indenture Trustee as part of the Trust Property, and all deposits to and withdrawals therefrom shall be made only upon the terms and conditions of the Basic Documents.  Amounts on deposit in each Account shall, to the extent permitted by Applicable Law, be invested, as directed in writing by the Servicer, by the Eligible Institution then maintaining such Account in Eligible Investments.

 

(b) The Issuer and the Servicer agree that each Eligible Institution, with which an Account is established, will agree substantially as follows:

 

(i) it will comply with Entitlement Orders related to such account issued by the Indenture Trustee, without further consent by the Servicer;

 

(ii) until termination of this Agreement, it will not enter into any other agreement related to such Account pursuant to which it agrees to comply with Entitlement Orders of any Person other than the Indenture Trustee;

 

(iii) all Account Collateral delivered or credited to it in connection with such account and all proceeds thereof will be promptly credited to such Account;

 

 

 

 

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(iv) it will treat all Account Collateral as Financial Assets; and

 

(v) all Account Collateral will be physically delivered (accompanied by any required endorsements) to, or credited to an account in the name of, the Eligible Institution maintaining the related Account in accordance with such Eligible Institution’s customary procedures such that such Eligible Institution establishes a Security Entitlement in favor of the Indenture Trustee with respect thereto over which the Indenture Trustee has Control.

 

(c) If the sum of the amounts on deposit in the Collection Account related to such Collection Period and the Reserve Fund on any Distribution Date equals or exceeds the Note Balance, all accrued and unpaid interest thereon and all amounts due to the Servicer and the Trustees, all such amounts on deposit will be applied up to the amounts necessary to retire the Notes and pay such amounts due.

 

Section 4.02. Reserve Fund.

 

(a) On the Closing Date, the Depositor shall deposit the Reserve Fund Deposit into the Reserve Fund from the net proceeds of the sale of the Class A Notes.  The Reserve Fund Property has been conveyed by the Depositor to the Issuer pursuant to Section 2.01(a).  Pursuant to the Indenture, the Issuer will pledge all of its right, title and interest in, to and under the Reserve Fund and the Reserve Fund Property to the Indenture Trustee on behalf of the Noteholders to secure its obligations under the Notes and the Indenture.

 

(b) If the Reserve Fund is no longer to be maintained at the Indenture Trustee, the Servicer shall, with DCFS USA’s and the Indenture Trustee’s prior approval (not to be unreasonably withheld) and assistance as necessary, promptly (and in any case within ten Business Days) cause the Reserve Fund to be moved to another Eligible Institution.  The Servicer shall promptly notify the Rating Agencies and the Trustees in writing of any change in the account number or location of the Reserve Fund.

 

(c) On each Distribution Date, the Indenture Trustee will deposit, or cause to be deposited, in the Reserve Fund, from amounts collected on or in respect of the Receivables during the related Collection Period and not used on that Distribution Date to pay the Required Payment Amount, the amount, if any, by which the Reserve Fund Required Amount for that Distribution Date exceeds the amount on deposit in the Reserve Fund on that Distribution Date, after giving effect to all required withdrawals from the Reserve Fund on that Distribution Date.

 

(d) On each Determination Date, the Servicer will determine the Reserve Fund Draw Amount, if any, for the related Distribution Date.  If the Reserve Fund Draw Amount for any Distribution Date is greater than zero, the Indenture Trustee will withdraw, or cause to be withdrawn, from the Reserve Fund, an amount equal to the lesser of the amount on deposit in the Reserve Fund and the Reserve Fund Draw Amount, and transfer the amount withdrawn to the Collection Account on the Deposit Date.  Notwithstanding the foregoing, if the Class A-1 Event has occurred and Available Collections for the May 2011 Distribution Date is less than the May 2011 Class A-1 Note Distribution, the Servicer shall instruct the Indenture Trustee in writing to withdraw from the Reserve Fund and deposit in the Collection Account on May 10, 2011 a portion of the Reserve Fund Draw Amount for the May 2011 Distribution Date equal to the lesser of such Reserve Fund Draw Amount and the amount of such insufficiency as determined by the Servicer.

 

(e) If the Reserve Fund Amount for any Distribution Date (after giving effect to the withdrawal of the Reserve Fund Draw Amount for such Distribution Date and the distribution described in the preceding sentence) exceeds the Reserve Fund Required Amount for such

 

  

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Distribution Date, the Servicer shall instruct the Indenture Trustee in writing to distribute or cause to be distributed on the related Deposit Date, the amount of such excess to the Collection Account for payment to the Certificateholders on such Distribution Date.  Any amount paid to the Certificateholders will no longer constitute a portion of the Trust Property and the Indenture Trustee and the Issuer hereby release, on each Distribution Date, their security interest in, to and under the Reserve Fund Property distributed to the Certificateholders.  Notwithstanding the foregoing, investment income for each Collection Period (net of losses and expenses) on amounts on deposit in the Reserve Fund shall constitute Available Collections.  For purposes of this Section, the May 2011 Distribution Date shall be May 16, 2011 regardless of whether the Class A-1 Event has occurred.

 

(f) If the Note Balance and all other amounts owing or to be distributed hereunder or under the Indenture to the Noteholders, the Trustees and the Servicer have been paid in full and the Issuer has been terminated, any remaining Reserve Fund Property shall be distributed to the Certificateholders.

 

Section 4.03. Monthly Remittance Condition.

 

(a) For so long as the Monthly Remittance Condition is (i) not met, the Servicer shall remit all amounts received on or in respect of the Receivables during any Collection Period to the Collection Account in immediately available funds no later than two Business Days after receipt and identification or (ii) met, the Servicer may remit all amounts received on or in respect of the Receivables during any Collection Period to the Collection Account in immediately available funds on or prior to the related Deposit Date; provided, however, that if the Class A-1 Event has occurred, the Servicer shall remit to the Collection Account on March 11, 1999 an amount of all amounts received on or with respect to the Receivables during the May 2011 Collection Period equal to the May 2011 Class A-1 Note Distribution.

 

(b) The Servicer shall remit to the Collection Account on or prior to the Closing Date all amounts received and identified by the Servicer on or in respect of the Receivables (including Net Liquidation Proceeds and all amounts received by the Servicer in connection with the repossession and sale of a Financed Vehicle (whether or not the related Receivable has been classified as a Defaulted Receivable)) during the period from but excluding the Cutoff Date to and including the second Business Day preceding the Closing Date.

 

(c) The Depositor and the Servicer may make any remittances pursuant to this Article with respect to a Collection Period net of distributions or reimbursements to be made to or by the Depositor or the Servicer with respect to such Collection Period; provided, however, that such obligations shall remain separate obligations, no party shall have a right of offset, and each such party shall account for all of the above described remittances and distributions as if the amounts were deposited or transferred separately.

 

Section 4.04. Collections.  Subject to Sections 4.03, 4.06 and 4.07(a), the Servicer shall remit to the Collection Account all amounts received by the Servicer on or in respect of the Receivables (including Net Liquidation Proceeds and all amounts received by the Servicer in connection with the repossession and sale of a Financed Vehicle (whether or not the related Receivable has been classified as a Defaulted Receivable) but excluding payments with respect to Purchased Receivables) as soon as practicable and in no event after the close of business on the second Business Day after such amounts have been received and identified.

 

Section 4.05. Application of Collections.  For purposes of this Agreement, all amounts received on or in respect of a Receivable during any Collection Period (including Net Liquidation

 

  

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Proceeds and all amounts received by the Servicer in connection with the repossession and sale of a Financed Vehicle (whether or not the related Receivable has been classified as a Defaulted Receivable) but excluding payments with respect to Purchased Receivables) shall be applied by the Servicer to interest and principal on such Receivable in accordance with the Simple Interest Method.

 

Section 4.06. Advances.

 

(a) If, as of the end of any Collection Period, the payments received during such Collection Period by or on behalf of an Obligor in respect of a Receivable (other than a Purchased Receivable) shall be less than the related Monthly Payment, whether as a result of any extension granted to the Obligor or otherwise, then, at the option of the Servicer, an amount equal to the product of the Principal Balance of such Receivable as of the first day of the related Collection Period and one-twelfth of its APR minus the amount of interest actually received on such Receivable during such Collection Period (each, an “Advance”) may be deposited by the Servicer into the Collection Account on the related Deposit Date or, in the case of the April 2011 Collection Period, if the Class A-1 Event has occurred, on or prior to May 10, 2011.  If such a calculation in respect of a Receivable results in a negative number, an amount equal to such negative amount shall be paid to the Servicer in reimbursement of any outstanding Advances.  In addition, in the event that a Receivable becomes a Defaulted Receivable, the amount of accrued and unpaid interest thereon (but not including interest for the current Collection Period) shall, up to the amount of outstanding Advances, be withdrawn from the Collection Account and paid to the Servicer in reimbursement of such outstanding Advances.  No Advances will be made with respect to the Principal Balance of Receivables.  The Servicer shall not be required to make an Advance to the extent that the Servicer, in its sole discretion, shall determine that such Advance is likely to become a Nonrecoverable Advance.

 

(b) Notwithstanding the provisions of Section 4.06(a), the Servicer shall be entitled to reimbursement for an outstanding Advance made in respect of a Receivable, without interest, from the following sources with respect to such Receivable: (i) subsequent payments made by or on behalf of the related Obligor, (ii) Net Liquidation Proceeds and Recoveries and (iii) the Purchase Amount.  If the Servicer determines that it has made a Nonrecoverable Advance, the Servicer shall reimburse itself, without interest, from unrelated amounts received by the Servicer on or in respect of the Receivables (including Net Liquidation Proceeds and all amounts received by the Servicer in connection with the repossession and sale of a Financed Vehicle (whether or not the related Receivable has been classified as a Defaulted Receivable)) to the extent it shall, concurrently with the withholding of any such amounts from deposit in or credit to the Collection Account, furnish to the Trustees a certificate of a Servicing Officer setting forth the basis for the Servicer’s determination, the amount of, and Receivable with respect to which, such Nonrecoverable Advance was made and the installment or installments or other proceeds respecting which such reimbursement has been taken.

 

Section 4.07. Additional Deposits.

 

(a) The following additional deposits shall be made: (i) the Seller shall remit to the Collection Account the aggregate Purchase Amount with respect to Purchased Receivables pursuant to Section 2.05 hereof or pursuant to Section 3.03(c) of the Receivables Purchase Agreement, (ii) the Servicer shall remit or cause to be remitted to the Collection Account (A) the

 

  

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aggregate Purchase Amount with respect to Purchased Receivables pursuant to Section 3.03 or Section 3.08 and (B) the amount required upon the optional purchase of all Receivables by the Servicer pursuant to Section 8.01 and (iii) the Indenture Trustee shall remit or shall cause to be remitted, pursuant to Section 4.02, the Reserve Fund Draw Amount to the Collection Account.

 

(b) All deposits required to be made in respect of a Collection Period pursuant to this Section by the Servicer may be made in the form of a single deposit and shall be made in immediately available funds, no later than 5:00 p.m., New York City time, on the related Deposit Date; provided, however, that if the Class A-1 Event has occurred and the amount of all amounts received on or with respect to the Receivables during the April 2011 Collection Period is less than the May 2011 Class A-1 Note Distribution, such deposit (up to the amount of such shortfall) shall be deposited into the Collection Account no later than May 10, 2011.

 

Section 4.08. Determination Date Calculations; Application of Available Funds.

 

(a) On each Determination Date, the Servicer shall calculate the following amounts with respect to the related Distribution Date and Collection Period:

 

(i) the Available Collections;

 

(ii) the Total Servicing Fee (including the amount of any Nonrecoverable Advances);

 

(iii) if not previously paid, the Total Trustee Fees;

 

(iv) the Interest Distributable Amount for each Class of Class A Notes;

 

(v) the Priority Principal Distributable Amount;

 

(vi) the Regular Principal Distributable Amount; and

 

(vii) the sum of the amounts described in clauses (ii) through (v) above (the “Required Payment Amount”); provided, however, that so long as the Notes have not been accelerated in accordance with the Indenture following an Event of Default, the aggregate amount to be included in the Required Payment Amount pursuant to clause (iii) above shall not exceed $100,000 in any given calendar year.

 

On each Determination Date, the Servicer shall calculate the Reserve Fund Amount, the Reserve Fund Required Amount, the Reserve Fund Draw Amount and the amount, if any, by which the Reserve Fund Required Amount exceeds the Reserve Fund Amount (after giving effect to any deposits to the Reserve Fund and the withdrawal of the Reserve Fund Draw Amount for such Distribution Date).

 

(b) On each Determination Date, the Servicer shall instruct the Indenture Trustee to apply (or cause to be applied) on the related Distribution Date, the Available Funds for such Distribution Date to make the related payments and deposits set forth in Section 2.08 of the Indenture.

 

(c) If the Class A-1 Event has occurred, the calculations hereunder for the May 2011 Distribution Dates with respect to the Interest Distributable Amounts, the Priority Principal Distributable Amount, the Regular Principal Distributable Amount, the Required Payment Amount, the Reserve Fund Amount and the Reserve Fund Draw Amount, and the respective components thereof, shall be calculated as if there were a single May 2011 Distribution Date.

 

 

 

 

 

 

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Section 4.09. Statements to Securityholders.  Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the Issuer, but not later than the latest date permitted by law, the Servicer shall cause each Trustee to mail to each Person who at any time during such calendar year shall have been a Securityholder, a statement, prepared by the Servicer, containing certain information for such calendar year or, in the event such Person shall have been a Securityholder during a portion of such calendar year, for the applicable portion of such year, for the purposes of such Securityholder’s preparation of federal income tax returns.  In addition, the Servicer shall furnish to the Trustees for distribution to such Person at such time any other information necessary under Applicable Law for the preparation of such income tax returns.

 

  

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ARTICLE FIVE

 

THE DEPOSITOR

 

Section 5.01. Representations and Warranties of Depositor.  The Depositor makes the following representations and warranties on which the Issuer is deemed to have relied in acquiring the Trust Property.  The representations and warranties speak as of the date of execution and delivery of this Agreement and as of the Closing Date, and shall survive the sale, transfer, assignment and conveyance of the Trust Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture.

 

(a) Organization and Good Standing.  The Depositor has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and has, power, authority and legal right to acquire, own and sell the Receivables.

 

(b) Due Qualification.  The Depositor is duly qualified to do business as a foreign limited liability company in good standing and has obtained all necessary licenses and approvals in each jurisdiction in which the failure to so qualify or to obtain such licenses and approvals would, in the reasonable judgment of the Depositor, materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, the Depositor Basic Documents, the Receivables or the Securities.

 

(c) Power and Authority.  The Depositor has the power and authority to execute, deliver and perform its obligations under the Depositor Basic Documents.  The Depositor has the power and authority to sell, assign, transfer and convey the property to be transferred to and deposited with the Issuer and has duly authorized such sale, assignment, transfer and conveyance by all necessary limited liability company action; and the execution, delivery and performance of the Depositor Basic Documents has been duly authorized by the Depositor by all necessary limited liability company action.

 

(d) Valid Sale; Binding Obligation.  This Agreement effects a valid sale, transfer, assignment and conveyance to the Issuer of the Receivables and the other Trust Property, enforceable against all creditors of and purchasers from the Depositor.  Each Depositor Basic Document constitutes a legal, valid and binding obligation of the Depositor enforceable against the Depositor in accordance with its terms, except as enforceability may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent transfer or other similar laws affecting the enforcement of creditors’ rights in general, and by general principles of equity, regardless of whether considered in a Proceeding in equity or at law.

 

(e) No Violation.  The execution, delivery and performance by the Depositor of the Depositor Basic Documents and the consummation of the transactions contemplated hereby and thereby and the fulfillment of the terms hereof and thereof does

 

  

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not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time, or both) a default under, the certificate of formation or limited liability company agreement of the Depositor, or conflict with or violate any of the material terms or provisions of, or constitute (with or without notice or lapse of time, or both) a default under, any indenture, agreement or other instrument to which the Depositor is a party or by which it shall be bound or to which any of its properties is subject; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than this Agreement); nor violate any law or, to the Depositor’s knowledge, any order, rule or regulation applicable to the Depositor or of Governmental Authority having jurisdiction over the Depositor or its properties, which conflict, breach, default, Lien or violation would have a material adverse effect on the performance by the Depositor of its obligations under or the validity or enforceability of, the Depositor Basic Documents, the Receivables or the Securities.

 

(f) No Proceedings.  There are no Proceedings or investigations pending, or to the Depositor’s knowledge, threatened against the Depositor, before any Governmental Authority having jurisdiction over the Depositor or its properties: (i) asserting the invalidity of any Basic Document or the Securities, (ii) seeking to prevent the issuance of the Securities or the consummation of any of the transactions contemplated by the Basic Documents, (iii) seeking any determination or ruling that, in the reasonable judgment of the Depositor, would materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, the Depositor Basic Documents, the Receivables or the Securities or (iv) relating to the Depositor and which might adversely affect the federal income tax attributes of the Issuer or the Securities.

 

Section 5.02. Liability of Depositor; Indemnities.

 

(a) The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Depositor under this Agreement.

 

(b) The Depositor shall indemnify, defend and hold harmless the Issuer, the Owner Trustee and the Indenture Trustee from and against any taxes that may at any time be asserted against any such Person with respect to the transactions contemplated by the Basic Documents, including any sales, gross receipts, gross margin, general corporation, tangible personal property, privilege or license taxes (but not including any taxes asserted with respect to, and as of the date of the sale of the Receivables to the Issuer or the issuance and original sale of the Securities, or federal or State income taxes arising out of distributions on the Securities), and all costs and expenses in defending against such taxes.

 

(c) The Depositor shall indemnify, defend and hold harmless the Issuer, the Trustees and the Securityholders from and against any loss, liability, claim, damage or expense incurred by reason of the Depositor’s willful misfeasance, bad faith or negligence (other than errors in judgment) in the performance of its duties under the Depositor Basic Documents, or by reason of reckless disregard of its obligations and duties under the Depositor Basic Documents.

 

 

 

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(d) The Depositor shall indemnify, defend and hold harmless the Trustees from and against all losses, liabilities, claims, damages or expenses arising out of or incurred in connection with the acceptance or performance of the trusts and duties contained herein, in the Trust Agreement (in the case of the Owner Trustee) and in the Indenture (in the case of the Indenture Trustee), except to the extent that such loss, liability, claim, damage or expense (i) shall be due to the willful misfeasance, bad faith or negligence of the Owner Trustee or the Indenture Trustee, as applicable, (ii) in the case of (A) the Owner Trustee, shall arise from the breach by the Owner Trustee of any of its representations or warranties set forth in the Trust Agreement or (B) the Indenture Trustee, shall arise from the breach by the Indenture Trustee of any of its representations and warranties set forth in the Indenture or shall arise out of or be incurred in connection with the performance by the Indenture Trustee of the duties of a Successor Servicer hereunder, (iii) shall be one as to which the Servicer is required to indemnify either Trustee or (iv) relates to any tax other than the taxes with respect to which the Servicer shall be required to indemnify either Trustee.  The Depositor shall pay any and all taxes levied or assessed upon all or any part of the Trust Property.

 

(e) Indemnification under this Section shall survive the resignation or removal of the Owner Trustee or the Indenture Trustee, as the case may be, and the termination of this Agreement and shall include reasonable fees and expenses of counsel and expenses of litigation.  If the Depositor shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Depositor, without interest.  Notwithstanding anything to the contrary contained herein, the Depositor shall only be required to pay (i) any fees, expenses, indemnities or other liabilities that it may incur under the Basic Documents from funds available pursuant to, and in accordance with, the payment priorities set forth in this Agreement and the other Basic Documents and (ii) to the extent the Depositor has additional funds available (other than funds described in clause (i) above) that would be in excess of amounts that would be necessary to pay the debt and other obligations of the Depositor in accordance with the Depositor’s certificate of formation, operating agreement and all financing documents to which the Depositor is a party.  The agreement set forth in the preceding sentence shall constitute a subordination agreement for purposes of Section 510(a) of the Bankruptcy Code.  In addition, no amount owing by the Depositor hereunder in excess of liabilities that it is required to pay in accordance with the preceding sentence shall constitute a “claim” (as defined in Section 101(5) of the Bankruptcy Code) against it.

 

 

 

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Section 5.03. Merger, Consolidation or Assumption of the Obligations of Depositor.  Any Person (i) into which the Depositor shall be merged or consolidated, (ii) resulting from any merger, conversion or consolidation to which the Depositor shall be a party or (iii) that shall succeed by purchase and assumption to all or substantially all of the business of the Depositor, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Depositor under this Agreement, shall be the successor to the Depositor under this Agreement without the execution or filing of any other document or any further act on the part of any of the parties to this Agreement; provided, however, that (A) the Depositor shall have delivered to the Trustees an Officer’s Certificate and an Opinion of Counsel each stating that such merger, conversion, consolidation or succession and such agreement of assumption comply with this Section, (B) the Depositor shall have delivered to the Trustees an Opinion of Counsel stating that, in the opinion of such counsel, either (1) all financing statements and continuation statements and amendments thereto have been authorized and filed that are necessary to fully preserve and protect the interest of the Issuer and the Indenture Trustee, respectively, in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (2) no such action shall be necessary to fully preserve and protect such interest and (C) the Rating Agency Condition shall have been satisfied.  Notwithstanding anything to the contrary contained herein, the execution of the foregoing agreement of assumption and compliance with clauses (A), (B) and (C) above shall be conditions to the consummation of the transactions referred to in clauses (i), (ii) and (iii) above.

 

Section 5.04. Limitation on Liability of Depositor and Others.  The Depositor and any director or officer or employee or agent of the 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 Depositor and any director or officer or employee or agent of the Depositor shall be reimbursed by the Indenture Trustee for any contractual damages, liability or expense incurred by reason of the Indenture Trustee’s willful misfeasance, bad faith or negligence (except for errors in judgment) in the performance of its duties hereunder, or by reason of reckless disregard of its respective obligations and duties hereunder.  The 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.  The indemnities contained in this Section shall survive the resignation of the Indenture Trustee or termination of this Agreement.

 

Section 5.05. Depositor Not to Resign.  Subject to the provisions of Section 5.03, the Depositor shall not resign from the obligations and duties hereby imposed on it as Depositor hereunder.

 

Section 5.06. Depositor May Own Securities.  The Depositor and any of its Affiliates may, in its individual or any other capacity, become the owner or pledgee of Securities with the same rights as it would have if it were not the Depositor or an Affiliate of the Depositor, except as otherwise expressly provided herein or in any other Basic Document (including in the definition of the terms “Note Balance” and “Outstanding”).  Except as otherwise expressly provided herein or in the other Basic Documents (including in the definition of the terms “Note Balance” and “Outstanding”), Securities so owned by or pledged to the Depositor or such Affiliate shall have an equal and proportionate benefit under the provisions of this Agreement and the other Basic

 

  

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Documents, without preference, priority or distinction as among the Notes and the Certificates as the case may be.

 

Section 5.07. Covenants of Depositor.  The Depositor makes the following covenants as of the date of this Agreement:

 

(a) The Depositor makes the covenants in Section 2.08, 4.03(c)(iv) and 4.03(c)(v) of the Depositor Limited Liability Company Agreement, which covenants are hereby incorporated into and made a part of this Agreement.

 

(b) The Depositor shall not conduct or promote any activities except as set forth in Section 2.04 of the Depositor Limited Liability Company Agreement.

 

  

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ARTICLE SIX

 

THE SERVICER

 

Section 6.01. Representations and Warranties of Servicer.  The Servicer makes the following representations and warranties on which the Issuer is deemed to have relied in acquiring the Trust Property.  The representations and warranties speak as of the date of execution and delivery of this Agreement and as of the Closing Date, and shall survive the sale, transfer, assignment and conveyance of the Trust Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture:

 

(a) Organization and Good Standing.  The Servicer is a limited liability company duly organized and validly existing under the laws of the State of Delaware and continues to hold a valid certificate to do business as such.  It is duly authorized to own its properties and transact its business and is in good standing in each jurisdiction in which the character of the business transacted by it or any properties owned or leased by it requires such authorization and in which the failure to be so authorized would have a material adverse effect on its business, properties, assets or condition (financial or other) and those of its subsidiaries, considered as one enterprise.  The Servicer has, and at all relevant times had, the power, authority and legal right to service the Receivables and to hold the Receivable Files as custodian on behalf of the Issuer.

 

(b) Due Qualification.  The Servicer is duly qualified to do business in good standing and has obtained all necessary licenses and approvals in each jurisdiction in which the failure to so qualify or to obtain such licenses and approvals would, in the reasonable judgment of the Servicer, materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, the Servicer Basic Documents, the Receivables or the Securities.

 

(c) Power and Authority.  The Servicer has the power and authority to execute, deliver and perform its obligations under the Servicer Basic Documents; and the execution, delivery and performance of the Servicer Basic Documents have been duly authorized by the Servicer by all necessary action.

 

(d) Binding Obligation.  Each Servicer Basic Document constitutes the legal, valid and binding obligation of the Servicer, enforceable against the Servicer in accordance with its terms, except as enforceability may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent transfer or other similar laws affecting the enforcement of creditors’ rights in general, and by general principles of equity, regardless of whether considered in a Proceeding in equity or at law.

 

(e) No Violation.  The execution, delivery and performance by the Servicer of the Servicer Basic Documents, the consummation of the transactions contemplated hereby and thereby and the fulfillment of their respective terms shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the certificate of formation or limited

 

  

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liability company agreement of the Servicer, or any material indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party, by which the Servicer is bound or to which any of its properties are subject; or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than the Servicer Basic Documents, or violate any law, order, rule or regulation applicable to the Servicer or its properties of any Governmental Authority having jurisdiction over the Servicer or any of its properties.

 

(f) No Proceedings.  There are no Proceedings or investigations pending or, to the knowledge of the Servicer, threatened, against the Servicer before any Governmental Authority having jurisdiction over the Servicer or its properties: (i) asserting the invalidity of any Basic Document, (ii) seeking to prevent the issuance of the Securities or the consummation of any of the transactions contemplated by the Basic Documents, (iii) seeking any determination or ruling that, in the reasonable judgment of the Servicer, would materially and adversely affect the performance by it of its obligations under, or the validity or enforceability of, this Agreement or the Receivables or (iv) seeking to adversely affect the federal income tax or other federal, State or local tax attributes of the Securities.

 

Section 6.02. Liability of Servicer; Indemnities.  The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Agreement.  Such obligations shall include the following:

 

(a) The Servicer shall indemnify, defend and hold harmless the Issuer, the Trustees, the Securityholders and the Depositor from and against all losses, liabilities, claims, damages and expenses arising out of or incurred in connection with the use, ownership or operation by the Servicer or any Affiliate of the Servicer of a Financed Vehicle.

 

(b) The Servicer shall indemnify, defend and hold harmless the Issuer, the Depositor and the Trustees from and against any taxes that may at any time be asserted against any such Person as a result of or relating to the transactions contemplated herein and in the other Basic Documents, including any sales, gross receipts, gross margin, general corporation, tangible personal property, privilege or license taxes (but not including any taxes asserted with respect to, and as of the date of, the sale of the Receivables to the Issuer or the issuance and original sale of the Securities, or federal or State income taxes arising out of distributions on the Securities) and costs and expenses in defending against such taxes.

 

(c) The Servicer shall indemnify, defend and hold harmless the Issuer, the Trustees, the Securityholders and the Depositor from and against any loss, liability, claim, damage or expense incurred by reason of the Servicer’s willful misfeasance, bad faith or negligence in the performance of its duties under the Servicer Basic Documents or by reason of a reckless disregard of its obligations and duties under the Servicer Basic Documents.

 

 

 

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(d) The Servicer shall indemnify, defend and hold harmless the Trustees and their respective officers, directors, employees and agents from and against all losses, liabilities, claims, damages and expenses arising out of or incurred in connection with the acceptance or performance of the trusts and duties herein and contained in the Trust Agreement (in the case of the Owner Trustee) and contained in the Indenture (in the case of the Indenture Trustee), except to the extent that such loss, liability, claim, damage or expense: (i) shall be due to the willful misfeasance, bad faith or negligence (except for errors in judgment) of the Owner Trustee or the Indenture Trustee, as applicable, (ii) in the case of the Owner Trustee, 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, (iii) in the case of the Indenture Trustee, shall arise from the breach by the Indenture Trustee of any of its representations and warranties set forth in the Indenture or shall arise out of or be incurred in connection with the performance by the Indenture Trustee of the duties of a Successor Servicer hereunder or (iv) relates to any tax other than to the taxes with respect to which either the Depositor or the Servicer shall be required to indemnify the Owner Trustee or the Indenture Trustee, as applicable.

 

(e) The Servicer shall pay the Owner Trustee compensation, reimbursement or other payments owed to it pursuant to Sections 8.01 and 8.02 of the Trust Agreement.

 

In addition to the foregoing indemnities, if either Trustee is entitled to indemnification by the Depositor pursuant to Section 5.02 and the Depositor is unable for any reason to provide such indemnification to either Trustee, then the Servicer shall be liable for any indemnification that such Trustee is entitled to under Section 5.02.  For purposes of this Section, in the event of a termination of the rights and obligations of the Servicer (or any Successor Servicer) pursuant to Section 7.01 or a resignation by such Servicer pursuant to Section 6.05, such Servicer shall be deemed to be the Servicer pending appointment of a Successor Servicer (other than the Indenture Trustee) pursuant to Section 7.02.  Indemnification under this Section by the Servicer (or any Successor Servicer), with respect to the period such Person was (or was deemed to be) the Servicer, shall survive the termination of each Person as Servicer or a resignation by such Person as Servicer, as well as the resignation or removal of the Owner Trustee or the Indenture Trustee, as the case may be, or the termination of this Agreement and shall include reasonable fees and expenses of counsel and expenses of litigation.  If the Servicer shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter collects any of such amounts from others, such Person shall promptly repay such amounts to the Servicer, as the case may be, without interest.

 

Section 6.03. Merger or Consolidation of, or Assumption of the Obligations of Servicer.  Any Person (i) into which the Servicer shall be merged or consolidated, (ii) which may result from any merger, conversion or consolidation to which the Servicer shall be a party or (iii) which may succeed to all or substantially all of the business of the Servicer, which Person in any of the foregoing cases is an Eligible Servicer and executes an agreement of assumption to perform every obligation of the Servicer under this Agreement, shall be the successor to the Servicer under this Agreement without the execution or filing of any other document or any further act on the part of any of the parties hereto; provided, however, the Servicer shall have delivered to the Depositor and the Trustees (a) an Officer’s Certificate and an Opinion of Counsel each stating that such merger, conversion or consolidation and such agreement of assumption comply with this Section

 

  

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and (b) an Opinion of Counsel stating that, in the opinion of such counsel, either (1) all financing statements and continuation statements and amendments thereto have been authorized and filed that are necessary to preserve and protect the interest of the Issuer and the Indenture Trustee, respectively, in the assets of the Issuer and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given or (2) no such action shall be necessary to preserve and protect such interest.  Notwithstanding anything to the contrary contained herein, the execution of the foregoing agreement of assumption and compliance with clauses (a) and (b) above shall be conditions to the consummation of the transactions referred to in clauses (i), (ii) and (iii) above.  The Servicer shall provide prior written notice of any merger, conversion, consolidation or succession pursuant to this Section to the Trustees, the Rating Agencies and the Depositor.  The Servicer shall provide such information in writing as reasonably requested by the Depositor to allow the Depositor to comply with its Exchange Act reporting obligations with respect to a Successor Servicer.

 

Section 6.04. Limitation on Liability of Servicer and Others.

 

(a) Neither the Servicer nor any of its directors, officers, employees or agents shall be under any liability to the Issuer or any Securityholders for any action taken or for refraining from the taking of any action pursuant hereto, or for errors in judgment; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder.  The Servicer and any of its respective directors, officers, employees or agents may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person in respect of any matters arising under this Agreement.

 

(b) Except as provided herein, the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its duties to administer and service the Receivables in accordance with this Agreement, and that in its opinion may involve it in any expense or liability; provided, however, that the Servicer may undertake any reasonable action that it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties to this Agreement and the interests of the Noteholders and the Certificateholders under this Agreement.  In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Servicer.

 

Section 6.05. DCFS USA Not to Resign as Servicer.  DCFS USA will not resign as Servicer under this Agreement except upon determination that the performance of its duties under this Agreement is no longer permissible under law.  Prior to the effectiveness of such resignation, DCFS USA will deliver to the Depositor and the Trustees (i) notice of any such determination permitting the resignation of DCFS USA as Servicer and (ii) an Opinion of Counsel to such effect.  Any such resignation will become effective in accordance with Section 7.02.

 

Section 6.06. Servicer May Own Securities.  The Servicer and any of its Affiliates may, in its individual or other capacity, become the owner or pledgee of Securities with the same rights as it would have if it were not the Servicer or an Affiliate of the Servicer, except as otherwise expressly provided herein or in any other Basic Document (including in the definition of the terms “Note Balance” and “Outstanding”).  Except as otherwise expressly provided herein or in the

 

  

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other Basic Documents (including in the definition of the terms “Note Balance” and “Outstanding”), Securities so owned by or pledged to the Servicer or such Affiliate shall have an equal and proportionate benefit under the provisions of this Agreement and the other Basic Documents, without preference, priority or distinction as among the Notes and the Certificates, as the case may be.

 

  

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ARTICLE SEVEN

SERVICER TERMINATION EVENTS

 

Section 7.01. Servicer Termination Events.  The occurrence of any one of the following events shall constitute an event of servicing termination hereunder (each, a “Servicer Termination Event”):

 

(a) any failure by the Servicer to deliver to the Indenture Trustee the Investor Report for any Collection Period, which failure shall continue unremedied beyond the earlier of two Business Days following the date such Investor Report was required to be delivered and the related Distribution Date, or any failure by the Servicer to make any required payment or deposit under this Agreement, which failure shall continue unremedied beyond the earlier of five Business Days following the date such payment or deposit was due and, in the case of a payment or deposit to be made no later than a Distribution Date or the related Deposit Date, such Distribution Date or Deposit Date, as applicable;

 

(b) any failure by the Servicer to duly observe or to perform in any material respect any other covenant or agreement of the Servicer set forth in this Agreement, which failure shall materially and adversely affect the rights of the Depositor or the Noteholders and shall continue unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given (i) to the Servicer by the Depositor or either Trustee or (ii) to the Depositor, the Servicer and the Trustees by the Holders of Notes evidencing not less than 25% of the Note Balance of the Controlling Class (or, after the Notes have been paid in full, the holders of Certificates evidencing not less than 25% of the aggregate Certificate Percentage Interests then outstanding);

 

(c) any representation or warranty of the Servicer made in this Agreement, or in any certificate delivered pursuant hereto or in connection herewith, other than any representation or warranty relating to a Receivable that has been purchased by the Servicer, proving to have been incorrect in any material respect as of the time when the same shall have been made, and the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or otherwise cured for a period of 30 days after the date on which written notice of such circumstance or condition, requiring the same to be eliminated or cured, shall have been given (i) to the Servicer by the Depositor or either Trustee or (ii) to the Depositor, the Servicer and the Trustees by the Holders of Notes evidencing not less than 25% of the Note Balance of the Controlling Class; or

 

(d) an Insolvency Event occurs with respect to the Servicer.

 

If a Servicer Termination Event shall have occurred and not have been remedied, either the Indenture Trustee or the Holders of Notes evidencing not less than 51% of the Note Balance of the Controlling Class (or holders of Certificates representing not less than 51% of the aggregate Certificate Percentage Interests outstanding if the Notes are no longer Outstanding), in

 

  

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each case by providing a Servicer Termination Notice to the Depositor, the Owner Trustee and the Servicer (and to the Indenture Trustee if given by the Noteholders) may terminate all the rights and obligations of the Servicer under this Agreement; provided, however, that the indemnification obligations of the Servicer under Section 6.02 shall survive such termination.

 

On or after the receipt by the Servicer of a Servicer Termination Notice, all authority and power of the Servicer under this Agreement, whether with respect to the Notes, the Certificates, the Trust Property or otherwise, shall, without further action, pass to and be vested in the Indenture Trustee or such Successor Servicer as may be appointed under Section 7.02; and, without limitation, the Trustees are hereby authorized and empowered to execute and deliver, on behalf of the outgoing Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivable Files or the certificates of title to the Financed Vehicles, or otherwise.  The outgoing Servicer shall cooperate with the Indenture Trustee, the Owner Trustee and such Successor Servicer in effecting the termination of the responsibilities and rights of the outgoing Servicer under this Agreement, including the transfer to the Indenture Trustee or such Successor Servicer for administration by it of all cash amounts that shall at the time be held by the outgoing Servicer for deposit, or have been deposited by the outgoing Servicer, in the Accounts or thereafter received with respect to the Receivables, all Receivable Files and all information or documents that the Indenture Trustee or such Successor Servicer may require.  In addition, the Servicer shall transfer its electronic records relating to the Receivables to the Successor Servicer in such electronic form as the Successor Servicer may reasonably request.  All Transition Costs shall be paid by the outgoing Servicer (or by the initial Servicer if the outgoing Servicer is the Indenture Trustee acting on an interim basis) upon presentation of reasonable documentation of such costs and expenses.

 

The Trustees shall have no obligation to notify the Noteholders, the Certificateholders or any other Person of the occurrence of any event specified in this Section prior to the continuance of such event through the end of any cure period specified in this Section.

 

Section 7.02. Appointment of Successor Servicer.  Upon the resignation of the Servicer pursuant to Section 6.05 or the termination of the Servicer pursuant to Section 7.01, the Indenture Trustee shall be the successor in all respects to the Servicer in its capacity as Servicer under this Agreement and shall be subject to all the obligations and duties placed on the Servicer by the terms and provisions of this Agreement, and shall provide such information in writing as reasonably requested by the Depositor to allow the Depositor to comply with its Exchange Act reporting obligations with respect to the Indenture Trustee in its capacity as Successor Servicer; provided, however, that the Indenture Trustee, as Successor Servicer, shall not, in any event, be required to make any Advances pursuant to Section 4.06 and shall have no obligations pursuant to Section 3.09 with respect to the fees and expenses of the Trustees, the fees and expenses of the  attorneys for the Trustees, the fees and expenses of any custodian appointed by the Trustees, the fees and expenses of Independent accountants or expenses incurred in connection with distributions and reports to the Securityholders.  As compensation therefor, the Indenture Trustee shall be entitled to such compensation (whether payable out of the Collection Account or otherwise) as the Servicer would have been entitled to under this Agreement if no such resignation or termination had occurred, except that all collections on or in respect of the Receivables shall be

 

  

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deposited in the Collection Account within two Business Days of receipt and shall not be retained by the Servicer.  Notwithstanding the foregoing, the Indenture Trustee may, if it shall be unwilling so to act, or shall, if it is legally unable so to act, appoint, or petition a court of competent jurisdiction to appoint, an Eligible Servicer as the successor to the terminated Servicer under this Agreement.  In connection with such appointment, the Indenture Trustee may make such arrangements for the compensation of such Successor Servicer out of collections on or in respect of the Receivables as it and such successor shall agree; provided, however, that such compensation shall not be greater than that payable to DCFS USA as initial Servicer hereunder without the prior consent of the Holders of Notes evidencing not less than 51% of the Note Balance of the Controlling Class (or Holders of Certificates representing not less than 51% of the aggregate Certificate Percentage Interests then outstanding if the Notes are no longer Outstanding).  The Indenture Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession, including providing such information in writing as reasonably requested by the Depositor to allow the Depositor to comply with its Exchange Act reporting obligations with respect to such Successor Servicer.  The Indenture Trustee shall not be relieved of its duties as Successor Servicer under this Section until a newly appointed Servicer shall have assumed the obligations and duties of the terminated Servicer under this Agreement.  Notwithstanding anything to the contrary contained herein, in no event shall the Indenture Trustee 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 hereunder.

 

Section 7.03. Effect of Servicing Transfer.

 

(a) After a transfer of servicing hereunder, the Indenture Trustee or Successor Servicer shall notify the Obligors to make directly to the Successor Servicer payments that are due under the Receivables after the effective date of such transfer.

 

(b) Except as provided in Section 7.02, after a transfer of servicing hereunder, the outgoing Servicer shall have no further obligations with respect to the administration, servicing, custody or collection of the Receivables and the Successor Servicer shall have all of such obligations, except that the outgoing 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 or items held by the outgoing Servicer (properly endorsed where required for the Successor Servicer to collect any such items) received as payments upon or otherwise in connection with the Receivables.

 

(c) Any Successor Servicer shall provide the Depositor with access to the Receivable Files and to the Successor Servicer’s records (whether written or automated) with respect to the Receivable Files.  Such access shall be afforded without charge, but only upon reasonable request and during normal business hours at the offices of the Successor Servicer.  Nothing in this Section shall affect the obligation of a Successor Servicer to observe any Applicable Law prohibiting disclosure of information regarding the Obligors, and the failure of the Servicer to provide access to information as a result of such obligation shall not constitute a breach of this Section.

 

 

 

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(d) Any transfer of servicing hereunder shall not constitute an assumption by the related Successor Servicer of any liability of the related outgoing Servicer arising out of any breach by such outgoing Servicer of such outgoing Servicer’s duties hereunder prior to such transfer of servicing.

 

Section 7.04. Notification to Noteholders and Rating Agencies.  Upon any notice of a Servicer Termination Event or upon any termination of, or any appointment of a successor to, the Servicer pursuant to this Article, the Indenture Trustee shall give prompt written notice thereof to the Noteholders and the Rating Agencies.

 

Section 7.05. Waiver of Past Servicer Termination Events.  The Noteholders evidencing not less than 51% of the Note Balance of the Controlling Class may, on behalf of all Noteholders, waive any Servicer Termination Event and its consequences, except an event resulting from the failure to make any required deposits to or payments from the Accounts in accordance with this Agreement.  Upon any such waiver of a Servicer Termination Event, such event shall cease to exist, and shall be deemed to have been remedied for every purpose of this Agreement.  No such waiver shall extend to any subsequent or other event or impair any right arising therefrom, except to the extent expressly so waived.

 

Section 7.06. Repayment of Advances.  If the identity of the Servicer shall change, the outgoing Servicer shall be entitled to receive reimbursement for outstanding and unreimbursed Advances made pursuant to Section 4.06 by the outgoing Servicer.

 

  

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ARTICLE EIGHT

 

TERMINATION

 

Section 8.01. Optional Purchase of All Receivables.

 

(a) If, as of the last day of any Collection Period, the Pool Balance shall be less than or equal to 10% of the Cutoff Date Pool Balance, the Servicer shall have the option to purchase on the following Distribution Date the Trust Estate, other than the Accounts.  To exercise such option, the Servicer shall notify the Depositor, the Owner Trustee, the Indenture Trustee and the Rating Agencies, not fewer than ten nor more than 30 days prior to the Distribution Date on which such repurchase is to be effected and shall deposit into the Collection Account on the related Deposit Date an amount equal to the aggregate Purchase Amount for the Receivables (including Receivables that became Defaulted Receivables during the related Collection Period), less the Reserve Fund Amount, which funds shall be transferred from the Reserve Fund into the Collection Account.  Notwithstanding the foregoing, the Servicer shall not be permitted to exercise such option unless the amount to be deposited in the Collection Account (together with amounts on deposit in the Reserve Fund and the Collection Account) pursuant to this Section is at least equal to the sum of all amounts due to the Servicer under this Agreement plus the Note Balance plus all accrued but unpaid interest (including any overdue interest) on the Notes plus all amounts due to the Servicer for any outstanding and unreimbursed Advances and Nonrecoverable Advances plus all accrued but unpaid Total Trustee Fees.  Upon such payment, the Seller shall succeed to and own all interests in and to the Issuer.  The aggregate amount so deposited in respect of such Distribution Date, plus, to the extent necessary, all amounts in the Reserve Fund, if any, shall be used to make payments in full to the Noteholders in the manner set forth in Article Four.

 

(b) Following the satisfaction and discharge of the Indenture and the payment in full of the principal of and interest on the Notes, the Certificateholders shall succeed to the rights of the Noteholders hereunder and the Indenture Trustee shall continue to carry out its obligations hereunder with respect to the Certificateholders, including making distributions from the Collection Account in accordance with Section 4.08(c) and making withdrawals from the Reserve Fund in accordance with Sections 4.02 and 4.07.

 

Section 8.02. Termination.  Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the earliest to occur of (i) the maturity or liquidation of the latest maturing Receivable and the disposition of any amounts received thereon in accordance with Section 2.08 of the Indenture, (ii) the payment to the Noteholders and the Certificateholders of all amounts required to be paid to them under the Basic Documents and (iii) the exercise by the Servicer of its rights under Section 8.01, the deposit into the Collection Account by the Servicer of the amount required to be deposited therein in accordance with Section 8.01 and the application of such amounts in accordance with Section 2.08 of the Indenture.

 

 

  

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ARTICLE NINE

 

EXCHANGE ACT REPORTING

 

Section 9.01. Further Assurances.  The Indenture Trustee and the Servicer shall reasonably cooperate with the Depositor in connection with the satisfaction of the Depositor’s reporting requirements under the Exchange Act with respect to the Issuer.  The Depositor shall not exercise its right to request delivery of information or other performance under these provisions other than in good faith.  In addition to the other information specified in this Article Nine, if so requested by the Depositor for the purpose of satisfying its reporting obligation under the Exchange Act, the Indenture Trustee and the Servicer shall provide the Depositor with (i) such information which is available to such Person without unreasonable effort or expense and within such timeframe as may be reasonably requested by the Depositor to comply with the Depositor’s reporting obligations under the Exchange Act and (ii) to the extent such Person is a party (and the Depositor is not a party) to any agreement or amendment required to be filed, copies of such agreement or amendment in EDGAR-compatible form.  Each of the Servicer and the Indenture Trustee acknowledges that interpretations of the requirements of Regulation AB may change over time, whether due to interpretive guidance provided by the Commission or its staff, consensus among participants in the asset-backed securities markets, advice of counsel, or otherwise, and agrees to comply with requests made by the Depositor in good faith for delivery of information under these provisions on the basis of evolving interpretations of Regulation AB.

 

Section 9.02. Form 10-D Filings.  So long as the Depositor is required to file Exchange Act Reports with respect to the Issuer, no later than each Determination Date, each of the Indenture Trustee and the Servicer shall notify (and the Servicer shall cause any subservicer to notify) the Depositor of any Form 10-D Disclosure Item with respect to such Person (or in the case of the Indenture Trustee, a Responsible Officer of such Person), together with a description of any such Form 10-D Disclosure Item in form and substance reasonably acceptable to the Depositor.  In addition to such information as the Servicer is obligated to provide pursuant to other provisions of this Agreement, if so requested by the Depositor, the Servicer shall provide such information which is available to the Servicer, without unreasonable effort or expense regarding the performance or servicing of the Receivables as is reasonably required to facilitate preparation of distribution reports in accordance with Item 1121 of Regulation AB.  Such information shall be provided concurrently with the statements to Securityholders pursuant to Section 4.09, commencing with the first such report due not less than five Business Days following such request.

 

Section 9.03. Form 8-K Filings.  So long as the Depositor is required to file Exchange Act Reports with respect to the Issuer, each of the Indenture Trustee and the Servicer shall promptly notify the Depositor, but in no event later than two Business Days after its occurrence, of any Reportable Event of which such Person (or in the case of the Indenture Trustee, a Responsible Officer of such Person) has actual knowledge.  Each Person shall be deemed to have actual knowledge of any such event to the extent that it relates to such Person or any action or failure to act by such Person.

 

Section 9.04. Form 10-K Filings.  So long as the Depositor is required to file Exchange Act Reports, (i) if the Item 1119 Parties listed on Schedule B have changed since the Closing

 

  

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Date, no later than February 1 of each year, commencing in 2010, the Depositor shall provide each of the Indenture Trustee and the Servicer with an updated Schedule B setting forth the Item 1119 Parties and (ii) no later than March 15 of each year, commencing in 2010, the Indenture Trustee and the Servicer shall notify the Depositor of any Form 10-K Disclosure Item, together with a description of any such Form 10-K Disclosure Item in form and substance reasonably acceptable to the Depositor.

 

Section 9.05. Report on Assessment of Compliance and Attestation.  So long as the Depositor is required to file Exchange Act Reports, on or before March 15 of each calendar year, commencing in 2010:

 

(a) The Indenture Trustee shall deliver to the Depositor and the Servicer the Servicing Criteria Assessment.  Such report shall be signed by an authorized officer of the Indenture Trustee and shall at a minimum address each of the Servicing Criteria specified on a certification substantially in the form of Part I of Schedule C hereto delivered to the Depositor concurrently with the execution of this Agreement (provided that such certification may be revised after the date of this Agreement as agreed by the Depositor and the Indenture Trustee to reflect any guidance with respect to such criteria from the Commission).  To the extent any of the Servicing Criteria are not applicable to the Indenture Trustee, with respect to asset-backed securities transactions taken as a whole involving the Indenture Trustee and that are backed by the same asset type backing the Notes, such report shall include such a statement to that effect.  The Indenture Trustee acknowledges and agrees that the Depositor and the Servicer with respect to its duties as the Certifying Person, and each of their respective officers and directors shall be entitled to rely upon each such Servicing Criteria Assessment and the attestation delivered pursuant to Section 9.05(b).

 

(b) The Indenture Trustee shall deliver to the Depositor and the Servicer a report of a registered public accounting firm that attests to, and reports on, the assessment of compliance made by the Indenture Trustee and delivered pursuant to the preceding paragraph.  Such attestation shall be in accordance with Rules 13a-18 and 15d-18 of the Exchange Act (or any successor provisions), Rules 1-02(a)(3) and 2-02(g) of Regulation S-X (or any successor provisions) under the Securities Act and the Exchange Act, including, that, in the event that an overall opinion cannot be expressed, such registered public accounting firm shall state in such report why it was unable to express such an opinion.  Such report must be available for general use and not contain restricted use language.

 

(c) In the event the Indenture Trustee is terminated or resigns during the term of this Agreement, such Person shall provide the documents and information pursuant to this Section with respect to the period of time it was subject to this Agreement or provided services with respect to the Issuer or the Receivables.

 

Section 9.06. Back-up Sarbanes-Oxley Certification.

 

(a) No later than February 15 of each year, beginning in 2011, the Servicer shall provide the Performance Certification to the Certifying Person as Schedule D (in the case of the

 

  

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Servicer), in each case on which the Certification Parties can reasonably rely; provided that so long as the Servicer is an Affiliate of the Depositor, the Servicer may, but is not required to deliver the Performance Certificate.

 

(b) The Depositor will not request delivery of a certification under this clause unless the Depositor is required under the Exchange Act to file an annual report on Form 10-K with respect to the Issuer.  In the event that prior to the filing date of the Form 10-K in March of each year, the Servicer has actual knowledge of information material to the Sarbanes-Oxley Certification, the Servicer shall promptly notify the Depositor.

 

Section 9.07. Representations and Warranties.  The Indenture Trustee represents that:

 

(i) there are no affiliations relating to the Indenture Trustee with respect to any Item 1119 Party;

 

(ii) there are no relationships or transactions with respect to any Item 1119 Party and the Indenture Trustee that are outside the ordinary course of business or on terms other than would be obtained in an arm’s-length transaction with an unrelated third party, apart from the transactions contemplated under the Basic Documents, and that are material to the investors’ understanding of the Notes; and

 

(iii) there are no legal Proceedings pending, or known to be contemplated by Governmental Authorities, against the Indenture Trustee, or of which the property of the Indenture Trustee is subject, that is material to the Noteholders.

 

Section 9.08. Indemnification.

 

(a) Each of the Indenture Trustee and the Servicer (if the Servicer is not DCFS USA) shall indemnify the Depositor, the Servicer with respect to its duties as Certifying Person or each Person who controls any of such parties (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) and the respective present and former directors, officers, employees and agents of each of the foregoing, and shall hold each of them harmless from and against any losses, damages, penalties, fines, forfeitures, legal fees and expenses and related costs, judgments, and any other costs, fees and expenses that any of them may sustain arising out of or based upon:

 

(i) (A) any untrue statement of a material fact contained or alleged to be contained in the Provided Information or (B) the omission or alleged omission to state in the Provided Information a material fact required to be stated in the Provided Information, or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, by way of clarification, that clause (B) shall be construed solely by reference to the related Provided Information and not to any other information communicated in connection with a sale or purchase of securities, without regard to whether the Provided Information or any portion thereof is presented together with or separately from such other information; or

 

(ii) with respect to the Indenture Trustee, any failure by the Indenture Trustee to deliver any Servicing Criteria Assessment when and as required under this Article and

 

  

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with respect to the Servicer, any failure by the Servicer to deliver any information, report, certification, accountant’s letter or other material when and as required under Section 3.11 or 3.12 or this Article, as applicable.

 

(b) In the case of any failure of performance described in Section 9.08(a)(ii), each of the Indenture Trustee and the Servicer shall promptly reimburse the Depositor for all costs reasonably incurred by each such party in order to obtain the information, report, certification, accountants’ letter or other material not delivered as required by the Indenture Trustee or the Servicer, as applicable.

 

(c) Notwithstanding anything to the contrary contained herein, in no event shall the Indenture Trustee be liable for special, indirect or consequential damages of any kind whatsoever, including but not limited to lost profits, even if the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

  

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ARTICLE TEN

 

MISCELLANEOUS

 

Section 10.01. Amendment.

 

(a) This Agreement may be amended from time to time by the parties hereto without the consent of any of the Noteholders to cure any ambiguity, to correct or supplement any provision in this Agreement that may be inconsistent with any other provisions in this Agreement or any offering document used in connection with the initial offer and sale of the Notes, to add, change or eliminate any other provisions with respect to matters or questions arising under this Agreement that are not inconsistent with the provisions of this Agreement; provided, however, that no such amendment (i) may materially adversely affect the interests of any Noteholder, as evidenced by either an Opinion of Counsel to the Servicer delivered to the Indenture Trustee or by satisfaction of the Rating Agency Condition with respect to such amendment and (ii) will be permitted unless an Opinion of Counsel is delivered to the Depositor and the Trustees to the effect that such amendment will not cause the Issuer to be characterized for federal income tax purposes as an association taxable as a corporation or otherwise have any material adverse impact on the federal income taxation of any Notes Outstanding.

 

(b) This Agreement may also be amended from time to time by the parties hereto, with the consent of the Indenture Trustee and the Holders of Notes evidencing at least 662⁄3% of the Note Balance of the Controlling Class (or if the Notes are no longer Outstanding, Holders of Certificates evidencing not less than 51% of the aggregate Certificate Percentage Interests), 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 Noteholders; provided, however, that no such amendment (i) will be permitted unless an Opinion of Counsel is delivered to the Depositor and the Trustees to the effect that such amendment will not cause the Issuer to be characterized for federal income tax purposes as an association or publicly traded partnership taxable as a corporation or otherwise have any material adverse impact on the federal income taxation of any Notes Outstanding or any Noteholder and (ii) may (A) increase or reduce in any manner the amount of, or accelerate or delay the timing of, or change the allocation or priority of, collections of payments on or in respect of the Receivables or distributions that are required to be made for the benefit of the Noteholders or change any Interest Rate or the Reserve Fund Required Amount without the consent of 100% of the Noteholders of Notes then Outstanding or (B) reduce the percentage of the Note Balance of the Controlling Class, the consent of the Noteholders of which is required for any amendment to this Agreement without the consent of 100% of the Noteholders of Notes then Outstanding.

 

(c) An amendment to this Agreement shall be deemed not to materially adversely affect the interests of any Noteholder if (i) the Person requesting such amendment obtains and delivers to the Trustees an Opinion of Counsel to that effect or (ii) the Rating Agency Condition is satisfied.

 

(d) Prior to the execution of any amendment or consent pursuant to this Section, the Servicer shall provide written notification of the substance of such amendment or consent to each Rating Agency.

 

 

 

 

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(e) Promptly after the execution of any amendment or consent pursuant to Section 10.01(b), the Owner Trustee shall furnish (i) written notification of the substance of such amendment or consent to each Certificateholder.  It shall not be necessary for the consent of the Noteholders pursuant to Section 10.01(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 any other consents of the Noteholders provided for in this Agreement) and of evidencing the authorization of the execution thereof by the Noteholders shall be subject to such reasonable requirements as the Trustees may prescribe.

 

(f) Prior to the execution of any amendment pursuant to this Section, the Depositor and the Trustees shall be entitled to receive and rely upon (i) an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and (ii) an Officer’s Certificate of the Servicer that all conditions precedent provided for in this Agreement to the execution of such amendment have been complied with.  The Owner Trustee or the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects such Owner Trustee’s or Indenture Trustee’s own rights, duties or immunities under this Agreement or otherwise.

 

(g) Notwithstanding the foregoing provisions of this Section, in the event the parties to this Agreement desire to further clarify or amend any provision of Article Nine, or subject to Section 9.05(a), the information contained in Schedule C, this Agreement shall be amended to reflect the new agreement between the parties covering matters in Article Nine, pursuant to Section 9.01, or Schedule C; provided, however, that (i) such amendment will not require any Opinion of Counsel or satisfaction of the Rating Agency Condition or the consent of any Securityholder and (ii) the Servicer shall have given written notice to the Rating Agencies not fewer than ten days prior to the effectiveness of any such amendment.

 

Section 10.02. Protection of Title to Issuer.

 

(a) The Depositor or the Servicer, or both, shall authorize and file such financing statements and cause to be authorized and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer and of the Indenture Trustee for the benefit of the Noteholders in the Receivables and in the proceeds thereof.  The Depositor or the Servicer, or both, shall deliver (or cause to be delivered) to the Trustees file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing.

 

(b) Neither the Depositor nor the Servicer shall change its name, identity or organizational structure in any manner that would make any financing statement or continuation statement filed in accordance with Section 10.02(a) seriously misleading within the meaning of Section 9-506 of the UCC, unless it shall have given the Trustees at least 30 days’ prior written notice thereof and shall have promptly filed such amendments to previously filed financing statements or continuation statements or such new financing statements as may be necessary to continue the perfection of the interest of the Issuer and the Indenture Trustee for the benefit of the Noteholders in the Receivables and the proceeds thereof.

 

 

 

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(c) Each of the Seller, the Depositor and the Servicer shall give the Trustees at least 30 days’ prior written notice of any change in its name, identity, organizational structure or jurisdiction of organization or any relocation of its principal place of business or chief executive office if, as a result of such change or relocation, the applicable provisions of the UCC would require the filing of any amendment to any previously filed financing statement or continuation statement or of any new financing statement and shall promptly file any such amendment, continuation statement or new financing statement.  The Depositor shall at all times maintain its jurisdiction of organization, its principal place of business and its chief executive office within the United States.  The Servicer shall at all times maintain each office from which it shall service Receivables, and each office at which the Receivable Files are located, within the United States.

 

(d) The Servicer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Receivable, 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 Receivable and the amounts from time to time deposited in the Collection Account in respect of such Receivable.

 

(e) The Servicer shall maintain its computer systems so that, from and after the time of transfer of the Receivables to the Issuer pursuant to this Agreement, the Servicer’s master computer records (including any back-up archives) that refer to a Receivable shall indicate clearly and unambiguously the interest of the Issuer and the Indenture Trustee in such Receivable and that such Receivable is owned by the Issuer and has been pledged to the Indenture Trustee pursuant to the Indenture.  Indication of the Issuer’s and the Indenture Trustee’s interest in a Receivable shall be deleted from or modified on the Servicer’s computer systems when, and only when, such Receivable shall have been paid in full or repurchased by the Seller or purchased by the Servicer.

 

(f) If at any time the Depositor or the Servicer shall propose to sell, grant a security interest in, or otherwise transfer any interest in any motor vehicle installment sales or installment loans contract to any prospective purchaser, lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, CDs, records or printouts (including any restored from back-up archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly and unambiguously that such Receivable has been sold and is owned by the Issuer and has been pledged to the Indenture Trustee (unless such Receivable has been paid in full or repurchased by the Seller or purchased by the Servicer).

 

(g) The Servicer shall permit the Trustees and their respective agents at any time during normal business hours, upon reasonable prior notice, to inspect, audit and make copies of and abstracts from the Servicer’s records regarding any Receivable.

 

(h) If the Seller has repurchased one or more Receivables from the Issuer pursuant to Section 2.05 or the Servicer has purchased one or more Receivables from the Issuer pursuant to Section 3.08, the Servicer shall, upon request, furnish to the Owner Trustee or to the Indenture Trustee, within ten Business Days, a list of all Receivables (by contract number) then held as part of the Issuer, together with a reconciliation of such list to the Schedule of Receivables (as

 

  

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amended or supplemented to date) and to each of the Investor Reports furnished before such request indicating removal of Receivables from the Issuer.

 

(i) The Servicer shall deliver to the Depositor and the Trustees, promptly after the authorization and delivery of each amendment to any financing statement delivered pursuant to this Agreement, an Opinion of Counsel stating that, in the opinion of such counsel, either (A) all financing statements and continuation statements have been authorized and filed that are necessary fully to preserve and protect the interest of the Depositor (in the case of an opinion delivered by the Servicer) or the Issuer and the Indenture Trustee (in the case of an opinion delivered by the Depositor) in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) no such action shall be necessary to preserve and protect such interest.

 

(j) The Depositor shall, to the extent required by Applicable Law, cause the Notes to be registered with the Commission pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time periods specified in such sections.

 

Section 10.03. Notices.  Unless otherwise specified in this Agreement, all notices, requests, demands, consents, waivers or other communications to or from the parties to this Agreement will be in writing.  Notices, requests, demands, consents and other communications will be deemed to have been given and made, (i) upon delivery or, in the case of a letter mailed via registered first class mail, postage prepaid, three days after deposit in the mail and (ii) in the case of (a) a facsimile, when receipt is confirmed by telephone or by reply e-mail or reply facsimile from the recipient, (b) an e-mail, when receipt is confirmed by telephone or by reply e-mail from the recipient and (c) an electronic posting to a password-protected website, upon printed confirmation of the recipient’s access to such password-protected website, or when notification of such electronic posting is confirmed in accordance with clauses (ii)(b) through (ii)(c) above.  Unless otherwise specified in this Agreement, any such notice, request, demand, consent or other communication will be delivered or addressed, in the case of (i) the Depositor, at 36455 Corporate Drive, Farmington Hills, Michigan  48331, Attention: Steven C. Poling (steven.c.poling@daimler.com, telecopier: (248) 991-6962), (ii) the Seller, at 36455 Corporate Drive, Farmington Hills, Michigan  48331, Attention: Steven C. Poling (steven.c.poling@daimler.com, telecopier: (248) 991-6962), (iii) the Servicer, at 36455 Corporate Drive, Farmington Hills, Michigan  48331, Attention: Steven C. Poling (steven.c.poling@daimler.com, telecopier: (248) 991-6962), (iv) the Issuer or the Owner Trustee, at the Corporate Trust Office, Attention: Yvette Howell (yhowell@wilmingtontrust.com, telecopier: (302) 636-4145), (v) the Indenture Trustee, at the Corporate Trust Office, Attention: Melissa Rosal (melissa.rosal@usbank.com, telecopier: (312) 325-8905), (vi) Standard & Poor’s, at Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York  10041, Attention: Asset Backed Surveillance Department (e-mail: Servicer_reports@sandp.com), (vii) Moody’s, at Moody’s Investors Service, Inc., ABS Monitoring Department, 7 World Trade Center, 25th Floor, 250 Greenwich Street, New York, New York  10007 (e-mail: Servicerreports@moodys.com) and (viii) as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

 

 

 

44

 

 

 

Section 10.04. Assignment.

 

(a) Notwithstanding anything to the contrary contained herein, except as provided in the remainder of this Section or as provided in Sections 6.03 and 7.02, this Agreement may not be assigned by the Depositor or the Servicer without the prior written consent of the Trustees and the Holders of Notes evidencing at least 662⁄3% of the Note Balance of the Controlling Class.

 

(b) The Depositor hereby acknowledges and consents to the mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Noteholders of all right, title and interest of the Issuer in, to and under the Trust Property and the assignment of any or all of the Issuer’s rights and obligations hereunder to the Indenture Trustee.

 

Section 10.05. Severability.  If any one or more of the covenants, agreements, provisions or terms of this Agreement is held invalid, illegal or unenforceable, then such covenants, agreements, provisions or terms will be deemed severable from the remaining covenants, agreements, provisions and terms of this Agreement and will in no way affect the validity, legality or enforceability of the other covenants, agreements, provisions and terms of this Agreement.

 

Section 10.06. Further Assurances.  The Servicer agrees to do and perform any and all acts and to execute any and all further instruments required or reasonably requested by the other parties hereto to more fully effect the purposes of this Agreement, including the execution of any financing statements or continuation statements relating to the Trust Estate for filing under the provisions of the UCC of any applicable jurisdiction.

 

Section 10.07. No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of the Depositor, either Trustee, the Noteholders or the Certificateholders, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges provided in this Agreement are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law.

 

Section 10.08. Successors and Assigns; Third-Party Beneficiaries.  This Agreement will inure to the benefit of and be binding upon the parties to this Agreement, the Owner Trustee and their assigns.  Except as otherwise provided in this Agreement, no other Person will have any right or obligation under this Agreement.

 

Section 10.09. Actions by Securityholders.

 

(a) Wherever in this Agreement a provision is made that an action may be taken or a notice, demand or instruction given by the Noteholders or the Certificateholders, such action, notice or instruction may be taken or given by any Noteholder or any Certificateholder, as applicable, unless such provision requires a specific percentage of the Noteholders or the Certificateholders.

 

(b) Any request, demand, authorization, direction, notice, consent, waiver or other act by a Noteholder or a Certificateholder shall bind such Noteholder or Certificateholder and every

 

  

45

  

subsequent Holder of the related Note or Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Owner Trustee, the Indenture Trustee or the Servicer in reliance thereon, whether or not notation of such action is made upon such Note or Certificate.

 

Section 10.10. Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be an original, and all of which will together constitute one and the same instrument.

 

Section 10.11. Table of Contents and Headings.  The Table of Contents and the various headings in this Agreement are included for convenience only and will not affect the meaning or interpretation of any provision of this Agreement.

 

Section 10.12. GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

Section 10.13. No Petition.  Each of the Seller, the Servicer and the Trustees covenants and agrees that it will not at any time institute against, or join any Person in instituting against, the Issuer or the Depositor any bankruptcy, reorganization, arrangement, insolvency or liquidation Proceedings, or other Proceedings under any Insolvency Law in connection with any obligations relating to any of the Basic Documents and agrees that it will not cooperate with or encourage others to file a bankruptcy petition against the Issuer during the same period.

 

Section 10.14. No Recourse.  It is expressly understood and agreed by the parties hereto that (i) this Agreement is executed and delivered by the Owner Trustee, not individually or personally but solely as Owner Trustee, in the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by the Owner Trustee but is made and intended for the purpose of binding only the Issuer, (iii) nothing herein contained shall be construed as creating any liability on the Owner Trustee, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (iv) under no circumstances shall the Owner Trustee be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Agreement or any other related documents.

 

Section 10.15. Servicer Payment Obligation.  The Servicer shall be responsible for the payment of all fees and expenses of the Issuer and the Trustees paid by any of them in connection with any of their obligations under the Basic Documents to obtain or maintain or cause to be obtained or maintained any required license under the (i) Maryland Vehicle Sales Finance Act or (ii) Pennsylvania Motor Vehicle Sales Finance Act.

 

  

46

  

IN WITNESS WHEREOF, the parties hereto have caused this Sale and Servicing Agreement to be duly executed by their respective officers, thereunto duly authorized, as of the day and year first above written.

 

 

	
  

	
MERCEDES-BENZ AUTO RECEIVABLES TRUST 2010-1

 

	
  

	
By:

	
WILMINGTON TRUST COMPANY, not in 

its individual capacity but solely as Owner 

Trustee on behalf of the Issuer

 

    By:_________________________________________       

Name:

Title:

 

	
  

	
DAIMLER RETAIL RECEIVABLES LLC, as Depositor

 

    By:_________________________________________       

    Name: Brian Evon

    Title: Vice President

 

 

    By: _________________________________________      

    Name: Steven C. Poling

    Title: Assistant Secretary

 

	
  

	
DCFS USA LLC, as Servicer

 

    By: _________________________________________      

    Name: Brian Stevens

    Title: Vice President and Controller

 

 

    By: _________________________________________      

    Name: Steven C. Poling

    Title: Assistant Secretary

 

 

Sale and Servicing Agreement

47

 

 

 

 

	
  

	
DCFS USA LLC, as Seller

 

    By:  _______________________________________     

    Name: Brian Stevens

    Title: Vice President and Controller

 

 

    By: ________________________________________      

    Name: Steven C. Poling

    Title: Assistant Secretary

 

Agreed and Accepted:

 

U.S. BANK NATIONAL ASSOCIATION

 

By: _____________________________                                                               

Name:

Title:

Sale and Servicing Agreement

  

 

  

SCHEDULE A

 

LOCATION OF RECEIVABLE FILES

 

Iron Mountain

1248 Avenue R

Grand Prairie, Texas  48089

 

FDI Collateral Management

9750 Goethe Road

Sacramento, California  95827

 

 

SA-1

 

 

SCHEDULE B

 

ITEM 1119 PARTIES

 

None

 

 

 

SB-1

 

SCHEDULE C

 

SERVICING AND DISCLOSURE ITEMS

 

Schedule C

 

Part I – Servicing Criteria (To Be Addressed in the Report on Assessment of Compliance)

 

The assessment of compliance to be delivered by the Servicer shall address, at a minimum, the criteria identified below as “Applicable Servicing Criteria”:

 

	
Reg AB Reference

	
Servicing Criteria

	
Applicable Servicing Criteria

	
Responsible Party

	  	
General Servicing Considerations

	  	  
	
1122(d)(1)(i)

	
Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.

	  	
Servicer

 

	
1122(d)(1)(ii)

	
If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.

	  	
Servicer

 

	
1122(d)(1)(iii)

	
Any requirements in the transaction agreements to maintain a back-up Servicer for the Pool Assets are maintained.

	
N/A

 

	  
	
1122(d)(1)(iv)

	
A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.

	
N/A

	  
	  	
Cash Collection and Administration

	  	  
	
1122(d)(2)(i)

	
Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt and identification, or such other number of days specified in the transaction agreements.

	  	
Servicer

 

	
1122(d)(2)(ii)

	
Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.

	
N/A for Obligor disbursements.

 

	
Servicer

 

	
1122(d)(2)(iii)

	
Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.

	  	
Servicer

 

	
1122(d)(2)(iv)

	
The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of over collateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.

	  	
Servicer

Indenture Trustee

 

 

 

 

 

SC-1

 

 

 

 

	
Reg AB Reference

	
Servicing Criteria

	
Applicable Servicing Criteria

	
Responsible Party

	
1122(d)(2)(v)

	
Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements.  For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.

	  	
Indenture Trustee

 

	
1122(d)(2)(vi)

	
Unissued checks are safeguarded so as to prevent unauthorized access.

	
N/A

	  
	
1122(d)(2)(vii)

	
Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts.  These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items.  These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.

	  	
Servicer

Indenture Trustee

	  	
Investor Remittances and Reporting

	  	  
	
1122(d)(3)(i)

	
Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements.  Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of Pool Assets serviced by the Servicer.

	  	
Servicer

 

	
1122(d)(3)(ii)

	
Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.

	  	
Servicer

Indenture Trustee

	
1122(d)(3)(iii)

	
Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.

	  	
Servicer

 

	
1122(d)(3)(iv)

	
Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.

	  	
Servicer

Indenture Trustee

 

 

 

 

SC-2

 

 

 

 

	
Reg AB Reference

	
Servicing Criteria

	
Applicable Servicing Criteria

	
Responsible Party

	  	
Pool Asset Administration

	  	  
	
1122(d)(4)(i)

	
Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.

	  	
Servicer

	
1122(d)(4)(ii)

	
Pool assets  and related documents are safeguarded as required by the transaction agreements

	  	
Servicer

	
1122(d)(4)(iii)

	
Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.

	  	
Servicer

 

	
1122(d)(4)(iv)

	
Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer’s obligor records maintained no more than two business days after receipt and identification, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.

	  	
Servicer

	
1122(d)(4)(v)

	
The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.

	  	
Servicer

	
1122(d)(4)(vi)

	
Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.

	  	
Servicer

 

	
1122(d)(4)(vii)

	
Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.

	  	
Servicer

 

	
1122(d)(4)(viii)

	
Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements.  Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).

	  	
Servicer

	
1122(d)(4)(ix)

	
Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.

	
N/A

	  

 

 

 

 

SC-3

 

 

 

	
Reg AB Reference

	
Servicing Criteria

	
Applicable Servicing Criteria

	
Responsible Party

	
1122(d)(4)(x)

	
Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.

	
N/A

	  
	
1122(d)(4)(xi)

	
Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the Servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.

	
N/A

	  
	
1122(d)(4)(xii)

	
Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.

	
N/A

	  
	
1122(d)(4)(xiii)

	
Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the Servicer, or such other number of days specified in the transaction agreements.

	
N/A

	  
	
1122(d)(4)(xiv)

	
Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.

	  	
Servicer

	
1122(d)(4)(xv)

	
Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.

	
N/A

	  

 

 

 

SC-4

 

 

 

Schedule C

 

Part II - Form 10-D Disclosure Items

 

	
FORM 10-D DISCLOSURE ITEMS

 

	
Item on Form 10-D

	
Responsible Party

	
Item 1: Distribution and Pool Performance Information

 

	  
	
Information included in the Monthly Investor Report

	
Servicer

Administrator

 

	
Any information required by 1121 which is NOT included on the Monthly Investor Report

 

	
Depositor

	
Item 2: Legal Proceedings

 

· Any legal Proceeding pending against the following entities or their respective property, that is material to Certificateholders, including any Proceeding known to be contemplated by governmental authorities:

	  
	
· Issuing Entity (Trust Fund)

	
Depositor

	
· Sponsor (Seller)

	
Seller (if a party to the Sales and Servicing Agreement) or Depositor

	
· Depositor

	
Depositor

	
· Indenture Trustee

	
Indenture Trustee

	
· Administrator

	
Administrator

	
· Servicer

	
Servicer

	
· Owner Trustee

	
Owner Trustee

	
· 1110(b) Originator

	
Depositor

	
· Any 1108(a)(2) Servicer (other than the Servicer or Administrator)

	
Depositor

	
· Any other party contemplated by 1100(d)(1)

 

	
Depositor

	
Item 3: Sale of Securities and Use of Proceeds

 

Information from Item 2(a) of Part II of Form 10-Q

 

With respect to any sale of securities by the sponsor, depositor or issuing entity, that are backed by the same asset pool or are otherwise issued by the issuing entity, whether or not registered, provide the sales and use of proceeds information in Item 701 of Regulation S-K.  Pricing information can be omitted if securities were not registered.

 

	
Depositor

	
Item 4: Defaults Upon Senior Securities

 

Information from Item 3 of Part II of Form 10-Q

 

Report the occurrence of any Event of Default (after expiration of any grace period and provision of any required notice)

 

	
Administrator

 

	
Item 5: Submission of Matters to a Vote of Security Holders

 

Information from Item 4 of Part II of Form 10-Q

 

	
Administrator

Indenture Trustee

 

 

 

 

SC-5

 

 

 

	
FORM 10-D DISCLOSURE ITEMS

 

	
Item on Form 10-D

	
Responsible Party

	
Item 6: Significant Obligors of Pool Assets

 

Item 1112(b) – Significant Obligor Financial Information*

 

	
Depositor

	
*This information need only be reported on the Form 10-D for the distribution period in which updated information is required pursuant to the Item.

 

	  
	
Item 7: Significant Enhancement Provider Information

 

Item 1114(b)(2) – Credit Enhancement Provider Financial Information*

 

	  
	
· Determining applicable disclosure threshold

	
Depositor

	
· Requesting required financial information (including any required accountants’ consent to the use thereof) or effecting incorporation by reference

 

	
Depositor

 

	
Item 1115(b) – Derivative Counterparty Financial Information*

 

	  
	
· Determining current maximum probable exposure

	
Depositor

	
· Determining current significance percentage

	
Depositor

	
· Requesting required financial information (including any required accountants’ consent to the use thereof) or effecting incorporation by reference

 

	
Depositor

 

	
*This information need only be reported on the Form 10-D for the distribution period in which updated information is required pursuant to the Items.

 

	  
	
Item 8: Other Information

 

Disclose any information required to be reported on Form 8-K during the period covered by the Form 10-D but not reported

 

	
Any party responsible for the applicable Form 8-K Disclosure item

	
Item 9: Exhibits

	  
	
 

Monthly Statement to Certificateholders

 

	
Administrator

	
Exhibits required by Item 601 of Regulation S-K, such as material agreements

 

	
Depositor

 

 

 

SC-6

 

 

Schedule C

 

Part III - Form 10-K Disclosure Items

 

	
FORM 10-K DISCLOSURE ITEMS

	
Item on Form 10-K

	
Responsible Party

	
Item 1B: Unresolved Staff Comments

 

	
Depositor

	
Item 9B: Other Information

	
Any party responsible for disclosure items on Form 8-K

	
Item 15: Exhibits, Financial Statement Schedules

	
Depositor

	
Additional Item:

Disclosure per Item 1117 of Reg AB

	
(i) All parties to the Sale and Servicing Agreement (as to themselves), (ii) the Depositor as to the issuing entity, (iii) the Depositor as to the sponsor, any 1106(b) originator, any 1100(d)(1) party

	
Additional Item:

Disclosure per Item 1119 of Reg AB

	
(i) All parties to the Sale and Servicing Agreement (as to themselves), (ii) the Depositor as to he sponsor, originator, significant obligor, enhancement or support provider

	
Additional Item:

Disclosure per Item 1112(b) of Reg AB

	
Depositor/ Servicer

	
Additional Item:

Disclosure per Items 1114(b) and 1115(b) of Reg AB

 

	
Depositor

 

 

 

 

SC-7

 

 

Schedule C

 

Part IV - Form 8-K Disclosure (Reportable Events)

 

	
FORM 8-K DISCLOSURE (REPORTABLE EVENTS)

 

	
Item on Form 8-K

	
Responsible Party

 

	
Item 1.01- Entry into a Material Definitive Agreement

 

Disclosure is required regarding entry into or amendment of any definitive agreement that is material to the securitization, even if depositor is not a party.

 

Examples: servicing agreement, custodial agreement.

 

Note: disclosure not required as to definitive agreements that are fully disclosed in the prospectus.

 

	
All parties as to themselves

	
Item 1.02- Termination of a Material Definitive Agreement

 

Disclosure is required regarding termination of any definitive agreement that is material to the securitization (other than expiration in accordance with its terms), even if depositor is not a party.

 

Examples: servicing agreement, custodial agreement.

 

	
All parties as to themselves

	
Item 1.03- Bankruptcy or Receivership

 

Disclosure is required regarding the bankruptcy or receivership, with respect to any of the following:

 

	
Depositor

	
· Sponsor (Seller)

	
Depositor/Sponsor (Seller)

	
· Depositor

	
Depositor

	
· Servicer

	
Servicer

	
· Affiliated Servicer

	
Servicer

	
· Other Servicer servicing 20% or more of the pool assets at the time of the report

	
Servicer

	
· Other material servicers

	
Servicer

	
· Indenture Trustee

	
Indenture Trustee

	
· Administrator

	
Administrator

	
· Significant Obligor

	
Depositor

	
· Credit Enhancer (10% or more)

	
Depositor

	
· Derivative Counterparty

	
Depositor

	
· Owner Trustee

 

	
Owner Trustee

	
Item 2.04- Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

 

Includes an early amortization, performance trigger or other event, including event of default, that would materially alter the payment priority/distribution of cash flows/amortization schedule.

 

Disclosure will be made of events other than waterfall triggers which are disclosed in the monthly statements to the certificateholders.

 

	
Depositor

Servicer

Administrator

 

 

 

 

SC-8

 

 

 

 

	
FORM 8-K DISCLOSURE (REPORTABLE EVENTS)

 

	
Item on Form 8-K

	
Responsible Party

 

	
Item 3.03- Material Modification to Rights of Security Holders

 

Disclosure is required of any material modification to documents defining the rights of Certificateholders, including the Pooling and Servicing Agreement.

 

	
Administrator

Indenture Trustee

Depositor

	
Item 5.03- Amendments of Articles of Incorporation or Bylaws; Change of Fiscal Year

 

Disclosure is required of any amendment “to the governing documents of the issuing entity”.

 

	
Depositor

	
Item 6.01- ABS Informational and Computational Material

	
Depositor

	
Item 6.02- Change of Servicer or Administrator

 

Requires disclosure of any removal, replacement, substitution or addition of any Servicer, affiliated servicer, and other servicer servicing 10% or more of pool assets at time of report, other material servicers or Indenture Trustee.

 

	
A change of both – Depositor

 

A change of Servicer or Administrator - Servicer/Administrator/Depositor/

 

	
Reg AB disclosure about any new servicer or Servicer is also required.

 

	
Servicer/Depositor

	
Reg AB disclosure about any new Indenture Trustee is also required.

 

	
New Indenture Trustee

	
Item 6.03- Change in Credit Enhancement or External Support

 

Covers termination of any enhancement in manner other than by its terms, the addition of an enhancement, or a material change in the enhancement provided.  Applies to external credit enhancements as well as derivatives.

 

	
N/A

	
Reg AB disclosure about any new enhancement provider is also required.

 

	
Depositor

	
Item 6.04- Failure to Make a Required Distribution

 

	
Servicer

Indenture Trustee

	
Item 6.05- Securities Act Updating Disclosure

 

If any material pool characteristic differs by 5% or more at the time of issuance of the securities from the description in the final prospectus, provide updated Reg AB disclosure about the actual asset pool.

 

	
Depositor

	
If there are any new servicers or originators required to be disclosed under Regulation AB as a result of the foregoing, provide the information called for in Items 1108 and 1110 respectively.

 

	
Depositor

	
Item 7.01- Reg FD Disclosure

 

	
Depositor

 

 

 

 

SC-9

 

 

 

 

	
FORM 8-K DISCLOSURE (REPORTABLE EVENTS)

 

	
Item on Form 8-K

	
Responsible Party

 

	
Item 8.01- Other Events

 

Any event, with respect to which information is not otherwise called for in Form 8-K, that the registrant deems of importance to certificateholders.

 

	
Depositor

	
Item 9.01- Financial Statements and Exhibits

	
Responsible party, as applicable, for reporting/disclosing the financial statement or exhibit

 

 

 

SC-10

 

 

SCHEDULE D

 

PERFORMANCE CERTIFICATION

 

(SERVICER)

 

Re:           Mercedes-Benz Auto Receivables Trust 2010-1

 

The undersigned Servicer hereby certifies to _______ and its officers, directors and Affiliates (collectively, the “Certification Parties”) as follows, with the knowledge and intent that the Certification Parties will rely on this Certification in connection with the certification concerning the Issuer to be signed by an officer of the Servicer and submitted to the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002:

 

1. I have reviewed:

 

(i) the servicer compliance statement of the Servicer provided in accordance with Item 1123 of Regulation AB (the “Compliance Statement”);

 

(ii) the report on assessment of the Servicer’s compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing Criteria”), provided in accordance with Rules 13a-18 and 15d-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Item 1122 of Regulation AB (the “Servicing Assessment”);

 

(iii) the registered public accounting firm’s attestation report provided in accordance with Rules 13a-18 and 15d-18 under the Exchange Act and Section 1122(b) of Regulation AB (the “Attestation Report”); and

 

(iv) all servicing reports, officer’s certificates and other information relating to the servicing of the Receivables by the Servicer during 200__ that were delivered by the Servicer to the Indenture Trustee pursuant to the Agreement (collectively, the “Servicing Information”).

 

2. Based on my knowledge, the Servicing Information, taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of the circumstances under which such statements were made, not misleading with respect to the period of time covered by the Servicing Information.

 

3. Based on my knowledge, all of the Servicing Information required to be provided by the Servicer under the Agreement has been provided to the Indenture Trustee.

 

4. I am responsible for reviewing the activities performed by DCFS USA LLC, as Servicer (the “Servicer”) under the Sale and Servicing Agreement, dated as of April 1, 2010 (the “Agreement”), among Mercedes-Benz Auto Receivables Trust 2010-1, as issuer (the “Issuer”), Daimler Retail Receivables LLC, as Depositor, DCFS USA LLC, as Servicer and as Seller and based on my knowledge and the compliance review conducted in preparing the Compliance

 

 

SD-1

 

Statement and except as disclosed in the Compliance Statement, the Servicing Assessment or the Attestation Report, the Servicer has fulfilled its obligations under the Agreement in all material respects.

5. The Compliance Statement required to be delivered by the Servicer pursuant to the Agreement, and the Servicing Assessment and Attestation Report required to be provided by the Servicer pursuant to the Agreement, have been provided to the Indenture Trustee.  Any material instances of noncompliance described in such reports have been disclosed to the Depositor.  Any material instance of noncompliance with the Servicing Criteria has been disclosed in such reports.

 

Capitalized terms not otherwise defined herein have the meanings ascribed thereto in the Agreement.

 

Date: ____________________

 

	
  

	
DCFS USA LLC

 

    By: ________________________________________________                                                                          

    Name:

    Title:

 

 

 

SD-2

 

EXHIBIT A

 

REPRESENTATIONS AND WARRANTIES AS TO THE RECEIVABLES

 

 The following representations and warranties shall be made in respect of the Receivables being transferred to the Issuer on the Closing Date as of the Cutoff Date.

 

(i) Characteristics of Receivables.  Each Receivable (A) was originated in the United States by the Seller or a Dealer located in the United States for the retail sale of a Financed Vehicle in the ordinary course of the Seller’s or the applicable Dealer’s business in accordance with the Seller’s credit policies as of the date of origination or acquisition of the related Receivable, is payable in United States dollars, has been fully and properly executed by the parties thereto, if not originated by the Seller, has been purchased by the Seller from such Dealer under an existing Dealer Agreement (or approved form of assignment) and has been validly assigned by such Dealer to the Seller, (B) has created a valid, subsisting and enforceable first priority security interest in favor of the Seller in the Financed Vehicle, which security interest shall be perfected and prior to any other interest in such Financed Vehicle, and which security interest is assignable by the Seller and reassignable by the assignee, (C) contains customary and enforceable provisions such that the rights and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security, (D) shall, except as otherwise provided in the Sale and Servicing Agreement, provide for level Monthly Payments (provided that the payment in the first or last month in the life of the Receivable may be minimally different from the level payment) that fully amortize the Amount Financed over its original term and shall provide for a finance charge or shall yield interest at its APR, (E) shall provide for, in the event that such Receivable is prepaid, a prepayment that fully pays the Principal Balance and includes accrued but unpaid interest at least through the date of prepayment in an amount calculated by using an interest rate at least equal to its APR, (F) is a Simple Interest Receivable, (G) is due from an Obligor with a mailing address within the United States or its territories, and (H)  to the best of the Seller’s knowledge, is not assumable by another Person in a manner which would release the Obligor thereof from such Obligor’s obligations to the Seller with respect to such Receivable.

 

(ii) Schedule of Receivables.  The information set forth in the Schedule of Receivables shall be true and correct in all material respects as of the close of business on the Cutoff Date, and the Receivables were selected (a) from those motor vehicle receivables of the Seller which met the selection criteria set forth in this Agreement and (b) using selection procedures, believed by the Seller, not to be adverse to the Noteholders.

 

(iii) Compliance with Law.  Each Receivable complied at the time it was originated or made, and at the Closing Date complies, in all material respects with all requirements of applicable federal, State and, to the best knowledge of the Seller, local laws, rulings and regulations thereunder (including usury laws).

 

(iv) Binding Obligation.  Each Receivable represents the genuine, legal, valid and binding payment obligation in writing of the related Obligor, enforceable by the holder thereof in accordance with its terms, except as (A) enforceability thereof may be limited by bankruptcy,

 

 

 

A-1

 

 

 

insolvency, reorganization or similar laws affecting the enforcement of creditors’ rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a Proceeding in equity or at law and (B) such Receivable may be modified by the application after the Cutoff Date of the Servicemembers Civil Relief Act or by any similar applicable State law.

 

(v) No Government Obligor.  No Receivable is due from the United States or any State or any agency, department, subdivision or instrumentality thereof.

 

(vi) Obligor Bankruptcy.  To the best of the Seller’s knowledge, at the Cutoff Date, no Obligor is the subject of a bankruptcy Proceeding.

 

(vii) Security Interest in Financed Vehicles.  Immediately prior to the transfer of the Receivables by the Seller to the Depositor, each Receivable was secured by a valid, binding and enforceable first priority perfected security interest in favor of the Seller in the related Financed Vehicle, which security interest has been validly assigned by the Seller to the Depositor.  The Servicer has received, or will receive within 180 days after the Closing Date, the original certificate of title for each Financed Vehicle or notice from the applicable State entity issuing such certificate of title, that such certificate of title is being processed (other than any Financed Vehicle that is subject to a certificate of title statute or motor vehicle registration law that does not require that the original certificate of title for such Financed Vehicle be delivered to the Seller).

 

(viii) Receivables in Force.  No Receivable shall have been satisfied, subordinated or rescinded, nor shall any Financed Vehicle have been released in whole or in part from the Lien granted by the related Receivable.

 

(ix) No Waivers.  No provision of a Receivable shall have been waived in such a manner that such Receivable fails to meet all of the other representations and warranties made by the Seller herein with respect thereto.

 

(x) No Amendments.  No Receivable shall have been amended or modified in such a manner that the total number of Monthly Payments has been increased or decreased or that the related Amount Financed has been increased or decreased or that such Receivable fails to meet all of the other representations and warranties made by the Seller herein with respect thereto.

 

(xi) No Defenses.  No Receivable is subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of any Receivable, or the exercise of any right thereunder, will not render such Receivable unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the Seller has not received written notice of the assertion with respect to any Receivable of any such right of rescission, setoff, counterclaim or defense.

 

(xii) No Liens.  No Liens or claims shall have been filed, including Liens for work, labor or materials or for unpaid local, State or federal taxes relating to any Financed Vehicle that shall be prior to, or equal or coordinate with, the security interest in such Financed Vehicle granted by the related Receivable.

 

 

 

 

A-2

 

 

 

(xiii) No Defaults; Repossessions.  Except for payment defaults that, as of the Cutoff Date, have been continuing for a period of not more than 30 days, no default, breach or violation under the terms of any Receivable, permitting acceleration, shall have occurred as of the Cutoff Date and no continuing condition that with notice or the lapse of time or both would constitute a default, breach or violation under the terms of any Receivable, permitting acceleration, shall have arisen; and the Seller shall not have waived any of the foregoing except as otherwise permitted hereunder.  On or prior to the Cutoff Date, no Financed Vehicle has been repossessed.

 

(xiv) Insurance.  Each Receivable requires the related Obligor to obtain physical damage insurance covering the related Financed Vehicle and to maintain such insurance.

 

(xv) Title.  It is the intention of the Seller that the transfers and assignments contemplated by the Receivables Purchase Agreement constitute a sale of the Receivables from the Seller to the Purchaser and that the beneficial interest in and title to the Receivables not be part of the debtor’s estate in the event of the appointment of a receiver or conservator for the Seller under any receivership, bankruptcy law, insolvency or banking law; no Receivable has been sold, transferred, assigned or pledged by the Seller to any Person other than the Purchaser; immediately prior to the transfer and assignment contemplated by the Receivables Purchase Agreement, the Seller had good and marketable title to each Receivable free and clear of all Liens and rights of others, except for Liens that shall be released on or before the Closing Date; immediately upon the transfer and assignment thereof, the Purchaser shall have good and marketable title to each Receivable, free and clear of all Liens and rights of others; and the transfer and assignment herein contemplated has been perfected under the UCC.

 

(xvi) Lawful Assignment.  No Receivable has been originated in, or is subject to the laws of, any jurisdiction under which the sale, transfer, assignment and conveyance of such Receivable under the Receivables Purchase Agreement or the Sale and Servicing Agreement or the pledge of such Receivables hereunder, thereunder or under the Indenture is unlawful, void or voidable or under which such Receivable would be rendered void or voidable as a result of any such sale, transfer, assignment, conveyance or pledge.  The Seller has not entered into any agreement with any account debtor that prohibits, restricts or conditions the assignment of the Receivables.

 

(xvii) All Filings Made.  All filings (including UCC filings) necessary in any jurisdiction to give the Purchaser, the Issuer and the Indenture Trustee a first priority security interest in the Receivables shall have been made or will be made on the Closing Date.

 

(xviii) One Original.  There shall be only one original executed copy of each Receivable.

 

(xix) Location of Receivable Files.  Each Receivable File shall be kept at one of the locations listed in Schedule A.

 

(xx) Custodial Agreements.  Immediately prior to the transfer of the Receivables by the Seller to the Purchaser, the Purchaser, an Affiliate of the Purchaser or an agent on behalf of the Purchaser had possession of the Receivable Files and there were no, and there will not be, any custodial agreements in effect affecting the right or ability of the Purchaser to make, or cause to be made, any delivery required under this Agreement.

 

 

 

 

A-3

 

 

 

(xxi) Bulk Transfer Laws.  The transfer of the Receivables and the Receivable Files by the Seller to the Purchaser pursuant to this Agreement is not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction.

 

(xxii) Principal Balance.  As of the Cutoff Date, each Receivable had a remaining Principal Balance of not more than $182,012.64 and not less than $2,012.45.

 

(xxiii) New and Pre-Owned Vehicles.  Based on Cutoff Date Pool Balance, approximately 69.99% of the Receivables were secured by new Financed Vehicles and approximately 30.01% of the Receivables were secured by pre-owned Financed Vehicles.

 

(xxiv) Original Term to Maturity.  Each Receivable had an original term to maturity of not more than 72 months and not less than 24 months and, based on the number of remaining Monthly Payments, a remaining term to maturity as of the Cutoff Date, of not more than 70 months and not less than 2 months.

 

(xxv) Weighted Average Remaining Term to Maturity.  As of the Cutoff Date, based on the number of remaining Monthly Payments, the weighted average remaining term to maturity of the Receivables was approximately 50.23 months.

 

(xxvi) Annual Percentage Rate.  Each Receivable has an APR of at least 0.94% and not more than 17.90% and the weighted average APR of the Receivables as of the Cutoff Date was approximately 4.06%.

 

(xxvii) Simple Interest Method.  All payments with respect to the Receivables have been allocated consistently in accordance with the Simple Interest Method.

 

(xxviii) Marking Records.  As of the Closing Date, the Seller will have caused its computer and accounting records relating to each Receivable to be marked to show that the Receivables have been sold to the Purchaser by the Seller and transferred and assigned by the Purchaser to the Issuer in accordance with the terms of the Sale and Servicing Agreement and pledged by the Issuer to the Indenture Trustee in accordance with the terms of the Indenture.

 

(xxix) Chattel Paper.  Each Receivable constitutes “tangible chattel paper” within the meaning of the UCC as in effect in the State of origination.

 

(xxx) Final Scheduled Distribution Date.  No Receivable has a final scheduled payment date later than six months prior to the Class A-4 Final Scheduled Distribution Date.

 

(xxxi) No Fleet Sales.  None of the Receivables have been included in a “fleet” sale (i.e., a sale to any single Obligor of more than seven Financed Vehicles).

 

(xxxii) No Fraud or Misrepresentation.  Each Receivable that was originated by a Dealer and was sold by the Dealer to the Seller, to the best of the Seller’s knowledge, was so originated and sold without fraud or misrepresentation on the part of such Dealer in either case.

 

 

 

 

A-4

 

 

 

(xxxiii) No Impairment.  The Seller has not done anything to convey any right to any Person that would result in such Person having a right to payments due under a Receivable or otherwise to impair the rights of the Depositor in any Receivable or the proceeds thereof.

 

(xxxiv) Servicing.  Each Receivable has been serviced in conformity with all Applicable Laws, rules and regulation and in conformity with the Seller’s policies and procedures which are consistent with customary, prudent industry standards.

 

(xxxv) No Consent.  To the best of the Seller’s knowledge, no notice to or consent from any Obligor is necessary to effect the acquisition of the Receivables by the Purchaser or the Issuer or the pledge of the Receivables by the Issuer to the Indenture Trustee.

 

(xxxvi) FICO Score.  The weighted average FICO score of the Receivables as of the Cutoff Date (based on the FICO score recorded at the respective dates of origination of such Receivables) was approximately 760.01.  The FICO score with respect to any Receivable with co-obligors is the higher of each obligor’s FICO score at the time of application.

 

 

A-5

 

 

 

 

 

EXHIBIT B

 

FORM OF INVESTOR REPORT

 

	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Investor Report

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Collection Period ended

	  	  	  	  	  	Page 1 of 6
	  	  	  	  	  	  	
Amounts in USD

	
Dates

	  	  	  	  	  	  
	
Collection Period No.

	  	  	  	  	  	  
	
Collection Period (from...to)

	  	  	  	  	  	
 

 

	
Determination Date

	  	  	  	  	  	  
	
Record Date

	  	  	  	  	  	  
	
Distribution Date

	  	  	  	  	  	  
	
Interest Period of the Class A-1 Note (from...to)

	  	  	  	  	
Actual/360 Days

	  
	
Interest Period of the A-2, A-3 and A-4 Notes (from...to)

	  	  	  	  	
30/360 Days

	  
	  	  	  	  	  	  	  
	
Summary

	  	  	  	  	  	  
	  	  	  	  	  	  	  
	  	
Initial Balance

	
Beginning Balance

	
Ending Balance

	
Principal Payment

	
Principal per $1000

Face Amount

	
Note Factor

	
Class A-1 Notes

	
$

	
$

	
$

	
$

	
$

	  
	
Class A-2 Notes

	
$

	
$

	
$

	
$

	
$

	  
	
Class A-3 Notes

	
$

	
$

	
$

	
$

	
$

	  
	
Class A-4 Notes

	
$

	
$

	
$

	
$

	
$

	  
	
Total Note Balance

	
$

	
$

	
$

	
$

	  	  
	  	  	  	  	  	  	  
	
Overcollateralization

	
$

	
$

	
$

	  	  	  
	
Adjusted Pool Balance

	
$

	
$

	
$

	  	  	  
	
Yield Supplement Overcollateralization Amount

	
$

	
$

	
$

	  	  	  
	
Pool Balance

	
$

	
$

	
$

	  	  	  
	  	  	  	  	  	  	  
	  	
Amount

	
Percentage

	  	  	  	  
	
Initial Overcollateralization Amount

	
$

	
%

	  	  	  	  
	
Target Overcollateralizaton Amount

	
$

	
%

	  	  	  	  
	
Current Overcollateralization Amount

	
$

	
%

	  	  	  	  

 

 

 

 

B-1

 

 

 

	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Investor Report

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Collection Period ended

	  	  	  	  	  	Page 2 of 6

	  	  	  	  	  	  	  
	  	
Interest Rate

	
Interest Payment

	
Interest per $1000 Face Amount

	
Interest & Principal Payment

	
Interest & Principal Payment per $1000 Face Amount

	
 

 

	
Class A-1 Notes

	
%

	
$

	
$

	
$

	
$

	  
	
Class A-2 Notes

	
%

	
$

	
$

	
$

	
$

	  
	
Class A-3 Notes

	
%

	
$

	
$

	
$

	
$

	  
	
Class A-4 Notes

	
%

	
$

	
$

	
$

	
$

	  
	
Total

	  	
$

	  	
$

	  	  
	  	  	  	  	  	  	  
	
Available Funds

	  	  	  	  	  	  
	
Principal Collections

	
$

	  	  	  	  	  
	
Interest Collections

	
$

	  	  	  	  	  
	
Net Liquidation Proceeds

	
$

	  	  	  	  	  
	
Recoveries

	
$

	  	  	  	  	  
	
Purchase Amounts

	
$

	  	  	  	  	  
	
Advances made by the Servicer

	
$

	  	  	  	  	  
	
Investment Earnings

	
$

	  	  	  	  	  
	
Available Collections

	
$

	  	  	  	  	  
	
Reserve Fund Draw Amount

	
$

	  	  	  	  	  
	
Available Funds

	
$

	  	  	  	  	  
	  	  	  	  	  	  	  
	
Distribution

	  	  	  	  	  	  
	
(1) Total Servicing Fee

	
$

	  	  	  	  	  
	
     Nonrecoverable Advances to the Servicer

	
$

	  	  	  	  	  
	
(2) Total Trustee Fees (max. $100,000 p.a.)

	
$

	  	  	  	  	  
	
(3) Interest Distributable Amount to Class A Notes

	
$

	  	  	  	  	  
	
(4) Priority Principal Distributable Amount

	
$

	  	  	  	  	  
	
(5) To Reserve Fund to reach the Reserve Fund Required Amount

	
$

	  	  	  	  	  
	
(6) Regular Principal Distributable Amount

	
$

	  	  	  	  	  
	
(7) Additional Servicing Fee and Transition Costs

	
$

	  	  	  	  	  
	
(8) Total Trustee Fees [not previously paid under (2)]

	
$

	  	  	  	  	  

 

 

 

 

B-2

 

 

 

	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Investor Report

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Collection Period ended

	  	  	  	  	  	Page 3 of 6

	
(9) Excess Collections to Certificateholders

	
$

	  	  	  	  	
 

 

	
Total Distribution

	
$

	  	  	  	  	  
	  	  	  	  	  	  	  
	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	
Investor Report

	  	  	  	  	  	  
	
Collection Period ended

	  	  	  	  	  	  
	  	  	  	  	  	  	
Amounts in USD

	
Distribution Detail

	  	  	  	  	  	  
	  	
Due

	
Paid

	
Shortfall

	  	  	  
	
Total Servicing Fee

	
$

	
$

	
$

	  	  	  
	
Total Trustee Fees

	
$

	
$

	
$

	  	  	  
	  	  	  	  	  	  	  
	
Monthly Interest Distributable Amount

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-1 Notes

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-2 Notes

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-3 Notes

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-4 Notes

	
$

	
$

	
$

	  	  	  
	
Interest Carryover Shortfall Amount

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-1 Notes

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-2 Notes

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-3 Notes

	
$

	
$

	
$

	  	  	  
	
thereof on Class A-4 Notes

	
$

	
$

	
$

	  	  	  
	
Interest Distributable Amount Class A Notes

	
$

	
$

	
$

	  	  	  
	  	  	  	  	  	  	  
	
Priority Principal Distributable Amount

	
$

	
$

	
$

	  	  	  
	
Regular Principal Distributable Amount

	
$

	
$

	
$

	  	  	  
	
Aggregate Principal Distributable Amount

	
$

	
$

	
$

	  	  	  
	  	  	  	  	  	  	  
	
Reserve Fund and Investment Earnings

	  	  	  	  	  	  
	  	  	  	  	  	  	  
	
Reserve Fund

	  	  	  	  	  	  
	  	  	  	  	  	  	  
	
Reserve Fund Required Amount

	
$

	  	  	  	  	  
	  	  	  	  	  	  	  
	
Reserve Fund Amount - Beginning Balance

	
$

	  	  	  	  	
Page 4 of 6

 

 

 

 

 

B-3

 

	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Investor Report

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Collection Period ended

	  	  	  	  	  	 

	
  plus top up Reserve Fund up to the Required Amount

	
$

	  	  	  	  	  
	
  plus Net Investment Earnings for the Collection Period

	
$

	  	  	  	  	  
	
  minus Net Investment Earnings

	
$

	  	  	  	  	  
	
  minus Reserve Fund Draw Amount

	
$

	  	  	  	  	  
	
Reserve Fund Amount - Ending Balance

	
$

	  	  	  	  	  
	  	  	  	  	  	  	  
	
Reserve Fund Amount Deficiency

	
$

	  	  	  	  	  
	  	  	  	  	  	  	  
	
Investment Earnings

	  	  	  	  	  	  
	  	  	  	  	  	  	  
	
Net Investment Earnings on the Reserve Fund

	
$

	  	  	  	  	  
	
Net Investment Earnings on the Collection Account

	
$

	  	  	  	  	  
	
Investment Earnings for the Collection Period

	
$

	  	  	  	  	  
	  	  	  	  	  	  	  
	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	
Investor Report

	  	  	  	  	  	  
	
Collection Period ended

	  	  	  	  	  	  
	  	  	  	  	  	  	
Amounts in USD

	  	  	  	  	  	  	  
	
Notices to Investors

	  	  	  	  	  	  

 

 

 

 

B-4

 

 

	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Investor Report

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Collection Period ended

	  	  	  	  	  	Page 5 of 6

	  	  	  	  	  	  	  
	
Pool Statistics

	  	  	  	  	  	
 

 

	  	  	  	  	  	  	  
	
Pool Data

	  	  	  	  	  	  
	  	
Amount

	
Number of Receivables

	  	  	  	  
	
Cutoff Date Pool Balance

	
$________________

	
______

	  	  	  	  
	  	  	  	  	  	  	  
	
Pool Balance beginning of Collection Period

	
$

	  	  	  	  	  
	
Principal Collections

	
$

	  	  	  	  	  
	
Principal Collections attributable to Full Pay-offs

	
$

	  	  	  	  	  
	
Principal Purchase Amounts

	
$

	  	  	  	  	  
	
Principal Gross Losses

	
$

	  	  	  	  	  
	
Pool Balance end of Collection Period

	
$

	  	  	  	  	  
	
Pool Factor   %

	
$

	  	  	  	  	  
	  	  	  	  	  	  	  
	  	
As of Cutoff Date

	
Current

	  	  	  	  
	
Weighted Average APR

	
%

	
%

	  	  	  	  
	
Weighted Average Number of Remaining Payments

	  	  	  	  	  	  
	
Weighted Average Seasoning (months)

	  	  	  	  	  	  
	  	  	  	  	  	  	  
	
Delinquency Profile *

	  	  	  	  	  	  
	  	
Amount

	
Number of Receivables

	
Percentage

	  	  	  
	
Current

	
$

	  	
%

	  	  	  
	
31-60 Days Delinquent

	
$

	  	
%

	  	  	  
	
61-90 Days Delinquent

	
$

	  	
%

	  	  	  
	
91-120 Days Delinquent

	
$

	  	
%

	  	  	  
	
Total

	
$

	  	
100%

	  	  	  
	
* A receivable is not considered delinquent if the amount past due is less than 10% of the payment due under such receivable

	  	  	  	  
	  	  	  	  	  	  	  
	
Losses

	  	  	  	  	  	  
	  	
Current

	  	  	  	  	  
	
Principal Gross Losses

	
$

	  	  	  	  	  
	
Principal Net Liquidation Proceeds

	
$

	  	  	  	  	  
	
Principal Recoveries

	
$

	  	  	  	  	  

 

 

 

 

B-5

 

 

 

	
Mercedes-Benz Auto Receivables Trust 2010-1

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Investor Report

	  	  	  	  	  	  
	 	 	 	 	 	 	 
	
Collection Period ended

	  	  	  	  	  	Page 6 of 6

	
Principal Net Losses

	
$

	  	  	  	  	
 

 

	
Cumulative Principal Net Losses

	
$

	  	  	  	  	  
	
Cumulative Principal Net Loss as % of Cutoff Date Pool Balance

	
%

	  	  	  	  	  
	  	  	  	  	  	  	  
	  	  	  	  	  	  	  
	  	  	  	  	  	  	  

 

 

 

 

B-6

 

 

 

 

 

APPENDIX A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

AA-1  

  

APPENDIX A

 

USAGE AND DEFINITIONS

 

USAGE

 

The following rules of construction and usage are applicable to this Appendix and to any agreement that incorporates this Appendix and any certificate or other document made or delivered pursuant to any such agreement:

 

(a) All terms defined in this Appendix, unless otherwise defined in any agreement that incorporates this Appendix or any certificate or other document made or delivered pursuant to any such agreement, have the meanings assigned in this Appendix.

 

(b) Accounting terms not defined in this Appendix or in any such agreement, certificate or other document, and accounting terms partly defined in this Appendix or in any such agreement, certificate or other document, to the extent not defined, have the respective meanings given to them under International Financial Reporting Standards as in effect on the date of such agreement, certificate or other document.  To the extent that the definitions of accounting terms in this Appendix or in any such agreement, certificate or other document are inconsistent with the meanings of such terms under International Financial Reporting Standards, the definitions contained in this Appendix or in any such agreement, certificate or other document will control.

 

(c) References to words such as “this Agreement”, “herein”, “hereof” and the like shall refer to an agreement that incorporates this Appendix as a whole and not to any particular part, Article or Section within such agreement.  References in an agreement to “Article”, “Section”, “Exhibit”, “Schedule”, “subsection” or another subdivision or to an attachment are, unless otherwise specified, to an article, section, exhibit, schedule, subsection or other subdivision of or an attachment to such agreement.  The term “or” means “and/or” and the term “including” means “including without limitation”.

 

(d) The definitions contained in this Appendix are equally applicable to both the singular and plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.

 

(e) Any agreement or statute defined or referred to in this Appendix or in any agreement that incorporates this Appendix means such agreement or statute as from time to time amended, modified, supplemented or replaced, including (in the case of agreements) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and includes (in the case of agreements) references to all attachments thereto and instruments incorporated therein and (in the case of statutes) any rules and regulations promulgated thereunder and any judicial and administrative interpretations thereof.

 

(f) References to a Person are also to its permitted successors and assigns.

 

 

AA-1

 

(g) References to deposits, transfers and payments of any amounts refer to deposits, transfers or payments of such amounts in immediately available funds; and the term “proceeds” has the meaning ascribed to such term in the UCC.

 

(h) Except where “not less than zero” or similar language is indicated, amounts determined by reference to a mathematical formula may be positive or negative.

 

DEFINITIONS

 

“Account Collateral” means, with respect to each Account, such Account, together with all cash, securities, Financial Assets and investments and other property from time to time deposited or credited to such Account and all proceeds thereof, including, with respect to the Reserve Fund, the Reserve Fund Deposit and the Reserve Fund Amount.

 

“Accountants” means a firm of independent public accountants.

 

“Accounts” means the Collection Account, the Note Payment Account and the Reserve Fund.

 

“Act” has the meaning specified in Section 11.03(a) of the Indenture.

 

“Additional Servicing Fee” means, for any Collection Period, if a Successor Servicer is appointed pursuant to Section 7.02 of the Sale and Servicing Agreement, the amount, if any, by which (i) the compensation payable to such Successor Servicer for such Collection Period exceeds (ii) the Monthly Servicing Fee for such Collection Period.

 

“Adjusted Pool Balance” means, as of any day, the Pool Balance minus the Yield Supplement Overcollateralization Amount for such day.

 

“Administration Agreement” means the Administration Agreement, dated as of April 1, 2010, among the Administrator, the Issuer, the Depositor and the Indenture Trustee.

 

“Administrator” means DCFS USA, in its capacity as administrator under the Administration Agreement, and its successors in such capacity.

 

“Advance” has the meaning specified in Section 4.06(a) of the Sale and Servicing Agreement.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person.  For purposes of this definition, “control”, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Aggregate Principal Distributable Amount” means, with respect to any Distribution Date, the Priority Principal Distributable Amount and the Regular Principal Distributable Amount.

 

 

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“Amount Financed” means, with respect to any Receivable, the aggregate amount advanced under such Receivable toward the purchase price of the related Financed Vehicle and any related costs, including accessories, insurance premiums, service and warranty contracts and other items customarily financed as part of a motor vehicle retail installment sale contract or installment loan.

 

“Applicable Law” means all applicable laws, ordinances, judgments, decrees, injunctions, writs and orders of any Governmental Authority and rules, regulations, orders, interpretations, licenses and permits of any Governmental Authority.

 

“Applicants” has the meaning specified in Section 3.07 of the Trust Agreement.

 

“APR” means, with respect to any Receivable, the annual percentage rate of interest stated in such Receivable.

 

“Authenticating Agent” means each Person appointed as an authenticating agent pursuant to Section 2.15 of the Indenture.

 

“Authorized Newspaper” means a newspaper of general circulation in The City of New York, printed in the English language and customarily published on each Business Day, whether or not published on Saturdays, Sundays and holidays.

 

“Authorized Officer” means, with respect to (i) the Issuer, any officer of the Owner Trustee who is authorized to act for or on behalf of the Owner Trustee in matters relating to the Issuer and who is identified on the list of authorized officers delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter), as well as the president, any Vice President, the treasurer, any assistant treasurer, the secretary or any assistant secretary of the Depositor and, for so long as the Administration Agreement is in effect, any Vice President or more senior officer of the Administrator who is authorized to act for the Administrator in matters relating to the Issuer and to be acted upon by the Administrator pursuant to the Administration Agreement and who is identified on the list of authorized officers delivered by the Administrator to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter) and (ii) any other Person, any president, Vice President, treasurer, assistant treasurer, secretary, assistant secretary or any other officer of such Person who customarily performs functions similar to those performed by any of the foregoing having direct responsibility for the administration of the Basic Documents and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

“Available Collections” means, for any Distribution Date and the related Collection Period, the sum of (i) all Obligor payments relating to interest and principal received by the Servicer with respect to the Receivables during the related Collection Period after the Cutoff Date (other than amounts comprising the Supplemental Servicing Fee), (ii) all Net Liquidation Proceeds, Insurance Proceeds (with respect to Receivables that are not Defaulted Receivables), Recoveries and Dealer Recourse payments received with respect to the Receivables during such Collection Period, (iii) interest and other income (net of losses and investment expenses) on

 

 

 

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amounts on deposit in the Reserve Fund and, in the event that collections on or in respect of the Receivables are required to be deposited by the Servicer into the Collection Account on a daily basis pursuant to Section 4.03 of the Sale and Servicing Agreement, the Collection Account, (iv) the aggregate Purchase Amounts deposited in the Collection Account on the related Deposit Date, (v) all prepayments received with respect to the Receivables attributable to any refunded item included in the Amount Financed of any Receivable, including amounts received as a result of rebates of extended warranty contract costs and proceeds received under physical damage, theft, credit life and credit disability insurance policies and (vi) all Advances deposited into the Collection Account by the Servicer on the related Deposit Date; provided, however, that Available Collections shall not include any payments or other amounts (including Net Liquidation Proceeds and Recoveries) received with respect to any (a) Purchased Receivable, the Purchase Amount for which was included in Available Collections for a previous Distribution Date and (b) Receivable to the extent that the Servicer has made an unreimbursed Advance with respect to such Receivable and is entitled to reimbursement from payments in respect of such Receivables or other Receivables or other amounts pursuant to Section 4.07 of the Sale and Servicing Agreement.

 

“Available Funds” means, with respect to any Distribution Date, the sum of (i) Available Collections and (ii) the Reserve Fund Draw Amount, if any.

 

“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. § 101 et seq.

 

“Basic Documents” means the Sale and Servicing Agreement, the Administration Agreement, the Indenture, the Note Depository Agreement, the Receivables Purchase Agreement and the Trust Agreement.

 

“Benefit Plan” means (i) employee benefit plans (as defined in Section 3(3) of ERISA) that are subject to Title I of ERISA, (ii) plans described in Section 4975(e)(1) of the Code, including individual retirement accounts or Keogh Plans, that are not exempt under Section 4975(g) of the Code and (iii) any entities whose underlying assets include plan assets by reason of a plan’s investment in such entities.

 

“Book-Entry Notes” means a beneficial interest in the Notes, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 2.10 of the Indenture.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions or trust companies in New York, New York, Wilmington, Delaware, Detroit, Michigan or St. Paul, Minnesota are authorized by law, regulation or executive order to be closed.

 

“Certificate” means a certificate evidencing the undivided beneficial interest of a Certificateholder in the assets of the Issuer, substantially in the form attached to the Trust Agreement as Exhibit A.

 

“Certificate of Trust” means the Certificate of Trust substantially in the form of Exhibit B to the Trust Agreement filed for the Issuer pursuant to Section 3810(a) of the Statutory Trust Statute.

 

 

 

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“Certificate Percentage Interest” means, with respect to a Certificate, the percentage specified on such Certificate as the Certificate Percentage Interest, which percentage represents the beneficial interest of the holder of such Certificate in the Issuer.  The initial Certificate Percentage Interest held by the Depositor shall be 100%.

 

“Certificate Register” and “Certificate Registrar” shall have the respective meanings specified in Section 3.04(a) of the Trust Agreement.

 

“Certificateholder” means a Person in whose name a Certificate is registered on the Certificate Register.

 

“Certification Parties” means, collectively, the Certifying Person and the entity for which the Certifying Person acts as an officer, and such entity’s officers, directors and Affiliates.

 

“Certifying Person” means an individual who signs the Sarbanes-Oxley Certification.

 

“Class” means a class of Notes, which may be the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes, as the context may require.

 

“Class A Noteholder” means the Person in whose name a Class A Note is registered in the Note Register.

 

“Class A Notes” means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes.

 

“Class A-1 Event” shall have occurred if any Class A-1 Notes are outstanding on the April 15, 2011 Distribution Date (after giving effect to any payments made on such date).

 

“Class A-1 Final Scheduled Distribution Date” means May 13, 2011.

 

“Class A-1 Interest Rate” means 0.30912% per annum (computed on the basis of the actual number of days in the related Interest Period divided by 360).

 

“Class A-1 Notes” means $280,000,000 aggregate principal amount of the Issuer’s 0.30912% Class A-1 Asset Backed Notes, substantially in the form of Exhibit A to the Indenture.

 

“Class A-2 Final Scheduled Distribution Date” means the August 15, 2012 Distribution Date.

 

“Class A-2 Interest Rate” means 0.70% per annum (computed on the basis of a 360-day year consisting of twelve 30-day months).

 

“Class A-2 Notes” means $220,000,000 aggregate principal amount of the Issuer’s 0.70% Class A-2 Asset Backed Notes, substantially in the form of Exhibit A to the Indenture.

 

“Class A-3 Final Scheduled Distribution Date” means the August 15, 2014 Distribution Date.

 

“Class A-3 Interest Rate” means 1.42% per annum (computed on the basis of a 360-day year consisting of twelve 30-day months).

 

 

 

 

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“Class A-3 Notes” means $425,000,000 aggregate principal amount of the Issuer’s 1.42% Class A-3 Asset Backed Notes, substantially in the form of Exhibit A to the Indenture.

 

“Class A-4 Final Scheduled Distribution Date” means the August 15, 2016 Distribution Date.

 

“Class A-4 Interest Rate” means 2.14% per annum (computed on the basis of a 360-day year consisting of twelve 30-day months).

 

“Class A-4 Notes” means $67,820,000 aggregate principal amount of the Issuer’s 2.14% Class A-4 Asset Backed Notes, substantially in the form of Exhibit A to the Indenture.

 

“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act, which initially shall be The Depository Trust Company.

 

“Clearing Agency Custodian” means the Indenture Trustee, as custodian for the Clearing Agency.

 

“Clearing Agency Participant” means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency.

 

“Closing Date” means April 21, 2010.

 

“Code” means the Internal Revenue Code of 1986 and the Treasury Regulations promulgated thereunder.

 

“Collateral” has the meaning specified in the Granting Clause of the Indenture.

 

“Collection Account” means the account designated as such, and established and maintained pursuant to Section 4.01(a) of the Sale and Servicing Agreement.

 

“Collection Period” means, with respect to any Distribution Date, the immediately preceding calendar month (or, in the case of the first Collection Period, the period from but excluding the Cutoff Date to and including the last day of the calendar month immediately preceding the calendar month in which the first Distribution Date occurs).

 

“Commission” means the United States Securities and Exchange Commission.

 

“Control” has the meaning specified in Section 8-106 of the UCC.

 

“Controlling Class” means the Class A Notes.

 

“Corporate Trust Office” means, with respect to (i) the Indenture Trustee, the office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of the Indenture is located at 209 South LaSalle Street, Suite 300, Chicago, IL  60604, Attention: Structured Finance – Mercedes-Benz Auto Receivables Trust 2010-1, or at such other address as the Indenture Trustee may designate

 

 

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from time to time by written notice to the Noteholders and the Issuer, or the principal corporate trust office of any successor Indenture Trustee at the address designated by such successor Indenture Trustee by written notice to the Noteholders and the Issuer or (ii) the Owner Trustee, the principal corporate trust office of the Owner Trustee located at 1100 North Market Street, Rodney Square North, Wilmington, Delaware 19890-1605, Attention: Corporate Trust Administration, or at such other address as the Owner Trustee may designate from time to time by notice to the Certificateholders, the Indenture Trustee, the Servicer and the Depositor, or the principal corporate trust office of any successor Owner Trustee at the address designated by such successor Owner Trustee by notice to the Certificateholders, the Indenture Trustee, the Servicer and the Depositor.

 

“Cutoff Date” means the close of business on March 31, 2010, the date after which the Issuer will be entitled to receive all amounts related to the Receivables.

 

“Cutoff Date Adjusted Pool Balance” means the Adjusted Pool Balance as of the Cutoff Date (i.e., $1,095,830,874.91).

 

“Cutoff Date Pool Balance” means the aggregate Principal Balance of the Receivables as of the Cutoff Date, which is $1,150,006,889.88.

 

“Daimler AG” means Daimler AG, a company organized under the laws of Germany.

 

“Daimler Retail Receivables” means Daimler Retail Receivables LLC, a Delaware limited liability company.

 

“DCFS USA” means DCFS USA LLC, a Delaware limited liability company.

 

“Dealer” means the dealer of motor vehicles who sold a Financed Vehicle and who originated and assigned the Receivable relating to such Financed Vehicle to the Seller under an existing agreement between such dealer and the Seller.

 

“Dealer Agreement” means an agreement between the Seller and a Dealer, entered into by the Seller in the ordinary course of its business, providing for the sale of Receivables by the Dealer to the Seller.

 

“Dealer Recourse” means, with respect to a Receivable, all recourse rights against the Dealer which originated the Receivable, and any successor to such Dealer.

 

“Default” means any event that with notice or the lapse of time or both would become an Event of Default.

 

“Defaulted Receivable” means a Receivable as to which (i) at least 10% of any payment, or any part of any payment, due under such Receivable has become 120 days or more delinquent (whether or not the Servicer has repossessed the related Financed Vehicle) or (ii) the Servicer has charged off any portion of the Principal Balance of the Receivable or has determined in accordance with its customary practices that such Receivable is uncollectible; provided, however, that (a) a Receivable will not become a Defaulted Receivable until the last day of the

 

 

 

 

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Collection Period during which one of the foregoing events first occurs and (b) a Purchased Receivable will not be deemed to be a Defaulted Receivable.

 

“Definitive Notes” means definitive, fully registered Notes issued pursuant to Section 2.12 of the Indenture.

 

“Deposit Date” means, with respect to any Distribution Date and the related Collection Period, the Business Day immediately preceding such Distribution Date.

 

“Depositor” means Daimler Retail Receivables, in its capacity as depositor, and its successors in such capacity.

 

“Depositor Basic Documents” means the Basic Documents to which the Depositor is a party.

 

“Depositor Limited Liability Company Agreement” means the Amended and Restated Limited Liability Company Agreement of the Depositor, dated as of September 30, 2009, by DCFS USA, as member.

 

“Determination Date” means, with respect to any Distribution Date, the second Business Day preceding such Distribution Date, commencing on June 11, 2010.

 

“Discount Rate” means, with respect to any Receivable, the greater of (i) the related APR and (ii) the Required Rate.

 

“Distribution Date” means the date on which the Issuer will pay interest and principal on the Notes, which will be the 15th day of each month or, if any such day is not a Business Day, the next Business Day, commencing June 15, 2010; provided, however, that, if the Class A-1 Notes remain outstanding, all principal of and accrued interest on the Class A-1 Notes shall be payable on the Final Scheduled Distribution Date for the Class A-1 Notes; provided, however, that solely for purposes of making payments on the Notes pursuant to Section 2.08 of the Indenture and making withdrawals from the Reserve Fund, if the Class A-1 Event shall have occurred, the Distribution Date in May 2011 shall mean (x) May 13, 2011 with respect to the Class A-1 Notes, and (y) May 16, 2011 with respect to the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes.  

 

“Eligible Deposit Account” means either (i) a segregated deposit account over which the Indenture Trustee or the Owner Trustee, as the case may be, has sole signature authority, maintained with an Eligible Institution meeting the requirements of clause (i) of the definition of the term “Eligible Institution” or (ii) a segregated trust account maintained with the trust department of an Eligible Institution meeting the requirements of clause (ii) of the definition of the term “Eligible Institution”, in each case bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Securityholders, the Noteholders or the Certificateholders, as the case may be.

 

“Eligible Institution” means (i) the corporate trust department of either Trustee or (ii) the corporate trust department of any other depository institution organized under the laws of the United States or any State or incorporated under the laws of a foreign jurisdiction with a branch or agency located in the United States or any State qualified to take deposits and subject to supervision and examination by federal or state banking authorities (a) which at all times has either (1) a long-term unsecured debt rating of at least “BBB” from Standard & Poor’s and “Baa2” from Moody’s or (2) a long-term unsecured debt rating, short-term unsecured debt rating or a certificate of deposit rating otherwise acceptable to the Rating Agencies and (b) whose deposits are insured by the Federal Deposit Insurance Corporation.

 

 

 

 

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 “Eligible Investments” means, at any time, any one or more of the following obligations, instruments, investments and securities:

 

(i) direct obligations of, and obligations 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;

 

(ii) demand deposits, time deposits, bankers’ acceptances or certificates of deposit of any depository institution or trust company (a) incorporated under the laws of the United States, any State or any United States branch of a foreign bank, (b) subject to supervision and examination by federal or State banking or depository institution authorities and (c) at the time of the investment or contractual commitment to invest therein, the commercial paper or other short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) of which have the Required Rating;

 

(iii) repurchase obligations, having maturities of not more than 365 days, 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 clause (ii) above;

 

(iv) short-term corporate securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any State thereof; provided, however, that (a) such investment shall not have an ‘r’ highlighter affixed to its rating and its terms shall have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change and (b) at the time of the investment, the short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such corporation) of such corporation shall have the highest rating from Moody’s and Standard & Poor’s;

 

(v) commercial paper having maturities of not more than 365 days, at the time of the investment, with the highest rating from Moody’s and Standard & Poor’s; provided, however, that such investment shall not have an ‘r’ highlighter affixed to its rating and its terms shall have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change;

 

(vi) guaranteed investment contracts issued by an insurance company or other corporation as to which the Rating Agency Condition shall have been satisfied;

 

(vii) investments in money market funds having a rating from Standard & Poor’s of at least “AAA-m” or “AAAm-G” and from Moody’s of at least “Aaa” (including funds for which either Trustee, the Servicer or any of their respective Affiliates is investment manager or advisor); and

 

(viii) any other investment as to which the Rating Agency Condition shall have been satisfied; provided, however, that in no event shall any such investment have a long-term rating of less than “AA” from Standard & Poor’s and “Aaa” from Moody’s or a

 

 

 

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short-term rating of less than “A-1” from Standard & Poor’s and “Prime-1” from Moody’s;

provided, that each of the foregoing investments shall mature no later than the Deposit Date immediately following the Collection Period in which such investment was made (or, if the Class A-1 Event has occurred, not later than May 10, 2011, in the case of investments made on or after the Deposit Date in April 2011 and prior to the Deposit Date in April 2011, in an amount at least equal to the May 2011 Class A-1 Note Distribution), and shall be required to be held to such maturity.

 

Notwithstanding anything to the contrary contained in this definition, (a) no Eligible Investment may be purchased at a premium, (b) no obligation or security shall be a “Eligible Investment” unless (i) the Indenture Trustee has Control over such obligation or security and (ii) at the time the Indenture Trustee first obtained Control or the Indenture Trustee became the Entitlement Holder with respect to such obligation or security, the Indenture Trustee did not have notice of any adverse claim with respect thereto within the meaning of Section 8-102 of the UCC and (c) with respect to investments above that require a rating of “A-1+” from Standard and Poor’s, such investments in certain short-term debt of issuers or deposits in institutions rated “A-1” by Standard & Poor’s will be permitted so long as (1) the total amount of investments in “A-1” issuers or deposits in “A-1” institutions must be limited to investments of the amount on deposit in the Collection Account and (2) the total amount of “A-1” investments shall not represent more than 20% of the Note Balance as of any date.

 

For purposes of this definition, any reference to the highest available credit rating of an obligation means the highest available credit rating for such obligation, or such lower credit rating (as approved in writing by each Rating Agency) as will not result in the qualification, downgrading or withdrawal of the rating then assigned to any Securities by such Rating Agency.

 

“Eligible Servicer” means a Person which, at the time of its appointment as Servicer, (i) has a net worth of not less than $50,000,000, (ii) is servicing a portfolio of motor vehicle retail installment sale contracts or motor vehicle loans, (iii) is legally qualified, and has the capacity, to service the Receivables, (iv) has demonstrated the ability to service a portfolio of motor vehicle installment sales contracts and installment loans similar to the Receivables professionally and competently in accordance with standards of skill and care that are consistent with prudent industry standards and (v) is qualified and entitled to use pursuant to a license or other written agreement, and agrees to maintain the confidentiality of, the software which the Servicer uses in connection with performing its duties and responsibilities under the Sale and Servicing Agreement or obtains rights to use, or develops at its own expense, software which is adequate to perform its duties and responsibilities under the Sale and Servicing Agreement.

 

“Entitlement Holder” has the meaning specified in Section 8-102 of the UCC.

 

“Entitlement Order” has the meaning specified in Section 8-102 of the UCC.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“Event of Default” has the meaning specified in Section 5.01 of the Indenture.

 

“Excess Collections” means, with respect to any Distribution Date, any Available Funds remaining after the distributions have been made pursuant to Section 2.08(a)(i) through (a)(viii) or Section 2.08(f)(i) through (f)(vi) of the Indenture.

 

 

 

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“Exchange Act” means the Securities Exchange Act of 1934.

 

“Exchange Act Reports” means any reports on Form 10-D, Form 8-K or Form 10-K required to be filed by the Depositor with respect to the Issuer under the Exchange Act.

 

“Executive Officer” means, with respect to any (i) corporation, limited liability company or depository institution, the chief executive officer, the chief operating officer, the chief financial officer, the president, any Vice President, the secretary or the treasurer of such entity and (ii) partnership, any general partner thereof.

 

“Expenses” means any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever.

 

“Final Scheduled Distribution Date” means the Class A-1 Final Scheduled Distribution Date, the Class A-2 Final Scheduled Distribution Date, the Class A-3 Final Scheduled Distribution Date or the Class A-4 Final Scheduled Distribution Date, as the context may require.

 

“Financed Vehicle” means, with respect to any Receivable, the related new or pre-owned Mercedes-Benz or smart motor vehicle, together with all accessions thereto, securing the related Obligor’s indebtedness under such Receivable.

 

“Financial Asset” has the meaning specified in Section 8-102(a)(9) of the UCC.

 

“First-Tier Assignment” means the first-tier assignment in substantially the form attached as Exhibit B to the Receivables Purchase Agreement.

 

“Form 10-D Disclosure Item” means, with respect to any Person, any event specified in Part II of Schedule C for which such Person is the responsible party, if such Person or in the case of the Owner Trustee or Indenture Trustee, a Responsible Officer of such Person, has actual knowledge of such event.

 

“Form 10-K Disclosure Item” means, with respect to any Person, (i) any Form 10-D Disclosure Item and (ii) any additional items specified in Part II of Schedule C for which such Person is the responsible party, or if such Person is the Indenture Trustee or the Owner Trustee, a Responsible Officer of such Person has actual knowledge of such event.

 

“Governmental Authority” means the United States, any State or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

“Grant” means to mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create and grant a lien upon and a security interest in and a right of set-off against, deposit, set over and confirm pursuant to the Indenture.  A Grant of the Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to

 

 

 

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claim for, collect, receive and give receipt for principal and interest payments in respect of the Collateral and all other monies payable thereunder, to give and receive notices and other commu­nications, to make waivers or other agreements, to exercise all rights and options, to bring Pro­ceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.

 

“Holder” means a Certificateholder or a Noteholder, as the context may require.

 

“Indemnified Parties” means the Owner Trustee and its officers, directors, successors, agents and servants.

 

“Indenture” means the Indenture, dated as of April 1, 2010, between the Issuer and the Indenture Trustee.

 

“Indenture Trustee” means U.S. Bank, in its capacity as Indenture Trustee under the Indenture, and its successors in such capacity.

 

“Independent” means, with respect to any Person, that such Person (i) is in fact independent of the Issuer, any other obligor on the Notes, the Depositor, the Seller, the Servicer and any of their respective Affiliates, (ii) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Depositor, the Seller, the Servicer or any of their respective Affiliates and (iii) is not connected with the Issuer, any such other obligor, the Depositor, the Seller, the Servicer or any of their respective Affiliates as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions.

 

“Independent Certificate” means a certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and acceptable to the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of “Independent” in the Indenture and that the signer is Independent within the meaning thereof.

 

“Initial Note Balance” means, as the context may require, with respect to (i) all of the Notes, $992,820,000 or (ii) any Note, an amount equal to the initial denomination of such Note.

 

“Insolvency Event” means, with respect to any Person, (i) the making of a general assignment for the benefit of creditors; (ii) the filing of a voluntary petition in bankruptcy; (iii) being adjudged as bankrupt or insolvent, or having had entered against such Person an order for relief in any bankruptcy or insolvency Proceeding; (iv) the filing by such Person of a petition or answer seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any Insolvency Laws; (v) the filing by such Person of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in any proceeding specified in clause (viii) below; (vi) the seeking, consenting to or acquiescing in the appointment of a trustee, receiver, liquidator or similar official of such Person or of all or any substantial part of the assets of such Person; (vii) the failure by such Person generally to pay its debts as such debts become due; (viii) the failure to obtain dismissal within 60 days of the commencement of any Proceeding against such Person

 

 

 

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seeking (a) reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, or (b) the appointment of a trustee, liquidator, receiver or similar official, in each case of such Person or of such Person’s assets or any substantial portion thereof; and (ix) the taking of action by such Person in furtherance of any of the foregoing.

 

“Insolvency Laws” means the Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments or similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

 

“Insurance Proceeds” means proceeds paid by any insurer under a comprehensive and collision or limited dual interest insurance relating to a Receivable, other than funds used for the repair of the related Financed Vehicle or otherwise released to the related Obligor in accordance with normal servicing procedures, after reimbursement to the Servicer for expenses recoverable under the related insurance policy.

 

“Interest Carryover Shortfall Amount” means, with respect to any Distribution Date and a Class of Notes, the excess, if any, of the Interest Distributable Amount for that Class of Notes on the immediately preceding Distribution Date over the amount in respect of interest that is actually deposited in the Note Payment Account with respect to that Class of Notes on that preceding Distribution Date, plus, to the extent permitted by Applicable Law, interest on the amount of interest due but not paid to such Noteholders on that preceding Distribution Date at the applicable Interest Rate.

 

“Interest Distributable Amount” means, with respect to any Distribution Date and a Class of Notes, the sum of the Monthly Interest Distributable Amount and the Interest Carryover Shortfall Amount for that Class of Notes for that Distribution Date.

 

“Interest Period” means, with respect to any Distribution Date and the (i) Class A-1 Notes, the period from, and including, the prior Distribution Date (or from, and including, the Closing Date with respect to the first Distribution Date) to, but excluding, the current Distribution Date and (ii) Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, the period from, and including, the 15th day of the prior calendar month (or from, and including, the Closing Date with respect to the first Distribution Date) to, but excluding, the 15th day of the current calendar month (assuming each month has 30 days).

 

“Interest Rate” means the Class A-1 Interest Rate, the Class A-2 Interest Rate, the Class A-3 Interest Rate and the Class A-4 Interest Rate, as applicable.

 

“Investor Report” means a report of the Servicer, delivered pursuant to Section 3.10 of the Sale and Servicing Agreement, substantially in the form of Exhibit B thereto.

 

“IRS” means the Internal Revenue Service.

 

“Issuer” means Mercedes-Benz Auto Receivables Trust 2010-1 until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained in the Indenture and required by the TIA, each other obligor on the Notes.

 

 

 

 

AA-13

 

“Issuer Basic Documents” means the Basic Documents to which the Issuer is a party.

 

“Issuer Order” or “Issuer Request” means a written order or request signed in the name of the Issuer by any Authorized Officer of the Issuer and delivered to the Indenture Trustee by the Administrator, if signed by an officer of the Administrator, or at the written direction of the Depositor, if signed by an officer of the Owner Trustee.

 

“Item 1119 Party” means the Depositor, the Seller, the Servicer, the Indenture Trustee, the Owner Trustee and any other material transaction party, as identified in Schedule B hereto.

 

“Lien” means any security interest, lien, claim, charge, pledge, equity or encumbrance of any kind other than tax liens, mechanics’ or materialmen’s liens, judicial liens and any other liens that may attach to a Financed Vehicle by operation of law.

 

“Maryland Vehicle Sales Finance Act” means Maryland Code Annotated, Financial Institutions §11-401 et seq.

 

“May 2011 Class A-1 Note Distribution” means the amount distributable from the Collection Account pursuant to Section 2.08 of the Indenture to the Noteholders of the Class A-1 Notes on the May 13, 2011 Distribution Date with respect to the Class A-1 Notes if the Class A-1 Event has occurred.

 

“Monthly Interest Distributable Amount” means, with respect to any Distribution Date and any Class of Notes, the interest due on that Class of Notes for the related Interest Period calculated based on the Interest Rate for that Class of Notes and the principal amount of that Class of Notes on the preceding Distribution Date, after giving effect to all payments of principal on such Class of Notes on or prior to that Distribution Date, or, in the case of the first Distribution Date, on the original principal amount of that Class of Notes as of the Closing Date.

 

“Monthly Payment” means, with respect to any Receivable, the amount of each fixed monthly payment payable to the obligee under such Receivable in accordance with the terms thereof, net of any portion of such monthly payment that represents late payment charges, extension fees or similar items.

 

“Monthly Remittance Condition” means that (i) DCFS USA, or its successor, is the Servicer and is a direct or indirect wholly owned subsidiary of Daimler AG, (ii) there exists no Event of Servicing Termination and (iii) with respect to (a) Standard & Poor’s, Daimler AG’s short-term unsecured debt is rated at least “A-1” by Standard & Poor’s and (b) Moody’s has agreed that the deposit of collections on or in respect of the Receivables into the Collection Account may be made by the Servicer on a monthly, rather than a daily, basis without such monthly deposits adversely impacting the ratings of any Outstanding Notes.

 

“Monthly Servicing Fee” means, for any Collection Period, the fee payable to the Servicer on the related Distribution Date for services rendered during such Collection Period, which is equal to the product of 1/12 of 1.00% (or 1/6 of 1.00% in the case of the first Distribution Date) and the Pool Balance as of the first day of that Collection Period (or as of the Cutoff Date in the case of the first Distribution Date).

 

“Monthly Trustee Fees” means the monthly fees, expenses and indemnification amounts payable in accordance with the Basic Documents to each of the Trustees on each Distribution Date for the related Collection Period for performing their respective obligations under the Basic Documents.

 

 

 

 

AA-14

 

“Moody’s” means Moody’s Investors Service, Inc.

 

 “Net Liquidation Proceeds” means all amounts received by the Servicer, from whatever source (including Insurance Proceeds), with respect to any Defaulted Receivable during the Collection Period in which such Receivable became a Defaulted Receivable, minus the sum of:

 

(i) expenses incurred by the Servicer in connection with the repossession and disposition of the related Financed Vehicle (to the extent not previously reimbursed to the Servicer); and

 

(ii) all payments required by law to be remitted to the Obligor.

 

“Net Losses” means, with respect to any Collection Period, the difference (which may be positive or negative) of (i) the aggregate Principal Balance of all Receivables that became Defaulted Receivables during such Collection Period and (ii) the aggregate Net Liquidation Proceeds and Recoveries received by the Servicer during such Collection Period.

 

“Nonrecoverable Advance” means an Advance which the Servicer determines in its sole discretion is non-recoverable from payments made on or in respect of the related Receivable.

 

“Note Balance” means, at any time, the aggregate principal amount of all Notes that are Outstanding at such time or the aggregate principal amount of all Notes of the Controlling Class or a particular Class that are Outstanding at such time, as the context requires.

 

“Note Depository Agreement” means the agreement, dated the Closing Date, between the Issuer and The Depository Trust Company, as the initial Clearing Agency, relating to the Notes.

 

“Note Factor” means, with respect to each Class of Notes as of any Distribution Date, a four or more digit decimal figure equal to the product of (i) the Note Balance of such Class of Notes as of such Distribution Date (after giving effect to any reductions thereof to be made on such Distribution Date) and (ii) 1.000000, divided by (iii) the original principal amount of such Class of Notes.

 

“Note Owner” means, with respect to any Book-Entry Note, the Person who is the beneficial owner of such Book-Entry Note, as reflected on the books of the Clearing Agency or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency).

 

“Note Payment Account” means the account designated as such, and established and maintained pursuant to Section 4.01(a) of the Sale and Servicing Agreement.

 

“Note Register” and “Note Registrar” have the respective meanings specified in Section 2.05(a) of the Indenture.

 

“Noteholder” means the Person in whose name a Note is registered on the Note Register.

 

“Notes” means the Class A Notes.

 

 

 

 

AA-15

 

 

“Obligor” means, with respect to any Receivable, the purchaser or co-purchasers of the related Financed Vehicle purchased in part or in whole by the execution and delivery of a Receivable or any other Person who owes or may be liable for payments under a Receivable.

 

“Officer’s Certificate” means, with respect to the Depositor, the Servicer or any other entity, a certificate signed by an Authorized Officer of the Depositor, the Servicer or such other entity, as the case may be.

 

“Opinion of Counsel” means a written opinion of counsel who may, except as otherwise provided in a Basic Document, be employees of or counsel to DCFS USA, the Depositor or any of their respective Affiliates and, in the case of an opinion of counsel to be delivered to a party to the Basic Documents or another entity, (i) is delivered by counsel reasonably acceptable to the related recipient and (ii) is addressed to such recipient.

 

“Optional Purchase” means the exercise by the Servicer of its option to purchase all remaining Receivables from the Issuer on any Distribution Date following the last day of a Collection Period as of which the Pool Balance is 10% or less of the Cutoff Date Pool Balance.

 

“Original Trust Agreement” means the Trust Agreement, dated as of August 27, 2009, between the Depositor and the Owner Trustee, pursuant to which the Issuer was created, as amended and restated by the Amended and Restated Trust Agreement, dated as of March 29, 2010, between the Depositor and the Owner Trustee.

 

 “Outstanding” means, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture except:

 

(i) Notes theretofore canceled by the Note Registrar or delivered to the Note Registrar for cancellation;

 

(ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Noteholders; provided, however, that if such Notes are to be redeemed, notice of such redemption must have been duly given pursuant to the Indenture or provision for such notice must have been made in a manner satisfactory to the Indenture Trustee; and

 

(iii) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a Protected Purchaser;

 

provided, however, that in determining whether the Noteholders of the requisite principal amount of the Notes Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or under any other Basic Document, Notes owned by the Issuer, any other obligor upon the Notes, the Depositor, the Seller, the Servicer or any of their respective Affiliates shall be disregarded and deemed not to be Outstanding unless all of the Notes of the related Class or Classes are owned by the Issuer, any other obligor upon the Notes, the Depositor, the Seller, the Servicer or any of their respective Affiliates, except that, in determining whether the Indenture Trustee shall be protected in relying on any such request,

 

 

 

AA-16

 

demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee knows to be so owned shall be so disregarded.  Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Depositor, the Seller, the Servicer or any of their respective Affiliates.

 

“Owner Trust Estate” means the $1 capital contribution from the Depositor and the Trust Property.

 

“Owner Trustee” means Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, and any successor in such capacity.

 

“Paying Agent” means the Indenture Trustee or any other Person that meets the eligibility standards specified in Section 6.11 of the Indenture and is authorized by the Issuer to make or cause to be made payments to and distributions from the Collection Account, the Note Payment Account and the Reserve Fund, including payments of principal or interest on the Notes or the Certificates on behalf of the Issuer.  The Indenture Trustee shall be the initial Paying Agent.

 

“Pennsylvania Motor Vehicle Sales Finance Act” means 69 P.S. § 601 et seq.

 

“Permitted Lien” means, with respect to any Receivable or Financed Vehicle, any tax lien, mechanics’ lien or lien that attaches to a Receivable or Financed Vehicle by operation of law and arises solely as a result of an action or omission of the related Obligor.

 

“Performance Certification” means each certification delivered to the Certifying Person pursuant to Section 9.06 of the Sale and Servicing Agreement.

 

“Person” means any legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, limited liability partnership, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity of whatever nature.

 

“Plan Asset Regulation” means 29 C.F.R. Section 2510.3-101 issued by the United States Department of Labor, as modified by Section 3(42) of ERISA.

 

“Pool Balance” means, as of any date, the aggregate Principal Balance of the Receivables as of such date; provided, however, that if the Receivables are purchased by the Servicer pursuant to Section 8.01(a) of the Sale and Servicing Agreement or are sold or otherwise liquidated by the Indenture Trustee following an Event of Default pursuant to Section 5.04 of the Indenture, the Pool Balance shall be deemed to be zero as of the last day of the Collection Period during which such purchase, sale or other liquidation occurs.

 

“Predecessor Note” means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.

 

 

 

AA-17

 

 

“Prepayment” means any prepayment, whether in part or in full, in respect of a Receivable.

 

“Principal Balance” means, with respect to any Receivable as of any date, the Amount Financed under such Receivable minus the sum of (i) that portion of all Monthly Payments actually received on or prior to such date allocable to principal using the Simple Interest Method and (ii) any Prepayment applied to reduce the unpaid principal balance of such Receivable; provided, however, that the Principal Balance of a (a) Defaulted Receivable shall be zero as of the last day of the Collection Period during which it became a Defaulted Receivable and (b) Purchased Receivable shall be zero as of the last day of the Collection Period during which it became a Purchased Receivable.

 

“Priority Principal Distributable Amount” means, with respect to any Distribution Date, the excess, if any, of the Note Balance of the Class A Notes as of such Distribution Date (before giving effect to any payments made to Noteholders on that Distribution Date) over the Adjusted Pool Balance as of the last day of the preceding Collection Period; provided, however, that the Priority Principal Distributable Amount for each Distribution Date on and after the Final Scheduled Distribution Date for any Class of Class A Notes will not be less than the amount that is necessary to reduce the outstanding principal balance of such Class of Class A Notes to zero.

 

“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.

 

“Protected Purchaser” has the meaning specified in Section 8-303 of the UCC.

 

“Provided Information” means, with respect to (i) the Indenture Trustee, the Servicing Criteria Assessment provided under Article Nine of the Indenture by or on behalf of the Indenture Trustee and (ii) the Servicer, the information provided pursuant to Sections 3.11 and 3.12 of the Sale and Servicing Agreement, by or on behalf of the Servicer.

 

“PTCE” means Prohibited Transaction Class Exemption.

 

“PTCE 95-60” means Prohibited Transaction Class Exemption 95-60.

 

“Purchase Amount” means the price at which the Seller must repurchase or the Servicer must purchase a Receivable in an amount equal to the sum of (i) the Principal Balance of such Receivable plus (ii) the amount of accrued but unpaid interest on such Principal Balance at the related APR to the last day of the Collection Period of repurchase.

 

“Purchased Receivable” means a Receivable purchased or repurchased, as applicable, as of the last day of a Collection Period as to which payment of the Purchase Amount has been made by the Servicer pursuant to Section 2.05, 3.03, 3.08 or 8.01 of the Sale and Servicing Agreement or by the Seller pursuant to Section 3.03(c) of the Receivables Purchase Agreement.

 

“Purchaser” means Daimler Retail Receivables, in its capacity as purchaser of the Receivables under the Receivables Purchase Agreement, and its successors in such capacity.

 

 

 

 

 

AA-18

 

 

“Purchaser Basic Documents” means the Basic Documents to which the Purchaser is a party.

 

“Rating Agency” means Moody’s or Standard & Poor’s; provided, however, that if either of Moody’s and Standard & Poor’s cease to exist, Rating Agency shall mean any nationally recognized statistical rating organization or other comparable Person designated by the Issuer to replace such Person, written notice of which designation shall have been given to the Depositor, the Servicer and the Trustees.

 

“Rating Agency Condition” means, with respect to any action, in the case of (i) Standard & Poor’s, that Standard & Poor’s shall have been given ten days (or such shorter period as is acceptable to Standard & Poor’s) prior notice thereof and that Standard & Poor’s shall have notified the Depositor, the Servicer and the Trustees in writing that such action will not result in a qualification, reduction or withdrawal of any of its then-current ratings assigned to the Notes and (ii) Moody’s, that Moody’s shall have been given ten days’ (or such shorter period as is acceptable to Moody’s) prior notice of such action.

 

“ Receivable” means each motor vehicle retail installment sale contract or installment loan identified on the Schedule of Receivables.

 

“Receivable Files” has the meaning specified in Section 2.06 of the Sale and Servicing Agreement.

 

“Receivables Purchase Agreement” means the Receivables Purchase Agreement, dated as of April 1, 2010, between the Seller and the Purchaser.

 

“Receivables Purchase Price” means $990,235,135.15.

 

“Record Date” means, with respect to (i) the Certificates and any Distribution Date, the close of business on the Business Day immediately preceding such Distribution Date and (ii) the Notes and any Distribution Date or Redemption Date, the close of business on the Business Day preceding such Distribution Date or Redemption Date; provided, however, that if Definitive Notes have been issued pursuant to Section 2.12 of the Indenture, Record Date shall mean, with respect to any Distribution Date or Redemption Date, the last day of the preceding Collection Period.

 

 “Recoveries” means, with respect to any Collection Period following the Collection Period in which a Receivable became a Defaulted Receivable, all amounts received by the Servicer from whatever source (including Insurance Proceeds) with respect to such Defaulted Receivable during such Collection Period, minus the sum of:

 

(i) expenses incurred by the Servicer in connection with the repossession and disposition of the related Financed Vehicle (to the extent not previously reimbursed to the Servicer); and

 

(ii) all payments required by law to be remitted to the related Obligor.

 

 

 

AA-19

 

 

 

“Redemption Date” means, in the case of a redemption of the Notes pursuant to Section 10.01 of the Indenture, the Distribution Date specified by the Servicer pursuant to such Section.

 

“Redemption Price” means, in the case of a redemption of the Notes pursuant to Section 10.01 of the Indenture, an amount equal to the unpaid principal amount of the Notes redeemed plus accrued and unpaid interest thereon through the related Interest Period at the related Interest Rates.

 

“Regular Principal Distributable Amount” means, with respect to any Distribution Date, an amount equal to the lesser of (i) the Note Balance of the Notes on that Distribution Date (before giving effect to any payments of principal made to Noteholders on that Distribution Date) and (ii) an amount equal to the amount, if any, by which the Note Balance of the Notes on that Distribution Date (before giving effect to any payments of principal made to Noteholders on that Distribution Date) exceeds the excess, if any, of the Adjusted Pool Balance as of the last day of the related Collection Period minus the Target Overcollateralization Amount, less the amount of any Priority Principal Distributable Amount.

 

“Regulation AB” means subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, subject to such clarification and interpretation as has been provided by the Commission in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by the Commission or its staff from time to time.

 

“Reportable Event” means any event required to be reported on Form 8-K, including each event specified on Part IV of Schedule C (i) for which such Person is the responsible party and (ii) of which such Person (or in the case of the Indenture Trustee, as Responsible Officer of such Person) has actual knowledge.

 

“Representatives” means Citigroup Global Markets Inc. and Barclays Capital Inc., each in its capacity as representative of the underwriters named in the Underwriting Agreement.

 

“Required Payment Amount” has, with respect to each Distribution Date, the meaning specified in Section 4.08(a)(vii) of the Sale and Servicing Agreement.

 

“Required Rate” means 6.25% per annum.

 

“Reserve Fund” means the account designated as such, and established and maintained pursuant to Section 4.01(a) of the Sale and Servicing Agreement.

 

“Reserve Fund Amount” means, with respect to any Distribution Date, the amount on deposit in and available for withdrawal from the Reserve Fund on such Distribution Date (after giving effect to all deposits to and withdrawals from the Reserve Fund on the preceding Distribution Date (or, in the case of the first Distribution Date, the Closing Date), including all interest and other investment earnings (net of losses and investment expenses) earned on such amount on deposit therein during the related Collection Period.

 

 

 

AA-20

 

 

 

“Reserve Fund Deficiency” means, as of any date, the excess of the Reserve Fund Required Amount over the Reserve Fund Amount.

 

“Reserve Fund Deposit” means an amount equal to $2,739,577.19.

 

“Reserve Fund Draw Amount” means, with respect to any Distribution Date and the related Collection Period, the lesser of (i) the amount, if any, by which the Required Payment Amount exceeds Available Collections and (ii) the Reserve Fund Amount (before giving effect to any deposits to or withdrawals from the Reserve Fund on such Distribution Date); provided, however, that the Reserve Fund Draw Amount shall equal the Reserve Fund Amount if (a) the sum of Available Collections and the Reserve Fund Amount equals or exceeds the Note Balance, accrued and unpaid interest thereon and all amounts required to be paid to the Servicer and the Trustees on such Distribution Date or (b) on the last day of such Collection Period the Pool Balance is zero.

 

“Reserve Fund Property” means the Reserve Fund and all amounts, securities, investments, Financial Assets and other property deposited in or credited to the Reserve Fund.

 

“Reserve Fund Required Amount” means, for (i) any Distribution Date on which the Note Balance is greater than $0, $2,739,577.19 and (ii) if the Notes have been paid in full, $0; provided, however, that the Reserve Fund Required Amount may not exceed the Note Balance.

 

“Responsible Officer” means, in the case of (i) the Indenture Trustee, any officer within the Corporate Trust Office of the Indenture Trustee with direct responsibility for the administration of the Indenture, including any principal, managing director, president, Vice President, assistant treasurer, assistant secretary or any other officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above-designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject and (ii) the Owner Trustee, any officer in the Corporate Trust Administration department of the Owner Trustee with direct responsibility for the administration of the Issuer and, with respect to a particular corporate trust matter, any other officer of the Owner Trustee to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

“Sale and Servicing Agreement” means the Sale and Servicing Agreement, dated as of April 1, 2010, among the Issuer, the Depositor, the Seller and the Servicer.

 

“Sarbanes-Oxley Certification” means the certification concerning the Issuer, to be signed by an officer of the Servicer or the Depositor and submitted to the Commission pursuant to the Sarbanes-Oxley Act of 2002.

 

“Schedule of Receivables” means the schedule of Receivables attached as Schedule A to the Receivables Purchase Agreement.

 

“Secretary of State” means the Secretary of State of the State of Delaware.

 

“Securities” means the Notes and the Certificates.

 

 

 

AA-21

 

 

 

“Securities Act” means the Securities Act of 1933.

 

“Securitization Transaction” means any transaction involving a sale or other transfer of receivables directly or indirectly to an issuing entity in connection with an issuance of publicly offered or privately placed, rated or unrated asset-backed securities.

 

“Security Entitlement” has the meaning specified in Section 8-102(a)(17) of the UCC.

 

“Securityholders” means the Noteholders and the Certificateholders.

 

“Seller” means DCFS USA, in its capacity as seller of the Receivables under the Receivables Purchase Agreement or the Sale and Servicing Agreement, as the case may be, and its successors in such capacity.

 

“Seller Basic Documents” means the Basic Documents to which the Seller is a party.

 

“Servicer” means DCFS USA, in its capacity as Servicer under the Sale and Servicing Agreement, and its successors in such capacity.

 

“Servicer Basic Documents” means the Basic Documents to which the Servicer is a party.

 

“Servicer Termination Event” has the meaning specified in Section 7.01 of the Sale and Servicing Agreement.

 

“Servicer Termination Notice” means a notice given to the Servicer pursuant to Section 7.01 of the Sale and Servicing Agreement terminating all rights and obligations of the Servicer under the Sale and Servicing Agreement, other than the indemnification obligations of the Servicer under Section 6.02 of the Sale and Servicing Agreement, which shall survive such termination.

 

“Servicing Criteria” means the “servicing criteria” set forth in Item 1122(d) of Regulation AB.

 

“Servicing Criteria Assessment” means a report of the Indenture Trustee’s assessment of compliance with the Servicing Criteria (as identified substantially in the form of Part I of Schedule C of the Indenture, with the Indenture Trustee being shown as the “Responsible Party”) during the immediately preceding calendar year, as set forth under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB.

 

“Servicing Officer” means any officer of the Servicer involved in, or responsible for, the administration and servicing of the Receivables whose name appears on a list of servicing officers attached to an Officer’s Certificate furnished on the Closing Date to the Trustees by the Servicer, as such list may be amended from time to time by the Servicer in writing.

 

“Simple Interest Method” means the method of allocating a fixed level payment between principal and interest, pursuant to which a portion of such payment is allocated to interest in an amount equal to the product of the APR of the related Receivable multiplied by the unpaid Principal Balance of such Receivable multiplied by the period of time (expressed as a fraction of

 

 

 

AA-22

 

a year, based on the actual number of days in the applicable calendar month and a 365-day year) elapsed since the preceding payment was made and the remainder of such payment is allocated to principal.

 

“Simple Interest Receivable” means any Receivable under which each payment is allocated between principal and interest in accordance with the Simple Interest Method.

 

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.

 

“State” means any of the 50 states of the United States or the District of Columbia.

 

“Statutory Exemption” means the prohibited transaction exemption provided by Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code.

 

“Statutory Trust Statute” means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code § 3801 et seq.

 

“Successor Servicer” means any entity appointed as a successor to the Servicer pursuant to Section 7.02 of the Sale and Servicing Agreement.

 

“Supplemental Servicing Fee” means the sum of (i) all extension fees charged in connection with extensions of Receivables and (ii) any administration fees and charges and all late payment fees and Prepayment fees actually collected (from whatever source) on the Receivables.

 

“Target Overcollateralization Amount” means, with respect to any Distribution Date, the greater of (i) 12.90% of the Adjusted Pool Balance as of the last day of the related Collection Period and (ii) 5.00% of the Cutoff Date Adjusted Pool Balance.

 

“Total Servicing Fee” means, for any Collection Period and the related Distribution Date, the sum of (i) the Monthly Servicing Fee for such Collection Period and (ii) all accrued but unpaid Monthly Servicing Fees for one or more prior Collection Periods.

 

“Total Trustee Fees” means, for any Collection Period and the related Distribution Date, with respect to each of the Trustees, the sum of (i) the Monthly Trustee Fees for such Collection Period and (ii) all accrued but unpaid Monthly Trustee Fees for the previous Collection Period.

 

“Transfer” means a sale, transfer, assignment, participation, pledge or other disposition of a Certificate.

 

“Transition Costs” means the reasonable costs and expenses (including reasonable attorneys’ fees but excluding overhead) incurred or payable by the Successor Servicer in connection with the transfer of servicing (whether due to termination, resignation or otherwise), including allowable compensation of employees and overhead costs incurred or payable in connection with the transfer of the Receivable Files or any amendment to the Sale and Servicing Agreement required in connection with the transfer of servicing.

 

 

 

AA-23

 

 

 

“Treasury Regulations” means regulations, including proposed or temporary regulations, promulgated under the Code.  References herein to specific provisions of proposed or temporary Treasury Regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

 

“Trust Agreement” means the Second Amended and Restated Trust Agreement, dated as of April 1, 2010, between the Depositor and the Owner Trustee.

 

“Trust Estate” means all money, instruments, rights, and other property that are subject or intended to be subject to the lien and security interest of the Indenture for the benefit of the Noteholders (including all property and interests Granted to the Indenture Trustee), including all proceeds thereof.

 

“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939 as in force on the Closing Date, unless otherwise specifically provided in the Indenture.

 

“Trust Property” means, as of any date, the Receivables and other property related thereto sold, transferred, assigned and conveyed to the Issuer pursuant to Section 2.01(a) of the Sale and Servicing Agreement.

 

“Trustee” means either the Owner Trustee or the Indenture Trustee, as the context requires.

 

“Trustees” means the Owner Trustee and the Indenture Trustee.

 

“UCC” means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction.

 

“Underwriting Agreement” means the Underwriting Agreement, dated April 13, 2010, among the Depositor, DCFS USA and the Representatives.

 

“United States” or “U.S.” means the United States of America.

 

“U.S. Bank” means U.S. Bank National Association, a national banking association.

 

“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.

 

“Yield Supplement Overcollateralization Amount” means, with respect to any Distribution Date and the related Collection Period (or any day in such Collection Period), the aggregate amount by which the Principal Balance of each Receivable (other than a Defaulted Receivable or a Purchased Receivable) as of the last day of such Collection Period, exceeds the present value of all remaining Monthly Payments, calculated using the Discount Rate and assuming that all such Monthly Payments are made on the last day of each month and that each month has 30 days.  The Yield Supplement Overcollateralization Amount for each Distribution Date shall equal the amount set forth below:

 

 

 

AA-24

 

 

 

	 	

Distribution Date

	 	

Yield Supplement Overcollateralization Amount

	 

	 	
Closing Date                          

	 	
 $54,176,014.97

	 
	 	
June 2010                          

	 	
 $50,199,025.96

	 
	 	
July 2010                          

	 	
 $48,267,078.07

	 
	 	
August 2010                          

	 	
 $46,373,224.23

	 
	 	
September 2010

	 	
 $44,517,742.62

	 
	 	
October 2010                          

	 	
 $42,700,902.40

	 
	 	
November 2010                          

	 	
 $40,922,984.08

	 
	 	
December 2010                          

	 	
 $39,184,240.96

	 
	 	
January 2011                          

	 	
 $37,484,950.44

	 
	 	
February 2011                          

	 	
 $35,825,381.16

	 
	 	
March 2011                          

	 	
 $34,205,795.77

	 
	 	
April 2011                          

	 	
 $32,626,426.10

	 
	 	
May 2011                          

	 	
 $31,087,496.06

	 
	 	
June 2011                          

	 	
 $29,589,172.14

	 
	 	
July 2011                          

	 	
 $28,131,450.87

	 
	 	
August 2011                          

	 	
 $26,714,275.49

	 
	 	
September 2011

	 	
 $25,337,608.70

	 
	 	
October 2011                          

	 	
 $24,001,505.32

	 
	 	
November 2011                          

	 	
 $22,706,046.69

	 
	 	
December 2011                          

	 	
 $21,451,250.51

	 
	 	
January 2012                          

	 	
 $20,237,173.05

	 
	 	
February 2012                          

	 	
 $19,063,874.13

	 
	 	
March 2012                          

	 	
 $17,931,315.08

	 
	 	
April 2012                          

	 	
 $16,839,489.82

	 
	 	
May 2012                          

	 	
 $15,788,344.29

	 
	 	
June 2012                          

	 	
 $14,777,709.10

	 
	 	
July 2012                          

	 	
 $13,807,292.33

	 
	 	
August 2012                          

	 	
 $12,876,831.28

	 
	 	
September 2012

	 	
 $11,985,843.86

	 
	 	
October 2012                          

	 	
 $11,133,335.63

	 
	 	
November 2012                          

	 	
 $10,317,834.39

	 
	 	
December 2012                          

	 	
 $9,538,297.86

	 
	 	
January 2013                          

	 	
 $8,793,829.09

	 
	 	
February 2013                          

	 	
 $8,083,327.15

	 
	 	
March 2013                          

	 	
 $7,405,751.62

	 
	 	
April 2013                          

	 	
 $6,760,357.73

	 
	 	
May 2013                          

	 	
 $6,147,272.18

	 
	 	
June 2013                          

	 	
 $5,566,570.22

	 
	 	
July 2013                          

	 	
 $5,018,104.78

	 
	 	
August 2013                          

	 	
 $4,501,444.39

	 
	 	
September 2013

	 	
 $4,015,974.78

	 
	 	
October 2013                          

	 	
 $3,561,326.54

	 
	 	
November 2013                          

	 	
 $3,137,307.64

	 
	 	
December 2013                          

	 	
 $2,743,592.16

	 
	 	
January 2014                          

	 	
 $2,379,889.01

	 
	 	
February 2014                          

	 	
 $2,045,887.56

	 
	 	
March 2014                          

	 	
 $1,741,353.26

	 
	 	
April 2014                          

	 	
 $1,465,909.16

	 
	 	
May 2014                          

	 	
 $1,219,259.52

	 
	 	
June 2014                          

	 	
 $1,000,423.76

	 
	 	
July 2014                          

	 	
 $808,048.85

	 
	 	
August 2014                          

	 	
 $640,711.73

	 
	 	
September 2014

	 	
 $497,156.52

	 
	 	
October 2014                          

	 	
 $376,256.07

	 
	 	
November 2014                          

	 	
 $277,282.50

	 
	 	
December 2014                          

	 	
 $198,887.35

	 
	 	
January 2015                          

	 	
 $138,469.64

	 
	 	
February 2015                          

	 	
 $92,593.32

	 
	 	
March 2015                          

	 	
 $58,350.62

	 
	 	
April 2015                          

	 	
 $33,750.39

	 
	 	
May 2015                          

	 	
 $16,885.49

	 
	 	
June 2015                          

	 	
 $6,577.36

	 
	 	
July 2015                          

	 	
 $1,548.88

	 
	 	
August 2015                          

	 	
 $35.46

	 
	 	
September 2015

	 	
 $0.73

	 
	 	
October 2015                          

	 	
 $0.37

	 
	 	
November 2015                          

	 	
 $0.12

	 

 

 

 

 

AA-25

 

 

 

	 	

Distribution Date

	 	

Yield Supplement Overcollateralization Amount

	 

	 	
December 2015 and after

	 	
 $0.00

	 

 

 

 

 

 

 

 

 

 

 

AA-26kl04010_ex10-1.htm

 

 

Exhibit 10.1

 

 

 

CREDIT AGREEMENT

 

among

 

 

BALTIC TRADING LIMITED,

 

 

as Borrower

 

 

VARIOUS LENDERS,

 

 

and

 

 

NORDEA BANK FINLAND PLC,

 

 

acting through its New York branch,

 

 

as Administrative Agent and Security Trustee

 

__________________________________

 

Dated as of April 16, 2010

__________________________________

 

  

  

  

 

 

	
SECTION 1.

	
AMOUNT AND TERMS OF THE FACILITY 

	
1

 

	
  

	
1.01

	
The Commitments

	
1

 

	
  

	
1.02

	
Amount of Each Borrowing; Limitation on Number of Borrowings 

	
1

 

	
  

	
1.03

	
Notice of Borrowing 

	
1

 

	
  

	
1.04

	
Disbursement of Funds 

	
2

 

	
  

	
1.05

	
Notes 

	
3

 

	
  

	
1.06

	
Pro Rata Borrowings 

	
4

 

	
  

	
1.07

	
Interest 

	
4

 

	
  

	
1.08

	
Interest Periods 

	
4

 

	
  

	
1.09

	
Increased Costs, Illegality, etc 

	
5

 

	
  

	
1.10

	
Compensation 

	
8

 

	
  

	
1.11

	
Change of Lending Office 

	
8

 

	
  

	
1.12

	
Replacement of Lenders 

	
8

 

	
SECTION 2.

	
COMMITMENT COMMISSION; FEES; REDUCTIONS OF COMMITMENT 

	
9

 

	
  

	
2.01

	
Commitment Commission; Fees 

	
9

 

	
  

	
2.02

	
Voluntary Termination or Reduction of Unutilized Commitments 

	
10

 

	
  

	
2.03

	
Commitment Reduction 

	
10

 

	
SECTION 3.

	
REPAYMENTS; PREPAYMENTS; TAXES 

	
10

 

	
  

	
3.01

	
Scheduled Repayments 

	
10

 

	
  

	
3.02

	
Voluntary Prepayments 

	
10

 

	
  

	
3.03

	
Mandatory Repayments 

	
11

 

	
  

	
3.04

	
Method and Place of Payment 

	
12

 

	
  

	
3.05

	
Net Payments; Taxes 

	
12

 

	
SECTION 4.

	
CONDITIONS PRECEDENT TO THE EFFECTIVE DATE 

	
14

 

	
  

	
4.01

	
Opinions of Counsel 

	
14

 

	
  

	
4.02

	
Corporate Documents; Proceedings; etc 

	
14

 

	
  

	
4.03

	
Solvency/Minimum Consolidated Net Worth Certificate 

	
14

 

	
  

	
4.04

	
Management Agreement 

	
15

 

	
  

	
4.05

	
Approvals 

	
15

 

	
  

	
4.06

	
Litigation 

	
15

 

	
  

	
4.07

	
Material Adverse Effect 

	
15

 

	
  

	
4.08

	
Environmental Laws 

	
15

 

	
  

	
4.09

	
Fees 

	
15

 

	
  

	
4.10

	
No Conflicts 

	
15

 

	
  

	
4.11

	
No Default or Event of Default 

	
15

 

	
  

	
4.12

	
Know Your Customer 

	
16

 

	
SECTION 5.

	
CONDITIONS PRECEDENT TO BORROWINGS UNDER THE FACILITY 

	
16

 

	
  

	
5.01

	
Opinions of Counsel 

	
16

 

 

 

  

  

  

 

 

 

	
  

	
5.02

	
Corporate Documents; Proceedings; etc

	
16

 

	
  

	
5.03

	
Subsidiaries Guaranty 

	
17

 

	
  

	
5.04

	
Pledge and Security Agreement 

	
17

 

	
  

	
5.05

	
Assignments of Earnings, Insurances and Charter 

	
17

 

	
  

	
5.06

	
Control Agreement 

	
18

 

	
  

	
5.07

	
Aggregate Purchase Price of Initial Vessels 

	
18

 

	
  

	
5.08

	
Mortgages 

	
18

 

	
  

	
5.09

	
Cash Collateral 

	
18

 

	
  

	
5.10

	
Memorandum of Agreement 

	
19

 

	
  

	
5.11

	
Vessel Documents 

	
19

 

	
  

	
5.12

	
Environmental Laws 

	
19

 

	
SECTION 6.

	
FURTHER CONDITIONS PRECEDENT 

	
20

 

	
  

	
6.01

	
Further Conditions Precedent 

	
20

 

	
SECTION 7.

	
REPRESENTATIONS, WARRANTIES AND AGREEMENTS 

	
20

 

	
  

	
7.01

	
Corporate/Limited Liability Company/Limited Partnership Status 

	
20

 

	
  

	
7.02

	
Corporate Power and Authority 

	
21

 

	
  

	
7.03

	
No Violation 

	
21

 

	
  

	
7.04

	
Governmental Approvals 

	
21

 

	
  

	
7.05

	
Financial Statements; Financial Condition; Undisclosed Liabilities 

	
21

 

	
  

	
7.06

	
Litigation 

	
22

 

	
  

	
7.07

	
True and Complete Disclosure 

	
23

 

	
  

	
7.08

	
Use of Proceeds; Margin Regulations 

	
23

 

	
  

	
7.09

	
Tax Returns and Payments 

	
23

 

	
  

	
7.10

	
Compliance with ERISA 

	
23

 

	
  

	
7.11

	
The Security Documents 

	
25

 

	
  

	
7.12

	
Representations and Warranties in Documents 

	
25

 

	
  

	
7.13

	
Subsidiaries 

	
25

 

	
  

	
7.14

	
Compliance with Statutes, etc 

	
25

 

	
  

	
7.15

	
Investment Company Act 

	
25

 

	
  

	
7.16

	
Pollution and Other Regulations 

	
25

 

	
  

	
7.17

	
Labor Relations 

	
26

 

	
  

	
7.18

	
Patents, Licenses, Franchises and Formulas 

	
26

 

	
  

	
7.19

	
Indebtedness 

	
26

 

	
  

	
7.20

	
Insurance 

	
27

 

	
  

	
7.21

	
Concerning the Vessels 

	
27

 

	
  

	
7.22

	
Citizenship 

	
27

 

	
  

	
7.23

	
Vessel Classification 

	
27

 

 

 

  

  

  

 

 

	
  

	
7.24

	
No Immunity 

	
27

 

	
  

	
7.25

	
Fees and Enforcement 

	
27

 

	
  

	
7.26

	
Form of Documentation 

	
27

 

	
  

	
7.27

	
Initial Vessel Acquisitions 

	
28

 

	
  

	
7.28

	
No Material Adverse Change 

	
28

 

	
SECTION 8.

	
AFFIRMATIVE COVENANTS 

	
28

 

	
  

	
8.01

	
Information Covenants 

	
28

 

	
  

	
8.02

	
Books, Records and Inspections 

	
31

 

	
  

	
8.03

	
Maintenance of Property; Insurance; Mortgagee Interest Insurance 

	
31

 

	
  

	
8.04

	
Corporate Franchises 

	
32

 

	
  

	
8.05

	
Compliance with Statutes, etc 

	
32

 

	
  

	
8.06

	
Compliance with Environmental Laws 

	
32

 

	
  

	
8.07

	
ERISA 

	
33

 

	
  

	
8.08

	
End of Fiscal Years; Fiscal Quarters 

	
34

 

	
  

	
8.09

	
Performance of Obligations 

	
34

 

	
  

	
8.10

	
Payment of Taxes 

	
34

 

	
  

	
8.11

	
Further Assurances 

	
34

 

	
  

	
8.12

	
Deposit of Earnings 

	
35

 

	
  

	
8.13

	
Ownership of Subsidiaries 

	
36

 

	
  

	
8.14

	
Flag of the Initial Vessels; Initial Vessel Classifications 

	
36

 

	
  

	
8.15

	
Consent to Assignment of Charters 

	
36

 

	
  

	
8.16

	
Management Agreement 

	
36

 

	
  

	
8.17

	
Exchange Listing 

	
36

 

	
SECTION 9.

	
NEGATIVE COVENANTS 

	
36

 

	
  

	
9.01

	
Liens 

	
36

 

	
  

	
9.02

	
Consolidation, Merger, Sale of Assets, etc 

	
38

 

	
  

	
9.03

	
Dividends 

	
40

 

	
  

	
9.04

	
Indebtedness 

	
41

 

	
  

	
9.05

	
Advances, Investments and Loans 

	
41

 

	
  

	
9.06

	
Transactions with Affiliates 

	
42

 

	
  

	
9.07

	
Collateral Maintenance 

	
43

 

	
  

	
9.08

	
Minimum Cash Balance 

	
43

 

	
  

	
9.09

	
Minimum Consolidated Net Worth 

	
43

 

	
  

	
9.10

	
Limitation on Modifications of Certificate of Incorporation and By-Laws; etc 

	
43

 

	
  

	
9.11

	
Limitation on Certain Restrictions on Subsidiaries 

	
44

 

	
  

	
9.12

	
Limitation on Issuance of Capital Stock 

	
44

 

 

 

  

  

  

 

 

 

	
  

	
9.13

	
Business 

	
45

 

	
  

	
9.14

	
Manager 

	
45

 

	
  

	
9.15

	
Bank Accounts 

	
45

 

	
SECTION 10.    EVENTS OF DEFAULT

	
 

	
45

 

	
  

	
10.01

	
Payments 

	
45

 

	
  

	
10.02

	
Representations, etc 

	
45

 

	
  

	
10.03

	
Covenants 

	
46

 

	
  

	
10.04

	
Default Under Other Agreements 

	
46

 

	
  

	
10.05

	
Bankruptcy, etc 

	
46

 

	
  

	
10.06

	
ERISA 

	
47

 

	
  

	
10.07

	
Security Documents 

	
47

 

	
  

	
10.08

	
Guaranty 

	
47

 

	
  

	
10.09

	
Judgments 

	
48

 

	
  

	
10.10

	
Change of Control 

	
48

 

	
SECTION 11.     DEFINITIONS AND ACCOUNTING TERMS

	
 

	
48

 

	
  

	
11.01

	
Defined Terms 

	
48

 

	
SECTION 12.    AGENCY AND SECURITY TRUSTEE PROVISIONS

	
 

	
48

 

	
  

	
12.01

	
Appointment 

	
48

 

	
  

	
12.02

	
Nature of Duties 

	
49

 

	
  

	
12.03

	
Lack of Reliance on the Agents 

	
49

 

	
  

	
12.04

	
Certain Rights of the Agents 

	
50

 

	
  

	
12.05

	
Reliance 

	
50

 

	
  

	
12.06

	
Indemnification 

	
50

 

	
  

	
12.07

	
The Administrative Agent in its Individual Capacity 

	
50

 

	
  

	
12.08

	
Holders 

	
51

 

	
  

	
12.09

	
Resignation by the Administrative Agent 

	
51

 

	
SECTION 13.    MISCELLANEOUS

	
 

	
51

 

	
  

	
13.01

	
Payment of Expenses, etc 

	
51

 

	
  

	
13.02

	
Right of Setoff 

	
52

 

	
  

	
13.03

	
Notices 

	
53

 

	
  

	
13.04

	
Benefit of Agreement 

	
53

 

	
  

	
13.05

	
No Waiver; Remedies Cumulative 

	
55

 

	
  

	
13.06

	
Payments Pro Rata 

	
55

 

	
  

	
13.07

	
Calculations; Computations 

	
55

 

	
  

	
13.08

	
GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL 

	
56

 

 

  

  

  

 

 

	
  

	
13.09

	
Counterparts 

	
57

 

	
  

	
13.10

	
Effectiveness 

	
57

 

	
  

	
13.11

	
Headings Descriptive 

	
57

 

	
  

	
13.12

	
Amendment or Waiver; etc 

	
57

 

	
  

	
13.13

	
Survival 

	
59

 

	
  

	
13.14

	
Domicile of Loans 

	
59

 

	
  

	
13.15

	
Limitation on Additional Amounts, etc 

	
59

 

	
  

	
13.16

	
Confidentiality 

	
59

 

	
  

	
13.17

	
Register 

	
60

 

	
  

	
13.18

	
Judgment Currency 

	
60

 

	
  

	
13.19

	
Language 

	
61

 

	
  

	
13.20

	
Waiver of Immunity 

	
61

 

	
  

	
13.21

	
USA PATRIOT Act Notice 

	
61

 

  

  

  

 

 

	APPENDIX A	 	Definitions
	 	 	 
	SCHEDULE I	-	The Lenders and the Commitments
	SCHEDULE II	- 	The Lenders’ Addresses
	SCHEDULE III	- 	Subsidiary Guarantors and Initial Vessels
	SCHEDULE IV	-	Indebtedness 
	SCHEDULE V	- 	Insurance
	SCHEDULE VI	- 	ERISA
	SCHEDULE VII	- 	Subsidiaries
	SCHEDULE VIII 	- 	Approved Classification Societies
	 	 	 
	
EXHIBIT A

	-	
Form of Notice of Borrowing

	
EXHIBIT B

	-	
Form of Note

	
EXHIBIT C-1

	- 	
Form of Opinion of Kramer Levin Naftalis & Frankel LLP, New York counsel to the Borrower and its Subsidiaries 

	EXHIBIT C-2	- 	Form of Opinion of Reeder & Simpson, special Marshall Islands counsel to the Borrower and its Subsidiaries
	
EXHIBIT C-3

	- 	
Form of Opinion of Constantine P. Georgiopoulos, New York maritime counsel to Borrower and its Subsidiaries

	
EXHIBIT D

	- 	

Form of Officer’s Certificate

	EXHIBIT E	- 	

Form of Guaranty

	
EXHIBIT F

	- 	
Form of Pledge Agreement

	
EXHIBIT G

	- 	
Form of Solvency/Minimum Consolidated Net Worth Certificate

	
EXHIBIT H-1

	- 	
Form of Assignment of Earnings

	
EXHIBIT H-2

	- 	

Form of Assignment of Insurances

	
EXHIBIT I

	- 	

Form of Compliance Certificate

	
EXHIBIT J

	- 	
Form of Subordination Provisions

	
EXHIBIT K

	- 	
Form of Assignment and Assumption Agreement

	
EXHIBIT L

	- 	
Form of Marshall Islands Vessel Mortgage

	 	 	 
	 	 	 

 

 

  

  

  

 

THIS SENIOR SECURED REVOLVING CREDIT FACILITY AGREEMENT (this “Agreement”), is made as of April 16, 2010, by and among (1) BALTIC TRADING LIMITED, a corporation organized and existing under the laws of the Republic of Marshall Islands (the “Borrower”), (2) the banks and financial institutions listed in Schedule I of this Agreement, as lenders (the “Lenders”) and (3) NORDEA BANK FINLAND PLC, acting through its New York branch (“Nordea”), as Administrative Agent (in such capacity, the “Administrative Agent”) and as security trustee under the Security Documents (in such capacity, the “Security Trustee”).  All capitalized terms used herein and defined in Appendix A are used herein as therein defined.

 

W I T N E S S E T H:

 

WHEREAS, the Borrower desires to (i) finance up to one hundred percent (100%) of the purchase price of the Additional Vessels, including vessel purchase deposits, and (ii) fund its and its Subsidiaries’ working capital requirements; and

 

WHEREAS, subject to and upon the terms and conditions herein set forth, the Lenders are willing to make available to the Borrower a credit facility (the “Facility”) not to exceed an amount (the “Facility Amount”) of One Hundred Million Dollars ($100,000,000), of which up to a maximum amount of Twenty Five Million Dollars ($25,000,000) at any time outstanding shall be available to fund working capital requirements of the Borrower and its Subsidiaries.

 

NOW, THEREFORE, IT IS AGREED:

 

SECTION 1.   Amount and Terms of the Facility.

 

1.01   The Commitments.  Subject to and upon the terms and conditions set forth herein, including Section 5 hereof, each Lender severally agrees to make, at any time on or after the Effective Date and prior to the Availability Termination Date, revolving loans (each, a “Loan” and, collectively, the “Loans”) to the Borrower, which Loans (i) shall bear interest in accordance with Section 1.07, (ii) shall be denominated in Dollars, (iii) may be repaid and reborrowed in accordance with the provisions hereof (subject to Section 3.01 hereof), (iv) shall not exceed for any Lender at any time the Commitment of such Lender at such time and (v) shall not exceed for all Lenders at any time the Total Commitment at such time.

 

1.02   Amount of Each Borrowing; Limitation on Number of Borrowings.  (a) The aggregate principal amount of each Borrowing of a Loan shall not be less than the Minimum Borrowing Amount.

 

(b)   More than one Borrowing may occur on the same date.  There shall be only four Borrowings per Additional Vessel and at no time shall there be outstanding more than ten Borrowings of Loans subject to different Interest Periods in the aggregate.

 

1.03   Notice of Borrowing.  (a)  Whenever the Borrower desires to make a Borrowing hereunder, it shall give the Administrative Agent at its Notice Office at least three Business Days’ prior written notice of each Loan to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 11:00 A.M.

 

 

  

  

  

 

 

(New York time).  Each such written notice (each a “Notice of Borrowing”), except as otherwise expressly provided in Section 1.09, shall be irrevocable and shall be given by the Borrower in the form of Exhibit A, appropriately completed to specify (i) the aggregate principal amount of the Loans to be made pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the initial Interest Period to be applicable thereto, (iv) the use of the proceeds of the Loans made pursuant to such Borrowing, and (v) to which account the proceeds of such Loans are to be deposited.  The Administrative Agent shall promptly give each Lender notice of such proposed Borrowing, of such Lender’s proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing.

 

(b)   Without in any way limiting the obligation of the Borrower to deliver a written Notice of Borrowing in accordance with Section 1.03(a), the Administrative Agent may act without liability upon the basis of telephonic notice of such Borrowing, believed by the Administrative Agent in good faith to be from an Authorized Officer of the Borrower prior to receipt of Notice of Borrowing.  In each such case, the Borrower hereby waives the right to dispute the Administrative Agent’s record of the terms of such telephonic notice of such Borrowing of Loans, absent manifest error.

 

1.04   Disbursement of Funds.  Except as otherwise specifically provided in the immediately succeeding sentence, no later than 12:00 Noon (New York time) on the date specified in each Notice of Borrowing, each Lender will make available its pro rata portion of each such Borrowing requested to be made on such date.  All such amounts shall be made available in Dollars and in immediately available funds at the Payment Office of the Administrative Agent and the Administrative Agent will make available to the Borrower (prior to 1:00 P.M. (New York time) on such day to the extent of funds actually received by the Administrative Agent at or prior to 12:00 Noon (New York time) on such day) at the Payment Office, in the account specified in the applicable Notice of Borrowing, the aggregate of the amounts so made available by the Lenders.  Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender’s portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent.  The Administrative Agent shall also be entitled to recover on demand from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Lender, at the overnight Federal Funds Rate and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.07.

 

 

 

  

2

  

 

 

1.05   Notes.  (a)  The Borrower’s obligation to pay the principal of, and interest on, the Loans made by each Lender shall be evidenced by a promissory note in favor of the Administrative Agent and, if requested by any Lender, be evidenced by a promissory note in favor of such Lender duly executed and delivered by the Borrower substantially in the form of Exhibit B with blanks appropriately completed in conformity herewith (each a “Note” and, collectively, the “Notes”); provided that in no event shall the aggregate face amount of the Notes issued at any time in favor of the Administrative Agent and any Lender exceed the Total Commitment.

 

(b)   Each Note shall (i) be executed by the Borrower, (ii) be payable to the order of the Administrative Agent or the appropriate Lender, as applicable, and be dated the Effective Date (or, in the case of Notes issued after the Effective Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to (x) the Commitment of such Lender on the Effective Date (or, in the case of Notes issued after the Effective Date, be in a stated principal amount equal to the Commitment of such Lender on the date of the issuance thereof) if issued in favor of a Lender and (y) the Total Commitment less the amount of any other Notes issued in favor of any Lender if issued in favor of the Administrative Agent, and be payable in the principal amount of the Loans evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as provided in Section 1.07, (vi) be subject to voluntary prepayment and mandatory repayment as provided in Sections 3.02 and 3.03, respectively, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents.

 

(c)   The Administrative Agent and/or each Lender, as applicable, will note on its internal records the amount, in the case of the Administrative Agent, of the Loans made to date and, in the case of each Lender in whose favor a Note has been issued, of each Loan made by it and in each instance, each payment in respect thereof and will, prior to any transfer of any relevant Notes, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby which notation shall be prima facie evidence of the amount of the Loans.  However, failure to make any such notation or any error in any such notation or endorsement shall not affect the Borrower’s obligations in respect of such Loans.

 

(d)   Notwithstanding anything to the contrary contained above in this Section 1.05 or elsewhere in this Agreement, Notes shall be delivered to the Administrative Agent and to only those Lenders that at any time specifically request the delivery of such Notes.  No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) incurred by the Borrower that would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or guaranties therefor provided pursuant to the Credit Documents.  Any Lender that does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (c).  At any time (including, without limitation, to replace any Note that has been destroyed or lost) when the Administrative Agent or any Lender requests the delivery of a Note to evidence any of Loans, the Borrower shall promptly execute and deliver to the Administrative Agent or such Lender, as applicable, the requested Note in the appropriate amount or amounts to evidence such Loans provided that, in the case of a substitute or replacement Note, the Borrower shall have received from such requesting Lender (i) an affidavit

 

 

 

  

3

  

 

 

of loss or destruction and (ii) a customary lost/destroyed Note indemnity, in each case in form and substance reasonably acceptable to the Borrower and the Administrative Agent or such requesting Lender, as applicable, and duly executed by such requesting Lender.

 

1.06   Pro Rata Borrowings.  All Borrowings of Loans under this Agreement shall be incurred from the Lenders pro rata on the basis of their Commitments.  It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.

 

1.07   Interest.  (a)  The Borrower agrees to pay interest in respect of the unpaid principal amount of each Loan from the date the proceeds thereof are made available to the Borrower until such Loan is paid in full at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Applicable Margin plus the LIBOR for such Interest Period.

 

(b)   Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate per annum equal to 2% per annum in excess of the rate then borne by such Loans (or, if such overdue amount is not interest or principal in respect of a Loan, 2.50% per annum in excess of the Base Rate as in effect from time to time), in each case with such interest to be payable on demand.

 

(c)   Accrued and unpaid interest shall be payable in respect of each Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period, on any repayment or prepayment (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.

 

(d)   On each Interest Determination Date, the Administrative Agent shall determine LIBOR for each Interest Period applicable to the Loans to be made pursuant to the applicable Borrowing and shall promptly notify the Borrower and the Lenders thereof.  Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto.

 

1.08   Interest Periods.  At the time the Borrower gives any Notice of Borrowing in respect of the making of any Loan (in the case of the initial Interest Period applicable thereto) or on the third Business Day prior to the expiration of an Interest Period applicable to such Loan (in the case of any subsequent Interest Period) (provided that any such notice shall be deemed to be given on a certain day only if given before 11:00 A.M. (New York time)), it shall have the right to elect, by giving the Administrative Agent notice thereof, the interest period (each an “Interest Period”) applicable to such Loan, which Interest Period shall, at the option of the Borrower, be a one, three or six month period, or such other period as may be mutually agreed by the Borrower and the Lenders; provided that:

 

                   (i)   all Loans comprising a Borrowing shall at all times have the same Interest Period;

 

 

  

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(ii)   the initial Interest Period for any Loan shall commence on the date of Borrowing of such Loan and each Interest Period occurring thereafter in respect of such Loan shall commence on the day on which the immediately preceding Interest Period applicable thereto expires;

 

(iii)   if any Interest Period relating to a Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month;

 

(iv)   if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the first succeeding Business Day; provided, however, that if any Interest Period for a Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

 

(v)   no Interest Period longer than one month may be selected at any time when an Event of Default (or, if the Administrative Agent or the Required Lenders have determined that such an election at such time would be disadvantageous to the Lenders, a Default) has occurred and is continuing;

 

(vi)   no Interest Period in respect of any Borrowing of any Loans shall be selected to the extent that it would cause the Loans borrowed in connection with such Borrowing to extend beyond the Maturity Date;

 

(vii)   no Interest Period in respect of any Borrowing of Loans shall be selected to the extent that it would cause the Loans borrowed in connection with such Borrowing to extend beyond any date upon which a mandatory repayment of Loans will be required to be made under Section 3.03(a) as a result of a reduction to the Total Commitment pursuant to Section 2.03 if the aggregate principal amount of Loans which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of Loans then outstanding less the aggregate amount of such required repayment on such date; and

 

(viii)   the selection of Interest Periods shall be subject to the provisions of Section 1.02(b).

 

If by 11:00 A.M. (New York time) on the third Business Day prior to the expiration of any Interest Period applicable to a Borrowing, the Borrower has failed to elect a new Interest Period to be applicable to such Loans as provided above, the Borrower shall be deemed to have elected a one month Interest Period to be applicable to such Loans effective as of the expiration date of such current Interest Period.

 

1.09   Increased Costs, Illegality, etc.  (a)  In the event that any Lender shall have determined in good faith (which determination shall, absent manifest error, be final and

 

 

 

  

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conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent):

 

(i)   on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the London interbank market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of LIBOR; or

 

(ii)   at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Loan because of (x) any change since the Effective Date in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as, for example, but not limited to:  (A) a change in the basis of taxation of payment to any Lender of the principal of or interest on such Loan or any other amounts payable hereunder (except for changes in the rate of tax imposed on such Lender), but without duplication of any amounts payable in respect of Taxes pursuant to Section 3.05, or (B) a change in official reserve requirements but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the LIBOR and/or (y) other circumstances arising since the Effective Date affecting such Lender or the London interbank market for Dollars or the position of such Lender in such market; or

 

(iii)   at any time, that the making or continuance of any Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law) and/or (z) impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the London interbank market for Dollars;

 

then, and in any such event, such Lender (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone and confirmed in writing) to the Borrower and, except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the Lenders).  Thereafter (x) in the case of clause (i) above, any Notice of Borrowing given by the Borrower with respect to any affected Loans which have not yet been incurred shall be deemed rescinded by the Borrower and the Total Commitment shall thereafter not be available to be borrowed hereunder, and the rate of interest applicable to any affected Loans then outstanding shall be the Base Rate, as in effect from time to time, from the date such notice is delivered to the Borrower and thereafter until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, (y) in the case of clause (ii) above, the Borrower agrees, subject to the provisions of Section 1.10 and Section 13.15 (to the extent applicable), to pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its reasonable good faith discretion shall

 

 

 

  

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determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for and the calculation thereof, submitted to the Borrower by such Lender in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, and subject to Section 1.11, such Lender shall so notify the Administrative Agent and the Borrower (and the Administrative Agent shall promptly give notice thereof to the other Lenders) and thereafter (A) except in the case of an event of the type described in clause (iii)(z) above, the Commitment of such Lender shall be permanently reduced by an amount sufficient to alleviate such circumstance arising pursuant to clause (iii)(x) or (y) above, or shall be terminated in its entirety if all of such Lender’s Loans are so affected, and the Borrower shall prepay in full the affected Loans of such Lender, together with accrued interest thereon and, in the event of a termination of such Lender’s Commitment, any Commitment Commission which may be due to such Lender under this Agreement (and, in the event all of such Lender’s Loans are being repaid, any other amounts which may be owing to such Lender hereunder (including, without limitation, any accrued and unpaid interest)), on either the last day of the then current Interest Period applicable to each such affected Loan (if such Lender may lawfully continue to maintain and fund such Loans) or immediately (if such Lender may not lawfully continue to maintain and fund such Loans to such day) and (B) in the case of an event of the type described in clause (iii)(z) above, the Commitment of such Lender shall be terminated in its entirety and the Borrower shall pay to such Lender any accrued and unpaid Commitment Commission which may be due to such Lender under this Agreement, and all outstanding Loans of such Lender shall, from the date such notice is delivered to the Borrower and thereafter until such time as the Administrative Agent or such Lender shall notify the Borrower that the circumstances giving rise to the operation of clause (iii)(z) above with respect to such Lender no longer exist, bear interest at a rate equal to the Base Rate, as in effect from time to time, it being understood that, notwithstanding anything to the contrary in this Agreement, to the extent any Loans of any Lender affected by circumstances described in clause (iii)(z) above are repaid prior to receipt by the Borrower of the notice described above with respect to the elimination of such circumstances giving rise to the operation of clause (iii)(z) above with respect to such Lender, any amount of the Commitment of such Lender which may otherwise result from such repayment shall be deemed permanently reduced upon the effectiveness of such repayment.  The Administrative Agent and each Lender (to the extent it continues to be a Lender hereunder) agree that if any of them gives notice to the Borrower of any of the events described in clause (i) or (iii) above, it shall promptly notify the Borrower and, in the case of any such Lender, the Administrative Agent, if such event ceases to exist.  If any such event described in clause (iii) above ceases to exist as to a Lender (to the extent it continues at such time to be a Lender hereunder), the obligations of such Lender to make Loans on the terms and conditions contained herein shall, to the extent of such Lender’s outstanding Loans and Commitments as in effect at such time, be immediately reinstated.

 

(b)   If any Lender in good faith determines that after the Effective Date the introduction of or effectiveness of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by the NAIC or any governmental authority, central bank or comparable agency will have the effect of increasing the amount of capital required or requested to be maintained by such Lender, or any

 

 

 

  

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corporation controlling such Lender, based on the existence of such Lender’s Commitments hereunder or its obligations hereunder, then the Borrower agrees, subject to the provisions of Section 13.15 (to the extent applicable), to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital.  In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Lender’s determination of compensation owing under this Section 1.09(b) shall, absent manifest error, but subject to the provisions of Section 13.15 (to the extent applicable), be final and conclusive and binding on all the parties hereto.  Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 1.09(b), will give prompt written notice thereof to the Borrower, which notice shall show in reasonable detail the basis for and calculation of such additional amounts.

 

1.10   Compensation.  The Borrower agrees, subject to the provisions of Section 13.15 (to the extent applicable), to compensate each Lender, upon its written request (which request shall set forth in reasonable detail the basis for requesting and the calculation of such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any such loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Loans but excluding any loss of anticipated profits) which such Lender may sustain in respect of Loans made to the Borrower:  (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Loans does not occur on a date specified therefor in a Notice of Borrowing (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.09(a)); (ii) if any prepayment or repayment (including any prepayment or repayment made pursuant to Section 1.09(a), Section 3.02 or Section 3.03 or as a result of an acceleration of the Loans pursuant to Section 10) of any of its Loans, or assignment of its Loans pursuant to Section 1.12, occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of any other Default or Event of Default arising as a result of the Borrower’s failure to repay Loans or make payment on any Note held by such Lender when required by the terms of this Agreement.

 

1.11   Change of Lending Office.  Each Lender agrees that on the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b) or Section 3.05 with respect to such Lender, it will, if requested by the Borrower, use reasonable good faith efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event, provided that, such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section.  Nothing in this Section 1.11 shall affect or postpone any of the obligations of the Borrower or the rights of any Lender provided in Section 1.09 and Section 3.05.

 

 

 

  

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1.12   Replacement of Lenders.  (x)  Upon the occurrence of a Lender Default by any Lender, (y) upon the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b) or Section 3.05 with respect to any Lender which results in such Lender charging to the Borrower increased costs in excess of those being generally charged by the other Lenders, or (z) as provided in Section 13.12(b) in the case of certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrower shall have the right, if no Default or Event of Default will exist immediately after giving effect to the respective replacement, to replace such Lender (the “Replaced Lender”) with one or more other Eligible Transferee or Eligible Transferees (collectively, the “Replacement Lender”) reasonably acceptable to the Administrative Agent, provided that:

 

(i)   at the time of any replacement pursuant to this Section 1.12, the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of the Replaced Lender and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum (without duplication) of (x) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, and (y) an amount equal to all accrued, but unpaid, Commitment Commission and other fees owing to the Replaced Lender pursuant to Section 2.01; and

 

(ii)   all obligations of the Borrower due and owing to the Replaced Lender at such time (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender concurrently with such replacement.

 

Upon the execution of the respective Assignment and Assumption Agreement, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 3.05, 13.01 and 13.06), which shall survive as to such Replaced Lender.

 

SECTION 2.   Commitment Commission; Fees; Terminations and Reductions of Commitment.

 

2.01   Commitment Commission; Fees.  (a)  The Borrower agrees to pay the Administrative Agent for distribution to each Lender a commitment commission (the “Commitment Commission”) for the period from the earlier of (x) March 18, 2010 and (y) the Effective Date, until the Availability Termination Date, computed at a rate for each day equal to 1.25% per annum on the daily average Unutilized Commitment of such Lender.  Accrued Commitment Commission shall be due and payable quarterly in arrears on each Commitment

 

 

 

  

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Commission Payment Date and on the Availability Termination Date (or such earlier date upon which the unutilized Total Commitment is terminated).

 

(b)   The Borrower shall pay to the Administrative Agent, for the Administrative Agent’s own account, such other fees as have been agreed to in writing from time to time by the Borrower or any of the Subsidiary Guarantors and the Administrative Agent.

 

2.02   Voluntary Termination or Reduction of Unutilized Commitments.  (a)  Upon at least three Business Days’ prior notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate or reduce the unutilized Total Commitment, in whole or in part, in a minimum amount of $5,000,000 and in integral multiples of $1,000,000 in the case of partial reductions thereto, provided that each such reduction shall apply proportionately to permanently reduce the Commitment of each Lender.

 

(b)   In the event of certain refusals by a Lender as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrower may, subject to the requirements of said Section 13.12(b) and upon five Business Days’ written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), terminate the entire Commitment of such Lender so long as all Loans, together with accrued and unpaid interest, Commitment Commission and all other amounts, owing to such Lender are repaid concurrently with the effectiveness of such termination (at which time Schedule I shall be deemed modified to reflect such changed amounts), and at such time such Lender shall no longer constitute a “Lender” for purposes of this Agreement, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 3.05, 13.01 and 13.06), which shall survive as to such repaid Lender.  To the extent such Lender has not been replaced by a Replacement Lender in accordance with Section 13.12(b)(A), the Total Commitment shall be permanently reduced by an amount equal to the Commitment of such Lender.

 

2.03   Commitment Reduction.  On the Maturity Date, the Total Commitments hereunder shall reduce to zero and the Final Payment will be due by the Borrower.

 

SECTION 3.   Repayments; Prepayments; Taxes.

 

3.01   Scheduled Repayments.  Subject to the provisions of this Section 3 regarding application of prepayments and Section 2 regarding reduction of Commitments, each Loan, with the exception of Loans made for working capital purposes which, in aggregate, shall not exceed Twenty Five Million Dollars ($25,000,000) in Loans at any time outstanding, shall be repaid with proceeds from follow-on equity offerings or otherwise within 12 months from the applicable Borrowing Date.  If any Loan is not repaid within 12 months from the applicable Borrowing Date, such Loan shall be converted into a term loan and be repaid in equal monthly installments over the subsequent 12 month period.  All amounts outstanding shall be repaid in full on the Maturity Date.

 

 

  

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3.02   Voluntary Prepayments.  The Borrower shall have the right to prepay the Loans in full or in part, which prepayments shall be applied, (i) in the event that any Loan has been converted to a term loan, to prepay any term loans in inverse order of their maturity and/or (ii) to the extent all term loans have been repaid or there are otherwise no term loans outstanding, pro-rata (except for such prepayments made pursuant to sub-clause (iv) below) to reduce Loans then outstanding, without premium or penalty except as provided by law, at any time and from time to time.  Prepayments hereunder shall be subject to the following terms and conditions:

 

(i)   the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York time) at its Notice Office at least three Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay such Loans and the amount of such prepayment, which notice the Administrative Agent shall promptly transmit to each of the Lenders;

 

(ii)   each prepayment shall be in an aggregate principal amount of at least $1,000,000;

 

(iii)   at the time of any prepayment of Loans pursuant to this Section 3.02 on any date other than the last day of the Interest Period applicable thereto, the Borrower shall pay the amounts required pursuant to Section 1.10; and

 

(iv)   in the event of certain refusals by a Lender as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrower may, upon five Business Days’ written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), prepay all Loans, together with accrued and unpaid interest, Commitment Commission, and other amounts owing to such Lender in accordance with said Section 13.12(b) so long as (A) the Commitment of such Lender is terminated concurrently with such prepayment (at which time Schedule I shall be deemed modified to reflect the changed Commitments) and (B) the consents required by Section 13.12(b) in connection with the prepayment pursuant to this clause (iv) have been obtained; except that to the extent such Lender has been replaced by a Replacement Lender in accordance with Section 13.12(b)(A), the Total Commitment shall not be reduced.

 

3.03   Mandatory Repayments.  (a)  On any day on which the aggregate outstanding principal amount of all Loans exceeds the Total Commitment as then in effect, the Borrower shall repay the principal of Loans in an amount equal to such excess plus any amounts required pursuant to Section 1.10.

 

(b)   In addition to any other mandatory repayments required pursuant to this Section 3.03, but without duplication, on (i) the Business Day following the date of any Collateral Disposition involving an Initial Vessel or an Acceptable Replacement Vessel (other than a Collateral Disposition constituting an Event of Loss or a Collateral Disposition in connection with a Vessel Exchange) and (ii) the earlier of (A) the date which is 180 days following any Collateral Disposition constituting an Event of Loss involving an Initial Vessel or

 

 

 

  

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an Acceptable Replacement Vessel and (B) the date of receipt by the Borrower, any of its Subsidiaries or the Administrative Agent of the insurance proceeds relating to such Event of Loss, the Borrower shall be required to (x) provide an Acceptable Replacement Vessel as Collateral pursuant to a Vessel Exchange or (y) permanently reduce the Facility Amount by an amount equal to the then Total Commitment, multiplied by a fraction, the numerator of which is the most recent Appraised Value of the Initial Vessel or Acceptable Replacement Vessel, as the case may be, subject to such Collateral Disposition or Event of Loss, and the denominator of which is the aggregate of the most recent Appraised Value of all Initial Vessels and all Acceptable Replacement Vessels.

 

(c)   With respect to each repayment of Loans required by Section 3.03(a), the Borrower may designate the specific Borrowing or Borrowings pursuant to which such Loans were made that are to be repaid, provided that (i) all Loans with Interest Periods ending on such date of required repayment shall be paid in full prior to the payment of any other Loans and (ii) each repayment of any Loans comprising a Borrowing shall be applied pro rata among such Loans.  In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the preceding provisions of this clause (c), make such designation in its sole reasonable discretion with a view, but no obligation, to minimize breakage costs owing pursuant to Section 1.10.

 

(d)   Notwithstanding anything to the contrary contained elsewhere in this Agreement, all then outstanding Loans shall be repaid in full on the Maturity Date.

 

3.04   Method and Place of Payment.  Except as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 12:00 Noon (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office of the Administrative Agent.  Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension.

 

3.05   Net Payments; Taxes.  (a)  All payments made by any Credit Party hereunder or under any Note will be made without setoff, counterclaim or other defense.  All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed on or measured by the net income or net profits (or any franchise tax or similar tax imposed in lieu thereof), gross receipts, net profits or net worth of a Lender, in each case pursuant to the laws of the jurisdiction in which the Lender is organized, or the jurisdiction in which the principal office or applicable lending office of such Lender is located, or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”).  If any Taxes are required to be withheld from any amounts payable to a Lender under this Agreement or any Note, then amounts payable by the Borrower to such Lender shall be increased to the

 

 

 

  

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extent necessary to yield to such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement or any Note, as applicable; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Taxes (i) that are attributable to such Lender’s failure to comply with the requirements of Section 3.05(b), or (ii) that are withholding taxes imposed on amounts payable to such Lender at the time such Lender (x) becomes a party to this Agreement or any Note, as applicable, or (y) designates a new lending office, except to the extent that such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Taxes pursuant to this Section 3.05.  The Borrower will furnish to the Administrative Agent within 45 days after the date of payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower.  The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender.

 

(b)   Each Lender agrees to use reasonable efforts (consistent with legal and regulatory restrictions and subject to overall policy considerations of such Lender) to file any certificate or document or to furnish to the Borrower any information as reasonably requested by the Borrower that may be necessary to establish any available exemption from, or reduction in the amount of, any Taxes; provided, however, that nothing in this Section 3.05(b) shall require a Lender to disclose any confidential information (including, without limitation, its tax returns or its calculations).

 

(c)   If the Borrower pays any additional amount under this Section 3.05 to a Lender and such Lender determines in its sole discretion that it has actually obtained or utilized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a “Tax Benefit”), such Lender shall pay to the Borrower an amount that such Lender shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by such Lender in such year as a consequence of such Tax Benefit; provided, however, that (i) any Lender may determine, in its sole discretion consistent with the policies of such Lender, whether to seek a Tax Benefit, (ii) any Taxes that are imposed on a Lender as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Lender directly attributable to such Tax Benefit that otherwise would not have expired) of any Tax Benefit with respect to which such Lender has made a payment to the Borrower pursuant to this Section 3.05(c) shall be treated as a Tax for which the Borrower is obligated to indemnify such Lender pursuant to this Section 3.05 without any exclusions or defenses, (iii) nothing in this Section 3.05(c) shall require any Lender to disclose any confidential information to the Borrower (including, without limitation, its tax returns), and (iv) no Lender shall be required to pay any amounts pursuant to this Section 3.05(c) at any time during which a Default or an Event of Default exists.

 

(d)   No provision of this Agreement will:

 

(i)   interfere with the right of any Lender to arrange its affairs (tax or otherwise) in whatever manner it thinks fit (excluding Section 1.09(a)(ii) or (iii), Section 1.09(b), or this Section 3.05);

 

 

 

  

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(ii)   oblige any Lender to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

 

(iii)   oblige any Lender to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

 

SECTION 4.   Conditions Precedent to the Effective Date.  The effectiveness of this Agreement on the Effective Date shall be expressly subject to the following conditions precedent:

 

4.01   Opinions of Counsel.  (a)  On the Effective Date, the Administrative Agent shall have received from Kramer Levin Naftalis & Frankel LLP, special New York counsel to the Borrower and the Subsidiary Guarantors, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Effective Date which shall (x) be in form and substance acceptable to the Administrative Agent and (y) cover matters incidental to the transactions contemplated herein as the Administrative Agent may reasonably request.

 

(b)   On the Effective Date, the Administrative Agent shall have received from Reeder & Simpson P.C., special Marshall Islands counsel to the Borrower and the Subsidiary Guarantors, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Effective Date which shall be in form and substance acceptable to the Administrative Agent.

 

4.02   Corporate Documents; Proceedings; etc.  (a)  On the Effective Date, the Administrative Agent shall have received a certificate, dated the Effective Date, signed by an Authorized Officer, member or general partner of the Borrower, and attested to by the secretary or any assistant secretary (or, to the extent the Borrower does not have a secretary or assistant secretary, the analogous Person within the Borrower) of the Borrower, in substantially the form of Exhibit D, with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws (or equivalent organizational documents) of the Borrower and the resolutions of the Borrower referred to in such certificate, and the foregoing shall be reasonably acceptable to the Administrative Agent.

 

(b)   All corporate, limited liability company, partnership and legal proceedings, and all material instruments and agreements in connection with the transactions contemplated by this Agreement, shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate, limited liability company and partnership proceedings, governmental approvals and good standing certificates which the Administrative Agent may have reasonably requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities.

 

4.03   Solvency/Minimum Consolidated Net Worth Certificate.  On the Effective Date, the Borrower shall have caused to be delivered to the Administrative Agent a certificate from the senior financial officer of the Borrower, in the form of Exhibit G, which shall be addressed to the Administrative Agent and each of the Lenders and dated the Effective Date, (i) setting forth the conclusion that, after giving effect to the incurrence of all the financings contemplated hereby, the Borrower individually, and the Borrower and its Subsidiaries taken as a

 

 

  

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whole, are not insolvent and will not be rendered insolvent by the incurrence of such indebtedness, and will not be left with unreasonably small capital with which to engage in their respective businesses and will not have incurred debts beyond their ability to pay such debts as they mature and (ii) certifying the Minimum Consolidated Net Worth and the calculations required to establish the Minimum Consolidated Net Worth as set forth in Section 9.09 and Appendix A hereto, respectively.

 

4.04   Management Agreement.  On the Effective Date, the Borrower shall have caused to be delivered to the Administrative Agent a certified copy of the Management Agreement.

 

4.05   Approvals.  On or prior to the Effective Date, all necessary governmental (domestic and foreign) and third party approvals and/or consents in connection with the Loans, and the granting of Liens under the Credit Documents, if any, shall have been obtained and remain in effect, and all applicable waiting periods with respect thereto shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the making of the Loans and the performance by the Borrower of this Agreement.  On the Effective Date, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the making of the Loans or the performance by the Borrower of this Agreement.

 

4.06   Litigation.  On the Effective Date, no actions, suits, investigations or proceedings of any Credit Party by any entity (private or governmental) shall be pending or, to the knowledge of any Credit Party, threatened with respect to (i) any Document, (ii) any Subsidiary Guarantor (i) which could either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or (ii) which the Administrative Agent shall determine could be reasonably expected to have a Material Adverse Effect.

 

4.07   Material Adverse Effect.  On the Effective Date, nothing shall have occurred (and neither the Administrative Agent nor any of the Lenders shall have become aware of facts or conditions not previously known to them) which the Administrative Agent or the Required Lenders shall determine has had, or could reasonably be expected to have, a Material Adverse Effect.

 

4.08   Environmental Laws.  On the Effective Date, there shall not exist any condition or occurrence on or arising from any property owned or operated or occupied by the Borrower or any of its Subsidiaries that (a) results in noncompliance by the Borrower or such Subsidiary with any applicable Environmental Law that has had, or could reasonably be expected to have, a Material Adverse Effect or (b) could reasonably be expected to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or such property, which in any such case individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

 

4.09   Fees.  On the Effective Date, the Borrower shall have paid to the Administrative Agent and the Lenders all costs, fees and expenses as set out in the Fee Letter.

 

 

  

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4.10   No Conflicts.  On the Effective Date, there shall be no material default under, and the transactions contemplated hereby shall not give rise to a material conflict with, any material agreement of the Borrower or any of its Subsidiaries.

 

4.11   No Default or Event of Default.  On the Effective Date, there shall exist no Default or Event of Default.

 

4.12   Know Your Customer.  On the Effective Date, the Administrative Agent shall have received such documentation and other evidence as is reasonably requested by the Administrative Agent in order for each Lender to carry out and be satisfied with the results of all necessary "know your customer" or other checks which it is required to carry out in relation to the transactions contemplated by this Agreement, the Notes and the other Credit Documents.

 

SECTION 5.   Conditions Precedent to Borrowings Under the Facility.  The obligation of each Lender to make the initial Loan available to the Borrower on the initial Borrowing Date under this Agreement shall be expressly subject to the following conditions precedent:

 

5.01   Opinions of Counsel.  (i) The Administrative Agent shall have received from Kramer Levin Naftalis & Frankel LLP, special New York counsel to the Borrower and the Subsidiary Guarantors, an opinion addressed to the Administrative Agent and each of the Lenders and dated the date of the initial Borrowing Date which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests (other than those to be covered by opinions delivered pursuant to clauses (ii) through (iii) below) granted pursuant to the Security Documents and such other matters incidental to the transactions contemplated herein as the Administrative Agent may reasonably request;

 

(ii)   The Administrative Agent shall have received from Reeder & Simpson P.C., special Marshall Islands counsel to the Borrower and the Subsidiary Guarantors (or such other counsel reasonably satisfactory to the Administrative Agent), an opinion addressed to the Administrative Agent and each of the Lenders and dated the date of the initial Borrowing Date which shall be in form and substance reasonably acceptable to the Administrative Agent and cover such matters as the Administrative Agent may reasonably request; and

 

(iii)   The Administrative Agent shall have received from (1) Reeder & Simpson P.C., special Marshall Islands counsel to the Borrower and the Subsidiary Guarantors, (2) Constantine P. Georgiopoulos, special New York maritime counsel to the Borrower and the Subsidiary Guarantors  or (3) if any Initial Vessel is to be registered in an Acceptable Flag Jurisdiction other than the Marshall Islands, special counsel to the Administrative Agent of such Acceptable Flag Jurisdiction, which counsel shall be chosen by the Administrative Agent, an opinion addressed to the Administrative Agent and each of the Lenders, which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests granted pursuant to the Vessel Mortgage(s) and such other matters incident thereto as the Administrative Agent may reasonably request.

 

 

  

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5.02   Corporate Documents; Proceedings; etc.  (i)  The Administrative Agent shall have received a certificate, dated the initial Borrowing Date, signed by an Authorized Officer, member or general partner of the Credit Parties owning or operating the Initial Vessels, and attested to by the secretary or any assistant secretary (or, to the extent such Credit Party does not have a secretary or assistant secretary, the analogous Person within such Credit Party) of such Credit Party, as the case may be, in the form of Exhibit D, with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws (or equivalent organizational documents) of such Credit Party and the resolutions of such Credit Party referred to in such certificate, and the foregoing shall be reasonably acceptable to the Administrative Agent.

 

(ii)   All corporate, limited liability company, partnership and legal proceedings, and all material instruments and agreements in connection with the transactions contemplated by this Agreement, shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate, limited liability company and partnership proceedings, governmental approvals and good standing certificates, if any, which the Administrative Agent may have reasonably requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities.

 

5.03   Subsidiaries Guaranty.  Each Subsidiary Guarantor shall have duly authorized, executed and delivered to the Administrative Agent a Guaranty substantially in the form of Exhibit E (as modified, supplemented or amended from time to time, the “Guaranty”), and the Guaranty shall be in full force and effect.

 

5.04   Pledge and Security Agreement.  The Borrower and each Subsidiary Guarantor shall have (x) duly authorized, executed and delivered a Pledge and Security Agreement substantially in the form of Exhibit F (as modified, supplemented or amended from time to time, the “Pledge Agreement”) and shall have (A) delivered to the Security Trustee, as pledgee, all the Pledged Securities, together with executed and undated stock powers in the case of capital stock constituting Pledged Securities, and (B) otherwise complied with all of the requirements set forth in the Pledge Agreement and (y) duly authorized, executed and delivered any other related documentation necessary or advisable to perfect the Lien on the Pledge Agreement Collateral referred to therein in the respective jurisdictions of formation of the respective Subsidiary Guarantor or the Borrower, as the case may be.

 

5.05   Assignments of Earnings, Insurances and Charter.  Each Credit Party which owns or operates an Initial Vessel shall have duly authorized, executed and delivered an Assignment of Earnings, an Assignment of Insurances and an Assignment of Charters, together covering all of such Credit Party’s present and future Earnings and Insurance Collateral, in each case together with:

 

(i)   proper Financing Statements (Form UCC-1) authorized for filing in the appropriate filing office of each jurisdiction as may be necessary, or in the reasonable opinion of the Security Trustee desirable, to perfect the security

 

 

  

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interests purported to be created by the Assignment of Earnings, Assignment of Charters and the Assignment of Insurances;

 

(ii)   certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name such Credit Party as debtor and that are filed in the jurisdictions referred to in Section 5.05(i) above, together with copies of such other financing statements (none of which shall cover the Collateral except to the extent evidencing Permitted Liens or in respect of which the Security Trustee shall have received, prior to or contemporaneously with the initial Borrowing Date, Form UCC-3 Termination Statements (or such other termination statements as shall be required by local law) authorized for filing); and

 

(iii)   evidence that all other actions necessary, or in the reasonable opinion of the Security Trustee desirable, to perfect and protect the security interests purported to be created by the Assignment of Earnings, the Assignment of Insurances and the Assignment of Charters have been taken.

 

5.06   Control Agreement.  The Borrower, each Subsidiary Guarantor and the Security Trustee, in its capacity as security trustee for the Lenders and as deposit bank, shall have duly executed and delivered a Control Agreement in the form attached to the Pledge Agreement with respect to each Operating Account.

 

5.07   Aggregate Purchase Price of Initial Vessels.  The Administrative Agent shall have received evidence from the Borrower that the aggregate purchase price of the Initial Vessels (or, to the extent no Subsidiary Guarantor has taken delivery of the Sixth Initial Vessel, of such Initial Vessels of which the Subsidiary Guarantors have taken delivery plus the amount of cash collateral delivered pursuant to Section 5.09) is at least Two Hundred Twenty Five Million Dollars ($225,000,000).

 

5.08   Mortgages.  Subject to the provisions of Section 5.09 hereof, each Credit Party which owns or operates an Initial Vessel shall have duly authorized, executed and delivered, and caused to be recorded in the appropriate vessel registry, a Vessel Mortgage with respect to such Initial Vessel owned or operated by such Credit Party on the initial Borrowing Date and such Vessel Mortgage shall be effective to create in favor of the Security Trustee and/or the Lenders a legal, valid and enforceable first priority security interest in and lien upon such Initial Vessels, subject only to Permitted Liens.  Except as specifically provided above, all filings, deliveries of instruments and other actions necessary or desirable in the reasonable opinion of the Security Trustee to perfect and preserve such security interests shall have been duly effected and the Security Trustee shall have received evidence thereof in form and substance reasonably satisfactory to the Security Trustee.

 

5.09   Cash Collateral.  If the applicable Subsidiary Guarantor has not yet taken delivery of the Initial Vessel named “Hull 1151” on Schedule III hereto (the “Sixth Initial Vessel”) and, as a result, the Security Documents relating to the Sixth Initial Vessel cannot be executed and delivered on the initial Borrowing Date, the Borrower shall have provided cash collateral to the Security Trustee in lieu of such Security Documents in an amount equal to the

 

 

  

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difference between (i) the aggregate purchase price of the Initial Vessels with respect to which Mortgages have been delivered to the Security Trustee on such date and (ii) $225,000,000.  Concurrently with the delivery to and acceptance by the applicable Subsidiary Guarantor of the Sixth Initial Vessel, the delivery of the documents required pursuant to Section 5.11 with respect to the Sixth Initial Vessel and execution and delivery (and in the case of the mortgage, recordation) of the Security Documents relating to the Sixth Initial Vessel to the Security Trustee (and in the case of the mortgage, filing with the appropriate ship registry) the cash collateral will be released to the Borrower or forwarded to the seller of the Sixth Initial Vessel as payment of a portion of the purchase price thereof.

 

5.10   Memorandum of Agreement.  To the extent that the Sixth Initial Vessel is not delivered to a Subsidiary Guarantor on the initial Borrowing Date, the Borrower shall provide to the Administrative Agent a duly executed memorandum of agreement pertaining to the Sixth Initial Vessel.

 

5.11   Vessel Documents.  Subject to the provisions of Section 5.09, the Administrative Agent shall have received each of the following with respect to each Initial Vessel:

 

(i)   certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of each Initial Vessel by the relevant Subsidiary Guarantor in a jurisdiction acceptable to the Required Lenders;

 

(ii)   the results of maritime registry searches with respect to each Initial Vessel, indicating no record liens other than Liens in favor of the Security Trustee and/or the Lenders, Permitted Liens and Liens being discharged prior to or contemporaneously with the initial Borrowing Date;

 

(iii)   class certificates from a classification society listed on Schedule VIII hereto or another internationally recognized classification society acceptable to the Security Trustee, indicating that each Initial Vessel meets the criteria specified in Section 7.23;

 

(iv)   a copy of the Operator’s DOC and the SMC, ISSC and IAPPC for each Initial Vessel;

 

(v)   Appraisals from at least two Approved Appraisers of each Initial Vessel of recent date in scope, form and substance reasonably satisfactory to the Administrative Agent;

 

(vi)   letters of undertaking of insurance brokers and insurance club managers; and

 

(vii)   a report, in form and scope reasonably satisfactory to the Administrative Agent, from a firm of independent marine insurance brokers appointed by the Administrative Agent with respect to the insurance maintained by the Credit

 

 

  

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Parties in respect of each Initial Vessel, together with a certificate from such broker certifying that such insurances (i) are placed with such insurance companies and/or underwriters and/or clubs, in such amounts, against such risks, and in such form, as are customarily insured against by similarly situated insureds for the protection of the Administrative Agent and/or the Lenders as mortgagee and (ii) conform with the insurance requirements of the respective Vessel Mortgage.

 

5.12   Environmental Laws.  There shall not exist any condition or occurrence on or arising from any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries that (a) results in noncompliance by the Borrower or such Subsidiary with any applicable Environmental Law that has had, or could reasonably be expect to have, a Material Adverse Effect or (b) could reasonably be expected to form the basis of a Environmental Claim against the Borrower or any of its Subsidiaries or any property (including, without limitation, the related Vessel), which in any such case individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

 

SECTION 6.   Further Conditions Precedent.

 

6.01   Further Conditions Precedent.  The obligation of each Lender to make Loans on each Borrowing Date is subject at the time of the making of such Loan to the satisfaction or waiver of the following conditions:

 

(a)   No Default; Representations and Warranties.  At the time of the making of such Loan and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in any other Credit Document shall be true and correct in all material respects both before and after giving effect to the making of such Loan with the same effect as though such representations and warranties had been made on the date of the making of such Loan (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date).

 

(b)   Notice of Borrowing.  Prior to the making of such Loan, the Administrative Agent shall have received a Notice of Borrowing required by Section 1.03(a).

 

(c)   Aggregate Amount of Loans.  On each Borrowing Date, the Aggregate Appraised Value of the Initial Vessels shall be at least the Required Percentage of the Facility Amount; provided that on each Borrowing Date prior to the delivery of Security Documents with respect to the Sixth Initial Vessel, the sum of the Aggregate Appraised Value of the Initial Vessels for which Security Documents have been delivered plus the amount of cash collateral delivered pursuant to Section 5.09 shall be at least the Required Percentage of the Facility Amount.

 

(d)   Fees.  The Borrower shall have paid to the Administrative Agent and the Lenders all required costs, fees and expenses.

 

 

  

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SECTION 7.   Representations, Warranties and Agreements.  In order to induce the Lenders to enter into this Agreement and to make the Loans, the Borrower makes the following representations, warranties and agreements, in each case on the Effective Date and on each Borrowing Date thereafter, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans, with the incurrence of each Loan on or after the Effective Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct in all material respects on and as of the Effective Date and on each Borrowing Date thereafter (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date):

 

7.01   Corporate/Limited Liability Company/Limited Partnership Status.  Each of the Borrower and each Subsidiary Guarantor (i) is a duly organized and validly existing corporation, limited liability company or limited partnership, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) has the corporate or other applicable power and authority to own its property and assets and to transact the business in which it is currently engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its business as currently conducted requires such qualifications, except for failures to be so qualified which, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

7.02   Corporate Power and Authority.  Each Credit Party has the corporate or other applicable power and authority to execute, deliver and perform the terms and provisions of each of the Credit Documents to which it is party and has taken all necessary corporate or other applicable action to authorize the execution, delivery and performance by it of each of such Credit Documents.  Each Credit Party has duly executed and delivered each of the Credit Documents to which it is party, and each of such Credit Documents constitutes the legal, valid and binding obligation of such Credit Party enforceable against such Credit Party in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

 

7.03   No Violation.  Neither the execution, delivery or performance by any Credit Party of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions thereof, will (i) contravene any material provision of any applicable law, statute, rule or regulation or any applicable order, writ, injunction or decree of any court or governmental instrumentality, (ii) conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the material properties or assets of the Borrower or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which the Borrower or any of its Subsidiaries is a party or by which it or any of its material property or assets is bound or to which

 

 

  

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it may be subject or (iii) violate any provision of the Certificate of Incorporation or By-Laws (or equivalent organizational documents) of the Borrower or any Subsidiary Guarantor.

 

7.04   Governmental Approvals.  No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or made or in the case of any filings or recordings in respect of the Security Documents (other than the Vessel Mortgages), will be made within 10 days of the date such Security Document is required to be executed pursuant hereto), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance by any Credit Party of any Credit Document to which it is a party or (ii) the legality, validity, binding effect or enforceability of  any Credit Document to which it is or will be a party.

 

7.05   Financial Statements; Financial Condition; Undisclosed Liabilities.  (a)  The audited consolidated balance sheets of the Borrower as at December 31, 2009 and the related consolidated statements of operations and of cash flows for the fiscal period ended thereon, reported on by and accompanied by financial statements, an unqualified report from Deloitte & Touche LLP, present fairly the consolidated financial condition of the Borrower as at such date, and the consolidated results of its operations and its consolidated cash flows for the fiscal period then ended.  All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein).

 

(b)   On and as of each Borrowing Date and after giving effect to all Indebtedness (including the Loans) being incurred or assumed and Liens created by the Credit Parties in connection therewith (i) the sum of the assets, at a fair valuation, of the Borrower and on a stand-alone basis and of the Borrower and its Subsidiaries taken as a whole will exceed their respective debts, (ii) the Borrower on a stand-alone basis and the Borrower and its Subsidiaries taken as a whole have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their respective ability to pay such debts as such debts mature, and (iii) the Borrower on a stand-alone basis and the Borrower and its Subsidiaries taken as a whole will have sufficient capital with which to conduct their respective businesses.  For purposes of this Section 7.05(b), “debt” means any liability on a claim, and “claim” means (a) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (b) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

(c)   Except as fully disclosed in the balance sheet delivered pursuant to Section 7.05(a), there were as of the Effective Date no liabilities or obligations with respect to the Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in the aggregate, would be materially adverse to the Borrower and its Subsidiaries taken as a whole.  None of the

 

 

  

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Credit Parties knows of any basis for the assertion against it of any liability or obligation of any nature that is not fairly disclosed (including, without limitation, as to the amount thereof) in the balance sheets delivered pursuant to Section 7.05(a) which, either individually or in the aggregate, could be materially adverse to the Borrower and its Subsidiaries taken as a whole.

 

(d)   Since December 31, 2009, nothing has occurred that, either individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

 

(e)   Since the Effective Date, except as permitted in Section 9.03, the Borrower has not paid any Dividends.

 

7.06   Litigation.  There are no actions, suits, investigations or proceedings by any entity (private or governmental) pending or, to the knowledge of any Credit Party, threatened (i) with respect to any Vessel, except for such actions, suits, investigations or proceedings with respect to a Vessel which could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or (ii) which could reasonably be expected to have a Material Adverse Effect.

 

7.07   True and Complete Disclosure.  All factual information (taken as a whole) furnished by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or any Lender (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with this Agreement, the other Credit Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of the Borrower or any of its Subsidiaries in writing to the Administrative Agent or any Lender will be, true and accurate in all material respects and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time such information was provided.

 

7.08   Use of Proceeds; Margin Regulations.  (a)  All proceeds of the Loans shall be used (i) to fund or refund to the Borrower the acquisition costs of the Additional Vessels (including vessel purchase deposits) and (ii) for working capital requirements of the Borrower and its Subsidiaries in a maximum principal amount of up Twenty Five Million Dollars ($25,000,000) in Loans at any time outstanding.

 

(b)   No part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock.  The making of any Loan will not violate or be inconsistent with the provisions of Regulations T, U or X of the Board of Governors of the Federal Reserve System.

 

7.09   Tax Returns and Payments.  Each of the Borrower and each of its Subsidiaries has timely filed all material U.S. federal income tax returns, statements, forms and reports for taxes and all other material U.S. and non-U.S. tax returns, statements, forms and reports for taxes required to be filed by or with respect to the income, properties or operations of the Borrower and/or any of its Subsidiaries (the “Returns”).  The Returns accurately reflect in all material respects all liability for taxes of the Borrower and its Subsidiaries for the periods covered thereby.  The Borrower and each of its Subsidiaries have at all times paid, or have provided adequate reserves (in accordance with GAAP) for the payment of, all material taxes

 

 

  

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that have become due and payable.  There is no action, suit, proceeding, investigation, audit, or claim now pending or, to the best knowledge of the Borrower or any of its Subsidiaries, threatened by any authority regarding any taxes relating to the Borrower or any of its Subsidiaries, except for such actions, suits, proceedings, investigations, audits, or claims that are not reasonably likely to have a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the Borrower or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Borrower or any of its Subsidiaries not to be subject to the normally applicable statute of limitations.

 

7.10   Compliance with ERISA.  (i) Schedule VI sets forth, as of the Effective Date, each Plan.  Each Plan, other than any Multiemployer Plan (and each related trust, insurance contract or fund), is in substantial compliance with its terms and with all applicable laws, including without limitation ERISA and the Code; each Plan, other than any Multiemployer Plan (and each related trust, if any), which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; to the best knowledge of the Borrower or any of its Subsidiaries or ERISA Affiliates, no Plan which is a Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability in an amount material to the Borrower’s operation; no Plan (other than a Multiemployer Plan) which is subject to Section 412 of the Code or Section 302 of ERISA has failed to satisfy the minimum funding standards applicable to such Plan under Section 430 of the Code and/or Section 303 of ERISA, or has applied for or received a funding waiver or an extension of any amortization period within the meaning of Section 412 of the Code or Section 302 of ERISA; all contributions required to be made with respect to a Plan have been or will be timely made (except as disclosed on Schedule VI); neither the Borrower nor any of its Subsidiaries nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; no condition exists which presents a material risk to the Borrower or any of its Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted by the PBGC to terminate or appoint a trustee to administer any Plan (in the case of a Multiemployer Plan, to the best knowledge of the Borrower or any of its Subsidiaries or ERISA Affiliates) which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, or, to the best knowledge of the Borrower or any of its Subsidiaries, expected or threatened which could reasonably be expected to have a Material Adverse Effect; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the Borrower and its Subsidiaries and ERISA Affiliates would have no liabilities to any Plans which are Multiemployer Plans in the event of a complete withdrawal therefrom in an amount which could reasonably be expected to have a Material Adverse Effect; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the

 

 

  

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Borrower, any of its Subsidiaries, or any ERISA Affiliate has at all times been operated in material compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of the Borrower or any of its Subsidiaries or any ERISA Affiliate exists nor has any event occurred which could reasonably be expected to give rise to any such lien on account of any Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any employee welfare plan (as defined in Section 3(1) of ERISA) which provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan the obligations with respect to which could reasonably be expected to have a Material Adverse Effect.

 

(ii)   Each Foreign Pension Plan, if any, has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities.  All contributions required to be made with respect to a Foreign Pension Plan have been or will be timely made.  Neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan that could reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries maintains or contributes to any Foreign Pension Plan the obligations with respect to which could in the aggregate reasonably be expected to have a Material Adverse Effect.

 

7.11   The Security Documents.  After the execution and delivery thereof and upon the taking of the actions mentioned in the immediately succeeding sentence, each of the Security Documents will create in favor of the Security Trustee for the benefit of the Secured Creditors a legal, valid and enforceable fully perfected first priority security interest in and Lien on all right, title and interest of the Credit Parties party thereto in the Collateral described therein, subject to no other Liens subject only to Permitted Liens.  No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings to be made on the initial Borrowing Date pursuant to the Security Documents, and, to the extent no Security Documents are delivered to the Security Trustee on the initial Borrowing Date with respect to the Sixth Initial Vessel, on the date such Security Documents with respect to the Sixth Initial Vessel are delivered.

 

7.12   Representations and Warranties in Documents.  On each Borrowing Date, all representations and warranties made by the Borrower and its Subsidiaries in the other Credit Documents were true and correct in all material respects at the time at which such representations and warranties were made (or deemed made).

 

7.13   Subsidiaries.  On the Effective Date, the Borrower has no Subsidiaries other than those Subsidiaries listed on Schedule VII (which Schedule identifies the correct legal name, direct owner, percentage ownership and jurisdiction of organization of each such Subsidiary on the date hereof).

 

7.14   Compliance with Statutes, etc.  Each of the Borrower and each of its Subsidiaries is in compliance in all material respects with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such

 

 

 

  

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noncompliances as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

7.15   Investment Company Act.  Neither the Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

7.16   Pollution and Other Regulations.  Each of the Borrower and each of its Subsidiaries is in compliance with all applicable Environmental Laws governing its business, except for such failures to comply as are not reasonably likely to have a Material Adverse Effect, and neither the Borrower nor any of its Subsidiaries is liable for any penalties, fines or forfeitures for failure to comply with any of the foregoing, except for such penalties, fines or forfeitures that are not reasonably likely to have a Material Adverse Effect.  All licenses, permits, registrations or approvals required for the business of the Borrower and each of its Subsidiaries, as conducted as of the Effective Date, under any Environmental Law have been secured and each of the Borrower and each of its Subsidiaries is in substantial compliance therewith, except for such failures to secure or comply as are not reasonably likely to have a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries is in any respect in noncompliance with, breach of or default under any applicable writ, order, judgment, injunction, or decree to which the Borrower or such Subsidiary is a party or which would affect the ability of the Borrower or such Subsidiary to operate any Vessel, Real Property or other facility and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute noncompliance, breach of or default thereunder, except in each such case, such noncompliances, breaches or defaults as are not likely to, either individually or in the aggregate, have a Material Adverse Effect.  There are no Environmental Claims pending or, to the knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries which, either individually or in the aggregate, are reasonably likely to have a Material Adverse Effect.  There are no facts, circumstances, conditions or occurrences on any Vessel, Real Property or other facility owned or operated by the Borrower or any of its Subsidiaries that is reasonably likely (i) to form the basis of an Environmental Claim against the Borrower, any of its Subsidiaries or any Vessel, Real Property or other facility owned by the Borrower or any of its Subsidiaries, or (ii) to cause such Vessel, Real Property or other facility to be subject to any restrictions on its ownership, occupancy, use or transferability under any Environmental Law, except in each such case, such Environmental Claims or restrictions that, either individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect.

 

7.17   Labor Relations.  Neither the Borrower nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect and there is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the Borrower’s knowledge, threatened against any of them before the National Labor Relations Board, and no material grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the Borrower’s knowledge, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the Borrower’s knowledge, threatened against the Borrower or any of its Subsidiaries and (iii) no union representation proceeding pending with respect to the employees of the Borrower

 

 

  

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or any of its Subsidiaries, except (with respect to the matters specified in clauses (i), (ii) and (iii) above) as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

7.18   Patents, Licenses, Franchises and Formulas.  Each of the Borrower and each of its Subsidiaries owns, or has the right to use, all material patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, and has obtained assignments of all leases and other rights of whatever nature, necessary for the present conduct of its business, without any known conflict with the rights of others, except for such failures and conflicts which could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

7.19   Indebtedness.  Schedule IV sets forth a true and complete list of all Indebtedness of the Borrower and its Subsidiaries as of the Effective Date and which is to remain outstanding after the Effective Date, in each case showing the aggregate principal amount thereof and the name of the borrower thereunder and any other entity which directly or indirectly guarantees such debt.

 

7.20   Insurance.  Schedule V sets forth a true and complete listing of all insurance maintained by each Credit Party as of the Effective Date, with the amounts insured (and any deductibles) set forth therein.

 

7.21   Concerning the Vessels.  Each Vessel owned or to be owned by a Subsidiary Guarantor or the Borrower will be operated in material compliance with all applicable law, rules and regulations.

 

7.22   Citizenship.  The Borrower and each other Credit Party which owns or operates, or will own or operate, one or more Initial Vessels is (or at the time it becomes an owner thereof, will be) qualified to own and operate such Initial Vessel under the laws of the Acceptable Flag Jurisdiction.

 

7.23   Vessel Classification.  Each Initial Vessel is or will be classified in the highest class available for vessels of its age and type with a classification society listed on Schedule VIII or another internationally recognized classification society acceptable to the Administrative Agent, free of any conditions or recommendations, other than as permitted, or as will be permitted, under the Vessel Mortgages.

 

7.24   No Immunity.  The Borrower does not, nor does any other Credit Party or any of their respective properties, have any right of immunity on the grounds of sovereignty or otherwise from the jurisdiction of any court or from setoff or any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of any jurisdiction.  The execution and delivery of the Credit Documents by the Credit Parties and the performance by them of their respective obligations thereunder constitute commercial transactions.

 

7.25   Fees and Enforcement.  No fees or taxes, including, without limitation, stamp, transaction, registration or similar taxes, are required to be paid to ensure the legality,

 

 

  

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validity, or enforceability of this Agreement or any of the other Credit Documents other than recording taxes which have been, or will be, paid as and to the extent due.  Under the laws of the each applicable Acceptable Flag Jurisdiction, the choice of the laws of the State of New York as set forth in the Credit Documents which are stated to be governed by the laws of the State of New York is a valid choice of law, and the irrevocable submission by each Credit Party to jurisdiction and consent to service of process and, where necessary, appointment by such Credit Party of an agent for service of process, in each case as set forth in such Credit Documents, is legal, valid, binding and effective.

 

7.26   Form of Documentation.  Each of the Credit Documents is in proper legal form under the laws of the applicable Acceptable Flag Jurisdiction for the enforcement thereof under such laws, subject only to such matters which may affect enforceability arising under the law of the State of New York.  To ensure the legality, validity, enforceability or admissibility in evidence of each such Credit Document in the applicable Acceptable Flag Jurisdiction, it is not necessary that any Credit Document or any other document be filed or recorded with any court or other authority in the applicable Acceptable Flag Jurisdiction, except as have been made, or will be made, in accordance with Section 5.

 

7.27   Initial Vessel Acquisitions.  At the time of consummation of each Vessel Acquisition with respect to an Initial Vessel, (i) all necessary material consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required, if any, in order to make or consummate each Vessel Acquisition with respect to an Initial Vessel have or will have been obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained), (ii) all applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes with respect to an Initial Vessel material adverse conditions upon any Vessel Acquisition with respect to an Initial Vessel, (iii) no judgment, order or injunction prohibiting or imposing material adverse conditions upon any Vessel Acquisition with respect to an Initial Vessel, or the incurrence of any Loan or the performance by the Borrower or any other Credit Party of their respective obligations under the respective Credit Documents shall exist and (iv) all actions taken by the Borrower and the Subsidiary Guarantors pursuant to or in furtherance of each such Vessel Acquisition with respect to an Initial Vessel were or, prior to the time when required, will have been taken in all material respects in compliance with all applicable laws.

 

7.28   No Material Adverse Change.  No material adverse change, which impairs the ability of the Borrower or any Subsidiary Guarantor to meet any of their obligations under this Agreement or any of the other Credit Documents, has occurred.

 

SECTION 8.   Affirmative Covenants.  The Borrower hereby covenants and agrees that on and after the Effective Date and until the Loans and the Notes, together with interest, the Commitment Commission and all other Obligations incurred hereunder and under any other Credit Document, are paid in full:

 

8.01   Information Covenants.  The Borrower will furnish to the Administrative Agent, with sufficient copies for each of the Lenders:

 

 

  

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(a)   Quarterly Financial Statements.  Within 45 days after the close of the first three quarterly accounting periods in each fiscal year of the Borrower, (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated statements of income and cash flows, in each case for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, and in each case, setting forth comparative figures for the related periods in the prior fiscal year (if any), all of which shall be certified by the senior financial officer of the Borrower, subject to normal year-end audit adjustments and (ii) management’s discussion and analysis of the important operational and financial developments during the fiscal quarter and year-to-date periods.

 

(b)   Annual Financial Statements.  Within 90 days after the close of each fiscal year of the Borrower, (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year (if any) and certified by Deloitte and Touche LLP or another independent certified public accounting firm of recognized national standing reasonably acceptable to the Administrative Agent, together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default pursuant to Sections 9.07 through 9.09, inclusive, which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and (ii) management’s discussion and analysis of the important operational and financial developments during such fiscal year.

 

(c)   Appraisal Reports.  Within 45 days after the close of the second and the fourth quarterly accounting periods in each fiscal year of the Borrower, and at any other time within 33 days of the written request of the Administrative Agent, Appraisals for each Initial Vessel (i) dated no more than 30 days prior to delivery thereof to the Administrative Agent, (ii) in form and substance satisfactory to the Administrative Agent and (iii) from at least two Approved Appraisers.  All such Appraisals shall be conducted by, and made at the expense of, the Borrower (it being understood that the Administrative Agent may and, at the request of the Required Lenders, shall, upon notice to the Borrower, obtain such Appraisals and that the cost of all such Appraisals will be for the account of the Borrower); provided that, unless a Default or an Event of Default has occurred and is continuing, in no event shall the Borrower be required to pay for Appraisals obtained pursuant to this Section 8.01(c) on more than two occasions in any single fiscal year of the Borrower, with the cost of any such reports in excess thereof to be paid by the Lenders on a pro rata basis.

 

(d)   Projections, etc.  As soon as available but not more than 45 days after the commencement of each fiscal year of the Borrower beginning with its fiscal year commencing on January 1, 2011, a budget of the Borrower and its Subsidiaries in reasonable detail for each of the twelve months and four fiscal quarters of such fiscal year.

 

(e)   Officer’s Compliance Certificates.  (i)  At the time of the delivery of the financial statements provided for in Sections 8.01(a) and (b), a certificate of the senior financial

 

 

  

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officer of the Borrower in the form of Exhibit I to the effect that, to the best of such officer’s knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof (in reasonable detail), which certificate shall (x) set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Sections 9.07 through 9.09, inclusive, at the end of such fiscal quarter or year, as the case may be, and (y) certify that there have been no changes to any of Schedule VII since the Effective Date and Annexes A through F of the Pledge Agreement since the initial Borrowing Date or, if later, since the date of the most recent certificate delivered pursuant to this Section 8.01(e)(i), or if there have been any such changes, a list in reasonable detail of such changes (but, in each case with respect to this clause (y), only to the extent that such changes are required to be reported to the Security Trustee pursuant to the terms of such Security Documents) and whether the Borrower and the other Credit Parties have otherwise taken all actions required to be taken by them pursuant to such Security Documents in connection with any such changes.

 

(ii)   At the time of a Collateral Disposition or Vessel Exchange in respect of any Initial Vessel, a certificate of the senior financial officer of the Borrower which certificate shall (x) certify on behalf of the Borrower the last Appraisals received pursuant to Section 8.01(c) determining the Aggregate Appraised Value after giving effect to such disposition or exchange, as the case may be, and (y) set forth the calculations required to establish whether the Borrower is in compliance with the provisions of Section 9.07 after giving effect to such disposition or exchange, as the case may be.

 

(f)   Notice of Default, Litigation or Event of Loss.  Promptly, and in any event within three Business Days after the Borrower obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or an Event of Default and which notice shall specify the nature thereof, the period of existence thereof and what action the Borrower proposes to take with respect thereto, (ii) any litigation or governmental investigation or proceeding pending or threatened (x) against the Borrower or any of its Subsidiaries which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (y) with respect to any Vessel Acquisition or any Credit Document and (iii) any Event of Loss.

 

(g)   Other Reports and Filings.  Promptly, copies of all financial information, proxy materials and other information and reports, if any, which the Borrower or any of its Subsidiaries shall file with the Securities and Exchange Commission (or any successor thereto) or deliver to holders of its Indebtedness pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor).

 

(h)   Environmental Matters.  Promptly upon, and in any event within five Business Days after, the Borrower obtains knowledge thereof, written notice of any of the following environmental matters occurring after the Effective Date, except to the extent that such environmental matters could not, either individually or in the aggregate, be reasonably expected to have a Material Adverse Effect:

 

(i)   any Environmental Claim pending or threatened in writing against the Borrower or any of its Subsidiaries or any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries;

 

 

 

  

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(ii)   any condition or occurrence on or arising from any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries that (a) results in noncompliance by the Borrower or such Subsidiary with any applicable Environmental Law or (b) could reasonably be expected to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any such Vessel or property;

 

(iii)   any condition or occurrence on any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries that could reasonably be expected to cause such Vessel or property to be subject to any restrictions on the ownership, occupancy, use or transferability by the Borrower or such Subsidiary of such Vessel or property under any Environmental Law; and

 

(iv)   the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided that in any event the Borrower shall deliver to the Administrative Agent all material notices received by the Borrower or any of its Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA or OPA.

 

All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Borrower’s or such Subsidiary’s response thereto.  In addition, the Borrower will provide the Administrative Agent with copies of all material communications with any government or governmental agency and all material communications with any Person relating to any Environmental Claim of which notice is required to be given pursuant to this Section 8.01(h), and such detailed reports of any such Environmental Claim as may reasonably be requested by the Administrative Agent or the Required Lenders.

 

(i)   Other Information.  From time to time, such other information or documents (financial or otherwise) with respect to the Borrower or its Subsidiaries as the Administrative Agent or the Required Lenders may reasonably request in writing.

 

8.02   Books, Records and Inspections.  The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries, in conformity in all material respects with generally accepted accounting principles and all requirements of law, shall be made of all dealings and transactions in relation to its business.  The Borrower will, and will cause each of its Subsidiaries to, permit officers and designated representatives of the Administrative Agent and the Lenders as a group to visit and inspect, during regular business hours and under guidance of officers of the Borrower or any of its Subsidiaries, any of the properties of the Borrower or its Subsidiaries, and to examine the books of account of the Borrower or such Subsidiaries and discuss the affairs, finances and accounts of the Borrower or such Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable advance notice and at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or the Required Lenders may request; provided that, unless an Event of Default exists and is continuing at such time, the

 

 

  

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Administrative Agent and the Lenders shall not be entitled to request more than two such visitations and/or examinations in any fiscal year of the Borrower.

 

8.03   Maintenance of Property; Insurance; Mortgagee Interest Insurance.  (a)  The Borrower will, and will cause each of its Subsidiaries to, (i) keep all material property necessary in its business in good working order and condition (ordinary wear and tear and loss or damage by casualty or condemnation excepted), (ii) maintain insurance on the Vessels in at least such amounts and against at least such risks as are in accordance with normal industry practice for similarly situated insureds and (iii) furnish to the Administrative Agent, at the written request of the Administrative Agent or any Lender, a complete description of the material terms of insurance carried.  In addition to the requirements of the immediately preceding sentence, the Borrower will at all times cause insurance of the types described in Schedule V to comply with the insurance requirements of the Vessel Mortgages.

 

(b)   The Borrower will reimburse the Administrative Agent, the Security Trustee and/or the Lenders for all costs, fees and expenses incurred in relation to mortgagee interest insurance; provided that the Borrower shall not be required to reimburse the Administrative Agent, Security Trustee and/or the Lenders for any costs, fees and expenses incurred in relation to mortgagee interest insurance at any time (i) the Credit Parties own six (6) Initial Vessels or any Acceptable Replacement Vessel and (ii) the Appraised Value of each Initial Vessel or any Acceptable Replacement Vessel is less than 15% of the Aggregate Appraised Value.

 

8.04   Corporate Franchises.  The Borrower will, and will cause each of its Subsidiaries, to do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents (if any) used in its business; provided, however, that nothing in this Section 8.04 shall prevent (i) sales or other dispositions of assets, consolidations or mergers by or involving the Borrower or any of its Subsidiaries which are permitted in accordance with Section 9.02, (ii) any Subsidiary Guarantor from changing the jurisdiction of its organization to the extent permitted by Section 9.10 or (iii) the abandonment by the Borrower or any of its Subsidiaries of any rights, franchises, licenses and patents that could not be reasonably expected to have a Material Adverse Effect.

 

8.05   Compliance with Statutes, etc.  The Borrower will, and will cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions (including all laws and regulations relating to money laundering) imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such non-compliances as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

8.06   Compliance with Environmental Laws.  (a)  The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all Environmental Laws applicable to the ownership or use of any Vessel or property now or hereafter owned or operated by the Borrower or any of its Subsidiaries (except to the extent non compliance is not reasonably likely to have a Material Adverse Effect), will within a reasonable time period pay or cause to be paid all costs and expenses incurred in connection with such compliance (except to the extent being contested in good faith), and will keep or cause to be kept all such Vessels or property free 

 

 

  

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and clear of any Liens imposed pursuant to such Environmental Laws.  Neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of, Hazardous Materials on any Vessel or property now or hereafter owned or operated or occupied by the Borrower or any of its Subsidiaries, or transport or permit the transportation of Hazardous Materials to or from any ports or property except in material compliance with all applicable Environmental Laws and as reasonably required by the trade in connection with the operation, use and maintenance of any such property or otherwise in connection with their businesses.  The Borrower will, and will cause each of its Subsidiaries to, maintain insurance on the Vessels in at least such amounts as are in accordance with normal industry practice for similarly situated insureds, against losses from oil spills and other environmental pollution.

 

(b)   At the written request of the Administrative Agent or the Required Lenders, which request shall specify in reasonable detail the basis therefor, at any time and from time to time, the Borrower will provide, at the Borrower’s sole cost and expense, an environmental assessment of any Vessel by such Vessel’s classification society (to the extent such classification society is listed on Schedule VIII hereto) or another internationally recognized classification society acceptable to the Administrative Agent.  If said classification society, in its assessment, indicates that such Vessel is not in compliance with the Environmental Laws, said society shall set forth potential costs of the remediation of such non-compliance; provided that, such request may be made only if (i) there has occurred and is continuing an Event of Default, (ii) the Administrative Agent or the Required Lenders reasonably and in good faith believe that the Borrower, any of its Subsidiaries or any such Vessel is not in compliance with Environmental Law and such non-compliance could reasonably be expected to have a Material Adverse Effect, or (iii) circumstances exist that reasonably could be expected to form the basis of a material Environmental Claim against the Borrower or any of its Subsidiaries or any such Vessel.  If the Borrower fails to provide the same within 90 days after such request was made, the Administrative Agent may order the same and the Borrower shall grant and hereby grants to the Administrative Agent and the Lenders and their agents access to such Vessel and specifically grants the Administrative Agent and the Lenders an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower’s expense.

 

8.07   ERISA.  As soon as reasonably possible and, in any event, within ten (10) days after the Borrower or any of its Subsidiaries or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to the Administrative Agent, with sufficient copies for each of the Lenders, a certificate of the senior financial officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto:  that a Reportable Event has occurred (except to the extent that the Borrower has previously delivered to the Administrative Agent a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 

 

 

  

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is reasonably expected to occur with respect to such Plan within the following 30 days; that failure to satisfy the applicable minimum funding standard with respect to a Plan (other than a Multiemployer Plan), within the meaning of Section 412 of the Code or Section 302 of ERISA, has occurred or an application may be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 302 of ERISA with respect to a Plan (other than a Multiemployer Plan); that any contribution required to be made with respect to a Plan or Foreign Pension Plan has not been timely made and such failure could result in a material liability for the Borrower or any of its Subsidiaries; that a Plan has been or may be reasonably expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA with a material amount of unfunded benefit liabilities; that a Plan (in the case of a Multiemployer Plan, to the best knowledge of the Borrower or any of its Subsidiaries or ERISA Affiliates) has a material Unfunded Current Liability; that proceedings may be reasonably expected to be or have been instituted by the PBGC to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a material delinquent contribution to a Plan; that the Borrower, any of its Subsidiaries or any ERISA Affiliate will or may reasonably expect to incur any material liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that the Borrower, or any of its Subsidiaries may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan.  Upon request, the Borrower will deliver to the Administrative Agent with sufficient copies to the Lenders (i) a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service and (ii) copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA.  In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the PBGC, and any notices received by the Borrower, any of its Subsidiaries or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan with respect to any circumstances or event that could reasonably be expected to result in a material liability shall be delivered to the Lenders no later than ten (10) days after the date such annual report has been filed with the Internal Revenue Service or such records, documents and/or information has been furnished to the PBGC or such notice has been received by the Borrower, such Subsidiary or such ERISA Affiliate, as applicable.

 

8.08   End of Fiscal Years; Fiscal Quarters.  The Borrower will cause (i) each of its, and each of its Subsidiaries’, fiscal years to end on December 31 of each year and (ii) each of its and its Subsidiaries’ fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year.

 

 

  

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8.09   Performance of Obligations.  The Borrower will, and will cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement and other debt instrument (including, without limitation, the Credit Documents) by which it is bound, except to the extent that any non-performances could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

8.10   Payment of Taxes.  The Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, in each case on a timely basis, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 9.01(i), provided that neither the Borrower nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with generally accepted accounting principles.

 

8.11   Further Assurances.  (a)  The Borrower, and each other Credit Party, agrees that at any time and from time to time, at the expense of the Borrower or such other Credit Party, it will promptly execute and deliver all further instruments and documents, and take all further action that may be reasonably necessary, or that the Administrative Agent may reasonably require, to perfect and protect any Lien granted or purported to be granted hereby or by the other Credit Documents, or to enable the Security Trustee to exercise and enforce its rights and remedies with respect to any Collateral.  Without limiting the generality of the foregoing, the Borrower will execute and file, or cause to be filed, such financing or continuation statements under the UCC (or any non-U.S. equivalent thereto), or amendments thereto, such amendments or supplements to the Vessel Mortgages (including any amendments required to maintain Liens granted by such Vessel Mortgages pursuant to the effectiveness of this Agreement), and such other instruments or notices, as may be reasonably necessary, or that the Administrative Agent may reasonably require, to protect and preserve the Liens granted or purported to be granted hereby and by the other Credit Documents.

 

(b)   The Borrower hereby authorizes the Security Agent to file one or more financing or continuation statements under the UCC (or any non-U.S. equivalent thereto), and amendments thereto, relative to all or any part of the Collateral without the signature of the Borrower, where permitted by law.  The Security Trustee will promptly send the Borrower a copy of any financing or continuation statements which it may file without the signature of the Borrower and the filing or recordation information with respect thereto.

 

(c)   To the extent that any Vessel Exchange is made by a Subsidiary of the Borrower which is not a Credit Party at the time of such exchange (and which has not otherwise executed and delivered the documents described below in this Section 8.11(c)), the Borrower will cause such Subsidiary (and any Subsidiary which directly owns the stock of such Subsidiary to the extent not a Credit Party) to execute and deliver to the Administrative Agent a counterpart of the Pledge Agreement (including any supplemental agreement required to give effect to such security interests purported to be created by the Pledge Agreement under applicable local law), the Guaranty, Assignment of Earnings, Assignment of Insurances, Assignment of Charters (if applicable) and the appropriate Vessel Mortgage(s), together with all related documentation

 

 

 

  

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(including, without limitation, opinions of counsel, corporate documents and proceedings and officer’s certificates) as such Subsidiary would have been required to deliver pursuant to Sections 4 and 5 of this Agreement had such Subsidiary been a Credit Party on a Borrowing Date.  The Credit Party whose Vessel shall no longer be part of the Collateral shall be released from all applicable Security Documents, and all Liens granted pursuant to the Security Documents applicable to such Vessel shall be released.

 

8.12   Deposit of Earnings.  Each Subsidiary Guarantor shall cause the earnings derived from each of the respective Initial Vessels or Acceptable Replacement Vessels, to the extent constituting Earnings and Insurance Collateral, to be deposited or remitted by the respective account debtor in respect of such earnings into one or more of the Operating Accounts maintained for such Subsidiary Guarantor or the Borrower from time to time.  Without limiting any Subsidiary Guarantor’s obligations in respect of this Section 8.12, each Subsidiary Guarantor agrees that, in the event it receives any earnings constituting Earnings and Insurance Collateral, or any such earnings are deposited other than in one of the Operating Accounts, it shall promptly deposit all such proceeds into one of the Operating Accounts maintained for such Subsidiary Guarantor or the Borrower from time to time.

 

8.13   Ownership of Subsidiaries.  The Borrower shall cause each Subsidiary Guarantor, to at all times, be directly wholly-owned by one or more Credit Parties.

 

8.14   Flag of the Initial Vessels; Initial Vessel Classifications.  (a)  When required by the terms hereof, the Borrower will, and will cause each of the Subsidiary Guarantors to, cause each Initial Vessel to be registered under the laws and flag of (x) the Republic of Marshall Islands or (y) any other jurisdiction acceptable to the Required Lenders (each jurisdiction in clauses (x) or (y), an “Acceptable Flag Jurisdiction”).  Notwithstanding the foregoing, any Credit Party may transfer an Initial Vessel registered in an Acceptable Flag Jurisdiction to another Acceptable Flag Jurisdiction pursuant to a Flag Jurisdiction Transfer.

 

(b)   The Borrower will, and will cause each of its Subsidiaries to, ensure that the representation set forth in Section 7.23 is true and correct in all respects at all times.

 

(c)           The Borrower will, and will cause each of the Subsidiary Guarantors to, comply with and ensure that their respective Initial Vessel shall comply with the requirements of the ISM Code, the ISPS Code and Annex VI in accordance with the respective implementation schedules thereof, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the term of this Agreement.

 

(d)           The Borrower will, and will cause each of the Subsidiary Guarantors to immediately notify the Administrative Agent of any actual or threatened withdrawal of a SMC, DOC, ISSC or IAPPC after having knowledge thereof.

 

8.15   Consent to Assignment of Charters.  The Borrower will, and will cause each of the Subsidiary Guarantors to, use its commercially reasonable efforts to cause each charter counterparty which is party to a charter with respect to each Initial Vessel that is eighteen (18) months or more in duration to execute and deliver to the Administrative Agent a Charterers’

 

 

  

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Consent and Agreement in substantially the form attached as Annex 1 to Exhibit B to the Assignment of Charters with such changes as may be approved by the Administrative Agent.

 

8.16   Management Agreement.  The Borrower will cause the Manager’s rights to payment under the Management Agreement and any liens created in favor of the Manager thereunder to be fully subordinated to those of the Lenders.

 

8.17   Exchange Listing.  The Borrower will remain listed on the New York Stock Exchange or such other exchange as is reasonably satisfactory to the Lenders.

 

SECTION 9.   Negative Covenants.  The Borrower hereby covenants and agrees that on and after the Effective Date and until this Agreement has terminated and the Loans, and the Notes, together with interest, the Commitment Commission and all other Obligations incurred hereunder and under any other Credit Document, are paid in full:

 

9.01   Liens.  The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any Collateral, whether now owned or hereafter acquired, or sell any such Collateral subject to an understanding or agreement, contingent or otherwise, to repurchase such Collateral (including sales of accounts receivable with recourse to the Borrower or any of its Subsidiaries), or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute with respect to any Collateral; provided that the provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as “Permitted Liens”):

 

(i)   inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP;

 

(ii)   Liens imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s and mechanics’ liens, liens for necessaries, salvage liens, general average liens, liens in respect of or covered by insurance (including permitted deductibles) and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of the Collateral and do not materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary or (y) which are being contested in good faith by appropriate proceedings, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the Collateral subject to any such Lien;

 

(iii)   Permitted Encumbrances;

 

(iv)   Liens created pursuant to the Security Documents;

 

 

 

  

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(v)   Liens arising out of judgments, awards, decrees or attachments with respect to which the Borrower or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review, provided that the aggregate amount of all such judgments, awards, decrees or attachments shall not constitute an Event of Default under Section 10.09;

 

(vi)   Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, Liens to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations in each case incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money) and Liens arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; provided that the aggregate value of all cash and property at any time encumbered pursuant to this clause (vi) shall not exceed $2,500,000; and

 

(vii)   Liens in respect of seamen’s wages which are not past due and other maritime Liens for amounts not past due arising in the ordinary course of business and not yet required to be removed or discharged under the terms of the respective Vessel Mortgages.

 

In connection with the granting of Liens described above in this Section 9.01 by the Borrower or any of its Subsidiaries, the Administrative Agent and the Security Trustee shall be authorized to take any actions deemed appropriate by it in connection therewith (including, without limitation, by executing appropriate lien subordination agreements in favor of the holder or holders of such Liens, in respect of the item or items of equipment or other assets subject to such Liens).

 

9.02   Consolidation, Merger, Sale of Assets, etc.  The Borrower will not, and will not permit any Subsidiary Guarantor to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or substantially all of its assets or any of the Collateral, or enter into any sale-leaseback transactions involving any of the Collateral, except that:

 

(i)   the Borrower and any Subsidiary Guarantor may sell, lease or otherwise dispose of any Initial Vessel or Acceptable Replacement Vessel, provided that, (x)(A) such sale is made at fair market value (as determined in accordance with the Appraisals most recently delivered to the Administrative Agent (or obtained by the Administrative Agent) pursuant to Sections 5.11(v) and 8.01(c) or delivered at the time of such sale to the Administrative Agent by the Borrower), (B) 100% of the consideration in respect of such sale shall consist of cash or Cash Equivalents received by the Borrower, or the respective Subsidiary Guarantor which owned such Initial Vessel or Acceptable Replacement Vessel, on the date of consummation of such sale, (C) at the time of such sale or other disposition, the Borrower shall apply the proceeds of such sale as required by Section 3.03(b) to

 

 

  

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permanently reduce the Facility Amount by an amount equal to the then Total Commitment, multiplied by a fraction, the numerator of which is the most recent Appraised Value of such Initial Vessel or Acceptable Replacement Vessel, and the denominator of which is the aggregate of the most recent Appraised Value of all Initial Vessels and all Acceptable Replacement Vessels or (y) so long as no Default or Event of Default has occurred and is continuing (or would arise after giving effect thereto) and so long as all representations and warranties made by the Borrower pursuant to Section 7 of this Agreement are true and correct both before and after any such exchange, an Initial Vessel may be exchanged for an Acceptable Replacement Vessel pursuant to a Vessel Exchange; provided further, that in the case of both clauses (x) and (y) above, the Borrower shall have delivered to the Administrative Agent an officer’s certificate, certified by the senior financial officer of the Borrower, demonstrating pro forma compliance (after giving effect to such Collateral Disposition and, in the case of calculations involving the Appraised Value of Vessels, using valuations consistent with the Appraisals most recently delivered to the Administrative Agent (or obtained by the Administrative Agent) pursuant to Sections 5.11(v) and 8.01(c) or the definition of Vessel Exchange) with each of the covenants set forth in Sections 9.07 through 9.09, inclusive, for the most recently ended Test Period (or at the time of such sale or exchange, as applicable) and projected compliance with such covenants for the one year period following such Collateral Disposition or Vessel Exchange, in each case setting forth the calculations required to make such determination in reasonable detail;

 

(ii)   the Borrower and its Subsidiaries may sell or discount, in each case without recourse and in the ordinary course of business, overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof consistent with customary industry practice (and not as part of any bulk sale);

 

(iii)   (A) the Borrower and any Subsidiary Guarantor may transfer assets or lease to or acquire or lease assets from the Borrower or any other Subsidiary Guarantor and (B) any Subsidiary of the Borrower (other than a Subsidiary Guarantor) may transfer assets or lease to or acquire or lease assets from any other Subsidiary of the Borrower (other than a Subsidiary Guarantor) or any Subsidiary of the Borrower (other than a Subsidiary Guarantor) may be merged into any Subsidiary of the Borrower (other than a Subsidiary Guarantor) or any Subsidiary Guarantor may be merged into any other Subsidiary Guarantor, in each case so long as all actions necessary or desirable to preserve, protect and maintain the security interest and Lien of the Security Trustee in any Collateral held by any Person involved in any such transaction are taken to the satisfaction of the Administrative Agent;

 

(iv)   following a Collateral Disposition permitted under this Agreement, the Subsidiary Guarantor which owned the Initial Vessel or Acceptable Replacement Vessel that is the subject of such Collateral Disposition may dissolve, provided

 

 

  

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 that, (x) all proceeds from such Collateral Disposition shall have been applied to the repayment of the Loans to the extent required in Section 3.03 of this Agreement, (y) all of the proceeds arising out of such dissolution shall be paid only to the Borrower and (z) no Event of Default is continuing unremedied at the time of such dissolution; and

 

(v)   the Borrower may consolidate or merge with any other Person if (A) at the time of such transaction and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and (B) the surviving entity in such consolidation or merger shall be the Borrower and the Borrower shall have delivered to the Administrative Agent, not less than ten (10) Business Days in advance of such consolidation or merger, an officer’s certificate signed by a senior financial officer of the Borrower, certifying (i) that no Default or Event of Default has occurred and is continuing (or would arise after giving effect to the intended consolidation or merger) and (ii) pro forma financial statements of the Borrower demonstrating the compliance of the Borrower with all covenants under this Agreement after giving effect to such merger or consolidation.

 

Notwithstanding the foregoing, the Borrower will not, and will not permit any Subsidiary Guarantor to, enter into any bareboat charter of any Initial Vessel without the prior written consent of the Required Lenders.

 

To the extent the Required Lenders waive the provisions of this Section 9.02 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 9.02, such Collateral (unless sold to the Borrower or a Subsidiary of the Borrower) shall be sold free and clear of the Liens created by the Security Documents, and the Administrative Agent and Security Trustee shall be authorized by the Lenders to take any actions deemed appropriate in order to effect the foregoing.

 

9.03   Dividends.  The Borrower will not, and will not permit any of its Subsidiaries to, authorize, declare or pay any Dividends, except that:

 

(i) (x)   any Subsidiary of the Borrower which is not a Subsidiary Guarantor may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower, (y) any Subsidiary Guarantor may pay Dividends to the Borrower or any other Subsidiary Guarantor and (z) if the respective Subsidiary is not a Wholly-Owned Subsidiary of the Borrower, such Subsidiary may pay Dividends to its shareholders generally so long as the Borrower and/or its respective Subsidiaries which own equity interests in the Subsidiary paying such Dividends receive at least their proportionate share thereof (based upon their relative holdings of the equity interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests of such Subsidiary);

 

(ii)   the Borrower may make, pay or declare cash Dividends; provided that, for all Dividends paid pursuant to this clause (ii), (A) Dividends shall be paid within 90 days of the declaration thereof; (B) Dividends paid in respect of a fiscal quarter

 

 

  

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shall only be paid after the date of delivery of quarterly or annual financial statements for such fiscal quarter pursuant to Sections 8.01(a) and (b), as the case may be, and on or prior to 45 days after the last day of the immediately succeeding fiscal quarter, (C) no Default or Event of Default shall have occurred and be continuing at the time of declaration, (D) no Default or Event of Default shall have occurred and be continuing (or would arise after giving effect thereto) at the time of payment, and (E) on or prior to the declaration and payment of a Dividend, the Borrower shall deliver to the Administrative Agent an officer’s certificate signed by the senior financial officer of the Borrower, certifying that the requirements set forth in preceding clauses (A) through (D) are satisfied;

 

(iii)   the Borrower may purchase or redeem shares of common stock of the Borrower in market purchases under Rule 10b-18 or other purchases approved by the Borrower’s Board of Directors, any committee thereof or any authorized officer; provided that (A) no Default or Event of Default shall have occurred and be continuing at the time of any such purchases, (B) no Default or Event of Default shall arise after giving effect to any such purchases and (C) the Borrower in the exercise of its rights under this Section 9.03(iii) shall not be permitted to purchase or redeem shares beneficially owned directly or indirectly by Peter Georgiopoulos; and

 

(iv)   the Borrower may authorize, declare and distribute a dividend of Rights (as such term is defined and which are convertible into other securities as set forth in the Shareholder Rights Agreement) as contemplated by the Shareholder Rights Agreement.

 

9.04   Indebtedness.   (a)  The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness (other than Indebtedness incurred pursuant to this Agreement and the other Credit Documents) except:

 

(i)    Indebtedness in a principal amount of up to Ten Million Dollars ($10,000,000) in the aggregate at any time outstanding, so long as at the time such Indebtedness is incurred: (x) no Default or Event of Default has occurred and is continuing, (y) such Indebtedness would not cause any Default or Event of Default, either on a pro forma basis for the most recently ended Test Period (or at the time of such incurrence, as applicable), or on a projected basis for the one year period following such incurrence, with each of the covenants set forth in Sections 9.07 through 9.09, inclusive, and (z) the Borrower shall have delivered an officer’s certificate from the senior financial officer of the Borrower certifying that the conditions set forth in clause (x) and (y) above are satisfied and setting forth the calculations of the pro forma compliance described in clause (y) above in reasonable detail;

 

        (ii)    Indebtedness permitted under Section 9.05(iii);

 

(iii)   the Borrower and its Subsidiaries may issue guarantees of Indebtedness permitted under Section 9.04(a)(i); and

 

 

 

  

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(iv)   the Borrower and its Subsidiaries may enter into and remain liable under Interest Rate Protection Agreements and Other Hedging Agreements entered into in the ordinary course of business and not for speculative purposes; provided that the Borrower’s and the Subsidiaries’ obligations thereunder are fully subordinate to their obligations hereunder on terms satisfactory to the Administrative Agent.

 

(b)   Notwithstanding anything to the contrary set forth above in this Section 9.04, (i) no Subsidiary Guarantor shall incur any Indebtedness for borrowed money (including Contingent Obligations in respect thereof) except for (x) Indebtedness incurred pursuant to this Agreement and the other Credit Documents and (y) intercompany Indebtedness permitted pursuant to Section 9.05(iii), and (ii) except as permitted under Section 9.04(a)(ii), the Borrower and the Subsidiary Guarantors shall not assume, incur or suffer to exist any Contingent Obligations in respect of any Indebtedness of any of its Subsidiaries which is not a Credit Party.

 

9.05   Advances, Investments and Loans.  The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any Equity Interests, or make any capital contribution to any other Person (each of the foregoing an “Investment” and, collectively, “Investments”) except that the following shall be permitted:

 

(i)   the Borrower and its Subsidiaries may acquire and hold accounts receivable owing to any of them;

 

(ii)   so long as no Event of Default exists or would result therefrom, the Borrower and its Subsidiaries may make loans and advances in the ordinary course of business to its employees so long as the aggregate principal amount thereof at any time outstanding which are made on or after the Effective Date (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $500,000;

 

(iii)   the Subsidiary Guarantors may make intercompany loans and advances to the Borrower and between or among one another, and Subsidiaries of the Borrower other than the Subsidiary Guarantors may make intercompany loans and advances to the Borrower or any other Subsidiary of the Borrower, provided that any loans or advances to the Borrower or any Subsidiary Guarantors pursuant to this Section 9.05(iii) shall be subordinated to the Obligations of the respective Credit Party pursuant to written subordination provisions substantially in the form of Exhibit J;

 

(iv)   the Borrower and its Subsidiaries may sell or transfer assets to the extent permitted by Section 9.02;

 

(v)   the Borrower may make Investments in the Subsidiary Guarantors and, so long as no Event of Default exists and is continuing, the Borrower may make Investments in its other Wholly-Owned Subsidiaries so long as management of the Borrower in good faith believe that, after giving effect to such Investment, the

 

 

  

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Borrower shall be able to meet its payment obligations in respect of this Agreement;

 

(vi)   the Borrower may make Investments in its non-Wholly-Owned Subsidiaries; provided that the aggregate amount of all Investments under this clause (vi) shall not exceed Ten Million Dollars ($10,000,000);

 

(vii)   so long as no Event of Default exists or could reasonably be expected to result therefrom, the Borrower and its Subsidiaries (other than the Subsidiary Guarantors) may make Investments in joint ventures in the ordinary course of business; and

 

(viii)   so long as no Event of Default exists or could reasonably be expected to result therefrom, the Borrower and its Subsidiaries (other than the Subsidiary Guarantors) may make Investments in a Person engaged in drybulk shipping operations.

 

9.06   Transactions with Affiliates.  The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of such Person, other than on terms and conditions no less favorable to such Person as would be obtained by such Person at that time in a comparable arm’s-length transaction with a Person other than an Affiliate, except that:

 

(i)   Dividends may be paid to the extent provided in Section 9.03;

 

(ii)   loans and other Investments may be made and other transactions may be entered into among the Borrower and its Subsidiaries to the extent permitted by Sections 9.04 and 9.05;

 

(iii)   the Borrower may pay customary director’s fees;

 

(iv)   the Borrower and its Subsidiaries may enter into employment agreements or arrangements with their respective officers and employees in the ordinary course of business; and

 

(v)   the Borrower and its Subsidiaries may pay management fees to Wholly-Owned Subsidiaries of the Borrower in the ordinary course of business; and

 

(vi)   the Borrower may enter into the Management Agreement and perform its obligations thereunder, including pay any management fees to the Manager as provided in the Management Agreement.

 

9.07   Collateral Maintenance.  The Borrower will not permit the Aggregate Appraised Value at any time to equal less than the Required Percentage of the Facility Amount, provided that, so long as any Default in respect of this Section 9.07 is not caused by any voluntary Collateral Disposition or a Vessel Exchange, such Default shall not constitute an Event of Default so long as within 45 days after such shortfall, the Borrower (i) makes such repayments

 

 

  

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of Loans in an amount sufficient to cure such Default, or (ii) permanently reduces the Total Commitment or (iii) delivers to the Security Trustee such additional collateral, as may be satisfactory to the Required Lenders in their sole discretion, of sufficient value to make the Aggregate Appraised Value plus such additional collateral equal to or greater than the Required Percentage of the Facility Amount, provided that the Lenders shall not unreasonably withhold or delay such determination (it being understood that any action taken in respect of items (i) through (iii) above shall only be effective to cure such default pursuant to this Section 9.07 to the extent that no Default or Event of Default exists hereunder immediately after giving effect thereto).

 

9.08   Minimum Cash Balance.  The Borrower will not permit the aggregate amount of (x) all cash and Cash Equivalents held by the Borrower and its Subsidiaries which are subject to a Lien under the Security Documents and (y) all undrawn credit facilities to the extent the proceeds thereof are available to fund the working capital requirements of the Borrower and the Subsidiary Guarantors with maturities in excess of twelve months on the last day of any fiscal quarter (commencing with and including the fiscal quarter ended June 30, 2010) to be less than $750,000 per vessel owned by the Borrower or any of its Subsidiaries.

 

9.09   Minimum Consolidated Net Worth.  The Borrower will not permit its Consolidated Net Worth at any time to be less than the Minimum Consolidated Net Worth.

 

9.10   Limitation on Modifications of Certificate of Incorporation and By-Laws; etc.  (a)  The Borrower will not, and will not permit any Subsidiary Guarantor to, amend, modify or change its Certificate of Incorporation, Certificate of Formation (including, without limitation, by the filing or modification of any certificate of designation), By-Laws, limited liability company agreement, partnership agreement (or equivalent organizational documents) or any agreement entered into by it with respect to its capital stock or membership interests (or equivalent equity interests), or enter into any new agreement with respect to its capital stock or membership interests (or equivalent interests), other than the Shareholders Rights Agreement or the Registration Rights Agreement or any amendments, modifications or changes or any such new agreements which are not in any way materially adverse to the interests of the Lenders.

 

(b)   Notwithstanding the foregoing provisions of this Section 9.10 or Section 8.04, upon not less than 30 days prior written notice to the Administrative Agent and so long as no Default or Event of Default exists and is continuing, any Subsidiary Guarantor may (x) change its jurisdiction of organization to another jurisdiction and (y) change its form of organization to another form, in each case to the extent reasonably satisfactory to the Administrative Agent, provided that, such Subsidiary Guarantor shall promptly take all actions reasonably deemed necessary by the Security Trustee to preserve, protect and maintain, without interruption, the security interest and Lien of the Security Trustee in any Collateral owned by such Subsidiary Guarantor to the satisfaction of the Security Trustee, and such Subsidiary Guarantor shall have provided to the Administrative Agent and the Lenders such opinions of counsel as may be reasonably requested by the Administrative Agent to assure itself that the conditions of this proviso have been satisfied.

 

9.11   Limitation on Certain Restrictions on Subsidiaries.  The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause

 

 

  

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or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any of the Borrower’s Subsidiaries or (c) transfer any of its properties or assets to the Borrower or any of the Borrower’s Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any agreement entered into by the Borrower or a Subsidiary of the Borrower in the ordinary course of business, (v) any holder of a Permitted Lien may restrict the transfer of the asset or assets subject thereto and (vi) restrictions which are not more restrictive than those contained in this Agreement.

 

9.12   Limitation on Issuance of Capital Stock.  (a)  The Borrower will not permit any Subsidiary to issue any preferred stock (or equivalent equity interests).

 

(b)   The Borrower will not permit any Subsidiary Guarantor to issue any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and additional issuances which do not decrease the percentage ownership of the Borrower or any of its Subsidiaries in any class of the capital stock of such Subsidiary and (iii) in the case of Foreign Subsidiaries of the Borrower, to qualify directors to the extent required by applicable law.  All capital stock of any Subsidiary Guarantor issued in accordance with clauses (i) and (ii) of this Section 9.12(b) shall be delivered to the Security Trustee pursuant to the Pledge Agreement.

 

9.13   Business.  (a)  The Borrower and its Subsidiaries will not engage in any business other than the businesses in which they are engaged in as of the Effective Date and activities directly related thereto, and similar or related businesses.

 

(b)   The Borrower will not, and will not permit any of its Subsidiaries to, (i) be engaged in (A) the retailing, wholesaling, trading or importing of goods or services for or with residents of the Republic of the Marshall Islands; (B) any extractive industry in the Republic of Marshall Islands; (C) any regulated professional service activity in the Republic of the Marshall Islands; (D) the export of any commodity or goods manufactured, processed, mined or made in the Republic of the Marshall Islands; or (E) the ownership of real property in the Republic of the Marshall Islands; and (ii) do business in the Republic of the Marshall Islands except that the Borrower and their Subsidiaries may (A) have its registered office in the Republic of the Marshall Islands and maintain their respective registered agent in the Republic of the Marshall Islands as required by the provisions of the Associations Law of 1990 of the Republic of the Marshall Islands, as amended; and (B) secure and maintain registry in the Republic of the Marshall Islands solely related to the operation or disposition of any vessel outside of the Republic of the Marshall Islands.

 

9.14   Manager.  The Borrowers and the Subsidiary Guarantors shall not (i) change the Manager of the Initial Vessels or any Acceptable Replacement Vessel or (ii) without

 

 

 

  

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the prior written consent of the Administrative Agent (such consent not be unreasonably withheld or delayed) (1) increase the compensation awarded to the Manager or (2) substantially diminish the duties of the Manager under the Management Agreement.

 

9.15   Bank Accounts.  The Borrower will not, and will not permit any Subsidiary Guarantor to, maintain any deposit, savings, investment or other similar accounts other than the Operating Accounts, except that (i) the Borrower may open and maintain any such account provided that it shall have granted to the Administrative Agent a first priority security interest in such account to secure the Obligations pursuant to documentation reasonably satisfactory to the Administrative Agent and all actions necessary or advisable in the reasonable opinion of the Administrative Agent to perfect such security interest shall have been taken and (ii) the Borrower and its Subsidiaries may open and maintain one or more disbursement accounts in order to fund operating expenses relating to the Vessels, which disbursement account(s) shall hold, collectively, no more than $100,000 per Vessel.

 

SECTION 10.   Events of Default.  Upon the occurrence of any of the following specified events (each an “Event of Default”):

 

10.01   Payments.  The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for three (3) or more Business Days, in the payment when due of any interest on any Loan or Note, or any Commitment Commission or any other amounts owing hereunder or thereunder; or

 

10.02   Representations, etc.  Any representation, warranty or statement made or deemed made by any Credit Party herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or

 

10.03   Covenants.  Any Credit Party shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Sections 8.01(f)(i), 8.03(a)(ii), 8.13, 8.14 or Section 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement and, in the case of this clause (ii), such default shall continue unremedied for a period of 30 days after written notice to the Borrower by the Administrative Agent or any of the Lenders; or

 

10.04   Default Under Other Agreements.  (i) The Borrower or any of its Subsidiaries shall default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) the Borrower or any of its Subsidiaries shall default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity, or (iii) any Indebtedness (other than the Obligations) of the Borrower or any of its Subsidiaries shall be declared to be due and payable, or required to be prepaid other than by a regularly

 

 

  

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scheduled required prepayment, prior to the stated maturity thereof, provided that it shall not be a Default or Event of Default under this Section 10.04 unless the aggregate principal amount of all Indebtedness as described in preceding clauses (i) through (iii), inclusive, exceeds $5,000,000 at any time; or

 

10.05   Bankruptcy, etc.  The Borrower or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against the Borrower or any of its Subsidiaries and the petition is not controverted within 20 days after service of summons, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower or any of its Subsidiaries or the Borrower or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower or any of its Subsidiaries or there is commenced against the Borrower or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing; or

 

10.06   ERISA.  (a)  Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 302 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is reasonably likely to have a trustee appointed to administer such Plan, any Plan which is subject to Title IV of ERISA is, shall have been or is reasonably likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to a Plan or a Foreign Pension Plan is not timely made, the Borrower or any of its Subsidiaries or any ERISA Affiliate has incurred or events have happened, or reasonably expected to happen, that will cause it to incur any liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower, or any of its Subsidiaries, has incurred or is reasonably likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to

 

 

  

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retired employees or other former employees (other than as required by Section 601 of ERISA) or Plans or Foreign Pension Plans; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, either individually and/or in the aggregate, in the reasonable opinion of the Required Lenders, has had, or could reasonably be expected to have, a Material Adverse Effect; or

 

10.07   Security Documents.  At any time after the execution and delivery thereof, any of the Security Documents shall cease to be in full force and effect, or shall cease in any material respect to give the Security Trustee for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, a perfected security interest in, and Lien on, all of the Collateral), in favor of the Security Trustee, superior to and prior to the rights of all third Persons (except in connection with Permitted Liens), and subject to no other Liens (except Permitted Liens), or any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any of the Security Documents and such default shall continue beyond any grace period (if any) specifically applicable thereto pursuant to the terms of such Security Document, or any “event of default” (as defined in any Vessel Mortgage) shall occur in respect of any Vessel Mortgage; or

 

10.08   Guaranty.  At any time after the execution and delivery thereof, the Guaranty, or any provision thereof, shall cease to be in full force or effect as to the relevant Subsidiary Guarantor (unless such  Subsidiary Guarantor is no longer a Subsidiary by virtue of a liquidation, sale, merger or consolidation permitted by Section 9.02) or any Subsidiary Guarantor (or Person acting by or on behalf of such Subsidiary Guarantor) shall deny or disaffirm such Subsidiary Guarantor’s obligations under the Guaranty, or Subsidiary Guarantor, shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Guaranty beyond any grace period (if any) provided therefor; or

 

10.09   Judgments.  One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate for the Borrower and its Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company to the satisfaction of the Administrative Agent) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 60 consecutive days, and the aggregate amount of all such judgments, to the extent not covered by insurance, exceeds $5,000,000 at any time; or

 

10.10   Change of Control.  A Change of Control shall occur;

 

then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Lenders, shall by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Lender or the holder of the Note to enforce its claims against any Credit Party (provided that, if an Event of Default specified in Section 10.05 shall occur, the result which would occur upon the giving of written notice by the Administrative Agent to the Borrower as specified in clauses (i), (ii) and (iii) below shall occur automatically

 

 

  

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without the giving of any such notice):  (i) declare the Commitments terminated, whereupon all Commitments of each Lender shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; and (iii)  enforce, as Security Trustee, all of the Liens and security interests created pursuant to the Security Documents.

 

SECTION 11.   Definitions and Accounting Terms.

 

11.01   Defined Terms.  Capitalized terms used as defined terms shall have the meaning attributed to them in Appendix A hereto.

 

SECTION 12.   Agency and Security Trustee Provisions.

 

12.01   Appointment.  (a)  The Lenders hereby designate Nordea Bank Finland Plc, acting through its New York branch, as Administrative Agent (for purposes of this Section 12, the term “Administrative Agent” shall include Nordea Bank Finland Plc, acting through its New York branch (and/or any of its affiliates) in its capacity as Security Trustee pursuant to the Security Documents and in its capacity as security trustee pursuant to the Vessel Mortgages) to act as specified herein and in the other Credit Documents.  Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Agents to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agents by the terms hereof and thereof and such other powers as are reasonably incidental thereto.  Each Agent may perform any of its duties hereunder by or through its respective officers, directors, agents, employees or affiliates and, may assign from time to time any or all of its rights, duties and obligations hereunder and under the Credit Documents to any of its banking affiliates.

 

(b)   The Lenders hereby irrevocably appoint Nordea Bank Finland Plc, acting through its New York branch as security trustee solely for the purpose of holding legal title to the Vessel Mortgages on each of the Initial Vessels on behalf of the applicable Lenders, from time to time, with regard to the (i) security, powers, rights, titles, benefits and interests (both present and future) constituted by and conferred on the Lenders or any of them or for the benefit thereof under or pursuant to the Vessel Mortgages (including, without limitation, the benefit of all covenants, undertakings, representations, warranties and obligations given, made or undertaken by any Lender in the Vessel Mortgages), (ii) all money, property and other assets paid or transferred to or vested in any Lender or any agent of any Lender or received or recovered by any Lender or any agent of any Lender pursuant to, or in connection with the Vessel Mortgages, whether from the Borrower or any Subsidiary Guarantor or any other person and (iii) all money, investments, property and other assets at any time representing or deriving from any of the foregoing, including all interest, income and other sums at any time received or receivable by any Lender or any agent of any Lender in respect of the same (or any part thereof).  Nordea Bank

 

 

 

  

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Finland plc, acting through its New York branch, hereby accepts such appointment as security trustee.

 

12.02   Nature of Duties.  The Agents shall have no duties or responsibilities except those expressly set forth in this Agreement and the Security Documents.  None of the Agents nor any of their respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by such Person’s gross negligence or willful misconduct (any such liability limited to the applicable Agent to whom such Person relates).  The duties of each of the Agents shall be mechanical and administrative in nature; none of the Agents shall have by reason of this Agreement or any other Credit Document any fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon any Agents any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein.

 

12.03   Lack of Reliance on the Agents.  Independently and without reliance upon the Agents, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower and its Subsidiaries and, except as expressly provided in this Agreement, none of the Agents shall have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter.  No Agent shall be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of the Borrower and its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of the Borrower and its Subsidiaries or the existence or possible existence of any Default or Event of Default.

 

12.04   Certain Rights of the Agents.  If any of the Agents shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Agents shall be entitled to refrain from such act or taking such action unless and until the Agents shall have received instructions from the Required Lenders; and the Agents shall not incur liability to any Person by reason of so refraining.  Without limiting the foregoing, no Lender or the holder of any Note shall have any right of action whatsoever against the Agents as a result of any of the Agents acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders.

 

12.05   Reliance.  Each of the Agents shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, email

 

 

  

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message, facsimile, order or other document or telephone message signed, sent or made by any Person that the applicable Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent.

 

12.06   Indemnification.  To the extent any of the Agents is not reimbursed and indemnified by the Borrower, the Lenders will reimburse and indemnify the applicable Agents, in proportion to their respective “percentages” as used in determining the Required Lenders, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by such Agents in performing their respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Lender shall be liable in respect to an Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct.

 

12.07   The Administrative Agent in its Individual Capacity.  With respect to its obligation to make Loans under this Agreement, each of the Agents shall have the rights and powers specified herein for a “Lender” and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term “Lenders,” “Secured Creditors”, “Required Lenders”, “holders of Notes” or any similar terms shall, unless the context clearly otherwise indicates, include each of the Agents in their respective individual capacity.  Each of the Agents may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders.

 

12.08   Holders.  The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent.  Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor.

 

12.09   Resignation by the Administrative Agent.  (a)  The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days’ prior written notice to the Borrower and the Lenders.  Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below.

 

(b)   Upon any such notice of resignation by the Administrative Agent, the Required Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower.

 

 

  

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(c)   If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower (which shall not be unreasonably withheld or delayed), shall then appoint a commercial bank or trust company with capital and surplus of not less than $500,000,000 as successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Lenders appoint a successor Administrative Agent as provided above.

 

(d)   If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 25th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent’s resignation shall become effective and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.

 

SECTION 13.   Miscellaneous.

 

13.01   Payment of Expenses, etc.  The Borrower agrees that it shall:  (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of each of the Agents (including, without limitation, the reasonable fees and disbursements of Seward & Kissel LLP  and local counsel to the Administrative Agent in each Acceptable Flag Jurisdiction to the extent an Initial Vessel or Acceptable Replacement Vessel is flagged therein) in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto, of the Agents in connection with their respective syndication efforts with respect to this Agreement and of the Agents and each of the Lenders in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for each of the Agents and for each of the Lenders); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp, documentary, transfer, sales and use, value added,  excise and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify the Agents and each Lender, and each of their respective officers, directors, trustees, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys’ and consultants’ fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any of the Agents or any Lender is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the proceeds of any Loans hereunder or the consummation of any transactions contemplated herein, or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged presence of Hazardous Materials on any Vessel or in the air, surface water or groundwater or on the surface or subsurface of any property at any time owned or

 

 

  

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operated by the Borrower or any of its Subsidiaries, the generation, storage, transportation, handling, disposal or Environmental Release of Hazardous Materials at any location, whether or not owned or operated by the Borrower or any of its Subsidiaries, the non-compliance of any Vessel or property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any Vessel or property, or any Environmental Claim asserted against the Borrower, any of its Subsidiaries or any Vessel or property at any time owned or operated by the Borrower or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding (but excluding any losses, liabilities, claims, damages, penalties, actions, judgments, suits, costs, disbursements or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified).  To the extent that the undertaking to indemnify, pay or hold harmless each of the Agents or any Lender set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law.  Notwithstanding the foregoing, neither any Agent nor any Lender, nor any of their respective Affiliates, Subsidiaries, officers, directors and employees shall be responsible to any Person for any consequential, indirect, special or punitive damages which may be alleged by such Person arising out of this Agreement or the other Credit Documents.

 

13.02   Right of Setoff.  In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Subsidiary or the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrower or any Subsidiary but in any event excluding assets held in trust for any such Person against and on account of the Obligations and liabilities of the Borrower or such Subsidiary, as applicable, to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured.

 

13.03   Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including email or facsimile communication) and mailed, faxed or delivered:  if to the Borrower, at the Borrower’s address specified under its signature below; if to any Lender, at its address specified opposite its name on Schedule II below; and if to the Administrative Agent, at its Notice Office; or, as to any other Credit Party, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Lender, at such other address as shall be designated by such Lender in a written notice to the Borrower and the Administrative Agent.  All such notices and

 

 

 

  

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communications shall, (i) when mailed, be effective three Business Days after being deposited in the mails, prepaid and properly addressed for delivery, (ii) when sent by overnight courier, be effective one Business Day after delivery to the overnight courier prepaid and properly addressed for delivery on such next Business Day, or (iii) when sent by email or facsimile, be effective when sent by email or facsimile, except that notices and communications to the Administrative Agent shall not be effective until received by the Administrative Agent.

 

13.04   Benefit of Agreement.  (a)  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, that (i) no Credit Party may assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Lenders, (ii) although any Lender may transfer, assign or grant participations in its rights hereunder with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed and shall not be required if any Event of Default is then in existence), such Lender shall remain a “Lender” for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Section 13.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a “Lender” hereunder and (iii) no Lender shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (x) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or Commitment Commission thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitments shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof), (y) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (z) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) securing the Loans hereunder in which such participant is participating.  In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation.

 

(b)   Notwithstanding the foregoing, any Lender (or any Lender together with one or more other Lenders) may (i) assign all or a portion of its Commitment and/or its outstanding Loans to its (x) parent company and/or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company or (y) in the case of any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor or (z) to one or more Lenders, or (ii) assign with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed and shall not be required if any Event of Default is then

 

 

 

  

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in existence) all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender or assigning Lenders, of such Commitments and outstanding principal amount of Loans hereunder to one or more Eligible Transferees (treating any fund that invests in bank loans and any other fund that invests in bank loans and is managed or advised by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption Agreement; provided that (1) at such time Schedule I shall be deemed modified to reflect the Commitments (and/or outstanding Loans, as the case may be) of such new Lender and of the existing Lenders, (2)  new Notes will be issued, at the Borrower’s expense, to such new Lender and to the assigning Lender upon the request of such new Lender or assigning Lender, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Loans, as the case may be), (3) the consent of the Administrative Agent shall be required in connection with any assignment pursuant to preceding clause (ii) (which consent shall not be unreasonably withheld or delayed), and (4) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,500.  To the extent of any assignment pursuant to this Section 13.04(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitments (it being understood that the indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 3.05, 13.01 and 13.06) shall survive as to such assigning Lender).  To the extent that an assignment of all or any portion of a Lender’s Commitments and related outstanding Obligations pursuant to Section 1.12 or this Section 13.04(b) would, at the time of such assignment, result in increased costs under Section 1.09, 1.10, or 3.05 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment).

 

(c)   Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank and, with the consent of the Administrative Agent, any Lender which is a fund may pledge all or any portion of its Notes or Loans to a trustee for the benefit of investors and in support of its obligation to such investors.

 

13.05   No Waiver; Remedies Cumulative.  No failure or delay on the part of the Administrative Agent or any Lender or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and the Administrative Agent or any Lender or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.  The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent or any Lender or the holder of any Note would otherwise have.  No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or

 

 

  

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any Lender or the holder of any Note to any other or further action in any circumstances without notice or demand.

 

13.06   Payments Pro Rata.  (a)  Except as otherwise provided in this Agreement (including Sections 2.02(b) and 3.02(iv)), the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the Lenders (other than any Lender that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received.

 

(b)   Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans or Commitment Commission, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

 

13.07   Calculations; Computations.  (a)  The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders).  In addition, all computations determining compliance with Sections 9.07 through 9.09, inclusive, shall utilize accounting principles and policies in conformity with those in effect on the Effective Date (with the foregoing generally accepted accounting principles, subject to the preceding proviso, herein called “GAAP”).  Unless otherwise noted, all references in this Agreement to “generally accepted accounting principles” shall mean generally accepted accounting principles as in effect in the United States.

 

(b)   All computations of interest and Commitment Commission hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or Commitment Commission are payable.

 

13.08   GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL.  (a)  THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE VESSEL MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES (OTHER THAN TITLE 14

 

 

  

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OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW).  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.  IF AT ANY TIME DURING WHICH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT REMAINS IN EFFECT, THE BORROWER DOES NOT MAINTAIN A REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL TIMES MAINTAIN, AN AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE TO THE ADMINISTRATIVE AGENT AND THE LENDERS WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH AGENT FOR SERVICE OF PROCESS OR SUMMONS; PROVIDED THAT ANY FAILURE ON THE PART OF  THE BORROWER TO COMPLY WITH THE FOREGOING PROVISIONS OF THIS SENTENCE SHALL NOT IN ANY WAY PREJUDICE OR LIMIT THE SERVICE OF PROCESS OR SUMMONS IN ANY OTHER MANNER DESCRIBED ABOVE IN THIS SECTION 13.08 OR OTHERWISE PERMITTED BY LAW.

 

(b)   THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(c)   EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

 

 

  

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13.09   Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.

 

13.10   Effectiveness.  This Agreement shall become effective on the date (the “Effective Date”) on which the Borrower, the Administrative Agent and each of the Lenders who are initially parties hereto shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written or facsimile notice (actually received) at such office that the same has been signed and mailed to it, which date shall be no later than April 16, 2010.  The Administrative Agent will give the Borrower and each Lender prompt written notice of the occurrence of the Effective Date.

 

13.11   Headings Descriptive.  The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

 

13.12   Amendment or Waiver; etc.  (a)  Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Lenders, provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (with Obligations being directly affected in the case of following clause (i) and, in the case of the following clause (vi), to the extent that any such Lender would be required to make a Loan in excess of its pro rata portion provided for in this Agreement or would receive a payment or prepayment of Loans or a commitment reduction that (in any case) is less than its pro rata portion provided for in this Agreement, in each case, as a result of any such amendment, modification or waiver referred to in the following clause (vi)), (i) extend the final scheduled maturity of any Loan or Note, extend the timing for or reduce the principal amount of any repayment pursuant to Section 3.03(b) or (c) or reduce the rate or extend the time of payment of interest on any Loan or Note or Commitment Commission (except in connection with the waiver of applicability of any post-default increase in interest rates), or reduce the principal amount thereof (except to the extent repaid in cash), (ii) release any Vessel Mortgage (except as expressly provided in the Credit Documents), (iii) amend, modify or waive any provision of this Section 13.12(a), (iv) reduce the percentage specified in the definition of Required Lenders (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the extensions of Loans and Commitments are included on the Effective Date), (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement, (vi) amend, modify or waive Section 1.06 or amend, modify or waive any other provision in this Agreement to the extent providing for payments or prepayments of Loans or reductions in Commitments, in each case, to be applied pro rata among the Lenders entitled to such payments or prepayments of Loans or reductions in Commitments (it being understood that the provision of additional extensions of credit pursuant to this Agreement, or the waiver of reduction or any

 

 

  

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mandatory prepayment of Loans by the Required Lenders shall not constitute an amendment, modification or waiver for purposes of this clause (vi)), or (vii) release any Subsidiary Guarantor from a Guaranty; provided, further, that no such change, waiver, discharge or termination shall (x) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of any Commitment of any Lender shall not constitute an increase in the Commitment of such Lender), (y) without the consent of each Agent, amend, modify or waive any provision of Section 12 as same applies to such Agent or any other provision as same relates to the rights or obligations of such Agent or (z) without the consent of the Security Trustee, amend, modify or waive any provision relating to the rights or obligations of the Security Trustee.

 

(b)   If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clauses (A) or (B) below, to either (A) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to Section 1.12 so long as at the time of such replacement, each such Replacement Lender consents to the proposed  change, waiver, discharge or termination or (B) terminate such non-consenting Lender’s Commitment, and repay such non-consenting Lender’s outstanding Loans, in accordance with Sections 2.02(b) and/or 3.02(iv), provided that, unless the Commitments are terminated, and Loans repaid, pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Required Lenders (determined before giving effect to the proposed action) shall specifically consent thereto, provided, further, that in any event the Borrower shall not have the right to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the exercise of such Lender’s rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to Section 13.12(a).

 

13.13   Survival.  All indemnities set forth herein including, without limitation, in Sections 1.09, 1.10, 3.05, 13.01 and 13.06 shall, subject to Section 13.15 (to the extent applicable), survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Loans.

 

13.14   Domicile of Loans.  Each Lender may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Lender.  Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of such transfer, result in increased costs under Section 1.09, 1.10, or 3.05 from those being charged by the respective Lender prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be

 

 

  

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obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer).

 

13.15   Limitation on Additional Amounts, etc.  Notwithstanding anything to the contrary contained in Sections 1.09, 1.10 or 3.05 of this Agreement, unless a Lender gives notice to the Borrower that it is obligated to pay an amount under any such Section within one year after the later of (x) in the case of Taxes, the date the Lender receives notice from the relevant taxing authority of the respective increased cost, Tax, loss, expense or liability, and in all other cases the date the Lender incurs the respective increased cost, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital or (y) the date such Lender has actual knowledge of its incurrence of the respective increased costs, Taxes, loss, expense or liability, reductions in amounts received or receivable or reduction in return on capital, then such Lender shall only be entitled to be compensated for such amount by the Borrower pursuant to said Section 1.09, 1.10, or 3.05, as the case may be, to the extent the costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital are incurred or suffered on or after the date which occurs one year prior to such Lender giving notice to the Borrower that it is obligated to pay the respective amounts pursuant to said Section 1.09, 1.10, or 3.05, as the case may be.  This Section 13.15 shall have no applicability to any Section of this Agreement other than said Sections 1.09, 1.10, and 3.05.

 

13.16   Confidentiality.  (a)  Subject to the provisions of clause (b) of this Section 13.16, each Lender agrees that it will use its best efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, advisors or counsel or to another Lender if the Lender or such Lender’s holding or parent company or board of trustees in its sole discretion determines that any such party should have access to such information, provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender) any  information with respect to the Borrower or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document, provided that any Lender may disclose any such information (a) as has become generally available to the public other than by virtue of a breach of this Section 13.16(a) by the respective Lender, (b) as may be required in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, (e) to the Administrative Agent or the Security Trustee and (f) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Lender, provided that such prospective transferee expressly agrees to be bound by the confidentiality provisions contained in this Section 13.16.

 

(b)   The Borrower hereby acknowledges and agrees that each Lender may share with any of its affiliates any information related to the Borrower or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Borrower or its Subsidiaries), provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender.

 

 

  

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13.17   Register.  The Borrower hereby designates the Administrative Agent to serve as the Borrower’s agent, solely for purposes of this Section 13.17, to maintain a register (the “Register”) on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment and prepayment in respect of the principal amount of the Loans of each Lender.  Failure to make any such recordation, or any error in such recordation shall not affect the Borrower’s obligations in respect of such Loans.  With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor.  The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b).  Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender.  The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.17, except to the extent caused by the Administrative Agent’s own gross negligence or willful misconduct.

 

13.18   Judgment Currency.  If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent’s New York office on the Business Day preceding that on which final judgment is given.  The obligations of the Borrower in respect of any sum due to any Lender or the Administrative Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency so purchased is less than the sum originally due to such Lender or the Administrative Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to any Lender or the Administrative Agent, as the case may be, in the specified currency, such Lender or the Administrative Agent, as the case may be, agrees to remit such excess to the Borrower.

 

 

  

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13.19   Language.  All correspondence, including, without limitation, all notices, reports and/or certificates, delivered by any Credit Party to the Administrative Agent, the Security Trustee or any Lender shall, unless otherwise agreed by the respective recipients thereof, be submitted in the English language or, to the extent the original of such document is not in the English language, such document shall be delivered with a certified English translation thereof.

 

13.20   Waiver of Immunity.  The Borrower, in respect of itself, each other Credit Party, its and their process agents, and its and their properties and revenues, hereby irrevocably agrees that, to the extent that the Borrower, any other Credit Party or any of its or their properties has or may hereafter acquire any right of immunity from any legal proceedings, whether in the United States, the Republic of the Marshall Islands or elsewhere, to enforce or collect upon the Obligations of the Borrower or any other Credit Party related to or arising from the transactions contemplated by any of the Credit Documents, including, without limitation, immunity from service of process, immunity from jurisdiction or judgment of any court or tribunal, immunity from execution of a judgment, and immunity of any of its property from attachment prior to any entry of judgment, or from attachment in aid of execution upon a judgment, the Borrower, for itself and on behalf of the other Credit Parties, hereby expressly waives, to the fullest extent permissible under applicable law, any such immunity, and agrees not to assert any such right or claim in any such proceeding, whether in the United States, the Republic of the Marshall Islands or elsewhere.

 

13.21   USA PATRIOT Act Notice.  Each Lender hereby notifies each Credit Party that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub.: 107-56 (signed into law October 26, 2001)) (the “PATRIOT Act”), it is required to obtain, verify, and record information that identifies each Credit Party, which information includes the name of each Credit Party and other information that will allow such Lender to identify each Credit Party in accordance with the PATRIOT Act, and each Credit Party agrees to provide such information from time to time to any Lender.

 

*     *     *

 

 

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.

 

	
  

	
BALTIC TRADING LIMITED, 

    as Borrower

 

 

By: /s/ John C. Wobensmith

   Name: John C. Wobensmith 

   Title:   President, Chief Financial Officer, Principal 

   Accounting Officer, Secretary, and Treasurer 

   Address: 

   c/o Genco Shipping & Trading Limited 

   299 Park Avenue, 20th Floor 

   New York, NY 10171 

   Telephone: (646) 443-8550 

   Facsimile:  (646) 443-8551 

   E-mail:  John.Wobensmith@gencoshipping.com

 

	
  

	
 

	
  

	
NORDEA BANK FINLAND PLC, acting through its New

   York branch, as Administrative Agent and Security 

   Trustee

 

 

	
  

	
By: /s/ Hans Chr. Kjelsrud

   Name: Hans Chr. Kjelsrud

   Title: Executive Vice President

 

 

	
  

	
By: /s/ Colleen Durkin

   Name: Colleen Durkin

   Title: First Vice President

 

 

  

  

  

 

 

	
  

	
NORDEA BANK FINLAND PLC, 

    acting through its New York branch, as Lender

 

 

	
  

	
By: /s/ Hans Chr. Kjelsrud

   Name: Hans Chr. Kjelsrud

   Title: Executive Vice President

 

 

	
  

	
By: /s/ Colleen Durkin

   Name: Colleen Durkin

   Title: First Vice President

 

 

  

  

  

APPENDIX A

 

DEFINITIONS

 

PART I

 

RULES OF CONSTRUCTION

 

The following rules of usage shall apply to the Credit Agreement, the Notes and the other Credit Documents (and each appendix, schedule, exhibit and annex thereto) unless otherwise required by the context or unless otherwise specified therein:

 

	
1.  

	
Unless otherwise specified, definitions set forth herein, in the Credit Agreement, the Notes or any other Credit Document shall be equally applicable to the singular and plural forms of the terms defined.

	
2.  

	
References to any Person in the Credit Agreement, the Note or any other Credit Document shall include such Person, its successors and permitted assigns and transferees.

	
3.  

	
References to any law in the Credit Agreement, the Notes or any other Credit Document shall include any amendment or modification to such law and any rules or regulations issued thereunder or any law enacted in substitution or replacement thereof.

	
4.  

	
Words such as “hereunder”, “hereto”, “hereof” and “herein” and other words of like import used in the Credit Agreement, the Notes or any other Credit Document shall, unless the context clearly indicates to the contrary, refer to the whole of such document and not to any particular article, section, subsection, paragraph or clause thereof.

PART II

 

GLOSSARY OF TERMS

 

“Acceptable Flag Jurisdiction” shall have the meaning provided in Section 8.14.

 

“Acceptable Replacement Vessel” shall mean, with respect to an Initial Vessel (or, if an Initial Vessel was already the subject of a Vessel Exchange, an Acceptable Replacement Vessel), any other vessel with an equal or greater fair market value than the Appraised Value of such Initial Vessel (or such Acceptable Replacement Vessel, if applicable); provided that such Acceptable Replacement Vessel must (i) be of the same type and the same or lesser age as the Initial Vessel (or the Acceptable Replacement Vessel, if applicable) it replaces, (ii) have a class complying with the requirements of Section 8.14, (iii) be registered and flagged in an Acceptable Flag Jurisdiction and (iv) be acceptable to the Required Lenders (provided that the Required Lenders shall not unreasonably withhold or delay such determination).  Any vessel 

 

 

  

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not meeting the requirements of (i)-(iv) but otherwise acceptable to the Required Lenders (provided that the Required Lenders shall not unreasonably withhold or delay such determination) shall be an Acceptable Replacement Vessel.

 

“Additional Vessels” shall mean dry bulk carriers owned by the Borrower or any Subsidiary Guarantor that are (i) between 25,000 and 180,000 dwt and (ii) no greater than 10 years in age at the time of acquisition thereof.

 

“Administrative Agent” shall have the meaning provided in the first paragraph of this Agreement, and shall include any successor thereto.

 

“Affiliate” shall mean, with respect to any Person, any other Person (including, for purposes of Section 9.06 only, all directors, officers and partners of such Person) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; provided, however, that for purposes of Section 9.06, an Affiliate of the Borrower shall include any Person that directly or indirectly owns more than 5% of any class of the capital stock of the Borrower and any officer or director of the Borrower or any of its Subsidiaries.  A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise.  Notwithstanding anything to the contrary contained above, for purposes of Section 9.06, neither the Administrative Agent, nor the Security Trustee, nor any Lender (or any of their respective affiliates) shall be deemed to constitute an Affiliate of the Borrower or its Subsidiaries in connection with the Credit Documents or its dealings or arrangements relating thereto.

 

“Agents” shall mean, collectively, the Administrative Agent and the Security Trustee.

 

“Aggregate Appraised Value” shall mean at any time, the sum of the Appraised Value of the Initial Vessels and any Acceptable Replacement Vessels owned by the Borrower and its Subsidiaries at such time.

 

“Agreement” shall have the meaning provided in the first paragraph of this Agreement, as modified, supplemented, amended or restated from time to time.

 

“Annex VI” shall mean Regulations for the Prevention of Air Pollution from Ships to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997).

 

“Applicable Margin” shall mean 3.25% per annum.

 

“Appraisal” shall mean, with respect to a Vessel, a written appraisal by an Approved Appraiser of the fair market value of such Vessel on an individual charter free basis.

 

“Appraised Value” of any Initial Vessel and any Acceptable Replacement Vessel at any time shall mean the arithmetic average of the fair market values of such Initial Vessel or

 

 

 

  

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Acceptable Replacement Vessel on an individual charter free basis as set forth on the Appraisals of at least two Approved Appraisers most recently delivered to, or obtained by, the Administrative Agent prior to such time pursuant to Sections 5.11(vi), 8.01(c) and 9.02(i) or the definition of Vessel Exchange.

 

“Approved Appraiser” shall mean Lorentzen & Stemoco AS, H. Clarksons & Company Limited (so long as the Lenders may rely on any appraisal provided thereby), Fearnleys Ltd., R.S. Platou Shipbrokers a.s., ICAP Hyde & Company, Ltd., Simpson Spence & Young Ltd. or such other independent appraisal firm as may be acceptable to the Required Lenders.

 

“Assignment and Assumption Agreement” shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit K (appropriately completed).

 

“Assignment of Charters” shall have the meaning provided in the Assignment of Earnings and substantially in the form of Exhibit B to the Assignment of Earnings.

 

“Assignment of Earnings” shall mean the assignment in respect of the earnings of the Initial Vessels or Acceptable Replacement Vessels from any and all sources to be executed by the relevant Subsidiary Guarantor in favor of the Security Trustee pursuant to Section 5.05 and substantially in the form Exhibit H-1.

 

“Assignment of Insurances” shall mean the assignment in respect of the insurances of the Initial Vessels or Acceptable Replacement Vessels to be executed by the relevant Subsidiary Guarantor in favor of the Security Trustee pursuant to Section 5.05 and substantially in the form Exhibit H-2.

 

“Authorized Officer” shall mean, with respect to (i) the delivery of Notices of Borrowing, the chairman of the board, or the treasurer of the Borrower, or any other officer of the Borrower designated in writing to the Administrative Agent by the chief executive officer, president or treasurer of the Borrower as being authorized to give notices under this Agreement, (ii) delivery of financial documents and officer’s certificates pursuant to this Agreement, the chairman of the board, the president, any vice president, the treasurer, any other financial officer or an authorized manager of any Credit Party and (iii) any other matter in connection with this Agreement or any other Credit Document, any officer (or a Person or Persons so designated by any two officers) of any Credit Party, in each case to the extent reasonably acceptable to the Administrative Agent.

 

“Availability Termination Date” shall mean the date that is one month before the Maturity Date, or such other later date as the Lenders and the Borrower may agree.

 

“Bankruptcy Code” shall have the meaning provided in Section 10.05.

 

“Base Rate” shall mean, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Rate for such day plus 1⁄2 of 1% per annum.

 

 

 

  

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“Borrower” shall have the meaning provided in the first paragraph of this Agreement.

 

“Borrowing” shall mean the borrowing of Loans from all the Lenders on a given date having the same Interest Period.

 

“Borrowing Date” shall mean each date on which Loans are incurred by the Borrower.

 

“Business Day” shall mean any day except Saturday, Sunday and any day which shall be in New York City or London a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close.

 

“Capitalized Lease Obligations” of any Person shall mean all rental obligations which, under generally accepted accounting principles, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles.

 

“Cash Equivalents” shall mean (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company having capital, surplus and undivided profits aggregating in excess of $200,000,000, with maturities of not more than one year from the date of acquisition by such Person, (iii) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s and in each case maturing not more than one year after the date of acquisition by such Person, and (v) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. § 9601 et seq.

 

“Change of Control” shall mean (i) the Borrower shall at any time and for any reason fail to own, directly or indirectly, 100% of the capital stock or other equity interests of each Subsidiary Guarantor, (ii) the sale, lease or transfer of all or substantially all of the Borrower’s assets to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), (iii) the liquidation or dissolution of the Borrower, (iv) any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than one or more of the Permitted Holders, shall at any time become the owner, directly or indirectly, beneficially or of

 

 

  

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record, of shares representing more than 30% of the outstanding voting or economic equity interests of the Borrower, (v) the replacement of a majority of the directors on the board of directors of the Borrower over a two-year period from the directors who constituted the board of directors of the Borrower at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the board of directors of the Borrower then still in office who either were members of such board of directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved, (vi) a “change of control” or similar event shall occur as provided in any outstanding Indebtedness of Borrower or any of its Subsidiaries (or the documentation governing the same), (vii) the Borrower’s common stock shall cease to be traded on the New York Stock Exchange or any other internationally recognized stock exchange or (viii) the Permitted Holders, collectively, are no longer the owners, directly or indirectly, beneficially or of record, of shares representing more than 30% of the outstanding voting interests of the Borrower.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to the Code are to the Code as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.

 

“Collateral” shall mean all property (whether real or personal) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Earnings and Insurance Collateral, all Initial Vessels or Acceptable Replacement Vessels, and all cash and Cash Equivalents at any time delivered as collateral thereunder or as required hereunder.

 

“Collateral Disposition” shall mean (i) the sale, lease, transfer or other disposition other than pursuant to a charter by the Borrower or any Subsidiary Guarantor to any Person other than the Borrower or a Subsidiary Guarantor of any Initial Vessel or Acceptable Replacement Vessel or (ii) any Event of Loss.

 

“Commitment” shall mean, for each Lender, the amount set forth opposite such Lender’s name in Schedule I hereto, as same may be (x) reduced from time to time pursuant to Sections 2.02, 2.03 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.12 or 13.04.

 

“Commitment Commission” shall have the meaning provided in Section 2.01(a).

 

“Commitment Commission Payment Date” shall mean the last Business Day of each March, June, September and December, commencing with June 30, 2010, and through, and including, the Availability Termination Date.

 

“Consolidated Net Worth” shall mean the Net Worth of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP after appropriate deduction for any minority interests in Subsidiaries.

 

 

 

  

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“Contingent Obligation” shall mean, as to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business and any products warranties extended in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if the less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

 

“Credit Documents” shall mean this Agreement, each Note, each Security Document, the Guaranty and, after the execution and delivery thereof, each additional guaranty or additional security document executed pursuant to Section 8.11.

 

“Credit Party” shall mean the Borrower, each Subsidiary Guarantor, and any other Subsidiary of the Borrower which at any time executes and delivers any Credit Document.

 

“Default” shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

 

“Dividend” with respect to any Person shall mean that such Person has declared or paid a dividend or returned any equity capital to its stockholders, partners or members or authorized or made any other distribution, payment or delivery of property (other than common stock or the right to purchase any of such stock of such Person) or cash to its stockholders, partners or members as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock or partnership or membership interests outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of, or equity interests in, such Person outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock or other equity interests).  Without limiting the foregoing, “Dividends” with respect to any Person shall also include all payments made or required to be

 

 

 

  

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made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes.

 

“DOC” means a document of compliance issued to an Operator in accordance with Rule 13 of the ISM Code.

 

“Dollars” and the sign “$” shall each mean lawful money of the United States.

 

“Earnings and Insurance Collateral” shall mean all “Earnings Collateral” and “Insurance Collateral”, as the case may be, as defined in the respective Assignment of Earnings and the respective Assignment of Insurances.

 

“Effective Date” shall have the meaning provided in Section 13.10.

 

“Eligible Transferee” shall mean and include a commercial bank, insurance company, financial institution, fund or other Person which regularly purchases interests in loans or extensions of credit of the types made pursuant to this Agreement, any other Person which would constitute a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act as in effect on the Effective Date or other “accredited investor” (as defined in Regulation D of the Securities Act).

 

“Environmental Claims” shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, “Claims”), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief in connection with alleged injury or threat of injury to health, safety or the environment due to the presence of Hazardous Materials.

 

“Environmental Law” shall mean any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on the Borrower or any of its Subsidiaries, relating to the environment, and/or Hazardous Materials, including, without limitation, CERCLA; OPA; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each case as amended from time to time.

 

 

  

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“Environmental Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment.

 

“Equity Interests” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

 

“ERISA Affiliate” shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the Borrower would be deemed to be a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

“Event of Default” shall have the meaning provided in Section 10.

 

“Event of Loss” shall mean any of the following events:  (x) the actual or constructive total loss of an Initial Vessel or Acceptable Replacement Vessel or the agreed or compromised total loss of an Initial Vessel or Acceptable Replacement Vessel; or (y) the capture, condemnation, confiscation, requisition, purchase, seizure or forfeiture of, or any taking of title to, an Initial Vessel or Acceptable Replacement Vessel.  An Event of Loss shall be deemed to have occurred:  (i) in the event of an actual loss of an Initial Vessel or Acceptable Replacement Vessel, at the time and on the date of such loss or if that is not known at noon Greenwich Mean Time on the date which such Initial Vessel was last heard from; (ii) in the event of damage which results in a constructive or compromised or arranged total loss of an Initial Vessel or Acceptable Replacement Vessel, at the time and on the date of the event giving rise to such damage; or (iii) in the case of an event referred to in clause (y) above, at the time and on the date on which such event is expressed to take effect by the Person taking such action.  Notwithstanding the foregoing, if such Initial Vessel or Acceptable Replacement Vessel shall have been returned to any Credit Party following any event referred to in clause (y) above prior to the date upon which a mandatory repayment of the Loans is required to be made under Section 3.03 hereof, no Event of Loss shall be deemed to have occurred by reason of such event.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934.

 

“Facility Amount” shall mean the amount of the credit facility granted by the Lenders to the Borrower pursuant to this Credit Agreement available to the Borrower from time to time pursuant to the terms hereof in principal amount at no time to exceed One Hundred Million United States Dollars (US$100,000,000).

 

 

 

  

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“Federal Funds Rate” shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 A.M. (New York time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion.

 

“Fee Letter” shall mean the fee letter dated February 25, 2010 entered into by and between the Borrower and the Administrative Agent in respect of the fees to be paid by the Borrower.

 

“Final Payment” means the amount equal to the sum of (i) all amounts necessary to repay the respective Loans in full plus (ii) all amounts necessary to repay accrued but unpaid interest and (iii) any other amounts owing by the Borrower to the Lenders pursuant to or in connection with this Agreement or any Security Document.

 

“Flag Jurisdiction Transfer” shall mean the transfer of the registration and flag of an Initial Vessel or Acceptable Replacement Vessel from one Acceptable Flag Jurisdiction to another Acceptable Flag Jurisdiction, provided that the following conditions are satisfied with respect to such transfer:

 

(i)   On each Flag Jurisdiction Transfer Date, the Credit Party which is consummating a Flag Jurisdiction Transfer on such date shall have duly authorized, executed and delivered, and caused to be recorded in the appropriate vessel registry a Vessel Mortgage with respect to the Initial Vessel or Acceptable Replacement Vessel, as the case may be, being transferred (the “Transferred Vessel”) and such Vessel Mortgage shall be effective to create in favor of the Security Trustee and/or the Lenders a legal, valid and enforceable first priority security interest, in and lien upon such Transferred Vessel, subject only to Permitted Liens.  All filings, deliveries of instruments and other actions necessary or desirable in the reasonable opinion of the Security Trustee to perfect and preserve such security interests shall have been duly effected and the Security Trustee shall have received evidence thereof in form and substance reasonably satisfactory to the Security Trustee.

 

(ii)   On each Flag Jurisdiction Transfer Date, the Administrative Agent shall have received from counsel to the Credit Parties consummating the relevant Flag Jurisdiction Transfer reasonably satisfactory to the Administrative Agent practicing in those jurisdictions in which the Transferred Vessel is registered and/or the Credit Party owning such Transferred Vessel is organized, opinions which shall be addressed to the Administrative Agent and each of the Lenders and dated such Flag Jurisdiction Transfer Date, which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the

 

 

  

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perfection of the security interests granted pursuant to the Vessel Mortgage(s) and such other matters incident thereto as the Administrative Agent may reasonably request.

 

(iii)   On each Flag Jurisdiction Transfer Date:

 

(A)   The Administrative Agent shall have received (x) certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of the Transferred Vessel transferred on such date by the relevant Subsidiary Guarantor and (y) the results of maritime registry searches with respect to the Transferred Vessel transferred on such date, indicating no record liens other than Liens in favor of the Security Trustee and/or the Lenders and Permitted Liens; and

 

(B)   The Administrative Agent shall have received a report, in form and scope reasonably satisfactory to the Administrative Agent, from a firm of independent marine insurance brokers reasonably acceptable to the Administrative Agent with respect to the insurance maintained by the Credit Party in respect of the Transferred Vessel transferred on such date, together with a certificate from such broker certifying that such insurances (i) are placed with such insurance companies and/or underwriters and/or clubs, in such amounts, against such risks, and in such form, as are customarily insured against by similarly situated insureds for the protection of the Administrative Agent and/or the Lenders as mortgagee and (ii) conform with the insurance requirements of the respective Vessel Mortgages.

 

(iv)   On or prior to each Flag Jurisdiction Transfer Date, the Administrative Agent shall have received a certificate, dated the Flag Jurisdiction Transfer Date, signed by an Authorized Officer, member or general partner of the Credit Party consummating such Flag Jurisdiction Transfer, certifying that (A) all necessary governmental (domestic and foreign) and third party approvals and/or consents in connection with the Flag Jurisdiction Transfer being consummated on such date and otherwise referred to herein shall have been obtained and remain in effect, (B) there exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon such Flag Jurisdiction Transfer or the other transactions contemplated by this Agreement and (C) copies of resolutions approving the Flag Jurisdiction Transfer of such Credit Party and any other matters the Administrative Agent may reasonably request.

 

(v)   On each Flag Jurisdiction Transfer Date, the Administrative Agent shall have received such other agreements, documents and certificates as it shall have reasonably requested.

 

“Flag Jurisdiction Transfer Date” shall mean the date on which a Flag Jurisdiction Transfer occurs.

 

 

 

  

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“Foreign Pension Plan” shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code.

 

“GAAP” shall have the meaning provided in Section 13.07(a).

 

“Genco” shall mean Genco Shipping & Trading Limited, a corporation organized and existing under the laws of the Republic of Marshall Islands.

 

“Genco Investments” shall mean Genco Investments LLC.

 

“Guaranty” shall have the meaning provided in Section 5.03.

 

“Hazardous Materials” shall mean: (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous waste,” “hazardous materials,” “extremely hazardous substances,” “restricted hazardous waste,” “toxic substances,” “toxic pollutants,” “contaminants,” or “pollutants,” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority under Environmental Laws.

 

“IAPPC” shall mean a valid international air pollution prevention certificate for a vessel issued under Annex VI.

 

“Indebtedness” shall mean, as to any Person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum amount available to be drawn under all letters of credit (including letters of credit) issued for the account of such Person and all unpaid drawings (including unpaid drawings) in respect of such letters of credit, (iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (to the extent of the value of the respective property), (iv) the aggregate amount required to be capitalized under leases under which such Person is the lessee, (v) all obligations of such person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent Obligations of such Person and (vii) all obligations under any Interest Rate Protection Agreement or Other Hedging Agreement or under any similar type of agreement;

 

 

  

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provided that Indebtedness shall in any event not include trade payables and expenses accrued in the ordinary course of business.

 

“Initial Vessels” shall mean the six (6) dry bulk carriers that are set out in Schedule III hereto.

 

“Interest Determination Date” shall mean, with respect to any Loan, the second Business Day prior to the commencement of any Interest Period relating to such Loan.

 

“Interest Period” shall have the meaning provided in Section 1.08.

 

“Interest Rate Protection Agreement” shall mean any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement, interest rate floor agreement or other similar agreement or arrangement.

 

“Investments” shall have the meaning provided in Section 9.05.

 

“ISM Code” means in relation to its application to the Borrower and Subsidiary Guarantors, the Initial Vessel and its operation:

 

(a)   ‘The International Management Code for the Safe Operation of Ships and for Pollution Prevention’, currently known or referred to as the ‘ISM Code’, adopted by the Assembly of the International Maritime Organization by Resolution A.741(18) on 4 November 1993 and incorporated on 19 May 1994 into Chapter IX of the International Convention for the Safety of Life at Sea 1974 (SOLAS 1974); and

 

all further resolutions, circulars, codes, guidelines, regulations and recommendations which are now or in the future issued by or on behalf of the International Maritime Organization or any other entity with responsibility for implementing the ISM Code, including without limitation, the ‘Guidelines on implementation or administering of the International Safety Management (ISM) Code by Administrations’ produced by the International Maritime Organization pursuant to Resolution A.788(19) adopted on 25 November 1995, as the same may be amended, supplemented or replaced from time to time.

 

“ISPS Code” means the International Ship and Port Facility Security Code constituted pursuant to resolution A.924(22) of the International Maritime Organization (“IMO”) adopted by a diplomatic conference of the IMO on Maritime Security on 13 December 2002 and now set out in Chapter XI-2 of the Safety of Life at Sea Convention (SOLAS) 1974 (as amended) adopted on July 1, 2004.

 

“ISSC” shall mean a valid and current International Ship Security Certificate issued under the ISPS Code.

 

 

  

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“Leaseholds” of any Person means all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures.

 

“Lender” shall mean each financial institution listed on Schedule I, as well as any Person which becomes a “Lender” hereunder pursuant to 13.04(b).

 

“Lender Default” shall mean (i) the refusal (which has not been retracted) or other failure (which has not been cured) of a Lender to make available its portion of any Borrowing required to be made in accordance with the terms of this Agreement as then in effect or (ii) a Lender having notified in writing the Borrower and/or the Administrative Agent that it does not intend to comply with its obligations under Section 1.01.

 

“LIBOR” shall mean the rate for deposits of Dollars for a period equivalent to the relevant Interest Period at or about 11:00 A.M. (London time) on the second Business Day before the first day of such period as set by the British Bankers’ Association as published on Reuters screen BBALIBOR; provided that if on such date no such rate is available from the British Bankers’ Association for the relevant Interest Period, LIBOR for such period shall be the rate quoted by the Administrative Agent as the offered rate for deposits of Dollars in an amount approximately equal to the amount in relation to which LIBOR is to be determined for a period equivalent to the relevant Interest Period to prime banks in the London Interbank Market at or about 11:00 A.M. (London time) on the second Business Day before the first day of such period (and the Administrative Agent shall inform the Borrower of such rate on such date).

 

“Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing).

 

“Loan” shall have the meaning provided in Section 1.01.

 

“Management Agreement” shall mean the management agreement between the Borrower and Manager dated March 15, 2010, as amended, and pursuant to which the Manager provides strategic, commercial, technical, financial and administrative services to the Borrower.

 

“Manager” shall mean Genco and/or one or more of its Affiliates that will provide.

 

“Margin Stock” shall have the meaning provided in Regulation U.

 

“Material Adverse Effect” shall mean a material adverse effect on the (i) Transaction, (ii) business, property, assets, liabilities, condition (financial or otherwise), operations or prospects (x) of the Initial Vessels or Acceptable Replacement Vessels or (y) the Borrower and the Subsidiary Guarantors taken as a whole, (iii) the rights and remedies of the 

 

 

 

  

A-13

  

 

 

Administrative Agent or the Lenders or (iv) the ability of any Credit Party to perform its obligations under the Credit Documents to which it is a party.

 

“Maturity Date” shall mean the fourth anniversary of the Effective Date.

 

“Minimum Borrowing Amount” shall mean $5,000,000 with any additional drawings in increments of $1,000,000

 

“Minimum Consolidated Net Worth” shall mean not less than the sum of (i) Seventy Five percent (75%) of the net proceeds of the initial public offering of the Borrower’s stock, plus (ii) the Seventy Five Million Dollar $75,000,000 equity contribution from Genco Investments, plus (iii) 50% of the value of any subsequent primary equity offerings of the Borrower.

 

“Moody’s” shall mean Moody’s Investors Service, Inc. and its successors.

 

“Multiemployer Plan” shall mean a Plan which is defined in Section 3(37) of ERISA.

 

“NAIC” shall mean the National Association of Insurance Commissioners (and its successors from time to time).

 

“Net Worth” shall mean, as to any Person, the sum of its capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account which, in accordance with GAAP, constitutes stockholders’ equity, but excluding any treasury stock.

 

“Note” shall have the meaning provided in Section 1.05(a).

 

“Notice of Borrowing” shall have the meaning provided in Section 1.03(a).

 

“Notice Office” shall mean the office of the Administrative Agent located at 437 Madison Avenue, New York, NY 10022, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.

 

“Obligations” shall mean all amounts owing to the Administrative Agent, the Security Trustee or any Lender pursuant to the terms of this Agreement or any other Credit Document.

 

“OPA” shall mean the Oil Pollution Act of 1990, as amended, 33 U.S.C. § 2701 et seq.

 

“Operating Account” shall mean all of the Subsidiary Guarantors’ deposit accounts maintained with Nordea Bank Finland Plc, New York Branch or any other financial institution reasonably acceptable to the Administrative Agent.

 

 

 

 

  

A-14

  

 

 

“Operator” shall mean, in respect of the Initial Vessels or Acceptable Replacement Vessels, the Person who is concerned with the operation of the Initial Vessels or Acceptable Replacement Vessels and falls within the definition of “Company” as set out in Rule 1.1.2 of the ISM Code.

 

“Other Hedging Agreement” shall mean any foreign exchange contracts, currency swap agreements, commodity agreements, forward freight agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency or commodity values.

 

“PATRIOT Act” shall have the meaning provided in Section 13.21.

 

“Payment Office” shall mean the office of the Administrative Agent located at 437 Madison Avenue, New York, NY 10022, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto.

 

“Permitted Encumbrance” shall mean easements, rights-of-way, restrictions, encroachments, exceptions to title and other similar charges or encumbrances on any Initial Vessel or Acceptable Replacement Vessel or any other property of the Borrower or any of its Subsidiaries arising in the ordinary course of business which do not materially detract from the value of such Initial Vessel or the property subject thereto.

 

“Permitted Holders” shall mean (i) Peter Georgiopoulos (including his immediate family members and trusts for his benefit and/or for the benefit of his immediate family members) and any corporation or other entity directly or indirectly controlled by Peter Georgiopoulos and (ii) Genco.

 

“Permitted Liens” shall have the meaning provided in Section 9.01.

 

“Person” shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof.

 

“Plan” shall mean any pension plan as defined in Section 3(2) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the Borrower or a Subsidiary of the Borrower or any ERISA Affiliate, and each such plan for the five-year period immediately following the latest date on which the Borrower, or a Subsidiary of the Borrower or any ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan.

 

“Pledge Agreement” shall have the meaning provided in Section 5.04.

 

 

 

  

A-15

  

 

 

“Pledge Agreement Collateral” shall mean all “Collateral” as defined in the Pledge Agreement.

 

“Pledged Securities” shall mean “Securities” as defined in the Pledge Agreement pledged (or required to be pledged) pursuant thereto.

 

“Prime Rate” shall mean the rate which the Administrative Agent announces from time to time as its prime lending rate, the Prime Rate to change when and as such prime lending rate changes.  The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

 

“Real Property” of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds.

 

“Register” shall have the meaning provided in Section 13.17.

 

“Registration Rights Agreement” shall mean the Registration Rights Agreement dated as of March 15, 2010 by and between the Borrower and Genco Investments.

 

“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements.

 

“Regulation U” shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

 

“Replaced Lender” shall have the meaning provided in Section 1.12.

 

“Replacement Lender” shall have the meaning provided in Section 1.12.

 

“Reportable Event” shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

 

“Required Lenders” shall mean Lenders the sum of whose outstanding Commitments (or, after the termination thereof, the then principal amount of all outstanding Loans) at such time represent 50% or more of the Total Commitment at such time (or, after termination thereof, the then principal amount of all outstanding Loans); provided that in the event that Nordea’s Commitment constitutes 50% or more of the Total Commitment, Required Lenders shall mean Lenders the sum of whose outstanding Commitments (or, after the termination thereof, the then principal amount of all outstanding Loans) at such time represents 66 2/3% or more of the Total Commitment (or after termination thereof, the then principal amount of all outstanding Loans).

 

 

 

 

  

A-16

  

 

 

“Required Percentage” shall mean 160%; provided, however, that if a Loan, other than a Loan for working capital purposes, has not been repaid with the proceeds from a follow-on equity offering or otherwise within 12 months of drawdown, the Required Percentage shall thereafter mean 200%.

 

“Returns” shall have the meaning provided in Section 7.09.

 

“S&P” shall mean Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc., and its successors.

 

“Secured Creditors” shall mean the “Secured Creditors” as defined in the Security Documents.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Security Documents” shall mean each Pledge Agreement, each Assignment of Earnings, each Assignment of Insurances, each Assignment of Charters, each Vessel Mortgage and, after the execution and delivery thereof, each additional security document executed pursuant to Section 8.11.

 

“Security Trustee” shall mean the Administrative Agent acting as mortgagee or security trustee for the Secured Creditors pursuant to the Security Documents.

 

“Shareholder Rights Agreement” shall mean the Shareholders Rights Agreement entered into as of March 5, 2010 by and between the Borrower and Mellon Investor Services LLC (operating with the service name BNY Mellon Shareowner Services), a New Jersey limited liability company, as rights agent, without giving effect to any amendments, modifications or supplements thereto.

 

“Sixth Initial Vessel” shall have the meaning provided in Section 5.09.

 

“SMC” means a safety management certificate issued in respect of the Collateral Rigs in accordance with Rule 13 of the ISM Code.

 

“Subsidiary” shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time.

 

“Subsidiary Guarantor” shall mean each direct and indirect Subsidiary of the Borrower listed on Schedule III hereto which owns an Initial Vessel or an Acceptable 

 

 

 

  

A-17

  

 

 

Replacement Vessel and is party to the Guaranty, or which executes a counterpart thereof after the Effective Date.

 

“Tax Benefit” shall have the meaning provided in Section 3.05(c).

 

“Taxes” shall have the meaning provided in Section 3.05(a).

 

“Test Period” shall mean each period of four consecutive fiscal quarters then last ended, in each case taken as one accounting period, provided that in the case of any first quarter ending prior to June 30, 2010, the “Test Period” shall be the period commencing on July 1, 2009 and ending on the last day of such fiscal quarter.

 

“Total Commitment” shall mean, at any time, the sum of the Commitments of each of the Lenders at such time.

 

“Transaction” shall mean, collectively, (i)  the entering into of the Credit Documents and the incurrence of Loans hereunder, and (ii) the payment of all fees and expenses in connection with the foregoing.

 

“Transferred Vessel” shall have the meaning provided in the definition of “Flag Jurisdiction Transfer” in this Appendix A.

 

“UCC” shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction.

 

“Unfunded Current Liability” of any Plan shall mean the amount, if any, by which the value of the accumulated plan benefits under the Plan determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions).

 

“United States” and “U.S.” shall each mean the United States of America.

 

“Unutilized Commitment” shall mean, with respect to any Lender, at any time, an amount equal to (i) such Lender’s Commitment at such time, less (ii) the sum of the aggregate principal amount of Loans made by such Lender then outstanding.

 

“Vessel” shall mean the Initial Vessels and the Additional Vessels.

 

“Vessel Acquisition” shall mean the acquisition of each of the Vessels.

 

“Vessel Exchange” shall mean the exchange of a Vessel for another vessel which vessel shall constitute an Acceptable Replacement Vessel and provided that the following conditions are satisfied with respect to such exchange:

 

 

 

  

A-18

  

 

 

(i)   On each Vessel Exchange Date, if the Subsidiary owning the Acceptable Replacement Vessel is not a Credit Party, (A) such Subsidiary shall (1) grant to the Security Trustee a first priority Lien (subject only to Permitted Liens) on all property of such Subsidiary by executing and delivering a counterpart of the Pledge Agreement, taking all actions required pursuant to Section 25 of the Pledge Agreement to become a Pledgor thereunder, and taking any other action reasonably requested by the Administrative Agent and (2) execute and deliver a counterpart of the Guaranty and (B) the Borrower shall pledge and deliver, or cause to be pledged and delivered, all of the capital stock of such Subsidiary owned by any Credit Party to the Security Trustee.

 

(ii)   On each Vessel Exchange Date, the Administrative Agent shall have received from counsel to the Credit Parties consummating the relevant Vessel Exchange (such counsel to practice in those jurisdictions in which the Acceptable Replacement Vessel is registered and/or the Credit Party owning such Acceptable Replacement Vessel is organized and to be acceptable to the Administrative Agent) opinions reasonably satisfactory to the Administrative Agent, which opinions shall be addressed to the Administrative Agent and each of the Lenders and dated such Vessel Exchange Date, which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests granted pursuant to the Vessel Mortgage(s) and such other matters incident thereto as the Administrative Agent may reasonably request.

 

(iii)   On each Vessel Exchange Date, the Credit Party which is consummating a Vessel Exchange on such date shall have duly authorized, executed and delivered an Assignment of Earnings, an Assignment of Insurances, and (if applicable) an Assignment of Charters, together covering all of such Credit Party’s present and future Earnings and Insurance Collateral, in each case together with:

 

(A)   proper Financing Statements (Form UCC-1) authorized for filing in the appropriate filing office of each jurisdiction as may be necessary or, in the reasonable opinion of the Security Trustee, desirable to perfect the security interests purported to be created by the Assignment of Earnings, the Assignment of Insurances and the Assignment of Charters;

 

(B)   certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name any Credit Party as debtor and that are filed in the jurisdictions referred to in clause (A) above, together with copies of such other financing statements (none of which shall cover the Collateral except to the extent evidencing Permitted Liens or in respect of which the Security Trustee shall have received, prior to contemporaneously with the Vessel Exchange Date, Form UCC-3 Termination Statements (or such other termination statements as shall be required by local law) authorized for filing); and

 

 

 

  

A-19

  

 

 

(C)   evidence that all other actions necessary or, in the reasonable opinion of the Security Trustee, desirable to perfect and protect the security interests purported to be created by the Assignment of Earnings, the Assignment of Insurances and (if applicable) the Assignment of Charters have been taken.

 

(iv)   On each Vessel Exchange Date, the Credit Party which is consummating a Vessel Exchange on such date shall have duly authorized, executed and delivered, and caused to be recorded in the appropriate vessel registry a Vessel Mortgage with respect to each of such Acceptable Replacement Vessel and such Vessel Mortgages shall be effective to create in favor of the Security Trustee and/or the Lenders a legal, valid and enforceable first priority security interest, in and lien upon such Acceptable Replacement Vessels, subject only to Permitted Liens.  Except as specifically provided above, all filings, deliveries of instruments and other actions necessary or desirable in the reasonable opinion of the Administrative Agent to perfect and preserve such security interests shall have been duly effected and the Administrative Agent shall have received evidence thereof in form and substance reasonably satisfactory to the Administrative Agent.

 

(v)   On each Vessel Exchange Date, the Administrative Agent shall have received each of the following with respect to the relevant Acceptable Replacement Vessel:

 

(A)   certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of such Acceptable Replacement Vessel by the relevant Subsidiary Guarantor,

 

(B)   the results of maritime registry searches with respect to such Acceptable Replacement Vessel, indicating no record liens other than Liens in favor of the Security Trustee and/or the Lenders and Permitted Liens,

 

(C)   class certificates from a classification society listed on Schedule VIII hereto or another internationally recognized classification society acceptable to the Administrative Agent, indicating that such Acceptable Replacement Vessel meets the criteria specified in Section 7.23,

 

(D)   Appraisals of recent date and from at least two Approved Appraisers in scope, form and substance reasonably satisfactory to the Administrative Agent, and

 

(E)   a report, in form and scope reasonably satisfactory to the Administrative Agent, from a firm of independent marine insurance brokers reasonably acceptable to the Administrative Agent with respect to the insurance maintained by the Credit Party in respect of such Acceptable Replacement Vessel, 

 

 

  

A-20

  

 

 

together with a certificate from such broker certifying that such insurances (i) are placed with such insurance companies and/or underwriters and/or clubs, in such amounts, against such risks, and in such form, as are customarily insured against by similarly situated insureds for the protection of the Administrative Agent and/or the Lenders as mortgagee and (ii) conform with the insurance requirements of the respective Vessel Mortgages.

 

(vi)   On or prior to each Vessel Exchange Date:

 

(A)   the Administrative Agent shall have received a certificate, dated the Vessel Exchange Date, signed by the senior financial officer of the Borrower which certificate shall set forth the calculations required to establish whether the Borrower is in compliance with the provisions of Section 9.07 after giving effect to such Vessel Exchange,

 

(B)   the Administrative Agent shall have received a certificate, dated the Vessel Exchange Date, signed by an Authorized Officer, member or general partner of the Credit Party commencing such Vessel Exchange, certifying that (1) all necessary governmental (domestic and foreign) and third party approvals and/or consents (including any necessary anti-trust approvals or consents) in connection with the Vessel Exchange being consummated on such date and otherwise referred to herein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which, in the reasonable judgment of the Administrative Agent, restrains, prevents or imposes materially adverse conditions upon the consummation of such Vessel Exchange or the transactions contemplated by this Agreement and (2) there exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon such Vessel Exchange or the other transactions contemplated by this Agreement, and

 

(C)   the Administrative Agent shall have received such other documents, certificates and opinions as it shall have reasonably requested.

 

(vii)   On each Vessel Exchange Date, there is no Event of Default as defined in Section 10.

 

“Vessel Exchange Date” shall mean each date on which a Vessel Exchange is consummated.

 

“Vessel Mortgage” shall mean a first preferred mortgage in substantially the form of Exhibit L, or such other form as may be reasonably satisfactory to the Administrative Agent, as such first preferred mortgage may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

 

 

A-21

 

 

  

  

  

 

 

“Wholly-Owned Subsidiary” shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director’s qualifying shares) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time.

 

 

 

 

A-22

 

 

  

  

  

SCHEDULE I

 

THE LENDERS AND THE COMMITMENTS

 

	
Lender

	
Commitment

	
NORDEA BANK FINLAND PLC,

acting through its New York branch

 

	
$100,000,000

 

 

 

 

  

  

  

SCHEDULE II

 

 

 

	
THE LENDERS’ ADDRESSES

	 	 
	
INSTITUTIONS

	
ADDRESSES

	
 

NORDEA BANK FINLAND PLC,

acting through its New York branch

	
 

Nordea Bank Finland Plc

	
437 Madison Avenue, 21st Floor

	
New York, NY  10022

	
Attn:  Head of Shipping, Offshore & Oil Services

	
Telephone:  (212) 318-9300

	
Facsimile:   (212) 421-4420

	  
	  	  

 

 

 

  

  

  

SCHEDULE III

 

 

	
SUBSIDIARY GUARANTORS AND INITIAL VESSELS

 

	
Initial Vessel Name

	
Owner/Subsidiary Guarantor

	
Design

	
Deadweight

	
Flag

	
Official No.

	
Year Built

	
Purchase Price

	
Borak

	
Baltic Leopard Limited

	
Supramax

	
53,000

	
Marshall Islands

	
3308

	
2009

	
$35,000,000

	
Inta

	
Baltic Jaguar Limited

	
Supramax

	
53,000

	
Marshall Islands

	
3192

	
2009

	
$35,000,000

	
Sinova

	
Baltic Panther Limited

	
Supramax

	
53,000

	
Marshall Islands

	
3205

	
2009

	
$35,000,000

	
Spice

	
Baltic Cougar Limited

	
Supramax

	
53,000

	
Marshall Islands

	
2376

	
2009

	
$35,000,000

	
Hull 1150

	
Baltic Bear Limited

	
Capesize

	
177,000

	
Marshall Islands

	
3402

	
2010

	
$73,000,000

	
Hull 1151

	
Baltic Wolf Limited

	
Capesize

	
177,000

	
Marshall Islands

	
3461

	
2010

	
$71,200,000

 

 

 

  

  

  

SCHEDULE IV

 

 

INDEBTEDNESS

 

 

NONE.

 

 

  

  

  

SCHEDULE V

 

INSURANCE

 

	  	  	  	
Bear

	
Wolf

	
Leopard

	
Panther

	
Cougar

	
Jaguar

	  	  	  	  	  	  	  	  	  
	
Hull and Machinery

	  	
65,000,000

	
65,000,000

	
32,000,000

	
32,000,000

	
32,000,000

	
32,000,000

	  	  	  	  	  	  	  	  	  
	
Increased Value Insurance

	
15,000,000

	
15,000,000

	
8,000,000

	
8,000,000

	
8,000,000

	
8,000,000

	  	  	  	  	  	  	  	  	  
	
Loss of Hire

	
Max Rate

	
40,000

	
40,000

	
28,000

	
28,000

	
28,000

	
28,000

	  	
Note 14 day deductible

	  	  	  	  	  	  
	  	
with a max of 90 days

	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
War Risk Insurance

	  	  	  	  	  	  
	  	
Includes coverage for Hull & Machinery as above

	  	  	  	  
	  	
Includes coverage for Increased Value as above

	  	  	  	  
	  	
Includes coverage for Loss of Hire as above

	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
Protection and Indemnity

	  	  	  	  	  	  
	  	
As per Club Rules

	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
Freight, Demurrage and Defense

	  	  	  	  	  	  
	  	
As per Club Rules

	  	  	  	  	  	  

  

  

  

SCHEDULE VI

 

ERISA

 

 

NONE.

 

 

 

  

  

  

SCHEDULE VII

 

SUBSIDIARIES

 

 

	
Name of Subsidiary

	
Direct Owner(s)

	
Percent(%) Ownership

	
Jurisdiction of

Organization

 

	
Baltic Cougar Limited

	
Baltic Trading Limited

	
100%

	
Marshall Islands

	
Baltic Leopard Limited

	
Baltic Trading Limited

	
100%

	
Marshall Islands

	
Baltic Panther Limited

	
Baltic Trading Limited

	
100%

	
Marshall Islands

	
Baltic Jaguar Limited

	
Baltic Trading Limited

	
100%

	
Marshall Islands

	
Baltic Bear Limited

	
Baltic Trading Limited

	
100%

	
Marshall Islands

	
Baltic Wolf Limited

	
Baltic Trading Limited

	
100%

	
Marshall Islands

 

  

  

  

SCHEDULE VIII

 

 

APPROVED CLASSIFICATION SOCIETIES

 

 

American Bureau of Shipping

Nippon Kaiji Kyokai

Germanischer Lloyd

Lloyd’s Register of Shipping

Bureau Veritas

Det Norske Veritas

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