Document:

Unassociated Document

Exhibit 4.2

 

Execution Copy

 

AMERICAN HONDA RECEIVABLES CORP.,

as Depositor,

 

CITIBANK, NATIONAL ASSOCIATION,

as Owner Trustee

and

CITIGROUP TRUST-DELAWARE, NATIONAL ASSOCIATION,

as Delaware Trustee

 

 

AMENDED AND RESTATED

TRUST AGREEMENT

 

Dated February 24, 2011

 

 

  

  

  

TABLE OF CONTENTS

 

	  	  	
Page

	
ARTICLE ONE

	
DEFINITIONS

	 	 	 
	
Section 1.01.

	
General Definitions

	
1

	
Section 1.02.

	
Other Definitional Provisions

	
5

	
Section 1.03.

	
Interpretive Provisions

	
5

	  
	
ARTICLE TWO

	
ORGANIZATION

	  	  	  
	
Section 2.01.

	
Name

	
5

	
Section 2.02.

	
Office

	
5

	
Section 2.03.

	
Purposes and Powers

	
6

	
Section 2.04.

	
Appointment of Owner Trustee and the Delaware Trustee

	
6

	
Section 2.05.

	
Initial Capital Contribution of Owner Trust Estate

	
7

	
Section 2.06.

	
Declaration of Trust

	
7

	
Section 2.07.

	
Liability of Owners

	
7

	
Section 2.08.

	
Title to Trust Property

	
7

	
Section 2.09.

	
Situs of Issuer

	
8

	
Section 2.10.

	
Representations and Warranties of the Depositor

	
8

	  
	
ARTICLE THREE

	
TRUST CERTIFICATES AND TRANSFER OF INTERESTS

	  	  	  
	
Section 3.01.

	
Initial Ownership

	
9

	
Section 3.02.

	
The Trust Certificates

	
9

	
Section 3.03.

	
Authentication and Delivery of Trust Certificates

	
10

	
Section 3.04.

	
Registration of Transfer and Exchange of Trust Certificates

	
10

	
Section 3.05.

	
Mutilated, Destroyed, Lost or Stolen Trust Certificates

	
12

	
Section 3.06.

	
Persons Deemed Owners

	
12

	
Section 3.07.

	
Access to List of Certificateholders’ Names and Addresses

	
12

	
Section 3.08.

	
Maintenance of Office or Agency

	
12

	
Section 3.09.

	
Appointment of Paying Agent

	
13

	
Section 3.10.

	
Definitive Trust Certificates

	
13

	
Section 3.11.

	
Repayment of Trust Certificates

	
13

 

  

i

  

 

	
ARTICLE FOUR

	
ACTIONS BY OWNER TRUSTEE

	  	  	  
	
Section 4.01.

	
Prior Notice to Owners with Respect to Certain Matters

	
13

	
Section 4.02.

	
Action by Owners with Respect to Certain Matters

	
14

	
Section 4.03.

	
Action by Owners with Respect to Bankruptcy

	
14

	
Section 4.04.

	
Restrictions on Owners’ Power

	
14

	
Section 4.05.

	
Majority Control

	
15

	  
	
ARTICLE FIVE

	
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES

	  	  	  
	
Section 5.01.

	
Establishment of Trust Account

	
15

	
Section 5.02.

	
Application of Trust Funds

	
15

	
Section 5.03.

	
Method of Payment

	
16

	
Section 5.04.

	
No Segregation of Monies; No Interest

	
16

	
Section 5.05.

	
Accounting and Reports to Owners, Internal Revenue Service and Others

	
16

	  
	
ARTICLE SIX

	
AUTHORITY AND DUTIES OF OWNER TRUSTEE

	  	  	  
	
Section 6.01.

	
General Authority

	
17

	
Section 6.02.

	
General Duties

	
17

	
Section 6.03.

	
Action Upon Instruction

	
17

	
Section 6.04.

	
No Duties Except as Specified in this Agreement or in Instructions

	
18

	
Section 6.05.

	
No Action Except Under Specified Documents or Instructions

	
19

	
Section 6.06.

	
Restrictions

	
19

	  	  	  
	
ARTICLE SEVEN

	
CONCERNING THE OWNER TRUSTEE AND THE DELAWARE TRUSTEE

	  	  	  
	
Section 7.01.

	
Acceptance of Trusts and Duties

	
19

	
Section 7.02.

	
Furnishing of Documents

	
20

	
Section 7.03.

	
Representations and Warranties of the Owner Trustee and the Delaware Trustee

	
21

	
Section 7.04.

	
Reliance, Advice of Counsel

	
22

	
Section 7.05.

	
Not Acting in Individual Capacity

	
23

	
Section 7.06.

	
Owner Trustee and Delaware Trustee Not Liable for Trust Certificates or Receivables

	
23

	
Section 7.07.

	
Owner Trustee or Delaware Trustee May Own Trust Certificates and Notes

	
24

	
Section 7.08.

	
Duties of the Delaware Trustee

	
24

 

  

ii

  

 

	
ARTICLE EIGHT

	
COMPENSATION OF OWNER TRUSTEE AND THE DELAWARE TRUSTEE

	  	  	  
	
Section 8.01.

	
Owner Trustee’s and Delaware Trustee’s Fees and Expenses

	
24

	
Section 8.02.

	
Indemnification

	
25

	
Section 8.03.

	
Payments to the Owner Trustee and to the Delaware Trustee

	
25

	  	  	  
	
ARTICLE NINE

	
TERMINATION OF TRUST AGREEMENT

	  	  	  
	
Section 9.01.

	
Termination of Trust Agreement

	
25

	  
	
ARTICLE TEN

	
SUCCESSOR AND ADDITIONAL OWNER TRUSTEES

	  	  	  
	
Section 10.01.

	
Eligibility Requirements for Owner Trustee and Delaware Trustee

	
27

	
Section 10.02.

	
Resignation or Removal of Owner Trustee or Delaware Trustee

	
27

	
Section 10.03.

	
Successor Owner Trustee or Delaware Trustee

	
28

	
Section 10.04.

	
Merger or Consolidation of Owner Trustee or Delaware Trustee

	
28

	
Section 10.05.

	
Appointment of Co-Trustee or Separate Trustee

	
29

	  
	
ARTICLE ELEVEN

	
MISCELLANEOUS

	  	  	  
	
Section 11.01.

	
Supplements and Amendments

	
30

	
Section 11.02.

	
No Legal Title to Owner Trust Estate in Owner

	
31

	
Section 11.03.

	
Limitations on Rights of Others

	
31

	
Section 11.04.

	
Notices

	
32

	
Section 11.05.

	
Severability

	
32

	
Section 11.06.

	
Separate Counterparts

	
32

	
Section 11.07.

	
Successors and Assigns

	
32

	
Section 11.08.

	
No Petition

	
32

	
Section 11.09.

	
No Recourse

	
32

	
Section 11.10.

	
Headings

	
33

	
Section 11.11.

	
Governing Law; Submission to Jurisdiction

	
33

	
Section 11.12.

	
Trust Certificates Nonassessable and Fully Paid

	
33

	
Section 11.13.

	
Depositor Payment Obligation

	
33

	
Section 11.14.

	
Tax Treatment

	
33

	
Section 11.15.

	
Waiver of Jury Trial

	
34

	
Section 11.16.

	
Communications with Rating Agencies

	
34

 

  

iii

  

EXHIBITS

 

	
Exhibit A - Form of Trust Certificate

	
A-1

	
Exhibit B - Form of Seller Certificate

	
B-1

	
Exhibit C - Form of Investment Letter

	
C-1

	
Exhibit D - Form of Rule 144A Letter

	
D-1

  

iv

  

 

This Amended and Restated Trust Agreement, dated February 24, 2011 is among American Honda Receivables Corp., a California corporation, as depositor (the “Depositor”), Citibank, National Association, as owner trustee (the “Owner Trustee”) and Citigroup Trust-Delaware, National Association, as Delaware trustee (the “Delaware Trustee”).

 

WHEREAS, Honda Auto Receivables 2011-1 Owner Trust has been created pursuant to a trust agreement, dated as of January 13, 2011 among the Depositor, the Owner Trustee and the Delaware Trustee (the “Initial Trust Agreement”); and

 

WHEREAS, the parties hereto are entering into this amended and restated trust agreement pursuant to which, among other things, the Initial Trust Agreement will be amended and restated and $25,646,787.94, aggregate principal amount of Asset Backed Certificates will be issued;

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE ONE

 

DEFINITIONS

 

Section 1.01.  General Definitions.  Whenever used herein, unless the context otherwise requires, the following words and phrases shall have the following meanings:

 

“Administration Agreement” means the administration agreement, dated February 24, 2011, among the Issuer, the Indenture Trustee, the Depositor and AHFC, as amended or supplemented from time to time.

 

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

 

“Agreement” means this Amended and Restated Trust Agreement, as the same may be amended and supplemented from time to time.

 

“AHFC” means American Honda Finance Corporation, and its successors.

 

“AHRC” means American Honda Receivables Corp., and its successors.

 

“Applicants” shall have the meaning specified in Section 3.07.

 

“Authenticating Agent” means the Owner Trustee or any authenticating agent appointed pursuant to Section 3.03.

 

“Benefit Plan Investor” means (i) an employee benefit plan (as such term is defined in Section 3(3) of ERISA) whether or not subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets include assets of a plan described in (i) or (ii) by reason of such plan’s investment in the entity.

  

  

  

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions or trust companies in Los Angeles, California, St. Paul, Minnesota, Chicago, Illinois, Wilmington, Delaware or New York, New York are authorized or obligated by law, regulation, executive order or governmental decree to remain closed.

 

“Certificate Balance” means, with respect to any Trust Certificate, the original certificate balance of such Trust Certificate minus all payments on such Trust Certificate with respect to principal.

 

“Certificate Distribution Account” means the account established and maintained as such pursuant to Section 5.01.

 

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

 

“Certificate Rate” means 0.00% per annum calculated on the basis of a 360 day year of twelve 30 day months.

 

“Certificate Register” and “Certificate Registrar” means the register maintained and the registrar (or any successor thereto) appointed pursuant to Section 3.04.

 

“Certificateholder” or “Holder” means a Person in whose name a Trust Certificate is registered.

 

“Closing Date” means February 24, 2011.

 

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

 

“Commission” means the Securities and Exchange Commission, and its successors.

 

“Corporate Trust Office” means, with respect to the Owner Trustee, the principal corporate trust office of the Owner Trustee located at Citibank, National Association, 388 Greenwich Street, 14th Floor, New York, New York 10013, Attention: Structured Finance Agency & Trust: Honda Auto Receivables 2011-1, or at such other address as the Owner Trustee may designate by notice to the Owners 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 Owners and
the Depositor.

 

“Delaware Trustee” means Citigroup Trust-Delaware, National Association, with its principal place of business in the State of Delaware, not in its individual capacity, but solely as Delaware Trustee under this Agreement, and any successor Delaware Trustee hereunder.

 

“Depositor” means AHRC in its capacity as depositor hereunder.

 

“DTC” means The Depository Trust Company, and its successors.

  

2

  

 

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

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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

 

“Indemnified Parties” means the Owner Trustee and its successors, assigns, agents and the Delaware Trustee and its successors, assigns, agents, the Paying Agent, the Certificate Registrar, any Authenticating Agent and any co-trustee.

 

“Indenture” means the indenture dated February 24, 2011 between the Issuer and U.S. Bank National Association, as indenture trustee.

 

“Investment Letter” means a letter delivered in connection with the transfer of a Trust Certificate pursuant to Section 3.04(a), substantially in the form of Exhibit C.

 

“Issuer” means the Honda Auto Receivables 2011-1 Owner Trust, and its successors.

 

“Opinion of Counsel” means one or more written opinions of counsel, who may be an employee of or counsel to the Seller, the Depositor or the Servicer, which counsel shall be acceptable to the Indenture Trustee, the Owner Trustee or each Rating Agency, as applicable.

 

“Original Certificate Balance” means $25,646,787.94.

 

“Original Contribution Amount” means $1,000.

 

“Owner” means each Holder of a Trust Certificate.

 

“Owner Trust Estate” means all right, title and interest of the Issuer in and to the property and rights assigned to the Issuer pursuant to Article Two of the Sale and Servicing Agreement, all funds on deposit from time to time in the Accounts and the Certificate Distribution Account, all other property of the Issuer from time to time, including any rights of the Owner Trustee and the Issuer pursuant to the Sale and Servicing Agreement and the Administration Agreement and all proceeds of the foregoing.

 

“Owner Trustee” means Citibank, National Association, not in its individual capacity but solely as owner trustee under this Agreement, and any successor Owner Trustee hereunder.

 

“Paying Agent” means any paying agent or co-paying agent appointed pursuant to Section 3.09.

 

“Payment Date” means the 15th calendar day of each month, commencing March 15, 2011, or if such day is not a Business Day, then the next succeeding Business Day.

  

3

  

“Percentage Interest” means, as to any Trust Certificate, (i) the original certificate balance for such Trust Certificate, as specified on the face thereof, divided by (ii) the Original Certificate Balance; provided, that in determining whether the Holders of the requisite portion or percentage of the Trust Certificates have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any other Basic Document, Trust Certificates owned by the Issuer, any other obligor upon the Certificates, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed to be
excluded from the Certificate Balance (unless such Persons own 100% of the Trust Certificates), except that, in determining whether the Indenture Trustee and Owner Trustee shall be protected in relying on any such request, demand, authorization, direction, notice, consent or waiver, only Trust Certificates that a Responsible Officer of the Indenture Trustee and the Owner Trustee have actual knowledge of being so owned shall be so disregarded.  Trust Certificates so owned that have been pledged in good faith may be regarded as included in the Certificate Balance if the pledgee establishes to the satisfaction of the Indenture Trustee or the Owner Trustee, as applicable, the pledgee’s right so to act with respect to such Trust Certificates and that the pledgee is not the Issuer, any other obligor upon the Trust Certificates, the Seller or any Affiliate of any of their
respective Affiliates.  Neither the Indenture Trustee nor the Owner Trustee shall incur any liability to any person in determining whether a pledgee has the right to act with respect to such Trust Certificates.

 

“Rating Agency” has the meaning set forth in the Sale and Servicing Agreement.

 

“Record Date” means the day immediately preceding the Payment Date so long as the securities are in book-entry form, and the last day of the month preceding the Payment Date if the securities are issued in definitive form.

 

“Required Rating” means, with respect to any entity, that such entity (or the parent of such entity) has a rating of at least BBB- by Fitch, Inc. and at least Baa3 by Moody’s Investors Service, Inc.

 

“Rule 144A Letter” means a letter delivered in connection with the transfer of a Trust Certificate pursuant to Section 3.04(a), substantially in the form attached hereto as Exhibit D.

 

“Sale and Servicing Agreement” means the sale and servicing agreement, dated February 24, 2011, among the Issuer, the Depositor and AHFC, as servicer, as amended or supplemented from time to time.

 

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

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Seller Certificate” means a certificate of transfer delivered in connection with the transfer of a Trust Certificate pursuant to Section 3.04(a), substantially in the form of Exhibit B.

 

“Statutory Trust Statute” means Chapter 38 of Title 12 of the Delaware Code, 12 Del.C. § 3801 et seq., as the same may be amended from time to time.

 

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

  

4

  

 

“Trust Certificate” means a certificate evidencing the beneficial interest of an Owner in the Trust, substantially in the form of Exhibit A.

 

Section 1.02.  Other Definitional Provisions.

 

(a)           Capitalized terms used herein that are not otherwise defined have the meanings ascribed thereto in the Sale and Servicing Agreement or the Indenture, as the case may be.

 

(b)           All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

 

Section 1.03.  Interpretive Provisions.

 

(a)           For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (i) terms used herein include, as appropriate, all genders and the plural as well as the singular, (ii) references to words such as “herein”, “hereof” and the like shall refer to this Agreement as a whole and not to any particular part, article or section within this Agreement, (iii) references to a section such as “Section 1.01” and the like shall refer to the applicable Section of this Agreement, (iv) the term “include”, and all variations thereof shall mean “include without
limitation”, (v) the term “or” shall include “and/or” and (vi) the term “proceeds” shall have the meaning set forth in the applicable UCC.

 

(b)           As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles.  To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles,
the definitions contained in this Agreement or in any such certificate or other document shall control.

 

ARTICLE TWO

 

ORGANIZATION

 

Section 2.01.  Name.  The trust created hereby shall be known as the “Honda Auto Receivables 2011-1 Owner Trust”, in which name the Owner Trustee may conduct the business of the Issuer, make and execute contracts and other instruments and sue and be sued, to the extent herein provided.

 

Section 2.02.  Office.  The Delaware office of the Issuer shall be in care of the Delaware Trustee at One Penns Way, New Castle, Delaware 19720, or at such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Owners and the Depositor.  The New York, New York office of the Issuer shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in New York as the Owner Trustee may designate by written notice to the Owners and the Depositor.

  

5

  

 

Section 2.03.  Purposes and Powers.

 

(a)           The sole purpose of the Issuer is to conserve the Owner Trust Estate and collect and disburse the periodic income therefrom for the use and benefit of the Certificateholders, and in furtherance of such purpose to engage in the following ministerial activities:

 

(i)           to issue the Notes pursuant to the Indenture and the Trust Certificates pursuant to this Agreement and to sell the Notes and the Trust Certificates;

 

(ii)          with the proceeds of the sale of the Notes and the Trust Certificates, to purchase the Receivables, to fund the Reserve Fund and the Yield Supplement Account, to pay the organizational, start-up and transactional expenses of the Trust and to pay the balance to the Depositor pursuant to the Sale and Servicing Agreement;

 

(iii)         to assign, grant, transfer, pledge, mortgage and convey the Owner Trust Estate pursuant to the Indenture and to hold, manage and distribute to the Owners pursuant to the Sale and Servicing Agreement any portion of the Owner Trust Estate released from the Lien of, and remitted to the Trust pursuant to, the Indenture;

 

(iv)         to enter into and perform its obligations under the Basic Documents to which it is to be a party;

 

(v)          to engage in those activities, including entering into agreements, that are necessary to accomplish the foregoing or are incidental thereto or connected therewith, including entering into interest rate swap agreements, interest rate cap agreements and other derivative instruments; and

 

(vi)         subject to compliance with the Basic Documents, to engage in such other activities as may be required in connection with conservation of the Owner Trust Estate and the making of distributions to the Owners and the Noteholders.

 

(b)         The Issuer is hereby authorized to engage in the foregoing activities.  The Issuer shall not engage in any activities, including, without limitation, assuming or incurring any indebtedness (with the exception of Notes), other than in connection with the foregoing or other than as required or authorized by the terms of this Agreement or the other Basic Documents.

 

Section 2.04.  Appointment of Owner Trustee and the Delaware Trustee.  The Depositor hereby appoints the Owner Trustee as trustee of the Issuer effective as of the date hereof, to have all the rights, powers and duties set forth herein, and the Owner Trustee hereby accepts such appointment.  The Depositor hereby appoints the Delaware Trustee as a trustee of the Issuer effective as of the date hereof, for the sole purpose of satisfying Section 3807(a) of the Delaware Statutory Trust Statute, and the Delaware Trustee hereby accepts such appointment. The Owner Trustee may engage, in the name of the Issuer or in its own name on
behalf of the Issuer, in the activities of the Issuer, make and execute contracts on behalf of the Issuer and sue on behalf of the Issuer.

  

6

  

 

Section 2.05.  Initial Capital Contribution of Owner Trust Estate.  The Depositor hereby reaffirms its sale, assignment, transfer and conveyance to the Owner Trustee, on or about the date of the Initial Trust Agreement, the sum of $1,000.00 (the “Original Contribution Amount”).  The Owner Trustee hereby reaffirms its receipt in trust from the Depositor, as of the date of the Initial Trust Agreement, of the Original Contribution Amount, which constituted the initial Owner Trust Estate and shall be on or before the date hereof deposited in the Certificate Distribution Account.  On the date hereof the Owner
Trustee is hereby directed to withdraw the Original Contribution Amount from the Certificate Distribution Account and transfer such sums to the Depositor via wire transfer to the Depositor’s account from which the Original Contribution Amount was received.  The Depositor shall pay organizational expenses of the Issuer as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee.

 

Section 2.06.  Declaration of Trust.  The Owner Trustee hereby declares that it will hold the Owner Trust Estate in trust upon and subject to the conditions set forth herein for the sole purpose of conserving the Owner Trust Estate and collecting and disbursing the periodic income therefrom for the use and benefit of the Owners, subject to the obligations of the Issuer under the Basic Documents.  It is the intention of the parties hereto that the Issuer constitute a statutory trust under the Statutory Trust Statute and that this Agreement constitute the governing instrument of such statutory trust.  It is the
intention of the parties hereto that, solely for income and franchise tax purposes, (i) so long as there is a sole Owner, the Issuer shall be disregarded as an entity separate from the owner, with the assets of the Issuer being the Receivables and other assets held by the Issuer, the owner of the Receivables being the sole Owner and the Notes being non-recourse debt of the sole Owner and (ii) if there is more than one Owner, the Issuer shall be treated as a partnership for income and franchise tax purposes, with the assets of the partnership being the Receivables and other assets held by the Issuer and with the partners of the partnership being the Owners and the Notes being debt of the partnership.  The parties agree that, unless otherwise required by appropriate tax authorities, the Issuer will file or cause to be filed annual or other necessary returns, reports and other
forms consistent with the characterization of the Issuer as provided in the preceding sentence for such tax purposes.  Effective as of the date hereof, the Owner Trustee and the Delaware Trustee, as applicable, shall have all rights, powers and duties set forth herein and in the Statutory Trust Statute for the sole purpose and to the extent necessary to accomplish the purpose of the Issuer as set forth in Section 2.03(a).

 

Section 2.07.  Liability of Owners.  The Owners shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of the State of Delaware.

 

Section 2.08.  Title to Trust Property.  Legal title to the Owner Trust Estate shall be vested at all times in the Issuer as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Owner Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be.

  

7

  

 

Section 2.09.  Situs of Issuer.  The Issuer will be located in the State of Delaware.  All bank accounts maintained by the Owner Trustee on behalf of the Issuer shall be located in the states of Delaware or New York.  The Issuer shall not have any employees in any state other than Delaware; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having employees within or without the State of Delaware.  Payments will be received by the Issuer only in, and payments will be made by the Issuer only from, the states of Delaware or New York.  The only offices of the
Issuer will be at the Corporate Trust Office and at the office of the Delaware Trustee, located at One Penns Way, New Castle, Delaware 19720.

 

Section 2.10.  Representations and Warranties of the Depositor.  The Depositor hereby represents and warrants to the Owner Trustee and Delaware Trustee that:

 

(a)          The Depositor has been duly organized and is validly existing as a corporation in good standing under the laws of the State of California, 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)          The Depositor is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its property or the conduct of its business shall require such qualifications.

 

(c)          The Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Owner Trustee as part of the Owner Trust Estate and the Depositor has duly authorized such sale and assignment and deposit to the Issuer by all necessary corporate action; and the execution, delivery and performance of this Agreement have been duly authorized by the Depositor by all necessary corporate action.

 

(d)          This Agreement constitutes a legal, valid and binding obligation of the Depositor, enforceable in accordance with its terms, except as such enforceability may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such enforceability shall be considered in a proceeding in equity or in law.

 

(e)          The execution, delivery and performance by the Depositor of this Agreement and the consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do 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) a default under, the articles of incorporation or bylaws 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) a default under, any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound; 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 pursuant to the Basic Documents); nor violate any law or, to the best of the Depositor’s knowledge, any order, rule or regulation applicable to the Depositor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties; which breach, default, conflict, lien or violation would have a material adverse effect on the earnings, business affairs or business prospects of the Depositor.

  

8

  

 

(f)          There are no proceedings or investigations pending or, to the Depositor’s knowledge, threatened, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties: (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the issuance of the Trust Certificates or the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement.

 

ARTICLE THREE

 

TRUST CERTIFICATES AND TRANSFER OF INTERESTS

 

Section 3.01.  Initial Ownership.  Upon the formation of the Issuer by the contribution by the Depositor pursuant to Section 2.05 and until the issuance of the Trust Certificates, the Depositor shall be the sole beneficiary of the Issuer.

 

Section 3.02.  The Trust Certificates.  The Trust Certificates shall be issued in minimum denominations of $100,000 and integral multiples thereof; provided, however, that one Trust Certificate may be issued in such denomination as required to include any residual amount.  The Trust Certificates shall be executed by the Owner Trustee on behalf of the Issuer by manual or facsimile signature of an authorized officer of the Owner Trustee and shall have deemed to have been validly issued when so executed and authenticated (as set forth in Section 3.03 below).  Trust Certificates bearing the manual or facsimile signatures
of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Owner Trustee, shall be validly issued and binding obligations of the Issuer and entitled to the benefit of this Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and delivery of such Trust Certificates or did not hold such offices at the date of authentication and delivery of such Trust Certificates.

 

A transferee of a Trust Certificate shall become a Certificateholder and shall be entitled to the rights and subject to the obligations of a Certificateholder hereunder upon such transferee’s acceptance of a Trust Certificate duly registered in such transferee’s name pursuant to Section 3.04.

  

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Section 3.03.  Authentication and Delivery of Trust Certificates.  On the Closing Date, the Owner Trustee shall cause to be authenticated and delivered upon the order of the Depositor, in exchange for the Receivables and the other assets of the Issuer, simultaneously with the sale, assignment and transfer to the Issuer of the Receivables, and the constructive delivery to the Issuer of the Receivable Files and the other assets of the Issuer, Trust Certificates duly authenticated by the Owner Trustee, in authorized denominations equaling in the aggregate the Original Certificate Balance and evidencing the entire ownership of the
Issuer.  No Trust Certificate shall entitle its Holder to any benefit under this Agreement, or be valid for any purpose, unless there shall appear on such Trust Certificate a certificate of authentication substantially in the form set forth in Exhibit A, executed by the Owner Trustee or the Trust’s Authenticating Agent, by manual signature; and such authentication shall constitute conclusive evidence that such Trust Certificate shall have been duly authenticated and delivered hereunder.  All Trust Certificates shall be dated the date of their authentication.  Upon issuance, authentication and delivery pursuant to the terms hereof, the Trust Certificates will be entitled to the benefits of this Agreement.  Whenever, in any Basic Document, a reference is made to authentication by the Owner Trustee, such reference shall include authentication
by the Owner Trustee and/or authentication by a party appointed to act as the Authenticating Agent of the Owner Trustee.  Citibank, National Association shall act as initial Authenticating Agent.

 

Section 3.04.  Registration of Transfer and Exchange of Trust Certificates.

 

(a)          The Certificate Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 3.08, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, it shall provide for the registration of Trust Certificates and of transfers and exchanges of Trust Certificates as herein provided.   Citibank, National Association shall act as initial Certificate Registrar.  The Owner Trustee may appoint an agent to act as Certificate Registrar.  Upon any resignation of the Certificate Registrar, the Owner Trustee shall promptly appoint a successor thereto.

 

The Trust Certificates have not been registered under the Securities Act or listed on any securities exchange.  No transfer of a Trust Certificate shall be made unless such transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities laws or is exempt from the registration requirements under the Securities Act and such state securities laws.  In the event that a transfer is to be made in reliance upon an exemption from the Securities Act and state securities laws, in order to assure compliance with the Securities Act and such laws, the Holder desiring to effect such transfer and such Holder’s prospective transferee shall each
certify to the Issuer in writing the facts surrounding the transfer in the form of a Seller Certificate and Investment Letter or a Rule 144A Letter.  Except in the case of a transfer as to which the proposed transferee has provided a Rule 144A Letter, there shall also be delivered to the Issuer an Opinion of Counsel that such transfer may be made pursuant to an exemption from the Securities Act and an Opinion of Counsel or memorandum of law that such transfer may be made pursuant to an exemption from state securities laws, which Opinion(s) of Counsel and memorandum of law shall not be an expense of the Issuer or the Owner Trustee.  The Depositor shall provide to any Holder of a Trust Certificate and any prospective transferee designated by any such Holder, information regarding the Trust Certificates and the Receivables and such other information as shall be
necessary to satisfy the condition to eligibility set forth in Rule 144A(d)(4) for transfer of any such Trust Certificate without registration thereof under the Securities Act pursuant to the registration exemption provided by Rule 144A.  Each Holder of a Trust Certificate desiring to effect such a transfer shall, and does hereby agree to, indemnify the Issuer, the Owner Trustee and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with federal and state securities laws.  The Owner Trustee on behalf of the Issuer shall cause each Trust Certificate to contain a legend in the form set forth on the form of Trust Certificate attached hereto as Exhibit A.

  

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(b)         Upon surrender for registration of transfer of any Trust Certificate at the office of the Certificate Registrar and subject to the satisfaction of the preceding paragraph, the Owner Trustee shall execute, authenticate and deliver (or shall cause its Authenticating Agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Trust Certificates in authorized denominations of a like aggregate original certificate balance dated the date of authentication by the Owner Trustee or any Authenticating Agent; provided that prior to such execution, authentication and delivery, the Owner Trustee shall have received an
Opinion of Counsel to the effect that the proposed transfer will not cause the Issuer to be characterized, as an association (or a publicly traded partnership) taxable as a corporation or alter the tax characterization of the Notes for federal income tax purposes.  At the option of a Holder, Trust Certificates may be exchanged for other Trust Certificates of authorized denominations of a like aggregate original certificate balance upon surrender of the Trust Certificates to be exchanged at the office or agency maintained pursuant to Section 3.08.

 

(c)         At the option of a Certificateholder, Trust Certificates may be exchanged for other Trust Certificates in authorized denominations of a like aggregate original certificate balance upon surrender of the Trust Certificates to be exchanged at the office of the Certificate Registrar.  Whenever any Trust Certificates are so surrendered for exchange, the Owner Trustee on behalf of the Issuer shall execute, authenticate and deliver (or shall cause its Authenticating Agent to authenticate and deliver) the Trust Certificates that the Certificateholder making the exchange is entitled to receive.  Every Trust Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder or such Holder’s attorney duly authorized in writing.

 

(d)         No service charge shall be made for any registration of transfer or exchange of Trust Certificates, but the Owner Trustee (or the Paying Agent) may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Trust Certificates.

 

(e)         The Trust Certificates may not be acquired or held by or for the account of a Benefit Plan Investor or a person who is not a United States Person within the meaning of Section 7701(a)(30) of the Code.  No transfer of a Trust Certificate shall be made unless the prospective transferee has certified to the Issuer in writing that it is not a Benefit Plan Investor.

 

(f)          All Trust Certificates surrendered for registration of transfer or exchange, if surrendered to the Issuer or any agent of the Owner Trustee or the Issuer under this Agreement, shall be delivered to the Owner Trustee and promptly cancelled by it, or, if surrendered to the Owner Trustee, shall be promptly cancelled by it, and no Trust Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement.  The Owner Trustee shall dispose of cancelled Trust Certificates in accordance with its normal practice.

 

(g)         The preceding provisions of this Section notwithstanding, the Owner Trustee shall not make, and the Certificate Registrar shall not register transfers or exchanges of, Trust Certificates for a period of 15 days preceding the due date for any payment with respect to the Trust Certificates.

  

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Section 3.05.  Mutilated, Destroyed, Lost or Stolen Trust Certificates.  If (i) any mutilated Trust Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Trust Certificate and (ii) there is delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to a Responsible Officer of the Owner Trustee that such Trust Certificate has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Issuer shall
execute and the Owner Trustee or its Authenticating Agent shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate in an authorized denomination and of a like original certificate balance.  In connection with the issuance of any new Trust Certificate under this Section, the Owner Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith.  Any duplicate Trust Certificate issued pursuant to this Section shall constitute conclusive evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Certificate shall be found at any time.

 

Section 3.06.  Persons Deemed Owners.  Prior to due presentation of a Trust Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar, any Paying Agent and any of their respective agents may treat the Person in whose name any Trust Certificate is registered as the owner of such Trust Certificate for the purpose of receiving distributions pursuant to Section 5.02 and for all other purposes whatsoever, and none of the Owner Trustee, the Certificate Registrar, any Paying Agent or any of their respective agents shall be affected by any notice to the contrary.

 

Section 3.07.  Access to List of Certificateholders’ Names and Addresses.  The Certificate Registrar shall furnish or cause to be furnished to the Servicer and the Depositor, within 15 days after receipt by the Certificate Registrar of a written request therefor from the Servicer or the Depositor, a list, in such form as the Servicer or the Depositor may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date.  If three or more Certificateholders, or one or more Certificateholders evidencing not less than 51% of the Percentage Interests of the Trust Certificates
(hereinafter referred to as the “Applicants”), apply in writing to the Certificate Registrar, and such application states that the Applicants desire to communicate with other Certificateholders with respect to their rights under this Agreement or under the Trust Certificates, then the Certificate Registrar shall, within five Business Days after the receipt of such application, afford such Applicants access during normal business hours to the current list of Certificateholders.  Each Holder, by receiving and holding a Trust Certificate, shall be deemed to have agreed not to hold any of the Depositor, the Certificate Registrar or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived.

 

Section 3.08.  Maintenance of Office or Agency.  The Trust shall maintain an office or offices or agency or agencies where Trust Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee or its agent in respect of the Trust Certificates and the Basic Documents may be served.  The Owner Trustee initially designates 388 Greenwich Street, 14th Floor, New York, New York 10013, as its office for such purposes.  The Owner Trustee shall give prompt written notice to the
Depositor and to the Certificateholders of any change in the location of the Certificate Register or any such office or agency.

  

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Section 3.09.  Appointment of Paying Agent.  The Paying Agent shall make distributions to Certificateholders from the Certificate Distribution Account pursuant to Sections 5.02 and 5.03 and shall report the amounts of such distributions to the Owner Trustee.  Any Paying Agent shall have the revocable power to withdraw funds from the Certificate Distribution Account for the purpose of making the distributions referred to above.  The Owner Trustee may revoke such power and remove the Paying Agent if the Owner Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement in any material respect.  Citibank, National Association shall act as the initial Paying Agent.  Each Paying Agent shall be permitted to resign as Paying Agent upon 30 days’ written notice to the Owner Trustee.  In the event that Citibank, National Association shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent (which shall be a bank or trust company).  The Owner Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Owner Trustee that, as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders.  The Paying Agent shall return all unclaimed funds to the Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Owner Trustee.  The provisions of Sections 7.01, 7.03, 7.04, 8.01 and 8.02 shall apply to the Owner Trustee also in its role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder.  Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise.

 

Section 3.10.  Definitive Trust Certificates.  The Trust Certificates, upon original issuance, will be issued in definitive, fully registered form.

 

Section 3.11.  Repayment of Trust Certificates.  In the event of an optional purchase pursuant to Section 8.01 (a) of the Sale and Servicing Agreement, the Trust Certificates will be prepaid in whole, but not in part, at an aggregate prepayment price equal to the aggregate Certificate Balance of all the Trust Certificates plus accrued interest thereon at the Certificate Rate.

 

ARTICLE FOUR

 

ACTIONS BY OWNER TRUSTEE

 

Section 4.01.  Prior Notice to Owners with Respect to Certain Matters.  Subject to the provisions and limitations of Section 4.04, with respect to the following matters, the Owner Trustee shall not take action unless at least 30 days before the taking of such action, the Owner Trustee shall have notified the Certificateholders in writing of the proposed action and the Owners shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Owners have withheld consent or provided alternative direction:

  

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(a)         the initiation of any claim or lawsuit by the Issuer (except claims or lawsuits brought in connection with the collection of the Receivables) and the compromise of any action, claim or lawsuit brought by or against the Issuer (except with respect to the aforementioned claims or lawsuits for collection of the Receivables);

 

(b)         the election by the Issuer to file an amendment to the Certificate of Trust (unless such amendment is required to be filed under the Statutory Trust Statute);

 

(c)         the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is required;

 

(d)         the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is not required and such amendment materially adversely affects the interests of the Owners;

 

(e)         the amendment, change or modification of the Administration Agreement, except to cure any ambiguity or to amend or supplement any provision in a manner or add any provision that would not materially adversely affect the interests of the Owners; or

 

(f)          the appointment pursuant to the Indenture of a successor Note Registrar, paying agent for the Notes or Indenture Trustee or pursuant to this Agreement of a successor Certificate Registrar, or the consent to the assignment by the Note Registrar, Paying Agent, Indenture Trustee or Certificate Registrar of its obligations under the Indenture or this Agreement, as applicable.

 

Section 4.02.  Action by Owners with Respect to Certain Matters.  Subject to the provisions and limitations of Section 4.04, the Owner Trustee shall not have the power, except upon the direction of the Owners, to (i) remove the Administrator pursuant to Section 1.09 of the Administration Agreement, (ii) appoint a successor Administrator pursuant to Section 1.09 of the Administration Agreement, (iii) remove the Servicer pursuant to Section 7.01 of the Sale and Servicing Agreement, (iv) except as expressly provided in the Basic Documents, sell the Receivables after the termination of the Indenture, or  (v) authorize the merger or
consolidation of the Issuer with or into any other statutory trust or entity (other than in accordance with Section 3.10 of the Indenture).  The Owner Trustee shall take the actions referred to in the preceding sentence only upon written instructions signed by the Owners.

 

Section 4.03.  Action by Owners with Respect to Bankruptcy.  The Owner Trustee shall not have the power to commence a voluntary proceeding in bankruptcy relating to the Issuer without the unanimous prior approval of all Owners (including the Depositor) and the delivery to the Owner Trustee by each such Owner of a certificate certifying that such Owner reasonably believes that the Issuer is insolvent.

 

Section 4.04.  Restrictions on Owners’ Power.  The Owners shall not direct the Owner Trustee to take or to refrain from taking any action if such action or inaction would be contrary to any obligation of the Issuer or the Owner Trustee under this Agreement or any of the other Basic Documents or would be contrary to the purpose of the Issuer as set forth in Section 2.03, nor shall the Owner Trustee be obligated to follow any such direction, if given.

  

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Section 4.05.  Majority Control.  Except as expressly provided herein, any action that may be taken by the Owners under this Agreement may be taken by the Holders of Trust Certificates evidencing not less than a majority of the Percentage Interests evidenced by the Trust Certificates.  Except as expressly provided herein, any written notice of the Owners delivered pursuant to this Agreement shall be effective if signed by Holders of Trust Certificates evidencing not less than a majority of the Percentage Interests evidenced by the Trust Certificates at the time of the delivery of such notice.

 

ARTICLE FIVE

 

APPLICATION OF TRUST FUNDS; CERTAIN DUTIES

 

Section 5.01.  Establishment of Trust Account.  The Owner Trustee, for the benefit of the Certificateholders, shall establish and maintain (or shall cause to be established and maintained) in the name of the Issuer an Eligible Account (the “Certificate Distribution Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders.

 

The Issuer shall possess all right, title and interest in funds on deposit from time to time in the Certificate Distribution Account and in the proceeds thereof.  Except as otherwise expressly provided herein, the Certificate Distribution Account shall be under the sole dominion and control of the Owner Trustee for the benefit of the Certificateholders.  If, at any time, the Owner Trustee ceases to be an Eligible Institution, the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if the Certificate Distribution Account is not then held by the Owner Trustee or an Affiliate thereof) shall cause the Certificate Distribution Account to be moved to an Eligible Institution and shall
transfer any cash and/or any investments to such new Certificate Distribution Account.  Monies on deposit in the Certificate Distribution Account may be invested in Eligible Investments upon the terms set forth in Section 4.01 of the Sale and Servicing Agreement, as if the Certificate Distribution Account were an “Account”.  Earnings on investments of funds in the Certificate Distribution Account shall be paid to the Servicer as part of the Supplemental Servicing Fee and any losses and investment expenses shall be charged against the funds in such account.

 

Section 5.02.  Application of Trust Funds.

 

(a)         On each Payment Date, the Paying Agent will distribute to Certificateholders, on the basis of the Percentage Interest evidenced by their Trust Certificates, amounts deposited in the Certificate Distribution Account pursuant to Section 4.06 of the Sale and Servicing Agreement with respect to such Payment Date.

 

(b)         On each Payment Date, the Paying Agent shall send to each Certificateholder the statement or statements provided to the Owner Trustee by the Servicer pursuant to Section 4.10 of the Sale and Servicing Agreement with respect to such Payment Date.

  

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(c)         In the event that any withholding tax is imposed on the Issuer’s payment (or allocations of income) to an Owner, such tax shall reduce the amount otherwise distributable to the Owner in accordance with this Section.  The Paying Agent will retain from amounts otherwise distributable to the Owners sufficient funds for the payment of any tax that is legally owed by the Issuer (but such authorization shall not prevent the Owner Trustee or the Paying Agent from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings) upon the written direction of the
Depositor.  The amount of any withholding tax imposed with respect to an Owner shall be treated as cash distributed to such Owner at the time it is withheld by the Issuer and remitted to the appropriate taxing authority.  If there is a possibility that withholding tax is payable with respect to a distribution, the Paying Agent may in its sole discretion withhold such amounts in accordance with this paragraph (c).

 

Section 5.03.  Method of Payment.  Subject to Section 9.01(c) respecting the final payment upon retirement of each Trust Certificate, distributions required to be made to Certificateholders on any Payment Date shall be made to each Certificateholder of record on the related Record Date by wire transfer, in immediately available funds, to the account of such Holder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have provided to the Certificate Registrar appropriate written instructions at least five Business Days prior to such Payment Date, or, if not, by check mailed to such
Certificateholder at the address of such Holder appearing in the Certificate Register.

 

Section 5.04.  No Segregation of Monies; No Interest.  Subject to Sections 5.01 and 5.02, monies received by the Owner Trustee or the Paying Agent hereunder need not be segregated in any manner except to the extent required by law or the Sale and Servicing Agreement and may be deposited under such general conditions as may be prescribed by law, and neither the Owner Trustee nor the Paying Agent shall be liable for any interest thereon.

 

Section 5.05.  Accounting and Reports to Owners, Internal Revenue Service and Others.  The Owner Trustee shall maintain (or cause to be maintained) the books of the Issuer on a fiscal year basis ending March 31 of each year and the accrual method of accounting.  In addition, the Issuer shall deliver to each Owner such information, reports or statements prepared by the Administrator as may be required by the Code and applicable Treasury Regulations and as may be required to enable each Owner to prepare its federal and state income tax returns.  Consistent with the Issuer’s characterization for tax purposes, as
disregarded as an entity separate from the Owner, no federal income tax return shall be filed on behalf of the Issuer unless either (i) the Owner Trustee shall receive an Opinion of Counsel that, based on a change in applicable law occurring after the date hereof, the Code requires such a filing or (ii) the Internal Revenue Service shall determine that the Issuer is required to file such a return.  Neither the Owner Trustee nor any Certificateholder will, under any circumstances, and at any time, make an election on IRS Form 8832 or otherwise, to classify the Trust as an association taxable as a corporation for federal, state or any other applicable tax purpose.  In the event that the Issuer is required to file tax returns, the Owner Trustee shall, to the extent not undertaken by the Administrator pursuant to the Administration Agreement, prepare or shall cause to be
prepared any tax returns required to be filed by the Issuer and shall remit such returns to the Depositor (or if the Depositor no longer owns any Certificates, the Owner designated for such purpose by the Depositor to the Owner Trustee in writing) at least five days before such returns are due to be filed.  The Depositor (or such designee Owner, as applicable) shall promptly sign such returns and deliver such returns after signature to the Owner Trustee and such returns shall be filed by the Owner Trustee with the appropriate tax authorities.  In no event shall the Owner Trustee or the Depositor (or such designee Owner, as applicable) be liable for any liabilities, costs or expenses of the Issuer or the Noteholders arising out of the application of any tax law, including federal, state, foreign or local income or excise taxes or any other tax imposed on or measured
by income (or any interest, penalty or addition with respect thereto or arising from a failure to comply therewith) except for any such liability, cost or expense attributable to any act or omission by the Owner Trustee or the Depositor (or such designee Owner, as applicable), as the case may be, in breach of its obligations under this Agreement.

  

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The Depositor is authorized and directed to execute on behalf of the Issuer, and after execution to deliver to the Administrator for filing with the Commission, all documents and forms required to be filed in accordance with applicable law or the rules and regulations prescribed by the Commission.

 

ARTICLE SIX

 

AUTHORITY AND DUTIES OF OWNER TRUSTEE

 

Section 6.01.  General Authority.  Subject to the provisions and limitations of Sections 2.03 and 2.06, the Owner Trustee is authorized and directed to execute and deliver the Basic Documents to which the Issuer is to be a party and each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which the Issuer is to be a party and any amendment or other agreement, as evidenced conclusively by the Owner Trustee’s execution thereof.  In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Issuer pursuant to the
Basic Documents.  The Owner Trustee is further authorized from time to time to take such action as the Administrator recommends with respect to the Basic Documents.

 

Section 6.02.  General Duties.  Subject to the provisions and limitations of Sections 2.03 and 2.06, it shall be the duty of the Owner Trustee to discharge (or cause to be discharged) all of its responsibilities pursuant to the terms of this Agreement and the other Basic Documents to which the Issuer is a party and to administer the Issuer in the interest of the Owners, subject to the Basic Documents and in accordance with the provisions of this Agreement.  Notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the other Basic Documents to the
extent the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee hereunder or under any Basic Document, and the Owner Trustee shall not be held liable for the default or failure of the Administrator to carry out its obligations under the Administration Agreement.

 

Section 6.03.  Action Upon Instruction.

 

(a)         Subject to Article Four, in accordance with the terms of the Basic Documents, the Owners may by written instruction direct the Owner Trustee in the management of the Issuer.  Such direction may be exercised at any time by written instruction of the Owners pursuant to Article Four.

  

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(b)         The Owner Trustee shall not be required to take any action hereunder or under any other Basic Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any other Basic Document or is otherwise contrary to law.

 

(c)         Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or under any other Basic Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Owners requesting instruction as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction of the Owners received, the Owner Trustee shall not be liable on account of such action to any Person.  If the Owner Trustee shall not have received appropriate instruction within ten days of such
notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement and the other Basic Documents, as it shall deem to be in the best interests of the Owners, and shall have no liability to any Person for such action or inaction.

 

(d)         In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Basic Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in such form as shall be appropriate under the circumstances) to the Owners requesting instruction and, to the extent that the Owner Trustee
acts or refrains from acting in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person.  If the Owner Trustee shall not have received appropriate instruction within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement or the other Basic Documents, as it shall deem to be in the best interests of the Owners, and shall have no liability to any Person for such action or inaction.

 

Section 6.04.  No Duties Except as Specified in this Agreement or in Instructions.  The Owner Trustee shall not have any duty or obligation to manage, make any payment with respect to, register, record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, any document contemplated hereby to which the Owner Trustee is a party, except as expressly provided by the terms of this Agreement or in any document or written instruction received by the Owner Trustee pursuant to Section 6.03; and no implied duties or obligations shall be read into this
Agreement or any other Basic Document against the Owner Trustee.  The Owner Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to prepare or file any Commission filing for the Issuer or to record this Agreement or any other Basic Document.  The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens (other than the lien of the Indenture) on any part of the Owner Trust Estate that result from actions by, or claims against, the Owner Trustee that are not related to the ownership or the administration of the Owner Trust Estate.

  

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Section 6.05.  No Action Except Under Specified Documents or Instructions.  The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Owner Trust Estate except in accordance with (i) the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) the Basic Documents and (iii) any document or instruction delivered to the Owner Trustee pursuant to Section 6.03.

 

Section 6.06.  Restrictions.  The Owner Trustee shall not take any action (i) that is inconsistent with the purposes of the Issuer set forth in Section 2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would result in the Issuer’s becoming taxable as a corporation for federal or state income tax purposes.  The Owners shall not direct the Owner Trustee to take action that would violate the provisions of this Agreement.

 

ARTICLE SEVEN

 

CONCERNING THE OWNER TRUSTEE AND THE DELAWARE TRUSTEE

 

Section 7.01.  Acceptance of Trusts and Duties.  Each of the Owner Trustee and the Delaware Trustee accepts the trusts hereby created and each agrees to perform its duties hereunder with respect to such trusts, but only upon the terms of this Agreement.  Each of the Owner Trustee and the Delaware Trustee also agrees to disburse all monies actually received by it constituting part of the Owner Trust Estate upon the terms of this Agreement and the other Basic Documents.  Neither the Owner Trustee nor the Delaware Trustee shall be answerable or accountable hereunder or under any other Basic Document under any
circumstances, except (i) for its own willful misconduct, bad faith or gross negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 7.03 expressly made by the Owner Trustee or the Delaware Trustee.  In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence):

 

(a)         neither the Owner Trustee nor the Delaware Trustee shall be liable for any error of judgment made in good faith by the Owner Trustee or the Delaware Trustee;

 

(b)         neither the Owner Trustee nor the Delaware Trustee shall be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Administrator or any Owner or Owners;

 

(c)         no provision of this Agreement or any other Basic Document shall require the Owner Trustee or the Delaware Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any other Basic Document if the Owner Trustee or the Delaware Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it;

  

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(d)         under no circumstances shall the Owner Trustee or the Delaware Trustee be liable for indebtedness evidenced by or arising under any Basic Document, including the principal of and interest on the Notes or the Trust Certificates;

 

(e)         neither the Owner Trustee nor the Delaware Trustee shall be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Depositor or for the form, character, genuineness, sufficiency, value or validity of any of the Owner Trust Estate, or for or in respect of the validity or sufficiency of the Basic Documents, other than the certificate of authentication on the Trust Certificates, and neither the Owner Trustee nor the Delaware Trustee shall in any event assume or incur any liability, duty or obligation to any Noteholder or to any Owner, other than as expressly provided for in the Basic
Documents;

 

(f)          neither the Owner Trustee nor the Delaware Trustee shall be liable for the default or misconduct of the Administrator, the Seller, the Depositor, the Indenture Trustee or the Servicer under any Basic Document or otherwise, and neither the Owner Trustee nor the Delaware Trustee shall have any obligation or liability to perform the obligations of the Issuer under this Agreement or the other Basic Documents that are required to be performed by the Administrator under the Administration Agreement, the Indenture Trustee under the Indenture or the Servicer or the Seller under the Sale and Servicing Agreement or any other Person under any of the Basic
Documents; 

 

(g)         neither the Owner Trustee nor the Delaware Trustee shall be under any obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any other Basic Document, at the request, order or direction of any of the Owners, unless such Owners have offered to the Owner Trustee and the Delaware Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee and the Delaware Trustee therein or thereby; the right of the Owner Trustee and the Delaware Trustee to
perform any discretionary act enumerated in this Agreement or in any other Basic Document shall not be construed as a duty, and neither the Owner Trustee nor the Delaware Trustee shall be answerable for other than its gross negligence, bad faith or willful misconduct in the performance of any such act; and

 

(h)         in no event shall the Owner Trustee or the Delaware Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation strikes, work stoppages, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities; it being understood that the Owner Trustee or the Delaware Trustee, as applicable, shall use reasonable efforts which are consistent with accepted practices in the
banking industry to resume performance as soon as practicable under the circumstances.

Section 7.02.  Furnishing of Documents.

 

The Owner Trustee shall furnish to the Owners, promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Basic Documents.

  

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Section 7.03.  Representations and Warranties of the Owner Trustee and the Delaware Trustee.  (1) The Owner Trustee hereby represents and warrants to the Depositor and the Owners, that:

 

(a)          it is a national banking association duly organized and validly existing under the laws of the United States of America; it has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement;

 

(b)          it has taken all corporate action necessary to authorize the execution and delivery by it of this Agreement, and this Agreement will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf; and

 

(c)          neither the execution nor the delivery by it of this Agreement, nor the consummation by it of the transactions contemplated hereby, nor compliance by it with any of the terms or provisions hereof will contravene any federal or Delaware governmental rule or regulation governing the banking or trust powers of the Owner Trustee or any judgment or order binding on it, or constitute any default under its charter documents or bylaws; and

 

(d)         this Agreement constitutes a legal, valid and binding obligation of the Owner Trustee, enforceable against the Owner Trustee in accordance with its terms, except as such enforceability may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such enforceability shall be considered in a proceeding in equity or in law; and

 

(e)         the execution, delivery and performance by the Owner Trustee of this Agreement and the consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do 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) a default under, the charter documents or bylaws of the Owner Trustee; 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 pursuant to the Basic Documents); and

 

(f)          there are no proceedings or investigations pending or, to the Owner Trustee’s actual knowledge, threatened, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Owner Trustee or its properties: (i) asserting the invalidity of this Agreement or (ii) seeking any determination or ruling that might materially and adversely affect the performance by the Owner Trustee of its obligations under, or the validity or enforceability of, this Agreement.

 

(2)         The Delaware Trustee hereby represents and warrants to the Depositor and the Owners that:

  

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(a)          it is a national banking association duly organized and validly existing under the laws of the United States of America; it has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement;

 

(b)         it has taken all corporate action necessary to authorize the execution and delivery by it of this Agreement, and this Agreement will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf; and

 

(c)         neither the execution nor the delivery by it of this Agreement, nor the consummation by it of the transactions contemplated hereby, nor compliance by it with any of the terms or provisions hereof will contravene any federal or Delaware law, governmental rule or regulation governing the banking or trust powers of the Delaware Trustee or any judgment or order binding on it, or constitute any default under its charter documents or bylaws; and

 

(d)         this Agreement constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against the Delaware Trustee in accordance with its terms, except as such enforceability may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such enforceability shall be considered in a proceeding in equity or in law; and

 

(e)         the execution, delivery and performance by the Delaware Trustee of this Agreement and the consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do 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) a default under, the charter documents or bylaws of the Delaware Trustee; 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 pursuant to the Basic Documents); and

 

(f)          there are no proceedings or investigations pending or, to the Delaware Trustee’s actual knowledge, threatened, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Delaware Trustee or its properties: (i) asserting the invalidity of this Agreement or (ii) seeking any determination or ruling that might materially and adversely affect the performance by the Delaware Trustee of its obligations under, or the validity or enforceability of, this Agreement.

Section 7.04. Reliance, Advice of Counsel.

 

(a)         The Owner Trustee and the Delaware Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties.  The Owner Trustee or the Delaware Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect.  As to any fact or matter the method of
determination of which is not specifically prescribed herein, the Owner Trustee and the Delaware Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee or the Delaware Trustee, for any action taken or omitted to be taken by it in good faith in reliance thereon.

  

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(b)         In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement and the other Basic Documents, the Owner Trustee and the Delaware Trustee (i) may act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trustee and the Delaware Trustee shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trustee or the Delaware Trustee with reasonable care, and (ii) may consult with counsel, accountants and other skilled persons to be selected with reasonable
care and employed by it.  The Owner Trustee and the Delaware Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written opinion or advice of any such counsel, accountants or other such persons and not contrary to this Agreement or any other Basic Document.

 

Section 7.05.  Not Acting in Individual Capacity.  Except as otherwise provided in this Article, in accepting the trusts hereby created, each of Citibank, National Association and Citigroup Trust-Delaware, National Association, acting solely as Owner Trustee and Delaware Trustee, respectively, hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee or the Delaware Trustee by reason of the transactions contemplated by this Agreement or any other Basic Document shall look only to the Owner Trust Estate for payment or satisfaction thereof.

 

Section 7.06.  Owner Trustee and Delaware Trustee Not Liable for Trust Certificates or Receivables.  The recitals contained herein and in the Trust Certificates (other than the signature of the Owner Trustee and the certificate of authentication on the Trust Certificates) shall be taken as the statements of the Depositor, and the Owner Trustee and the Delaware Trustee assume no responsibility for the correctness thereof.  The Owner Trustee and the Delaware Trustee make no representations as to the validity or sufficiency of this Agreement, any other Basic Document or the Trust Certificates (other than the signature of the
Owner Trustee and the certificate of authentication on the Trust Certificates and the representations and warranties in Section 7.03) or the Notes, or of any Receivable or related documents.  The Owner Trustee and the Delaware Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Receivable, or the perfection and priority of any security interest created by any Receivable in any Financed Vehicle or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Owner Trust Estate or its ability to generate the payments to be distributed to Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation, the existence, condition and ownership of any Financed Vehicle; the existence and enforceability of any insurance
thereon; the existence and contents of any Receivable on any computer or other record thereof; the validity of the assignment of any Receivable to the Issuer or of any intervening assignment; the completeness of any Receivable; the performance or enforcement of any Receivable; the compliance by the Depositor or the Servicer with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation, or any action of the Administrator, the Indenture Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee.

  

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Section 7.07.  Owner Trustee or Delaware Trustee May Own Trust Certificates and Notes.  Each of the Owner Trustee and the Delaware Trustee in its individual or any other capacity may become the owner or pledgee of Trust Certificates or Notes and may deal with the Depositor, the Administrator, the Indenture Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner Trustee or the Delaware Trustee, respectively.

 

Section 7.08.  Duties of the Delaware Trustee.   The Delaware Trustee is appointed to serve as the trustee of the Trust in the State of Delaware for the sole purpose of satisfying the requirement of Section 3807(a) of the Delaware Act that the Trust have at least one trustee with a principal place of business in Delaware.  It is understood and agreed by the parties hereto that the Delaware Trustee shall have none of the duties or liabilities of the Owner Trustee.  The duties of the Delaware Trustee shall be limited to (a) accepting legal process served on the Trust in the State of Delaware and (b) the
execution of any certificates required to be filed with the Secretary of State of the State of Delaware which the Delaware Trustee is required to execute under Section 3811 of the Delaware Act.  To the extent that, at law or in equity, the Delaware Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust, the beneficial owners thereof or any other person, it is hereby understood and agreed by the other parties hereto that such duties and liabilities are replaced by the duties and liabilities of the Delaware Trustee expressly set forth in this Section 7.08.  The Delaware Trustee shall have all the rights, privileges and immunities of the Owner Trustee.

ARTICLE EIGHT

 

COMPENSATION OF OWNER TRUSTEE AND THE DELAWARE TRUSTEE

 

Section 8.01.  Owner Trustee’s and Delaware Trustee’s Fees and Expenses.  Each of the Owner Trustee and the Delaware Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Depositor and the Owner Trustee and the Delaware Trustee, respectively, and upon the formation of the Issuer, each of the Owner Trustee and the Delaware Trustee shall be entitled to be reimbursed by the Issuer for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and
counsel as each of the Owner Trustee and the Delaware Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder.

  

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Section 8.02.  Indemnification.  The Issuer shall, or shall cause the Administrator to, indemnify each Indemnified Party and its respective officers, directors, employees and agents against any and all loss, liability or expense (including reasonable attorney’s fees and expenses) incurred by it in connection with the administration of the Issuer and the performance of its duties hereunder not resulting from its own willful misconduct, gross negligence or bad faith.  The Indemnified Party shall notify the Issuer and the Administrator promptly of any claim for which it may seek indemnity.  The indemnities
contained in this Section shall survive the resignation or termination of the Owner Trustee, the Delaware Trustee or the termination of this Agreement.  In the event of any claim, action or proceeding for which indemnity will be sought pursuant to this Section, the Owner Trustee’s or the Delaware Trustee’s choice of legal counsel shall be subject to the approval of the Depositor (or if the Depositor is no longer an owner, the designee of the Depositor), which approval shall not be unreasonably withheld.  Neither the Issuer nor the Administrator need reimburse any expense or indemnify against any loss, liability or expense incurred by any Indemnified Party (1) through such party’s own willful misconduct, gross negligence or bad faith or (2)  in the case of the inaccuracy of any representation or warranty contained in Sections 7.03 expressly
made by the Owner Trustee or the Delaware Trustee.

 

Section 8.03.  Payments to the Owner Trustee and to the Delaware Trustee.  Any amounts paid to the Owner Trustee and to the Delaware Trustee pursuant to this Article shall be deemed not to be a part of the Owner Trust Estate immediately after such payment.  Any amounts owing to the Owner Trustee under this Agreement or the other Basic Documents shall constitute a claim against the Owner Trust Estate.

 

ARTICLE NINE

 

TERMINATION OF TRUST AGREEMENT

 

Section 9.01.  Termination of Trust Agreement.

 

(a)         The Issuer shall dissolve immediately prior to the earlier to occur of (i) the purchase on any Payment Date by the Servicer, or any successor Servicer, at its option, pursuant to Section 8.01(a) of the Sale and Servicing Agreement, of the Owner Trust Estate other than the Accounts and the Certificate Distribution Account, (ii) the final distribution by the Owner Trustee of all monies or other property or proceeds of the Owner Trust Estate in accordance with the terms of the Indenture, the Sale and Servicing Agreement, and Article Five, or (iii) the Payment Date next succeeding the month which is one year after the maturity or other liquidation of the last
Receivable and the disposition of any amount received upon liquidation of any property remaining in the Owner Trust Estate.  The bankruptcy, liquidation, dissolution, death or incapacity of any Owner shall not (i) operate to terminate this Agreement or the Issuer, (ii) entitle such Owner’s legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of all or any part of the Issuer or Owner Trust Estate or (iii) otherwise affect the rights, obligations and liabilities of the parties hereto.  The Issuer shall be entitled to deduct from the final distribution to Certificateholders any amounts required to pay any other claims against and obligations of the Issuer in accordance with Section 3808(e) of the Statutory Trust Statute.

 

(b)         Except as provided in Section 9.01(a), neither of the Depositor nor any Owner shall be entitled to revoke or terminate the Issuer.

  

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(c)         The outstanding Trust Certificates are subject to redemption in whole, but not in part, pursuant to Section 8.01 of the Sale and Servicing Agreement; provided that the Issuer has available funds sufficient to pay the aggregate Certificate Balance of all the Trust Certificates, together with accrued interest at the Certificate Rate to but excluding the Payment Date.  Notice of any termination of the Issuer, specifying the Payment Date upon which Certificateholders shall surrender their Trust Certificates to the Paying Agent for payment of the final distribution and cancellation, shall be given by the Owner Trustee by letter to Certificateholders
mailed within five Business Days of receipt of notice of such termination from the Servicer given pursuant to Section 8.01(b) of the Sale and Servicing Agreement, stating (i) the Payment Date upon or with respect to which final payment of the Trust Certificates shall be made upon presentation and surrender of the Trust Certificates at the office of the Paying Agent therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Trust Certificates at the office of the Paying Agent therein specified.  The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent (if other than the Owner Trustee) at the time such notice is given to Certificateholders.  Upon
presentation and surrender of the Trust Certificates, the Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Payment Date pursuant to Section 5.02.  The Owner Trustee shall promptly notify the Administrator (who shall make such notice available to each Rating Agency pursuant to Section 1.02(c) of the Administration Agreement) upon the final payment of the Trust Certificates.

 

(d)         In the event that all of the Certificateholders shall not surrender their Trust Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to the remaining Certificateholders to surrender their Trust Certificates for cancellation and receive the final distribution with respect thereto.  If within one year after the second notice all the Trust Certificates shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Trust Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement.  Subject to applicable escheat laws, any funds remaining in the Issuer after exhaustion of such remedies shall be distributed by the Owner Trustee to the Depositor, in its capacities as Depositor and as Holder of such Certificate.

 

(e)         Upon the winding up of the Issuer and its termination, the Owner Trustee shall, upon the direction and at the expense of the Depositor, cause the Certificate of Trust to be cancelled by filing a certificate of cancellation with the Secretary of State in accordance with Section 3810 of the Statutory Trust Statute.  Upon the filing of the certificate of cancellation, the Issuer and this Agreement (other than Article 8) shall terminate and be of no further force or effect.

 

ARTICLE TEN

 

SUCCESSOR AND ADDITIONAL OWNER TRUSTEES

 

Section 10.01.  Eligibility Requirements for Owner Trustee and Delaware Trustee.  The Owner Trustee shall at all times (i) maintain its principal place of business in the State of New York or such other location within the United States to which the Depositor shall consent in writing, (ii) be authorized to exercise corporate trust powers, (iii) have a combined capital and surplus of at least $50,000,000, (iv) be subject to supervision or examination by federal or state authorities and (v) have the Required Rating.  If such person shall publish reports of condition at least annually pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  The Delaware Trustee shall at all times be a person satisfying the provisions of Section 3807(a) of the Statutory Trust Statute.  In case at any time the Owner Trustee or the Delaware Trustee, as applicable, shall cease to be eligible in accordance with the provisions of this Section, the Owner Trustee or the Delaware Trustee, as applicable, shall resign immediately in the manner and with the effect specified in Section 10.02.

  

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Section 10.02.  Resignation or Removal of Owner Trustee or Delaware Trustee.  The Owner Trustee or Delaware Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Administrator.  Upon receiving such notice of resignation, the Administrator shall promptly appoint a successor Owner Trustee or Delaware Trustee, as applicable, by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee or Delaware Trustee, as applicable, and one copy to the successor Owner Trustee or Delaware Trustee, as
applicable.  If no successor Owner Trustee or Delaware Trustee, as applicable, shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee or Delaware Trustee, as applicable, may petition at the Issuer’s expense any court of competent jurisdiction for the appointment of a successor Owner Trustee or Delaware Trustee, as applicable.

 

If at any time the Owner Trustee or Delaware Trustee, as applicable, shall cease to be eligible in accordance with Section 10.01 and shall fail to resign after written request therefor by the Administrator, or if at any time the Owner Trustee or Delaware Trustee, as applicable, shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or Delaware Trustee, as applicable, of either of their property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or Delaware Trustee or of either of their property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Administrator may remove the Owner
Trustee or Delaware Trustee, as applicable.  If the Administrator shall remove the Owner Trustee or Delaware Trustee, as applicable, under the authority of the immediately preceding sentence, the Administrator shall promptly appoint a successor Owner Trustee or Delaware Trustee, as applicable, by written instrument, in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee or Delaware Trustee, as applicable, so removed and one copy to the successor Owner Trustee or Delaware Trustee, as applicable, and shall pay all fees and expenses owed to the outgoing Owner Trustee or Delaware Trustee, as applicable.

 

Any resignation or removal of the Owner Trustee or Delaware Trustee, as applicable, and appointment of a successor Owner Trustee or Delaware Trustee, as applicable, pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Owner Trustee or Delaware Trustee, as applicable, pursuant to Section 10.03 and payment of all fees and expenses owed to the outgoing Owner Trustee or Delaware Trustee, as applicable.  The Administrator shall provide notice of such resignation or removal of the Owner Trustee or Delaware Trustee, as applicable, to each Rating Agency pursuant to Section 1.02(c) of the Administration Agreement.

  

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Section 10.03.  Successor Owner Trustee or Delaware Trustee.  Any successor Owner Trustee or Delaware Trustee, as applicable, appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to the Administrator and to its predecessor Owner Trustee or Delaware Trustee, as applicable, an instrument accepting such appointment under this Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee or Delaware Trustee, as applicable, shall become effective, and such successor Owner Trustee or Delaware Trustee, as applicable, without any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee or Delaware Trustee, as applicable.  The predecessor Owner Trustee or Delaware Trustee, as applicable, shall upon payment of its fees and expenses deliver to the successor Owner Trustee or Delaware Trustee, as applicable, all documents and statements and monies held by it under this Agreement and the Administrator and the predecessor Owner Trustee or Delaware Trustee, as applicable, shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee or Delaware Trustee, as applicable, all such rights, powers, duties and obligations.

 

No successor Owner Trustee or Delaware Trustee, as applicable, shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee or Delaware Trustee, as applicable, shall be eligible pursuant to Section 10.01.

 

Upon acceptance of appointment by a successor Owner Trustee or Delaware Trustee, as applicable, pursuant to this Section, the Administrator shall mail notice thereof to all Certificateholders, the Indenture Trustee and the Noteholders; and, in the case of each Rating Agency, shall make such notice available pursuant to Section 1.02(c) of the Administration Agreement.  If the Administrator shall fail to mail such notice within ten days after acceptance of such appointment by the successor Owner Trustee or Delaware Trustee, as applicable, the successor Owner Trustee or Delaware Trustee, as applicable, shall cause such notice to be mailed at the expense of the Administrator.

 

Section 10.04.  Merger or Consolidation of Owner Trustee or Delaware Trustee.  Any Person into which the Owner Trustee or Delaware Trustee, as applicable, may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Owner Trustee or Delaware Trustee, as applicable, shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Owner Trustee or Delaware Trustee, as applicable, shall be the successor of the Owner Trustee or Delaware Trustee, as applicable, hereunder, without the execution or filing of
any instrument or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, that such Person shall be eligible pursuant to Section 10.01 and, provided, further, that the Owner Trustee or Delaware Trustee, as applicable, shall mail notice of such merger or consolidation to the Administrator (who shall make such notice available to each Rating Agency pursuant to Section 1.02(c) of the Administration Agreement).

  

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Section 10.05.  Appointment of Co-Trustee or Separate Trustee.  Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Owner Trust Estate or any Financed Vehicle may at the time be located, the Administrator and the Owner Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Administrator and Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or as separate trustee or separate trustees, of all or any part of the Owner Trust Estate,
and to vest in such Person, in such capacity, such title to the Trust or any part thereof and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Administrator and the Owner Trustee may consider necessary or desirable.  If the Administrator shall not have joined in such appointment within 15 days after the receipt by it of a request to do so, the Owner Trustee alone shall have the power to make such appointment.  The Owner Trustee agrees that upon receipt of a written request from the Administrator to appoint a co-trustee, it will, at the expense of the Issuer, either (i) promptly provide evidence reasonably satisfactory to the Administrator that such co-trustee is not required or (ii) cooperate fully to ensure a co-trustee is appointed with any required timeframe.  No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a successor Owner Trustee pursuant to Section 10.01, except that such co-trustee or successor trustee shall have the Required Rating, and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.03.

 

Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

 

(a)         all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Owner Trust
Estate or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee;

 

(b)         no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and

 

(c)         the Administrator and the Owner Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee.

 

Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them.  Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article.  Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the Owner Trustee.  Each such instrument shall be filed with the Owner Trustee and a copy thereof given to the Administrator.

  

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Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name.  If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor co-trustee or separate trustee.

 

ARTICLE ELEVEN

 

MISCELLANEOUS

 

Section 11.01.  Supplements and Amendments.

 

(a)         This Agreement may be amended by the parties hereto with prior written notice to the Administrator (who shall make such notice available to each Rating Agency pursuant to Section 1.02(c) of the Administration Agreement), without the consent of any Securityholders, to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in
any material respect the interests of any Noteholder or Certificateholder.

 

(b)         This Agreement may also be amended from time to time by the parties hereto, with prior written notice to the Administrator (who shall make such notice available to each Rating Agency pursuant to Section 1.02(c) of the Administration Agreement), with the consent of the Holders of Trust Certificates evidencing not less than a majority of the Percentage Interests evidenced by the Trust Certificates and, if such amendment materially and adversely affects the interests of the Noteholders, with the consent of Holders (as such term is defined in the Indenture) of Notes evidencing not less than a majority of the Outstanding Amount of the Notes, 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 or the Certificateholders; provided, however, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders, (ii) increase or reduce any Interest Rate or Certificate Rate or (iii) reduce the aforesaid percentage of the Outstanding Amount of the Notes or of the Percentage Interests evidenced by the Trust Certificates required to consent to any such amendment, without the consent of the Holders of all the outstanding Notes and Trust Certificates affected thereby.

 

(c)         Prior to the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to the Indenture Trustee and the Administrator (who shall make such notice available to each Rating Agency pursuant to Section 1.02(c) of the Administration Agreement).

  

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

 

(e)         Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State.

 

(f)          In connection with the execution of any amendment to this Agreement or any other basic Document to which the Issuer is a party and for which amendment the Owner Trustee’s or the Delaware Trustee’s consent is sought, the Owner Trustee and the Delaware Trustee shall be entitled to receive and rely upon an Opinion of Counsel to the effect that the execution of such amendment is authorized or permitted by this Agreement or such other Basic Document, as the case may be, and that all conditions precedent in this Agreement or such other Basic Document, as the case may be, for the execution and delivery thereof by the Issuer or the Owner Trustee, as
the case may be, have been satisfied.  The Owner Trustee or the Delaware Trustee may, but shall not be obligated to, enter into any such amendment that affects the Owner Trustee’s or Delaware Trustee’s own rights, duties or immunities under this Agreement or otherwise.

 

Section 11.02.  No Legal Title to Owner Trust Estate in Owner.  The Owner shall not have legal title to any part of the Owner Trust Estate.  The Owners shall be entitled to receive distributions with respect to their undivided ownership interest therein only in accordance with Articles Five and Nine.  No transfer, by operation of law or otherwise, of any right, title or interest of the Owners to and in their ownership interest in the Owner Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the
Owner Trust Estate.

 

Section 11.03.  Limitations on Rights of Others.  The provisions of this Agreement are solely for the benefit of the Owner Trustee, the Delaware Trustee, the Indemnified Parties, the Depositor, the Owners, the Administrator and, to the extent expressly provided herein, the Indenture Trustee and the Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein.

  

31

  

Section 11.04.  Notices.

 

(a)         Unless otherwise expressly specified or permitted by the terms hereof, all demands, notices and communications under this Agreement shall be in writing, personally delivered, mailed by electronic mail (if an address therefore has been provided by the respective party in writing), mailed by certified mail, return receipt requested, delivered by overnight delivery service, or sent via facsimile transmission and shall be deemed to have been duly given upon receipt (i) in the case of the Owner Trustee, Citibank, N.A., 388 Greenwich Street, 14th Floor, New York, New York 10013,
Attention: Structured Finance Agency & Trust: Honda Auto Receivables 2011-1, (ii) in the case of the Delaware Trustee, to Citigroup Trust-Delaware, National Association, One Penns Way, New Castle, Delaware 19720, Attention: William M. Hearn, (iii) in the case of the Depositor, to American Honda Receivables Corp., 20800 Madrona Avenue, Torrance, California 90503, Attention: President or (iv) as to any party, at such other address as shall be designated by such party in a written notice to the other party.

 

(b)         Any notice required or permitted to be given to a Certificateholder shall be given by overnight delivery or first-class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register.  Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice.

 

Section 11.05.  Severability.  If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other covenants, agreements, provisions or terms of this Agreement or of the Trust Certificates or the rights of the Holders thereof.

 

Section 11.06.  Separate Counterparts.  This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

 

Section 11.07.  Successors and Assigns.  All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the Depositor and its permitted assigns, the Owner Trustee and its successors, the Delaware Trustee and its successors and each Owner and its successors and permitted assigns, all as herein provided.  Any request, notice, direction, consent, waiver or other instrument or action by an Owner shall bind the successors and assigns of such Owner.

 

Section 11.08.  No Petition.  The Owner Trustee and the Delaware Trustee, by entering into this Agreement, each Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee and each Noteholder, by accepting the benefits of this Agreement, each hereby covenants and agrees that it will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, this Agreement or any other
Basic Document.

 

Section 11.09.  No Recourse.  Each Certificateholder by accepting a Trust Certificate acknowledges that such Certificateholder’s Trust Certificates represent beneficial interests in the Issuer only and do not represent interests in or obligations of the Depositor, the Seller, the Servicer, the Administrator, the Owner Trustee, the Delaware Trustee, the Indenture Trustee or any of their respective Affiliates and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in the Trust Certificates, this Agreement or any other Basic Document.

  

32

  

 

Section 11.10.  Headings.  The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

 

Section 11.11.  Governing Law; Submission to Jurisdiction.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

Each of the parties hereto hereby submits to the jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby.  Each of the parties hereto hereby further irrevocably waives any claim that any such courts lack jurisdiction over such party, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement in any of the aforesaid courts, that any such court lacks jurisdiction over such party. Each of the parties hereto irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

Section 11.12.  Trust Certificates Nonassessable and Fully Paid.  Certificateholders shall not be personally liable for obligations of the Issuer.  The interests represented by the Trust Certificates shall be nonassessable for any losses or expenses of the Issuer or for any reason whatsoever, and, upon the authentication thereof by the Owner Trustee pursuant to Section 3.03, 3.04 or 3.05, the Trust Certificates are and shall be deemed fully paid.

 

Section 11.13.  Depositor Payment Obligation.  The Depositor shall be responsible for payment of the Administrator’s compensation under the Administration Agreement and shall reimburse the Administrator for all expenses and liabilities of the Administrator incurred thereunder.  In addition, the Depositor 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 any required license under the Pennsylvania Motor Vehicle Sales Finance Act and the Maryland Act (MD Fin. Inst.
Code Ann., Title 11, Subtitle 4).

 

Section 11.14.  Tax Treatment.  Notwithstanding the foregoing or anything herein to the contrary, all persons (and their respective employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction described herein and all materials of any kind (including opinions or other tax analyses) that are provided to the recipient relating to such tax treatment and tax structure.

  

33

  

 

Section 11.15.  Waiver of Jury Trial.  Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to the transaction contemplated hereby.

 

Section 11.16.  Communications with Rating Agencies.  If the Owner Trustee or Delaware Trustee shall receive any written or oral communications from any Rating Agency (or any of their respective officers, directors or employees) with respect to the transactions contemplated hereby or under the Basic Documents or in any way relating to the Notes, the Owner Trustee or Delaware Trustee, as applicable, agrees to coordinate with the Administrator with respect to any communication received from a Rating Agency and further agrees that in no event shall the Owner Trustee or the Delaware Trustee, as applicable, engage in any oral
communication with respect to the substance of the transactions contemplated hereby or under the Basic Documents or in any way relating to the Notes, with any Rating Agency (or any of their respective officers, directors or employees) without the participation of the Administrator.

 

Neither Owner Trustee nor the Delaware Trustee will be responsible for delays attributable to the Administrator’s failure to deliver any information related to any communication with a Rating Agency (with respect to this section, the “Information”), defects in the Information supplied to the Rating Agency or Administrator or other circumstances beyond the control of the Owner Trustee or the Delaware Trustee, as applicable.  In addition, neither the Owner Trustee nor the Delaware Trustee shall be under any obligation to make any determination as to the veracity or applicability of any Information provided to it, or whether any such Information is required to be maintained on a website or
other public medium.

  

34

  

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

 

	
AMERICAN HONDA RECEIVABLES CORP.,

	
as Depositor

	 
	
By:

	/s/ Paul C. Honda
	  	
  Name:  Paul C. Honda

	  	
  Title:    Treasurer

	 
	
CITIBANK, NATIONAL ASSOCIATION,

	
as Owner Trustee

	 
	
By:

	/s/ Louis Piscitelli
	  	
  Name:  Louis Piscitelli

	  	
  Title:    Vice President

	
CITIGROUP TRUST-DELAWARE, NATIONAL ASSOCIATION,

	
as Delaware Trustee

	 
	
By:

	/s/ William M. Hearn  
	  	
  Name:  William M. Hearn  

	  	
  Title:    President

 

  

35

  

 

EXHIBIT A

 

FORM OF TRUST CERTIFICATE

 

THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.  IN ADDITION, THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN SECTION 3.04 OF THE TRUST AGREEMENT UNDER WHICH THIS CERTIFICATE ISSUED (A COPY OF WHICH TRUST AGREEMENT IS AVAILABLE FROM THE OWNER TRUSTEE  UPON REQUEST), INCLUDING RECEIPT BY THE OWNER TRUSTEE OF AN INVESTMENT LETTER IN WHICH THE TRANSFEREE MAKES CERTAIN REPRESENTATIONS.

 

	
NUMBER: R-1                     Initial Certificate Balance: $25,646,787.94

	 
	
HONDA AUTO RECEIVABLES 2011-1 OWNER TRUST

	 
	
0.00% ASSET BACKED CERTIFICATE

 

evidencing a fractional undivided interest in the Issuer, as defined below, the property of which includes a pool of retail installment sale or conditional sale contracts secured by new and used Honda and Acura motor vehicles.

 

(This Trust Certificate does not represent an interest in or obligation of American Honda Receivables Corp., American Honda Finance Corporation or any of their respective affiliates.)

 

THIS CERTIFIES THAT American Honda Receivables Corp.  is the registered owner of a 100 percent nonassessable, fully-paid, undivided interest in the Honda Auto Receivables 2011-1 Owner Trust (the “Issuer”), formed by American Honda Receivables Corp., a California corporation (the “Depositor”).

 

The Issuer was created pursuant to a Trust Agreement dated as of January 13, 2011, as amended and restated by an Amended and Restated Trust Agreement dated February 24, 2011 (as amended or supplemented from time to time, the “Trust Agreement”), among the Depositor and Citibank, National Association, as owner trustee (the “Owner Trustee”) and Citigroup Trust-Delaware, National Association, as Delaware trustee (the “Delaware Trustee”); a summary of certain of the pertinent provisions of which is set forth below.  Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Trust Agreement.

  

A-1

  

This Trust Certificate is one of the duly authorized certificates designated as “Asset Backed Certificates” (the “Trust Certificates”).  Issued under an Indenture dated February 24, 2011 (the “Indenture”), between the Issuer and U.S. Bank National Association, as indenture trustee, are four classes of Notes designated as “Class A-1 0.3248% Asset Backed Notes,” “Class A-2 0.65% Asset Backed Notes”, “Class A-3 1.13% Asset Backed Notes” and “Class A-4 1.80% Asset Backed Notes” (collectively, the “Notes”).  This Trust Certificate is issued under and is
subject to terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the Holder of this Trust Certificate, by virtue of its acceptance thereof, assents and by which such Holder is bound.  The property of the Issuer includes, among other things, a pool of retail installment sale or conditional sale contracts for new and used Honda and Acura motor vehicles (collectively, the “Receivables”), all monies received on or in respect of the Receivables on or after February 1, 2011, security interests in the vehicles financed thereby, certain bank accounts and the proceeds thereof, proceeds from claims on certain insurance policies and certain other rights under the Trust Agreement and the Sale and Servicing Agreement and all proceeds of the foregoing.

 

It is the intent of the Depositor, the Servicer and the Certificateholder that, solely for purposes of federal income, state and local income tax and any other income taxes, the Issuer will be treated as a disregarded entity not separate from the sole Certificateholder.  The purchaser hereof, by acceptance of the Trust Certificates, agrees to treat, and to take no action inconsistent with the above treatment for so long as it is the sole Owner.

 

Solely in the event the Trust Certificates are held by more than a single Owner, it is the intent of the Depositor, the Servicer and the Certificateholders that, solely for purposes of federal income, state and local income and single business tax and any other income taxes, the Issuer will be treated as a partnership and the Certificateholders will be treated as partners in the partnership.  The purchaser hereof and the other Certificateholders, by acceptance of a Trust Certificate, agree to treat, and to take no action inconsistent with the treatment of, the Trust Certificates for such tax purposes as partnership interests in the Issuer.

 

Each Certificateholder, by its acceptance of a Trust Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Depositor, or join in any institution against the Depositor of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, the Trust Agreement or any other Basic Document.

 

Distributions on this Trust Certificate will be made as provided in the Trust Agreement by the Owner Trustee by wire transfer or check mailed to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Trust Certificate or the making of any notation hereon.  Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Trust Certificate will be made after due notice by the Owner Trustee of the pendency of such distribution and only upon presentation and surrender of this Trust Certificate at the office or agency maintained for the purpose by the Owner Trustee.

 

Reference is hereby made to the further provisions of this Trust Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Owner Trustee or the authenticating agent, by manual signature, this Trust Certificate shall not entitle the Holder hereof to any benefit under the Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.

  

A-2

  

 

THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuer and not in its individual capacity, has caused this Trust Certificate to be duly executed.

 

	
HONDA AUTO RECEIVABLES 2011-1 OWNER 

TRUST

	  	  
	
By:

	
CITIBANK, NATIONAL ASSOCIATION,

not in its individual capacity but solely as Owner Trustee on behalf of the Trust

	  	  
	
By:

	
   

	  	
  Authorized Signatory

 

OWNER TRUSTEE’S OR AUTHENTICATING AGENT’S CERTIFICATE OF 

AUTHENTICATION

 

This is one of the Trust Certificates referred to in the within-mentioned Trust Agreement.

 

	
CITIBANK, NATIONAL ASSOCIATION,

not in its individual capacity but solely as Authenticating Agent on behalf of the Trust

	  	
CITIBANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Owner Trustee on behalf of the Trust

OR

	
By:

	
   

	  	
By:

	
   

	  	
  Authorized Signatory

	  	  	
  Authorized Signatory

  

A-3

  

[REVERSE OF TRUST CERTIFICATE]

 

The Trust Certificates do not represent an obligation of, or an interest in, the Depositor, the Servicer, the Owner Trustee or any of their respective affiliates and no recourse may be had against such parties or their assets, except as expressly set forth or contemplated herein or in the Trust Agreement or the other Basic Documents.  In addition, this Trust Certificate is not guaranteed by any governmental agency or instrumentality and is limited in right of payment to certain collections and recoveries with respect to the Receivables (and certain other amounts), all as more specifically set forth herein and in the Sale and Servicing Agreement.  A copy of each of the Sale and Servicing Agreement
and the Trust Agreement may be examined by any Certificateholder upon written request during normal business hours at the principal office of the Depositor and at such other places, if any, designated by the Depositor.

 

The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor and the rights of the Certificateholders under the Trust Agreement at any time by the parties thereto with the consent of the Holders of the Trust Certificates and the Notes, each voting as a class, evidencing not less than a majority of the Percentage Interests evidenced by the outstanding Trust Certificates, or a majority of the outstanding principal balance of the Notes of each such class.  Any such consent by the Holder of this Trust Certificate shall be conclusive and binding on such Holder and on all future Holders of this Trust Certificate
and of any Trust Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent is made upon this Trust Certificate.  The Trust Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Trust Certificates.

 

As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Trust Certificate is registrable in the Certificate Register upon surrender of this Trust Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Owner Trustee, accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Trust Certificates evidencing the same original certificate balance in the Issuer will be issued to the designated transferee.

 

Except as provided in the Trust Agreement, the Trust Certificates are issuable only as registered Trust Certificates.  As provided in the Trust Agreement and subject to certain limitations therein set forth, Trust Certificates are exchangeable for new Trust Certificates evidencing the same aggregate original certificate balance, as requested by the Holder surrendering the same.  No service charge will be made for any such registration of transfer or exchange, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith.

 

The Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee or the Certificate Registrar may treat the Person in whose name this Trust Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Registrar or any such agent shall be affected by any notice to the contrary.

  

A-4

  

 

The obligations and responsibilities created by the Trust Agreement and the Issuer created thereby shall terminate upon the payment to Certificateholders of all amounts required to be paid to them pursuant to the Trust Agreement and the Sale and Servicing Agreement and the disposition of all property held as part of the Owner Trust Estate.  The Servicer of the Receivables may at its option purchase the Owner Trust Estate at a price specified in the Sale and Servicing Agreement, and such purchase of the Receivables and other property of the Issuer will effect early retirement of the Trust Certificates; provided, however, such right of purchase is exercisable only as of the last day of any Collection Period
as of which the Pool Balance is less than or equal to 10% of the Original Pool Balance.

 

The Trust Certificates may not be acquired or held by a Benefit Plan Investor.  By accepting and holding this Trust Certificate, the Holder hereof shall be deemed to have represented and warranted that it is not a Benefit Plan Investor.

  

A-5

  

ASSIGNMENT

 

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

 

PLEASE INSERT SOCIAL SECURITY OR

OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

(Please print or type name and address, including postal zip code, of assignee)

 

the within Trust Certificate, and all rights thereunder, any hereby irrevocably constitutes and appoints __________________, attorney, to transfer said Trust Certificate on the books of the Certificate Registrar, with full power of substitution in the premises.

	
·

	
Signature Guaranteed:

	  
	 	 	
   

 

NOTICE:  The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Trust Certificate in every particular, without alteration, enlargement or any change whatsoever.  Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Certificate Registrar, which requirements include membership or participation in STAMP or such other “signature guarantee program” as may be determined by the Certificate Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

  

A-6

  

 

EXHIBIT B

 

FORM OF TRANSFEROR CERTIFICATE

 

_______________, ____

 

	
[Seller]

	 
	

   

	

   

	

   

CITIBANK, NATIONAL ASSOCIATION

388 Greenwich Street, 14th Floor

New York, New York 10013

 

	
  

	
Re:

	
Honda Auto Receivables 2011-1 Owner Trust

	
  

	
Asset Backed Certificates                       

 

Dear Sirs:

 

In connection with our disposition of the above-referenced Asset Backed Certificates (the “Certificates”) we certify that (i) we understand that the Certificates have not been registered under the Securities Act of 1933, as amended (the “Act”), and are being transferred by us in a transaction that is exempt from the registration requirements of the Act and (ii) we have not offered or sold any Certificates to, or solicited offers to buy any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, in a manner that would be deemed, or taken any other action which would result in, a violation of Section 5 of the Act.

	
Very truly yours,

	  
	
[NAME OF TRANSFEROR]

	  	  
	
By

	
   

	  	
Authorized Officer

 

  

B-1

  

 

EXHIBIT C

 

FORM OF INVESTMENT LETTER

 

_______________, ___

 

	
Seller

	  
	  
	  
	  

CITIBANK, NATIONAL ASSOCIATION

388 Greenwich Street, 14th Floor

New York, New York 10013 

 

	
  

	
Re:

	
Honda Auto Receivables 2011-1 Owner Trust

	
  

	
Asset Backed Certificates                       

 

Dear Sirs:

 

In connection with our acquisition of the above-referenced Asset Backed Certificates (the “Certificates”) we certify that (a) we understand that the Certificates are not being registered under the Securities Act of 1933, as amended (the “Act”), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we are an “accredited investor,” as defined in Regulation D under the Act, and have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of investments in the Certificates, (c) we have had the opportunity to ask
questions of and receive answers from the Seller concerning the purchase of the Certificates and all matters relating thereto or any additional information deemed necessary to our decision to purchase the Certificates, (d) we are acquiring the Certificates for investment for our own account and not with a view to any distribution of such Certificates (but without prejudice to our right at all times to sell or otherwise dispose of the Certificates in accordance with clause (f) below), (e) we have not offered or sold any Certificates to, or solicited offers to buy any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, or taken any other action that would result in a violation of Section 5 of the Act or any state securities laws, (f) we are not a Benefit Plan Investor and (g) we will not sell, or otherwise dispose of any Certificates
unless (i) such sale, transfer or other disposition is made pursuant to an effective registration statement under the Act and in compliance with any state securities laws or is exempt from such registration requirements and, if requested, we will at our expense provide an Opinion of Counsel satisfactory to the addresses of this certificate that such sale, transfer or other disposition may be made pursuant to an exemption from the Act, (ii) the purchaser or transferee of such Certificate has executed and delivered to you a certificate to substantially the same effect as this certificate and (iii) the purchaser or transferee has otherwise complied with any conditions for transfer set forth in the Amended and Restated Trust Agreement dated as of February 24 2011, among American Honda Receivables Corp., as depositor, Citibank, National Association, as Owner Trustee and Citigroup
Trust-Delaware, National Association, as Delaware Trustee.

  

C-1

  

 

	
Very truly yours,

	  
	
[NAME OF TRANSFEROR]

	  	  
	
By

	
   

	  	
Authorized Officer

 

  

C-2

  

 

EXHIBIT D

 

FORM OF RULE 144A LETTER

 

_______________, 20__

 

	
Seller

	  
	  
	  
	  

CITIBANK, NATIONAL ASSOCIATION

388 Greenwich Street, 14th Floor

New York, New York 10013

	
  

	
Re:

	
Honda Auto Receivables 2011-1 Owner Trust

	
  

	
Asset Backed Certificates                       

 

Dear Sirs:

 

In connection with our acquisition of the above-referenced Asset Backed Certificates (the “Certificates”) we certify that (a) we understand that the Certificates are not being registered under the Securities Act of 1933, as amended (the “Act”), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of investments in the Certificates, (c) we have had the opportunity to ask questions of and receive answers from the Seller concerning the purchase of the Certificates
and all matters relating thereto or any additional information deemed necessary to our decision to purchase the Certificates, (d) we have not, nor has anyone acting on our behalf, offered, transferred, pledged, sold or otherwise disposed of the Certificates or an interest in the Certificates, or solicited any offer to buy, transfer, pledge or otherwise dispose of the Certificates or any interest in the Certificates from any person in any manner or made any general solicitation by means of general advertising or in any other manner, taken any other action that would constitute a distribution of the Certificates under the Act or that would render the disposition of the Certificates a violation of Section 5 of the Act or any state securities laws or require registration pursuant thereto, and we will not act, or authorize any person to act, in such manner with respect to the Certificates,
(e) we are not a Benefit Plan Investor and (f) we are a “qualified institutional buyer” as that term is defined in Rule 144A under the Act.  We are aware that the sale to us is being made in reliance on Rule 144A.  We are acquiring the certificates for our own account or for resale pursuant to Rule 144A and understand that such certificates may be resold, pledged or transferred only (i) to a person reasonably believed to be a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A or (ii) pursuant to another exemption from registration under the Act.

  

 

  

 

	
Very truly yours,

	  
	
[NAME OF TRANSFEREE]

	  
	
By

	  
	  	
Authorized OfficerUnassociated Document

 

 

 

 

REVOLVING LOAN AGREEMENT

 

 

 

 

 

HARRIS & HARRIS GROUP, INC.

 

and

 

 

TD BANK, N.A.

 

Dated as of February 24, 2011

  

  

  

TABLE OF CONTENTS

	  	  	
Page

	  	  	  
	
SECTION  I. DEFINITIONS AND INTERPRETATION

	
1

	  	  	  
	
1.1.

	
Terms Defined

	
1

	  	  	  
	
1.2.

	
Accounting Principles

	
8

	  	  	  
	
1.3.

	
Construction

	
8

	  	  
	
SECTION  II. THE LOANS

	
8

	  	  	  
	
2.1.

	
Revolving Credit - Description

	
8

	  	  	  
	
2.2.

	
Advances and Payments

	
9

	  	  	  
	
2.3.

	
Interest

	
10

	  	  	  
	
2.4.

	
Additional Interest Provisions

	
11

	  	  	  
	
2.5.

	
Late Fee

	
11

	  	  	  
	
2.6.

	
Revolving Credit Closing Fee

	
11

	  	  	  
	
2.7.

	
Non-Utilization Fee

	
11

	  	  	  
	
2.8.

	
Prepayments

	
11

	  	  	  
	
2.9.

	
Use of Proceeds

	
11

	  	  	  
	
2.10.

	
Capital Adequacy

	
11

	  	  	  
	
2.11.

	
Funding Indemnity

	
12

	  	  	  
	
2.12.

	
Inability to Determine Interest Rate

	
12

	  	  	  
	
2.13.

	
Illegality

	
12

	  	  	  
	
2.14.

	
Requirements of Law

	
13

	  	  
	
SECTION  III. SECURITY

	
13

	  	  	  
	
3.1.

	
Collateral Account

	
13

	  	  
	
SECTION  IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

	
14

	  	  	  
	
4.1.

	
Resolutions, Opinions, and Other Documents

	
14

	  	  	  
	
4.2.

	
Absence of Certain Events

	
14

	  	  	  
	
4.3.

	
Warranties and Representations at Closing

	
14

	  	  	  
	
4.4.

	
Compliance with this Agreement

	
15

	  	  	  
	
4.5.

	
Officers’ Certificate

	
15

	  	  	  
	
4.6.

	
Closing

	
15

	  	  	  
	
4.7.

	
Waiver of Rights

	
15

	  	  	  
	
4.8.

	
Conditions for Future Advances

	
15

	  	  
	
SECTION  V. REPRESENTATIONS AND WARRANTIES

	
15

	  	  	  
	
5.1.

	
Organization and Validity

	
15

	  	  	  
	
5.2.

	
Pending Litigation

	
16

	  	  	  
	
5.3.

	
Title to Properties

	
16

	  	  	  
	
5.4.

	
Governmental Consent

	
16

	  	  	  
	
5.5.

	
Taxes

	
16

	  	  	  
	
5.6.

	
Financial Statements

	
17

	  	  	  
	
5.7.

	
Full Disclosure

	
17

	  	  	  
	
5.8.

	
Government Regulations, etc.

	
17

	  	  	  
	
5.9.

	
Reserved

	
18

	  	  	  
	
5.10.

	
Names and Intellectual Property

	
18

	  	  	  
	
5.11.

	
Investments, Guarantees, Contracts, etc.

	
18

  

  

  

	  	  	  
	
5.12.

	
Subsidiaries

	
18

	  	  	  
	
5.13.

	
Other Associations

	
18

	  	  	  
	
5.14.

	
Environmental Matters

	
18

	  	  	  
	
5.15.

	
Regulation O

	
19

	  	  	  
	
5.16.

	
Capital Stock

	
19

	  	  	  
	
5.17.

	
Solvency

	
19

	  	  	  
	
5.18.

	
Anti-Terrorism Laws

	
19

	  	  
	
SECTION  VI. BORROWER’S AFFIRMATIVE COVENANTS

	
20

	  	  	  
	
6.1.

	
Payment of Taxes and Claims

	
20

	  	  	  
	
6.2.

	
Maintenance of Properties and Corporate Existence

	
20

	  	  	  
	
6.3.

	
Other Agreements

	
21

	  	  	  
	
6.4.

	
Business Conducted

	
21

	  	  	  
	
6.5.

	
Litigation

	
21

	  	  	  
	
6.6.

	
Issue Taxes

	
21

	  	  	  
	
6.7.

	
Unrestricted, Unencumbered Liquid Assets

	
21

	  	  	  
	
6.8.

	
Financial and Business Infomation

	
21

	  	  	  
	
6.9.

	
Officers’ Certificates

	
21

	  	  	  
	
6.10.

	
Collateral Account

	
22

	  	  	  
	
6.11.

	
Bank Accounts

	
22

	  	  	  
	
6.12.

	
Reserved

	
22

	  	  	  
	
6.13.

	
Information to Participant

	
23

	  	  	  
	
6.14.

	
Material Adverse Developments

	
23

	  	  	  
	
6.15.

	
Places of Business

	
23

	  	  	  
	
6.16.

	
Employee Benefit Plans

	
23

	  	  	  
	
6.17.

	
Power of Attorney

	
23

	  	  	  
	
6.18.

	
Guaranty of Material Subsidiaries

	
24

	  	  
	
SECTION  VII. BORROWER’S NEGATIVE COVENANTS

	
24

	  	  	  
	
7.1.

	
Merger, Consolidation, Dissolution or Liquidation

	
24

	  	  	  
	
7.2.

	
Reserved

	
24

	  	  	  
	
7.3.

	
Liens and Encumbrances

	
24

	  	  	  
	
7.4.

	
Transactions With Affiliates or Subsidiaries.

	
24

	  	  	  
	
7.5.

	
Additional Indebtedness

	
24

	  	  	  
	
7.6.

	
Guarantees

	
24

	  	  	  
	
7.7.

	
Reserved

	
24

	  	  	  
	
7.8.

	
Reserved

	
24

	  	  	  
	
7.9.

	
Use of Lenders’ Name

	
24

	  	  	  
	
7.10.

	
Miscellaneous Covenants

	
24

	  	  	  
	
7.11.

	
Jurisdiction of Organization

	
25

	  	  
	
SECTION  VIII. DEFAULT

	
25

	  	  	  
	
8.1.

	
Events of Default

	
25

	  	  	  
	
8.2.

	
Cure

	
26

	  	  	  
	
8.3.

	
Rights and Remedies on Default

	
27

	  	  	  
	
8.4.

	
Nature of Remedies

	
27

	  	  	  
	
8.5.

	
Set-Off

	
27

	  	  
	
SECTION  IX. MISCELLANEOUS

	
27

	  	  	  
	
9.1.

	
Governing Law

	
27

	  	  	  
	
9.2.

	
Integrated Agreement

	
28

	  	  	  
	
9.3.

	
Waiver

	
28

	  	  	  
	
9.4.

	
Indemnity

	
28

  

  

  

	  	  	  
	
9.5.

	
Time

	
28

	  	  	  
	
9.6.

	
Expenses of Lender

	
29

	  	  	  
	
9.7.

	
Brokerage

	
29

	  	  	  
	
9.8.

	
Notices

	
29

	  	  	  
	
9.9.

	
Headings

	
30

	  	  	  
	
9.10.

	
Survival

	
30

	  	  	  
	
9.11.

	
Successors and Assigns

	
30

	  	  	  
	
9.12.

	
Counterparts

	
31

	  	  	  
	
9.13.

	
Modification

	
31

	  	  	  
	
9.14.

	
Signatories

	
31

	  	  	  
	
9.15.

	
Third Parties

	
31

	  	  	  
	
9.16.

	
Discharge of Taxes, Borrower’s Obligations, Etc.

	
31

	  	  	  
	
9.17.

	
Withholding and Other Tax Liabilities

	
31

	  	  	  
	
9.18.

	
Consent to Jurisdiction

	
31

	  	  	  
	
9.19.

	
Additional Documentation

	
31

	  	  	  
	
9.20.

	
Waiver of Jury Trial

	
32

	  	  	  
	
9.21.

	
Consequential Damages

	
32

	  	  	  
	
9.22.

	
Confidentiality

	
32

 

  

  

  

 

REVOLVING LOAN AGREEMENT

 

This REVOLVING LOAN AGREEMENT (“Agreement”) is dated this 24th day of February, 2011, by and between HARRIS & HARRIS GROUP, INC., a New York business corporation with an address of 1450 Broadway, 24th Floor, New York, New York 10018 (“Borrower”) and TD BANK, N.A., a national banking association with an address at 324 South Service Road, Melville, New York 11747 (“Lender”).

 

BACKGROUND

 

A.           Borrower desires to establish financing arrangements with Lender and Lender is willing to make loans and extensions of credit to Borrower under the terms and provisions hereinafter set forth.

 

B.           The parties desire to define the terms and conditions of their relationship in writing.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

 

SECTION  I.  DEFINITIONS AND INTERPRETATION

 

1.1.           Terms Defined :  As used in this Agreement, the following terms have the following respective meanings:

 

Act – The Investment Company Act of 1940, as amended from time to time.

 

Adjusted LIBOR Rate – For the LIBOR Interest Period for each LIBOR Rate Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate determined pursuant to the following formula:

 

Adjusted LIBOR Rate =                      London Interbank Offered Rate

1 – LIBOR Reserve Percentage

 

Advance(s) – Any monies advanced or credit extended to Borrower by Lender under the Revolving Credit, including without limitation, cash advances.

 

Advance Request – Shall have the meaning set forth in Section 2.2(b)(ii).

 

Affiliate – Any corporation, partnership, joint venture, trust or unincorporated organization which, directly or indirectly, controls or is controlled by or is under common control with the Borrower.  Notwithstanding the foregoing, any Person that is accounted for under GAAP as a portfolio investment of either Borrower or a Subsidiary of Borrower shall not, for purposes of this Agreement or any other Loan Document be deemed an “Affiliate” of the Borrower or such Subsidiary.

 

Anti-Terrorism Laws – Any statute, treaty, law (including common law), ordinance, regulation, rule, order, opinion, release, injunction, writ, decree or award of any Governmental Authority relating to terrorism or money laundering, including Executive Order No. 13224 and the USA Patriot Act.

 

Authorized Officer – Any officer (or comparable equivalent) of Borrower authorized by specific resolution of Borrower.

 

 

  

1

  

 

 

Bank Affiliate – With respect to Lender, any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with Lender.  For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 25% or more of any class of Capital Stock having  ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Capital Stock, contract or otherwise.

 

Bankruptcy Code – Title 11 of the United States Code entitled “Bankruptcy”, as now or hereinafter in effect, or any successor statute.

 

Base Rate – The higher of (i) the Federal Funds Rate plus fifty basis points (0.50%) and (ii) the Prime Rate.  The Base Rate is not necessarily the lowest or best rate of interest offered by Lender to any borrower or class of borrowers.

 

Base Rate Loans – That portion of the Loans accruing interest based on a rate determined by reference to the Base Rate.

 

Blocked Person – Shall have the meaning set forth in Section 5.17.

 

Business Day – A day other than Saturday or Sunday when Lender is open for business in New York, New York.

 

Capitalized Lease Obligations – Any Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, consistently applied.

 

Capital Stock – Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all other ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.

 

Change of Control – With respect to Borrower, (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of Capital Stock of Borrower representing more than 45% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of Borrower or (b) the acquisition of direct or indirect control of Borrower by any Person or group.

 

Closing – Shall have the meaning set forth in Section 4.6.

 

Closing Date – Shall have the meaning set forth in Section 4.6.

 

Code – Internal Revenue Code of 1986, as amended from time to time.

 

Collateral – Shall have the meaning set forth in Section 3.1.

 

Commonly Controlled Entity – An entity, whether or not incorporated, which is under common control with Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes Borrower and which is treated as a single employer under Section 414 of the Code.

Compliance Certificate – Shall have the meaning set forth in Section 6.9.

 

  

2

  

 

Default – Any event, act, condition or occurrence which with notice, or lapse of time or both, would constitute an Event of Default hereunder.

 

Dollar, Dollars and U.S. Dollars and the Symbol $ – Lawful money of the United States of America.

 

Environmental Laws – Any and all Federal, foreign, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees and any and all common law requirements, rules and bases of liability regulating, relating to or imposing liability or standards of conduct concerning pollution, protection of the environment, or the impact of pollutants, contaminants or toxic or hazardous substances on human health or the environment, as now or may at any time hereafter be in effect from time to time.

 

ERISA – The Employee Retirement Income Security Act of 1974, as the same may be in effect, from time to time.

 

Event of Default – Shall have the meaning set forth in Section 8.1.

 

Executive Order No. 13224 – The Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same may be in effect from time to time.

 

Expenses – Shall have the meaning set forth in Section 9.6.

 

Federal Funds Rate – For any day, the rate of interest per annum as determined by Lender at which overnight Federal Funds are offered to Lender for such day by major banks in the interbank market, with each change in the Federal Funds Rate to be automatically and immediately effective on the date of any change in such rate. Each determination of the Federal Funds Rate by Lender shall be deemed conclusive and binding on Borrower absent manifest error.

 

GAAP – Generally accepted accounting principles as in effect on the Closing Date applied in a manner consistent with the most recent reviewed financial statements of Borrower furnished to Lender and described in Section 5.6 herein.

 

Governmental Authority – Any United States federal, state or local government or political subdivision, or any agency, authority, bureau, central bank, commission, department or instrumentality thereof, or any court, tribunal, grand jury, or arbitration.

 

Guarantor – Shall have the meaning set forth in Section 6.18.

 

Guaranty – Shall have the meaning set forth in Section 6.18.

 

Hazardous Substances – Any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance or similar term, under any Environmental Law.

 

Hedging Agreements – Any Interest Hedging Instrument or any other interest rate protection agreement, foreign currency exchange agreement, commodity purchase or option agreement, or any other interest rate hedging device or swap agreement (as defined in 11 U.S.C. § 101 et. seq.).

 

  

3

  

Indebtedness – All of the following with respect to any Person without duplication:  (i) indebtedness for money borrowed, (ii) purchase money obligations, (iii) Capitalized Lease Obligations, (iv) reimbursement obligations with regard to letters of credit and acceptances; provided, however, that reimbursement obligations supporting credit or liquidity facilities shall not constitute Indebtedness until such time as a reimbursement payment becomes due and payable under the agreement entered into in connection with such reimbursement obligations, (v) guarantees of the foregoing types of indebtedness and (vi) all
liabilities for borrowed money secured by any Lien with respect to any property owned by such Person.

 

Interest Hedging Instrument – Any documentation evidencing any interest rate swap, interest “cap” or “collar” or any other interest rate hedging device or swap agreement (as defined in 11 U.S.C. § 101 et. seq.) between Borrower and Lender (or any Bank Affiliate).

 

IRS – Internal Revenue Service.

 

LIBOR Interest Period – As to any LIBOR Rate Loan, a period of one month, two months or three months commencing on the date such LIBOR Rate Loan is made, as selected by Borrower pursuant to the terms of this Agreement (including continuations and conversions thereof); provided however, (i) if any LIBOR Interest Period commencing on a given day of a calendar month would otherwise end on a day for which there is no numerically corresponding day in the relevant calendar month, such LIBOR Interest Period shall end on the last Business Day of the relevant calendar month and (ii) no LIBOR Interest Period shall extend beyond the Revolving Credit
Maturity Date.

 

LIBOR Rate Loans – That portion(s) of the Loans accruing interest based on a rate determined by reference to the Adjusted LIBOR Rate.

 

LIBOR Reserve Percentage – For any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D, as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of LIBOR Rate Loans is determined), whether or not Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time.  LIBOR Rate Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to Lender.  The Adjusted LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage.

 

Lien – Any interest of any kind or nature in property securing an obligation owed to, or a claim of any kind or nature in property by, a Person other than the owner of the Property, whether such interest is based on the common law, statute, regulation or contract, and including, but not limited to, a security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt, a lease, consignment or bailment for security purposes, a trust, or an assignment.  For the purposes of this Agreement, Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.

 

  

4

  

Loans – the unpaid balance of cash Advances under the Revolving Credit which may be Base Rate Loans or LIBOR Rate Loans.

 

Loan Documents – Collectively, this Agreement, the Revolving Credit Note, the Guaranty and all agreements, instruments and documents executed and/or delivered in connection therewith, all as may be supplemented, restated, superseded, amended or replaced from time to time.

 

London Banking Days – Any day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in London, England.

 

London Interbank Offered Rate – With respect to any LIBOR Rate Loan, the rate of interest per annum in Dollars (rounded upwards, if necessary, at Lender’s option, to the next 100th of one percent) equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), for the applicable LIBOR Interest Period as published by Bloomberg (or such other commercially available source providing quotations of BBA LIBOR as designated by Lender from time to time) at approximately 11:00 A.M. (London time) 2 London Banking Days prior to the first day of such LIBOR
Interest Period for a term comparable to such LIBOR Interest Period; provided however, if more than one BBA LIBOR Rate is specified, the applicable rate shall be the arithmetic mean of all such rates.  If, for any reason, such rate is not available, the term London Interbank Offered Rate shall mean, with respect to any LIBOR Rate Loan for the LIBOR Interest Period applicable thereto, the rate of interest per annum (rounded upwards, at Lender’s option, to the next 100th of one percent) determined by Lender to be the average rate of interest per annum at which deposits in Dollars are offered for such LIBOR Interest Period to major banks in London, England at approximately 11:00 A.M. (London time) 2 London Banking Days prior to the first day of such LIBOR Interest Period for a term
comparable to such LIBOR Interest Period.

 

Material Adverse Effect – A material adverse effect with respect to (a) the business, assets, properties, financial condition, stockholders’ equity, contingent liabilities, prospects, material agreements or results of operations of Borrower, or (b) Borrower’s ability to pay the Obligations in accordance with the terms hereof, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of Lender hereunder or thereunder.

 

Material Subsidiary – Any Subsidiary that has at least $500,000 in assets, as reflected on the most recent financial statements delivered pursuant to Section 6.8(a) hereof.

 

Maximum Revolving Credit Amount – The sum of Ten Million and 00/100 Dollars ($10,000,000).

 

Notice of Conversion/Extension – A written notice of conversion of a LIBOR Rate Loan to a Base Rate Loan, or of a Base Rate Loan to a LIBOR Rate Loan or extension of a LIBOR Rate Loan, in each case substantially in the form of Exhibit “C” attached hereto.

 

  

5

  

Obligations – All existing and future debts, liabilities and obligations of every kind or nature at any time owing by Borrower to Lender or any other subsidiary of Lender or Bank Affiliate, under this Agreement, or any Interest Hedging Instrument between Borrower or Lender or any other subsidiary of Lender or Bank Affiliate, whether joint or several, related or unrelated, primary or secondary, due or to become due (including debts, liabilities and obligations obtained by assignment), and whether principal, interest, fees, indemnification obligations hereunder or Expenses (specifically including interest accruing after the commencement of any
bankruptcy, insolvency or similar proceeding with respect to Borrower, whether or not a claim for such post-commencement interest is allowed), including, without limitation, debts, liabilities and obligations in respect of the Revolving Credit and any extensions, modifications, substitutions, increases and renewals thereof; the payment of all amounts advanced by Lender or any other subsidiary of Lender or Bank Affiliate to preserve, protect and enforce rights hereunder and in the Collateral; and all Expenses incurred by Lender or any other subsidiary of Lender or Bank Affiliate.  Without limiting the generality of the foregoing, Obligations shall include any other debts, liabilities or obligations owing to Lender or any other subsidiary of Lender or Bank Affiliate in connection with any lockbox, cash management, or other services (including electronic funds transfers or
automated clearing house transactions) provided by Lender or any other subsidiary of Lender or Bank Affiliate to Borrower, as well as any other loan, advances or extension of credit, under any existing or future loan agreement, promissory note, or other instrument, document or agreement between Borrower and Lender or any other subsidiary of Lender or Bank Affiliate.

 

Organizational Documents – The certificate of incorporation and by-laws of Borrower, together with any and all other consents or resolutions, and such other agreements related to the corporate governance of Borrower; in each case including any and all modifications thereof as of the date of the document referring to such Organizational Document and any and all future modifications thereof.

 

Overadvance – Shall have the meaning set forth in Section 2.1(a).

 

PBGC – The Pension Benefit Guaranty Corporation.

 

Permitted Encumbrances – (a) Liens securing taxes, assessments, and other charges or levies imposed by any Governmental Authority (excluding any Lien imposed pursuant to any of the provisions of ERISA) or the claims of materialmen, mechanics, carriers, warehousemen, or landlords for labor, materials, supplies, or rentals incurred in the ordinary course of business, which are not at the time required to be paid or discharged under Section 6.1; (b) Liens consisting of deposits or pledges made, in the ordinary course of business, in connection with, or to secure payment of, obligations under workmen’s compensation, unemployment insurance,
or similar applicable laws; (c) Liens in favor of Lender; (d) covenants, restrictions, rights of way, easements, and other matters of public record, and other matters to which like properties are commonly subject, that singly or in the aggregate do not materially and adversely affect the value or marketability of, or materially interfere with the use or enjoyment of any asset of Borrower; and (e) judgment Liens not constituting an Event of Default.

 

  

6

  

Permitted Indebtedness – (a) Indebtedness to Lender in connection with the Revolving Credit or otherwise pursuant to the Loan Documents; (b) Indebtedness under Hedging Agreements, provided such Hedging Agreements are entered into in the ordinary course of business and not for speculative purposes; (c) purchase money Indebtedness (including Capitalized Lease Obligations) hereafter incurred by Borrower to finance the purchase of fixed assets; provided that, (i) such Indebtedness incurred in any fiscal year shall not exceed $1,000,000, (ii) such Indebtedness shall not exceed the purchase price of the assets funded and (iii) no such Indebtedness
may be refinanced for a principal amount in excess of the principal amount outstanding at the time of such refinancing; and (d) Indebtedness existing on the Closing Date that is identified and described on Schedule “1.1(a)” attached hereto and made part hereof.

 

Permitted Investments – Investments permitted under the Act.

 

Person – An individual, partnership, corporation, trust, limited liability company, limited liability partnership, unincorporated association or organization, joint venture or any other entity.

 

Plan – At any particular time, any defined benefit plan (as that term is defined in Section 3(5) of ERISA) which is subject to Title IV of ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

Prime Rate – The rate published from time to time in The Wall Street Journal as the “U.S. Prime Rate” or, in the event The Wall Street Journal ceases to be published, goes on strike, is otherwise not published or ceases publication of “Prime Rates”, the base, reference or other rate then designated by Lender, in its sole discretion, for general commercial loan reference.  The Prime Rate is not necessarily the lowest or best rate of interest offered by Lender to any borrower or class
of borrowers.

 

Property – Any interest of Borrower in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

Regulation D – Regulation D of the Board of Governors of the Federal Reserve System comprising Part 204 of Title 12, Code of Federal Regulations, as amended, and any successor thereto.

 

Requirement of Law – Collectively, all federal, state and local laws, statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

 

Revolving Credit – Shall have the meaning set forth in Section 2.1(a).

Revolving Credit Closing Fee – Shall have the meaning set forth in Section 2.6.

 

Revolving Credit Maturity Date – February 24, 2014, or such later date as Lender may, in its sole and absolute discretion, designate in writing to Borrower.

 

  

7

  

 

Revolving Credit Note – Shall have the meaning set forth in Section 2.1(b).

 

Subsidiary – With respect to any Person at any time, (i) any corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person or owned by a corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person; (ii) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; and (iii) any partnership, joint venture, limited liability company or other entity of which ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person.  Notwithstanding the foregoing, any Person that is accounted for under GAAP as a portfolio investment of either Borrower or a Subsidiary of Borrower shall not, for purposes of this Agreement or any other Loan Document be deemed a “Subsidiary” of the Borrower or such Subsidiary.

 

UCC – The Uniform Commercial Code in effect from time to time in the State of New York.

 

Unrestricted, Unencumbered Liquid Assets – Unrestricted, unencumbered marketable securities, cash and cash equivalents.  Moneys deposited in the Collateral Account to satisfy the Collateral Account Requirement shall not constitute Unrestricted, Unencumbered Liquid Assets.

 

Other Capitalized Terms – Any other capitalized terms used without further definition herein shall have the respective meaning set forth in the UCC.

 

1.2.           Accounting Principles:  Where the character or amount of any asset or liability or item of revenue or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, this shall be done in accordance with GAAP as in effect on the Closing Date, to the extent applicable, except as otherwise expressly provided in this Agreement.  If there are any changes in GAAP after the Closing Date that would affect the computation of any financial covenants, such changes shall only be followed,
with respect to such financial covenants, from and after the date this Agreement shall have been amended to take into account any such changes.

 

1.3.           Construction:  No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting shall apply to any Loan Documents.

 

SECTION  II.  THE LOANS

 

2.1.           Revolving Credit - Description:

a.           Subject to the terms and conditions of this Agreement, Lender hereby establishes for the benefit of Borrower a revolving credit facility (collectively, the “Revolving Credit”) which shall include cash Advances extended by Lender to or for the benefit of Borrower from time to time hereunder.  The aggregate principal amount of unpaid cash Advances shall not at any time exceed the Maximum Revolving Credit Amount.  Subject to such limitation, the outstanding balance of Advances under the Revolving Credit may fluctuate from time to time, to be reduced by repayments made by Borrower, to be increased by future Advances
which may be made by Lender, to or for the benefit of Borrower, and, subject to the provisions of Section 8 below, shall be due and payable on the Revolving Credit Maturity Date.  If the aggregate principal amount of unpaid cash Advances at any time exceeds the Maximum Revolving Credit Amount (such excess referred to as “Overadvance”), Borrower shall immediately repay the Overadvance in full.

  

8

  

 

b.           At Closing, Borrower shall execute and deliver a promissory note to Lender for the Maximum Revolving Credit Amount (“Revolving Credit Note”).  The Revolving Credit Note shall evidence Borrower’s unconditional obligation to repay Lender for all Advances made under the Revolving Credit with interest as herein provided.  Each Advance under the Revolving Credit shall be deemed evidenced by the Revolving Credit Note, which is deemed incorporated herein by reference and made part hereof.  The Revolving Credit Note shall be in form and substance satisfactory to Lender.

 

c.           The term of the Revolving Credit shall expire on the Revolving Credit Maturity Date.  On such date, unless having been sooner accelerated by Lender pursuant to the terms hereof, all sums owing under the Revolving Credit shall be due and payable in full, and as of and after such date Borrower shall not request and Lender shall not make any further Advances under the Revolving Credit.

 

2.2.           Advances and Payments:

 

a.           Except to the extent otherwise set forth in this Agreement, all payments of principal and of interest on the Revolving Credit and all Expenses, fees, indemnification obligations and all other charges payable by Borrower under this Agreement and any other Loan Document and any other Obligations of Borrower, shall be made to Lender at its banking office at 324 South Service Road, Melville, New York 11747 or such other office as Lender may designate in writing, in United States Dollars, in immediately available funds.  Borrower hereby authorizes Lender to charge account number 4250727240 maintained at Lender (the “Direct Debit
Account”) for all of Borrower’s Obligations as they become due from time to time under this Agreement including, without limitation, interest, principal and fees.  Borrower acknowledges that Borrower’s failure to maintain sufficient funds in the Direct Debit Account for payment of any of the Obligations, or Lender’s failure to charge any such account shall not relieve Borrower of any payment obligation under this Agreement or any other Loan Document.  Any payments received prior to 2:00 p.m. Eastern time on any Business Day shall be deemed received on such Business Day. Any payments (including any payment in full of the Obligations) received after 2:00 p.m. Eastern time on any Business Day shall be deemed received on the immediately following Business Day.

 

b.           i.           All cash Advances requested by Borrower under the Revolving Credit that are (a) LIBOR Rate Loans must be in the minimum amount of Five Hundred Thousand Dollars ($500,000) and integral multiples of Fifty Thousand Dollars ($50,000) in excess thereof and (b) Base Rate Loans must be in the minimum amount of One Hundred Thousand Dollars ($100,000) and integrated multiples of Ten Thousand Dollars ($10,000) in excess thereof.

 

ii.           All cash Advances requested by Borrower under the Revolving Credit are to be in writing pursuant to a written request (“Advance Request”) executed by an Authorized Officer in the form of Exhibit ”A” attached hereto.  Such Requests must be requested by 10:00 A.M., Eastern time, on the date such Advance is to be made. Requests for LIBOR Rate Loans must be requested three (3) Business Days in advance and must specify the amount of the LIBOR Rate Loan and the LIBOR Interest Period.  If no LIBOR Interest Period is
specified, the LIBOR Interest Period shall be deemed to be a one month period.

 

  

9

  

iii.          Upon receiving a request for an Advance in accordance with subparagraph (ii) above, and subject to the conditions set forth in this Agreement, Lender shall make the requested Advance available to Borrower.

 

2.3.           Interest:

 

a.           The unpaid principal balance of cash Advances under the Revolving Credit shall bear interest, subject to the terms hereof at a per annum rate equal to, at the Borrower’s option, (i) the Adjusted LIBOR Rate plus one hundred twenty five basis points (1.25%) or (ii) the Base Rate.

 

b.           Changes in the interest rate applicable to the Base Rate Loans shall become effective on the same day there is a change in the Base Rate.

 

c.           Interest on Base Rate Loans shall be payable monthly, in arrears, on the first day of each month, beginning on the first day of the first full calendar month after the Closing Date, and on the Revolving Credit Maturity Date.  Interest on LIBOR Rate Loans shall be payable on the last day of the applicable LIBOR Interest Period and on the Revolving Credit Maturity Date.

 

d.           Borrower may elect from time to time to convert Base Rate Loans to LIBOR Rate Loans, by delivering a Notice of Conversion/Extension to Lender at least three (3) Business Days prior to the proposed date of conversion.  In addition, Borrower may elect from time to time to convert all or any portion of a LIBOR Rate Loan to a Base Rate Loan by giving Lender irrevocable written notice thereof by 12:00 noon one (1) Business Day prior to the proposed date of conversion.  LIBOR Rate Loans may only be converted to Base Rate Loans on the last day of the applicable LIBOR Interest Period.  If the date upon which a LIBOR Rate
Loan is to be converted to a Base Rate Loan is not a Business Day, then such conversion shall be made on the next succeeding Business Day and during the period from such last day of a LIBOR Interest Period to such succeeding Business Day such Loan shall bear interest as if it were a Base Rate Loan.  All or any part of outstanding Base Rate Loans may be converted as provided herein; provided that no Loan may be converted into a LIBOR Rate Loan when any Event of Default has occurred and is continuing.

 

e.           Borrower may continue any LIBOR Rate Loans upon the expiration of a LIBOR Interest Period with respect thereto by delivering a Notice of Conversion/Extension to Lender at least three (3) Business Days prior to the proposed date of extension; provided that no LIBOR Rate Loan may be continued as such when any Event of Default has occurred and is continuing, in which case such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable LIBOR Interest Period with respect thereto.  If Borrower shall fail to give timely notice of an election to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate Loans is
not permitted hereunder, each such LIBOR Rate Loan shall be automatically converted to a Base Rate Loan at the end of the applicable LIBOR Interest Period with respect thereto.

 

f.           Borrower shall not request and Lender shall not make or continue, or convert any Loan to a LIBOR Rate Loan while an Event of Default exists.

 

g.           Borrower may not have more than six (6) LIBOR Rate Loans outstanding at any time.

 

  

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2.4.           Additional Interest Provisions:

 

a.           Interest on the Advances shall be calculated on the basis of a year of three hundred sixty (360) days but charged for the actual number of days elapsed.

 

b.           After the occurrence and during the continuance of an Event of Default hereunder, the per annum effective rate of interest on all outstanding principal under the Loans shall be increased by four hundred (400) basis points.  Borrower agrees that the default rate payable to Lender is a reasonable estimate of Lender’s damages and is not a penalty.

 

c.           All contractual rates of interest chargeable on outstanding principal under the Loans shall continue to accrue and be paid even after Default, an Event of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the happening of any event or occurrence similar or dissimilar.

 

d.           In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such court determines Lender has charged or received interest hereunder in excess of the highest applicable rate, Lender shall apply, in its sole discretion, and set off such excess interest received by Lender against other Obligations due or to become due and such rate shall automatically be reduced to the
maximum rate permitted by such law.

 

2.5.           Late Fee:  Borrower shall unconditionally pay to Lender a late charge equal to six percent (6%) of any and all payments of principal or interest on the Loans that are not paid within fifteen (15) days of the due date.  Such late charge shall be due and payable regardless of whether Lender has accelerated the Obligations.  Borrower agrees that any late fee payable to Lender is a reasonable estimate of Lender’s damages and is not a penalty.

 

2.6.           Revolving Credit Closing Fee:  At Closing, Lender shall have fully earned and Borrower shall unconditionally pay to Lender, a non-refundable fee with respect to the Revolving Credit (“Revolving Credit Closing Fee”) of Twenty Five Thousand Dollars ($25,000), less amounts previously paid thereon.

 

2.7.           Non-Utilization Fee:  Borrower agrees to pay to Lender a non-utilization fee of fifteen basis points (0.15%) per annum, payable quarterly in arrears on the first day of April, July, October, and January of each year, commencing on April 1, 2011, on the difference between the Maximum Revolving Credit Amount and the Loans calculated daily for each day the Revolving Credit is available under this Agreement.

 

2.8.           Prepayments:  Borrower may prepay the Revolving Credit in whole or in part at any time or from time to time, without penalty or premium except as provided in Section 2.11.  Any prepayment shall be accompanied by all accrued and unpaid interest.

 

2.9.           Use of Proceeds:  The extensions of credit under and proceeds of the Revolving Credit shall be used for general corporate purposes.

 

2.10.           Capital Adequacy:  If after the date hereof the adoption of or any change in any law, governmental rule, regulation, policy, guideline, directive or similar requirement (whether or not having the force of law) imposes, modifies, or deems applicable any capital adequacy, capital maintenance or similar requirement which affects the manner in which Lender allocates capital resources to its commitments (including any commitments hereunder), and as a result thereof, in the opinion of Lender, the rate of return on Lender’s capital with regard to the Loans is reduced to
a level below that which Lender could have achieved but for such circumstances, then in such case and upon notice from Lender to Borrower, from time to time, Borrower shall pay Lender such additional amount or amounts as shall compensate Lender for such reduction in Lender’s rate of return.  Such notice shall contain the statement of Lender with regard to any such amount or amounts which shall, in the absence of manifest error, be binding upon Borrower.  In determining such amount, Lender may use any reasonable method of averaging and attribution that it deems applicable.  Lender agrees to use reasonable efforts to avoid or to minimize any amounts which may otherwise be payable pursuant to this Section 2.10; provided however, that such efforts shall not cause the imposition on Lender of any additional costs or legal or regulatory burdens deemed by
Lender in its reasonable discretion to be material.

 

  

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2.11.           Funding Indemnity:  Borrower shall indemnify Lender, and hold Lender harmless from any loss, damages, liability, or expense which Lender may sustain or incur as a consequence of the making of a prepayment of Loans on a day which is not the last day of a LIBOR Interest Period with respect thereto.  With respect to such Loans, such indemnification shall equal the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid for the period from the date of such prepayment at the applicable rate of interest for such Loans
provided for herein over (ii) the amount of interest (as reasonably determined by Lender) which would have accrued to Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the London interbank Eurodollar market. This covenant shall survive the termination of this Agreement, and the payment of the Obligations.

 

2.12.           Inability to Determine Interest Rate:  Notwithstanding any other provision of this Agreement, if Lender shall reasonably determine (which determination shall be conclusive and binding absent manifest error) that, (i) by reason of circumstances affecting the relevant market, reasonable and adequate means do not exist for ascertaining the Adjusted LIBOR Rate for a LIBOR Interest Period, or (ii) the Adjusted LIBOR Rate does not adequately and fairly reflect the cost to Lender of funding LIBOR Rate Loans that Borrower has requested be outstanding as a LIBOR Rate Loan during
a LIBOR Interest Period, Lender shall forthwith give telephone notice of such determination, confirmed in writing, to Borrower at least two (2) Business Days prior to the first day of such LIBOR Interest Period. Unless Borrower shall have notified Lender upon receipt of such telephone notice that it wishes to rescind or modify its request regarding such LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate Loan shall be made as Base Rate Loans and any Loans that were requested to be converted into or continued as LIBOR Rate Loans shall remain as or be converted into Base Rate Loans. Until any such notice has been withdrawn by Lender, no further Loans shall be made as, continued as, or converted into, LIBOR Rate Loans for the LIBOR Interest Periods so affected.

 

2.13.           Illegality:  Notwithstanding any other provision of this Agreement, if after the date hereof the adoption of or any change in any Requirement of Law or in the interpretation or application thereof to Lender by the relevant Governmental Authority shall make it unlawful for Lender to make or maintain LIBOR Rate Loans as contemplated by this Agreement, or to obtain in the interbank Eurodollar market, the funds with which to make such Loans, (a) Lender shall promptly notify Borrower thereof, (b) the commitment of Lender hereunder to make LIBOR Rate Loans or continue LIBOR
Rate Loans as such shall forthwith be suspended until Lender shall give notice that the condition or situation which gave rise to the suspension shall no longer exist, and (c) Lender’s Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the last day of the LIBOR Interest Period for such Loans, or within such earlier period as required by law, to Base Rate Loans.  Borrower hereby agrees promptly to pay Lender, upon its demand, any additional amounts necessary to compensate Lender for actual and direct costs (but not including anticipated profits) reasonably incurred by Lender in connection with any repayment in accordance with this Section 2.13, including but not limited to, any interest or fees payable by Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to this Section 2.13 submitted by Lender, to Borrower shall be presumptive evidence of such amounts owing.  Lender agrees to use reasonable efforts to avoid or to minimize any amounts which may otherwise be payable pursuant to this Section 2.13; provided however, that such efforts shall not cause the imposition on Lender of any additional costs or legal or regulatory burdens deemed by Lender in its reasonable discretion to be material.

 

  

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2.14.           Requirements of Law:

 

a.           If after the date hereof the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

 

i.           shall subject Lender to any tax of any kind whatsoever with respect to any LIBOR Rate Loan made by it, or change the basis of taxation of payments to Lender in respect thereof (except for taxes on or changes in the rate of tax on the overall net income of Lender and franchise taxes);

 

ii.           shall impose, modify, or hold applicable, any reserve, special deposit, compulsory loan, or similar requirement against assets held by, deposits or other liabilities in, or for the account of, advances, loans, or other extension of credit (including participations therein) by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or

 

iii.           shall impose on such Lender any other condition;

 

and the result of any of the foregoing is to materially increase the cost to Lender of making or maintaining LIBOR Rate Loans, or to reduce any amount receivable hereunder, or under the Revolving Credit Note, then, in any such case, Borrower shall promptly pay Lender, upon its demand, any additional amounts necessary to compensate Lender for such additional costs or reduced amount receivable which Lender reasonably deems to be material as determined by Lender, with respect to its LIBOR Rate Loans.  A certificate as to any additional amounts payable pursuant to this Section 2.14 submitted by Lender to Borrower shall be presumptive evidence of such amounts owing.  Lender agrees to use reasonable
efforts to avoid, or to minimize, any amounts which might otherwise be payable pursuant to this Section 2.14; provided however, that such efforts shall not cause the imposition on Lender of any additional costs or legal regulatory burdens deemed by Lender in good faith to be material.

 

b.           The agreements in this Section 2.14 shall survive the termination of this Agreement and payment of the Obligations.

 

SECTION  III.  SECURITY

3.1.           Collateral Account:  As collateral for all Obligations, the Borrower shall deposit with Lender funds in an amount not less than the Loans (the “Collateral Account Requirement”), which account shall be account number 4257613236 (the “Collateral Account”), and which Collateral Account shall not be otherwise encumbered except as permitted by this Agreement (the “Collateral”). Any amount in the Collateral Account in excess of the Collateral Account Requirement shall be available for withdrawal from the Collateral Account by Borrower at
Borrower’s request.

 

  

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SECTION  IV.  CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

 

Closing under this Agreement is subject to the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Lender and Lender’s counsel):

 

4.1.           Resolutions, Opinions, and Other Documents:  Borrower shall have delivered, or caused to be delivered to Lender the following:

 

a.           this Agreement, the Revolving Credit Note, each of the other Loan Documents, and any other documents to be executed and/or delivered by any other Person pursuant to this Agreement, all properly executed;

 

b.           certified copies of (i) resolutions of Borrower’s board of directors (or the executive committee thereof) ratifying, affirming and approving the execution, delivery and performance of this Agreement, the Revolving Credit Note to be issued hereunder and each of the other Loan Documents required to be delivered by any Section hereof; and (ii) Borrower’s certificate of incorporation, by-laws and certificate of good standing;

 

c.           an incumbency certificate for Borrower identifying Authorized Officers, with specimen signatures;

 

d.           reserved;

 

e.           evidence of any third party consent, including any consent of a Governmental Authority, needed to authorize the Loan and the execution and delivery of the Loan Documents by Borrower;

 

f.           opinion of counsel to Borrower;

 

g.           such financial statements, reports, certifications and other operational information as Lender may reasonably require, satisfactory in all respects to Lender;

 

h.           certification by the chief executive officer or other Authorized Officer of Borrower that there has not occurred any material adverse change in the operations and condition (financial or otherwise) of Borrower since December 31, 2009;

 

i.           payment by Borrower of all fees, including the Revolving Credit Closing Fee, and Expenses associated with the Loans;

 

j.           such other documents reasonably required by Lender.

 

4.2.           Absence of Certain Events:  At the Closing Date, no Default or Event of Default hereunder shall have occurred and be continuing.

 

4.3.           Warranties and Representations at Closing: The warranties and representations contained in Section 5 as well as any other Section of this Agreement shall be true and correct in all material respects on the Closing Date.

 

  

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4.4.           Compliance with this Agreement:  Borrower shall have performed and complied with all agreements, covenants and conditions contained herein which are required to be performed or complied with by Borrower before or at the Closing Date including, without limitation, the provisions of Sections 6 and 7 hereof which are required to be performed or complied with by Borrower before or at the Closing Date.

 

4.5.           Officers’ Certificate:  Lender shall have received a certificate dated the Closing Date and signed by the chief financial officer of Borrower certifying that all of the conditions specified in this Section have been fulfilled.

 

4.6.           Closing:  Subject to the conditions of this Section, the Loans shall be made available on such date (the “Closing Date”) and at such time as may be mutually agreeable to the parties contemporaneously with the execution hereof (“Closing”) at 324 South Service Road, Melville, New York 11747.

 

4.7.           Waiver of Rights:  By completing the Closing hereunder, or by making Advances hereunder, Lender does not thereby waive a breach of any warranty or representation made by Borrower hereunder or under any agreement, document, or instrument delivered to Lender or otherwise referred to herein, and any claims and rights of Lender resulting from any breach or misrepresentation by Borrower are specifically reserved by Lender.

 

4.8.           Conditions for Future Advances:  The making of Advances under the Revolving Credit in any form following the Closing Date is subject to the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Lender and its counsel) following the Closing Date:

 

a.           This Agreement and each of the other Loan Documents shall be effective;

 

b.           No event or condition shall have occurred or become known to Borrower, or would result from the making of any requested Advance, which would reasonably be expected to have a Material Adverse Effect;

 

c.           No Default or Event of Default then exists or after giving effect to the making of the Advance would exist;

 

d.           Each Advance is within and complies with the terms and conditions of this Agreement including, without limitation, the notice provisions contained in Section 2.2 hereof;

 

e.           Each representation and warranty set forth in Section 5 and any other Loan Document in effect at such time (as amended or modified from time to time) is then true and correct in all material respects as if made on and as of such date except to the extent such representations and warranties are made only as of a specific earlier date.

 

SECTION  V.  REPRESENTATIONS AND WARRANTIES

 

To induce Lender to complete the Closing and make the initial Advances under the Revolving Credit and Loans to Borrower, Borrower warrants and represents to Lender that:

 

5.1.           Organization and Validity:

 

a.           i.           Borrower is a duly organized, validly existing business corporation, in good standing under the laws of the State of New York; has the power to own and hold the Property it purports to own and hold and to carry on its business as now being conducted and proposed to be conducted.

 

  

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ii.           Borrower is a “business development company” within the meaning of the Act and is in compliance with the provisions of the Act in all material respects.

 

b.           The making and performance of this Agreement and the other Loan Documents will not violate any Requirement of Law, or the certificate of incorporation, resolution or bylaw provisions of Borrower, or violate or result in a default (immediately or with the passage of time) under any contract, agreement or instrument to which Borrower is a party, or by which Borrower is bound.  Borrower is not in violation of any term of any agreement or instrument to which it is a party or by which it may be bound which violation has or would reasonably be expected to have a Material Adverse Effect, or of its certificate of incorporation, resolution or
bylaw provisions.

 

c.           Borrower has all requisite power and authority to enter into and perform this Agreement and to incur the obligations herein provided for, and will have taken all proper and necessary action to authorize the execution, delivery and performance of this Agreement, and the other Loan Documents.

 

d.           This Agreement, the Revolving Credit Note to be issued hereunder, and all of the other Loan Documents, when delivered, will be valid and binding upon Borrower, and enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

5.2.           Pending Litigation:  There are no judgments or judicial or administrative orders or proceedings pending, or to the knowledge of Borrower, threatened, against Borrower in any court or before any Governmental Authority which have, or are reasonably likely to have, a Material Adverse Effect.  To the knowledge of Borrower, there are no investigations (civil or criminal) pending or threatened against Borrower in any court or before any Governmental Authority which is reasonably likely to have a Material Adverse Effect.  Borrower is not in default with
respect to any order of any Governmental Authority, which default has had or is reasonably likely to have a Material Adverse Effect.

 

5.3.           Title to Properties:  Borrower has good title to its Property sufficient for the conduct of the business of Borrower, free from Liens and free from the claims of any other Person, except for Permitted Encumbrances.

 

5.4.           Governmental Consent:  Neither the nature of Borrower or of its business or Property, nor any relationship between Borrower and any other Person, nor any circumstance affecting Borrower in connection with the issuance or delivery of this Agreement, the Revolving Credit Note or any other Loan Documents is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of Borrower, except for such of the foregoing as have been obtained or effected and except for such failures to obtain or
effect the foregoing as have not had and are not reasonably likely to have a Material Adverse Effect.

 

5.5.           Taxes:  All tax returns required to be filed by Borrower in any jurisdiction have been filed, and all taxes, assessments, fees and other governmental charges upon Borrower, or upon any of its Property, income or franchises, which are shown to be due and payable on such returns have been paid, except for those taxes being contested in good faith with due diligence by appropriate proceedings for which appropriate reserves have been maintained under GAAP and as to which no Lien has been entered. Borrower is not aware of any proposed additional tax assessment or tax to be
assessed against or applicable to Borrower.

 

  

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5.6.           Financial Statements:  The annual financial statements of Borrower as of December 31, 2009, heretofore delivered to Lender, are complete and accurate in all material respects, and fairly present the financial condition of the entities described therein as at the dates thereof and for the periods covered thereby, all having been prepared in accordance with GAAP consistently applied throughout the relevant periods.

 

5.7.           Full Disclosure:  The financial statements referred to in Section 5.6 of this Agreement do not, nor does any other written statement of Borrower to Lender in connection with the negotiation of the Loans, contain any untrue statement of a material fact.  Such financial or written statements do not omit a material fact, the omission of which would make the statements contained therein misleading.  There is no fact known to Borrower which has not been disclosed in writing to Lender which has or would reasonably be expected to have a Material Adverse
Effect. Notwithstanding the foregoing, as to projected financial information, Borrower represents and warrants only that such information, at the time furnished to Lender, was prepared in good faith based on reasonable assumptions under the circumstances.

 

5.8.           Government Regulations, etc.:

 

a.           The use of the proceeds of and Borrower’s issuance of the Revolving Credit Note will not directly or indirectly violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.  Borrower does not own or intend to carry or purchase at any time any “margin stock” within the meaning of said Regulation U, other than such margin stock that, when aggregated with all other margin stock owned by
Borrower, has not more than 25% of the value (determined by a reasonable method) of the total assets of Borrower as of such time.

 

b.           Borrower has obtained all licenses, permits, franchises or other governmental authorizations necessary for the ownership of its Property and for the conduct of its business.

 

c.           As of the date hereof, no employee benefit plan (“Pension Plan”), as defined in Section 3(2) of ERISA, maintained by Borrower or under which Borrower could have any liability under ERISA (i) has failed to meet the minimum funding standards established in Section 302 of ERISA, (ii) has failed to comply with the applicable requirements of ERISA and of the Code, including all applicable rulings and regulations thereunder, except for non-compliances that, singly or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect, (iii) has engaged in or been involved in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code which would subject Borrower to any material liability, or (iv) has been terminated if such termination would subject Borrower to any material liability.  Borrower has not assumed, or received notice of a claim asserted against Borrower for, withdrawal liability (as defined in Section 4207 of ERISA) with respect to any multi employer pension plan and is not a member of any Controlled Group (as defined in ERISA).  Borrower has timely made all contributions when due with respect to any multi employer pension plan in which it participates and no event has occurred triggering a claim against Borrower for withdrawal liability with respect to any multi employer pension plan in which Borrower participates.  All Pension Plans and multi employer pension plans in which Borrower participates are
shown on Schedule “5.8(c)” attached hereto and made part hereof.

 

  

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d.           Borrower is not in violation of or receipt of written notice that it is in violation of any Requirement of Law, a violation of which causes or would reasonably be expected to cause a Material Adverse Effect.

 

5.9.           Reserved:

 

5.10.            Names and Intellectual Property:

 

a.           Within five (5) years prior to the Closing Date, Borrower has not conducted business under or used any other name (whether corporate or assumed) except for the names shown on Schedule “5.10(a)” attached hereto and made part hereof.  Borrower is the sole owner of all names listed on such Schedule “5.10(a)” and any and all business done and all invoices issued in such trade names are Borrower’s sales, business and invoices.  Each trade name of Borrower represents a division or trading style of Borrower and not a separate Subsidiary or Affiliate or independent entity.

 

b.           As of the Closing Date, all trademarks, service marks, patents or copyrights which Borrower uses, plans to use or has a right to use are shown on Schedule “5.10(b)” attached hereto and made part hereof and Borrower is the sole owner of such Property except to the extent any other Person has claims or rights in such Property, as such claims and rights are shown on Schedule “5.10(b)”.  Borrower is not in violation of any rights of any other Person with respect to such Property.

 

5.11.           Investments, Guarantees, Contracts, etc.: 

 

a.           As of the Closing Date, Borrower has not entered into any leases for real or personal Property (whether as landlord or tenant or lessor or lessee), except as shown on Schedule “5.11(a),” attached hereto and made part hereof.

 

b.           Borrower is not a party to any contract or agreement, or subject to any charter or other corporate restriction, which has or is reasonable likely to have a Material Adverse Effect.

 

c.           Except as otherwise specifically provided in this Agreement, Borrower has not agreed or consented to cause or permit any of its Property whether now owned or hereafter acquired to be subject in the future (upon the happening of a contingency or otherwise), to a Lien not permitted by this Agreement.

 

5.12.           Subsidiaries:  As of the Closing Date, Borrower does not have any Subsidiaries or Affiliates, except as shown on Schedule “5.12” attached hereto and made part hereof.

 

5.13.           Other Associations:  As of the Closing Date, Borrower is not engaged and has no interest in any joint venture or partnership with any other Person except as shown on Schedule “5.13,” attached hereto and made part hereof.

 

5.14.           Environmental Matters:  Except as shown on Schedule “5.14,” attached hereto and made part hereof and except for such matters as, singly or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect:

 

a.           To the best of Borrower’s knowledge after due inquiry, no Property presently owned, leased or operated by Borrower contains, or has previously contained, any Hazardous Substances in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law.

b.           To the best of Borrower’s knowledge after due inquiry, Borrower is in compliance, and, for the duration of all applicable statutes of limitations periods, has been in compliance with all applicable Environmental Laws, and there is no contamination at, under or about any properties presently owned, leased, or operated by Borrower or violation of any Environmental Law with respect to such properties which could reasonably be expected to interfere with any of their continued operations or reasonably be expected to impair the fair saleable value thereof.

 

  

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c.           Borrower has not received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance assessment with Environmental Laws and Borrower has no knowledge that any such notice will be received or is being threatened.

 

d.           Hazardous Substances have not been transported or disposed of in a manner or to a location which are reasonably likely to give rise to liability of Borrower under any Environmental Law.

 

e.           No judicial proceeding or governmental or administrative action is pending, or to the knowledge of Borrower, threatened under any Environmental Law to which Borrower is, or to Borrower’s knowledge will be, named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding.

 

5.15.           Regulation O:  No director, executive officer or principal shareholder of Borrower is a director, executive officer or principal shareholder of Lender.  For the purposes hereof the terms “director” “executive officer” and “principal shareholder” (when used with reference to Lender), have the respective meanings assigned thereto in Regulation O issued by the Board of Governors of the Federal Reserve System.

 

5.16.           Capital Stock:  All of the Capital Stock of Borrower has been duly and validly authorized and issued and is fully paid and non-assessable and has been sold and delivered to the holders thereof in compliance with, or under valid exemption from, all Federal and state laws and the rules and regulations of all Governmental Authorities governing the sale and delivery of securities.

 

5.17.           Solvency:  After giving effect to the transactions contemplated under this Agreement, Borrower is solvent, is able to pay its debts as they become due, and has capital sufficient to carry on its business and all businesses in which it is about to engage, and now owns Property having a value both at fair valuation and at present fair salable value greater than the amount required to pay Borrower’s debts.  Borrower will not be rendered insolvent by the execution and delivery of this Agreement or any of the other Loan Documents executed in connection with
this Agreement or by the transactions contemplated hereunder or thereunder.

 

5.18.           Anti-Terrorism Laws:

 

a.           General.  Neither Borrower nor any Affiliate of Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

b.           Executive Order No. 13224.   Neither Borrower nor any Affiliate of Borrower, or to Borrower’s knowledge, any of its respective agents acting or benefiting in any capacity in connection with the Loans or other transactions hereunder, is any of the following (each a “Blocked Person”):

 

  

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i.           a Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224;

 

ii.           a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224;

 

iii.           a Person with which Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

iv.           a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224;

 

v.           a Person that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or

 

vi.           a Person who is affiliated with a Person listed above.

 

SECTION  VI.  BORROWER’S AFFIRMATIVE COVENANTS

 

Borrower covenants that until all of the Obligations are paid and satisfied in full, that:

 

6.1.           Payment of Taxes and Claims:  Borrower shall pay, before they become delinquent, all taxes, assessments and governmental charges, or levies imposed upon it, or upon Borrower’s Property, and all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons, entitled to the benefit of statutory or common law Liens which, in any case, if unpaid, would result in the imposition of a Lien upon its Property; provided however, that Borrower shall not be required to pay any such tax, assessment, charge, levy, claim or demand if the amount,
applicability or validity thereof, shall at the time, be contested in good faith and by appropriate proceedings by Borrower, and if  Borrower shall have set aside on its books adequate reserves in respect thereof, if so required in accordance with GAAP; which deferment of payment is permissible so long as no Lien other than a Permitted Encumbrance has been entered and Borrower’s title to, and its right to use, its Property are not materially adversely affected thereby.

 

6.2.           Maintenance of Properties and Corporate Existence:

 

a.           Corporate Existence – Borrower shall maintain at all times its status and its good standing as a business corporation under the state law of its incorporation.

 

b.           Licenses and Audits – Borrower shall (a) maintain all licenses, certifications and permits necessary to continue operations; (b) provide Lender with copies of any final third party audit reports which are material to the Borrower’s operations or other material regulatory communications; and (c) provide the Lender with copies of all reports and forms filed with respect to all pension or other employee benefit plans under ERISA, as applicable, except as filed in the normal course of business and that would not result in an adverse action to be taken under ERISA, and
details related to information of a reportable ERISA event.

 

c.           Maintenance of Insurance – Borrower shall maintain insurance in such amounts and against such risks as are insured against by other entities of similar size engaged in similar activities in the same geographic area.  Upon the request of the Lender, the Borrower shall deliver copies of certificates of insurance evidencing coverage.

 

  

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d.           Financial Records – Borrower shall keep current and accurate books of records and accounts in accordance with GAAP.  Borrower shall not change its fiscal year end date without the prior written consent of Lender, which written consent shall not be unreasonably withheld, delayed or conditioned.

 

e.           Business Development Company – Borrower shall maintain its status as a business development company and shall comply with the Act in all material respects.

 

f.           Compliance with Laws – Borrower shall comply with all Requirements of Law applicable to it or affecting its Property, except for non-compliances that, singly or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect. Borrower shall timely satisfy all assessments, fines, costs and penalties imposed (after exhaustion of all appeals, provided a stay has been put in effect during such appeal) by any Governmental Authority against Borrower or any Property of Borrower.

 

6.3.            Other Agreements: Borrower will not enter into any agreement containing any provision which would be violated or breached by the performance of Borrower’s obligations under the Loan Documents.

 

6.4.           Business Conducted:  Borrower shall continue in the business presently operated by it using commercially reasonable efforts to maintain its customers and goodwill.  Borrower shall not engage, directly or indirectly, in any material respect in any line of business substantially different from the businesses conducted by Borrower immediately prior to the Closing Date.

 

6.5.           Litigation:  Borrower shall give Lender prompt written notice of any action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency (i) which, if adversely determined against the Borrower would be reasonably likely to have a Material Adverse Effect or (ii) in which the amount involved is $50,000 or more and is not covered by insurance.

 

6.6.           Issue Taxes:  Borrower shall pay all documentary, stamp or similar taxes, if any, in connection with the issuance of the Revolving Credit Note and the recording of any lien documents.  The obligations of Borrower hereunder shall survive the payment of Borrower’s Obligations hereunder and the termination of this Agreement.

 

6.7.           Unrestricted, Unencumbered Liquid Assets: Borrower shall at all times maintain Unrestricted, Unencumbered Liquid Assets of not less than $7,500,000.

 

6.8.           Financial and Business Information:  Borrower shall deliver or cause to be delivered to Lender the following:

 

a.           Financial Statements and Reports:

 

i.            (A) as soon as available and in any event within ninety (90) days following the end of each respective fiscal year, copies of the audited financial statements of the Borrower, on a consolidated basis, including balance sheets as at the end of such fiscal year, and the related statements of income, and cash flow for such fiscal year, prepared in accordance with GAAP; and (B) as soon as available and in any event within forty-five (45) days after the close of the first, second and third fiscal quarter, a copy of the unaudited financial statements as of the end of such quarter for the Borrower, on a consolidated basis, and the related balance
sheets, and the related statements of income and cash flow for such fiscal year, prepared in accordance with GAAP (except for the absence of footnotes and subject to normal year-end audit adjustments), certified by the chief financial officer of the Borrower.

 

  

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ii.           provide Lender with copies of any audit reports and regulatory communications received from any Governmental Authority which, individually or in the aggregate, would have a Material Adverse Effect;

 

b.           Notice of Event of Default – promptly upon becoming aware of the existence of any condition or event which constitutes a Default or an Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action Borrower is taking (and proposes to take) with respect thereto;

 

c.           Notice of Claimed Default – promptly upon receipt by Borrower, notice of default, oral or written, given to Borrower by any creditor for Indebtedness for borrowed money in excess of $50,000;

 

d.           Securities and Other Reports – if Borrower shall be required to file reports with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, promptly upon its becoming available, one copy of each financial statement, report, notice or proxy statement sent by Borrower to stockholders generally, and, a copy of each regular or periodic report, and any registration statement, or prospectus in respect thereof, filed by Borrower with any securities exchange or with federal or state securities and exchange
commissions or any successor agency; and

 

e.           Additional Reports – Borrower shall, if requested by Lender, promptly furnish Lender with copies of all reports filed with any federal, state or local Governmental Authority or any other documents or reports requested by Lender.

 

f.           Publicly-Filed Documents Deemed Delivered – The filing by Borrower of any financial statement or other document with the Securities and Exchange Commission shall constitute delivery thereof to Lender for all purposes of this Agreement.

 

6.9.           Officers’ Certificates:  In addition to the financial statements delivered to Lender pursuant to Section 6.8(a)(i) hereof, Borrower shall deliver to Lender a certificate (“Compliance Certificate”) (in the form of Exhibit “B,” attached hereto and made part hereof) from the chief financial officer or chief executive officer of Borrower setting forth:

 

a.           Event of Default – that the signer has reviewed the relevant terms of this Agreement, and has made (or caused to be made under his/her supervision) a review of the transactions and conditions of Borrower from the beginning of the accounting period covered by the financial statements being delivered therewith to the date of the certificate, and that such review has not disclosed the existence during such period of any condition or event which constitutes a Default or an Event of Default or, if any such condition or event exists, specifying the nature and period of existence
thereof and what action Borrower has taken or proposes to take with respect thereto.

 

b.           Covenant Compliance – the information (including detailed calculations) required in order to establish that Borrower is in compliance with the requirements of Section 6.7 of this Agreement, as of the end of the period covered by the financial statements delivered.

 

6.10.           Collateral Account: Borrower shall maintain the Collateral Account at the Collateral Account Requirement.

 

6.11.           Bank Accounts:  Borrower shall maintain its major depository and disbursement account(s) with Lender.

6.12.           Reserved:

  

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6.13.           Information to Participant:  Lender may divulge to any participant, assignee or co-lender or prospective participant, assignee or co-lender it may obtain in the Revolving Credit or any portion thereof, all information, and furnish to such Person copies of any reports, financial statements, certificates, and documents obtained under any provision of this Agreement, or related agreements and documents.

 

6.14.            Material Adverse Developments:  Borrower agrees that immediately upon becoming aware of any development or other information outside the ordinary course of business and excluding matters of a general economic, financial or political nature, which would reasonably be expected to have a Material Adverse Effect, it shall give to Lender telephonic notice specifying the nature of such development or information and such anticipated effect.  In addition, such verbal communication shall be confirmed by written notice thereof to Lender on the same day such verbal
communication is made or the next Business Day thereafter.

 

6.15.           Places of Business:  Borrower shall give thirty (30) days prior written notice to Lender of any changes in the location of its headquarters located at 1450 Broadway, 24th Floor, New York, NY 10018.

 

6.16.           Employee Benefit Plans:  Borrower shall (a) fund all of its Pension Plan(s) in a manner that will satisfy the minimum funding standards of Section 302 of ERISA, (b) furnish Lender, promptly upon Lender’s request, with copies of all reports or other statements filed with the United States Department of Labor, the PBGC or the IRS with respect to all Pension Plan(s), or which Borrower, or any member of a Controlled Group, may receive from the United States Department of Labor, the IRS or the PBGC, with respect to all such Pension Plan(s), and (c) promptly advise
Lender of the occurrence of any reportable event (as defined in Section 4043 of ERISA, other than a reportable event for which the thirty (30) day notice requirement has been waived by the PBGC) or prohibited transaction (under Section 406 of ERISA or Section 4975 of the Code) with respect to any such Pension Plan(s) and the action which Borrower proposes to take with respect thereto.  Borrower will make all contributions when due with respect to any multi employer pension plan in which it participates and will promptly advise Lender upon (x) its receipt of notice of the assertion against Borrower of a claim for withdrawal liability, (y) the occurrence of any event which, to the best of Borrower’s knowledge, would trigger the assertion of a claim for withdrawal liability against Borrower, and (z) upon the occurrence of any event which, to the best of
Borrower’s knowledge, would place Borrower in a Controlled Group as a result of which any member (including Borrower) thereof may be subject to a claim for withdrawal liability, whether liquidated or contingent.

 

6.17.            Power of Attorney:  Borrower shall promptly, upon the reasonable request of the Lender and at the Borrower’s expense, execute, acknowledge, and deliver, or cause the execution, acknowledgement, and delivery of, any document or instrument supplemental to or confirmatory to the Loan Documents or otherwise necessary or desirable in the Lender’s reasonable opinion for the creation, preservation, and/or perfection of any security interests in the Collateral that are given by Borrower to Lender. Borrower hereby irrevocably constitutes and appoints Lender,
during the continuance of an Event of Default hereunder, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Borrower to take any appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of the Loan Documents.  The powers conferred on Lender shall not impose any duty upon Lender to exercise any such power.

 

  

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6.18.            Guaranty of Material Subsidiaries:  Upon the request of Lender, Borrower shall cause any Material Subsidiary to guaranty the Loans (each a “Guarantor”) and, in connection therewith, enter into a guaranty in the form attached hereto as Exhibit D (collectively, the “Guaranty”) and provide Lender with such organizational documents, certificates, opinions of counsel and other materials required by Lender.

 

SECTION  VII.  BORROWER’S NEGATIVE COVENANTS:

 

Borrower covenants that until all of the Obligations are paid and satisfied in full, that:

 

7.1.            Merger, Consolidation, Dissolution or Liquidation: Borrower shall not merge or consolidate with any other Person or engage in a division, conversion, dissolution or liquidation.

 

7.2.           Reserved:

 

7.3.           Liens and Encumbrances:  Without the Lender’s prior written consent, Borrower shall not: (i) execute a negative pledge agreement with any Person covering any of its Property or (ii) cause or permit or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), its Property, whether now owned or hereafter acquired, to be subject to a Lien or be subject to any claim except for Permitted Encumbrances.

 

7.4.           Transactions With Affiliates or Subsidiaries: Borrower shall not enter into any transaction with any Subsidiary or other Affiliate, including, without limitation, the purchase, sale, or exchange of Property, or the loaning or giving of funds to any Affiliate or any Subsidiary unless:  (i) such Subsidiary or Affiliate is engaged in a business substantially related to the business conducted by Borrower and the transaction is in the ordinary course of and pursuant to the reasonable requirements of Borrower’s business and upon terms substantially the same and no less
favorable to Borrower as it would obtain in a comparable arm’s length transactions with any Person not an Affiliate or a Subsidiary, and so long as such transaction is not prohibited hereunder; or (ii) such transaction is intended for incidental administrative purposes.

 

7.5.           Additional Indebtedness:  Without Lender’s prior written consent, Borrower shall not incur additional Indebtedness, except for Permitted Indebtedness.

 

7.6.           Guarantees:  Excepting the endorsement in the ordinary course of business of negotiable instruments for deposit or collection, Borrower shall not become or be liable, directly or indirectly, primary or secondary, matured or contingent, in any manner, whether as guarantor, surety, accommodation maker, or otherwise, for the existing or future Indebtedness of any kind of any Person.

 

7.7.           Reserved:

 

7.8.           Reserved:

 

7.9.           Use of Lenders’ Name:  Borrower shall not use Lender’s name in connection with any of its business operations.  Nothing herein contained is intended to permit or authorize Borrower to make any contract on behalf of Lender.

 

7.10.           Miscellaneous Covenants:

 

a.           Borrower shall not become or be a party to any contract or agreement which at the time of becoming a party to such contract or agreement materially impairs Borrower’s ability to perform under this Agreement, or under any other instrument, agreement or document to which Borrower is a party or by which it is or may be bound.

 

  

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b.           Borrower shall not carry or purchase at any time any “margin stock” within the meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II, other than such margin stock that, when aggregated with all other margin stock owned by Borrower, has not more than 25% of the value (determined by a reasonable method) of the total assets of Borrower at such time.

 

7.11.           Jurisdiction of Organization:  If a Registered Organization, Borrower shall not change its jurisdiction of organization.

 

SECTION  VIII.  DEFAULT

 

8.1.           Events of Default:  Each of the following events shall constitute an event of default (“Event of Default”):

 

a.           Payments – if Borrower fails to make any payment of principal or interest, including any Overadvance, under the Obligations within five (5) days after the date such payment is due and payable; or

 

b.           Other Charges – if Borrower fails to pay any other charges, fees, Expenses or other monetary obligations owing to Lender arising out of or incurred in connection with this Agreement within five (5) days after receipt of notice from Lender that such payment is due and payable; or

 

c.           Particular Covenant Defaults – if Borrower fails to perform, comply with or observe any covenant or undertaking contained in this Agreement and (other than with respect to the covenants contained in Sections 6.2(a), 6.7, 6.8(b), 6.9, 6.10 and Section 7 for which no cure period shall exist), such failure continues for thirty (30) days after the occurrence thereof; or

 

d.           Financial Information – if any statement, report, financial statement, or certificate made or delivered by Borrower or any of its officers, employees or agents, to Lender in connection with the Loans is not true and correct, in all material respects, when made; or

 

e.           Warranties or Representations – if any warranty, representation or other statement by or on behalf of Borrower contained in or pursuant to this Agreement, the other Loan Documents or in any document, agreement or instrument furnished in compliance with, relating to, or in reference to this Agreement, is false, erroneous, or misleading in any material respect when made; or

 

f.           Agreements with Others – (i) if Borrower shall default beyond any grace period in the payment of principal or interest of any Indebtedness of Borrower; or (ii) if Borrower otherwise defaults beyond any grace period under the terms or covenants of any such Indebtedness;

 

g.           Other Agreements with Lender – if Borrower breaches or violates the terms of, or if a default (after expiration of any applicable cure period), or an Event of Default, occurs under any other existing or future agreement (related or unrelated) (including, without limitation, the other Loan Documents) between Borrower and Lender; or

 

h.           Judgments – there shall be entered against the Borrower any final uninsured judgment which, singly or with any other final uninsured judgment or judgments against the Borrower then remaining unpaid, exceeds $50,000 unless the Borrower contests in good faith and by proper proceedings such judgment and sets aside and maintains reserves adequate to cover any such judgment or establishes bond before execution on any asset of the Borrower; or

 

  

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i.           Assignment for Benefit of Creditors, etc. – if Borrower makes or proposes in writing, an assignment for the benefit of creditors generally, offers a composition to creditors, or makes or sends notice of an intended bulk sale of any business or all or substantially all of the assets now or hereafter owned or conducted by  Borrower; or

 

j.           Bankruptcy, Dissolution, etc. – upon the commencement of any action for the dissolution or liquidation of Borrower, or the commencement of any proceeding to avoid any transaction entered into by Borrower, or the commencement of any case or proceeding for reorganization or liquidation of Borrower’s debts under the Bankruptcy Code or any other state or federal law, now or hereafter enacted for the relief of debtors, whether instituted by or against Borrower; provided however, that Borrower shall have sixty (60) days to obtain the dismissal or discharge of involuntary proceedings filed against it, it being understood that during such sixty (60) day period, Lender shall not be obligated to make Advances hereunder and Lender may seek adequate protection in any bankruptcy proceeding; or

 

k.           Receiver – upon the appointment of a receiver, liquidator, custodian, trustee or similar official or fiduciary for Borrower or for Borrower’s Property; or

 

l.           Reserved; or

 

m.           Termination of Business. – if Borrower ceases any material portion of its business operations as presently conducted

 

n.           Pension Benefits, etc. – if Borrower fails to comply with ERISA so that proceedings are commenced to appoint a trustee under ERISA to administer Borrower’s employee plans or the PBGC institutes proceedings to appoint a trustee to administer such plan(s), or a Lien is entered to secure any deficiency or claim or a “reportable event” as defined under ERISA occurs, which reportable event has had, or is reasonably likely to have, a Material Adverse Effect; or

 

o.           Investigations – Lender receives information which reasonably leads it to believe Borrower may have directly or indirectly been engaged in any type of activity which would be reasonably likely to result in the forfeiture of any material property of Borrower to any governmental entity, federal, state or local; or

 

p.           Liens – if any Lien in favor of Lender shall cease to be valid, enforceable and perfected and prior to all other Liens other than Permitted Encumbrances or if Borrower or any Governmental Authority shall assert any of the foregoing; or

 

q.           Change of Control - if there shall occur a Change of Control; or

 

r.           Guaranty – if any breach or default occurs under the Guaranty, or if the Guaranty, or any obligation to perform thereunder is terminated; or

 

s.           Material Adverse Effect – if there is any change in Borrower’s financial condition which, in Lender’s reasonable opinion, has or would be reasonably likely to have a Material Adverse Effect.

 

8.2.           Cure:  Nothing contained in this Agreement or the Loan Documents shall be deemed to compel Lender to accept a cure of any Event of Default hereunder.

 

 

  

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8.3.           Rights and Remedies on Default:

 

a.           In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of a Default or an Event of Default, Lender may, in its discretion, withhold or cease making Advances under the Revolving Credit.

 

b.           In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of an Event of Default, Lender may, in its discretion, terminate the Revolving Credit and declare the Obligations immediately due and payable, all without demand, notice, presentment or protest or further action of any kind (it also being understood that the occurrence of any of the events or conditions set forth in Sections 8.1(i), (j), or (k) shall
automatically cause an acceleration of the Obligations).

 

c.           In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the acceleration of the Obligations following the occurrence of an Event of Default (other than the rights with respect to clause (i) below which Lender may exercise at any time after an Event of Default and regardless of whether there is an acceleration), Lender may, in its discretion, exercise all rights with respect to the collateral under the UCC and any other applicable law or in equity, and
under all Loan Documents permitted to be exercised after the occurrence of an Event of Default.

 

8.4.           Nature of Remedies:  All rights and remedies granted Lender hereunder and under the Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and Lender may proceed with any number of remedies at the same time until all Obligations are satisfied in full.  The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Lender, upon or at any time after the occurrence of an Event of Default, may proceed against Borrower, at any time, under
any agreement, with any available remedy and in any order.

 

8.5.           Set-Off: Borrower hereby grants to Lender a continuing lien, security interest, and right of setoff as security for all of Obligations upon and against all the deposits and credits of Borrower (other than clients’ trust and other fiduciary accounts or escrows and donor restricted assets) now or hereafter in the possession, custody, or control of Lender and its successors and assigns or in transit to any of them.  Upon the occurrence and continuation of an Event of Default, Lender may setoff the same or any part thereof and apply
the same to the Obligations of Borrower.  To the extent permitted by law, any and all rights to require Lender to exercise its remedies with respect to any other collateral which secures the Obligations prior to exercising its right of set-off with respect to such deposits or credits of the Borrower, are hereby voluntarily, intentionally, and irrevocably waived.

 

SECTION  IX.  MISCELLANEOUS

 

9.1.        Governing Law:  THIS AGREEMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK.  THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.

 

  

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9.2.           Integrated Agreement:  The Revolving Credit Note, the other Loan Documents and this Agreement shall be construed as integrated and complementary of each other, and as augmenting and not restricting Lender’s rights and remedies.  If, after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall constitute an amendment thereto and shall control.

 

9.3.           Waiver:  No omission or delay by Lender in exercising any right or power under this Agreement or any related agreements and documents will impair such right or power or be construed to be a waiver of any Default, or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and as to Borrower no waiver will be valid unless in writing and signed by Lender and then only to the extent specified.

 

9.4.           Indemnity:

 

a.           Borrower releases and shall indemnify, defend and hold harmless Lender and its respective officers, employees and agents, of and from any claims, demands, liabilities, obligations, judgments, injuries, losses, damages and costs and expenses (including, without limitation, reasonable legal fees) resulting from (i) acts or conduct of Borrower under, pursuant or related to this Agreement and the other Loan Documents, (ii) Borrower’s breach or violation of any representation, warranty, covenant or undertaking contained in this Agreement or the other Loan Documents, (iii) Borrower’s failure to comply with any Requirement of Law, and (iv)
any claim by any other creditor of Borrower against Lender arising out of any transaction whether hereunder or in any way related to the Loan Documents and all costs, expenses, fines, penalties or other damages resulting therefrom, in each case except to the extent arising or resulting from acts or conduct of Lender constituting willful misconduct or gross negligence.

 

b.           Promptly after receipt by an indemnified party under subsection (a) above of notice of the commencement of any action by a third party, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof. The omission so to notify the indemnifying party shall relieve the indemnifying party from any liability which it may have to any indemnified party under such subsection to the extent the indemnifying party is unable to defend such actions as a result of such failure to so notify.  In case any such action
shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnified party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation.

 

9.5.           Time:  Whenever Borrower shall be required to make any payment, or perform any act, on a day which is not a Business Day, such payment may be made, or such act may be performed, on the next succeeding Business Day.

 

  

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9.6.           Expenses of Lender:  At Closing and from time to time thereafter, Borrower will pay upon demand of Lender all reasonable costs, fees and expenses of Lender in connection with (i) the analysis, negotiation, preparation, execution, administration, delivery and termination of this Agreement, and other Loan Documents and the documents and instruments referred to herein and therein, and any amendment, amendment and restatement, supplement, waiver or consent relating hereto or thereto, whether or not any such amendment, amendment and restatement, supplement, waiver or consent
is executed or becomes effective, search costs, the reasonable fees, expenses and disbursements of counsel for Lender and reasonable charges of any expert consultant to Lender, (ii) the enforcement of Lender’s rights hereunder, or the collection of any payments owing from, Borrower under this Agreement and/or the other Loan Documents or the protection, preservation or defense of the rights of Lender hereunder and under the other Loan Documents, and (iii) any refinancing or restructuring of the credit arrangements provided under this Agreement and other Loan Documents in the nature of a “work-out” or of any insolvency or bankruptcy proceedings, or otherwise (including the reasonable fees and disbursements of counsel for Lender and, with respect to clauses (ii) and (iii), reasonable allocated costs of internal counsel) (collectively, the
“Expenses”);

 

9.7.           Brokerage:  This transaction was brought about and entered into by Lender and Borrower acting as principals and without any brokers, agents or finders being the effective procuring cause hereof.  Borrower represents that it has not committed Lender to the payment of any brokerage fee, commission or charge in connection with this transaction.  If any such claim is made on Lender by any broker, finder or agent or other person, Borrower hereby indemnifies, defends and saves such party harmless against such claim and further will defend, with counsel
satisfactory to Lender, any action or actions to recover on such claim, at Borrower’s own cost and expense, including such party’s reasonable counsel fees.  Borrower further agrees that until any such claim or demand is adjudicated in such party’s favor, the amount demanded shall be deemed an Obligation of Borrower under this Agreement.

 

9.8.           Notices:

 

a.           Any notice, demand, consent request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing and shall be deemed given if delivered in person to the person listed below or if sent by telecopy or by nationally recognized overnight courier, as follows, unless such address is changed by written notice hereunder:

 

	  	
If to Lender to:

	
TD Bank, N.A.

	  	  	
324 South Service Road

	  	  	
Melville, New York 11747

	  	  	
Attention:  John Topolovec

	
 

	  	
      Vice President

	  	  	
Facsimile No. (631) 962-2834

	  	  	  

  

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With copies to Lender’s Counsel:

	
Harris Beach PLLC

	  	  	
333 Earle Ovington Boulevard, Suite 901

	  	  	
Uniondale, New York 11553

	  	  	
Attention: Robert J. Chanis, Esq.

	  	  	
Facsimile No. (516) 880-8483

	  	  	  
	  	
If to Borrower to:

	
Harris & Harris Group, Inc.

	  	  	
1450 Broadway, 24th Floor

	  	  	
New York, New York 10018

	  	  	
Attention:  Daniel Wolfe

	  	  	
      President

	  	  	
Facsimile No. (212) 582-9563

	 	 	 
	  	
With copies to Borrower’s Counsel:

	
Sutherland

	  	  	
1275 Pennsylvania Avenue, NW

	  	  	
Washington, District of Columbia  20004-2415

	  	  	
Attention: James D. Darrow, Esq.

	  	  	
Facsimile No.  (202) 637-3593

	  	  	  

b.           Any notice sent by Lender, or Borrower by any of the above methods shall be deemed to be given when so received.

 

c.           Lender shall be fully entitled to rely upon any telecopy transmission or other writing purported to be sent by any Authorized Officer (whether requesting an Advance or otherwise) as being genuine and authorized.

 

9.9.           Headings:  The headings of any paragraph or Section of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement.

 

9.10.           Survival:  All warranties, representations, and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by it under this Agreement, shall be considered to have been relied upon by Lender, and shall survive the delivery to Lender of the Revolving Credit Note, regardless of any investigation made by Lender or on its behalf. Except as otherwise expressly provided herein, all covenants made by Borrower hereunder or under any other agreement or instrument shall be deemed continuing until all
Obligations are satisfied in full.  All indemnification obligations under this Agreement, including under Section 9.4 and 9.7, shall survive the termination of this Agreement and payment of the Obligations for a period of two (2) years.

 

9.11.           Successors and Assigns:  This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties.  Borrower may not transfer, assign or delegate any of its duties or obligations hereunder.  Borrower acknowledges and agrees that Lender may at any time, and from time to time, (a) sell participating interests in the Loans, and Lender’s rights hereunder to other financial institutions, and (b) sell, transfer, or assign the Loans and Lender’s rights hereunder, to any one or more additional banks or
financial institutions, subject (as to Lender’s rights under this clause (b)) to Borrower’s written consent, which consent shall not be unreasonably withheld; provided that, no consent under this clause (b) shall be required if an Event of Default exists at the time of such sale, transfer or assignment.

 

  

30

  

9.12.           Counterparts:  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and were upon the same instrument.

 

9.13.           Modification:  No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower and Lender.

 

9.14.           Signatories:  Each individual signatory hereto represents and warrants that he is duly authorized to execute this Agreement on behalf of his principal and that he executes the Agreement in such capacity and not as a party.

 

9.15.           Third Parties:  No rights are intended to be created hereunder, or under any related agreements or documents for the benefit of any third party donee, creditor or incidental beneficiary of Borrower.  Nothing contained in this Agreement shall be construed as a delegation to Lender of Borrower’s duty of performance, including, without limitation, Borrower’s duties under any account or contract with any other Person.

 

9.16.           Discharge of Taxes, Borrower’s Obligations, Etc.:  Lender, in its sole discretion, shall have the right at any time, and from time to time, with at least ten (10) days prior notice to Borrower if Borrower fails to do so, to: (a) pay for the performance of any of Borrower’s obligations hereunder, and (b) discharge taxes or Liens, at any time levied or placed on Borrower’s Property in violation of this Agreement unless Borrower is in good faith with due diligence by appropriate proceedings contesting such taxes or Liens and maintaining proper reserves
therefor in accordance with GAAP.  Expenses and advances shall be added to the Revolving Credit, and bear interest at the rate applicable to the Revolving Credit, until reimbursed to Lender.  Such payments and advances made by Lender shall not be construed as a waiver by Lender of a Default or Event of Default under this Agreement.

 

9.17.           Withholding and Other Tax Liabilities:  In the event that any Lien, assessment or tax liability against Borrower shall arise in favor of any taxing authority, whether or not notice thereof shall be filed or recorded as may be required by law, Lender shall have the right (but shall not be obligated, nor shall Lender hereby assume the duty) to pay any such Lien, assessment or tax liability by virtue of which such charge shall have arisen; provided, however, that Lender shall not pay any such tax, assessment or Lien if the amount, applicability or validity thereof is being
contested in good faith and by appropriate proceedings by Borrower.  In order to pay any such Lien, assessment or tax liability, Lender shall not be obliged to wait until such lien, assessment or tax liability is filed before taking such action as hereinabove set forth.  Any sum or sums which Lender shall have paid for the discharge of any such Lien shall be added to the Revolving Credit and shall be paid by Borrower to Lender with interest thereon at the rate applicable to the Revolving Credit, upon demand, and Lender shall be subrogated to all rights of such taxing authority against Borrower.

 

9.18.           Consent to Jurisdiction:  Borrower and Lender each hereby irrevocably consent to the non-exclusive jurisdiction of the courts of the State of New York or the United States District Court for the Southern District of New York in any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking.  Borrower waives any objection which Borrower may have based upon lack of personal jurisdiction, improper venue or forum non conveniens.

 

9.19.           Additional Documentation:  Borrower shall execute and/or re-execute, and cause any Guarantor or other Person party to any Loan Document, to execute and/or re-execute and to deliver to Lender or Lender’s counsel, as may be deemed appropriate, any document or instrument signed in connection with this Agreement which was incorrectly signed or which should have been signed at or prior to the Closing, but which was not so signed and delivered.  Borrower agrees to comply with any written request by Lender within ten (10) days after receipt by Borrower of such
request.

 

  

31

  

9.20.           Waiver of Jury Trial:  BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.

 

9.21.           Consequential Damages:  Neither Lender nor agent or attorney of Lender, shall be liable for any consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations.

 

9.22.            Confidentiality:  Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees, trustees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the
extent  required by applicable laws or regulations or by any subpoena or similar legal process; (d) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (e) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any  assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty’s or prospective counterparty’s professional advisor) to any credit derivative transaction relating to obligations of Borrower; (f) with the consent of Borrower; (g) to the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to Lender on a nonconfidential basis from a source other than Borrower; or (h) to any nationally recognized rating agency that requires access to information about Lender’s or its Affiliates’ investment portfolio in connection with ratings issued with respect to Lender or its Affiliates.

 

For the purposes of this Section, “Information” means all information received from Borrower relating to Borrower or its business, other than any such information that is available to Lender on a nonconfidential basis prior to disclosure by Borrower; provided that, in the case of information received from Borrower after the date hereof, such information is clearly identified in writing at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as
such Person would accord to its own confidential information.  Lender acknowledges that (a) the Information may include material non-public information concerning Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable law, including federal and state securities laws.

 

  

32

  

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be delivered in New York, New York as of the day and year first written above.

 

HARRIS & HARRIS GROUP, INC.

By:_____________________________________________

Name: Daniel Wolfe

Title:   President

 

TD BANK, N.A.

 

By:_____________________________________________

Name:  John Topolovec

Title:    Vice President

 

(Signature Page to Revolving Loan Agreement)

S-1

  

  

  

EXHIBIT “A”

 

FORM OF REVOLVING CREDIT ADVANCE REQUEST

Harris & Harris Group, Inc.

1450 Broadway, 24th Floor

New York, New York 10018 (“Borrower”)

TD Bank, N.A.

324 South Service Road

Melville, New York 11747 (“Lender”)

Borrower hereby requests an Advance in the amount of $___________ pursuant to Section 2.2 of that certain Revolving Loan Agreement by and among Borrower and Lender dated as of February 24, 2011 (as amended, restated or otherwise modified from time to time, the “Loan Agreement”). Borrower hereby requests that such Advance be a (select one) [Base Rate Loan or LIBOR Rate Loan].  [If a LIBOR Rate Loan, the LIBOR Interest Period for such Advance is ____].   The proposed date of the Advance is ____.

Borrowers hereby represent and warrant to Lender as follows:

 

a.      There exists no Default or Event of Default under the Loan Agreement.

 

	
  

	
b.

	
All representations and warranties made by Borrower in the Loan Agreement are true and correct, and all covenants of the Borrower made in the Loan Agreement have been performed, in each case as of the date hereof.

 

	
  

	
c.

	
Prior to this request, the aggregate principal amount of all Advances outstanding under the Revolving Credit are $_____________.

 

 

        HARRIS & HARRIS GROUP, INC.

By: __________________________________________

Name:

Title:

Date:  _____________, 201_

A-1

  

  

  

EXHIBIT “B”

COMPLIANCE CERTIFICATE

TD Bank, N.A.

324 South Service Road

Melville, New York 11747

Attention: John Topolovec

The undersigned, the _____________ of Harris & Harris Group, Inc. (“Borrower”), gives this certificate to TD Bank, N.A. (“Lender”), in accordance with the require­ments of Section 6.9 of that certain Revolving Loan Agreement, dated as of February 24, 2011, by and between Borrower and Lender (“Loan Agreement”).  Capitalized terms used in this Certificate, unless otherwise defined herein, shall have the meanings ascribed to them in the Loan Agreement.

1.           Based upon my review of the consolidated balance sheets and statements of income of Borrower for the fiscal period ending __________________, 201_, copies of which are attached hereto, I hereby certify that:

(a)           The Borrower has Unrestricted, Unencumbered Liquid Assets of _________________; and

2.           No Default exists on the date hereof, other than: ____________________  [if none, so state]; and

3.           No Event of Default exists on the date hereof, other than: __________________ [if none, so state].

Very truly yours,

By: __________________________

Name: _______________________

Title:_________________________

B-1

  

  

  

EXHIBIT “C”

FORM OF NOTICE OF EXTENSION/CONVERSION

Dated as of: ______________

TD Bank, N.A.

324 South Service Road

Melville, New York 11747

Attention: John Topolovec

Ladies and Gentlemen:

This irrevocable Notice of Conversion/Continuation (the “Notice”) is delivered to you under Section 2.3 of the Revolving Loan Agreement dated as of February 24, 2011 (as amended, restated or otherwise modified from time to time, the “Loan Agreement”), by and among Harris & Harris Group, Inc. (“Borrower”) and TD Bank, N.A., as lender (“Lender”).

 

	
  

	
1.

	
This Notice is submitted for the purpose of:

 

(Check one and complete applicable information in accordance with the Loan Agreement.)

o           Converting all or a portion of a Base Rate Loan into a LIBOR Rate Loan

 

	
  

	
(a)

	
The aggregate outstanding principal balance of such Loan is $__________.

 

	
  

	
(b)

	
The principal amount of such Loan to be converted is $___________.

 

	
  

	
(c)

	
The requested effective date of the conversion of such Loan is _________.

 

	
  

	
(d)

	
The requested LIBOR Interest Period applicable to the converted Loan is ______.

 

	
  

	
o

	
Converting a portion of LIBOR Rate Loan into a Base Rate Loan

 

	
  

	
(a)

	
The aggregate outstanding principal balance of such Loan is $__________.

 

	
  

	
(b)

	
The last day of the current LIBOR Interest Period for such Loan is ___________.

 

	
  

	
(c)

	
The principal amount of such Loan to be converted is $____________.

 

	
  

	
(d)

	
The requested effective date of the conversion of such Loan is _________.

 

	
  

	
o

	
Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate Loan

 

	
  

	
(a)

	
The aggregate outstanding principal balance of such LIBOR Rate Loan is $__________.

 

	
  

	
(b)

	
The last day of the current LIBOR Interest Period for such Loan is ____________.

 

	
  

	
(c)

	
The principal amount of such LIBOR Rate Loan to be continued is $_____________.

 

C-1

  

  

  

 

	
  

	
(d)

	
The requested effective date of the continuation of such LIBOR Rate Loan is ________.

 

	
  

	
(e)

	
The requested LIBOR Interest Period applicable to the continued LIBOR Rate Loan is ______.

 

 

2.            All of the conditions applicable to the conversion or continuation of the Loan requested herein as set forth in the Loan Agreement have been satisfied or waived as of the date hereof and will remain satisfied or waived to the date of such Loan.

 

3.            No Event of Default exists.

 

4.            Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Loan Agreement.

 

IN WITNESS WHEREOF, the undersigned, on behalf of Borrower, has executed this Notice of Conversion/Continuation this ____ day of __________, 201__.

 

	 	
HARRIS & HARRIS GROUP, INC.

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

 

C-2

  

  

  

EXHIBIT “D”

FORM OF GUARANTY

D-1

  

  

  

Schedule 1.1(a)

Permitted Indebtedness

None.

  

  

  

Schedule 5.08(c)

Employee Benefit Plans

Harris & Harris Group 401(k) Plan

 

  

  

  

Schedule 5.10(a)

Prior Business Names

None.

  

  

  

Schedule 5.10(b)

Trademarks, Copyrights, etc.

Harris & Harris Group, Inc.®

Nanotech for CleantechTM

Nanotech for HealthcareTM

Nanotech for ElectronicsTM

 

  

  

  

Schedule 5.11(a)

Leases

Lease dated July 1, 2008 by and between Jack Rominger, Tommie Plemons and Dale Denson as Lessor and Harris & Harris Enterprises, Inc., a Delaware Corporation, as Lessee.

Lease Agreement, dated September 24, 2009, between Rosh 1450 Properties LLC and Harris & Harris Group, Inc.

Sublease dated October 19, 2010 by and between Harris & Harris Enterprises, Inc. and Vector Economics, Inc.

Sublease dated June 5, 2009 by and between Harris & Harris Enterprises, Inc., a Delaware Corporation and SoftTech VC Inc., a California S Corporation.

  

  

  

Schedule 5.12

Subsidiaries and Affiliates

Harris & Harris Enterprises, Inc.

Harris Partners I, L.P.

 

  

  

  

Schedule 5.13

Other Associations

None.

 

  

  

  

Schedule 5.14

Environmental Matters

None.

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