Document:

ex_133167.htm

Exhibit 4.2

 

 

EXECUTION COPY

 

 

 

 

 

 

 

 

AMENDED AND RESTATED TRUST AGREEMENT

 

 

 

by and between

 

 

HERCULES CAPITAL FUNDING 2019-1 LLC,

as the Trust Depositor

 

 

and

 

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as the Owner Trustee

 

 

Dated as of January 22, 2019

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Asset-Backed Notes

 

 

 

 

TABLE OF CONTENTS

 

	 	Page 
	 	 
	
			ARTICLE I DEFINITIONS

				
			1

			
	
			Section 1.01

				
			Definitions

				
			1

			
	
			Section 1.02

				
			Other Terms

				
			4

			
	
			Section 1.03

				
			Computation of Time Periods

				
			4

			
	
			Section 1.04

				
			Interpretation

				
			4

			
	
			Section 1.05

				
			References

				
			5

			
	
			Section 1.06

				
			Calculations

				
			5

			
	
			ARTICLE II ORGANIZATION

				
			5

			
	
			Section 2.01

				
			Name

				
			5

			
	
			Section 2.02

				
			Office

				
			6

			
	
			Section 2.03

				
			Purposes and Powers

				
			6

			
	
			Section 2.04

				
			Appointment of Owner Trustee

				
			7

			
	
			Section 2.05

				
			Initial Capital Contribution of Trust Estate

				
			7

			
	
			Section 2.06

				
			Declaration of Trust

				
			7

			
	
			Section 2.07

				
			Liability of the Certificateholders

				
			8

			
	
			Section 2.08

				
			Title to Trust Property

				
			8

			
	
			Section 2.09

				
			Situs of Trust

				
			8

			
	
			Section 2.10

				
			Representations and Warranties of the Trust Depositor

				
			8

			
	
			Section 2.11

				
			Federal Income Tax Allocations

				
			9

			
	
			Section 2.12

				
			Covenant of Certificateholders

				
			11

			
	
			ARTICLE III TRUST CERTIFICATES AND TRANSFER OF INTERESTS

				
			12

			
	
			Section 3.01

				
			Initial Ownership.

				
			12

			
	
			Section 3.02

				
			The Trust Certificates

				
			12

			
	
			Section 3.03

				
			Authentication of Trust Certificates

				
			12

			
	
			Section 3.04

				
			Registration of Transfer and Exchange of Trust Certificates

				
			13

			
	
			Section 3.05

				
			Mutilated, Destroyed, Lost or Stolen Trust Certificates

				
			13

			
	
			Section 3.06

				
			Persons Deemed Owners

				
			14

			
	
			Section 3.07

				
			Access to List of Certificateholders’ Names and Addresses

				
			14

			
	
			Section 3.08

				
			Maintenance of Office or Agency

				
			14

			
	
			Section 3.09

				
			Appointment of Trustee as Paying Agent

				
			15

			
	
			Section 3.10

				
			Transfer Restrictions

				
			15

			
	
			ARTICLE IV ACTIONS BY OWNER TRUSTEE

				
			19

			
	
			Section 4.01

				
			Prior Notice to and Consent by Certificateholders with Respect to Certain Matters

				
			19

			
	
			Section 4.02

				
			Action by Certificateholders with Respect to Bankruptcy

				
			21

			
	
			Section 4.03

				
			Restrictions on Certificateholders’ Power

				
			21

			
	
			Section 4.04

				
			Majority Control

				
			21

			

 

-i-

 

 

TABLE OF CONTENTS

(continued)

 

	 	Page 
	 	 
	
			ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES

				
			22

			
	
			Section 5.01

				
			Establishment of Trust Account

				
			22

			
	
			Section 5.02

				
			Application of Trust Funds

				
			22

			
	
			Section 5.03

				
			Method of Payment

				
			23

			
	
			Section 5.04

				
			No Segregation of Moneys; No Interest

				
			23

			
	
			Section 5.05

				
			Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others

				
			23

			
	
			Section 5.06

				
			Signature on Returns; Partnership Representative

				
			24

			
	
			ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE

				
			24

			
	
			Section 6.01

				
			General Authority

				
			24

			
	
			Section 6.02

				
			General Duties

				
			25

			
	
			Section 6.03

				
			Action upon Instruction

				
			25

			
	
			Section 6.04

				
			No Duties Except as Specified in this Agreement or in Instructions

				
			26

			
	
			Section 6.05

				
			Restrictions

				
			27

			
	
			ARTICLE VII CONCERNING THE OWNER TRUSTEE

				
			27

			
	
			Section 7.01

				
			Acceptance of Trusts and Duties

				
			27

			
	
			Section 7.02

				
			Furnishing of Documents

				
			29

			
	
			Section 7.03

				
			Representations and Warranties

				
			29

			
	
			Section 7.04

				
			Reliance; Advice of Counsel

				
			30

			
	
			Section 7.05

				
			Not Acting in Individual Capacity

				
			31

			
	
			Section 7.06

				
			Owner Trustee Not Liable for Trust Certificates or Loans

				
			31

			
	
			Section 7.07

				
			Owner Trustee May Own Trust Certificates and Notes

				
			31

			
	
			ARTICLE VIII COMPENSATION OF OWNER TRUSTEE

				
			32

			
	
			Section 8.01

				
			Owner Trustee’s Fees and Expenses

				
			32

			
	
			Section 8.02

				
			Indemnification

				
			32

			
	
			Section 8.03

				
			Payments to the Owner Trustee

				
			33

			
	
			ARTICLE IX TERMINATION OF TRUST AGREEMENT

				
			33

			
	
			Section 9.01

				
			Termination of Trust Agreement

				
			33

			
	
			ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

				
			34

			
	
			Section 10.01

				
			Eligibility Requirements for Owner Trustee

				
			34

			
	
			Section 10.02

				
			Resignation or Removal of Owner Trustee

				
			35

			
	
			Section 10.03

				
			Successor Owner Trustee

				
			35

			
	
			Section 10.04

				
			Merger or Consolidation of Owner Trustee

				
			36

			
	
			Section 10.05

				
			Appointment of Co-Trustee or Separate Trustee

				
			36

			

 

-ii-

 

 

TABLE OF CONTENTS

(continued)

 

	 	Page 
	 	 
	
			ARTICLE XI MISCELLANEOUS

				
			38

			
	
			Section 11.01

				
			Supplements and Amendments

				
			38

			
	
			Section 11.02

				
			No Legal Title to Trust Estate in Certificateholders

				
			39

			
	
			Section 11.03

				
			Limitations on Rights of Others

				
			40

			
	
			Section 11.04

				
			Notices

				
			40

			
	
			Section 11.05

				
			Severability

				
			40

			
	
			Section 11.06

				
			Separate Counterparts

				
			41

			
	
			Section 11.07

				
			Successors and Assigns

				
			41

			
	
			Section 11.08

				
			No Petition

				
			41

			
	
			Section 11.09

				
			No Recourse

				
			41

			
	
			Section 11.10

				
			Headings

				
			42

			
	
			Section 11.11

				
			GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL

				
			42

			
	
			Section 11.12

				
			Termination of Original Trust Agreement

				
			42

			

 

-iii-

 

 

EXHIBITS

 

	Exhibit A	Form of Trust Certificate (Physical)	A-1-1
	Exhibit B	Form of Certificate of Trust	B-1
	Exhibit C	Form of Purchaser’s Representation and Warranty Letter	C-1-1

        

-iv-

 

 

TRUST AGREEMENT

 

THIS AMENDED AND RESTATED TRUST AGREEMENT (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Trust Agreement” or this “Agreement”), dated as of January 22, 2019, is between HERCULES CAPITAL FUNDING 2019-1 LLC, a Delaware limited liability company, as trust depositor (the “Trust Depositor”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, together with its successors and assigns, the “Trust Company”), as owner trustee (solely in such capacity, the “Owner Trustee”).

 

R E C I T A L S

 

WHEREAS, the Trust Depositor and the Owner Trustee have heretofore established a trust known as the Hercules Capital Funding Trust 2019-1 (the “Trust”) pursuant to the Trust Agreement dated as of December 20, 2018 (the “Original Trust Agreement”) and the Certificate of Trust (as defined below); and

 

WHEREAS, the Trust Depositor desires to continue the Trust; and

 

WHEREAS, the Trust Depositor desires to retain the Owner Trustee as the trustee of the Trust; and

 

WHEREAS, the Owner Trustee is willing to continue to serve as trustee of the Trust; and

 

WHEREAS, each of the Trust Depositor and the Owner Trustee consents to the amendment and restatement on the Original Trust Agreement pursuant to this Agreement.

 

NOW, THEREFORE, based upon the above recitals, the mutual promises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

	 	
			Section 1.01

				
			Definitions.

			

 

For all purposes of this Trust Agreement, except as otherwise expressly provided below or unless the context otherwise requires, capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Sale and Servicing Agreement, dated as of January 22, 2019 (the “Sale and Servicing Agreement”), among Hercules Capital Funding Trust 2019-1, as the Issuer, Hercules Capital Funding 2019-1 LLC, as the Trust Depositor, Hercules Capital, Inc., as the Seller and as the Servicer and U.S. Bank National Association, as the Trustee, Backup Servicer, Custodian and Paying Agent which capitalized terms are incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein or below.

 

 

 

 

“Agreement” shall have the meaning given to such term in the Preamble of this Trust Agreement.

 

“Bankruptcy Action” shall have the meaning given to such term in Section 4.02 of this Agreement.

 

“Benefit Plan” shall have the meaning given to such term in Section 3.10(b) of this Trust Agreement.

 

“Capital Account” shall have the meaning given to such term in Section 2.11(d) of this Trust Agreement.

 

“Certificate Account” shall have the meaning given to such term in Section 5.01(a) of this Trust Agreement.

 

“Certificate Register” shall mean the Certificate Register established and maintained in accordance with this Trust Agreement.

 

“Certificate Registrar” shall mean, initially, the Trustee, and thereafter, any successor appointed pursuant to this Trust Agreement.

 

“Certificate of Trust” shall mean a certificate of trust duly executed in the form of Exhibit B attached hereto.

 

“Corporate Trust Office” shall mean (a) in the case of Owner Trustee: Wilmington Trust, National Association, Rodney Square North, 1100 Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration and in the case of the Trustee/Certificate Registrar: U.S. Bank National Association, 111 Fillmore Avenue East, Attn: Bondholder Services - EP-MN-WS2N, St. Paul, Minnesota, 55107, Ref: Hercules 2019-1; (b) in the case of the Trustee: the principal office of the Trustee currently located at (i) for Note transfer purposes and presentment of the Notes for final payment thereon, the corporate office of the Trustee located at 111 Fillmore Avenue East, Attention: Bondholder Services-EP-MNWS2N, St. Paul, MN 55107, Reference: Hercules Capital Funding Trust 2019-1 and (ii) for all other purposes, the corporate office of the Trustee located at One Federal Street, 3rd Floor, Boston, Massachusetts 02110, Attention: Jack Lindsay, Reference: Hercules Capital Funding Trust 2019-1 telephone number (617) 603-6789, facsimile number (855) 869-2187, email: jack.lindsay@usbank.com; and (c) at such other address as the Owner Trustee or the Trustee may designate from time to time by notice to the Issuer.

 

“Domestic Corporation” shall mean an entity that is treated as a corporation for U.S. federal income tax purposes and is created or organized in, or under the laws of, the United States, any state thereof or the District of Columbia.

 

“Expenses” shall have the meaning given to such term in Section 8.02 of this Trust Agreement.

 

“Fiscal Year” shall have the meaning given to such term in Section 2.11(e) of this Trust Agreement.

 

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“Indemnified Parties” shall have the meaning given to such term in Section 8.02 of this Trust Agreement.

 

“Majority Certificateholders” means the Holder or Holders of Trust Certificates evidencing an aggregate Percentage Interest in excess of 50%.

 

“Non-Foreign Status Certificate” shall have the meaning given to such term in Section 3.10(g) of this Trust Agreement.

 

“Original Trust Agreement” shall have the meaning given to such term in the recitals of this Trust Agreement.

 

“Owner Trustee” shall have the meaning given to such term in the Preamble of this Trust Agreement.

 

“Percentage Interest” shall mean with respect to a Trust Certificate, the percentage set forth on the face thereof.

 

“QIBs” shall have the meaning given to such term in Section 3.10 of this Trust Agreement.

 

“S&P” means Standard & Poor’s Financial Services LLC.

 

“Sale and Servicing Agreement” shall have the meaning given to such term in Section 1.01 of this Trust Agreement.

 

“Secretary of State” shall have the meaning given to such term in Section 2.02 of this Agreement.

 

“Section 385 Certificateholder” shall mean a holder of a Trust Certificate (or interest therein) that is (a) a Domestic Corporation, (b) an entity that is treated as a partnership for U.S. federal income tax purposes and has an expanded group partner (as defined in Treasury Regulations Section 1.385-3(g)(12)) that is a Domestic Corporation or (c) a disregarded entity or grantor trust of an entity described in clause (a) or (b).

 

“Section 385 Controlled Partnership” shall have the meaning set forth in Treasury Regulations Section 1.385-1(c)(1) for a “controlled partnership”.

 

“Transfer” shall have the meaning given to such term in Section 3.10(d) of this Trust Agreement.

 

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

 

“Trust” shall have the meaning given to such term in the recitals of this Trust Agreement.

 

3

 

 

“Trust Agreement” shall have the meaning given to such term in the Preamble of this Trust Agreement.

 

“Trust Certificate” shall mean a trust certificate representing a beneficial interest in the Trust executed and authenticated in the form of Exhibit A attached hereto.

 

“Trust Company” shall have the meaning given to such term in the Preamble of this Trust Agreement.

 

“Trust Depositor” shall have the meaning given to such term in the Preamble of this Trust Agreement.

 

“Trust Estate” shall mean all right, title and interest of the Trust in and to the Loan Assets and all other property and rights assigned to the Trust pursuant to the Sale and Servicing Agreement, all funds on deposit from time to time in the Transaction Accounts and the Certificate Account, and all other property of the Trust from time to time, including any rights of the Owner Trustee and the Trust pursuant to the Transaction Documents.

 

	 	
			Section 1.02

				
			Other Terms.

			

 

All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States. The symbol “$” shall mean the lawful currency of the United States of America. All terms used in Article 9 of the UCC in the State of Delaware, and not specifically defined herein, are used herein as defined in such Article 9.

 

	 	
			Section 1.03

				
			Computation of Time Periods.

			

 

Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding”, and the word “within” means “from and excluding a specified date and to and including a later specified date”.

 

	 	
			Section 1.04

				
			Interpretation.

			

 

In this Agreement, unless a contrary intention appears:

 

(i)     the singular number includes the plural number and vice versa;

 

(ii)     reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by the Transaction Documents;

 

(iii)     reference to any gender includes each other gender;

 

(iv)     reference to day or days without further qualification means calendar days;

 

4

 

 

(v)     unless otherwise stated, reference to any time means New York, New York time;

 

(vi)     references to “writing” include printing, typing, lithography, electronic or other means of reproducing words in a visible form;

 

(vii)     reference to any agreement (including any Transaction Document), document or instrument means such agreement, document or instrument as amended, modified, supplemented, replaced, restated, waived or extended and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Transaction Documents, and reference to any promissory note includes any promissory note that is an extension or renewal thereof or a substitute or replacement therefor; and

 

(viii)     reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any Section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such Section or other provision.

 

	 	
			Section 1.05

				
			References.

			

 

All Section references (including references to the Preamble), unless otherwise indicated, shall be to Sections (and the Preamble) in this Agreement.

 

	 	
			Section 1.06

				
			Calculations.

			

 

Except as otherwise provided herein, all interest rate and basis point calculations hereunder will be made on the basis of a 360 day year consisting of twelve 30-day months and will be carried out to at least three decimal places.

 

ARTICLE II

ORGANIZATION

 

	 	
			Section 2.01

				
			Name.

			

 

The Trust created and continued hereby shall be known as the “Hercules Capital Funding Trust 2019-1,” in which name the Trust shall have power and authority and is hereby authorized and empowered, without the need for further action on the part of the Trust, and the Owner Trustee shall have power and authority, and is hereby authorized and empowered, to conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued.

 

5

 

 

	 	
			Section 2.02

				
			Office.

			

 

The office of the Trust shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in the State of Delaware as the Owner Trustee may designate by written notice to the Certificateholders and the Trust Depositor. The Trust shall constitute a statutory trust within the meaning of Section 3801(g) of the Statutory Trust Statute for which the Owner Trustee has filed a Certificate of Trust with the Secretary of State of the State of Delaware (the “Secretary of State”) pursuant to Section 3810(a) of the Statutory Trust Statute. The execution and filing of the Certificate of Trust by the Owner Trustee is hereby ratified, authorized, and approved. The Owner Trustee shall have power and authority, and is hereby authorized and empowered, to execute and file with the Secretary of State any other certificate required or permitted under the Statutory Trust Statute to be filed with the Secretary of State. It is the intention of the parties hereto that this Trust Agreement constitute the governing instrument of such statutory trust.

 

	 	
			Section 2.03

				
			Purposes and Powers.

			

 

The purpose of the Trust is, and the Trust shall have the power and authority and is hereby authorized and empowered, without the need for further action on the part of the Trust, and the Owner Trustee shall have power and authority, and is hereby authorized and empowered (but shall not be obligated), in the name and on behalf of the Trust, to do or cause to be done all acts and things necessary, appropriate or convenient to cause the Trust, to engage in the following activities:

 

(a)     to execute, authenticate, deliver, and issue from time to time the Notes pursuant to the Indenture and the Trust Certificates pursuant to this Trust Agreement and, if applicable, a supplement hereto, and to sell the Notes and to transfer the Trust Certificates pursuant to such agreements and the other Transaction Documents;

 

(b)     with the proceeds of the sale of the Notes, to purchase the Initial Loans, to pay the organizational, start-up and transactional expenses of the Trust and to fund the Transaction Accounts then permitted or required to be funded pursuant to the Sale and Servicing Agreement or the Indenture;

 

(c)     as permitted under the Transaction Documents, to purchase, acquire, own, hold, receive, manage, exercise rights and remedies with respect to, sell, transfer and dispose of, the Trust Estate or any portion thereof as well as any permitted Trust subsidiary;

 

(d)     to assign, grant, transfer, pledge, mortgage, convey and grant a security interest in the Trust Estate pursuant to the Indenture and to hold, manage, transfer and distribute to the Certificateholders pursuant to the terms of this Trust Agreement and the Sale and Servicing Agreement any portion of the Trust Estate released from the lien of, and remitted to the Trust pursuant to, the Indenture;

 

(e)     to enter into, execute, deliver and perform its obligations under the Transaction Documents to which it is to be a party and to exercise its rights and remedies thereunder;

 

6

 

 

(f)     subject to compliance with the Transaction Documents, to engage in such other activities as may be required in connection with the conservation of the Trust Estate and the making of distributions to the Certificateholders, the Noteholders and others specified in the Transaction Documents; and

 

(g)     to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith.

 

The Trust is hereby authorized to engage in the foregoing activities. The Trust shall not engage in any activity other than in connection with the foregoing or other than as required or authorized by the terms of this Agreement or the other Transaction Documents. Nothing contained herein shall be deemed to authorize the Owner Trustee on behalf of the Trust to engage in any other business operations or any activities other than those set forth in this Section 2.03. Specifically, the Owner Trustee shall have no authority on behalf of the Trust to engage in any business operations, or acquire any assets other than those specifically included in the Trust Estate from time to time in accordance with the Transaction Documents. Similarly, the Owner Trustee shall have no discretionary duties other than performing those acts necessary to accomplish the purpose of this Trust as set forth in this Section 2.03, certain of which may be delegated to the Servicer or the Administrator. Notwithstanding anything to the contrary contained herein, the Trust may hold the Notes prior to their sale by the Initial Purchaser.

 

	 	
			Section 2.04

				
			Appointment of Owner Trustee.

			

 

The Trust Depositor hereby appoints the Owner Trustee as trustee of the Trust 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.

 

	 	
			Section 2.05

				
			Initial Capital Contribution of Trust Estate.

			

 

The Trust Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of ten dollars ($10.00). The Owner Trustee hereby acknowledges receipt from the Trust Depositor, as of the date hereof, of the foregoing contribution, which shall constitute the initial Trust Estate (prior to giving effect to the conveyances described in the Sale and Servicing Agreement) and shall be deposited in the Certificate Account. The Trust Depositor shall pay organizational expenses of the Trust 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 Trust Estate in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders, subject to the obligations of the Trust under the Transaction Documents. It is the intention of the parties hereto that the Trust constitute a statutory trust under the Statutory Trust Statute and that this Trust Agreement constitute the governing instrument of such statutory trust. It is the intention of the parties hereto that, solely for federal income tax purposes, the Trust shall be treated as set forth in Section 2.11 of this Agreement. The parties agree that, unless otherwise required by appropriate tax authorities, the Trust will file or cause to be filed annual or other necessary returns, reports and other forms consistent with the characterization of the Trust as set forth in Section 2.11 of this Agreement. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and authority set forth herein and in the Statutory Trust Statute with respect to accomplishing the purposes of the Trust.

 

7

 

 

	 	
			Section 2.07

				
			Liability of the Certificateholders.

			

 

No Certificateholder shall have any personal liability for any liability or obligation of the Trust.

 

	 	
			Section 2.08

				
			Title to Trust Property.

			

 

Legal title to all of the Trust Estate shall be vested at all times in the Trust as a separate legal entity except where Applicable Law in any jurisdiction requires title to any part of the 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. If any portion of the Trust Estate is deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, (a) the Trust Depositor or the Owner Trustee, upon having actual knowledge thereof, will immediately notify the Trustee and the Servicer and (b) the Servicer will cause to be filed such UCC financing statements and related filings, documents or writings as are necessary (or as shall be reasonably requested by the Trustee) to maintain the Trustee’s security interest in the Collateral under the Indenture.

 

	 	
			Section 2.09

				
			Situs of Trust.

			

 

All bank accounts maintained by the Owner Trustee or the Trustee on behalf of the Trust shall be located in the State of Delaware or such other state in which the Corporate Trust Office of the Owner Trustee or the Trustee may be located. The Trust shall not have any employees in any state other than Delaware; provided 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 Trust only in Delaware or such other state in which the Corporate Trust Office of the Trustee may be located, and payments will be made by the Trust only from Delaware or such other state in which the Corporate Trust Office of the Trustee may be located. The only office of the Trust will be at the Corporate Trust Office in Delaware.

 

	 	
			Section 2.10

				
			Representations and Warranties of the Trust Depositor.

			

 

The Trust Depositor hereby represents and warrants to the Owner Trustee that:

 

(a)     The Trust Depositor is duly organized and validly existing as a limited liability company in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted.

 

(b)     The Trust Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms. The Trust Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Trust and the Trust Depositor has duly authorized such sale and assignment and deposit to the Trust by all necessary limited liability company action.

 

8

 

 

(c)     The execution, delivery and performance of this Agreement have been duly authorized by the Trust Depositor by all necessary limited liability company action.

 

(d)     This Agreement constitutes a legal, valid and binding obligation of the Trust Depositor enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization and similar laws relating to creditors’ rights generally and subject to general principles of equity.

 

(e)     The execution, delivery and performance of this Trust Agreement and the other Transaction Documents to which it is a party by the Trust Depositor, and the consummation of the transactions contemplated hereby and thereby, will not violate any material Applicable Law applicable to the Trust Depositor, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Trust Depositor is a party or by which the Trust Depositor or any of the Trust Depositor’s properties may be bound, or result in the creation or imposition of any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind upon any of its properties pursuant to the terms of any such mortgage, indenture, contract or other agreement, other than as contemplated by the Transaction Documents.

 

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

 

	 	
			Section 2.11

				
			Federal Income Tax Allocations.

			

 

(a)     It is the intent of the Trust Depositor and the Certificateholders that (i) for any period that the Trust Certificates are owned by a single beneficial owner for U.S. federal income tax purposes, the Trust will be disregarded as an entity separate from such beneficial owner for U.S. federal income tax purposes, and the Certificateholders (and the beneficial owner of the Trust Certificates), by acceptance of the Trust Certificates (or a beneficial interest therein), agree to take no action inconsistent with such treatment and (ii) for any period that the Trust Certificates are owned by more than one beneficial owner for U.S. federal income tax purposes, the Trust will be treated as a partnership for U.S. federal income tax purposes, other than a publicly traded partnership, the partners of which are the beneficial owners of the Trust Certificates, and the Certificateholders (and beneficial owners of the Trust Certificates), by acceptance of a Trust Certificate (or beneficial interest therein) agree to treat the Trust Certificates as equity and to take no action inconsistent with such treatment.

 

(b)     Neither the Trust Depositor nor any Certificateholder will, under any circumstances, and at any time, make an election on Internal Revenue Service Form 8832 or otherwise take any action that would cause the Trust to be treated as an association, publicly traded partnership or taxable mortgage pool taxable as a corporation for U.S. federal income tax purposes.

 

9

 

 

(c)     For any period that the Trust has two or more equity owners and is treated as a partnership for U.S. federal income tax purposes, the provisions of Section 2.11(d)-(g) shall apply.

 

(d)     With respect to each taxable year (or portion thereof) in which the Trust is classified as a partnership for U.S. federal income tax purposes, (i) a capital account (“Capital Account”) will be maintained by the Trust for each Certificateholder with respect to all items of income, deduction, gain, loss or credit and such items will be allocated to such Capital Accounts in a manner consistent with Section 704 of the Code, and (ii) without limiting the foregoing, upon liquidation of the Trust or at such time as a Certificateholder ceases to hold any Trust Certificates in the Trust, liquidating distributions will be made in accordance with the Capital Account balances of the Certificateholders (as determined after taking into account all required Capital Account adjustments for the taxable year during which such liquidation occurs) by the later of the end of the taxable year or, the date which is 90 days after the date of such liquidation. The provisions of this Section relating to Capital Accounts are intended to comply with such provisions and related provisions issued with respect to Section 704 of the Code and shall be interpreted consistently therewith. The Trust shall have the authority to make such adjustments to the Certificateholder’s Capital Accounts as may be required to cause the allocations made by the Trust to comply with such provisions.

 

(e)     With respect to each taxable year (or portion thereof) in which the Trust is classified as a partnership for U.S. federal income tax purposes, at least once each such taxable year of the Trust for U.S. federal income tax purposes (as determined under Section 706 of the Code, a “Fiscal Year”), after adjusting each Certificateholder’s Capital Account for all contributions and distributions with respect to such Fiscal Year, the Trust shall allocate all profits and losses and items thereof in the following order of priority: (i) first, profits and losses and items thereof shall be allocated in the manner and to the extent provided by (A) Treas. Regs. §1.704-1(b)(4), (B) Treas. Regs. §1.704-1(b)(2) (to comply with the substantial economic effect safe harbors), including, without limitation, Treas. Regs. §1.704-1(b)(2)(ii)(d) (the “qualified income offset”) and Treas. Regs. §1.704-1(b)(2)(iv) (capital accounting requirements) and (C) Treas. Regs. §1.704-2, including, without limitation, Treas. Regs. §§1.704-2(e) (provided that allocations pursuant to Treas. Regs. §1.704-2(e) shall be made to the Certificateholders pro rata in accordance with the capital each Certificateholder has contributed to the Trust), 1.704-2(i)(2), and 1.704-2(i)(4); and (ii) all remaining profits and losses and items thereof shall be allocated to the Certificateholders’ Capital Accounts in a manner such that, after such allocations have been made, the balance of each Certificateholder’s Capital Account (which may be a positive, negative, or zero balance) shall equal (A) the amount that would be distributed to such Certificateholder, determined as if the Trust were to sell all of its assets for the Section 704(b) Book Value (as defined below) thereof and distribute the proceeds thereof (net of any sales commissions and other similar transaction fees and payments required to be made to creditors) pursuant to the relevant legal documents setting forth such distributions, minus (B) the sum of (I) such Certificateholder’s share of the “partnership minimum gain” (as determined under Treas. Regs. §§1.704-2(d) and (g)(3)) and “partner minimum gain” (as determined under Treas. Regs. §1.704-2(i)), and (II) the amount, if any, that such Certificateholder is obligated (or is deemed for U.S. federal income tax purposes to be obligated) to contribute, in its capacity as a Certificateholder, to the capital of the Trust as of the last day of such Fiscal Year. For purposes of this Section 2.11, (i) the term “Section 704(b) Book Value” means, with respect to any Trust property, the Trust's adjusted basis for U.S. federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treas. Regs. §§1.704-1(b)(2)(iv)(d) through (g), provided that on the date of the contribution of an asset to the Trust, the Section 704(b) Book Value of any asset contributed to the Trust shall be equal to the fair market value of such asset on the date of such contribution, and (ii) the term “profits and losses” shall mean the items of profit and loss of the Trust (including separately stated items) as computed under Treas. Regs. §1.704-1(b)(2)(iv).

 

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(f)     With respect to each taxable year (or portion thereof) in which the Trust is classified as a partnership for U.S. federal income tax purposes, except as provided in this Section 2.11(f), each item of taxable income, gain, loss, deduction, or credit shall be allocated in the same manner as its correlative item of “book” items allocated pursuant to Section 2.11(e). In accordance with Section 704(c)(1)(A) of the Code (and the principles thereof) and Treas. Regs. §1.704-3, income, gain, loss and deduction with respect to any property contributed to the capital of the Trust, or after Trust property has been revalued under Treas. Regs. §1.704-1(b)(2)(iv)(f), shall, solely for U.S. federal, state and local tax purposes, be allocated among the Certificateholders so as to take into account any variation between the adjusted basis of such Trust property to the Trust for U.S. federal income tax purposes and its value as so determined at the time of the contribution or revaluation of Trust property.

 

(g)     In the event that the Trust is treated as a partnership for U.S. federal income tax purposes, the Servicer shall be the partnership representative within the meaning of Section 6223(a) of the Code. The partnership representative may, in its sole discretion, cause the Trust to make an election under Section 754 of the Code. The partnership representative shall (i) if the Trust is eligible, cause the Trust to elect, pursuant to Section 6221(b) of the Code, that Section 6221(a) of the Code shall not apply to the Trust or (ii) if the election in Section 6221(b) of the Code is not available, to the extent applicable, cause the Trust to make the election under Section 6226(a) of the Code.

 

	 	
			Section 2.12

				
			Covenant of Certificateholders.

			

 

Each Certificateholder agrees to be bound by the terms and conditions of the Trust Certificates and of this Trust Agreement, including any supplements or amendments hereto, and to perform the obligations of a Certificateholder as set forth therein or herein, in all respects as if it were a signatory hereto. This undertaking is made for the benefit of the Trust Depositor, the Trust, the Owner Trustee, the Trust Company and all other Certificateholders present and future.

 

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ARTICLE III

TRUST CERTIFICATES AND TRANSFER OF INTERESTS

 

	 	
			Section 3.01

				
			Initial Ownership.

			

 

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

 

	 	
			Section 3.02

				
			The Trust Certificates.

			

 

(a)     The Trust Certificates shall be substantially in the form set forth in Exhibit A hereto, with such changes as may be specified in a supplement to this Trust Agreement. Except as otherwise set forth in a supplement to this Trust Agreement, the Trust Certificates shall be issued from time to time in minimum Percentage Interests of 10% and integral multiples of 1% in excess thereof; provided that one Trust Certificate may be issued in a different denomination. The Trust Certificates shall be executed on behalf of the Trust by manual or facsimile signature of an authorized officer of the Owner Trustee. Trust Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of this Trust 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.

 

(b)     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.

 

	 	
			Section 3.03

				
			Authentication of Trust Certificates.

			

 

Concurrently with the initial transfer of the Initial Loans to the Trust pursuant to the Sale and Servicing Agreement, the Trust shall issue the Trust Certificates, in an aggregate Percentage Interest equal to 100%, executed by the Owner Trustee on behalf of the Trust, authenticated by the Certificate Registrar and delivered to or upon the written order of the Trust Depositor, signed by its chairman of the board, its chief executive officer, its chief financial officer, its president, any vice president, secretary or any assistant treasurer, without further limited liability company action by the Trust Depositor, in authorized denominations. 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 Certificate Registrar, by manual signature; such authentication shall constitute conclusive evidence that such Trust Certificate has been duly and validly authorized, issued, authenticated and delivered hereunder and, subject to the terms of this Agreement, fully paid and non-assessable. All Trust Certificates shall be dated the date of their authentication.

 

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			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, the Certificate Registrar shall provide for the registration of Trust Certificates and, subject to Section 3.10 hereof, of transfers and exchanges of Trust Certificates as herein provided. The Trustee shall be the initial Certificate Registrar. Promptly upon written request therefor from the Owner Trustee, the Certificate Registrar shall provide to the Owner Trustee in writing such information regarding or contained in the Certificate Register as the Owner Trustee may reasonably request. The Owner Trustee shall be entitled to rely (and shall be fully protected in relying) on such information.

 

(b)     Upon surrender for registration of transfer of any Trust Certificate at the office or agency maintained pursuant to Section 3.08, the Certificate Registrar shall cause the Owner Trustee to execute on behalf of the Trust and the Certificate Registrar shall 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 amount dated the date of authentication by the Certificate Registrar or any authenticating agent. At the option of a Certificateholder, Trust Certificates may be exchanged for other Trust Certificates of authorized denominations of a like aggregate amount upon surrender of the Trust Certificates to be exchanged at the office or agency maintained pursuant to Section 3.08.

 

(c)     Every Trust Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer and accompanied by IRS Form W-8 BEN, W-8 ECI or W-9, as applicable, and such other documentation as may be required by the Owner Trustee in order to comply with Applicable Law, each in a form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the registered Certificateholder or such registered Certificateholder’s attorney duly authorized in writing. Each Trust Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Certificate Registrar in accordance with its customary practice.

 

(d)     No service charge shall be made for any registration of transfer or exchange of Trust Certificates, but the Owner Trustee or the Certificate Registrar 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.

 

	 	
			Section 3.05

				
			Mutilated, Destroyed, Lost or Stolen Trust Certificates.

			

 

If (a) any mutilated Trust Certificate shall be surrendered to the Certificate Registrar, or if the Certificate Registrar and the Owner Trustee shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Certificate, and (b) there shall be delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be reasonably required by them to save each of them harmless, then in the absence of notice to the Trust that such Trust Certificate has been acquired by a protected purchaser, the Certificate Registrar shall cause the Owner Trustee on behalf of the Trust to execute and the Certificate Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like tenor and denomination. The Holder of such Trust Certificate shall pay the reasonable expenses and charges of the Certificate Registrar and the Owner Trustee in connection therewith. In connection with the issuance of any new Trust Certificate under this Section 3.05, the Owner Trustee or the Certificate Registrar 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 3.05 shall constitute conclusive evidence of ownership of a beneficial interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Certificate shall be found at any time.

 

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			Section 3.06

				
			Persons Deemed Owners.

			

 

Prior to due presentation of a Trust Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar or any paying agent or other agent thereof may treat the Person in whose name any Trust Certificate is registered in the Certificate Register 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 or any paying agent or other agent thereof shall be bound 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 Trustee or any other party acting as paying agent, the Owner Trustee, the Servicer and the Trust Depositor, within ten (10) Business Days after receipt by the Certificate Registrar of a written request therefor from the Trustee, the Owner Trustee, the Servicer or the Trust Depositor, a list, in such form as the Trustee or any other party acting as paying agent, the Owner Trustee, the Servicer or the Trust 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 Holders of Trust Certificates evidencing not less than 25% of the Percentage Interests 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 Trust Agreement or under the Trust Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Certificate Registrar shall, within five (5) Business Days after the receipt of such application, afford such applicants access during normal business hours to the current list of Certificateholders. Upon receipt of any such application, the Certificate Registrar will promptly notify the Trust Depositor by providing a copy of such application and a copy of the list of Certificateholders produced in response thereto. Each Certificateholder, by receiving and holding a Trust Certificate, shall be deemed to have agreed not to hold any of the Trust Depositor, the Certificate Registrar and 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 Certificate Registrar 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 Certificate Registrar in respect of the Trust Certificates and the Transaction Documents may be served. The Certificate Registrar initially designates the office of the Certificate Registrar at the Corporate Trust Office as its office for such purposes. The Certificate Registrar shall give prompt written notice to the Trust Depositor, any paying agent, the Owner Trustee and 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 Trustee as Paying Agent.

			

 

The Trustee shall make distributions to Certificateholders from the Certificate Account pursuant to Section 5.02 and shall report the amounts of such distributions to the Owner Trustee. Any paying agent of the Trustee shall have the revocable power to withdraw funds from the Certificate Account for the purpose of making the distributions referred to above. The Owner Trustee (acting at the written direction of the Administrator or the Certificateholder) may revoke such power and remove the Trustee or any other party acting as paying agent of the Trustee, if the Administrator or the Certificateholder determines in its sole discretion that the Trustee or any other party acting as paying agent shall have failed to perform its obligations under this Trust Agreement in any material respect. The paying agent initially shall be U.S. Bank National Association, as Trustee under the Indenture. U.S. Bank National Association shall be permitted to resign as paying agent upon 30 days’ written notice to the Owner Trustee and the Servicer. In the event that U.S. Bank National Association shall no longer be the paying agent, the Owner Trustee (acting at the written direction of the Administrator or the Certificateholder) shall appoint a successor to act as paying agent (which shall be a bank or trust company). The Owner Trustee shall cause the Trustee and 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 the Trustee and such successor paying agent or additional paying agent shall agree with the Owner Trustee that, as paying agent, the Trustee and 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 Trustee or any other party acting as 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, 7.04, 7.05, 7.06, 8.01 and 8.02 shall apply to U.S. Bank National Association or the Owner Trustee also in its role as paying agent and Certificate Registrar as if U.S. Bank National Association and the Owner Trustee were named in such Sections, for so long as U.S. Bank National Association or the Owner Trustee shall act as paying agent or Certificate Registrar and, to the extent applicable, to any other paying agent or certificate registrar 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

				
			Transfer Restrictions.

			

 

The Trust Certificates may not be offered, transferred or sold except to the Trust Depositor or an Affiliate thereof or to Qualified Institutional Buyers (“QIBs”) for purposes of Rule 144A under the Securities Act who are Qualified Purchasers for purposes of Section 3(c)(7) under the 1940 Act, and who are United States persons (as defined in Section 7701(a)(30) of the Code) in reliance on an exemption from the registration requirements of the Securities Act.

 

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(a)     The Trust Certificates have not been registered or qualified under the Securities Act, or any state securities law. No transfer, sale, pledge or other disposition of any Trust Certificate shall be made unless such disposition is made pursuant to an effective registration statement under the Securities Act and effective registration or qualification under applicable state securities laws, or is made in a transaction which does not require such registration or qualification. No transfer of any Trust Certificates shall be made if such transfer would require the Trust to register as an “investment company” under the 1940 Act. In the event that a transfer is to be made, the transferee shall execute and deliver to the Owner Trustee and Certificate Registrar a certification substantially in the form of Exhibit C hereto. In the event that such transfer is to be made in reliance on the availability of an exemption under the Securities Act, the Owner Trustee may require the prospective transferee to provide an Opinion of Counsel satisfactory to it that such transfer may be made pursuant to an exemption from the Securities Act, which Opinion of Counsel shall not be an expense of the Owner Trustee or of the Trust.

 

(b)     Neither the Trust Certificates nor any beneficial interest in such Trust Certificates may be acquired or held by or with plan assets of any employee benefit plans, retirement arrangements, individual retirement accounts or Keogh plans subject to either Part 4, Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Code (a “Benefit Plan”) and any such purported transfer shall not be effective. Each transferee of a Trust Certificate shall be required to represent (a) that it is not a Benefit Plan and is not acquiring such Trust Certificate with the plan assets of a Benefit Plan and (b) that if such Trust Certificate is subsequently deemed to be a plan asset of such a Benefit Plan, it will dispose of such Trust Certificate.

 

(c)     Each Trust Certificate will bear the legends set forth in paragraph 6 of Exhibit C hereto.

 

(d)     No transfer, sale, pledge or other disposition of one or more Trust Certificates (a “Transfer”) shall be made unless the Percentage Interest of the Trust Certificates so Transferred is no less than ten (10%) percent.

 

(e)     Notwithstanding any other provision herein or elsewhere, other than to determine that any certification delivered to the Owner Trustee or Certificate Registrar, as the case may be, pursuant to Section 3.10(a) hereof is substantially in the form of Exhibit C hereto and to determine (including, without limitation, based on one or more certificates from the Person transferring such Trust Certificate and/or the Note Registrar) that any transfer of a Trust Certificate described in such certification delivered to the Owner Trustee complies with Section 3.10(d), the Owner Trustee and Certificate Registrar shall have no obligation to determine whether or not any transfer or exchange or proposed or purported transfer or exchange of a Trust Certificate is permitted under or in accordance with this Agreement, the Securities Act or applicable state securities laws, and the Owner Trustee and Certificate Registrar shall have no personal liability to any Person in connection with any transfer or exchange or proposed or purported transfer or exchange (and/or registration thereof).

 

(f)     No Transfer of a Trust Certificate or any interest therein shall be made unless the Trust and the Owner Trustee (and any of their agents) receive from the prospective transferee a representation and warranty that the prospective transferee is a “United States person” as defined in section 7701(a)(30) of the Code and a correct, complete and properly executed Internal Revenue Service Form W-9 (or applicable successor form). If any holder of a Trust Certificate or any interest therein (other than the Trust Depositor as the initial Certificateholder) fails to provide the Trust and the Owner Trustee (and any of their agents) with the properly completed and signed tax certification specified above, the acquisition of its interest in the Trust Certificates shall be void ab initio.

 

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(g)      No Transfer of a Trust Certificate or any interest therein shall be made unless the transferor delivers to the transferee, with a copy to the Trust and the Owner Trustee, prior to the Transfer of the Trust Certificate or any interest therein, a properly completed certificate, in a form reasonably acceptable to the transferee and the Trust, stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person within the meaning of Section 1446(f)(2) of the Code (such certificate, a “Non-Foreign Status Certificate”). Each transferor of a Trust Certificate or any interest therein acknowledges, or by acquiring the Trust Certificate or any interest therein will be deemed to acknowledge, that the failure to provide a Non-Foreign Status Certificate to the transferee may result in withholding on the amount realized on its disposition of the Trust Certificate.

 

(h)     No Transfer of a Trust Certificate or any interest therein, including the initial issuance to the Trust Depositor, shall be made, unless the prospective transferee acknowledges (other than the Trust Depositor) and agrees that no Trust Certificate or any interest therein may be acquired or owned by any Person that is classified for U.S. federal income tax purposes as a partnership, subchapter S corporation or grantor trust unless (i)(A) none of the direct or indirect beneficial owners of any interest in such Person have or ever will have more than 40% of the value of its interest in such Person attributable to the aggregate interest of such Person in the Trust Certificates and any other equity interests of the Trust, and (B) it is not and will not be a principal purpose of the arrangement involving the investment of such Person in the Trust Certificates and any other equity interests of the Trust to permit any partnership to satisfy the 100 partner limitation of Treasury Regulation Section 1.7704-1(h)(1)(ii) or (ii) such Person obtains an opinion of nationally recognized U.S. tax counsel reasonably acceptable to the Trust that such transfer will not cause the Trust to be treated as a publicly traded partnership taxable as a corporation.

 

(i)     No Transfer of a Trust Certificate or any interest therein, including the initial issuance to the Trust Depositor, shall be made unless the prospective transferee acknowledges and agrees that no Trust Certificate may be acquired, and no Certificateholder (or holder of an interest in a Trust Certificate) may sell, transfer, assign, participate, pledge or otherwise dispose of a Trust Certificate (or any interest therein) or other equity interest in the Trust or cause a Trust Certificate (or any interest therein) or other equity interest in the Trust to be marketed, (i) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treasury Regulation Section 1.7704-1(b), including without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations or (ii) if such acquisition, sale, transfer, assignment, participation, pledge or other disposition would cause the combined number of holders of Trust Certificates and other equity interests in the Trust to be more than 88.

 

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(j)     No Transfer of a Trust Certificate or any interest therein, including the initial issuance to the Trust Depositor, shall be made unless the prospective transferee acknowledges and agrees that it will not participate in the creation or other transfer of any financial instrument or contract the value of which is determined in whole or in part by reference to the Trust (including the amount of distributions by the Trust, the value of the Trust’s assets, the results of the Trust’s operation or the Trust Certificates).

 

(k)     No Transfer of a Trust Certificate or any interest therein, including the initial issuance to the Trust Depositor, shall be made unless the prospective transferee acknowledges and agrees that any sale, transfer, assignment, participation, pledge, or other disposition of a Trust Certificate that would violate any of the three preceding paragraphs above or otherwise cause the Trust to be unable to rely on the “private placement” safe harbor of Treasury Regulation Section 1.7704-1(h) will be void and of no force or effect, and it will not transfer any interest in its Trust Certificates to any person that does not agree to be bound by the three preceding paragraphs above or by this paragraph.

 

(l)     Unless the Trust Depositor, Trust and Owner Trustee have received an Opinion of Counsel from Dechert LLP or other nationally recognized tax counsel that the restriction on the proposed acquisition of a Trust Certificate (or any interest therein) described by this paragraph is no longer necessary to conclude that any such acquisition (and subsequent resale of the applicable Notes described below) will not cause the Treasury Regulations under Section 385 of the Code to apply to such Notes in a manner that could cause a material adverse effect on the Trust or the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (i) a Section 385 Certificateholder cannot acquire a Trust Certificate (or any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder owns any Notes or (B) a Section 385 Controlled Partnership of such expanded group owns any Notes and (ii) a Section 385 Certificateholder cannot hold a Trust Certificate (or any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note or (B) a Section 385 Controlled Partnership of such expanded group acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note. The preceding sentence shall not apply if the Noteholder or potential Noteholder is a U.S. corporate member of the same U.S. corporate “affiliated group” (as defined in Section 1504 of the Code) filing a consolidated federal income tax return that includes each of any applicable related Section 385 Certificateholders (including in the case of a partnership, the relevant “expanded group partner” (as defined in Treasury Regulation Section 1.385-3(g)(12)). If a Certificateholder (or holder of an interest in a Trust Certificate) fails to comply with the foregoing requirements, the Trust and Depositor are authorized, at their discretion, to compel such Certificateholder (or holder of an interest in a Trust Certificate) to sell its Trust Certificate (or interest therein) to a Person whose ownership complies with this subsection so long as such sale does not otherwise cause a material adverse effect on the Trust or cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.

 

(m)     Each holder or beneficial owner of a Trust Certificate (or any interest therein) acknowledges and agrees, and will be deemed to have acknowledged and agreed, that, for so long as the Trust is disregarded as separate from it for U.S. federal income tax purposes, neither a Trust Certificate (or any interest therein) or a Note (or any interest therein) may be transferred by it (except to a person that is disregarded as separate from such holder or beneficial owner for U.S. federal income tax purposes), unless it shall have received written advice of Dechert LLP or an opinion of nationally recognized U.S. tax counsel reasonably acceptable to the Trust that such transfer will not cause the Trust to be treated as a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes or otherwise to be subject to U.S. federal income tax on a net basis.

 

(n)     Each holder or beneficial owner of a Trust Certificate (or any interest therein) acknowledges and agrees, and will be deemed to have acknowledged and agreed, that, for so long as the Trust is classified as a partnership for U.S. federal income tax purposes, it shall not acquire any Trust Certificates (or any other interest treated as equity in the Issuer for U.S. federal income tax purposes) if such transfer would cause the Trust to be treated as a disregarded entity for U.S. federal income tax purposes, unless it shall have received written advice of Dechert LLP or an opinion of nationally recognized U.S. tax counsel reasonably acceptable to the Trust that such transfer will not cause the Trust to be treated as a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes or otherwise to be subject to U.S. federal income tax on a net basis.

 

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ARTICLE IV

ACTIONS BY OWNER TRUSTEE

 

	 	
			Section 4.01

				
			Prior Notice to and Consent by Certificateholders with Respect to Certain Matters.

			

 

With respect to the following matters, the Trust shall not take action unless either (i), at least ten (10) Business Days before the taking of such action, the Owner Trustee shall have notified the Certificateholders and the Trust Depositor (who shall promptly forward such notice to any Rating Agency) in writing of the proposed action and the Certificateholders holding a Percentage Interest of not less than 66-2/3% shall not, prior to the tenth (10th) Business Day after such notice is given, have notified the Owner Trustee in writing that such Certificateholders have withheld consent or provided alternative direction or (ii) Certificateholders holding a Percentage Interest of not less than 66-2/3% direct the Owner Trustee to take action with respect to:

 

(a)     the initiation of any claim or lawsuit by the Trust and the compromise of any action, claim or lawsuit brought by or against the Trust;

 

(b)     the election by the Trust 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 or any other Transaction Document in circumstances where the consent of any Noteholder is required;

 

(d)     the amendment of the Indenture or any other Transaction Document in circumstances where the consent of any Noteholder is not required and such amendment may reasonably be expected to adversely affect the interest of the Certificateholders;

 

(e)     such Certificateholders direct the Owner Trustee to initiate any amendment to any Transaction Document or to seek any waiver or other modification thereof;

 

(f)     the appointment pursuant to the Indenture of a successor paying agent or Trustee or pursuant to this Trust Agreement of a successor Certificate Registrar, or paying agent, or the consent to the assignment by the Trustee or Certificate Registrar of its obligations under the Indenture or this Trust Agreement, as applicable;

 

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(g)     the consent to the calling or waiver of any Event of Default of any Transaction Document or such Certificateholders direct the Owner Trustee to call or waive any such Event of Default;

 

(h)     the consent to the assignment of the Trustee or Servicer of their respective obligations under any Transaction Document;

 

(i)     except as provided in Article IX hereof, the dissolution, termination or liquidation of the Trust in whole or in part;

 

(j)     the merger or consolidation of the Trust with or into any other entity, or conveyance or transfer of all or substantially all of the Trust’s assets to any other entity;

 

(k)     the incurrence, assumption or guaranty by the Trust of any indebtedness other than as set forth in this Agreement or the Transaction Documents;

 

(l)     the doing of any act which would make it impossible to carry on the ordinary business of the Trust as described in Section 2.03 hereof;

 

(m)     the confession of a judgment against the Trust;

 

(n)     the possession of Loan Assets or other Collateral, or assignment of the Trust’s right to property, for other than a purpose permitted under Section 2.03;

 

(o)     the lending by the Trust of any funds to any entity, except as permitted or required under the Sale and Servicing Agreement with respect to the Loan Assets or other Collateral;

 

(p)     the change in the Trust’s purpose and powers from those set forth in this Trust Agreement; or

 

(q)     the removal or replacement of the Servicer or the Trustee.

 

In addition, the Trust shall not commingle its assets with those of any other entity other than as permitted under the Transaction Documents. The Trust shall maintain its financial and accounting books and records separate from those of any other entity; provided that the Trust may be consolidated with another entity in accordance with U.S. generally accepted accounting principles and, when so consolidated will note on its consolidated financial statement that the Trust’s assets are not available to satisfy the claims of creditors of such consolidating Person. Except as expressly set forth herein, the Trust shall pay its indebtedness, operating expenses and liabilities from its own funds, and the Trust shall not pay the indebtedness, operating expenses and liabilities of any other entity.

 

20

 

 

	 	
			Section 4.02

				
			Action by Certificateholders with Respect to Bankruptcy.

			

 

To the extent permitted by Applicable Law, the Trust shall not have the power, without the unanimous prior written approval of the Certificateholders, and to the extent otherwise consistent with the Transaction Documents, to (i) institute proceedings to have the Trust declared or adjudicated as bankrupt or insolvent, (ii) consent to the institution of bankruptcy or insolvency proceedings against the Trust, (iii) file a petition or consent to a petition seeking reorganization or relief on behalf of the Trust under any applicable federal or state law relating to bankruptcy, (iv) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any similar official) of the Trust or a substantial portion of the property of the Trust, (v) make any assignment for the benefit of the Trust’s creditors, (vi) cause the Trust to admit in writing its inability to pay its debts generally as they become due, or (vii) take any action, or cause the Trust to take any action, in furtherance of any of the foregoing (any of the above, a “Bankruptcy Action”). So long as the Indenture remains in effect, and to the extent permitted by Applicable Law, no Certificateholder shall have the power to take and shall not take any Bankruptcy Action with respect to the Trust or direct the Owner Trustee to take any Bankruptcy Action with respect to the Trust.

 

	 	
			Section 4.03

				
			Restrictions on Certificateholders’ Power.

			

 

The Certificateholders 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 Trust or the Owner Trustee under this Trust Agreement or any of the Transaction Documents or would cause a violation of any of the Transaction Documents or would be contrary to or inconsistent with Section 2.03, nor shall the Owner Trustee be obligated to follow any such direction, if given.

 

	 	
			Section 4.04

				
			Majority Control.

			

 

Except as expressly provided herein or in any supplement to this Trust Agreement, any action or direction that may be taken or given by the Certificateholders under this Trust Agreement may not be taken or given unless agreed to or directed by the Majority Certificateholders. Except as expressly provided herein or in any supplement to this Trust Agreement, any written notice of the Certificateholders delivered pursuant to this Trust Agreement shall be effective if signed by Majority Certificateholders at the time of the delivery of such notice.

 

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ARTICLE V

APPLICATION OF TRUST FUNDS; CERTAIN DUTIES

 

	 	
			Section 5.01

				
			Establishment of Trust Account.

			

 

(a)     For the benefit of the Certificateholders, the Trustee on behalf of the Trust shall establish and maintain in the name of the Trust an Eligible Deposit Account with the Trustee (the “Certificate Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. Each Qualified Institution maintaining the Certificate Account shall agree in writing (and the Trustee does hereby so agree) to comply with all instructions originated by the Trustee or any other party acting as paying agent, or Owner Trustee directing the disposition of funds in the account without the further consent of the Trust.

 

(b)     The Trust shall possess all right, title and interest in all funds on deposit from time to time in the Certificate Account and in all proceeds thereof. Except as provided in Section 3.09 or as otherwise expressly provided herein, the Certificate Account shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders. If, at any time, the Certificate Account ceases to be an Eligible Deposit Account, the Trustee shall within ten (10) Business Days (or such longer period, not to exceed 30 calendar days, as to which any Rating Agency may consent) establish a new Certificate Account as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Certificate Account.

 

	 	
			Section 5.02

				
			Application of Trust Funds.

			

 

(a)     On each Payment Date and at and in accordance with the instruction of the Servicer, the Trustee shall distribute to the Certificateholders, pro rata based on their respective Percentage Interests, the amounts deposited in the Certificate Account received from the Trustee pursuant to the Indenture or the Sale and Servicing Agreement.

 

(b)     On each Payment Date, the Trustee shall, or shall cause the Servicer to, make available to each Certificateholder via its website at http://pivot.usbank.com the statement or statements provided to the Trustee by the Servicer pursuant to the Indenture and the Sale and Servicing Agreement with respect to such Payment Date.

 

(c)     In the event that any withholding tax is imposed on the Trust’s payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to the Certificateholder in accordance with this Section 5.02. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee or the Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by Applicable Law, pending the outcome of such proceedings); provided that the Trustee shall not be responsible for determining whether any such tax is owed and may rely for such purposes on the written direction of the Trust Depositor or Servicer. The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 5.02(c). In the event that a Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee or the Trustee shall reasonably cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees to reimburse the Owner Trustee and the Trustee, in its capacity as paying agent, for any out-of-pocket expenses incurred. The Certificateholders shall supply the Owner Trustee, the Trustee and any paying agent with Internal Revenue Service forms, with appropriate supporting documentation, and such other certificates, information or forms that the Owner Trustee, the Trustee or any paying agent may request from time to time in connection with any withholding tax or the application for a refund thereof.

 

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			Section 5.03

				
			Method of Payment.

			

 

Subject to Section 9.01(c), distributions required to be made to Certificateholders on any Payment Date shall be made to each Certificateholder of record on the preceding Record Date either by wire transfer, in immediately available funds, to the account of such Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have provided to the Certificate Registrar and the Trustee or any other party acting as paying agent appropriate written instructions at least five (5) 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 Moneys; No Interest.

			

 

Subject to Sections 5.01 and 5.02, moneys received by the Owner Trustee, the Trustee or any paying agent hereunder shall be held uninvested, need not be segregated in any manner except to the extent required by any Applicable Law or the Sale and Servicing Agreement and may be deposited under such general conditions as may be prescribed by any Applicable Law, and neither a paying agent, the Trustee, the Trust Company nor the Owner Trustee shall be liable for any interest thereon.

 

	 	
			Section 5.05

				
			Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others.

			

 

The Trust Depositor shall (a) maintain (or cause to be maintained) the books of the Trust on a calendar year basis on the accrual method of accounting, (b) deliver (or cause to be delivered) to each Certificateholder, as may be required by the Code and applicable Treasury Regulations, such information as may be required (including, if applicable, Schedule K-1) to enable each Certificateholder to prepare its federal and state income tax returns, (c) prepare or cause to be prepared, and file, or cause to be filed, all tax returns, if any, relating to the Trust (including, if applicable, a partnership information return, IRS Form 1065) and in writing direct the Owner Trustee to make such elections as from time to time may be required or appropriate under any applicable state or federal statute or any rule or regulation thereunder so as to maintain the Trust’s characterization as a partnership for federal income tax purposes or an entity that is disregarded as separate from its sole beneficial owner for federal income tax purposes, (d) collect or cause to be collected any withholding tax as described in and in accordance with Section 5.02(c) with respect to income or distributions to Certificateholders and (e) upon the request of the Trust, provide to necessary parties such reasonably current information as is specified in paragraph (d)(4) of Rule 144A under the Securities Act. The Owner Trustee shall make all elections pursuant to this Section 5.05 as directed by the Trust Depositor in writing.

 

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			Section 5.06

				
			Signature on Returns; Partnership Representative.

			

 

(a)     The Servicer shall sign on behalf of the Trust the tax returns of the Trust, and any other returns as may be required by law if any, as the same shall be furnished to it in execution form by the Trust Depositor, unless Applicable Law requires a Certificateholder to sign such documents, in which case such documents shall not be furnished to the Servicer, but shall be furnished to and signed by the Trust Depositor so long as it is a Certificateholder, in its capacity as “partnership representative” (if applicable), or such other Certificateholder as may have been designated “partnership representative” (if applicable). In executing any such return, the Servicer shall rely entirely upon, and shall have no personal liability for, information or calculations provided by the Trust Depositor.

 

(b)     In the event the Trust Depositor is a Certificateholder and the Trust is characterized as a partnership, the Trust Depositor shall be the “partnership representative” of the Trust pursuant to the Code. In the event the Trust receives a notice of final partnership administrative adjustment under Section 6231(a)(3) of the Code, the Trust shall make an election pursuant to Section 6226 of the Code and shall comply with all of the requirements and procedures required in connection with such election.

 

ARTICLE VI

AUTHORITY AND DUTIES OF OWNER TRUSTEE

 

	 	
			Section 6.01

				
			General Authority.

			

 

Each of the Owner Trustee, the Servicer, the Administrator and the Trust Depositor shall have power and authority, and each is hereby authorized and empowered, in the name and on behalf of the Trust, to execute and deliver the Transaction Documents to which the Trust is to be a party and each certificate or other document attached as an Exhibit to or contemplated by the Transaction Documents to which the Trust is to be a party and any amendment or other agreement or instrument, in each case, in such form as the Owner Trustee, the Servicer, the Administrator or the Trust Depositor shall approve, as evidenced conclusively by the Owner Trustee’s, the Servicer’s, the Administrator’s or the Trust Depositor’s execution thereof. In addition to the foregoing, the Owner Trustee shall have power and authority and hereby is further authorized (but shall not be obligated) to take all actions required of the Trust pursuant to the Transaction Documents. The Trust and the Owner Trustee are hereby authorized to delegate such power and authority, or any portion thereof, with respect to the duties and obligations of the Trust and/or the Owner Trustee under this Agreement and the other Transaction Documents to the Servicer and the Administrator. The Owner Trustee shall have power and authority and hereby is further authorized from time to time to take such action as the Servicer, the Trust Depositor or the Administrator recommends and directs with respect to the Transaction Documents.

 

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			Section 6.02

				
			General Duties.

			

 

It shall be the duty of the Owner Trustee to discharge (or cause to be discharged) all of the duties expressly required to be performed by the Owner Trustee under the terms of this Agreement in the interest of the Certificateholders, subject to the Transaction 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 Transaction Documents to the extent the Trust Depositor has agreed hereunder or the Servicer has agreed in the Sale and Servicing Agreement or the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee or of the Trust under any Transaction Document, and the Owner Trustee shall not be held personally liable for the default or failure of the Trust Depositor, the Administrator or the Servicer to carry out its obligations under the Sale and Servicing Agreement, the Administration Agreement or this Trust Agreement, as applicable.

 

	 	
			Section 6.03

				
			Action upon Instruction.

			

 

(a)     Subject to Article IV and Section 7.01 and in accordance with the terms of the Transaction Documents, the Certificateholders may by written instruction direct the Owner Trustee in the management of the Trust. Such direction may be exercised at any time by written instruction to the Owner Trustee of the Certificateholders pursuant to Article IV.

 

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

 

(c)     Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Trust Agreement or under any Transaction Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction as to the course of action to be adopted and stating that if the Owner Trustee shall not have received appropriate instruction within ten (10) Business 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 Transaction Documents as it shall deem to be in the best interests of the Certificateholders and shall have no personal liability to any Person for such action or inaction. To the extent the Owner Trustee acts or refrains from acting in good faith in accordance with any written instruction received from Majority Certificateholders, the Owner Trustee shall not be personally liable on account of such action or inaction to any Person. If the Owner Trustee shall not have received appropriate instruction within ten (10) Business 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 Transaction Documents as it shall deem to be in the best interests of the Certificateholders and shall have no personal liability to any Person for such action or inaction.

 

25

 

 

(d)     In the event that the Owner Trustee is unsure as to the application of any provision of this Trust Agreement or any Transaction 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 Trust 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 or permitted 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 Certificateholders requesting instruction and stating that if the Owner Trustee shall not have received appropriate instruction within ten (10) Business 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 Transaction Documents as it shall deem to be in the best interests of the Certificateholders, and shall have no personal liability to any Person for such action or inaction. To the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received from Majority Certificateholders, the Owner Trustee shall not be personally liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within ten (10) Business 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 Transaction Documents as it shall deem to be in the best interests of the Certificateholders, and shall have no personal 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 Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, the Transaction Documents or any document contemplated hereby or thereby, except as expressly provided by the terms of this Trust Agreement or in any document or written instruction received by the Owner Trustee pursuant to Section 6.03; and no implied duties (including fiduciary duties) or obligations shall be read into this Trust Agreement or any other Transaction Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing or amending 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, preparing or filing any tax, qualification to do business or securities law filing or report, monitoring or enforcing the satisfaction of any risk retention requirements, the execution or filing of any documents or filings with the Commission for the Trust or recording this Trust Agreement or any Transaction 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 on any part of the Trust Estate that result from actions by, or claims against, the Owner Trustee in its individual capacity that are not related to the Trust, this Trust Agreement, the Trust Company’s serving as Owner Trustee or the ownership or the administration of the Trust Estate.

 

26

 

 

	 	
			Section 6.05

				
			Restrictions.

			

 

(a)     The Owner Trustee shall not take any action that, (i) is inconsistent with the purposes of the Trust set forth in Section 2.03 or (ii) to the actual knowledge of a Responsible Officer of the Owner Trustee, would result in the Trust’s becoming taxable as a corporation for federal income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section 6.05.

 

(b)     Notwithstanding anything contained herein to the contrary, the Owner Trustee shall not be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such action will (i) require the registration with, licensing by or the taking of any other similar action in respect of, any state or other governmental authority or agency of any jurisdiction other than the State of Delaware by or with respect to the Owner Trustee; (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivisions thereof in existence on the date hereof other than the State of Delaware becoming payable by the Owner Trustee; or (iii) subject the Owner Trustee to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts unrelated to the consummation of the transactions by the Owner Trustee contemplated hereby. The Owner Trustee shall be entitled to obtain advice of counsel (which advice shall be an expense of the Trust) to determine whether any action required to be taken pursuant to the Agreement results in the consequences described in clauses (i), (ii) and (iii) of the preceding sentence. In the event that said counsel advises the Owner Trustee that such action will result in such consequences, the Owner Trustee may, or if instructed to do so by the Trust Depositor, shall appoint an additional trustee pursuant to Section 10.05 hereof to proceed with such action.

 

ARTICLE VII

CONCERNING THE OWNER TRUSTEE

 

	 	
			Section 7.01

				
			Acceptance of Trusts and Duties.

			

 

The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder but only upon the terms of this Trust Agreement. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the Trust Estate upon the terms of this Trust Agreement and the other Transaction Documents. The Owner Trustee shall not be personally answerable or accountable hereunder or under any other Transaction Document under any circumstances, except to the Trust and the Certificateholders (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. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence):

 

(a)     the Owner Trustee shall not be personally liable for any error of judgment made by a Responsible Officer of the Owner Trustee which did not result from gross negligence or willful misconduct on the part of such Responsible Officer;

 

27

 

 

(b)     the Owner Trustee shall not be personally liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Trust Depositor, the Servicer or of Certificateholders holding such Percentage Interest as is required with respect thereto under this Agreement or the applicable Transaction Documents;

 

(c)     no provision of this Trust Agreement or any other Transaction Document shall require the Owner Trustee to expend or risk its own funds or otherwise incur any personal financial liability in the performance of any of its rights or powers hereunder or under any Transaction Document if the Owner 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;

 

(d)     under no circumstances shall the Owner Trustee be personally liable for indebtedness evidenced by or arising under any of the Transaction Documents, including the principal of and interest on the Notes;

 

(e)     the Owner Trustee shall not be personally responsible (i) for or in respect of the validity or sufficiency of this Trust Agreement or for the due execution hereof by the Trust Depositor, (ii) for the form, character, genuineness, sufficiency, value or validity of any of the Trust Estate, or (iii) for or in respect of the validity or sufficiency of the Transaction Documents, other than the Owner Trustee’s due execution of the Trust Certificate on behalf of the Trust, and the Owner Trustee shall in no event assume or incur any personal liability, duty, or obligation to any Noteholder or any Certificateholder other than as expressly provided for herein or expressly agreed to in the Transaction Documents;

 

(f)     the Owner Trustee shall not be personally liable for the default or misconduct of the Trust Depositor, the Trustee, the Certificate Registrar, the Administrator or the Servicer or any other Person under any of the Transaction Documents or otherwise and the Owner Trustee shall have no obligation or personal liability to monitor or perform the obligations of the Trust or the Certificate Registrar under this Trust Agreement or the other Transaction Documents that are required to be performed by the Trustee under the Indenture, the Administrator under the Administration Agreement or the Servicer or the Trust Depositor under the Sale and Servicing Agreement;

 

(g)     the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement, or to institute, conduct or defend any litigation under this Trust Agreement or otherwise or in relation to this Trust Agreement or any other Transaction Document, at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Trust Agreement or in any other Transaction Document shall not be construed as a duty, and the Owner Trustee shall not be personally answerable therefor other than to the Trust and the Certificateholders for its willful misconduct, bad faith or gross negligence in the performance of any such act;

 

28

 

 

(h)     the Owner Trustee shall not be liable or responsible for delays or failures in the performance of its obligations hereunder arising out of or caused, directly or indirectly, by circumstances beyond its control (such acts include but are not limited to acts of God, strikes, lockouts, riots, acts of war and interruptions, losses or malfunctions of utilities, computer (hardware or software) or communications services); it being understood that the Owner Trustee shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances;

 

(i)     to the fullest extent permitted by law and notwithstanding anything in this Agreement to the contrary, the Owner Trustee shall not be personally liable for (x) special, consequential or punitive damages, however styled, including, without limitation, lost profits or (y) the acts or omissions of any nominee, correspondent, clearing agency or securities depository through which it holds the Trust’s securities or assets;

 

(j)     each of the parties hereto hereby agrees and, as evidenced by its acceptance of any benefits hereunder, any Certificateholder agrees that the Owner Trustee in any capacity (x) has not provided and will not provide in the future, any advice, counsel or opinion regarding the tax, regulatory, financial, investment, securities law or insurance implications and consequences of the formation, funding and ongoing administration of the Trust, including, but not limited to, income, gift and estate tax issues, insurable interest issues, risk retention issues, doing business or other licensing matters and the initial and ongoing selection and monitoring of financing arrangements, (y) has not made any investigation as to the accuracy of any representations, warranties or other obligations of the Trust under the Transaction Documents and shall have no liability in connection therewith and (z) the Owner Trustee has not prepared or verified, and shall not be responsible or liable for, any information, disclosure or other statement in any disclosure or offering document or in any other document issued or delivered in connection with the sale or transfer of the Notes; and

 

(k)     It shall be the Administrator's duty and responsibility, and not the Owner Trustee's duty or responsibility, to cause the Trust to respond to, defend, participate in or otherwise act in connection with any regulatory, administrative, governmental, investigative or other proceeding or inquiry relating in any way to the trust, its assets or the conduct of its business.

 

	 	
			Section 7.02

				
			Furnishing of Documents.

			

 

The Owner Trustee shall furnish to the Certificateholders duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Transaction Documents.

 

	 	
			Section 7.03

				
			Representations and Warranties.

			

 

The Owner Trustee hereby represents and warrants to the Trust Depositor, for the benefit of the Trust Depositor and Certificateholders, that:

 

(a)     It is national banking association, duly organized and validly existing in good standing under the laws of the United States of America. It has all requisite power and authority to execute, deliver and perform its obligations under this Trust Agreement.

 

29

 

 

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

 

(c)     Neither the execution nor the delivery by it of this Trust Agreement, nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terms or provisions hereof, will (i) contravene any federal or Delaware state law, governmental rule or regulation governing the trust powers of the Trust Company or any judgment or order binding on it, (ii) constitute any default under its charter documents or organizational documents or any indenture, mortgage, contract, long-term lease, license or other agreement or instrument to which it is a party or by which any of its properties may be bound or (iii) result in the creation or imposition of any lien, charge or encumbrance on the Trust Estate resulting from actions by or claims against the Owner Trustee individually which are unrelated to this Agreement or the other Transaction Documents.

 

(d)     This Agreement constitutes a legal, valid and binding obligation of the Owner Trustee enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization and similar laws relating to creditors’ rights generally and creditors of national banking associations and subject to general principles of equity.

 

(e)     To the Owner Trustee’s best knowledge, there are no proceedings or investigations pending, or to the Owner Trustee’s knowledge threatened, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Owner Trustee or its properties: (A) asserting the invalidity of this Trust Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by this Trust Agreement or (C) 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 Trust Agreement.

 

	 	
			Section 7.04

				
			Reliance; Advice of Counsel.

			

 

(a)     The Owner Trustee shall incur no personal 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 an appropriate Person or Persons. The Trustee need not investigate any fact or matter stated in any such document, including verifying the correctness of any numbers or calculations. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any Person 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 may for all purposes hereof require and rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officer or agent of an appropriate Person or Persons or of any manager thereof, as to such fact or matter and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon.

 

30

 

 

(b)     In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Trust Agreement or the other Transaction Documents, the Owner Trustee may act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trustee shall not be personally liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care, and may consult with counsel, accountants and other skilled Persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be personally 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. The Owner Trustee shall have no duty to monitor or supervise any other trustee, the Certificate Registrar, a paying agent, the Trust Depositor, the Holders, the Servicer, any Subservicer, the Trustee, the Administrator, any agent, independent contractor, officer, employee or manager of the Trust, any delegatee of any trustee, or any other Person.

 

	 	
			Section 7.05

				
			Not Acting in Individual Capacity.

			

 

Except as provided in this Article VII, in performing its duties hereunder, the Trust Company acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Trust Agreement or any Transaction Document shall look only to the Trust Estate for payment or satisfaction thereof.

 

	 	
			Section 7.06

				
			Owner Trustee Not Liable for Trust Certificates or Loans.

			

 

The recitals contained herein and in the Trust Certificates shall be taken as the statements of the Trust Depositor and the Owner Trustee assumes no personal responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Trust Agreement, of any other Transaction Document or of the Trust Certificates (other than as to the due execution by the Owner Trustee of the Trust Certificates on behalf of the Trust) or the Notes, or of any Loan or related documents. The Owner Trustee shall at no time have any personal responsibility or liability for or with respect to the legality, validity and enforceability of any Loan, or for or with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be distributed to Certificateholders under this Trust Agreement or the Noteholders under the Indenture, including, without limitation: (a) the existence, condition and ownership of any collateral securing a Loan; (b) the existence and enforceability of any insurance thereon; (c) the validity of the assignment of any Loan to the Trust or of any intervening assignment; (d) the performance or enforcement of any Loan; and (e) the compliance by the Trust Depositor or the Servicer with any warranty or representation made under any Transaction Document or in any related document or the accuracy of any such warranty or representation, or any action of the Trust Depositor, the Trustee, the Administrator or the Servicer or any subservicer taken in the name of the Owner Trustee.

 

	 	
			Section 7.07

				
			Owner Trustee May Own Trust Certificates and Notes.

			

 

The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Trust Certificates or Notes and may deal with the Trust Depositor, the Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner Trustee.

 

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ARTICLE VIII

COMPENSATION OF OWNER TRUSTEE

 

	 	
			Section 8.01

				
			Owner Trustee’s Fees and Expenses.

			

 

The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Trust Depositor and the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Trust Depositor for its other reasonable expenses hereunder, including, but not limited to, the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder. The Trust Depositor shall be responsible for such fees and expenses only to the extent the same are not paid pursuant to the Priority of Payments, such fees and expenses to be paid to the Owner Trustee in accordance with the Priority of Payments.

 

	 	
			Section 8.02

				
			Indemnification.

			

 

Trust Depositor shall be liable as primary obligor for, and shall indemnify, defend and hold harmless the Owner Trustee (in its individual capacity and in its capacity as Owner Trustee) and its successors, assigns, agents and servants (collectively, the “Indemnified Parties”) from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits (provided that any indemnification for damages is limited to actual damages, not consequential, special or punitive damages), and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses and fees and expenses incurred in connection with the enforcement of indemnification rights) of any kind and nature whatsoever (collectively, “Expenses”) which may at any time be imposed on, incurred by or asserted against an Indemnified Party in any way relating to or arising out of this Trust Agreement, the Transaction Documents, the Trust Estate, the administration of the Trust Estate or the action or inaction of the Owner Trustee hereunder, except only that the Trust Depositor shall not be liable for or required to indemnify an Indemnified Party from and against Expenses arising or resulting from the gross negligence or willful misconduct of such Indemnified Party. The indemnities contained in this Section shall survive the resignation or removal of the Owner Trustee and the termination of this Trust Agreement. If an Indemnified Party seeks indemnification hereunder it shall promptly notify the Trust Depositor if a Responsible Officer of the Indemnified Party receives a complaint, claim, compulsory process or other notice of any loss, claim, damage or liability giving rise to a claim of indemnification hereunder but failure to provide such notice shall not relieve the Trust Depositor of its indemnification obligations hereunder unless the Trust Depositor is deprived of material substantive or procedural rights or defenses as a result thereof. The Trust Depositor shall assume (with the consent of the Indemnified Party, such consent not to be unreasonably withheld) the defense and any settlement of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the Indemnified Party in respect of such claim; provided that the Owner Trustee shall be entitled to retain separate counsel at the expense of the Trust Depositor in the event that a conflict of interest or the possible imposition of criminal liability. If the consent of the Indemnified Party required in the immediately preceding sentence is unreasonably withheld, the Trust Depositor is relieved of its indemnification obligations hereunder with respect to such Person to the extent its defense of its claims are prejudiced thereby. The Trust Depositor shall be responsible for such indemnification to the extent the same is not paid pursuant to the Priority of Payments, such indemnification to be paid first in accordance with the Priority of Payments.

 

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			Section 8.03

				
			Payments to the Owner Trustee.

			

 

Any amounts paid to the Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of the Trust Estate immediately after such payment.

 

ARTICLE IX

TERMINATION OF TRUST AGREEMENT

 

	 	
			Section 9.01

				
			Termination of Trust Agreement.

			

 

(a)     The Trust shall dissolve, liquidate and be wound up in accordance with Section 3808 of the Statutory Trust Statute upon (i) the final distribution by the Trustee or any other party acting as paying agent of all moneys or other property or proceeds of the Trust Estate in accordance with the terms of the Indenture, the Sale and Servicing Agreement and Article V, upon which the Trustee or any other party acting as paying agent shall notify the Owner Trustee and the Trust Depositor in writing and (ii) the written consent of the Certificateholders. The bankruptcy, liquidation, termination, dissolution, death or incapacity of any Certificateholder shall not (x) operate to dissolve or terminate this Trust Agreement or the Trust or (y) entitle such Certificateholder’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 Trust or Trust Estate or (z) otherwise affect the rights, obligations and liabilities of the parties hereto.

 

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

 

(c)     Notice of any termination of the Trust, specifying the Payment Date upon which the Certificateholders shall surrender their Trust Certificates to the Trustee or any other party acting as paying agent of the Trustee for payment of the final distribution and cancellation, shall be given by the Trustee or any other party acting as paying agent by letter to Certificateholders mailed within five (5) Business Days of receipt of written notice of such termination from the Servicer stating, as set forth in such notice from the Servicer, (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 Trustee 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 Trustee therein specified. The Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Owner Trustee at the time such notice is given to Certificateholders. Upon presentation and surrender of the Trust Certificates, the Trustee shall cause to be distributed to Certificateholders amounts distributable on such Payment Date pursuant to Section 5.02.

 

33

 

 

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 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 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 Trust Agreement. Any funds remaining in the Trust after exhaustion of such remedies shall be distributed by the Trustee or any other party acting as paying agent, to the Trust Depositor. Certificateholders shall thereafter look solely to the Trust Depositor as general unsecured creditors.

 

(d)     Upon the winding up of the Trust and payment of all liabilities in accordance with Section 3808 of the Statutory Trust Statute, the paying agent shall make a final distribution to the Certificateholders in accordance with Article V and Section 9.01(c) above and the Administrator shall instruct the Owner Trustee to cause the Certificate of Trust to be cancelled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Statutory Trust Statute. Thereupon, the Trust and this Trust Agreement (other than the rights, benefits, protections, privileges and immunities of the Owner Trustee and the Trust Company) shall terminate.

 

ARTICLE X

SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

 

	 	
			Section 10.01

				
			Eligibility Requirements for Owner Trustee.

			

 

The Owner Trustee shall at all times be a Person (a) satisfying the provisions of Section 3807(a) of the Statutory Trust Statute; (b) authorized to exercise corporate trust powers; (c) having a combined capital and surplus of (or having a parent with a combined capital and surplus of) at least $100,000,000 and subject to supervision or examination by federal or state banking authorities; and (d) having (or having a parent that has) an investment grade rating with respect to S&P and Moody’s. If such Person shall publish reports of condition at least annually pursuant to Applicable Law or the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 10.01, 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. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section 10.01, the Owner Trustee 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.

			

 

(a)     The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Trust Depositor. Upon receiving such notice of resignation, the Trust Depositor shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy shall be delivered to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee, at the expense of the Trust Depositor, may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee.

 

(b)     The Trust Depositor may remove the Owner Trustee at any time without cause or at any time (1) that the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 10.01 and shall fail to resign after written request therefor by the Trust Depositor or (2) the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. If the Trust Depositor shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Trust Depositor shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one (1) copy of which instrument shall be delivered to the outgoing Owner Trustee so removed, and one (1) copy shall be delivered to the successor Owner Trustee, and shall pay all fees owed to the outgoing Owner Trustee in its individual capacity.

 

(c)     Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section shall not become effective until the appointment by the successor Owner Trustee pursuant to Section 10.03 has become effective and, in the case of removal, payment of all accrued and unpaid fees and expenses owed to the outgoing Owner Trustee in its individual capacity. The Trust Depositor shall provide notice of such resignation or removal of the Owner Trustee to all Holders, the Trustee, the Servicer and any Rating Agency.

 

	 	
			Section 10.03

				
			Successor Owner Trustee.

			

 

(a)     Any successor Owner Trustee appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to the Trust Depositor and to its predecessor Owner Trustee an instrument accepting such appointment under this Trust Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective, and such successor Owner Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Trust Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall upon payment of fees, expenses and indemnity owing to it in its individual capacity deliver to the successor Owner Trustee all documents and statements and monies held by it under this Trust Agreement; and the Trust Depositor and the predecessor Owner Trustee 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 all such rights, powers, duties and obligations.

 

35

 

 

(b)     No successor Owner Trustee shall accept appointment as provided in this Section 10.03 unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 10.01.

 

(c)     Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section 10.03, the Trust Depositor shall mail notice thereof to all Holders, the Trustee, the Servicer and any Rating Agency. If the Trust Depositor shall fail to mail such notice within ten (10) Business Days after acceptance of such appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Trust Depositor. Furthermore, upon acceptance of appointment by a successor Owner Trustee pursuant to this Section 10.03, such successor Owner Trustee shall file an amendment to the Certificate of Trust with the Secretary of State in accordance with the provisions of Section 3810 of the Statutory Trust Statute.

 

	 	
			Section 10.04

				
			Merger or Consolidation of Owner Trustee.

			

 

Any Person into which the Owner Trustee 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 shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee 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; provided, further, that the Owner Trustee shall mail notice of such merger or consolidation to all Holders, the Trustee, the Servicer and the Trust Depositor (who shall promptly forward such notice to any Rating Agency) and file an amendment to the Certificate of Trust with the Secretary of State in accordance with the provisions of Section 3810 of the Statutory Trust Statute.

 

	 	
			Section 10.05

				
			Appointment of Co-Trustee or Separate Trustee.

			

 

(a)     Notwithstanding any other provisions of this Trust Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the Trust Depositor and the Owner Trustee acting jointly shall have the power and authority to execute and deliver all instruments to appoint one or more Persons approved by the Trust Depositor 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 Trust Estate, and to vest in such Person, in such capacity, such title to the Trust Estate or any part thereof and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Trust Depositor and the Owner Trustee may consider necessary or desirable. If the Trust Depositor shall not have joined in such appointment within 15 Business Days after the receipt by it of a request so to do, the Owner Trustee alone shall have the power, authority and authorization to make such appointment. No co-trustee or separate trustee under this Trust Agreement shall be required to meet the terms of eligibility as a successor Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.03.

 

36

 

 

(b)     Each separate trustee and co-trustee shall, to the extent permitted by any Applicable Law, be appointed and act subject to the following provisions and conditions:

 

(i)     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 Applicable 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 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;

 

(ii)     no separate trustee or co-trustee under this Trust Agreement or the Owner Trustee shall be personally liable by reason of any act or omission of any other trustee under this Trust Agreement; and

 

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

 

(c)     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 Trust Agreement and the conditions of this Article X. 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 Trust 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 each of the Trust Depositor, the Trustee and the Servicer.

 

(d)     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 Trust Agreement on its behalf and in its name, and the Owner Trustee shall have the full power and authority to delegate its responsibilities to the Servicer as provided for herein and in the other Transaction Documents. 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.

 

37

 

 

ARTICLE XI

MISCELLANEOUS

 

	 	
			Section 11.01

				
			Supplements and Amendments.

			

 

(a)     This Trust Agreement may be amended by the Trust Depositor, the Trust Company, and the Owner Trustee, with the consent of the Majority Noteholders (so long as the Notes are outstanding) and the consent of the Majority Certificateholders for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Trust Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided that such action shall not, as evidenced by an Officer’s Certificate of the Servicer, materially adversely affect the interests of any Noteholder or Certificateholder. Notwithstanding anything to the contrary contained herein, this Trust Agreement may be amended by the Trust Depositor, the Trust Company, and the Owner Trustee without the consent of any Noteholder or Certificateholder to cure any ambiguity or to correct or supplement any provisions in this Trust Agreement in a manner consistent with the intent of this Trust Agreement and the Transaction Documents.

 

(b)     Except as provided in Section 11.01(a) hereof, this Trust Agreement may be amended from time to time by the Trust Depositor, the Trust Company, and the Owner Trustee, with the consent of the Majority Noteholders (so long as the Notes are outstanding) and the consent of the Majority Certificateholders, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Trust Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders hereunder; provided that no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of any amounts received on the Loans which are required to be distributed on any Note or Trust Certificate without the consent of the Holder of that Note or Trust Certificate or (b) reduce the aforesaid percentage of Noteholders and the aggregate Percentage Interest of Certificateholders required to consent to any such amendment, without the consent of the holders of all the outstanding Notes and Trust Certificates.

 

(c)     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 the Trustee and the Trust Depositor (who shall promptly forward such notice to any Rating Agency) and the Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder and Noteholder.

 

(d)     It shall not be necessary for the consent of Certificateholders or Noteholders pursuant to this Section 11.01 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 or Noteholders provided for in this Trust Agreement or in any other Transaction Document) and of evidencing the authorization of the execution thereof by Certificateholders or Noteholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe.

 

38

 

 

(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 of Delaware.

 

(f)     Prior to the execution of any amendment to this Trust Agreement or the Certificate of Trust, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Trust Agreement and an officer’s certificate of the Trust Depositor that all conditions precedent to the execution and delivery of such amendment have been met. The Owner Trustee and the Trust Company may, but shall not be obligated to, enter into any such amendment that affects the Owner Trustee’s or the Trust Company’s own rights, duties or immunities under this Trust Agreement or otherwise. Notwithstanding any other provision herein or elsewhere, no provision, amendment, supplement, waiver, or consent of or with respect to any of the Transaction Documents that affects any right, power, authority, duty, benefit, protection, privilege, immunity or indemnity of the Owner Trustee or the Trust Company shall be binding on the Owner Trustee or the Trust Company unless the Owner Trustee and the Trust Company shall have expressly consented thereto in writing.

 

(g)     This Trust Agreement may only be amended to the extent that written advice from Dechert LLP or an opinion of tax counsel of nationally recognized standing in the United States experienced in such matters is delivered to the Issuer (with a copy to the Owner Trustee) to the effect that such amendment will not (i) cause the Trust to be treated as an association, publicly traded partnership or taxable mortgage pool, in each case, taxable as a corporation for U.S. federal income tax purposes, (ii) cause the Notes to be deemed to have been sold or exchanged under Section 1001 of the Code or (iii) cause any Notes that were characterized as indebtedness at the time of issuance to be characterized as other than indebtedness.

 

	 	
			Section 11.02

				
			Customer Identification Program.

			

 

Pursuant to Applicable Law, the Owner Trustee is required to obtain on or before closing, and from time to time thereafter, documentation to verify and record information that identifies each person who opens an account. For a non-individual person such as a business entity, a charity, a trust or other legal entity, the Owner Trustee will ask for documentation to verify the entity’s formation and existence, its financial statements, licenses, tax identification documents, identification and authorization documents from individuals claiming authority to represent the entity and other relevant documentation and information (including beneficial owners of such entities). To the fullest extent permitted by Applicable Law, the Owner Trustee may conclusively rely on, and shall be fully protected and indemnified in relying on, any such information received. Failure to provide such information may result in an inability of the Owner Trustee to perform its obligations hereunder, which, at the sole option of the Owner Trustee, may result in the Owner Trustee’s resignation in accordance with the terms hereof. The parties hereto agree that for purposes of Applicable Law, (a) Ownership Prong: The Trust Depositor is and shall be deemed to be the sole beneficial owner of the Trust, and (b) Control Prong: The Trust Depositor is and shall deemed to be the party with the power and authority to control the Trust.

 

39

 

 

	 	
			Section 11.03

				
			No Legal Title to Trust Estate in Certificateholders.

			

 

The Certificateholders shall not have legal title to any part of the Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their undivided beneficial ownership interest therein only in accordance with Articles V and IX. No transfer, by operation of law or otherwise, of any right, title or interest of the Certificateholders to and in their beneficial ownership interest in the Trust Estate shall operate to dissolve the Trust or 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 Trust Estate.

 

	 	
			Section 11.04

				
			Limitations on Rights of Others.

			

 

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

 

	 	
			Section 11.05

				
			Notices.

			

 

(a)     Any request, demand, authorization, direction, notice, consent, waiver or Act of Certificateholders or other documents provided or permitted by this Trust Agreement shall be in writing to and mailed, return receipt requested, hand delivered, sent by overnight courier service guaranteeing next day delivery or by facsimile or telecopy in legible form, if to the Owner Trustee, addressed to its Corporate Trust Office; or if to the Trust Depositor, addressed to Hercules Capital Funding 2019-1 LLC, c/o Hercules Capital, Inc., 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, Attention: Chief Financial Officer, Re: Hercules Capital Funding Trust 2019-1, Telephone: (650) 289-3060, Facsimile No.: (650) 473-9194; with a copy to Hercules Capital Funding 2019-1 LLC, c/o Hercules Capital, Inc., 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, Attention: General Counsel, Re: Hercules Capital Funding Trust 2019-1, Telephone: (650) 289-3060, Facsimile No.: (650) 473-9194 or if to a Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register.

 

(b)     Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents made as provided above will be deemed effective (except that notice to the Owner Trustee shall be deemed given only upon actual receipt by the Owner Trustee): (i) if in writing and delivered in Person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day.

 

40

 

 

	 	
			Section 11.06

				
			Severability.

			

 

Any provision of this Trust Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

	 	
			Section 11.07

				
			Separate Counterparts.

			

 

This Trust 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 11.08

				
			Successors and Assigns.

			

 

All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the Trust Depositor, the Owner Trustee, the Trust Company, each Certificateholder and their respective successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder.

 

	 	
			Section 11.09

				
			No Petition.

			

 

(a)     To the extent permitted by Applicable Law, the Trust Depositor will not, prior to the date which is one (1) year and one (1) day (or, if longer, the applicable preference period then in effect) after payment in full of the Notes rated by any Rating Agency (or such longer preference period as shall then be in effect), institute against the Trust 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 Trust Agreement or any of the other Transaction Documents.

 

(b)     To the extent permitted by Applicable Law, the Owner Trustee, by entering into this Trust Agreement, each Certificateholder, by accepting a Trust Certificate, and the Trustee and each Noteholder, by accepting the benefits of this Trust Agreement, hereby covenant and agree that they will not, prior to the date which is one (1) year and one (1) day (or if longer, the applicable preference period as shall then be in effect) after payment in full of the Notes rated by any Rating Agency (or such longer preference period as shall then be in effect), institute against the Trust, or join in any institution against the Trust 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 Trust Agreement or any of the other Transaction Documents; provided, however, that nothing contained herein shall prevent the Owner Trustee from filing a proof of claim in any such proceeding.

 

(c)     The provisions of this Section 11.08 shall survive the termination of this Trust Agreement for any reason whatsoever.

 

41

 

 

	 	
			Section 11.10

				
			No Recourse.

			

 

To the extent permitted by Applicable Law, each Certificateholder by accepting a Trust Certificate acknowledges that such Certificateholder’s Trust Certificates represent beneficial interests in the Trust only and do not represent interests in or obligations of the Trust Depositor, the Servicer, the Seller, the Owner Trustee, the Trust Company, the Trustee, Certificate Registrar or any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Trust Agreement, the Trust Certificates or the Transaction Documents. Each Certificateholder by accepting a Trust Certificate (i) acknowledges that such Trust Certificate represents a beneficial interest in the Trust only and does not represent an interest in or an obligation of the Trust Depositor, the Servicer, the Seller, the Owner Trustee, the Trustee, or any Affiliate of the foregoing, and no recourse may be had against any such party or their assets, except as may be expressly set forth or contemplated in the Transaction Documents and (ii) enters into the undertakings and agreements provided for such Certificateholder set forth in Section 13.09 of the Sale and Servicing Agreement. The right to distributions of the assets of the Trust or the proceeds thereof arising under this Agreement or the Trust Certificates shall be payable solely in accordance with the priority set forth in Section 7.06 of the Sale and Servicing Agreement until the final discharge of the Indenture, and no Certificateholder shall have any recourse against the Trust except in accordance therewith. The provisions of this Section 11.09 shall survive any termination of this Agreement.

 

	 	
			Section 11.11

				
			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 11.12

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

			

 

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. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THIS TRUST.

 

Any legal action or proceeding with respect to this Trust Agreement may be brought in the courts of the United States for the District of Delaware, and by execution and delivery of this Trust Agreement, each party hereto consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each such party irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Trust Agreement or any document related hereto.

 

42

 

 

To the extent permitted by applicable law, each party hereto irrevocably waives all right of trial by jury in any action, proceeding or counterclaim based on, or arising out of, under or in connection with this Agreement or any matter arising hereunder.

 

	 	
			Section 11.13

				
			Termination of Original Trust Agreement.

			

 

The parties hereto agree that the Original Trust Agreement is hereby superseded in its entirety by this Agreement.

 

[Remainder of Page Intentionally Left Blank.]

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

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

 

	
			 

				
			HERCULES CAPITAL FUNDING 2019-1 LLC,

			as Trust Depositor

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				 	
			 

			
	
			 

				
			Name:

				
			 

				
			 

			
	
			 

				
			Title:

				
			 

				
			 

			

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

A&R Trust Agreement

 

 

 

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

 

	
			 

				
			WILMINGTON TRUST, NATIONAL 

			ASSOCIATION, as Owner Trustee

			and as the Trust Company

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				 	
			 

			
	
			 

				
			Name:

				
			 

				
			 

			
	
			 

				
			Title:

				
			 

				
			 

			

 

 

 

 

 

 

 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

A&R Trust Agreement

 

 

 

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

 

	
			 

				
			U.S. BANK NATIONAL ASSOCIATION, as

			Trustee, hereby accepts the appointment as

			Certificate Registrar and paying agent pursuant to

			Sections 3.04 and 3.09 hereof and agrees to be

			bound by the obligations expressly set forth herein

			applicable to it in such capacities.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				 	
			 

			
	
			 

				
			Name:

				
			 

				
			 

			
	
			 

				
			Title:

				
			 

				
			 

			

 

 

 

 

 

 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

A&R Trust Agreement

 

 

 

EXHIBIT A

 

FORM OF TRUST CERTIFICATE

 

THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS TRUST CERTIFICATE, AGREES THAT THIS TRUST CERTIFICATE MAY BE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAW AND ONLY TO (1) A “QUALIFIED INSTITUTIONAL BUYER,” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT IS A “QUALIFIED PURCHASER” AS DEFINED IN SECTION 2(A)(51) OF THE INVESTMENT COMPANY ACT OF 1940 (EACH SUCH PERSON, A “QUALIFIED PURCHASER”), (2) AN INSTITUTION THAT QUALIFIES AS AN “ACCREDITED INVESTOR” MEETING THE REQUIREMENTS OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN “INSTITUTIONAL ACCREDITED INVESTOR”) THAT IS A QUALIFIED PURCHASER PURSUANT TO AN EXEMPTION UNDER THE SECURITIES ACT AND, IN EITHER CASE, IS ACQUIRING SUCH TRUST CERTIFICATE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE INSTITUTIONAL ACCREDITED INVESTORS), PURSUANT TO AN EXEMPTION FROM REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND IN EACH CASE, SUBJECT TO (A) THE RECEIPT BY THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE TRUST AGREEMENT AND (B) THE RECEIPT BY THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE OWNER TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAW OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (3) PURSUANT TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR (4) PURSUANT TO A VALID REGISTRATION STATEMENT. EACH INVESTOR IN THIS TRUST CERTIFICATE WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT EITHER (I) IT IS NOT, AND IS NOT DIRECTLY OR INDIRECTLY ACQUIRING THIS TRUST CERTIFICATE FOR, ON BEHALF OF OR WITH ANY ASSETS OF, AN EMPLOYEE BENEFIT PLAN OR OTHER ARRANGEMENT SUBJECT TO PART 4, SUBTITLE B, TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS OF ANY SUCH PLANS (COLLECTIVELY, A “BENEFIT PLAN INVESTOR”) OR A PLAN OR OTHER ARRANGEMENT SUBJECT TO ANY PROVISIONS UNDER ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIVELY SIMILAR TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”) OR (II) IT IS A PLAN SUBJECT TO SIMILAR LAW AND ITS ACQUISITION, HOLDING AND DISPOSITION OF SUCH TRUST CERTIFICATE OR ANY INTEREST THEREIN WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION OF SIMILAR LAW. SUCH REPRESENTATION SHALL BE DEEMED MADE ON EACH DAY FROM THE DATE ON WHICH THE ACQUIRER ACQUIRES ITS INTEREST IN THE TRUST CERTIFICATE THROUGH AND INCLUDING THE DATE ON WHICH THE ACQUIRER DISPOSES OF ITS INTEREST IN THE TRUST CERTIFICATE.

 

 

 

 

THIS TRUST CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.

 

NO TRANSFER, SALE, PLEDGE OR OTHER DISPOSITION OF ONE OR MORE TRUST CERTIFICATES (A “TRANSFER”) SHALL BE MADE UNLESS SIMULTANEOUSLY WITH THE TRANSFER THE PERCENTAGE INTEREST OF THE TRUST CERTIFICATES SO TRANSFERRED IS NO LESS THAN TEN (10%) PERCENT.

 

Each holder of this trust certificate (AND any interest therein) represents and warrants that it is a “United States Person” as defined in section 7701(a)(30) of the Code and will provide the trust and THE OWNER TRUSTEE (AND ANY OF THEIR AGENTS) with a correct, complete and properly executed Internal Revenue Service Form W-9 (or applicable successor form). If any holder of this trust certificate (or any interest therein) (OTHER THAN THE INITIAL HOLDER) fails to provide the trust and the owner trust (and any of their agents) with the properly completed and signed tax certifications specified above, the acquisition of its interest in this trust CERTIFICATE shall be void ab initio.

 

Each transferor of this trust Certificate (and any interest therein) will agree, or by acquiring this trust Certificate or an interest therein will be deemed to have agreed, to deliver to the transferee, with a copy to the trust and the owner Trustee, prior to the transfer of the trust Certificate (and any interest therein), a properly completed certificate, in a form reasonably acceptable to the transferee and the Trust, stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person within the meaning of Section 1446(f)(2) of the Code (such certificate, a “Non-Foreign Status Certificate”). Each transferor of this trust Certificate (and any interest therein) ACKNOWLEDGES, or by acquiring this trust Certificate or an interest therein will be deemed to ACKNOWLEDGE, that the failure to provide a Non-Foreign Status Certificate to the transferee may result in withholding on the amount realized on its disposition of the trust Certificate.

 

A-1-2

 

 

THIS trust CERTIFICATE (and ANY INTEREST THEREIN) MAY NOT BE acquired or owned by any Person (OTHER THAN THE TRUST DEPOSITOR) that is classified for U.S. federal income tax purposes as a partnership, subchapter S corporation or grantor trust unless (i) (A) none of the direct or indirect beneficial owners of any interest in such Person have or ever will have more than 40% of the value of its interest in such Person attributable to the AGGREGATE interest of such Person in THE trust CERTIFICATES and any other equity interestS OF the Trust, and (B) it is not and will not be a principal purpose of the arrangement involving the investment of such Person in THE trust CERTIFICATES AND ANY OTHER EQUITY INTERESTs OF THE TRUST to permit any partnership to satisfy the 100 partner limitation of Treas. Reg. § 1.7704-1(h)(1)(ii) or (ii) such Person obtains an Opinion of NATIONALLY RECOGNIZED U.S. TAX Counsel REASONABLY ACCEPTABLE TO THE TRUST that such transfer will not cause the Trust to be treated as a publicly traded partnership taxable as a corporation.

 

THIS trust CERTIFICATE (and ANY INTEREST THEREIN) MAY NOT BE acquired, and no Certificateholder may sell, transfer, assign, participate, pledge or otherwise dispose of this trust CERTIFICATE (and any interest therein) or cause this trust CERTIFICATE (and any interest therein) to be marketed, (i) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treas. Reg. § 1.7704-1(b), including, without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations, or (ii) if such acquisition, sale, transfer, assignment, participation, pledge or other disposition would cause THE COMBINED NUMBER OF HOLDERS OF trust certificates and other equity interests in the trust to be more than 88.

 

no holder of this trust certificate (and any interest therein) will participate in the creation or other transfer of any financial instrument or contract the value of which is determined in whole or in part by reference to the trust (including the amount of distributions by the trust, the value of the trust’s assets, the results of the trust’s operations or the trust certificates).

 

Each holder of this trust certificate (AND any interest therein) acknowledges and agrees that any sale, transfer, assignment, participation, pledge, or other disposition of thIS trust certificate that would violate ANY OF the tHREE preceding paragraphs above or otherwise cause the trust to be unable to rely on the “private placement” safe harbor of Treas. Reg. § 1.7704-1(h) will be void and of no force or effect, and it will not transfer any interest in thIS trust certificate to any Person that does not agree to be bound by the tHREE preceding paragraphs above or by this paragraph.

 

A-1-3

 

 

Unless the trust Depositor, Trust and Owner Trustee have received an Opinion of Counsel from Dechert LLP or other nationally recognized tax counsel that the restriction on the proposed acquisition of THIS trust Certificate (and any interest therein) described by this PARAGRAPH is no longer necessary to conclude that any such acquisition (and subsequent resale of the applicable Notes described below) will not cause the Treasury Regulations under Section 385 of the code to apply to such Notes in a manner that could cause a material adverse effect on the Trust or the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (i) a Section 385 Certificateholder cannot acquire a trust Certificate (and any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder owns any Notes or (B) a Section 385 Controlled Partnership of such expanded group owns any Notes and (ii) a Section 385 Certificateholder cannot hold a trust Certificate (and any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note or (B) a Section 385 Controlled Partnership of such expanded group acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note. The preceding sentence shall not apply if the Noteholder or potential Noteholder is a U.S. corporate member of the same U.S. corporate “affiliated group” (as defined in Section 1504 of the Code) filing a consolidated federal income tax return that includes each of any applicable related Section 385 Certificateholders (including in the case of a partnership, the relevant “expanded group partner” (as defined in Treasury Regulation Section 1.385-3(g)(12)).  If a Certificateholder (or holder of an interest in a trust Certificate) fails to comply with the foregoing requirements, the Trust and Depositor are authorized, at their discretion, to compel such Certificateholder (or holder of an interest in a trust Certificate) to sell its trust Certificate (or interest therein) to a Person whose ownership complies with this PARAGRAPH so long as such sale does not otherwise cause a material adverse effect on the Trust or cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.

 

EACH HOLDER OF THIS TRUST CERTIFICATE (OR ANY INTEREST THEREIN) ACKNOWLEDGES AND AGREES, AND WILL BE DEEMED TO HAVE ACKNOWLEDGED AND AGREED, THAT, FOR SO LONG AS THE TRUST IS DISREGARDED AS SEPARATE FROM IT FOR U.S. FEDERAL INCOME TAX PURPOSES, NEITHER A TRUST CERTIFICATE (OR ANY INTEREST THEREIN) OR A NOTE (OR ANY INTEREST THEREIN) MAY BE TRANSFERRED BY IT (EXCEPT TO A PERSON THAT IS DISREGARDED AS SEPARATE FROM SUCH HOLDER OR BENEFICIAL OWNER FOR U.S. FEDERAL INCOME TAX PURPOSES), UNLESS IT SHALL HAVE RECEIVED WRITTEN ADVICE OF DECHERT LLP OR AN OPINION OF NATIONALLY RECOGNIZED U.S. TAX COUNSEL REASONABLY ACCEPTABLE TO THE TRUST THAT SUCH TRANSFER WILL NOT CAUSE THE TRUST TO BE TREATED AS A PUBLICLY TRADED PARTNERSHIP TAXABLE AS A CORPORATION FOR U.S. FEDERAL INCOME TAX PURPOSES OR OTHERWISE TO BE SUBJECT TO U.S. FEDERAL INCOME TAX ON A NET BASIS.

 

EACH HOLDER OF THIS TRUST CERTIFICATE (OR ANY INTEREST THEREIN) ACKNOWLEDGES AND AGREES, AND WILL BE DEEMED TO HAVE ACKNOWLEDGED AND AGREED, THAT, FOR SO LONG AS THE TRUST IS CLASSIFIED AS A PARTNERSHIP FOR U.S. FEDERAL INCOME TAX PURPOSES, IT SHALL NOT ACQUIRE ANY TRUST CERTIFICATES (OR ANY OTHER INTEREST TREATED AS EQUITY IN THE ISSUER FOR U.S. FEDERAL INCOME TAX PURPOSES) IF SUCH TRANSFER WOULD CAUSE THE TRUST TO BE TREATED AS A DISREGARDED ENTITY FOR U.S. FEDERAL INCOME TAX PURPOSES, UNLESS IT SHALL HAVE RECEIVED WRITTEN ADVICE OF DECHERT LLP OR AN OPINION OF NATIONALLY RECOGNIZED U.S. TAX COUNSEL REASONABLY ACCEPTABLE TO THE TRUST THAT SUCH TRANSFER WILL NOT CAUSE THE TRUST TO BE TREATED AS A PUBLICLY TRADED PARTNERSHIP TAXABLE AS A CORPORATION FOR U.S. FEDERAL INCOME TAX PURPOSES OR OTHERWISE TO BE SUBJECT TO U.S. FEDERAL INCOME TAX ON A NET BASIS.

 

A-1-4

 

 

	NUMBER 1	PERCENTAGE INTEREST: 100%

 

HERCULES CAPITAL FUNDING TRUST 2019-1

 

TRUST CERTIFICATE

 

Evidencing a beneficial ownership interest in the Trust, as defined below, the property of which includes primarily the Loans transferred to the Trust by Hercules Capital Funding 2019-1 LLC.

 

(This Trust Certificate does not represent an interest in or obligation of Hercules Capital Funding 2019-1 LLC, Hercules Capital, Inc. (the “Servicer”) or the Owner Trustee (as defined below) (as such or in its individual capacity) or any of their respective affiliates, except to the extent described below.)

 

THIS CERTIFIES THAT HERCULES CAPITAL FUNDING 2019-1 LLC is the registered owner of the nonassessable, fully paid, beneficial ownership interest in HERCULES CAPITAL FUNDING TRUST 2019-1 (the “Trust”) formed by Hercules Capital Funding 2019-1 LLC, in the Percentage Interest evidenced hereby.

 

The Trust was created pursuant to a Trust Agreement, dated as of December 20, 2018 (as amended and restated as of January 22, 2019 and as further amended, modified, restated, waived, substituted or supplemented from time to time, the “Trust Agreement”), between Hercules Capital Funding 2019-1 LLC, as trust depositor (the “Trust Depositor”), and Wilmington Trust, National Association, as owner trustee (the “Owner Trustee”), a summary of certain of the pertinent provisions of which is set forth below and a Certificate of Trust filed with the Secretary of State of the State of Delaware on December 20, 2018. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Trust Agreement.

 

This Trust Certificate is one of a duly authorized issue of Hercules Capital Funding Trust 2019-1 Certificates (herein called the “Trust Certificates”). This Trust Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of this Trust Certificate by virtue of its acceptance hereof assents and by which such holder is bound.

 

Under the Trust Agreement, there will be distributions on the 20th day of each month or, if such 20th day is not a Business Day, the next Business Day (each, a “Payment Date”), commencing on February 20, 2019, to the Person in whose name this Trust Certificate is registered at the close of business on the last Business Day of the month immediately preceding the Payment Date (the “Record Date”), such Certificateholder’s Percentage Interest in the amount to be distributed to Certificateholders on such Payment Date pursuant to the terms of the Sale and Servicing Agreement and the Indenture.

 

The Holder of this Trust Certificate acknowledges and agrees that its rights to receive distributions in respect of this Trust Certificate are subordinated to the rights of the Noteholders as described in the Sale and Servicing Agreement and the Indenture.

 

A-1-5

 

 

It is the intent of the Trust Depositor and the Certificateholders that (i) for any period that the Trust Certificates are owned by a single beneficial owner, for U.S. federal income tax purposes, the Trust will be disregarded as an entity separate from such beneficial owner for U.S. federal income tax purposes, and the Certificateholders (and the beneficial owner of the Trust Certificates), by acceptance of the Trust Certificates (or a beneficial interest therein), agree to take no action inconsistent with such treatment and (ii) for any period that the Trust Certificates are owned by more than one beneficial owner fore U.S. federal income tax purposes, the Trust will be treated as a partnership for U.S. federal income tax purposes, other than a publicly traded partnership, the partners of which are the beneficial owners of the Trust Certificates, and the Certificateholders (and beneficial owners of the Trust Certificates), by acceptance of a Trust Certificate (or beneficial interest therein) agree to treat the Trust Certificates as equity and to take no action inconsistent with such treatment.

 

To the fullest extent permitted by Applicable Law, each Certificateholder, by its acceptance of a Trust Certificate, covenants and agrees that such Certificateholder, will not prior to the date which is one (1) year and one (1) day (or, if longer, the applicable preference period then in effect) after the payment in full of the Notes rated by any Rating Agency, institute against the Trust, or join in any institution against the Trust 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 of the other Transaction Documents.

 

Distributions on this Trust Certificate will be made as provided in the Trust Agreement by the Trustee or any other party acting as paying agent 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 Trustee or any other party acting as paying agent of the pendency of such distribution and only upon presentation and surrender of this Trust Certificate at the office or agency maintained for that purpose by the Trustee or any other party acting as paying agent.

 

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 Certificate Registrar, 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.

 

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.

 

A-1-6

 

 

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

 

 

	
			 

				
			HERCULES CAPITAL FUNDING TRUST

			2019-1

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			WILMINGTON TRUST, NATIONAL

			ASSOCIATION, solely as Owner Trustee

			and not in its individual capacity

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	 	 	 	 
	
			 

				
			By:

				
			 

				
			 

			
	 	 	Authorized Signatory	 

 

 

CERTIFICATE OF AUTHENTICATION

 

This is one of the Trust Certificates of Hercules Capital Funding Trust 2019-1 referred to in the within-mentioned Trust Agreement.

 

 

	
			 

				
			U.S. BANK NATIONAL ASSOCIATION, as

			Certificate Registrar

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				 	
			 

			
	
			 

				
			 

				Authorized Signatory	
			 

			

 

 

 

 

 

A-1-7

 

 

[REVERSE OF TRUST CERTIFICATE]

 

The Trust Certificates do not represent an obligation of, or an interest in, the Trust Depositor, the Servicer, the Owner Trustee or any affiliates of any of them 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, the Indenture or the Transaction 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 Loans (and certain other amounts), all as more specifically set forth herein and in the Transaction Documents. A copy of each of the Transaction Documents may be examined by any Certificateholder upon written request during normal business hours at the principal office of the Trust Depositor and at such other places, if any, designated by the Trust Depositor.

 

The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Trust Depositor and the rights of the Certificateholders under the Trust Agreement at any time, by the Trust Depositor, the Trust Company and the Owner Trustee with the consent of the holders of the Trust Certificates evidencing not less than a majority of the outstanding Percentage Interest and of the holders of the Majority Noteholders. 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 registerable in the Certificate Register upon surrender of this Trust Certificate for registration of transfer at the offices or agencies of the Certificate Registrar, 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 of authorized denominations evidencing the same aggregate interest in the Trust will be issued to the designated transferee. The initial Certificate Registrar appointed under the Trust Agreement is U.S. Bank National Association.

 

The Trust Certificates are issuable only as registered Trust Certificates without coupons in minimum Percentage Interests of ten (10%) percent and integral multiples of one (1%) percent in excess thereof; provided that one Trust Certificate may be issued in a different denomination. As provided in the Trust Agreement and subject to certain limitations therein set forth, Trust Certificates are exchangeable for new Trust Certificates of authorized denominations evidencing the same aggregate denomination, 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.

 

A-1-8

 

 

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.

 

This Trust Certificate may not be acquired directly or indirectly by, or held by or with plan assets of any employee benefit plans, retirement arrangements, individual retirement accounts or Keogh plans subject to either Title I of the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended. By accepting and holding this Trust Certificate, the Holder hereof shall be deemed to have represented and warranted that it is not any of the foregoing entities.

 

This Trust Certificate may not be transferred to any person who is not a U.S. Person, as such term is defined in Section 7701(a)(30) of the Internal Revenue Code, as amended.

 

Each purchaser of the Trust Certificates shall be required, prior to purchasing a Trust Certificate, to execute the Purchaser’s Representation and Warranty Letter in the form attached to the Trust Agreement as Exhibit C.

 

The obligations and responsibilities created by the Trust Agreement and the Trust created thereby shall terminate upon (i) 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 Trust and (ii) the written consent of the Certificateholders. The Servicer on behalf of the Trustee has the option to cause the sale of the corpus of the Trust at a price and pursuant to procedures specified in the Indenture and the Sale and Servicing Agreement, and such sale of the receivables and other property of the Trust will effect early retirement of the Trust Certificates.

 

A-1-9

 

 

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, hereby irrevocably constituting and appointing

 

to transfer said Trust Certificate on the books of the Certificate Registrar, with full power of substitution in the premises.

 

 

 

Dated:

 

	 	 	*
	 	Signature Guaranteed:	 
	 	 	 
	 	 	*

 

* NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Trust Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company.

 

A-1-10

 

 

EXHIBIT B

 

CERTIFICATE OF TRUST OF

HERCULES CAPITAL FUNDING TRUST 2019-1

 

 

This Certificate of Trust of HERCULES CAPITAL FUNDING TRUST 2019-1 (the “Trust”), is being duly executed and filed by the undersigned, as owner trustee, to form a statutory trust under the Statutory Trust Statute (12 Del. Code, § 3801 et seq.) (the “Act”).

 

1.     Name. The name of the statutory trust formed hereby is HERCULES CAPITAL FUNDING TRUST 2019-1.

 

2.     Delaware Trustee. The name and business address of a trustee of the Trust having its principal place of business in the State of Delaware is Wilmington Trust, National Association, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.

 

3.     Effective Date. This Certificate of Trust shall be effective upon its filing with the Secretary of State of the State of Delaware.

 

IN WITNESS WHEREOF, the undersigned, being the only owner trustee of the Trust, has duly executed this Certificate of Trust in accordance with Section 3811(a)(1) of the Act.

 

	
			 

				
			WILMINGTON TRUST, NATIONAL 

			ASSOCIATION, not in its individual capacity, but

			solely as owner trustee of the Trust

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				 	
			 

			
	
			 

				Name:	
			 

				
			 

			
	
			 

				
			Title:

				
			 

				
			 

			

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT C

 

Form of Purchaser’s Representation and Warranty Letter

 

Dated: January 22, 2019

 

Hercules Capital Funding Trust 2019-1

c/o Wilmington Trust, National Association, as Owner Trustee

1100 North Market Street

Wilmington, Delaware 19890

Attention: Corporate Trust Administration

 

U.S. Bank National Association, as Certificate Registrar

111 Fillmore Avenue East

Attn: Bondholder Services - EP-MN-WS2N

St. Paul, Minnesota, 55107

Ref: Hercules 2019-1

 

 

	
			Re:

				
			Hercules Capital Funding Trust 2019-1 (the “Trust”)

			

 

 

Ladies and Gentlemen:

 

In connection with our proposed acquisition of Trust Certificates (the “Trust Certificates”) issued under the Trust Agreement, dated as of December 20, 2018 (as amended and restated as of January 22, 2019 and as further amended, modified, restated, replaced, waived, substituted, supplemented or extended from time to time, the “Agreement”; capitalized terms used but not defined herein shall have the meanings given to such terms in the Agreement), between Hercules Capital Funding 2019-1 LLC, as Trust Depositor (the “Trust Depositor”), and Wilmington Trust, National Association, as Owner Trustee, the undersigned (the “Purchaser”) represents, warrants and agrees that:

 

1.     It is (1) the Trust Depositor or an Affiliate thereof, (2) a Qualified Institutional Buyer (a “QIB”) for purposes of Rule 144A under the Securities Act and is acquiring the Trust Certificates for its own institutional account or for the account of a QIB or (3) an Institutional “Accredited Investor” (within the meaning of Rule 501 (a)(1)-(3) or (7) under the Securities Act) purchasing for investment and not for distribution in violation of the act.

 

2.     It is not an employee benefit plan, retirement arrangement, individual retirement account or Keogh plan subject to either Title I of the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended and is not acquiring Trust Certificates with plan assets of any of the foregoing.

 

3.     It has such knowledge and experience in evaluating business and financial matters so that it is capable of evaluating the merits and risks of an investment in the Trust Certificates. It understands the full nature and risks of an investment in the Trust Certificates and based upon its present and projected net income and net worth, it believes that it can bear the economic risk of an immediate or future loss of its entire investment in the Trust Certificates.

 

C-1-1

 

 

4.     It understands that the Trust Certificates will be offered in a transaction not involving any public offering within the meaning of the Securities Act, and that, if in the future it decides to resell, pledge or otherwise transfer any Trust Certificates, such Trust Certificates may be resold, pledged or transferred only (a) to a person who the seller reasonably believes is a QIB/QP that purchases for its own account or for the account of another QIB/QP or (b) pursuant to an effective registration statement under the Securities Act.

 

5.     It understands that each Trust Certificate will bear legends substantially to the following effect:

 

THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS TRUST CERTIFICATE, AGREES THAT THIS TRUST CERTIFICATE MAY BE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND OTHER APPLICABLE LAW AND ONLY (1) A “QUALIFIED INSTITUTIONAL BUYER,” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT IS A “QUALIFIED PURCHASER” AS DEFINED IN SECTION 2(A)(51) OF THE INVESTMENT COMPANY ACT OF 1940 (EACH SUCH PERSON, A “QUALIFIED PURCHASER”) , (2) AN INSTITUTION THAT QUALIFIES AS AN “ACCREDITED INVESTOR” MEETING THE REQUIREMENTS OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (“INSTITUTIONAL ACCREDITED INVESTOR”) THAT IS A QUALIFIED PURCHASER PURSUANT TO AN EXEMPTION UNDER THE SECURITIES ACT AND, IN EITHER CASE, IS ACQUIRING SUCH TRUST CERTIFICATE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE INSTITUTIONAL ACCREDITED INVESTORS), PURSUANT TO AN EXEMPTION FROM REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND IN EACH CASE, SUBJECT TO (A) THE RECEIPT BY THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE TRUST AGREEMENT AND (B) THE RECEIPT BY THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE OWNER TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE ACT AND OTHER APPLICABLE LAW OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (3) PURSUANT TO ANOTHER EXEMPTION AVAILABLE UNDER THE ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR (4) PURSUANT TO A VALID REGISTRATION STATEMENT. EACH INVESTOR IN THIS TRUST CERTIFICATE WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT EITHER (I) IT IS NOT, AND IS NOT DIRECTLY OR INDIRECTLY ACQUIRING THIS TRUST CERTIFICATE FOR, ON BEHALF OF OR WITH ANY ASSETS OF, AN EMPLOYEE BENEFIT PLAN OR OTHER ARRANGEMENT SUBJECT TO PART 4, SUBTITLE B, TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS OF ANY SUCH PLANS (COLLECTIVELY, A “BENEFIT PLAN INVESTOR”) OR A PLAN OR OTHER ARRANGEMENT SUBJECT TO ANY PROVISIONS UNDER ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIVELY SIMILAR TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”) OR (II) IT IS A PLAN SUBJECT TO SIMILAR LAW AND ITS ACQUISITION, HOLDING AND DISPOSITION OF SUCH TRUST CERTIFICATE OR ANY INTEREST THEREIN WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION OF SIMILAR LAW. SUCH REPRESENTATION SHALL BE DEEMED MADE ON EACH DAY FROM THE DATE ON WHICH THE ACQUIRER ACQUIRES ITS INTEREST IN THE TRUST CERTIFICATE THROUGH AND INCLUDING THE DATE ON WHICH THE ACQUIRER DISPOSES OF ITS INTEREST IN THE TRUST CERTIFICATE.

 

THIS TRUST CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.

 

NO TRANSFER, SALE, PLEDGE OR OTHER DISPOSITION OF ONE OR MORE TRUST CERTIFICATES (A “TRANSFER”) SHALL BE MADE UNLESS SIMULTANEOUSLY WITH THE TRANSFER THE PERCENTAGE INTEREST OF THE TRUST CERTIFICATES SO TRANSFERRED IS NO LESS THAN TEN (10%) PERCENT.

 

C-1-2

 

 

Each holder of this trust certificate (AND any interest therein) represents and warrants that it is a “United States Person” as defined in section 7701(a)(30) of the Code and will provide the trust and THE OWNER TRUSTEE (AND ANY OF THEIR AGENTS) with a correct, complete and properly executed Internal Revenue Service Form W-9 (or applicable successor form). If any holder of this trust certificate (or any interest therein) (OTHER THAN THE INITIAL HOLDER) fails to provide the trust and the owner trust (and any of their agents) with the properly completed and signed tax certifications specified above, the acquisition of its interest in this trust CERTIFICATE shall be void ab initio.

 

Each transferor of this trust Certificate (and any interest therein) will agree, or by acquiring this trust Certificate or an interest therein will be deemed to have agreed, to deliver to the transferee, with a copy to the trust and the owner Trustee, prior to the transfer of the trust Certificate (and any interest therein), a properly completed certificate, in a form reasonably acceptable to the transferee and the Trust, stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person within the meaning of Section 1446(f)(2) of the Code (such certificate, a “Non-Foreign Status Certificate”). Each transferor of this trust Certificate (and any interest therein) ACKNOWLEDGES, or by acquiring this trust Certificate or an interest therein will be deemed to ACKNOWLEDGE, that the failure to provide a Non-Foreign Status Certificate to the transferee may result in withholding on the amount realized on its disposition of the trust Certificate.

 

THIS trust CERTIFICATE (and ANY INTEREST THEREIN) MAY NOT BE acquired or owned by any Person (OTHER THAN THE TRUST DEPOSITOR) that is classified for U.S. federal income tax purposes as a partnership, subchapter S corporation or grantor trust unless (i) (A) none of the direct or indirect beneficial owners of any interest in such Person have or ever will have more than 40% of the value of its interest in such Person attributable to the AGGREGATE interest of such Person in THE trust CERTIFICATES and any other equity interestS OF the Trust, and (B) it is not and will not be a principal purpose of the arrangement involving the investment of such Person in THE trust CERTIFICATES AND ANY OTHER EQUITY INTERESTs OF THE TRUST to permit any partnership to satisfy the 100 partner limitation of Treas. Reg. § 1.7704-1(h)(1)(ii) or (ii) such Person obtains an Opinion of NATIONALLY RECOGNIZED U.S. TAX Counsel REASONABLY ACCEPTABLE TO THE TRUST that such transfer will not cause the Trust to be treated as a publicly traded partnership taxable as a corporation.

 

THIS trust CERTIFICATE (and ANY INTEREST THEREIN) MAY NOT BE acquired, and no Certificateholder may sell, transfer, assign, participate, pledge or otherwise dispose of this trust CERTIFICATE (and any interest therein) or cause this trust CERTIFICATE (and any interest therein) to be marketed, (i) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treas. Reg. § 1.7704-1(b), including, without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations, or (ii) if such acquisition, sale, transfer, assignment, participation, pledge or other disposition would cause THE COMBINED NUMBER OF HOLDERS OF trust certificates and other equity interests in the trust to be more than 88.

 

no holder of this trust certificate (and any interest therein) will participate in the creation or other transfer of any financial instrument or contract the value of which is determined in whole or in part by reference to the trust (including the amount of distributions by the trust, the value of the trust’s assets, the results of the trust’s operations or the trust certificates).

 

Each holder of this trust certificate (AND any interest therein) acknowledges and agrees that any sale, transfer, assignment, participation, pledge, or other disposition of thIS trust certificate that would violate ANY OF the tHREE preceding paragraphs above or otherwise cause the trust to be unable to rely on the “private placement” safe harbor of Treas. Reg. § 1.7704-1(h) will be void and of no force or effect, and it will not transfer any interest in thIS trust certificate to any Person that does not agree to be bound by the tHREE preceding paragraphs above or by this paragraph.

 

C-1-3

 

 

Unless the trust Depositor, Trust and Owner Trustee have received an Opinion of Counsel from Dechert LLP or other nationally recognized tax counsel that the restriction on the proposed acquisition of THIS trust Certificate (and any interest therein) described by this PARAGRAPH is no longer necessary to conclude that any such acquisition (and subsequent resale of the applicable Notes described below) will not cause the Treasury Regulations under Section 385 of the code to apply to such Notes in a manner that could cause a material adverse effect on the Trust or the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (i) a Section 385 Certificateholder cannot acquire a trust Certificate (and any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder owns any Notes or (B) a Section 385 Controlled Partnership of such expanded group owns any Notes and (ii) a Section 385 Certificateholder cannot hold a trust Certificate (and any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note or (B) a Section 385 Controlled Partnership of such expanded group acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note. The preceding sentence shall not apply if the Noteholder or potential Noteholder is a U.S. corporate member of the same U.S. corporate “affiliated group” (as defined in Section 1504 of the Code) filing a consolidated federal income tax return that includes each of any applicable related Section 385 Certificateholders (including in the case of a partnership, the relevant “expanded group partner” (as defined in Treasury Regulation Section 1.385-3(g)(12)).  If a Certificateholder (or holder of an interest in a trust Certificate) fails to comply with the foregoing requirements, the Trust and Depositor are authorized, at their discretion, to compel such Certificateholder (or holder of an interest in a trust Certificate) to sell its trust Certificate (or interest therein) to a Person whose ownership complies with this PARAGRAPH so long as such sale does not otherwise cause a material adverse effect on the Trust or cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.

 

6.     It is acquiring the Trust Certificates for its own account and not with a view to the public offering thereof in violation of the Securities Act (subject, nevertheless, to the understanding that disposition of its property shall at all times be and remain within its control).

 

7.     It has been furnished with all information regarding the Trust and Trust Certificates which it has requested from the Trust and the Trust Depositor.

 

8.     Neither it nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of any Trust Certificate, any interest in any Trust Certificate or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of any Trust Certificate, any interest in any Trust Certificate or any other similar security from, or otherwise approached or negotiated with respect to any Trust Certificate, any interest in any Trust Certificate or any other similar security with, any person in any manner or made any general solicitation by means of general advertising or in any other manner, which would constitute a distribution of the Trust Certificates under the Securities Act or which would require registration pursuant to the Securities Act nor will it act, nor has it authorized or will authorize any person to act, in such manner with respect to any Trust Certificate.

 

9.     It is a Qualified Purchaser (“QP”) for purposes of Section 3(c)(7) of the 1940 Act.

 

C-1-4

 

 

10.     It acknowledges and agrees that it is a “United States person” as defined in section 7701(a)(30) of the Code and it has provided to the Trust and the Owner Trustee (and any of their agents) a correct, complete and properly executed Internal Revenue Service Form W-9 (or applicable successor form) and any transfer of the Trust Certificates to any person that fails to provide such form shall be void ab initio.

 

11.     It acknowledges and agrees that, no transfer of a Trust Certificate or any interest therein shall be made unless the transferor delivers to the transferee, with a copy to the Trust, the Owner Trustee and the Certificate Registrar, prior to the Transfer of the Trust Certificate or any interest therein, a properly completed certificate, in a form reasonably acceptable to the transferee and the Trust, stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person within the meaning of Section 1446(f)(2) of the Code (such certificate, a “Non-Foreign Status Certificate”). It acknowledges that the failure to provide a Non-Foreign Status Certificate to the transferee may result in withholding on the amount realized on its disposition of the Trust Certificate.

 

12.     It is not, and it agrees that no Trust Certificate or any interest therein may be acquired or owned by any Person (other than the Trust Depositor) that is, classified for U.S. federal income tax purposes as a partnership, subchapter S corporation or grantor trust unless (i)(A) none of the direct or indirect beneficial owners of any interest in such Person have or ever will have more than 40% of the value of its interest in such Person attributable to the aggregate interest of such Person in the Trust Certificates and any other equity interests of the Trust, and (B) it is not and will not be a principal purpose of the arrangement involving the investment of such Person in the Trust Certificates and any other equity interests of the Trust to permit any partnership to satisfy the 100 partner limitation of Treasury Regulation Section 1.7704-1(h)(1)(ii) or (ii) such Person obtains an opinion of nationally recognized U.S. tax counsel reasonably acceptable to the Trust that such transfer will not cause the Trust to be treated as a publicly traded partnership taxable as a corporation.

 

13.     It acknowledges and agrees that no Trust Certificate may be acquired, and no Certificateholder (or holder of an interest in a Trust Certificate) may sell, transfer, assign, participate, pledge or otherwise dispose of a Trust Certificate (or any interest therein) or other equity interest in the Trust or cause a Trust Certificate (or any interest therein) or other equity interest in the Trust to be marketed, (i) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treasury Regulation Section 1.7704-1(b), including without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations or (ii) if such acquisition, sale, transfer, assignment, participation, pledge or other disposition would cause the combined number of holders of Trust Certificates and other equity interests in the Trust to be more than 88.

 

14.     It acknowledges and agrees that it will not participate in the creation or other transfer of any financial instrument or contract the value of which is determined in whole or in part by reference to the Trust (including the amount of distributions by the Trust, the value of the Trust’s assets, the results of the Trust’s operation or the Trust Certificates).

 

15.     It acknowledges and agrees that any sale, transfer, assignment, participation, pledge, or other disposition of a Trust Certificate that would violate any of the three preceding paragraphs above or otherwise cause the Trust to be unable to rely on the “private placement” safe harbor of Treasury Regulation Section 1.7704-1(h) will be void and of no force or effect, and it will not transfer any interest in its Trust Certificates to any person that does not agree to be bound by the three preceding paragraphs above or by this paragraph.

 

C-1-5

 

 

16.     It acknowledges and agrees that, unless the Trust Depositor, Trust and Owner Trustee have received an Opinion of Counsel from Dechert LLP or other nationally recognized tax counsel that the restriction on the proposed acquisition of a Trust Certificate (or any interest therein) described by this paragraph is no longer necessary to conclude that any such acquisition (and subsequent resale of the applicable Notes described below) will not cause the Treasury Regulations under Section 385 of the Code to apply to such Notes in a manner that could cause a material adverse effect on the Trust or the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (i) a Section 385 Certificateholder cannot acquire a Trust Certificate (or any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder owns any Notes or (B) a Section 385 Controlled Partnership of such expanded group owns any Notes and (ii) a Section 385 Certificateholder cannot hold a Trust Certificate (or any interest therein) if (A) a member of any “expanded group” (as defined in Treasury Regulation Section 1.385-1(c)(4)) that includes such Section 385 Certificateholder acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note or (B) a Section 385 Controlled Partnership of such expanded group acquires any Notes from the Trust, any Affiliate of the Trust or any other subsequent transferor of a Note. The preceding sentence shall not apply if the Noteholder or potential Noteholder is a U.S. corporate member of the same U.S. corporate “affiliated group” (as defined in Section 1504 of the Code) filing a consolidated federal income tax return that includes each of any applicable related Section 385 Certificateholders (including in the case of a partnership, the relevant “expanded group partner” (as defined in Treasury Regulation Section 1.385-3(g)(12)). It understands that if it fails to comply with the foregoing requirements, the Trust and Depositor are authorized, at their discretion, to compel it to sell its Trust Certificate (or interest therein) to a Person whose ownership complies with this subsection so long as such sale does not otherwise cause a material adverse effect on the Trust or cause the Trust to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.

 

C-1-6

 

 

	 	
			Very truly yours,

			 

			Hercules Capital Funding 2019-1 LLC

				 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	
			Name:

			Title: 

				 	 

 

 

 

 

 

 

 

C-1-7ex_133169.htm

Exhibit 10.1

 

 

EXECUTION COPY

 

 

 

 

 

 

SALE AND SERVICING AGREEMENT

 

by and among

 

HERCULES CAPITAL FUNDING TRUST 2019-1,

as the Issuer,

 

HERCULES CAPITAL FUNDING 2019-1 LLC,

as the Trust Depositor,

 

HERCULES CAPITAL, INC.

as the Seller and as the Servicer,

 

and

 

U.S. BANK NATIONAL ASSOCIATION,

as the Trustee, Backup Servicer, Custodian and Paying Agent 

 

Dated as of January 22, 2019

 

 

 

Hercules Capital Funding Trust 2019-1

Asset-Backed Notes

 

 

 

 

TABLE OF CONTENTS

 

	 	 	Page 
	 	 	 
	
			ARTICLE 1. DEFINITIONS

				
			2

			
	
			Section 1.01.

				
			Definitions

				
			2

			
	
			Section 1.02.

				
			Usage of Terms

				
			39

			
	
			Section 1.03.

				
			Section References

				
			39

			
	
			Section 1.04.

				
			Calculations

				
			39

			
	
			Section 1.05.

				
			Accounting Terms

				
			40

			
	
			ARTICLE 2. ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS

				
			40

			
	
			Section 2.01.

				
			Creation and Funding of Issuer; Transfer of Loan Assets

				
			40

			
	
			Section 2.02.

				
			Conditions to Transfer of Initial Loan Assets to Issuer

				
			42

			
	
			Section 2.03.

				
			Acceptance by Issuer

				
			44

			
	
			Section 2.04.

				
			Conveyance of Substitute Loans

				
			44

			
	
			Section 2.05.

				
			Optional Sales of Loans

				
			46

			
	
			Section 2.06.

				
			Optional Substitution of Loans

				
			46

			
	
			Section 2.07.

				
			Acquisition of Additional Loans

				
			47

			
	
			Section 2.08.

				
			Release of Excluded Amounts

				
			49

			
	
			Section 2.09.

				
			Delivery of Documents in the Loan File

				
			50

			
	
			Section 2.10.

				
			Limitations on Optional Sale and Substitution

				
			50

			
	
			Section 2.11.

				
			Certification by Custodian; Possession of Loan Files

				
			51

			
	
			ARTICLE 3. REPRESENTATIONS AND WARRANTIES

				
			52

			
	
			Section 3.01.

				
			Representations and Warranties Regarding the Trust Depositor

				
			53

			
	
			Section 3.02.

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

				
			57

			
	
			Section 3.03.

				
			[Reserved]

				
			57

			
	
			Section 3.04.

				
			Representations and Warranties Regarding the Required Loan Documents

				
			57

			
	
			Section 3.05.

				
			[Reserved]

				
			57

			
	
			Section 3.06.

				
			Representations and Warranties Regarding the Servicer

				
			57

			
	
			Section 3.07.

				
			Representations of the Backup Servicer

				
			59

			

 

-i-

 

 

TABLE OF CONTENTS

(continued)

 

	 	Page 
	 	 
	
			ARTICLE 4. PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

				
			60

			
	
			Section 4.01.

				
			Custody of Loans

				
			60

			
	
			Section 4.02.

				
			Filing

				
			61

			
	
			Section 4.03.

				
			Changes in Name, Organizational Structure or Location

				
			61

			
	
			Section 4.04.

				
			Costs and Expenses

				
			61

			
	
			Section 4.05.

				
			Sale Treatment

				
			61

			
	
			Section 4.06.

				
			Separateness from Trust Depositor

				
			62

			
	
			ARTICLE 5. SERVICING OF LOANS

				
			62

			
	
			Section 5.01.

				
			Appointment and Acceptance

				
			62

			
	
			Section 5.02.

				
			Duties of the Servicer and the Backup Servicer

				
			62

			
	
			Section 5.03.

				
			Liquidation of Loans

				
			69

			
	
			Section 5.04.

				
			[Reserved.]

				
			70

			
	
			Section 5.05.

				
			Maintenance of Insurance

				
			70

			
	
			Section 5.06.

				
			Collection of Certain Loan Payments

				
			70

			
	
			Section 5.07.

				
			Access to Certain Documentation and Information Regarding the Loans

				
			71

			
	
			Section 5.08.

				
			Satisfaction of Collateral and Release of Loan Files

				
			71

			
	
			Section 5.09.

				
			Scheduled Payment Advances; Servicing Advances and Nonrecoverable Advances

				
			73

			
	
			Section 5.10.

				
			Title, Management and Disposition of Foreclosed Property

				
			74

			
	
			Section 5.11.

				
			Servicing Compensation

				
			76

			
	
			Section 5.12.

				
			Assignment; Resignation

				
			76

			
	
			Section 5.13.

				
			Merger or Consolidation of Servicer

				
			77

			
	
			Section 5.14.

				
			Limitation on Liability of the Servicer and Others

				
			77

			
	
			Section 5.15.

				
			Determination of Reserve Account Required Balance

				
			78

			
	
			Section 5.16.

				
			Rights of and Limitation of Liability of Backup Servicer

				
			78

			
	
			ARTICLE 6. COVENANTS OF THE TRUST DEPOSITOR

				79
	
			Section 6.01.

				
			Legal Existence

				
			79

			
	
			Section 6.02.

				
			[Reserved]

				
			79

			
	
			Section 6.03.

				
			Security Interests

				
			79

			
	
			Section 6.04.

				
			Delivery of Collections

				
			80

			
	
			Section 6.05.

				
			Regulatory Filings

				
			80

			
	
			Section 6.06.

				
			Compliance with Law

				
			80

			

 

-ii-

 

 

TABLE OF CONTENTS

(continued)

 

	 	 	Page 
	 	 	 
	
			Section 6.07.

				
			Activities; Transfers of Notes or Certificates by Trust Depositor

				
			80

			
	
			Section 6.08.

				
			Indebtedness

				
			80

			
	
			Section 6.09.

				
			Guarantees

				
			81

			
	
			Section 6.10.

				
			Investments

				
			81

			
	
			Section 6.11.

				
			Merger; Sales

				
			81

			
	
			Section 6.12.

				
			Distributions

				
			81

			
	
			Section 6.13.

				
			Other Agreements

				
			81

			
	
			Section 6.14.

				
			Separate Legal Existence

				
			82

			
	
			Section 6.15.

				
			Location; Records

				
			82

			
	
			Section 6.16.

				
			Liability of Trust Depositor

				
			82

			
	
			Section 6.17.

				
			Bankruptcy Limitations

				
			82

			
	
			Section 6.18.

				
			Limitation on Liability of Trust Depositor and Others

				
			83

			
	
			Section 6.19.

				
			Payments from Obligors

				
			83

			
	
			ARTICLE 7. ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS;

				
			83

			
	
			Section 7.01.

				
			Distribution Account; Lockbox Account and Other Accounts

				
			83

			
	
			Section 7.02.

				
			Reserve Account

				
			84

			
	
			Section 7.03.

				
			Collection Account

				
			85

			
	
			Section 7.04.

				
			Reinvestment Account

				
			88

			
	
			Section 7.05.

				
			Securityholder Distributions

				
			88

			
	
			Section 7.06.

				
			Allocations and Distributions

				
			89

			
	
			ARTICLE 8. SERVICER DEFAULT; SERVICER TRANSFER

				
			89

			
	
			Section 8.01.

				
			Servicer Default

				
			93

			
	
			Section 8.02.

				
			Servicer Transfer

				
			94

			
	
			Section 8.03.

				
			Acceptance by Successor Servicer; Reconveyance; Successor Servicer to Act

				
			95

			
	
			Section 8.04.

				
			Notification to Securityholders

				
			97

			
	
			Section 8.05.

				
			Effect of Transfer

				
			98

			
	
			Section 8.06.

				
			Database File

				
			98

			
	
			Section 8.07.

				
			Waiver of Defaults

				
			98

			

 

-iii-

 

 

TABLE OF CONTENTS

(continued)

 

	 	 	Page 
	 	 	 
	
			ARTICLE 9. REPORTS

				
			98

			
	
			Section 9.01.

				
			Monthly Reports

				
			98

			
	
			Section 9.02.

				
			Quarterly Reports

				
			99

			
	
			Section 9.03.

				
			Preparation of Reports; Officer’s Certificate

				
			100

			
	
			Section 9.04.

				
			Other Data; Obligor Financial Information

				
			100

			
	
			Section 9.05.

				
			Annual Report of Accountants

				
			102

			
	
			Section 9.06.

				
			Statements of Compliance from Servicer

				
			103

			
	
			Section 9.07.

				
			[Reserved]

				
			103

			
	
			Section 9.08.

				
			Notices of Event of Default, Servicer Default or Rapid Amortization Event

				
			103

			
	
			Section 9.09.

				
			Trustee’s Right to Examine Servicer Records, Audit Operations and Deliver Information to Noteholders

				
			103

			
	
			ARTICLE 10. TERMINATION

				
			104

			
	
			Section 10.01.

				
			Optional Redemption of Notes; Rights of Certificateholders Following Satisfaction and Discharge of Indenture

				
			104

			
	
			Section 10.02.

				
			Termination

				
			105

			
	
			ARTICLE 11. REMEDIES UPON MISREPRESENTATION; REPURCHASE OPTION

				
			105

			
	
			Section 11.01.

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

				
			105

			
	
			Section 11.02.

				
			Reassignment of Repurchased or Substituted Loans

				
			106

			
	
			ARTICLE 12. INDEMNITIES

				
			106

			
	
			Section 12.01.

				
			Indemnification by Servicer

				
			106

			
	
			Section 12.02.

				
			Indemnification by Trust Depositor

				
			107

			
	
			Section 12.03.

				
			Survival

				
			108

			
	
			ARTICLE 13. MISCELLANEOUS

				
			108

			
	
			Section 13.01.

				
			Amendment

				
			108

			
	
			Section 13.02.

				
			[Reserved]

				
			108

			
	
			Section 13.03.

				
			Governing Law

				
			109

			
	
			Section 13.04.

				
			Notices

				
			110

			
	
			Section 13.05.

				
			Severability of Provisions

				
			113

			
	
			Section 13.06.

				
			Third Party Beneficiaries

				
			113

			

 

-iv-

 

 

TABLE OF CONTENTS

(continued)

 

	 	 	Page 
	 	 	 
	
			Section 13.07.

				
			Counterparts

				
			113

			
	
			Section 13.08.

				
			Headings

				
			114

			
	
			Section 13.09.

				
			No Bankruptcy Petition; Disclaimer

				
			114

			
	
			Section 13.10.

				
			Jurisdiction

				
			114

			
	
			Section 13.11.

				
			Tax Characterization

				
			114

			
	
			Section 13.12.

				
			[Reserved]

				
			115

			
	
			Section 13.13.

				
			Limitation of Liability of Owner Trustee

				
			115

			
	
			Section 13.14.

				
			[Reserved]

				
			115

			
	
			Section 13.15.

				
			No Partnership

				
			115

			
	
			Section 13.16.

				
			Successors and Assigns

				
			115

			
	
			Section 13.17.

				
			Acts of Holders

				
			115

			
	
			Section 13.18.

				
			Duration of Agreement

				
			116

			
	
			Section 13.19.

				
			Limited Recourse

				
			116

			
	
			Section 13.20.

				
			Confidentiality

				
			116

			
	
			Section 13.21.

				
			Non-Confidentiality of Tax Treatment

				
			117

			

 

-v-

 

 

EXHIBITS

 

	
			Exhibit A

				
			Form of Assignment

				
			A‐1

			
	
			Exhibit B

				
			Form of Closing Certificate of Trust Depositor

				
			B‐1

			
	
			Exhibit C

				
			Form of Closing Certificate of Servicer/Seller

				
			C‐1

			
	
			Exhibit D

				
			Form of Liquidation Report

				
			D‐1

			
	
			Exhibit E

				
			EU Retention Undertaking Letter

				
			E‐1

			
	
			Exhibit F

				
			Servicer Officer’s Certificate

				
			F‐1

			
	
			Exhibit G

				
			List of Loans

				
			G‐1

			
	
			Exhibit H-1

				
			Form of Quarterly Report

				
			H‐1

			
	
			Exhibit H-2

				
			Form of Monthly Report

				
			H‐2

			
	
			Exhibit I

				
			[Reserved]

				
			I‐1

			
	
			Exhibit J

				
			[Reserved]

				
			J‐1

			
	
			Exhibit K

				
			Form of Annual Certification Regarding Required Loan Documents

				
			K‐1

			
	
			Exhibit L‐1

				
			Form of Initial Certification

				
			L‐1

			
	
			Exhibit L‐2

				
			Form of Final Certification

				
			L‐2

			
	
			Exhibit M

				
			Form of Request for Release of Documents

				
			M‐1

			

 

-vi-

 

 

SALE AND SERVICING AGREEMENT

 

THIS SALE AND SERVICING AGREEMENT, dated as of January 22, 2019, is by and among:

 

	 	
			(1)

				
			HERCULES CAPITAL FUNDING TRUST 2019-1, a statutory trust created and existing under the laws of the State of Delaware (together with its successors and assigns, the “Issuer”);

			

 

	 	
			(2)

				
			HERCULES CAPITAL FUNDING 2019-1 LLC, a Delaware limited liability company, as the trust depositor (together with its successor and assigns, in such capacity, the “Trust Depositor”);

			

 

	 	
			(3)

				
			HERCULES CAPITAL, INC., a Maryland corporation (together with its successors and assigns, “Hercules”), as the servicer (together with its successors and assigns, in such capacity, the “Servicer”), and as the seller (together with its successors and assigns, in such capacity, the “Seller”); and

			

 

	 	
			(4)

				
			U.S. BANK NATIONAL ASSOCIATION (together with its successors and assigns, “U.S. Bank”), not in its individual capacity but as the trustee (together with its successors and assigns, in such capacity, the “Trustee”), not in its individual capacity but as the backup servicer (together with its successors and assigns, in such capacity, the “Backup Servicer”) and not in its individual capacity but as the custodian (together with its successors and assigns in such capacity, the “Custodian”) and not in its individual capacity but as paying agent (together with its successors and assigns in such capacity, the “Paying Agent”).

			

 

R E C I T A L S

 

WHEREAS, in the regular course of its business, the Seller originates and/or otherwise acquires Loans (as defined herein);

 

WHEREAS, the Trust Depositor acquired the Initial Loans from the Seller and may acquire from time to time thereafter certain Additional Loans and Substitute Loans;

 

WHEREAS, it is a condition to the Trust Depositor’s acquisition of the Initial Loans, any Additional Loans and any Substitute Loans from the Seller that the Seller make certain representations and warranties regarding the Loan Assets for the benefit of the Trust Depositor as well as the Issuer;

 

WHEREAS, on the Closing Date, the Trust Depositor will sell, convey and assign all its right, title and interest in the Initial Loan Assets and certain other assets to the Issuer as provided herein;

 

WHEREAS, the Issuer is willing to purchase and accept assignment of the Loan Assets from the Trust Depositor pursuant to the terms hereof;

 

WHEREAS, the Servicer is willing to service the Loan Assets for the benefit and account of the Issuer pursuant to the terms hereof; and

 

WHEREAS, the Backup Servicer is willing to provide backup servicing for the Loan Assets.

 

 

 

 

NOW, THEREFORE, based upon the above recitals, the mutual premises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

ARTICLE 1.

DEFINITIONS

 

Section 1.01.     Definitions.

 

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

 

“1940 Act” means the Investment Company Act of 1940, as amended.

 

“Additional Loan” means one or more Loans transferred by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer under and in accordance with Section 2.07.

 

“Additional Loan Assets” means any assets acquired by the Issuer from the Trust Depositor following the Closing Date in connection with the conveyance of one or more Additional Loans pursuant to Section 2.07, which assets shall include the Trust Depositor’s right, title and interest in the following:

 

(i)     the Additional Loans listed in the related Subsequent List of Loans and all monies due, to become due or paid in respect thereof accruing on and after the Additional Loan Cutoff Date and all Insurance Proceeds, Liquidation Proceeds and other recoveries thereon, in each case as they arise after the Additional Loan Cutoff Date;

 

(ii)     all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Loans;

 

(iii)     all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Loans;

 

(iv)     all collections and Records (including Computer Records) with respect to the foregoing;

 

(v)     all documents relating to the applicable Loan Files; and

 

2

 

 

(vi)     all income, payments, proceeds and other benefits of any and all of the foregoing, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the foregoing, but excluding any Excluded Amount with respect thereto.

 

“Additional Loan Cutoff Date” means each date on or after the Closing Date on which an Additional Loan is transferred to the Issuer.

 

“Adjusted Pool Balance” means, as of any Payment Date, Reference Date and Transfer Date, the Pool Balance (as of the last day of the related Collection Period, for any Reference Date or Payment Date, or as of such Transfer Date in the case of any Transfer Date) minus, without duplication, (a) the Excess Concentration Amounts (as of the last day of the related Collection Period, for any Reference Date or Payment Date, or as of such Transfer Date in the case of any Transfer Date), as applicable, minus (b) the aggregate Outstanding Loan Balance of all Delinquent Loans and Restructured Loans as of such date.

 

“Administration Agreement” means the Administration Agreement, as amended, supplemented or otherwise modified and in effect from time to time, dated as of the Closing Date, among the Issuer, the Administrator, the Owner Trustee and the Trustee.

 

“Administrative Expense Cap” means for all fees, expenses and indemnity payments due and owing with respect to each of the Trustee, the Owner Trustee, the Backup Servicer, the Custodian, the Split Loan Agent, if any, the Paying Agent and the Lockbox Bank pursuant to clause 1 of Section 7.06(a), prior to the occurrence of an Event of Default, collectively, an aggregate annual maximum amount of $500,000 (for the year ending on the first anniversary of the Closing Date and each year ending on each subsequent anniversary thereof), provided, however, that any amounts in respect of indemnification owing to the Backup Servicer as Successor Servicer shall not be subject to the Administrative Expense Cap. After the occurrence of an Event of Default that is continuing, the Administrative Expense Cap will not apply to indemnity payments to the Trustee, the Owner Trustee, the Backup Servicer, the Custodian, the Split Loan Agent (if any), the Paying Agent and the Lockbox Bank. If the Administrative Expense Cap is reached, all amounts owed to such parties above the Administrative Expense Cap will be paid pursuant to clause 6 of Section 7.06(a) and clause 3 of the Section 7.06(b) and will again be paid pursuant to clause 1 of the Section 7.06(a) beginning on the next anniversary of the Closing Date until the Administrative Expense Cap is again reached for such year.

 

“Administrative Expenses” means fees and expenses (excluding amounts related to indemnification) due or accrued with respect to any Payment Date and payable by the Issuer:

 

(a)     to any Person in respect of any governmental fee, charge or tax in relation to the Issuer;

 

3

 

 

(b)     to the Trustee, the Lockbox Bank, the Custodian, the Paying Agent and the Split Loan Agent (if any), (i) any monthly fees to be paid to it pursuant to the Transaction Documents, (ii) any additional fees, expenses or other amounts due and owing thereto and (iii) if a Successor Servicer is being appointed, any Servicing Transfer Costs incurred by the Trustee;

 

(c)     to the Owner Trustee, (i) any monthly fees to be paid to it pursuant to the Transaction Documents and (ii) any additional fees, expenses or other amounts due and owing thereto;

 

(d)     to the Backup Servicer, (i) the Backup Servicer Fee to be paid to it pursuant to the Transaction Documents, (ii) any additional fees, expenses or other amounts due and owing thereto and (iii) fees and expenses and other amounts payable to the Backup Servicer in connection with a Servicer Transfer pursuant to Section 8.02(c);

 

(e)     to the Independent Accountants, agents and counsel of the Issuer for fees and expenses including, but not limited to, audit fees and expenses, and to the Servicer for expenses and other amounts (excluding the Servicing Fee, any Scheduled Payment Advances and any Servicing Advances) payable under this Agreement;

 

(f)     to the Trustee, for unpaid fees and expenses (including fees and expenses of its agents and counsel) incurred in the exercise of its rights and remedies on behalf of the Securityholders pursuant to Article V of the Indenture; and

 

(g)     to KBRA for its surveillance fees in relation to the Notes;

 

provided that Administrative Expenses will not include (I) any amounts due or accrued with respect to the actions taken on or in connection with the Closing Date, (II) any principal of or interest on any Notes or (III) amounts payable to Trustee and the Owner Trustee in respect of indemnification.

 

“Administrator” means Hercules, as administrator pursuant to the Administration Agreement.

 

4

 

 

“Advance Rate” means for any Payment Date, with respect to each Loan included in the Collateral as of the related Reference Date, an amount to be determined by the number of obligors as set forth below:

 

	
			# of 

			Obligors

				 	
			Advance

			Rate

			
	
			10 or fewer

				 	
			N/A (Rapid

			Amortization

			Event)

			
	
			11-14

				 	
			60%

			
	
			15-29

				 	
			65%

			
	
			30

				 	
			66%

			
	
			31

				 	
			67%

			
	
			32

				 	
			68%

			
	
			33

				 	
			69%

			
	
			34 or more

				 	
			70%

			

 

“Affiliate” of any specified Person means any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person, or is a director or officer of such Person; provided that for purposes of determining whether any Loan is an Eligible Loan or any Obligor is an Eligible Obligor, the term Affiliate shall not include any Affiliate relationship which may exist solely as a result of direct or indirect ownership of, or control by, a common owner which is a financial institution, fund or other investment vehicle which is in the business of making diversified investments including investments independent from the Loans. For the purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”), when used with respect to any specified Person means the possession, direct or indirect, of the power to vote 25% or more of the voting securities of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. Each of the Trustee and the Owner Trustee may conclusively presume that a Person is not an Affiliate of another Person unless a Responsible Officer of such trustee has actual knowledge to the contrary.

 

“Agented Loan” means, any Loan with respect to which, (a) the Loan is originated or purchased by the Seller in accordance with the Credit and Collection Policy as a part of a syndicated loan transaction that has been fully consummated prior to such Loan becoming part of the Collateral, (b) the Issuer, as assignee of the Loan, has all of the rights (including without limitation voting rights) of the Seller with respect to such Loan and the Seller’s right, title and interest in and to the Related Property, (c) the Loan is secured by an undivided interest in the Related Property that also secures and is shared by, on a pro rata basis, all other holders of such Obligor’s notes of equal priority issued in such syndicated loan transaction and (d) the Seller (or a wholly owned subsidiary of the Seller) is the lead agent or collateral agent for all lenders in such syndicated loan transaction and receives payment directly from the Obligor and may collect such payments on behalf of such lenders.

 

“Aggregate Outstanding Loan Balance” means, as of any date, the sum of the Outstanding Loan Balance for each Loan owned by the Issuer.

 

5

 

 

“Aggregate Outstanding Principal Balance” means, as of any date of determination, the sum of the Outstanding Principal Balances of the Notes on such date.

 

“Agreement” means this Sale and Servicing Agreement, as amended, modified, waived, supplemented or restated from time to time in accordance with the terms hereof.

 

“Applicable Law” means, for any Person or property of such Person, all existing and future applicable laws, rules, regulations (including proposed, temporary and final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by any Governmental Authority (including, without limitation, usury laws, the Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System), the Customer Identification Program requirements established under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Title III of Pub. L. 107 56 (signed into law October 26, 2001) and its implementing regulations (collectively, USA PATRIOT Act), the Financial Crimes Enforcement Network’s (FinCEN) Customer Due Diligence Requirements and such other laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions and applicable judgments, decrees, injunctions, writs, awards or orders of any court, arbitrator or other administrative, judicial, or quasi-judicial tribunal or agency of competent jurisdiction.

 

“Applicable Premium” means (i) prior to the end of the Reinvestment Period, the Make-Whole Premium; and (ii) $0 thereafter.

 

“Assignment” means each Assignment, substantially in the form of Exhibit A, relating to an assignment, transfer and conveyance of Loans and the Related Property by the Trust Depositor to the Issuer.

 

“Available Funds” means, with respect to any Payment Date, an amount equal to the sum of, without duplication, (a) Collections received during the related Collection Period; (b) interest earned on and any other investment earnings with respect to funds on deposit in each of the Collection Account and the Reserve Account during the related Interest Period; and (c) any Scheduled Payment Advances deposited into the Collection Account on the related Reference Date.

 

“Backup Servicer” has the meaning provided in the Preamble.

 

“Backup Servicer Fee” means the annual administration fee payable to the Backup Servicer as provided in the fee letter agreement between the Issuer and U.S. Bank.

 

“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.), as amended from time to time.

 

“Beneficial Owner” shall have the meaning provided in the Indenture.

 

6

 

 

“Borrowing Base” means, for any Payment Date, the sum of (A) the product of (x) the Advance Rate and (y) the Adjusted Pool Balance, (B) the amount on deposit in the Reinvestment Account (including for the avoidance of doubt, any capital contributions), and (C) all Principal Collections in the Collection Account anticipated to be deposited into the Reinvestment Account on such Payment Date (or the related Payment Date, as applicable) pursuant to Section 7.06(b), in each case determined as of the related Reference Date.

 

“Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in New York, New York, Palo Alto, California, Wilmington, Delaware, Boston, Massachusetts, or St. Paul, Minnesota are authorized or obligated by law or executive order to be closed.

 

“Cash Yield Rate” means, for any Loan, a rate of return inclusive of interest, scheduled principal and fees for such Loan.

 

“Certificate” means the Hercules Capital Funding Trust 2019-1 Certificate representing a beneficial ownership interest in the Issuer and issued pursuant to the Trust Agreement.

 

“Certificate Account” shall have the meaning provided in Section 5.01 of the Trust Agreement.

 

“Certificate Register” shall have the meaning provided in the Trust Agreement.

 

“Certificateholder” means the registered holder of the Certificate.

 

“Closing Date” means January 22, 2019.

 

“Co-Agented Loan” means, any Loan with respect to which, (a) the Loan is originated or purchased by the Seller in accordance with the Credit and Collection Policy as a part of a syndicated loan transaction that has been fully consummated prior to such Loan becoming part of the Collateral, (b) the Issuer, as assignee of the Loan, has all of the rights (including without limitation voting rights) of the Seller with respect to such Loan and the Seller’s right, title and interest in and to the Related Property, (c) the Loan is secured by an undivided interest in the Related Property that also secures and is shared by, on a pro rata basis, all other holders of such Obligor’s notes of equal priority issued in such syndicated loan transaction and (d) either (i) the Seller (or a wholly owned subsidiary of the Seller) is a co-agent, collateral agent or paying agent in such syndicated loan transaction, (ii) neither the Seller nor any other lender is deemed to be the collateral agent in such syndicate loan transaction, or (iii) the Seller receives payment directly from the Obligor thereof on behalf of itself (but not on behalf of any other holders of such Obligor’s notes) and no other holder of such Obligor’s notes (nor any affiliate thereof) is identified as the lead agent, collateral agent or paying agent in such syndicated loan transaction.

 

“Code” means the Internal Revenue Code of 1986, as amended, or any successor legislation thereto.

 

7

 

 

“Collateral” means, as of any date, the “Indenture Collateral,” as such term is defined in the Indenture.

 

“Collection Account” means the interest bearing trust account so designated and established and maintained pursuant to Section 7.03(a).

 

“Collection Period” means, with respect to the first Payment Date, the period from and including the Cutoff Date to the close of business February 4, 2019, and for any Payment Date thereafter, the period from and including the fifth day of the calendar month in which the prior Payment Date occurred to the fourth day of the calendar month in which such Payment Date occurs.

 

“Collections” means the aggregate of Interest Collections and Principal Collections.

 

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

 

“Computer Records” means the computer records generated by the Servicer that provide information relating to the Loans and that were used by the Seller in selecting the Loans conveyed by the Trust Depositor to the Issuer pursuant to Section 2.01 (and any Additional Loans conveyed by the Trust Depositor to the Issuer pursuant to Section 2.07 and Substitute Loans conveyed by the Trust Depositor to the Issuer pursuant to Section 2.04 and Section 2.06, respectively).

 

“Continued Error” shall have the meaning provided in Section 8.03(e).

 

“Contractual Obligation” means, with respect to any Person, any provision of any securities issued by such Person or any indenture, mortgage, deed of trust, contract, undertaking, agreement, instrument or other document to which such Person is a party or by which it or any of its property is bound or is subject.

 

“Corporate Trust Office” means, with respect to the Trustee, the Owner Trustee or the Backup Servicer, as applicable, the office of the Trustee, the Owner Trustee or the Backup Servicer at which at any particular time its corporate trust business with respect to the transaction shall be principally administered, which offices at the date of the execution of this Agreement are located at the addresses set forth in Section 13.04.

 

“Credit and Collection Policy” means the policies and procedures of the Seller and Servicer with respect to underwriting, credit monitoring, investment grading, collection and servicing of Life Sciences Loans and Technology Loans in effect on the Cutoff Date, including without limitation the valuation policy and procedures of the Seller and Servicer and the Credit Monitoring Guidelines, in each case as amended, modified or supplemented from time to time, a description of which has been provided to the Trust Depositor, the Issuer, the Owner Trustee and the Trustee; and, with respect to any Successor Servicer (including for the avoidance of doubt the Backup Servicer in such capacity), the written credit and collection policies and procedures of such Person at the time such Person becomes a Successor Servicer.

 

8

 

 

“Credit Monitoring Guidelines” means the written Valuation Policy and Procedures of the Seller and Servicer dated October 2014 and in effect as of the Cutoff Date, as amended, modified or supplemented from time to time.

 

“Curtailment” means, with respect to a Loan, any payment of principal received by the Issuer during a Collection Period as part of a payment allocable to a Loan that is in excess of the principal portion of the Scheduled Payment due for such Collection Period and which is not intended to satisfy the Loan in full, nor is intended to cure a delinquency including any accelerated amortization due to structural features of the related Loan.

 

“Custodian” has the meaning provided in the Preamble.

 

“Cutoff Date” means with respect to (i) the Initial Loans, the Initial Cutoff Date or (ii) any Additional Loan or Substitute Loan, the related Transfer Date.

 

“Cutoff Date Pool Balance” shall have the meaning provided in Section 2.10.

 

“Defaulted Loan” means a Loan in the Collateral as to which the earliest of the following has occurred: (i) any payment, or any part of any payment, due under such Loan (taking into account any waivers or modifications granted by the Servicer on such Loan) has become 120 days or more delinquent, whether or not the Servicer has foreclosed upon the related Collateral; (ii) the Servicer has foreclosed upon and sold the related collateral; (iii) 90 days has elapsed since the related Collateral was foreclosed upon by the Servicer; or (iv) the Servicer has determined in accordance with its customary practices that the Loan is uncollectible; provided if the principal amount of a Loan is reduced, written down or written off by the Servicer, the portion of such Loan (but not the whole Loan) that is so reduced, written down or written off shall be deemed to be a Defaulted Loan; provided, however, that any Loan that the Seller or the Trust Depositor is obligated to and does repurchase or purchase under this Agreement or any Loan that has been substituted and replaced by the Issuer with a Substitute Loan pursuant to Section 2.04 and Section 2.06 will not be deemed to be a Defaulted Loan.

 

“Distribution Account” means the non-interest bearing trust account so designated and established and maintained pursuant to Section 7.01.

 

“Delinquent Loan” means a Loan which is more than forty-five (45) days delinquent in payment; provided, however, that any Loan that has been substituted and replaced by the Issuer with a Substitute Loan pursuant to Section 2.04 and Section 2.06 will not be deemed to be a Delinquent Loan.

 

“Dollar” and “$” means the lawful currency of the United States.

 

“EBITDA” means, with respect to any Loan, (i) “EBITDA” of the Obligor under such Loan or (ii) if the Underlying Loan Agreement for such Loan do not require an Obligor to calculate EBITDA, “operating income” (or such similar financial measurement), in each case as calculated and reported in accordance with the Underlying Loan Agreement for such Loan and with such adjustments as the Servicer determines to be appropriate in accordance with the Servicing Standard.

 

9

 

 

“ECA Calculation Balance” means, for any Record Date, Payment Date or Transfer Date means the sum of (i) the Pool Balance as of the last day of the related Collection Period (or for any Transfer Date, such Transfer Date), (ii) all funds on deposit in the Reinvestment Account as of the last day of the related Collection Period (or for any Transfer Date, as of such Transfer Date) and (iii) all Principal Collections in the Collection Account that are anticipated to be deposited in the Reinvestment Account on such Payment Date (or in the case of a Record Date or Transfer Date, the immediately following Payment Date) pursuant to Section 7.06(b).

 

“Eligible Deposit Account” means either (a) a segregated account with a Qualified Institution, or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any state of the United States or the District of Columbia, or any domestic branch of a foreign bank, having corporate trust powers and acting as trustee for funds deposited in the related account, so long as any of the securities of that depository institution has a credit rating from Moody’s or another nationally recognized statistical rating organization in one of its generic rating categories that signifies investment grade.

 

“Eligible Loan” means, (i) on and as of the Cutoff Date, in the case of the Initial Loans, (ii) on and as of the Additional Loan Cutoff Date, in the case of any Additional Loans, and (iii) on and as of the related Substitute Loan Cutoff Date, in the case of any Substitute Loans, a Loan as to which each of the following is true:

 

(a)     such Loan is either a Life Sciences Loan or a Technology Loan, has been originated or purchased by the Seller in the ordinary course of the Seller’s business and has been fully and properly executed by the parties thereto;

 

(b)     such Loan is not a commercial loan to an obligor that is generally a later-stage, established company that is, at the time of origination of such Loan, (i) not venture backed (ii) is generating positive EBITDA and (iii) cash flow positive operations;

 

(c)     provides for periodic payments of interest and/or principal in cash, which are due and payable on a monthly or quarterly basis;

 

(d)     the information provided to the Issuer and its assigns in respect of such Loan pursuant to the Transaction Documents is true and correct in all material respects;

 

(e)     provides for, in the event that such Loan is prepaid in whole, a prepayment that fully pays the principal amount of such prepayment together with interest and fees through the date of payment;

 

(f)     such Loan satisfies in all material respects the requirements under the Credit and Collection Policy and was originated in accordance therewith;

 

10

 

 

(g)     such Loan represents the legal, valid and binding payment obligation in writing of the related Obligor, enforceable by the holder thereof in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity;

 

(h)     such Loan is not due from the United States or any state thereof or from any agency, department or instrumentality of the United States or any state thereof;

 

(i)     such Loan is secured by a valid, binding and enforceable first priority or second priority perfected security interest (subject to Permitted Liens) in favor of the underlying secured parties upon certain property of the Obligor identified in the Loan documentation; provided that, if the Seller is the sole lender, pursuant to the Underlying Loan Agreement, immediately prior to its conveyance, transfer, contribution and assignment by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer, such Loan is secured by a valid, binding and enforceable first priority or second priority perfected security interest (subject to Permitted Liens) in favor of the Seller, which security interest in favor of the Seller has been assigned by the Seller to the Trust Depositor, by the Trust Depositor to the Issuer, and pledged by the Issuer to the Trustee;

 

(j)     such Loan is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of any contract, or the exercise of any right thereunder, will not render such contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and neither the Seller nor the Trust Depositor has received written notice of the assertion of any such right of rescission, setoff, counterclaim or defense asserted with respect thereto;

 

(k)     such Loan does not have liens or claims (other than Permitted Liens) that exist or have been filed for work, labor or materials or unpaid state or federal taxes relating to collateral that are prior to, or equal or coordinate with, the security interest in such collateral created by the related Underlying Loan Agreement, except for such liens or claims that have been waived or modified as permitted hereunder;

 

(l)     the Servicer is not aware that any default, breach, violation or event permitting acceleration under the terms of any Underlying Loan Agreement has occurred and is continuing with respect to such Loan, nor is the Servicer aware of any continuing condition with respect to such Loan that, with notice or the lapse of time or both, would constitute a default, breach, violation or event permitting acceleration under the terms of any contract, except for such defaults, breaches, violations or events which have been or are permitted to be waived or modified as permitted under the Servicing Standard and the Credit and Collection Policy;

 

(m)     such Loan does not relate to property that has been foreclosed upon;

 

(n)     such Loan has not been sold, transferred, assigned or pledged to any person other than the Issuer and has not been discharged;

 

11

 

 

(o)     (i) immediately prior to the transfer of such Loan to the Trust Depositor, the Seller had good and marketable title to such Loan free and clear of all liens, encumbrances, security interests and rights of others (other than Permitted Liens) and, immediately upon such transfer, the Trust Depositor shall have good and marketable title to such Loan, free and clear of all liens, encumbrances, security interests and rights of others; and (ii) immediately prior to the transfer of such Loan to the Issuer, the Trust Depositor had good and marketable title to such Loan free and clear of all liens, encumbrances, security interests and rights of others (other than Permitted Liens) and, immediately upon such transfer, the Issuer shall have good and marketable title to such Loan, free and clear of all liens, encumbrances, security interests and rights of others;

 

(p)     has been perfected against the related Obligor by all necessary action under the relevant UCC, Personal Property Security Act or other applicable statutes existing in jurisdictions in Canada that do not use the Personal Property Security Act, or applicable statutes existing in the relevant jurisdictions;

 

(q)     has not been originated in, and is not subject to the laws of, any jurisdiction under which the sale, transfer, assignment and conveyance of such contract under the Sale and Contribution Agreement, this Agreement or the pledge of such Loan under the Indenture, is unlawful, void or voidable;

 

(r)     other than with respect to Noteless Loans and Participated Loans, such Loan has only one original executed promissory note for each note relating to such Loan;

 

(s)     such Loan was not due from an Obligor that was the subject of a proceeding under the Bankruptcy Code or was bankrupt;

 

(t)     such Loan had a Cash Yield Rate, as determined by the Servicer in accordance with the Credit and Collection Policy, of at least 6% per annum;

 

(u)     the Required Loan Documents relating to such Loan have been delivered to the Custodian prior to the Closing Date, in the case of any Initial Loan, the Transfer Date, in the case of any Additional Loan, or the applicable date of substitution, in the case of any Substitute Loan;

 

(v)     such Loan had no payment due that was thirty-one (31) or more days past due and such Loan was not a Defaulted Loan;

 

(w)     such Loan is due from an Obligor with its headquarters, principal place of business and primary operations in the United States, Canada (other than in the Province of Quebec), the United Kingdom, Australia or a member state of the European Union;

 

(x)     such Loan is payable in U.S. Dollars;

 

12

 

 

(y)      such Loan is in registered form for U.S. federal income tax purposes (or in registered or bearer form if not a “registration-required obligation” as defined in Section 163(f)(2)(A) of the Code);

 

(z)       such Loan has not been subject to waiver or modified, except as permitted hereunder;

 

(aa)      as of the Transfer Date of such Loan, the Hercules Credit Score of the Loan is Grade 3, Grade 2 or Grade 1;

 

(bb)     the origination of such Loan by the Seller and the transfer of such Loan by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer have complied in all material respects with Applicable Law;

 

(cc)     no selection procedures believed by the Seller, the Trust Depositor or the Servicer to be adverse to the interests of any Noteholder shall have been employed in the selection of such Loan;

 

(dd)     all required notifications, if any, have been given to the collateral agent, the paying agent and any other parties required by the Underlying Loan Agreement of, and all required consents, if any, have been obtained with respect to, the Seller’s assignment of such Loan and the Seller’s right, title and interest in the Related Property to the Trust Depositor, the assignment thereof to the Issuer and the Trustee’s security interest therein on behalf of the Noteholders;

 

(ee)     the scheduled term to maturity of such Loan is no later than six months prior to the Legal Final Payment Date;

 

(ff)     if such Loan is an Agented Loan, Co-Agented Loan or a Third Party Agented Loan:

 

(i)     if the entity serving as the collateral agent of the security for all notes of the Obligor issued under the applicable Underlying Loan Agreement has changed from the time of the origination of the Loan, all appropriate assignments of the collateral agent’s rights in and to the collateral on behalf of the holders of the indebtedness of the Obligor under such facility have been executed and filed or recorded as appropriate prior to such Loan becoming a part of the Collateral;

 

(ii)     except as otherwise provided in the related intercreditor agreement, the right to control certain actions of and replace the collateral agent and/or the paying agent of the Obligor’s indebtedness under the facility may be exercised by at least a majority in interest of all holders of such indebtedness;

 

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(iii)     all required notifications, if any, have been given to the collateral agent, the paying agent and any other parties required by the underlying loan agreement of, and all required consents, if any, have been obtained with respect to, the Seller’s assignment of such Loan and the Seller’s right title and interest in the Related Property to the Trust Depositor, the assignment thereof to the Issuer and the Trustee’s security interest therein on behalf of the Noteholders; and

 

(iv)     all indebtedness of the Obligor of the same priority within each facility is cross-defaulted, the Related Property securing such indebtedness is held by the collateral agent for the benefit of all holders of such indebtedness and all holders of such indebtedness (A) have an undivided pari passu interest in the collateral securing such indebtedness, (B) share in the proceeds of the sale or other disposition of such collateral on a pro rata basis and (C) may transfer or assign their right, title and interest in the Related Property;

 

(gg)     all actions or additional actions (if any) necessary to perfect the security interest and assignment of such Loan and any material Related Property to the Trust Depositor, the Issuer, and the Trustee have been taken as of or prior to the Transfer Date of such Loan;

 

(hh)     such Loan is not made to an Obligor doing business in the energy, clean energy or alternative energy sector;

 

(ii)      such Loan shall not be a revolving line of credit or include any unfunded commitment; and

 

(jj)      if such Loan is a floating rate Loan, such Loan either (i) has a credit spread over the applicable floating rate index of no less than 3% or (ii) a minimum total interest rate floor of at least 7.5%.

 

“Eligible Repurchase Obligations” means repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States, in either case entered into with a depository institution or trust company (acting as principal) described in clause (c)(ii) of the definition of Permitted Investments.

 

“Enterprise Value” means, with respect to the Obligor of a Loan, as determined by the Servicer on a quarterly basis as follows:

 

	 	
			(a)

				
			If such Obligor is a publicly-traded company, the public market capitalization of such company; or

			

 

	 	
			(b)

				
			If such Obligor is a private company, a value based on (1) the market adjusted implied value of the most recent round of financing of such Obligor or (2) market multiples and the most recent financial statements of such Obligor;

			

 

14

 

 

provided that the Servicer may adjust the Enterprise Value of an Obligor based on such Obligor’s performance since the last round of financing.

 

“Error” shall have the meaning provided in Section 8.03(e).

 

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

 

“Excess Concentration Amounts” means, as to any Payment Date, the sum of the following amounts (without duplication):

 

(a)     the amount by which the aggregate Outstanding Loan Balance of all Loans made to any single Obligor (together with Affiliates thereof) in the Collateral exceeds five percent (5%) of the ECA Calculation Balance; plus

 

(b)     the amount by which the aggregate Outstanding Loan Balance of all Loans made to the five (5) largest Obligors (together, in each case, with Affiliates thereof) in the Collateral (based on the aggregate Outstanding Loan Balance of all Loans in the Collateral as of the Payment Date) exceeds twenty-three percent (23%) of the ECA Calculation Balance; plus

 

(c)     the amount by which the aggregate Outstanding Loan Balance of all Loans made to the ten (10) largest Obligors (together, in each case, with Affiliates thereof) in the Collateral (based on the aggregate Outstanding Loan Balance of all Loans in the Collateral as of the Payment Date) exceeds forty-four percent (44%) of the ECA Calculation Balance;

 

(d)     the amount by which the aggregate Outstanding Loan Balance for Technology Loans exceeds 40% of the ECA Calculation Balance;

 

(e)      the amount by which the aggregate Outstanding Loan Balance for fixed rate Loans exceeds 85% of the ECA Calculation Balance;

 

(f)     the amount by which the aggregate Outstanding Loan Balance for Loans with a Hercules Credit Score of Grade 3 or worse exceeds 35% of the ECA Calculation Balance;

 

(g)     the amount by which the aggregate Outstanding Loan Balance for Loans that have more than 15% of their original loan balance due at maturity exceeds 20% of the ECA Calculation Balance;

 

(h)     the amount by which the aggregate Outstanding Loan Balance for Life Sciences Loans that have an original interest only period greater than 24 months measured from the last credit action taken pursuant to the Credit and Collection Policy exceeds 25% of the ECA Calculation Balance;

 

(i)     the amount by which the aggregate Outstanding Loan Balance for Loans that are second lien Loans exceeds 15% of the ECA Calculation Balance;

 

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(j)     the amount by which the aggregate Outstanding Loan Balance for Loans that are Participated Loans exceeds 15% of the ECA Calculation Balance;

 

(k)     the amount by which the aggregate Outstanding Loan Balance for Loans with respect to which any Obligor material to the underwriting of such Loan does not have its headquarters, principal place of business or primary operations in the United States exceeds 20% of the ECA Calculation Balance; and

 

(l)     the amount by which the aggregate Outstanding Loan Balance for Loans that are Participated Loans with respect to which the administrative agent on the underlying Loans, other than the Seller or an affiliate thereof, does not have an investment grade corporate rating issued by a national recognized statistical rating organization, exceeds 5% of the ECA Calculation Balance.

 

provided, for the avoidance of doubt, that the Outstanding Loan Balance of all Loans made to any single Obligor (together with Affiliates thereof) will be assigned to the category above that results in the greatest excess amount and will not be included in more than one category for any date of determination.

 

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

 

“Excluded Amounts” means (a) any amount received by, on or with respect to any Loan in the Collateral, which amount is attributable to the payment of any tax, fee or other charge imposed by any Governmental Authority on such Loan, (b) any amount representing escrows relating to taxes, insurance and other amounts in connection with any Loan which is held in an escrow account for the benefit of the related Obligor and the secured party pursuant to escrow arrangements, (c) any amount with respect to any Loan substituted, sold, retransferred or replaced under Sections 2.04, 2.05, 2.06 or 11.01, to the extent such amount is attributable to a time after the effective date of such substitution, sale, retransfer or replacement, (d) any origination fee retained by the Seller in connection with the origination of any Loan, and (e) any amount permitted to be retained by the Servicer as an Excluded Amount hereunder.

 

“FDIC” means the Federal Deposit Insurance Corporation and any successor thereto.

 

“Finance Charges” means, with respect to any Loan, any interest or finance charges owing by an Obligor pursuant to or with respect to such Loan.

 

“Foreclosed Property” means Related Property acquired by the Issuer or a subsidiary thereof for the benefit of the Noteholders in foreclosure or by other legal process.

 

“Foreclosed Property Disposition” means the final sale of a Foreclosed Property or of Repossessed Property. The proceeds of any “Foreclosed Property Disposition” constitute part of the definition of Liquidation Proceeds.

 

“Global Note” shall have the meaning provided in the Indenture.

 

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“Governmental Authority” means, with respect to any Person, any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over such Person or its property.

 

“Hercules” means Hercules Capital, Inc., a Maryland corporation, together with its successors in interest.

 

“Hercules Credit Score” means, for any Obligor, the internal credit rating grade assigned to such Obligor by the Seller in accordance with the Credit and Collection Policy.

 

“Holder” means (a) with respect to a Certificate, the Person in whose name such Certificate is registered in the Certificate Register, and (b) with respect to a Note, the Person in whose name such Note is registered in the Note Register; provided that a Beneficial Owner of a Note shall be deemed a Holder of such Note as provided in Section 13.17.

 

“Indebtedness” means, with respect to any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current liabilities incurred in the ordinary course of business and payable in accordance with customary trade practices) or which is evidenced by a note, bond, debenture or similar instrument, (b) all obligations of such Person under capital leases, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, and (d) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.

 

“Indenture” means the Indenture, dated as of the Closing Date, between the Issuer and the Trustee, as such agreement may be amended, modified, waived, supplemented or restated from time to time.

 

“Independent” means, when used with respect to any specified Person, such Person (a) is in fact independent of the Issuer, any other obligor on the Notes, the Trust Depositor and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Trust Depositor or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Trust Depositor or any Affiliate of any of the foregoing Persons as an officer, employee, trustee, partner, director or person performing similar functions; provided that a Person that otherwise satisfies the requirements of clauses (a) through (c) of this definition, but is a director, officer or manager of a bankruptcy remote special purpose Affiliate of Hercules, will be deemed to be Independent for purposes hereof.

 

“Independent Accountants” shall have the meaning provided in Section 9.05.

 

“Ineligible Loan” shall have the meaning provided in Section 11.01.

 

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“Initial Note Principal Balance” means $250,000,000.

 

“Initial Cutoff Date” means December 31, 2018.

 

“Initial Loans” means those Loans conveyed to the Issuer on the Closing Date and identified for inclusion in the Collateral on the initial List of Loans required to be delivered pursuant to Section 2.02(d).

 

“Initial Loan Assets” means any assets acquired by the Issuer from the Trust Depositor on the Closing Date pursuant to Section 2.01, which assets shall include the Trust Depositor’s right, title and interest in the following:

 

(i)       the Initial Loans listed in the initial List of Loans and all monies due, to become due or paid in respect thereof accruing on and after the Cutoff Date and all Insurance Proceeds, Liquidation Proceeds and other recoveries thereon, in each case as they arise after the Cutoff Date;

 

(ii)      all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Loans;

 

(iii)     all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Loans;

 

(iv)     the Transaction Accounts, together with all cash and investments in each of the foregoing;

 

(v)      all collections and Records (including Computer Records) with respect to the foregoing;

 

(vi)     all documents relating to the applicable Loan Files; and

 

(vii)   all income, payments, proceeds and other benefits of any and all of the foregoing, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the foregoing, but excluding any Excluded Amount with respect thereto.

 

“Initial Purchaser” means Guggenheim Securities, LLC.

 

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“Insolvency Event” means, with respect to a specified Person, (i) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the ordering of the winding-up or liquidation of such Person’s affairs, which decree or order shall remain unstayed or undismissed and in effect for a period of 60 consecutive days; or (ii) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or the taking of possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

 

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

 

“Insolvency Proceeding” means any case, action or proceeding before any court or other Governmental Authority relating to any Insolvency Event.

 

“Insurance Policy” means, with respect to any Loan, an insurance policy covering liability and physical damage to or loss of the applicable Related Property, including, but not limited to, title, hazard, life, accident and/or flood insurance policies.

 

“Insurance Proceeds” means any amounts payable or any payments made on or with respect to a Loan or the Related Property under any Insurance Policy which are not applied or paid by the Obligor, the Servicer or, in the case of Co-Agented Loans or Third Party Agented Loans, the party primarily responsible for servicing such Loans, as applicable, to the restoration or repair of the Related Property or released to the Obligor, another creditor or any other Person in accordance with the Applicable Law, the Required Loan Documents, the Credit and Collection Policy, the Servicing Standard and this Agreement, net of costs of collection.

 

“Interest Amount” means, for each Interest Period, the sum of (A) product of (i) the Interest Rate for such Interest Period, (ii) the Outstanding Principal Balance of the Notes as of the first day of such Interest Period (after giving effect to all distributions made on such day) and (iii) one-twelfth (or, in the case of the first Interest Period, a fraction, the numerator of which is the number of days from and after the Closing Date to and including the day before the first Payment Date, and the denominator of which is 360) and (B) all unpaid Interest Shortfalls from any prior Payment Dates (and interest accrued thereon at the Interest Rate, to the extent permitted by law).

 

“Interest Collections” means the aggregate of:

 

(a)     all amounts deposited into the Collection Account in respect of:

 

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(i)      all payments received on or after the Cutoff Date on account of interest on the Loans (including Finance Charges and other fees) and all late payment, default and waiver charges; and

 

(ii)     the interest portion of any amounts received (x) in connection with the purchase or repurchase of any Loan (but which shall exclude interest on Loans accrued to the date of acquisition thereof by the Issuer purchased with Principal Collections) and the amount of any adjustment for Substitute Loans and (y) as Servicing Advances (if any); and

 

(iii)     amounts transferred from the Reserve Account or as a result of the amount on deposit in the Reserve Account being in excess of the Reserve Account Required Balance; plus

 

(b)     investment earnings on funds invested in Permitted Investments in the Transaction Accounts (other than the Reserve Account); minus

 

(c)     the amount of any losses incurred in connection with investments in Permitted Investments in the Transaction Accounts.

 

“Interest Period” means, for the first Payment Date, the period commencing on the Closing Date and ending on and including the day before the first Payment Date; and thereafter, the period commencing on a Payment Date and ending on and including the day before the next Payment Date.

 

“Interest Rate” means the annual rate of interest payable with respect to the Notes, which shall be equal to 4.703% per annum.

 

“Interest Shortfall” means, with respect to the Notes and any Payment Date, as applicable, an amount equal to the excess, if any, of (a) the Interest Amount over (b) the amount of interest actually paid to the Notes.

 

“Issuer” means the trust created by the Trust Agreement and funded pursuant to this Agreement.

 

“KBRA” means Kroll Bond Rating Agency, Inc. and any successor thereto.

 

“Legal Final Payment Date” means February 22, 2028.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing (including any UCC financing statement or any similar instrument filed against a Person’s assets or properties).

 

20

 

 

“Life Sciences Loan” means a Loan made to an Obligor that is a life sciences company, including, but not limited to, a company involved in drug discovery and development, drug delivery, medical devices and equipment, biotechnology tools, specialty pharmaceuticals and therapeutic, diagnostic and surgical devices.

 

“Liquidation Expenses” means, with respect to any Loan, the aggregate amount of all out-of-pocket expenses reasonably incurred by the Servicer (including amounts paid to any Subservicer) and any reasonably allocated costs of counsel (if any), in each case in accordance with the Servicer’s customary procedures in connection with the repossession, refurbishing and disposition of any Related Property securing such Loan upon or after the expiration or earlier termination of such Loan and other out-of-pocket costs related to the liquidation of any such Related Property, including the attempted collection of any amount owing pursuant to such Loan if it is a Defaulted Loan, and, if requested by the Trustee, the Servicer must provide to the Trustee a breakdown of the Liquidation Expenses for any Loan along with any supporting documentation therefor.

 

“Liquidation Proceeds” means, with respect to any Defaulted Loan, whatever is receivable or received when such Loan or the Related Property is sold, liquidated, foreclosed, exchanged, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes all amounts representing late fees and penalties relating thereto net of, without duplication, (a) Liquidation Expenses relating to such Loan or Related Property reimbursed to the Servicer therefrom pursuant to the terms of this Agreement and (b) amounts required to be released to other creditors, including any other costs, expenses and taxes, or the related Obligor or grantor pursuant to applicable law or the governing Required Loan Documents.

 

“Liquidation Report” shall have the meaning provided in Section 5.03(d).

 

“List of Loans” means the list identifying each Loan constituting part of the Loan Assets, which list shall consist of the initial List of Loans reflecting the Initial Loans transferred to the Issuer on the Closing Date attached to this Agreement as Exhibit G, together with any Subsequent List of Loans amending the most current List of Loans reflecting any Additional Loans and Substitute Loans transferred to the Issuer on the related Additional Loan Cutoff Date or Substitute Loan Cutoff Date, as applicable (together with, if applicable, a deletion from such list of the related Loan or Loans with respect to which a Substitution Event has occurred), and which list in each case (a) identifies by account number each Loan included in the Collateral, and (b) sets forth as to each such Loan (i) the Outstanding Loan Balance as of the Cutoff Date in the case of the Initial Loans, the related Additional Loan Cutoff Date in the case of Additional Loans and the related Substitute Loan Cutoff Date in the case of Substitute Loans, (ii) the maturity date (iii) the Loan Type, (iv) whether such Loan is a Co-Agented Loan or Third-Party Agented Loan (and the name of the agent thereunder), (v) whether such Loan is a Noteless Loan or a Participated Loan and (vi) whether evidence of filing of UCC-1 financing statements naming the Seller as secured party with respect to such Loan are available.

 

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“Loan” means, to the extent transferred by the Trust Depositor to the Issuer, an individual loan to an Obligor, or portion thereof made by the Seller including, but not limited to, Agented Loans, Co-Agented Loans, Third Party Agented Loans and Participated Loans.

 

“Loan Assets” means, collectively and as applicable, the Initial Loan Assets, the Additional Loan Assets and the Substitute Loan Assets, as applicable.

 

“Loan File” means, with respect to any Loan and Related Property, (a) each of the Required Loan Documents and (b) duly executed originals (to the extent indicated on the Annex A to the List of Loans) or copies (including electronic copies) of any credit agreement, intercreditor agreement, subordination agreement, UCC financing statements (or similar instruments) and any amendments to any of the foregoing, in each case, identified on Annex A to the List of Loans with respect to such Loan and Related Property.

 

“Loan Rate” means, for each Loan and Collection Period, the current cash pay interest rate for such Loan in such period, as specified in the related Underlying Note, Underlying Loan Agreement or related Required Loan Documents.

 

“Loan Type” means, with respect to any Loan, means the characterization of such Loan as a Technology Loan or Life Sciences Loan.

 

“Lockbox Account” means the segregated account so designated and established and maintained pursuant to Section 7.01(a).

 

“Lockbox Bank” shall have the meaning provided in Section 7.01.

 

“Majority Noteholders” means, as of any date of determination, the Noteholders evidencing at least 51% of the Aggregate Outstanding Principal Balance of all Notes.

 

“Make-Whole Premium” means the positive difference, if any, between (a) the present value, computed using a discount rate equal to the Treasury Rate plus 0.50%, of all interest (less the Interest Amount) and principal that would otherwise be expected to be payable on the Notes assuming such Notes do not amortize and are redeemed in full at the end of the Reinvestment Period at a price of 100% of the Aggregate Outstanding Principal Balance as of such date less (b) the Aggregate Outstanding Principal Balance of the Notes as of the Redemption Date.

 

“Monthly Report” shall have the meaning provided in Section 9.01.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Nonrecoverable Advance” means any Scheduled Payment Advance or Servicing Advance, as applicable, previously made in respect of a Loan or any Related Property that, as determined by the Servicer in its reasonable, good faith judgment, will not be ultimately recoverable from subsequent payments or collections with respect to the applicable Loan including, without limitation, payments or reimbursements from the related Obligor, Insurance Proceeds or Liquidation Proceeds on or in respect of such Loan or Related Property.

 

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“Note” means any one of the notes of the Issuer, executed and authenticated in accordance with the Indenture.

 

“Note Purchase Agreement” means the Note Purchase Agreement, dated January 14, 2019, by and among the Seller, the Trust Depositor, the Servicer, the Issuer, the Initial Purchaser, and the Co-Managers.

 

“Note Register” shall have the meaning provided in Section 4.02(a) of the Indenture.

 

“Noteholder” means each Person in whose name a Note is registered in the Note Register; provided that a Beneficial Owner of a Note may be deemed a Holder of such Note as provided in Section 13.17.

 

“Noteless Loan” means any Loan that, pursuant to the terms of the related credit agreement (or equivalent document), is not evidenced by a note.

 

“Notice of Substitution” shall have the meaning provided in Section 2.06.

 

“Obligor” means, with respect to any Loan, any Person or Persons obligated to make payments pursuant to or with respect to such Loan, including any guarantor thereof, but excluding, in each case, any such Person that is an obligor or guarantor that is in addition to the primary obligors or guarantors with respect to the assets, cash flows or credit of which the related Loan is principally underwritten.

 

“Offering Memorandum” means the Offering Memorandum dated January 15, 2019, prepared in connection with the offer and sale of the Notes.

 

“Officer’s Certificate” means a certificate delivered to the Trustee signed by a Responsible Officer of (i) the member of the Trust Depositor, (ii) the Servicer, or (iii) the Owner Trustee, the Administrator, or any other Person acting on behalf of the Issuer, as required by this Agreement or any other Transaction Document.

 

“Opinion of Counsel” means a written opinion of counsel, who may be outside counsel, or internal counsel (except with respect to federal securities law, tax law, bankruptcy law or UCC matters), for the Issuer, the Trust Depositor or the Servicer, including Dechert LLP or other counsel reasonably acceptable to the Owner Trustee or the Trustee, as the case may be.

 

“Optional Redemption” means a redemption of the Notes pursuant to Section 10.01 of the Indenture.

 

“Original Trust Agreement” shall have the meaning provided in Section 2.01.

 

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“Outstanding” shall have the meaning provided in Section 1.01 of the Indenture.

 

“Outstanding Loan Balance” of a Loan means, with respect to any date of determination, the outstanding principal amount of such Loan.

 

“Outstanding Principal Balance” means, as of date of determination and with respect to any Notes, the original principal amount of such Notes on the Closing Date, as reduced by all amounts paid by the Issuer with respect to such principal amount up to such date.

 

“Owner Trustee” means the Person acting, not in its individual capacity, but solely as Owner Trustee, under the Trust Agreement, its successors in interest and any successor owner trustee under the Trust Agreement. The Owner Trustee will initially be Wilmington Trust, National Association.

 

“Owner Trustee Cap” means the portion of the Administrative Expense Cap reserved for the Owner Trustee, subject to an annual maximum amount of $100,000.

 

“Participated Loans” means the Loans in which the Seller holds a participation interest as of the Closing Date, the related Additional Loan Cutoff Date or the related Substitute Loan Cutoff Date (if after the Closing Date), as the case may be, which interest has been assigned to the Trust Depositor and the Issuer pursuant to the Transfer and Servicing Agreements.

 

“Paying Agent” has the meaning provided in the Preamble.

 

“Payment Date” means the 20th day of each month, commencing in February 2019, or if such day is not a Business Day, on the next succeeding Business Day.

 

“Percentage Interest” means, for the Holder of any Note of any class, the fraction, expressed as a percentage, the numerator of which is the then current Outstanding Principal Balance represented by such Note and the denominator of which is the then current Outstanding Principal Balance of all Notes.

 

“Permitted Investments” means on any date of determination, book-entry securities, negotiable instruments or securities represented by instruments in registered form for U.S. federal income tax purposes (or in registered or bearer form if not a “registered-required obligation” as defined in Section 163(f)(2)(A)) with maturities not exceeding the next Payment Date that evidence:

 

(i)      direct obligations of, and obligations fully guaranteed by, the United States or any agency or instrumentality of the United States;

 

(ii)     demand deposits, time deposits or certificates of deposit of any depository institution (including any affiliate of the Trust Depositor, the Servicer, the Trustee or the Owner Trustee) or trust company incorporated under the laws of the United States or any state thereof or the District of Columbia (or any domestic branch of a foreign bank) and subject to supervision and examination by Federal or state banking or depository institution authorities (including depository receipts issued by any such institution or trust company as custodian with respect to any obligation referred to in clause (i) above or a portion of such obligation for the benefit of the holders of such depository receipts); provided that at the time of the investment or contractual commitment to invest therein (which shall be deemed to be made again each time funds are reinvested following each Payment Date), the commercial paper or other short-term senior unsecured debt obligations (other than such obligations the rating of which is based on the credit of a person other than such depository institution or trust company) of such depository institution or trust company shall have a credit rating from Moody’s of “P-1” or from another nationally recognized statistical rating organization in its highest investment category, in each case, as notified to the Trustee in writing by the Issuer (or the Servicer on its behalf);

 

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(iii)     commercial paper (including commercial paper of any affiliate of the Trust Depositor, the Servicer, the Trustee or the Owner Trustee) having, at the time of the investment or contractual commitment to invest therein, a rating from Moody’s of “P-1” or from another nationally recognized statistical rating organization in its highest investment category, in each case, as notified to the Trustee in writing by the Issuer (or the Servicer on its behalf);

 

(iv)     investments in money market funds (including funds for which the Trust Depositor, the Servicer, the Trustee or the Owner Trustee or any of their respective affiliates is investment manager or advisor) having a rating from Moody’s of “Aaa (mf)” or from another nationally recognized statistical rating organization in its highest investment category, in each case, as notified to the Trustee in writing by the Issuer (or the Servicer on its behalf);

 

(v)      banker’s acceptances issued by any depository institution or trust company referred to in clause (ii) above; and

 

(vi)     repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States, in either case entered into with a depository institution or trust company (acting as principal) referred to in clause (ii) above.

 

The Trustee may purchase or sell to itself or an Affiliate, as principal or agent, the Permitted Investments described above.

 

“Permitted Liens” means

 

(i)     with respect to the interest of the Seller, the Trust Depositor and the Issuer in the Loans included in the Collateral: (a) Liens in favor of the Trust Depositor created pursuant to the Sale and Contribution Agreement and transferred to the Issuer pursuant hereto, (b) Liens in favor of the Issuer created pursuant to this Agreement, (c) Liens in favor of the Trustee created pursuant to the Indenture and/or this Agreement, and (d) Liens, if any, which have priority over first priority perfected security interests in the Loans or any portion thereof under the UCC or any other Applicable Law; and

 

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(ii)     with respect to the interest of the Seller, the Trust Depositor and the Issuer in the other Collateral (including any Related Property): (a) materialmen’s, warehousemen’s, mechanics’ and other Liens arising by operation of law in the ordinary course of business for sums not due or sums that are being contested in good faith, (b) purchase money security interests in certain items of equipment, (c) Liens for state, municipal and other local taxes if such taxes shall not at the time be due and payable or the validity or amount thereof is currently being contested by an appropriate Person in good faith by appropriate proceedings, (d) other customary Liens permitted with respect thereto consistent with the Credit and Collection Policy or the Servicing Standard, (e) Liens in favor of the Trust Depositor created by the Seller and transferred by the Trust Depositor to the Issuer pursuant to this Agreement, (f) Liens in favor of the Issuer created pursuant to this Agreement, (g) Liens in favor of the Trustee created pursuant to the Indenture and/or this Agreement, and (h) with respect to Agented Loans, Co-Agented Loans and Third Party Agented Loans, Liens in favor of the lead agent, the collateral agent or the paying agent on behalf of all holders of indebtedness of such Obligor under the related facility.

 

“Person” means any individual, corporation, estate, partnership, business or statutory trust, limited liability company, sole proprietorship, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or other entity.

 

“Physical Note” shall have the meaning provided in the Indenture.

 

“Pool Balance” means, as of any date of determination, the Aggregate Outstanding Loan Balance minus (a) the Outstanding Loan Balance of all Defaulted Loans and (b) the Outstanding Loan Balance of all Ineligible Loans required to be repurchased by the Seller pursuant to Section 11.01.

 

“Predecessor Servicer Work Product” shall have the meaning provided in Section 8.03(e).

 

“Prepayments” means any and all (a) prepayments, including prepayment premiums, on or with respect to a Loan (including, with respect to any Loan and any Collection Period, any Scheduled Payment, Finance Charge or portion thereof that is due in a subsequent Collection Period that the Servicer has received and expressly permitted the related Obligor to make in advance of its scheduled due date, and that will be applied to such Scheduled Payment on such due date), (b) Liquidation Proceeds, and (c) Insurance Proceeds.

 

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“Principal Collections” means amounts deposited into the Collection Account in respect of payments received on or after the Cutoff Date in the case of the Initial Loans, the applicable Additional Loan Cutoff Date in the case of any Additional Loans and the applicable Substitute Loan Cutoff Date in the case of any Substitute Loans on account of principal of the Loans, including (without duplication):

 

(a)     the principal portion of:

 

(i)      any Scheduled Payments and Prepayments; and

 

(ii)     any amounts received other than Interest Collections (1) in connection with the purchase or repurchase of any Loan (and any related Substitution Deficit Amounts) and (2) as Servicing Advances (if any);

 

(b)     all Curtailments;

 

(c)     all Liquidation Proceeds;

 

(d)     all Sale Proceeds;

 

(e)     Insurance Proceeds (other than amounts to be applied to the restoration or repair of the Related Property, or released or to be released to the Obligor or others);

 

(f)     any proceeds from any Related Property securing the Loans (other than amounts released or to be released to the Obligor or others);

 

(g)     all funds transferred from the Reinvestment Account in accordance with the Transaction Documents (other than investment earnings);

 

(h)     following a Rapid Amortization Event or on the Legal Final Payment Date, all funds transferred from the Reserve Account; and

 

(i)     all other amounts not specifically included in Interest Collections.

 

“Principal Distribution Amount” means, for any Payment Date, an amount equal to the greater of (A) the Outstanding Principal Balance of the Notes (calculated immediately prior to such Payment Date) minus the Borrowing Base and (B) zero.

 

“Priority of Payments” means, collectively, the payments made on each Payment Date in accordance with Section 7.06(a), Section 7.06(b) and Section 7.06(c), as applicable.

 

“Proceeds” means, with respect to any Collateral, whatever is receivable or received when such Collateral is sold, liquidated, foreclosed, exchanged, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes all rights to payment with respect to any insurance relating to such Collateral.

 

“Qualified Additional Loan” means a Loan which is an Eligible Loan and meets each of the following additional criteria, as of its date of acquisition by the Issuer:

 

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(a)     the sum of (a) the product of (i) the Outstanding Loan Balance of such Loan multiplied by (ii) the Advance Rate, plus (b) accrued and unpaid interest and fees thereon is greater than or equal to the cash amount paid by the Issuer for such Additional Loan;

 

(b)     immediately following the Transfer Date of such Additional Loan, the weighted average Cash Yield Rate of all Loans as of the applicable Transfer Date shall not be decreased by more than 100 basis points from the weighted average Cash Yield Rate of the Initial Loans as of the Initial Cutoff Date; and

 

(c)     immediately prior to and following the Transfer Date of any Additional Loan, no Event of Default is occurring and continuing.

 

“Qualified Institution” means (a) the corporate trust department of the Trustee, or (b) a depository institution organized under the laws of the United States or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), that has either a long-term unsecured debt rating of at least “Baa3” from Moody’s (or another nationally recognized statistical rating organization in one of its generic rating categories that signifies investment grade) or a long-term unsecured debt rating, a short-term unsecured debt rating or a certificate of deposit rating from another nationally recognized statistical rating agency acceptable to KBRA, and whose deposits are insured by the FDIC.

 

“Qualified Substitute Loan” means a Loan which is an Eligible Loan and meets each of the following additional criteria, as of its date of substitution:

 

(a)     such Substitute Loan is of substantially similar or better credit quality to the Loan it will replace (as measured by reference to the Hercules Credit Score of the replaced Loan at the time such Loan was initially transferred to the Issuer);

 

(b)     immediately following the Transfer Date of such Substitute Loan, the weighted average Cash Yield Rate of all Loans as of the applicable Transfer Date shall not be decreased by more than 100 basis points from the weighted average Cash Yield Rate of the Initial Loans as of the initial Cutoff Date;

 

(c)     the Outstanding Loan Balance of such Substitute Loan (or, if more than one Substitute Loan will replace a Loan or Loans, the sum of the Outstanding Loan Balances of such Substitute Loans) is substantially similar to the Loan it will replace (and in the event that such Substitute Loan has an Outstanding Loan Balance that is less than that of the replaced Loan(s), the applicable Substitution Deficit Amount will be paid to the Issuer, for deposit into the Collection Account, at the time of substitution), and in any case will not be more than 110% of the Aggregate Outstanding Loan Balance(s) of the Loan(s) being replaced;

 

(d)     the scheduled term to maturity of such Substitute Loan (or, if more than one Substitute Loan will replace a Loan or Loans in the Loan Pool, the combined effect of such Substitute Loans) will not cause the remaining weighted average life of the Aggregate Outstanding Loan Balance (measured immediately prior to the removal of the Loans related to such substitution) to increase by more than four months; provided that, in the case of any substitution made after the Reinvestment Period Termination Date, such substitution will not cause the remaining weighted average life of the Aggregate Outstanding Loan Balance (measured immediately prior to the removal from of the Loans related to such substitution) to increase.

 

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“Quarterly Report” has the meaning provided in Section 9.02.

 

“Rapid Amortization Event” shall mean the occurrence of any of the following:

 

(i)     the aggregate Outstanding Loan Balance of all Delinquent Loans and Restructured Loans that would constitute Delinquent Loans had such Loans not become Restructured Loans exceeds ten percent (10%) of the Aggregate Outstanding Loan Balance for a period of three (3) consecutive Payment Dates;

 

(ii)     the aggregate Outstanding Loan Balance of Defaulted Loans exceeds, for a period of three (3) consecutive Payment Dates, 5% of the initial Pool Balance determined as of the Closing Date;

 

(iii)     the Aggregate Outstanding Principal Balance exceeds the Borrowing Base for a period of three (3) consecutive Payment Dates (after giving effect to all distributions on such Payment Dates);

 

(iv)     the Loans in the Collateral consist of Loans to 10 or fewer Obligors (together, in each case, with Affiliates thereof); and

 

(v)     the occurrence and continuance of an Event of Default.

 

“Rating Agency” means each of KBRA and any other nationally recognized statistical rating organization, so long as such Persons maintain a rating on any of the Notes; and if any of KBRA or such other organization (if any) no longer maintains a rating on any of the Notes, such other nationally recognized statistical rating organization, if any, selected by the Trust Depositor.

 

“Record Date” means, with respect to each Payment Date, (i) for Global Notes, the close of business on the Business Day immediately preceding such Payment Date and (ii) for Physical Notes, the close of business on the last Business Day of the month immediately preceding the month in which such Payment Date occurs.

 

“Records” means all documents, books, records and other information (including without limitation, Computer Records, computer programs, tapes, disks, data processing software and related property and rights) executed in connection with the origination or acquisition of the Loans or maintained with respect to the Loans and the related Obligors that the Seller or the Servicer have generated, in which the Seller, the Trust Depositor, the Issuer, the Trustee or the Servicer have acquired an interest pursuant to the Transfer and Servicing Agreements or in which the Seller, the Trust Depositor, the Issuer, the Trustee or the Servicer have otherwise obtained an interest to the extent transferable, and subject to any confidentiality and/or transferability restrictions.

 

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“Redemption Date” means any Payment Date designated as such by the Issuer in connection with an Optional Redemption.

 

“Redemption Price” means, in connection with an Optional Redemption, pursuant to Section 10.01 of the Indenture, an amount equal to the sum (without duplication) of: (i) the then Outstanding Principal Balance of the Notes to be redeemed plus accrued and unpaid interest thereon to but excluding the Redemption Date and all other amounts accrued and unpaid with respect thereto; plus (ii) the Applicable Premium; plus (iii) all administrative and other fees, expenses, advances and other amounts accrued and payable or reimbursable in accordance with the Priority of Payments (including fees and expenses, if any, incurred by the Trustee and the Servicer in connection with any sale of Loans in connection with an Optional Redemption).

 

“Reference Date” means the day of each month that is the third (3rd) Business Day prior to a Payment Date.

 

“Reinvestment Account” means the interest bearing trust account so designated and established and maintained pursuant to Section 7.04(a).

 

“Reinvestment Period” means the period beginning on the Closing Date to but excluding the Reinvestment Period Termination Date.

 

“Reinvestment Period Termination Date” means the earlier to occur of (a) the Payment Date occurring in January, 2021, (b) the occurrence of a Rapid Amortization Event or a Reinvestment Period Early Termination Event and (c) the day of any optional redemption of the Notes. For the avoidance of doubt, there will only be one Reinvestment Period, and such period cannot be re-commenced or continue after the occurrence of a Rapid Amortization Event or any Reinvestment Period Early Termination Event.

 

“Reinvestment Period Early Termination Event” means, as of any date of determination, the aggregate Outstanding Loan Balance of all Defaulted Loans (including any Defaulted Loans optionally sold or substituted by the Issuer or previously liquidated by the Servicer, in each case measured at the time each such Loan becomes a Defaulted Loan) exceeds 13.5% of the Pool Balance as of the Closing Date.

 

“Related Loan” means, with respect to any Loan, one or more related revolving lines of credit or other related loans to the same Obligor, which may include future funding obligations, made by Hercules, an Affiliate of the Hercules, or an unaffiliated third party.

 

“Related Property” means, with respect to any Loan and as applicable in the context used, the interest of the Obligor, or the interest of the Seller, Trust Depositor or Issuer under the Loan, in any property or other assets designated and pledged or mortgaged as collateral to secure repayment of such Loan (including, without limitation, a pledge of the stock, membership or other ownership interests in the Obligor, but excluding any warrant interest in an Obligor held by the Seller or any of its Affiliates other than the Issuer or Trust Depositor), including all Proceeds from any sale or other disposition of such property or other assets.

 

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“Repossessed Property” means items of Related Property taken in the name of the Issuer or a subsidiary thereof as a result of legal action enforcing the Lien on the Related Property resulting from a default on the related Loan.

 

“Required Loan Documents” means, with respect to:

 

(a)     all Loans in the aggregate:

 

(i)      a blanket assignment of all of the Seller’s and Trust Depositor’s right, title and interest in and to all Related Property securing the Loans at any time transferred to the Issuer including, without limitation, all rights under applicable guarantees and Insurance Policies;

 

(ii)     irrevocable powers of attorney of the Seller, the Trust Depositor and the Issuer to the Trustee to execute, deliver, file or record and otherwise deal with the Related Property for the Loans at any time transferred to the Issuer. The powers of attorney will be delegable by the Trustee to the Servicer and any Successor Servicer and will permit the Trustee or its delegate to prepare, execute and file or record UCC financing statements and notices to insurers;

 

(iii)     blanket UCC-1 financing statements in respect of the Loans to be transferred to the Issuer as Collateral and naming the Issuer and the Trustee, as assignee of the Issuer, as “Secured Party” and the Trust Depositor as the “Debtor”;

 

(b)     for each Loan (provided, however, that in the case of each Participated Loan, in each case, as indicated on the List of Loans, to the extent in the possession of the Seller or reasonably available to the Seller, copies of all documents and instruments described in clause (b)(y), with respect to such Participated Loan): (x) other than in the case of a Noteless Loan or Participated Loan, the original or, if accompanied by a “lost note” affidavit and indemnity, a copy of the Underlying Note, endorsed by the prior holder of record either in blank or to the Trustee (and evidencing an unbroken chain of endorsements from the prior holder thereof evidenced in the chain of endorsements to the Trustee), with any endorsement to the Trustee to be in the following form: “U.S. Bank National Association, its successors and assigns, as Trustee under the Indenture, relating to Hercules Capital Funding Trust 2019-1,” (y) in the case of a Participated Loan, a copy of each transfer document or instrument relating to such Participated Loan evidencing the assignment of such Participated Loan to the Seller, from the Seller to the Trust Depositor and from the Trust Depositor to the Trustee or in blank and (z) in the case of a Noteless Loan, a copy of each transfer document or instrument relating to such Noteless Loan evidencing the assignment of such Noteless Loan from the Seller to the Trust Depositor and from the Trust Depositor to the Trustee or in blank;

 

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“Required Payments” shall mean each of the items described in clauses 1 through 4 of Section 7.06(a).

 

“Reserve Account” means the interest bearing trust account so designated and established and maintained pursuant to Section 7.02(a).

 

“Reserve Account Required Balance” shall mean, as of any Payment Date, an amount equal to 3.0% of the Aggregate Outstanding Principal Balance of the Notes on such date after taking into account all amounts applied to the Aggregate Outstanding Principal Balance on such date.

 

“Reserve Available Funds” means all amounts deposited into the Collection Account from the Reserve Account pursuant to Section 7.02.

 

“Responsible Officer” means, when used with respect to (a) the Owner Trustee or the Trustee, any officer assigned to the Corporate Trust Office with responsibility for administration of the transactions contemplated by the Transaction Documents, including any Chief Executive Officer, President, Executive Vice President, Vice President, Assistant Vice President, Secretary, any Assistant Secretary, Financial Services Officer, trust officer or any other officer of the Owner Trustee or the Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject and, in each case, responsible for the administration of this Agreement and the other Transaction Documents, (b) the Trust Depositor, the Seller, the Administrator, the Servicer or the Backup Servicer, the President, Chief Executive Officer, Executive Vice President or any Vice President thereof who is also a Servicing Officer of such Person or of the sole member of such Person, as applicable and (c) with respect to the Issuer, a Responsible Officer of the Trust Depositor, Administrator, Servicer or Owner Trustee.

 

“Restructured Loan” means any Loan (including any portion of a Loan) that has been, or in accordance with the Credit and Collection Policy is required to be, modified or restructured to extend the maturity thereof or reduce the amount (other than by reason of the repayment thereof) or extend the time for payment of principal thereof, or otherwise modify the payment terms thereof, in each case as a result of the Obligor’s material financial underperformance, distress or default. Such Loan shall cease to be a Restructured Loan when such Loan has been performing for at least six (6) consecutive calendar months since the date the most recent modification was made and is no longer required to be so modified or restructured in accordance with the Credit and Collection Policy.

 

“Sale and Contribution Agreement” means the Sale and Contribution Agreement, dated as of the date hereof, between the Seller and the Trust Depositor, as such agreement may be amended, modified, waived, supplemented or restated from time to time.

 

“Sale Proceeds” means all proceeds received as a result of sales of Loans (other than Defaulted Loans) pursuant to this Agreement, net of any sales, brokerage and related administrative or sales expenses of the Servicer or the Trustee in connection with any such sale.

 

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“Scheduled Payment” means, with respect to any Loan, each payment of principal and/or interest scheduled to be made by the related Obligor under the terms of such Loan after (a) in the case of the Initial Loans, the Cutoff Date, (b) in the case of Additional Loans, the Additional Loan Cutoff Date or (c) in the case of Substitute Loans, the related Substitute Loan Cutoff Date, as adjusted pursuant to the terms of the related Underlying Note and/or Required Loan Documents.

 

“Scheduled Payment Advance” means, with respect to any Payment Date, the amounts, if any, deposited by the Servicer in the Collection Account for such Payment Date in respect of Scheduled Payments (or portions thereof) pursuant to Section 5.09.

 

“Secured Parties” means, collectively, the Noteholders, the Trustee, the Servicer, the Backup Servicer, the Custodian, and the Owner Trustee.

 

“Securities” means the Notes and the Certificate, or any of them.

 

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

 

“Securityholders” means, collectively, the Noteholders and the Certificateholder.

 

“Seller” shall have the meaning provided in the Preamble.

 

“Servicer” means initially Hercules, or its successors in interest, until any Servicer Transfer hereunder or the resignation or permitted assignment by the Servicer and, thereafter, means the Backup Servicer or other Successor Servicer appointed pursuant to Article VIII with respect to the duties and obligations required of the Servicer under this Agreement.

 

“Servicer Default” shall have the meaning specified in Section 8.01.

 

“Servicer Transfer” shall have the meaning specified in Section 8.02(c).

 

“Servicing Advances” means all reasonable and customary “out-of-pocket” costs and expenses incurred in the performance by the Servicer of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of any Related Property (including the security interest therein), (b) any pursuit of collections, enforcement or judicial proceedings, including foreclosures, and other actions to realize on the Loans, (c) the management and liquidation of any Foreclosed Property or Repossessed Property, (d) compliance with its obligations under this Agreement and other Transaction Documents and (e) services rendered in connection with the liquidation of a Loan (other than Liquidation Expenses), for all of which costs and expenses the Servicer is entitled to reimbursement with interest thereon as provided in this Agreement.

 

“Servicing Fee” shall have the meaning provided in Section 5.11.

 

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“Servicing File” means, for each Loan, the following documents or instruments:

 

(a)     copies of each of the Required Loan Documents; and

 

(b)     any other portion of the Loan File which is not part of the Required Loan Documents.

 

“Servicing Officer” means any officer of the Servicer involved in, or responsible for, the administration and servicing of Loans whose name appears on a list of servicing officers appearing in an Officer’s Certificate furnished to the Trustee by the Servicer, as the same may be amended from time to time.

 

“Servicing Standard” means, with respect to any Loans and all other assets included in the Collateral, to service and administer such Loans and other assets in the Collateral in accordance with the Underlying Loan Agreements (as applicable) and all customary and usual servicing practices, in a manner consistent with the Servicer’s servicing of comparable senior loan agreements that it owns or services for itself or others, without regard to: (i) the Servicer’s right to receive compensation for its services hereunder or with respect to any particular transaction, or (ii) the ownership, servicing or management for others by the Servicer of any other loans, debt securities or property by the Servicer.

 

“Servicing Transfer Costs” means the fees, costs and expenses, if any, incurred by the Trustee or by any Successor Servicer (including the Backup Servicer) in connection with the transfer of servicing to any such Successor Servicer, which shall not exceed the Transition Expense Cap; provided that the foregoing limitations shall not apply after the occurrence of an Event of Default that is continuing and the Trustee has initiated proceedings or actions in furtherance of the liquidation of the Collateral.

 

“Solvent” means, as to any Person at any time, that (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) such Person is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s property would constitute unreasonably small capital.

 

“Split Loan” means an Additional Loan or Substitute Loan acquired by the Issuer that has one or more Related Loans or other loans under the same facility or tranche that will be financed by Hercules or an Affiliate thereof in a Warehouse Loan Facility.

 

“Split Loan Account” means any designated account held at the Split Loan Agent in the name of Hercules, as agent for the benefit of the Trustee and the applicable Warehouse Lender, as secured parties in respect of Split Loans and any Related Loans, respectively.

 

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“Split Loan Agent” means U.S. Bank or another Qualified Institution serving as Split Loan Agent pursuant to the Transaction Documents.

 

“Split Loan Intercreditor Agreement” means any intercreditor agreement entered into by and among the Issuer, the Servicer, the applicable Warehouse Lender, Split Loan Agent, the Trustee, the Custodian and the Backup Servicer, which shall provide, among other things, key terms that are substantially as follows: (a) payments received in respect of such Split Loans and the Related Loans will be applied pro rata to the outstanding principal exposure among the lenders or, if payment is received in connection with a particular tranche, pro rata among all lenders in the particular tranche; (b) the percentage of lenders required to constitute required lenders under the underlying credit documents will be at least 50.1 percent of the outstanding loan amount thereunder; provided that, upon certain key events, if there are three (3) or fewer unaffiliated lenders (i.e., lenders not affiliated with Hercules) all lenders must consent or vote affirmatively to constitute required lenders under the underlying credit documents; (c) upon an exercise of remedies with respect to such Split Loans and Related Loans, Hercules, as agent for the underlying secured parties, will allocate collateral proceeds pro rata based on outstanding principal exposure of the lenders; (d) each Warehouse Lender, the Trustee and the Custodian will acknowledge the rights and interests of the other secured parties and the Split Loan Agent with respect to such Split Loans and the Related Loans, the underlying loan files and the Split Loan Account; and (e) in the event of either an involuntary bankruptcy filing (which filing remains unstayed for a period of sixty (60) days) or a voluntary bankruptcy filing by Hercules, any exercise of remedies by Hercules (as agent for the underlying secured parties under the underlying credit documents) or amendments or other modifications to the underlying credit documents will be subject to approval of and direction by required lenders under the underlying credit documents (subject to clause (b) above).

 

“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.

 

“Subsequent List of Loans” means a list, in the form of the initial List of Loans delivered on the Closing Date, but listing each Additional Loan or Substitute Loan, as the case may be, transferred to the Issuer from time to time.

 

“Subservicer” means any direct or indirect wholly owned subsidiary of Hercules that Hercules has identified as a subservicer or additional collateral agent or any other Person with whom the Servicer has entered into a Subservicing Agreement and who satisfies the requirements set forth in Section 5.02(b) of this Agreement in respect of the qualification of a Subservicer.

 

“Subservicing Agreement” means any agreement between the Servicer and any Subservicer relating to subservicing and/or administration of certain Loans as provided in this Agreement, a copy of which shall be delivered, along with any modifications thereto, to the Trustee.

 

“Substitute Loan” means one or more Loans transferred by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer under and in accordance with Section 2.06.

 

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“Substitute Loan Assets” means any assets acquired by the Issuer from the Trust Depositor following the Closing Date in connection with substitution of one or more Substitute Loans pursuant to Section 2.04 or Section 2.06, which assets shall include the Trust Depositor’s right, title and interest in the following:

 

(i)     the Substitute Loans listed in the related Subsequent List of Loans and all monies due, to become due or paid in respect thereof accruing on and after the Substitute Loan Cutoff Date and all Insurance Proceeds, Liquidation Proceeds and other recoveries thereon, in each case as they arise after the Substitute Loan Cutoff Date;

 

(ii)     all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Loans;

 

(iii)     all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Loans;

 

(iv)     all collections and Records (including Computer Records) with respect to the foregoing;

 

(v)      all documents relating to the applicable Loan Files; and

 

(vi)     all income, payments, proceeds and other benefits of any and all of the foregoing, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the foregoing, but excluding any Excluded Amount with respect thereto.

 

“Substitute Loan Cutoff Date” means each date on or after the Closing Date on which a Substitute Loan is transferred to the Issuer.

 

“Substitution Deficit Amount” means, in respect of one or more Loans replaced with one or more Substitute Loans, the amount (if positive) by which the Outstanding Loan Balance of such Loans exceeds the Outstanding Loan Balance of such Substitute Loans.

 

“Substitution Event” shall have the meaning provided in Section 2.06.

 

“Successor Servicer” shall have the meaning provided in Section 8.02(b).

 

“Successor Servicer Engagement Fee” shall have the meaning provided in Section 5.02(y).

 

“Super-Majority Noteholders” means prior to the payment in full of the Notes, the Noteholders evidencing more than 66 2/3% of the Aggregate Outstanding Principal Balance of Notes (excluding Notes held by the Trust Depositor, the Seller, the Servicer or any of their respective Affiliates).

 

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“Tape” shall have the meaning provided in Section 9.04(a).

 

“Technology Loan” means a Loan made to an Obligor that is a technology company, including a company involved in, but not limited to, semi-conductor manufacturing, software, internet consumer and business services, content providers, media, communications and networking, clean technologies (excluding companies doing business in the energy, clean energy or alternative energy sectors), information services, or internet consumer and business services.

 

“Termination Notice” shall have the meaning provided in Section 8.02(a).

 

“Third Party Agented Loan” means, any Loan with respect to which, (a) the Loan is originated by a Person other than or in addition to the Seller as part of a syndicated loan transaction which has been fully consummated prior to such Loan becoming part of the Collateral, (b) upon the sale of the Loan under the Transfer and Servicing Agreements to the Issuer, the Required Loan Documents shall have been delivered to the Custodian, (c) the Issuer, as assignee of the Loan, has all of the rights (including without limitation voting rights) of the Seller which have been transferred by the Seller with respect to the Loan and the Seller’s right, title and interest in and to the Related Property, (d) the Loan is secured by an undivided interest in the Related Property that also secures and is shared by, on a pro rata basis, all other holders of such Obligor’s indebtedness of equal priority issued in such syndicated loan transaction, and (e) the third party Loan originator (or an affiliate thereof) is the lead agent, collateral agent or paying agent for all lenders in such syndicated loan transaction.

 

“Transaction Account Property” means the Transaction Accounts, all amounts and investments held from time to time in any Transaction Account (whether in the form of deposit accounts, physical property, book-entry securities, uncertificated securities or otherwise), and all proceeds of the foregoing.

 

“Transaction Accounts” means, collectively, the Collection Account, the Reserve Account, the Distribution Account, the Reinvestment Account and the Lockbox Account.

 

“Transaction Documents” means the Transfer and Servicing Agreements, the Trust Agreement, the Administration Agreement, the Notes, the Certificate, any Split Loan Intercreditor Agreement (to the extent the Issuer acquires any Split Loans), the Note Purchase Agreement, any fee letters, any UCC financing statements filed pursuant to the terms of the Transaction Documents, and any additional document the execution of which is necessary or incidental to carrying out the terms of, or which is identified as a “Transaction Document” in, the foregoing documents, all as such documents are amended, modified, restated, replaced, waived, substituted, supplemented or extended from time to time.

 

“Transfer and Servicing Agreements” means, collectively, this Agreement, the Indenture and the Sale and Contribution Agreement.

 

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“Transfer Date” means, with respect to any Loan, the date upon which such Loan is conveyed to or acquired by the Issuer.

 

“Transfer Deposit Amount” means, on any date of determination with respect to any Loan, an amount equal to the sum of (a) the Outstanding Loan Balance of such Loan, (b) accrued interest thereon through such date of determination at the Loan Rate provided for thereunder and (c) any outstanding Scheduled Payment Advances and Servicing Advances thereon that have not been waived by the Servicer entitled thereto.

 

“Transition Expense Cap” means, for any given servicing transfer, an aggregate maximum amount of $25,000 for a servicing transfer to the Backup Servicer or $150,000 to any other Successor Servicer.

 

“Treasury Rate” means, in the case of an Optional Redemption of the Notes, the yield to maturity (adjusted to a “mortgage equivalent basis” pursuant to the standards and practices of the Securities Industry and Financial Markets Association) at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days (but not more than five Business Days) prior to the Redemption Date (or, if such statistical release is not so published or available, any publicly available source of similar market data selected by the Issuer in good faith)) most nearly equal to the period from the Redemption Date to the end of the Reinvestment Period; provided, however, that if the period from the Redemption Date to the end of the Reinvestment Period is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the redemption date to such applicable date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

“Trust Agreement” means the Amended and Restated Trust Agreement, dated as of the Closing Date, between the Trust Depositor and the Owner Trustee, as amended, modified, restated, waived or supplemented from time to time.

 

“Trust Depositor” shall have the meaning provided in the Preamble.

 

“Trust Depositor LLC Agreement” means the Limited Liability Company Agreement of the Trust Depositor, dated as of the Closing Date, between the Seller, as the sole member, and the Independent manager party thereto.

 

“Trust Estate” shall have the meaning provided in the Trust Agreement.

 

“Trustee” means the Person acting as Trustee under the Indenture, its successors in interest and any successor trustee under the Indenture.

 

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“Trustees” means the Owner Trustee and the Trustee, or any of them individually as the context may require.

 

“UCC” means the Uniform Commercial Code, as amended from time to time, as in effect in any specified jurisdiction.

 

“Underlying Loan Agreement” means, with respect to any Loan, the single-lender or multi-lender commercial loan or credit agreement or other debt agreement or instrument evidencing such Loan or facility pursuant to which such Loan is made.

 

“Underlying Note” means the one or more promissory notes executed by the applicable Obligor evidencing a Loan.

 

“United States” means the United States of America.

 

“U.S. Bank” shall have the meaning provided in the Preamble.

 

“Volcker Rule” means Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), as implemented by regulations jointly adopted by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Corporation and the Commission and any orders or interpretations issued thereby.

 

“Warehouse Lender” means one or a syndicate of financial institutions providing warehouse loan financing to Hercules or an Affiliate thereof pursuant to a Warehouse Loan Facility.

 

“Warehouse Loan Facility” means a warehouse loan facility provided to Hercules or an Affiliate thereof by one or more Warehouse Lenders.

 

Section 1.02.     Usage of Terms.

 

With respect to all terms in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to “writing” include printing, typing, lithography and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all amendments, modifications and supplements thereto or any changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the term “including” means “including without limitation.”

 

Section 1.03.     Section References.

 

All Section references (including references to the Preamble), unless otherwise indicated, shall be to Sections (and the Preamble) in this Agreement.

 

Section 1.04.     Calculations.

 

Except as otherwise provided herein, all interest rate and basis point calculations hereunder will be made on the basis of a 360 day year consisting of twelve 30-day months and will be carried out to at least three decimal places.

 

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Section 1.05.     Accounting Terms.

 

All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States.

 

ARTICLE 2.

ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS

 

Section 2.01.     Creation and Funding of Issuer; Transfer of Loan Assets.

 

(a)     The Issuer shall be governed pursuant to the terms and conditions of the Trust Agreement, dated as of the Closing Date, between the Trust Depositor and the Owner Trustee (the “Original Trust Agreement”), upon the execution and delivery of the Original Trust Agreement and created by the filing by the Owner Trustee of an appropriately completed Certificate of Trust (as defined in the Original Trust Agreement) under the Statutory Trust Statute. The Trust Depositor, as settlor of the Issuer, shall fund and convey assets to the Issuer pursuant to the terms and provisions hereof. The Issuer shall be administered pursuant to the provisions of this Agreement, the Administration Agreement and the Trust Agreement for the benefit of the Securityholders. Each of the Owner Trustee and the Administrator is hereby specifically recognized by the parties hereto as empowered to conduct business dealings on behalf of the Issuer in accordance with the terms hereof and of the Trust Agreement and Administration Agreement. The initial Servicer is hereby specifically recognized by the parties hereto as empowered to act on behalf of the Issuer in accordance with Section 5.02(g) and Section 5.02(h). The Servicer is hereby specifically recognized by the parties hereto as empowered to perform the duties and obligations required to be performed by the Servicer under the Transaction Documents.

 

(b)     Subject to and upon the terms and conditions set forth herein, and in consideration of the Issuer’s delivery to or upon the order of the Trust Depositor of the Notes and the payment to the Trust Depositor of the net proceeds of the Notes, the Trust Depositor hereby sells, transfers, assigns, sets over and otherwise conveys to the Issuer all the right, title and interest of the Trust Depositor in and to the Initial Loan Assets.

 

To the extent the purchase price paid to the Trust Depositor for any Loan Assets is less than the fair market value of such Loan Assets, the difference between such fair market value and such purchase price shall be deemed to be a capital contribution made by the Trust Depositor to the Issuer on the Closing Date in the case of the Initial Loans, as of the related Additional Loan Cutoff Date in the case of any Additional Loans and as of the related Substitute Loan Cutoff Date in the case of any Substitute Loans. For all purposes of this Agreement, any contributed Loan Assets shall be treated the same as Loan Assets sold for cash, including without limitation for purposes of Section 11.01.

 

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(c)     The Seller and the Trust Depositor each acknowledge with respect to itself that the representations and warranties of the Seller in the Sale and Contribution Agreement and of the Trust Depositor in Section 3.01 through Section 3.04 hereof will run to and be for the benefit of the Issuer and the Trustees, and the Issuer and the Trustees may enforce directly (without joinder of the Trust Depositor when enforcing against the Seller) the repurchase obligations of the Seller or Trust Depositor, as applicable, with respect to breaches of such representations and warranties that materially and adversely affect the interests of any Noteholder as set forth in the Sale and Contribution Agreement or in this Agreement; provided that neither the Owner Trustee nor the Trustee shall have a duty or obligation (i) to discover or make and attempt to discover, inquire about or investigate the breach of any of such representations or warranties, (ii) to determine if such breach materially and adversely affects the interests of any Noteholder or (iii) to enforce the repurchase obligations of the Seller and/or the Trust Depositor it being understood that a Trustee’s sole duty upon receipt by a Responsible Officer of actual knowledge or written notice of a breach that materially and adversely affects the interests of Noteholders shall be to make demand upon the Seller or Trust Depositor, as applicable, to repurchase the Loan(s) unless the applicable Trustee receives written direction and indemnity reasonably satisfactory to it from the Super-Majority Noteholders specifying the additional action to be taken (or omitted) by the Trustee, including but not limited to commencing litigation against the Seller or Trust Depositor, as applicable.

 

(d)     The sale, transfer, assignment, set-over and conveyance of the Loan Assets by the Trust Depositor to the Issuer pursuant to this Agreement does not constitute and is not intended to result in a creation or an assumption by the Issuer of any obligation of the Seller or the Trust Depositor in connection with the Loan Assets, or any agreement or instrument relating thereto, including, without limitation, (i) any obligation to any Obligor relating to any unfunded commitment from the Seller or the Trust Depositor, (ii) any taxes, fees, or other charges imposed by any Governmental Authority and (iii) any insurance premiums that remain owing with respect to any Loan Asset at the time such Loan Asset is sold hereunder. Without limiting the foregoing, (x) the Issuer does not assume any obligation to purchase any additional notes or loans under agreements governing the Loan Assets and (y) the sale, transfer, assignment, set-over and conveyance of the Loan Assets by the Trust Depositor to the Issuer pursuant to this Agreement does not constitute and is not intended to result in a creation or an assumption by the Trust Depositor or the Issuer of any obligation of the Seller as lead agent or collateral agent under any Agented Loan or Co-Agented Loan. The Trust Depositor also hereby assigns to the Issuer all of the Trust Depositor’s right, title and interest (but none of its obligations) under the Sale and Contribution Agreement, including but not limited to the Trust Depositor’s right to exercise the remedies created by the Sale and Contribution Agreement.

 

(e)     The Seller, Trust Depositor and Issuer intend and agree that (i) the transfer of the Loan Assets by the Seller to the Trust Depositor under the Sale and Contribution Agreement and the transfer of the Loan Assets by the Trust Depositor to the Issuer hereunder are intended to be a sale, conveyance and transfer of ownership of the Loan Assets, as the case may be, rather than the mere granting of a security interest to secure a borrowing and (ii) such Loan Assets shall not be part of the Seller’s or the Trust Depositor’s estate in the event of a filing of a bankruptcy petition or other action by or against such Person under any Insolvency Law. In the event, however, that notwithstanding such intent and agreement, such transfers are deemed to be a mere granting of a security interest to secure indebtedness, the Seller shall be deemed to have granted (and as of the Closing Date hereby grants to) the Trust Depositor and the Trust Depositor shall be deemed to have granted (and as of the Closing Date hereby grants) to the Issuer, as the case may be, a perfected first priority security interest in all right, title and interest of the Seller or of the Trust Depositor, respectively, in such Loan Assets and this Agreement shall constitute a security agreement under Applicable Law, securing the repayment of the purchase price paid hereunder, the obligations and/or interests represented by the Securities, in the order and priorities, and subject to the other terms and conditions of, this Agreement, the Indenture and the Trust Agreement, together with such other obligations or interests as may arise hereunder and thereunder in favor of the parties hereto and thereto.

 

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(f)     If any such transfer of the Loan Assets is deemed to be the mere granting of a security interest to secure a borrowing, the Trust Depositor may, to secure the Trust Depositor’s own borrowing under this Agreement (to the extent that the transfer of the Loan Assets thereunder is deemed to be a mere granting of a security interest to secure a borrowing) repledge and reassign (i) all or a portion of the Loan Assets pledged to Trust Depositor by the Seller and with respect to which the Trust Depositor has not released its security interest at the time of such pledge and assignment, and (ii) all proceeds thereof. Such repledge and reassignment may be made by Trust Depositor with or without a repledge and reassignment by Trust Depositor of its rights under any agreement with the Seller, and without further notice to or acknowledgment from the Seller. The Seller waives, to the extent permitted by applicable law, all claims, causes of action and remedies, whether legal or equitable (including any right of setoff), against Trust Depositor or any assignee of Trust Depositor relating to such action by Trust Depositor in connection with the transactions contemplated by this Agreement.

 

(g)     The Trust Depositor and the Issuer acknowledge and agree (and the Trustee is hereby directed to acknowledge and does acknowledge) that, solely for administrative convenience, any assignment agreement required to be executed and delivered in connection with the transfer of a Loan in accordance with the terms of related Underlying Loan Agreements may reflect that the Seller is assigning such Loan directly to the Issuer. Nothing in such assignment agreements shall be deemed to impair the transfers of the Loan Assets by the Seller to the Trust Depositor in accordance with the terms of this Agreement and the Sale and Contribution Agreement, as applicable, and the subsequent transfer of the Loan Assets by the Trust Depositor to the Issuer in accordance with the terms hereof.

 

Section 2.02.     Conditions to Transfer of Initial Loan Assets to Issuer.

 

On or before the Closing Date, or, with respect to clause (g) below, within the period specified therein, the Seller or the Trust Depositor, as applicable, shall deliver or cause to be delivered to the Initial Purchaser, Owner Trustee and Trustee each of the documents, certificates and other items as follows:

 

(a)     a certificate of an officer of the Seller substantially in the form of Exhibit C hereto;

 

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(b)     copies of resolutions of Hercules, as Seller and Servicer, and the sole member of the Trust Depositor approving the execution, delivery and performance of this Agreement, the Transaction Documents to which it is a party and the transactions contemplated hereunder and thereunder, certified in each case by the Secretary or an Assistant Secretary of Hercules and the sole member of the Trust Depositor;

 

(c)     officially certified evidence dated within 30 days of the Closing Date of due formation and good standing of the Seller under the laws of the State of Maryland;

 

(d)     the initial List of Loans, certified by an officer of the Trust Depositor, together with an Assignment with respect to the Initial Loan Assets substantially in the form of Exhibit A (along with the delivery of any instruments and Loan Files as required under Section 2.09);

 

(e)     a certificate of an officer of the sole member of the Trust Depositor substantially in the form of Exhibit B hereto;

 

(f)     a letter from a nationally recognized accounting firm, addressed to the Seller and the Trust Depositor, stating that such firm has reviewed a sample of ten (10) of the Initial Loans and performed specific procedures for such sample with respect to certain loan terms;

 

(g)     officially certified evidence dated within 30 days of the Closing Date of due organization and good standing of the Trust Depositor under the laws of the State of Delaware;

 

(h)     evidence of the proper filing of a UCC-1 financing statement, naming the Seller as seller or debtor, naming the Trust Depositor as assignor, buyer or secured party, and naming the Issuer as total assignee of the Seller, buyer or secured party and describing the Loan Assets as collateral, with the office of the Secretary of State of the State of Delaware and in such other locations as required by the applicable UCC; and evidence of the proper filing of a UCC-1 financing statement, naming the Trust Depositor as seller or debtor, naming the Issuer as assignor, buyer or secured party, and naming the Trustee as total assignee of the Trust Depositor, buyer or secured party and describing the Loan Assets as collateral with the office of the Secretary of State of the State of Delaware and in such other locations as required by the applicable UCC; and evidence of proper filing of a UCC-1 financing statement, naming the Issuer as debtor, naming the Trustee as secured party and describing the Collateral as collateral with the office of the Secretary of State of the State of Delaware and in such other locations as required by the applicable UCC;

 

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(i)     an Officer’s Certificate listing the Servicer’s Servicing Officers;

 

(j)     a fully executed copy of each of the Transaction Documents;

 

(k)     except with respect to (i) Agented Loans, Co-Agented Loans and Third Party Agented Loans where the Seller (or a wholly-owned subsidiary of the Seller) receives payments on behalf of or as agent for the other lenders thereunder or where payments thereunder are made directly to such other lenders on behalf of or as agent for the Seller (or a wholly-owned subsidiary of the Seller) and (ii) Loans described in Section 7.01(d), a copy of the written notice from the Servicer notifying and directing the Obligor with respect to each such Loan to make all payments on the Loans, whether by wire transfer, ACH or otherwise, directly to the Lockbox Account;

 

(l)     a copy of the written notice from the Servicer notifying and directing each of Hercules’s co-lenders under Co-Agented Loans and Third-Party Agented Loans that receive payments on behalf of the Seller, to transfer such payments received from the Obligors with respect to such Loans to the Lockbox Account within one (1) business day of receipt of such payments by such co-lender; and

 

(m)     written evidence with respect to the reconveyance of and release of any Lien upon any portion of Collateral previously secured by another warehouse financing of the Seller or its Affiliates.

 

Section 2.03.     Acceptance by Issuer.

 

On the Closing Date, if the conditions set forth in Section 2.02 have been satisfied, the Issuer shall issue to, or upon the order of, the Trust Depositor the Certificate representing ownership of a beneficial interest in one hundred percent (100%) of the Issuer and the Issuer shall issue, and the Trustee shall authenticate, to, or upon the order of, the Trust Depositor the Notes secured by the Collateral.

 

Section 2.04.     Conveyance of Substitute Loans.

 

(a)     With respect to any Substitute Loans to be conveyed to the Trust Depositor by the Seller as described in Section 2.06, the Seller hereby sells, transfers, assigns, sets over and otherwise conveys to the Trust Depositor, without recourse other than as expressly provided herein (and the Trust Depositor shall purchase through cash payment and/or by exchange of one or more related Loans released by the Issuer to the Trust Depositor on the related Substitute Loan Cutoff Date), all the right, title and interest of the Seller in and to the Substitute Loans and Related Property.

 

The purchase price may equal, exceed or be less than the fair market value of such Substitute Loan as of the related Substitute Loan Cutoff Date, plus in each case accrued interest thereon. To the extent the purchase price of any Loan is less than the fair market value thereof, the Seller will be deemed to have made a capital contribution with respect to such excess to the Trust Depositor.

 

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(b)     Subject to Sections 2.01(d) and (e) and the conditions set forth in Section 2.06, the Trust Depositor shall sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse other than as expressly provided herein and therein, (i) all the right, title and interest of the Trust Depositor in and to the Substitute Loans and (ii) all other Related Property related to such Substitute Loans (the property in clauses (i) and (ii) above, upon such transfer, becoming part of the Collateral).

 

(c)     The Seller shall transfer to the Trust Depositor under the Sale and Contribution Agreement and the Trust Depositor shall transfer to the Issuer hereunder the applicable Substitute Loans and Related Property only upon the satisfaction of each of the following conditions on or prior to the related Substitute Loan Cutoff Date (in addition to the conditions set forth in Section 2.10):

 

(i)      the Trust Depositor shall have provided the Issuer and the Trustee with timely notice of such substitution, which shall be delivered no later than 11:00 a.m. on the related Substitute Loan Cutoff Date;

 

(ii)     there shall have occurred, with respect to each such Substitute Loan, a corresponding Substitution Event with respect to one or more Loans then in the Collateral;

 

(iii)     the Seller and the Trust Depositor shall have delivered to the Issuer and the Trustee a Subsequent List of Loans listing the applicable Substitute Loans and an assignment agreement as required by the related Underlying Loan Agreement indicating that the Issuer is the holder of the related Substitute Loan;

 

(iv)     the Seller shall have deposited or caused to be deposited in the Collection Account all Collections received by it with respect to the applicable Substitute Loans on and after the related Substitute Loan Cutoff Date;

 

(v)      each of the representations and warranties made by the Trust Depositor pursuant to Sections 3.02 and 3.04 applicable to the Substitute Loans shall be true and correct as of the related Substitute Loan Cutoff Date;

 

(vi)     the Seller shall bear all incidental transactions costs incurred in connection with a substitution effected pursuant to this Agreement and shall, at its own expense, on or prior to the related Substitute Loan Cutoff Date, indicate in its Computer Records that ownership of each Substitute Loan identified on the Subsequent List of Loans has been sold by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer pursuant to the Transfer and Servicing Agreements; and

 

(vii)     if such Substitute Loan is a Co-Agented Loans or a Third-Party Agented Loan, the Servicer shall have notified and directed each of Hercules’s co-lenders under such Substitute Loan that receive payments on behalf of the Seller, to transfer such payments received from the Obligors with respect to such Substitute Loan to the Lockbox Account within one (1) business day of receipt of such payments by such co-lender.

 

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(d)     The Servicer, the Issuer and the Trustee (at the request of the Servicer) shall execute and deliver such instruments, consents or other documents and perform all acts reasonably requested by the Servicer in order to effect the transfer and release of any of the Issuer’s interests in the Loans that are being substituted.

 

Section 2.05.     Optional Sales of Loans.

 

(a)     At its option, any Loan may be sold by the Issuer to Hercules (or any of its Affiliates) or a third party if:

 

(i)      such Loan becomes a Defaulted Loan;

 

(ii)     such Loan becomes a Delinquent Loan;

 

(iii)     such Loan becomes a Restructured Loan; or

 

(iv)     the Issuer (or the Servicer on its behalf), in its discretion, elects to sell the Loan.

 

(b)     No optional sale of any Loan (whether to Hercules, any of its affiliates, or a third party) may be executed for a price less than the sum of (i) the Outstanding Loan Balance of such Loan and (ii) interest accrued to the date of such sale on the principal balance of such Loan at the interest rate applicable to such Loan, and any such sale shall be subject to the further limitations described in Section 2.10 below.

 

The Sale Proceeds from any sale pursuant to this Section 2.05(a) will be deposited into the Collection Account and allocated as provided in Section 7.06. Upon receipt by the Servicer for deposit in the Collection Account of the amounts of Sale Proceeds received in connection with any such sale, the Servicer shall request and the Issuer and the Trustee shall assign to the party designated by the Servicer (or to the Servicer itself) all of the Issuer’s and Trustee’s right, title and interest in the repurchased Loan and related Loan Assets without recourse, representation or warranty. Thereafter, such reassigned Loan shall no longer be included in the Collateral.

 

Section 2.06.     Optional Substitution of Loans.

 

(a)     At its option, any Loan may be substituted by the Issuer and replaced with a substitute loan (each such Loan, a “Substitute Loan”) if any of the following occur (each, a “Substitution Event”):

 

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(i)      such Loan becomes a Defaulted Loan;

 

(ii)     such Loan becomes a Delinquent Loan;

 

(iii)     such Loan becomes a Restructured Loan; or

 

(iv)     the Issuer, in its discretion, elects to substitute the Loan.

 

Any such substitution shall be initiated by delivery of written notice (a “Notice of Substitution”) to the Trustee from the Servicer that the Issuer intends to substitute a Loan pursuant to this Section 2.06 and shall be completed prior to sixty (60) days after delivery of such notice. Each Notice of Substitution shall specify the Loan to be substituted, the reasons for such substitution and the Transfer Deposit Amount with respect to the Loan. The price deemed paid by the Issuer for any Substitute Loan shall be an amount equal to the Outstanding Loan Balance thereof, plus accrued interest thereon.

 

(b)     No substitution of a Substitute Loan will be permitted unless the Servicer determines that such Substitute Loan is a Qualified Substitute Loan as of the date each such Substitute Loan is transferred to the Issuer.

 

(c)     Any such substitution shall be subject to the further limitations described in Section 2.10 below.

 

Section 2.07.     Acquisition of Additional Loans.

 

(a)     During the Reinvestment Period, the Servicer may elect to transfer a portion of the Principal Collections in the Collection Account that are anticipated to be otherwise available for deposit in the Reinvestment Account on the immediately following Payment Date pursuant to Section 7.06(b) to the Reinvestment Account in accordance with Section 7.06(b), which amounts, together with other amounts on deposit in the Reinvestment Account, may be used by the Issuer to acquire Additional Loans at any time during the Reinvestment Period.

 

(b)     With respect to any Additional Loans to be conveyed to the Trust Depositor by the Seller in connection with the acquisition of such Additional Loan, the Seller hereby sells, transfers, assigns, sets over and otherwise conveys to the Trust Depositor, without recourse other than as expressly provided herein (and the Trust Depositor shall purchase through cash payment), all the right, title and interest of the Seller in and to the Additional Loans and Related Property.

 

(c)     Subject to Sections 2.01(d) and (e), the Trust Depositor shall sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse other than as expressly provided herein and therein, (i) all the right, title and interest of the Trust Depositor in and to the Additional Loans and (ii) all other Related Property related to such Additional Loans (the property in clauses (i) and (ii) above, upon such transfer, becoming part of the Collateral).

 

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(d)     The Seller shall transfer to the Trust Depositor under the Sale and Contribution Agreement and the Trust Depositor shall transfer to the Issuer hereunder the applicable Additional Loans and Related Property only upon the satisfaction of each of the following conditions on or prior to the related Additional Loan Cutoff Date:

 

(i)      such Additional Loan is a Qualified Additional Loan as of the date such Additional Loan is transferred to the Issuer;

 

(ii)     the Trust Depositor shall have provided the Issuer and the Trustee with timely notice of such acquisition, which shall be delivered no later than 11:00 a.m. on the related Additional Loan Cutoff Date;

 

(iii)     the Seller and the Trust Depositor shall have delivered to the Issuer and the Trustee a Subsequent List of Loans listing the applicable Additional Loans and an assignment agreement as required by the related Underlying Loan Agreement indicating that the Issuer is the holder of the related Additional Loan;

 

(iv)     the Seller shall have deposited or caused to be deposited in the Collection Account all Collections received by it with respect to the applicable Additional Loans on and after the related Additional Loan Cutoff Date;

 

(v)      each of the representations and warranties made by the Trust Depositor pursuant to Sections 3.02 and 3.04 applicable to the Additional Loans shall be true and correct as of the related Additional Loan Cutoff Date;

 

(vi)     the Seller shall bear all incidental transactions costs incurred in connection with an acquisition of Additional Loans effected pursuant to this Agreement and shall, at its own expense, on or prior to the related Additional Loan Cutoff Date, indicate in its Computer Records that ownership of each Additional Loan identified on the Additional List of Loans has been sold by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer pursuant to the Transfer and Servicing Agreements; and

 

(vii)     if such Additional Loan is a Co-Agented Loans or a Third-Party Agented Loan, the Servicer shall have notified and directed each of Hercules’s co-lenders under such Substitute Loan that receive payments on behalf of the Seller, to transfer such payments received from the Obligors with respect to such Substitute Loan to the Lockbox Account within one (1) business day of receipt of such payments by such co-lender.

 

(e)     The Issuer’s acquisition of Split Loans will be subject to the satisfaction of the following conditions:

 

(i)     on or prior to the Transfer Date on which the Issuer acquires any Split Loans:

 

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(1)     U.S. Bank (or another Qualified Institution) shall have been designated as Split Loan Agent by the Issuer, the Servicer and the applicable Warehouse Lender and shall have accepted its appointment as such Split Loan Agent;

 

(2)     the Issuer, the Servicer, the applicable Warehouse Lender, the Split Loan Agent, and acting at the direction of the Issuer, the Trustee, the Custodian and the Backup Servicer shall have implemented an arrangement with the applicable Warehouse Lender governing the splitting of such Split Loans with the loans financed by the applicable Warehouse Lender pursuant to a Split Loan Intercreditor Agreement satisfying the requirements set forth in this Agreement;

 

(3)     the Issuer (or the Servicer on its behalf) shall have instructed the Obligors under any such Split Loans acquired by the Issuer to make payments to the applicable Split Loan Account;

 

(4)     the original loan files relating to any Split Loans shall have been delivered to the Split Loan Agent to be held by the Split Loan Agent (or its agent), as custodian, and as agent for the benefit of the applicable Warehouse Lender and the Issuer; and

 

(5)     the Servicer shall serve as the sole administrative and/or collateral agent in respect of such Split Loan.

 

(ii)     Collections received in respect of any Split Loans shall be swept on a daily basis by the Split Loan Agent (at the direction of the Servicer) or the Servicer, as applicable, to a subaccount held at the Split Loan Agent in the name of the Issuer and then swept on a daily basis by the Split Loan Agent to the Collection Account.

 

(f)     The Issuer (or the Servicer on its behalf) shall deliver notice to the Rating Agency of the implementation of any Split Loan arrangement and the entry into any Split Loan Intercreditor Agreement.

 

Section 2.08.     Release of Excluded Amounts.

 

(a)     The parties hereto acknowledge and agree that the Issuer has no interest in the Excluded Amounts. The Trustee hereby agrees to release to the Issuer from the Loan Assets, and the Issuer hereby agrees to release to the Trust Depositor, any Excluded Amounts immediately upon identification thereof and upon receipt of an Officer’s Certificate of the Servicer, which release shall be automatic and shall require no further act by the Trustee or the Issuer; provided that the Trustee and Issuer shall execute and deliver such instruments of release and assignment or other documents, or otherwise confirm the foregoing release, as may reasonably be requested by the Trust Depositor in writing. Such Excluded Amounts shall not constitute and shall not be included in the Loan Assets.

 

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(b)     Immediately upon the release to the Trust Depositor by the Trustee of any Excluded Amounts, the Trust Depositor hereby irrevocably agrees to release to the Seller such Excluded Amounts, which release shall be automatic and shall require no further act by the Trust Depositor; provided that the Trust Depositor shall execute and deliver such instruments of release and assignment or other documents, or otherwise confirm the foregoing release of such Excluded Amounts, as may be reasonably requested by the Seller in writing.

 

Section 2.09.     Delivery of Documents in the Loan File.

 

(a)     Subject to the delivery requirements set forth in Section 2.09(b), the Issuer hereby authorizes and directs the Seller and the Trust Depositor to deliver possession of all the Loan Files to the Custodian on the Trustee’s behalf (with copies to be held by the Servicer), on behalf of and for the account of the Noteholders. The Seller and the Trust Depositor shall also identify on the List of Loans (including any deemed amendment thereof associated with any Additional Loans or Substitute Loans), whether by attached schedule or marking or other effective identifying designation, all Loans that are evidenced by such instruments.

 

(b)     With respect to each Loan in the Collateral, (i) on or prior to the Closing Date in the case of the Initial Loans and two (2) Business Days before the related Additional Loan Cutoff Date in the case of any Additional Loan or the Substitute Loan Cutoff Date in the case of any Substitute Loans (or, in each case, such lesser time as shall be acceptable to the Custodian), the Trust Depositor or the Seller will deliver or cause to be delivered to the Custodian on the Trustee’s behalf, to the extent not previously delivered, each of the Required Loan Documents with respect to such Loan (including electronic copies except to the extent required under the definition of Required Loan Documents or noted on Annex A to the List of Loans); and (ii) on or before the Closing Date in the case of the Initial Loans and on or before the related Additional Loan Cutoff Date in the case of any Additional Loan or the related Substitute Loan Cutoff Date in the case of any Substitute Loan (or, in each case, such lesser time as shall be acceptable to the Custodian), the Trust Depositor or the Seller will deliver or cause to be delivered to the Custodian on the Trustee’s behalf, to the extent not previously delivered, each of the documents in the Loan File that is not part of the Required Loan Documents with respect to such Loan (including electronic copies except to the extent noted on Annex A to the List of Loans).

 

Section 2.10.     Limitations on Optional Sale and Substitution.

 

In no event may (a) the aggregate Outstanding Loan Balance of Delinquent Loans and Restructured Loans optionally sold or substituted by the Issuer hereunder for any reason exceed 7.5% (rounded to the nearest tenth of a percent) of the sum of (i) the Aggregate Outstanding Loan Balance as of the Cutoff Date (the “Cutoff Date Pool Balance”) plus (ii) the sum of the Outstanding Loan Balance of each Additional Loan acquired by the Issuer after the Closing Date (determined as of the date such Additional Loan is acquired by the Issuer), subject to the limitation in clause (c) below on aggregate optional sales and substitutions with respect to all of the Loans, (b) the aggregate Outstanding Loan Balance of Defaulted Loans sold or substituted by the Issuer exceed 7.5% (rounded to the nearest tenth of a percent) of the sum of (i) the Cutoff Date Pool Balance plus (ii) the sum of the Outstanding Loan Balance of each Additional Loan acquired by the Issuer after the Closing Date (determined as of the date such Additional Loan is acquired by the Issuer), subject to the limitation in clause (c) below on aggregate optional sales and substitutions with respect to all of the Loans, or (c) the aggregate Outstanding Loan Balance of all Loans (including any Delinquent Loans, Restructured Loans or Defaulted Loans optionally sold or substituted as described above) optionally sold or substituted by the Issuer for any reason exceed 15% (rounded to the nearest whole number) of the sum of (i) the Cutoff Date Pool Balance plus (ii) the sum of the Outstanding Loan Balance of each Additional Loan acquired by the Issuer after the Closing Date (determined as of the date such Additional Loan is acquired by the Issuer). The foregoing limitations shall not apply to sales to unaffiliated third parties of (i) Delinquent Loans, Restructured Loans or Defaulted Loans where the Issuer (or the Servicer on its behalf) has determined in good faith that the best recovery for such Loan is the sale thereof, (ii) a Loan which is subject to contractual purchase rights of unaffiliated third parties and such unaffiliated third party has exercised such right and (iii) a Loan which is being refinanced and the related Obligor or new lender has requested that such Loan be sold to an unaffiliated third party for the purpose of refinancing such Loan. For the purpose of calculating the percentage of the Cutoff Date Pool Balance comprising Loans that are optionally sold or substituted as described above, any Substitute Loans that have been placed into the Collateral in satisfaction of the Trust Depositor’s obligations to repurchase or substitute Loans pursuant to Section 11.01 shall be disregarded.

 

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Section 2.11.     Certification by Custodian; Possession of Loan Files.

 

(a)     Review; Certification. On or prior to the date that is two (2) Business Days after the Closing Date (in the case of the Initial Loans), the related Additional Loan Cutoff Date (in the case of any Additional Loans) or the related Substitute Loan Cutoff Date (in the case of any Substitute Loans), the Custodian shall review the Required Loan Documents in the Loan File that are required to be delivered pursuant to Section 2.09(b) on the Closing Date (in the case of the Initial Loans), the related Additional Loan Cutoff Date (in the case of any Additional Loans) or the related Substitute Loan Cutoff Date (in the case of any Substitute Loans), and shall deliver to the Seller, the Trust Depositor, the Trustee, and the Servicer a certification with respect to the Required Loan Documents delivered to it at such time in the form attached hereto as Exhibit L-1 on or prior to the date that is two (2) Business Days after the Closing Date (in the case of the Initial Loans), the related Additional Loan Cutoff Date (in the case of any Additional Loans) or the related Substitute Loan Cutoff Date (in the case of any Substitute Loans). Within two (2) Business Days after the Custodian receives the Required Loan Documents in the Loan File that are permitted, pursuant to Section 2.09(b), to be delivered after the related Additional Loan Cutoff Date (in the case of any Additional Loans) or the related Substitute Loan Cutoff Date (in the case of any Substitute Loans), the Custodian shall deliver to the Seller, the Trust Depositor, the Trustee and the Servicer a certification with respect to the Required Loan Documents delivered to it at such time in the form attached hereto as Exhibit L-1, which updated certification shall supplement any previous certification given. Within 360 days after the Closing Date (in the case of the Initial Loans), the related Additional Loan Cutoff Date (in the case of any Additional Loans) and the related Substitute Loan Cutoff Date (in the case of any Substitute Loans), the Custodian shall deliver to the Seller, the Servicer, the Trust Depositor, the Trustee and any Noteholder who requests a copy from the Trustee a final certification in the form attached hereto as Exhibit L-2. A copy of the final certification will be provided to any Noteholder upon request.

 

(b)     Non-Conforming Loan Files. If the Custodian during the process of reviewing the Required Loan Documents in a Loan File finds any document constituting the Required Loan Documents that is not properly executed (if applicable), has not been received, is unrelated to a Loan identified in the List of Loans, or does not conform on its face in a material respect to the requirements of the definition of Required Loan Documents, or the description thereof as set forth in items (b)(i) and (ii) of the definition of List of Loans, the Custodian shall promptly so notify the Seller, the Trust Depositor and the Servicer in the form of an exception report attached to a certification required to be delivered pursuant to Section 2.11(a). In performing any such review, the Custodian may conclusively rely on the Seller as to the purported genuineness of any such document and any signature thereon. It is understood that the scope of the Custodian’s review of the Loan Files is limited solely to confirming that the documents listed in the definition of Required Loan Documents have been executed and received and relate to the Loans identified in the List of Loans. The Seller agrees to use commercially reasonable efforts to remedy a defect in a document constituting part of a Loan File of which it is so notified by the Custodian in an exception report and which the Seller, the Trust Depositor or the Servicer has determined to be material in nature. If, however, within 30 days after the determination by the Seller (notice of which determination shall be provided to the Trust Depositor and the Servicer (with a copy to the Trustee and the Owner Trustee) or notice from the Trust Depositor or Servicer (with a copy to the Trustee and the Owner Trustee) that an exception is material, the Seller has not remedied the defect and such defect materially and adversely affects the value of the related Loan, such Loan will be treated as an Ineligible Loan and the Seller will (i) substitute in lieu of such Loan a Substitute Loan in the manner and subject to the conditions set forth in Section 11.01 or (ii) repurchase such Loan at a purchase price equal to the Transfer Deposit Amount, which purchase price shall be deposited in the Collection Account within such 30 day period. For the avoidance of doubt, neither the Trustee nor the Custodian shall be responsible for determining whether an item listed on an exception report constitutes a material defect or whether such defect materially and adversely affects the value of the related Loan or the interest of any Noteholder.

 

(c)     Release of Entire Loan File upon Sale, Substitution or Repurchase. Subject to Section 5.08(a), upon receipt by the Custodian of a certification of a Servicing Officer of the Servicer of such substitution or of such purchase and the deposit of the amounts then required to be deposited as described in Section 2.05, Section 2.06, Section 2.11(b) or Section 11.01, as applicable, in the Collection Account (which certification shall be in the form of Exhibit M hereto), the Custodian shall release and ship to the Servicer for release to the Seller the related Loan File and, upon request, the Trustee and the Issuer shall execute, without recourse, and deliver such instruments of transfer necessary to transfer all right, title and interest in such Loan to the Seller free and clear of any Liens created by the Transaction Documents. All costs of any such transfer shall be borne by the Seller.

 

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(d)     Partial Release of Loan File and/or Related Property. Subject to Section 5.08(b), if in connection with taking any action in connection with a Loan (including, without limitation, the amendment to documents in the Loan File and/or a revision to Related Property) the Servicer requires any item constituting part of the Loan File, or the release from the Lien of the related Loan of all or part of any Related Property, the Servicer shall deliver to the Custodian a certificate to such effect in the form attached as Exhibit M hereto. Subject to Section 5.08(d), upon receipt of such certification, the Custodian shall ship for delivery to the Servicer within two (2) Business Days of such request (if such request was received by 2:00 p.m., central time), the requested documentation, and, upon request of the Servicer, the Trustee shall execute, without recourse, and deliver such instruments of transfer necessary to release all or the requested part of the Related Property from the Lien of the related Loan and/or the Lien under the Transaction Documents.

 

(e)     Annual Certification. Within ninety (90) days of the beginning of each calendar year, commencing in 2019, the Custodian shall deliver to the Seller, the Trust Depositor and the Servicer a certification in the form of Exhibit K.

 

(f)     Notwithstanding any language to the contrary herein, neither the Trustee nor the Custodian makes any representations as to, and shall not be responsible to verify, (i) the validity, legality, enforceability, due authorization, recordability, sufficiency for any purpose, or genuineness of any of the documents contained in each Loan File or (ii) the collectability, insurability, effectiveness or suitability of any such Loan Asset. In its review of documents and instruments pursuant to this Agreement, the Custodian and Trustee shall be under no duty or obligation to inspect, review or examine the Loan Files to determine that the contents thereof are genuine, enforceable or appropriate for the represented purpose or that they are other than what they purport to be on their face.

 

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES

 

The Trust Depositor makes, and upon each conveyance of Additional Loans or Substitute Loans, as applicable, is deemed to make, the representations and warranties in Section 3.01 through Section 3.04, on which the Issuer will rely in purchasing the Initial Loan Assets on the Closing Date, any Additional Loan Assets on the relevant Additional Loan Cutoff Date and any Substitute Loan Assets on the relevant Substitute Loan Cutoff Date, and on which the Securityholders will rely.

 

Such representations and warranties are given as of the execution and delivery of this Agreement and as of the Closing Date (or Additional Loan Cutoff Date or Substitute Loan Cutoff Date, as applicable), but shall survive the sale, transfer and assignment of the Loan Assets to the Issuer. The repurchase obligation or substitution obligation of the Trust Depositor set forth in Section 11.01 constitutes the sole remedy available for a breach of a representation or warranty of the Trust Depositor set forth in Section 3.01 through Section 3.04 of this Agreement.

 

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Section 3.01.     Representations and Warranties Regarding the Trust Depositor.

 

The Trust Depositor represents and warrants to the Issuer and the Trustee that:

 

(a)     Organization and Good Standing. The Trust Depositor is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the power to own its assets and to transact the business in which it is currently engaged. The Trust Depositor is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would reasonably be expected to have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Trust Depositor or the Issuer.

 

(b)     Authorization; Valid Sale; Binding Obligations. The Trust Depositor has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which it is a party, and to create the Issuer and cause it to make, execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which the Issuer is a party, and the Trust Depositor has taken all necessary limited liability company action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party. This Agreement shall effect a valid sale, transfer and assignment of or grant a security interest in the Loan Assets from the Trust Depositor to the Issuer. This Agreement and the other Transaction Documents to which the Trust Depositor is a party constitute the legal, valid and binding obligation of the Trust Depositor enforceable in accordance with their respective terms, except as enforcement of such terms may be limited by applicable Insolvency Laws and general principles of equity, whether considered in a suit at law or in equity.

 

(c)     No Consent Required. The Trust Depositor is not required to obtain the consent of any other party (other than those that it has already obtained) or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority (other than (i) the filing of UCC financing statements and (ii) those that it has already obtained) in connection with the execution, delivery, performance, validity or enforceability of this Agreement or the other Transaction Documents to which it is a party.

 

(d)     No Violations. The execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party by the Trust Depositor, and the consummation of the transactions contemplated hereby and thereby, will not violate in any material respect any Applicable Law applicable to the Trust Depositor, or conflict with, result in a default under or constitute a breach of the Trust Depositor’s organizational documents or material Contractual Obligations to which the Trust Depositor is a party or by which the Trust Depositor or any of the Trust Depositor’s properties may be bound, or result in the creation or imposition of any Lien of any kind upon any of its properties pursuant to the terms of any such material Contractual Obligations, other than as contemplated by the Transaction Documents.

 

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(e)     Litigation. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Trust Depositor threatened, against the Trust Depositor or any of its properties or with respect to this Agreement, the other Transaction Documents to which it is a party or the Securities (i) that, if adversely determined, would in the reasonable judgment of the Trust Depositor be expected to have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Trust Depositor or the Issuer or the transactions contemplated by this Agreement or the other Transaction Documents to which the Trust Depositor is a party or (ii) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Certificate or Notes.

 

(f)     Solvency. The Trust Depositor, at the time of and after giving effect to each conveyance of Loan Assets hereunder, is Solvent on and as of the date thereof.

 

(g)     Taxes. The Trust Depositor has filed or caused to be filed all tax returns which, to its knowledge, are required to be filed and has paid all taxes shown to be due and payable on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any amount of tax due, the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with generally accepted accounting principles have been provided on the books of the Trust Depositor); no tax Lien has been filed and, to the Trust Depositor’s knowledge, no claim is being asserted, with respect to any such tax, fee or other charge.

 

(h)     Place of Business; No Changes. The Trust Depositor’s location (within the meaning of Article 9 of the UCC) is the State of Delaware. The Trust Depositor has not changed its name, whether by amendment of its certificate of formation, by reorganization or otherwise, and has not changed its location within the 4-months preceding the Closing Date.

 

(i)      Not an Investment Company. The Trust Depositor is not and, after giving effect to the transactions contemplated by the Transaction Documents, will not be required to be registered as an “investment company” under the 1940 Act.

 

(j)     Sale Treatment. Other than for accounting and tax purposes, the Trust Depositor has treated the transfer of Loan Assets to the Issuer for all purposes as a sale and purchase on all of its relevant books and records and other applicable documents.

 

(k)     Security Interest.

 

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(i)     This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in favor of the Issuer in all right, title and interest of Trust Depositor in the Loan Assets, which security interest is prior to all other Liens (except for Permitted Liens), and is enforceable as such against creditors of and purchasers from the Trust Depositor;

 

(ii)     the Loans, along with the related Loan Files, constitute “general intangibles,” “instruments,” “accounts,” “investment property,” or “chattel paper,” within the meaning of the applicable UCC;

 

(iii)     the Trust Depositor owns and has, and upon the sale and transfer thereof by the Trust Depositor to the Issuer, the Issuer will have, good and marketable title to the Loan Assets free and clear of any Lien (other than Permitted Liens), claim or encumbrance of any Person;

 

(iv)     the Trust Depositor has received all consents and approvals required by the terms of the Loan Assets to the sale of the Loan Assets hereunder to the Issuer;

 

(v)     the Trust Depositor has caused the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the security interest in the Loan Assets granted to the Issuer under this Agreement to the extent perfection can be achieved by filing a financing statement;

 

(vi)     other than the security interest granted to the Issuer pursuant to this Agreement, the Trust Depositor has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Loan Assets. The Trust Depositor has not authorized the filing of and is not aware of any financing statements naming the Trust Depositor as debtor that include a description of collateral covering the Loan Assets other than any financing statement (A) relating to the security interest granted by the Trust Depositor under this Agreement, or (B) that has been terminated or for which a release or partial release has been filed. The Trust Depositor is not aware of the filing of any judgment or tax Lien filings against the Trust Depositor;

 

(vii)     all original executed copies of each Underlying Note (if any) that constitute or evidence the Loan Assets have been delivered to the Trustee;

 

(viii)     the Trust Depositor has received a written acknowledgment from the Trustee that the Trustee or its bailee is holding any Underlying Notes that constitute or evidence any Loan Assets solely on behalf of and for the benefit of the Securityholders; and

 

(ix)     none of the Underlying Notes that constitute or evidence any Loan Assets has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Issuer and the Trustee.

 

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(l)     Value Given. The cash payments and the Certificate received by the Trust Depositor in respect of the purchase price of the Loan Assets sold hereunder constitute reasonably equivalent value in consideration for the transfer to the Issuer of such Loan Assets under this Agreement, such transfer was not made for or on account of an antecedent debt owed by the Seller to the Trust Depositor, and such transfer was not and is not voidable or subject to avoidance under any Insolvency Law.

 

(m)     Investment Company. The Issuer is not and, after giving effect to the transactions contemplated by the Transaction Documents, will not be required to be registered as an “investment company” within the meaning of the 1940 Act.

 

(n)     No Defaults. The Trust Depositor is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default would reasonably be expected to have consequences that would materially and adversely affect the condition (financial or otherwise) or operations of the Trust Depositor or its respective properties or might have consequences that would materially and adversely affect its performance hereunder.

 

(o)     Bulk Transfer Laws. The transfer, assignment and conveyance of the Loans by the Trust Depositor pursuant to this Agreement are not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction.

 

(p)     Origination and Collection Practices. The origination and collection practices used by any Affiliate of the Trust Depositor with respect to each Loan have been consistent with the Servicing Standard and have complied with the Credit and Collection Policy in all material respects.

 

(q)     [Reserved].

 

(r)     Lack of Intent to Hinder, Delay or Defraud. Neither the Trust Depositor nor any of its Affiliates sold, or will sell, any interest in any Loan Asset with any intent to hinder, delay or defraud any of their respective creditors.

 

(s)     Nonconsolidation. The Trust Depositor conducts its affairs such that the Issuer would not be substantively consolidated in the estate of the Trust Depositor and their respective separate existences would not be disregarded in the event of the Trust Depositor’s bankruptcy.

 

(t)     Accuracy of Information. All written factual information heretofore furnished by the Trust Depositor for purposes of or in connection with this Agreement or the other Transaction Documents to which Trust Depositor is a party, or any transaction contemplated hereby or thereby is, and all such written factual information hereafter furnished by the Trust Depositor to any party to the Transaction Documents will be, true and accurate in all material respects, on the date such information is stated or certified; provided that the Trust Depositor shall not be responsible for any factual information furnished to it by any third party not affiliated with it, or the Seller or the Servicer, except to the extent that a Responsible Officer of the Trust Depositor has actual knowledge that such factual information is inaccurate in any material respect.

 

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The representations and warranties set forth in Section 3.01(k) may not be waived by any Person and shall survive the termination of this Agreement. The Trust Depositor and Issuer shall provide the Rating Agency with prompt written notice upon obtaining knowledge of any breach of the representations and warranties set out in Section 3.01(k).

 

Section 3.02.     Representations and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate.

 

The Trust Depositor represents and warrants as to each Initial Loan as of the Closing Date, as of each Additional Loan Cutoff Date with respect to each Additional Loan and as of each Substitute Loan Cutoff Date with respect to each Substitute Loan, that:

 

(a)     List of Loans. The information set forth in the List of Loans attached hereto as Exhibit G (as the same may be amended or deemed amended in respect of a conveyance of Additional Loans on an Additional Loan Cutoff Date or Substitute Loans on a Substitute Loan Cutoff Date) is true, complete and correct as of the Closing Date and each Substitute Loan Cutoff Date, as applicable.

 

(b)     Eligible Loan. Such Loan satisfies the criteria for the definition of Eligible Loan set forth in this Agreement as of the date of its conveyance hereunder.

 

Section 3.03.   [Reserved].

 

Section 3.04.   Representations and Warranties Regarding the Required Loan Documents.

 

The Trust Depositor represents and warrants on the Closing Date with respect to the Initial Loans (or as of the related Additional Loan Cutoff Date (with respect to Additional Loans) or as of the related Substitute Loan Cutoff Date (with respect to Substitute Loans), as applicable), that except as otherwise provided in Section 2.09, the Required Loan Documents and each other item included in the Loan File for each Loan are in the possession of the Trustee (or the Custodian, on behalf of the Trustee).

 

Section 3.05.   [Reserved].

 

Section 3.06.   Representations and Warranties Regarding the Servicer.

 

The initial Servicer represents and warrants to the Owner Trustee and the Trustee that:

 

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(a)     Organization and Good Standing. The Servicer is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and has the power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Servicer or the Issuer. The Servicer is properly licensed in each jurisdiction to the extent required by the laws of such jurisdiction to service the Loans in accordance with the terms hereof and in which the failure to so qualify would reasonably be expected to have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Servicer or Issuer.

 

(b)     Authorization; Binding Obligations. The Servicer has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which the Servicer is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which the Servicer is a party, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which the Servicer is a party. This Agreement and the other Transaction Documents to which the Servicer is a party constitute the legal, valid and binding obligations of the Servicer enforceable in accordance with their respective terms, except as enforcement of such terms may be limited by applicable Insolvency Laws and general principles of equity, whether considered in a suit at law or in equity.

 

(c)     No Consent Required. The Servicer is not required to obtain the consent of any other party (other than those that it has already obtained) or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority (other than those that it has already obtained) in connection with the execution, delivery, performance, validity or enforceability of this Agreement or the other Transaction Documents to which the Servicer is a party.

 

(d)     No Violations. The execution, delivery and performance by the Servicer of this Agreement and the other Transaction Documents to which the Servicer is a party will not violate any Applicable Law applicable to the Servicer, or conflict with, result in a default under or constitute a breach of the Servicer’s organizational documents or any material Contractual Obligations to which the Servicer is a party or by which the Servicer or any of the Servicer’s properties may be bound, or result in the creation of or imposition of any Lien of any kind upon any of its properties pursuant to the terms of any such material Contractual Obligations, other than as contemplated by the Transaction Documents.

 

(e)     Litigation. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Servicer threatened, against the Servicer or any of its properties or with respect to this Agreement, or any other Transaction Document to which the Servicer is a party that, if adversely determined, would in the reasonable judgment of the Servicer be expected to have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Servicer or the Issuer or the transactions contemplated by this Agreement or any other Transaction Document to which the Servicer is a party.

 

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(f)     Reports. All reports, certificates and other written information furnished by the Servicer with respect to the Loans are correct in all material respects on the date such information is furnished or certified; provided that the Servicer shall not be responsible for any information furnished to it by any third party not affiliated with the Servicer contained in any such reports, certificates or other written information, except to the extent that a Responsible Officer of the Servicer has actual knowledge that such factual information is inaccurate in any material respect.

 

Section 3.07.   Representations of the Backup Servicer.

 

The Backup Servicer represents and warrants to the Owner Trustee and the Trustee that:

 

(a)     Organization and Good Standing. The Backup Servicer has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with power, authority and legal right to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to enter into and perform its obligations under this Agreement;

 

(b)     Due Qualification. The Backup Servicer is duly qualified to do business, is in good standing and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Loans as required by this Agreement) requires or shall require such qualification;

 

(c)     Power and Authority. The Backup Servicer has the power and authority to execute and deliver this Agreement and the other Transaction Documents to which the Backup Servicer is a party and to carry out its terms and their terms, respectively, and the execution, delivery and performance of this Agreement and the other Transaction Documents to which the Backup Servicer is a party have been duly authorized by the Backup Servicer by all necessary corporate action;

 

(d)     Binding Obligation. This Agreement and the other Transaction Documents to which the Backup Servicer is a party shall constitute the legal, valid and binding obligations of the Backup Servicer enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law;

 

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(e)     No Violation. The consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which the Backup Servicer is a party, and the fulfillment of the terms of this Agreement and the other Transaction Documents to which the Backup Servicer is a party, shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Backup Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Backup Servicer is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement, or violate any law, order, rule or regulation applicable to the Backup Servicer of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Backup Servicer or any of its properties;

 

(f)     No Proceedings. There are no proceedings or investigations pending or, to the Backup Servicer's knowledge, threatened against the Backup Servicer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Backup Servicer or its properties (A) asserting the invalidity of this Agreement or any of the Transaction Documents to which the Backup Servicer is a party, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Agreement or any of the Transaction Documents to which the Backup Servicer is a party, (C) seeking any determination or ruling that would reasonably be expected to materially and adversely affect the performance by the Backup Servicer of its obligations under, or the validity or enforceability of, this Agreement or any of the Transaction Documents to which the Backup Servicer is a party or (D) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Notes;

 

(g)     No Consents. The Backup Servicer is not required to obtain the consent of any other party or any consent, license, approval or authorization, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement which has not already been obtained.

 

ARTICLE 4.

PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS

 

Section 4.01.   Custody of Loans.

 

The contents of each Loan File shall be held in the custody of the Custodian (on behalf of the Trustee) under the Indenture for the benefit of, and as agent for, the Securityholders.

 

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Section 4.02.     Filing.

 

On the Closing Date, the Seller, Trust Depositor and Servicer shall cause the UCC financing statement(s) referred to in Section 2.02(h) hereof to be filed, and from time to time the Servicer, on behalf of the Issuer, shall take and cause to be taken such actions and execute such documents as are necessary or desirable or as the Owner Trustee (acting at the direction of the Certificateholder) or Trustee (acting at the direction of the Majority Noteholders) may reasonably request to perfect and protect the Trustee’s first priority perfected security interest in the Loan Assets against all other Persons, including, without limitation, the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of all records or documents of title. Notwithstanding the obligations of the Seller, Trust Depositor and Servicer set forth in the preceding sentence, the Issuer hereby authorizes the Servicer to prepare and file, at the expense of the initial Servicer, such UCC financing statements (including but not limited to renewal, continuation or in lieu statements) and amendments or supplements thereto or other instruments as the Servicer may from time to time deem necessary or appropriate in order to perfect and maintain the security interest granted hereunder in accordance with the UCC.

 

Section 4.03.     Changes in Name, Organizational Structure or Location.

 

(a)       During the term of this Agreement, none of the Seller, the Servicer, the Trust Depositor or the Issuer shall change its name, form of organization, existence, state of formation or location without first giving at least 30 days’ prior written notice to the other parties hereto and the Owner Trustee.

 

(b)     If any change in either the Servicer’s, the Seller’s or the Trust Depositor’s name, form of organization, existence, state of formation, location or other action would make any financing or continuation statement or notice of ownership interest or Lien relating to any Loan Asset seriously misleading within the meaning of applicable provisions of the UCC or any title statute, the Servicer, no later than ten (10) Business Days after the effective date of such change, shall file such amendments as may be required (including, but not limited to, any filings and other acts necessary or advisable under the UCC of each relevant jurisdiction) to preserve and protect the Trustee’s security interest in the Loan Assets and the proceeds thereof.

 

Section 4.04.     Costs and Expenses.

 

The initial Servicer agrees to pay all reasonable costs and disbursements in connection with the perfection and the maintenance of perfection, as against all third parties, of the Trustees’ and Issuer’s right, title and interest in and to the Loan Assets (including, without limitation, the security interest in the Related Property related thereto and the security interests provided for in the Indenture); provided that to the extent permitted by the Required Loan Documents, the Servicer may seek reimbursement for such costs and disbursements from the related Obligors.

 

Section 4.05.     Sale Treatment.

 

Other than for accounting and tax purposes, the Trust Depositor shall treat the transfer of Loan Assets made hereunder for all purposes as a sale and purchase on all of its relevant books and records.

 

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Section 4.06.   Separateness from Trust Depositor.

 

The Seller agrees to take or refrain from taking or engaging in with respect to the Trust Depositor each of the actions or activities specified in the “substantive consolidation” opinion of Dechert LLP (including any certificates of the Seller delivered in connection therewith) delivered on the Closing Date, upon which the conclusions therein are based.

 

ARTICLE 5.

SERVICING OF LOANS

 

Section 5.01.   Appointment and Acceptance.

 

(a)     Hercules is hereby appointed as Servicer pursuant to this Agreement and pursuant to the other Transaction Documents under which the Servicer has any rights, duties or obligations. Hercules accepts such appointment and agrees to act as the Servicer pursuant to this Agreement and pursuant to the other Transaction Documents under which Hercules, as Servicer, has any rights, duties or obligations.

 

(b)     U.S. Bank National Association is hereby appointed as Backup Servicer pursuant to this Agreement and pursuant to the other Transaction Documents under which the Backup Servicer has any rights, duties or obligations. U.S. Bank National Association hereby accepts such appointment and agrees to act as the Backup Servicer pursuant to this Agreement and pursuant to the other Transaction Documents under which U.S. Bank National Association, as Backup Servicer, has any rights, duties or obligations, subject to the terms of this Agreement.

 

Section 5.02.   Duties of the Servicer and the Backup Servicer.

 

(a)     The Servicer, as an independent contract servicer, shall service and administer the Loans (including, with respect to Agented Loans, Co-Agented Loans and Third Party Agented Loans, the Issuer’s interest as a lender thereunder) and shall have full power and authority, acting alone, to do any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable and consistent with the terms of this Agreement, the Credit and Collection Policy and the Servicing Standard and the Issuer’s rights under the applicable Underlying Loan Agreements. The parties hereto each acknowledge, and the Noteholders and the Certificateholder are hereby deemed to acknowledge, that the Servicer, as Servicer under this Agreement, possesses only such rights with respect to the enforcement of rights and remedies with respect to the Loans and the Related Property and under the Required Loan Documents as those which have been transferred to the Issuer with respect to the related Loan. Therefore, the provisions of this Article V shall not apply to Third Party Agented Loans or Participated Loans except to the extent the Servicer, on behalf of the Issuer, has the right to vote, consent, give directions, make advances or receive payments with respect thereto, and these provisions shall only apply to Agented Loans and Co-Agented Loans with respect to which the Servicer is the lead agent and to the extent not inconsistent with the related Required Loan Documents.

 

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(b)     The Servicer may perform its duties directly or, consistent with the Servicing Standard, through agents, accountants, experts, attorneys, brokers, consultants or nominees selected with reasonable care by the Servicer. The Servicer will remain fully responsible and fully liable for its duties and obligations hereunder and under any other Transaction Document notwithstanding any such delegation to a third party. Performance by any such third party of any of the duties of the Servicer hereunder or under any other Transaction Document shall be deemed to be performance thereof by the Servicer. In addition, the Servicer may enter into Subservicing Agreements for any servicing and administration of Loans with any entity; provided that for any Subservicing Agreement that delegates all or substantially all of the Servicer’s duties hereunder, the Holders of 100% of the Notes shall have consented in writing to such Subservicing Agreement and the Servicer shall have provided the Rating Agency with written notice of such Subservicing Agreement; provided, further, that the Backup Servicer shall not be required to obtain such consent if, after such time as the Backup Servicer shall have become the Servicer hereunder, it shall enter into a Subservicing Agreement that delegates all or substantially all of the Servicer’s duties hereunder. The Servicer shall be entitled to terminate any Subservicing Agreement in accordance with the terms and conditions of such Subservicing Agreement and to either itself directly service the related Loans or enter into a Subservicing Agreement with a successor Subservicer as permitted in this clause (b); provided that the Servicer shall promptly notify the Rating Agency of the termination of any Subservicing Agreement that had delegated all or substantially all of the Servicer’s duties hereunder. Notwithstanding any Subservicing Agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a Subservicer or referencing actions taken through a Subservicer or otherwise, so long as this Agreement shall remain effective, the Servicer shall remain obligated and primarily liable to the Trustee, for the benefit of Holders and on behalf of the Issuer, for the servicing and administering of the Loans in accordance with the provisions of this Agreement, the Credit and Collection Policy and the Servicing Standard, without diminution of such obligation or liability by virtue of such Subservicing Agreements or other arrangements with third parties pursuant to this clause (b) or by virtue of indemnification from the Subservicer and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Loans. For purposes of this Agreement, the Servicer shall be deemed to have received payments on Loans when any Subservicer has received such payments. The Servicer shall be entitled to enter into any agreement with a Subservicer for indemnification of the Servicer by such Subservicer, and nothing contained in this Agreement shall be deemed to limit or modify such indemnification.

 

(c)     Any Subservicing Agreement that may be entered into and any transactions or services relating to the Loans involving a Subservicer in its capacity as such and not as an originator shall be deemed to be between the Subservicer and the Servicer alone, and the Trustee and the Securityholders shall not be deemed parties thereto and shall have no claims, rights, obligations, duties or liabilities with respect to the Subservicer except as set forth in Section 5.02(d). Notwithstanding the foregoing, the Servicer shall (i) at its expense and without reimbursement, deliver to the Trustee a copy of each Subservicing Agreement and (ii) provide notice of the termination of any Subservicer within a reasonable time after such Subservicer’s termination to the Trustee.

 

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(d)     In the event the initial Servicer shall for any reason no longer be the Servicer, the initial Servicer at its expense and without right of reimbursement therefor, shall, upon request of the Trustee, deliver to the Backup Servicer or other Successor Servicer all documents and records (including computer tapes and diskettes) in its possession relating to each Subservicing Agreement and the Loans then being serviced hereunder and an accounting of amounts collected and held by it hereunder and otherwise use its best efforts to effect the orderly and efficient transfer of the Subservicing Agreements and of any other arrangements with third parties pursuant to clause (a) of this Section 5.02 to the Backup Servicer or other Successor Servicer to the extent permitted thereby.

 

(e)     Modifications and Waivers Relating to Loans.

 

(i)     So long as it is consistent with the Credit and Collection Policy and the Servicing Standard, the Servicer may agree to waive, modify or vary any term of any Loan, if in the Servicer’s determination such waiver, modification or variance will not be materially adverse to the interests of the Noteholders; provided that the Servicer may not:

 

(1)     agree to amend, waive, modify or vary any Loan in any manner that would extend the stated maturity date of such Loan beyond the Legal Final Payment Date; or

 

(2)     enter into any amendment, waiver, modification or variance with respect to any Loan solely in order to render such Loan eligible for repurchase or substitution hereunder.

 

(ii)     Except as expressly set forth in Section 5.02(e)(i), the Servicer may execute any amendments, waivers, modifications or variances related to such Loan and any documents related thereto on behalf of the Issuer.

 

(iii)    [Reserved].

 

(iv)    Although costs incurred by the Servicer or any Subservicer in respect of Servicing Advances, including any interest owed with respect thereto, may be added to the amount owing by the Obligor under the related Loan, such amounts shall not be so added for the purposes of calculating distributions to Noteholders. Any fees and costs imposed in connection therewith on the Obligor of the related Loan, and any reimbursement of Servicing Advances by any Obligor or out of Sale Proceeds, Liquidation Proceeds or Insurance Proceeds, in each case, received with respect to the related Loan or its Related Property shall be withdrawn and payable to the Servicer from the Collection Account pursuant to Section 7.03(h) as additional servicing compensation or reimbursement, as applicable. Without limiting the generality of the foregoing, so long as it is consistent with the Credit and Collection Policy and the Servicing Standard, the Servicer shall continue, and is hereby authorized and empowered to execute and deliver on behalf of the Issuer, the Trustee and each Securityholder, all instruments of amendment, waiver, satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Loans and with respect to any Related Property. Such authority shall include, but not be limited to, the authority to substitute or release items of Related Property consistent with the Credit and Collection Policy and the Servicing Agreement and sell Loans previously transferred to the Issuer. The Issuer and the Trustee have granted a power of attorney to the Servicer with respect thereto, pursuant to Section 5.02(t). In connection with any such sale, the Servicer shall deposit in the Collection Account, pursuant to Section 7.03(b), all proceeds received upon such sale (other than Excluded Amounts). If reasonably required by the Servicer, the Issuer and the Trustee shall furnish the Servicer, within five (5) Business Days of receipt of the Servicer’s request, with any powers of attorney and other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement or under any of the other Transaction Documents. Any such request by the Servicer to the Issuer or the Trustee shall be accompanied by a certification in the form of Exhibit F attached hereto signed by a Servicing Officer. In connection with any substitution of Related Property, the Servicer shall deliver to the Trustee the items required by, and within the time frame set forth in, Section 2.09, assuming that the date of substitution is the relevant Substitute Loan Cutoff Date.

 

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(v)     The Servicer will not be in breach of its obligations under this Agreement by reason of any waiver, modification or variance taken by the administrative agent, syndicate agent or other Person acting in a similar capacity in respect of a Third Party Agented Loan or Participated Loan pursuant to its own authority or in respect of an Agented Loan, Co-Agented Loan or Third Party Agented Loan at the direction of the requisite percentage of the lenders in violation of this Agreement if the Servicer, acting on behalf of the Issuer, did not consent to such waiver, modification or variance on behalf of the Issuer.

 

(f)     The Servicer shall service and administer the Loans (including collection, foreclosure, foreclosed property and repossessed collateral management procedures other than for Third Party Agented Loans and Participated Loans, and with respect to Third Party Agented Loans and Participated Loans, the Issuer’s interest as a lender or purchaser thereunder) in accordance with the Required Loan Documents and other documents in the Loan File, the Credit and Collection Policy and the Servicing Standard.

 

(g)     In accordance with the power set forth in Section 2.01(a), the initial Servicer shall perform the duties of the Issuer under the Transaction Documents. In furtherance of the foregoing, the initial Servicer shall consult with the Owner Trustee as the Servicer deems appropriate regarding the duties of the Issuer under the Transaction Documents. The initial Servicer shall monitor the performance of the Issuer and the Owner Trustee of their respective duties under the Transaction Documents and shall advise the Owner Trustee when action is necessary to comply with the Issuer’s or the Owner Trustee’s duties under the Transaction Documents. The initial Servicer shall prepare for execution by the Owner Trustee or the Issuer or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the Transaction Documents.

 

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(h)     In addition to the duties of the Servicer set forth in this Agreement or any of the Transaction Documents, the initial Servicer shall perform or shall cause to be performed such calculations and shall prepare for execution by the Issuer or the Owner Trustee or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer to prepare, file or deliver pursuant to state and federal tax and securities laws. In accordance with the directions of the Issuer or the Owner Trustee, as applicable, the initial Servicer shall administer, perform or supervise the performance of such other activities in connection with the Issuer as are not covered by any of the foregoing provisions and as are expressly requested by the Issuer or the Owner Trustee and are reasonably within the capability of the Servicer. The Servicer is hereby authorized to execute documents, instruments and certificates on behalf of the Issuer.

 

(i)     Notwithstanding anything in this Agreement or any of the Transaction Documents to the contrary, the Servicer shall be responsible for promptly (upon a Responsible Officer of the Servicer having actual knowledge thereof) notifying the Owner Trustee and the Trustee in the event that any withholding tax is imposed on the Issuer’s payments (or allocations of income) to a Securityholder. Any such notice shall be in writing and specify the amount of any withholding tax required to be withheld by the Owner Trustee or the Trustee pursuant to such provision.

 

(j)     All tax returns required to be signed by the Issuer, if any, will be signed by the Servicer (so long as the Servicer is the Seller) on behalf of the Issuer if permitted under applicable law and otherwise by the Owner Trustee on behalf of the Issuer.

 

(k)     The Servicer shall maintain appropriate books of account and records relating to services performed under this Agreement, which books of account and records shall be reasonably accessible for inspection by the Owner Trustee and Trustee at any time during the Servicer’s normal business hours upon not less than three (3) Business Days’ prior written notice.

 

(l)     The initial Servicer shall provide written notice to the Rating Agency, the Backup Servicer and the Trustee of any change to the Servicing Standard and any material adverse change to the Credit and Collection Policy.

 

(m)     For so long as any of the Notes are outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) of the Securities Act, (i) the initial Servicer will provide or cause to be provided to any holder of such Notes and any prospective purchaser thereof designated by such holder, upon the request of such a holder or prospective purchaser, the information required to be provided to such holder or prospective purchaser by Rule 144A(d)(4) under the Securities Act; and (ii) the initial Servicer shall update such information from time to time in order to prevent such information from becoming false and misleading and will take such other actions as are necessary to ensure that the safe harbor exemption from the registration requirements of the Securities Act under Rule 144A is and will be available for resales of such Notes conducted in accordance with Rule 144A.

 

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(n)     The initial Servicer will keep in full force and effect its existence, rights and franchise as a Maryland corporation, and the Servicer shall obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement and of any of the Loans and to perform its duties under this Agreement.

 

(o)     The Servicer shall be entitled to reimbursement for any Servicing Advances or Scheduled Payment Advances from Collections. Notwithstanding anything contained herein to the contrary, in no event shall the application of Scheduled Payment Advances prevent a Loan from being or becoming a Defaulted Loan.

 

(p)     The Servicer shall not be responsible for any taxes payable by the Issuer or any Servicing Fees payable to any Successor Servicer.

 

(q)     All payments received on Loans by the Servicer will be applied by the Servicer to amounts due by each Obligor in accordance with the provisions of the related Required Loan Documents or, if to be applied at the discretion of the Servicer, then consistent with the Credit and Collection Policy and the Servicing Standard.

 

(r)     To the extent permitted by applicable law, the initial Servicer shall be responsible for any tax reporting, disclosure, record keeping or list maintenance requirements of the Issuer under Code Sections 6011(a), 6111 or 6112, including, but not limited to, the preparation of IRS Form 8886 pursuant to Treasury Regulations Section 1.6011-4(d) or any successor provision and any required list maintenance under Treasury Regulations Section 301.6112-1 or any successor provision.

 

(s)     The Servicer will maintain the Servicing Files at the principal place of business of the Servicer at the address set forth in Section 13.04 hereof in accordance with the Servicing Standard.

 

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(t)     The Trust Depositor, the Issuer and the Trustee each hereby irrevocably (except as provided below) appoint the Servicer its respective true and lawful agent and attorney-in-fact (with full power of substitution) in its name, place and stead and at the Issuer’s expense, in connection with the performance of the Servicer’s duties provided for in this Agreement and in the other Transaction Documents, including the following powers: (a) to give any necessary receipts or acquittance for amounts collected or received on or with respect to the Loans and the Related Property, (b) to make all necessary transfers of the Loans, and/or of the Related Property, as applicable, in accordance herewith and therewith, (c) to execute (under hand under seal or as a deed) and deliver all necessary or appropriate bills of sale, assignments, agreements and other instruments and endorsements in connection with any such transfer, and (d) to execute (under hand, under seal or as a deed) any votes, consents, directions, releases, amendments, waivers, satisfactions and cancellations, agreements, instruments, orders or other documents or certificates in connection with or pursuant to this Agreement or the other Transaction Documents relating thereto or to the duties of the Servicer hereunder or thereunder, the Trust Depositor, the Issuer and the Trustee hereby ratifying and confirming all that such attorney-in-fact (or any substitute) shall lawfully do under this power of attorney and in accordance with this Agreement and the other Transaction Documents as applicable thereto. Nevertheless, if so requested by the Servicer, the Trust Depositor, the Issuer and the Trustee or any thereof, as requested, shall ratify and confirm any such act by executing and delivering to the Servicer or as directed by the Servicer all proper bills of sale, assignments, releases, endorsements and other certificates, instruments and documents of whatever nature as may reasonably be designated in any such request. This power of attorney shall, however, expire, and the Servicer and any substitute agent or attorney-in-fact appointed by the Servicer pursuant hereto shall cease to have any power to act as the agent or attorney-in-fact of the Trust Depositor, the Issuer or of the Trustee upon termination of this Agreement or upon a Servicer Transfer from and after which the Successor Servicer shall be deemed to have the rights of the Servicer pursuant to this clause (t).

 

(u)     The Servicer shall execute and file such financing statements and cause to be executed and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer, the Securityholders, the Trustee and the Owner Trustee in the Loans and in the proceeds thereof. The Servicer shall deliver (or cause to be delivered) to the Owner Trustee and the Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing.

 

(v)     The Servicer shall provide the Backup Servicer with a list of attorneys used in servicing or collecting on the Loans and shall provide an updated list to the Backup Servicer on an annual basis.

 

(w)     Notwithstanding any other provision of this Agreement, if any material conflict or material inconsistency exists among the Required Loan Documents, the Credit and Collection Policy and the Servicing Standard, the provisions of the Required Loan Documents shall control.

 

(x)     As set forth in and subject to the provisions of Article VIII, in the event the Servicer fails to perform its obligations hereunder, the Backup Servicer, should it assume the role of Successor Servicer, shall be responsible for the Servicer’s duties in this Agreement as if it were the Servicer, provided that the Backup Servicer shall not be liable for the Servicer’s breach of its obligations.

 

(y)     The Backup Servicer shall receive a one-time fee of $125,000 (“the “Successor Servicer Engagement Fee”) if it assumes the obligations of the Servicer hereunder.

 

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(z)     The Backup Servicer shall have the following duties: (i) the Backup Servicer shall conduct periodic on-site visits not more than once every 12 months to meet with appropriate operations personnel to discuss any changes in processes and procedures that have occurred since the last visit, (ii) within 90 days of the Closing Date and receipt of a complete data set from the Servicer, the Backup Servicer shall have completed all data-mapping, and (iii) not more than once per year, the Backup Servicer shall update or amend the data-mapping by effecting a data-map refresh upon receipt of written notice from the Servicer specifying updated or amended fields, if any, in (a) fields in the Tape or (b) fields confirmed in the original data-mapping referred to in clause (ii) above. Each on-site visit shall be at the cost of Hercules.

 

Section 5.03.   Liquidation of Loans.

 

(a)     In the event that any payment due under any Loan and not postponed pursuant to Section 5.02 is not paid when the same becomes due and payable, or in the event the Obligor fails to perform any other covenant or obligation under the Loan which results in an event of default thereunder, the Servicer in accordance with the Required Loan Documents, the Credit and Collection Policy and the Servicing Standard shall take such commercially reasonable action as shall maximize the amount of recovery thereon and as the Servicer shall deem to be in the best interests of the Issuer; provided that if such Loan is an Agented Loan, Co-Agented Loan or a Third Party Agented Loan, the Servicer’s obligations shall be limited to exercising the Issuer’s rights thereunder; provided, further, that in lieu of taking such action, the Servicer, consistent with its Credit and Collection Policy and the Servicing Standard, may amend or modify such Loan.

 

(b)     The Servicer will not be in breach of its obligations under this Section 5.03 by reason of any action taken by the administrative agent, syndicate agent or other Person acting in a similar capacity in respect of a Third Party Agented Loan or a Participated Loan pursuant to its own authority or in respect of an Agented Loan, Co-Agented Loan, Third Party Agented Loan or Participated Loan at the direction of the requisite percentage of the lenders in violation of this Agreement if the Servicer, acting on behalf of the Issuer, did not consent to such action on behalf of the Issuer. The Servicer, consistent with its Credit and Collection Policy and the Servicing Standard, may accelerate all payments due under any Loan to the extent permitted by the Required Loan Documents and foreclose upon at a public or private sale or otherwise comparably effect the ownership of Related Property relating to Defaulted Loans for which the related Loan is still outstanding and as to which no satisfactory arrangements can be made for collection of delinquent payments in accordance with the provisions of Section 5.10 nor satisfactory amendment or modification is made in accordance with Section 5.03(a). Subject to applicable law, the Servicer shall act, or shall engage an experienced Person qualified to act, as sales and processing agent for the Related Property that is foreclosed upon. In connection with such foreclosure or other conversion and any other liquidation action or enforcement of remedies, the Servicer shall exercise collection and foreclosure procedures in accordance with the Credit and Collection Policy and the Servicing Standard. Any sale of the Related Property is to be evidenced by a certificate of a Responsible Officer of the Servicer delivered to the Trustee setting forth the Loan, the Related Property, the sale price of the Related Property and certifying that such sale price is the fair market value of such Related Property. In any case in which any such Related Property has suffered damage, the Servicer will not expend funds in connection with any repair or toward the repossession of such Related Property unless it reasonably determines that such repair and/or repossession will increase the Liquidation Proceeds by an amount greater than the amount of such expenses.

 

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(c)     No later than two (2) Business Days following its receipt thereof, the Servicer will remit to the Lockbox Account, for subsequent deposit in the Collection Account, the Liquidation Proceeds and any Insurance Proceeds received in connection with the sale or disposition of Related Property relating to a Defaulted Loan.

 

(d)     After a Loan has been liquidated, the Servicer shall promptly prepare and forward to the Trustee and upon request, any Securityholder, a report (the “Liquidation Report”), in the form attached hereto as Exhibit D, detailing the Liquidation Proceeds received from such Loan, the Liquidation Expenses incurred and reimbursed to the Servicer with respect thereto, any Scheduled Payment Advances and Servicing Advances, together with interest due thereon, reimbursed to the Servicer therefrom, any loss incurred in connection therewith, and any Nonrecoverable Advances to be reimbursed to the Servicer with respect thereto in accordance with the Priority of Payments in Section 7.06.

 

Section 5.04.   [Reserved.]

 

Section 5.05.   Maintenance of Insurance.

 

In connection with its activities as Servicer of the Loans, the Servicer agrees to present claims to the insurer under any applicable Insurance Policy (other than with respect to Third Party Agented Loans) and, with respect to any Foreclosed Property, any applicable general liability policy, and to settle, adjust and compromise such claims, in each case, consistent with the terms of the Required Loan Documents, the Credit and Collection Policy and the Servicing Standard. Any amounts collected by the Servicer under any such Insurance Policies in respect of the related Loan (other than amounts to be applied to the restoration or repair of the Related Property or amounts to be released to the Obligor or other creditors or Persons in accordance with Applicable Law, the Required Loan Documents, the Credit and Collection Policy and the Servicing Standard) shall be deposited in the Collection Account, subject to withdrawal pursuant to Section 7.03(h).

 

Section 5.06.   Collection of Certain Loan Payments.

 

(a)     The Servicer shall make reasonable efforts, consistent with the Credit and Collection Policy and the Servicing Standard, to collect all payments required under the terms and provisions of the Loans as and when the same become due. Consistent with the foregoing and the Credit and Collection Policy and the Servicing Standard, the Servicer may in its discretion waive or permit to be waived any fee or charge which the Servicer would be entitled to retain hereunder as servicing compensation and extend the due date for payments due on a Loan as provided in Section 5.02(e).

 

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(b)     Except as otherwise permitted under this Agreement, the Servicer agrees not to make, or consent to, any change, in the direction of, or instructions with respect to, any payments to be made by an Obligor or, in connection with an Agented Loan, Co-Agented Loan or a Third Party Agented Loan, the paying agent with respect thereto, in any manner that would diminish, impair, delay or otherwise adversely affect the timing or receipt of such payments without the prior written consent of the Trustee (acting at the direction of a Majority of Noteholders) and with the consent of the Majority Noteholders.

 

Section 5.07.   Access to Certain Documentation and Information Regarding the Loans.

 

The Servicer shall provide to the Issuer, the Trustee, the Backup Servicer, any Noteholder, any bank, thrift or insurance company regulatory authority and the supervisory agents and examiners of any regulated Noteholder, access to the documentation regarding the Loans required by applicable local, state and federal regulations, such access being afforded without charge but only upon not less than three Business Days prior written request by the Issuer, the Trustee, the Backup Servicer or any such regulated Noteholder and during normal business hours at the offices of the Servicer designated by it and in a manner that does not unreasonably interfere with the Servicer’s normal operations or customer or employee relations. The Trustee, the Backup Servicer, the Issuer, such Noteholder and the representative of any such regulatory authority designated by the related Noteholder to view such information shall and shall cause their representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Trustee and the Issuer may reasonably determine that such disclosure is consistent with their obligations hereunder. The Servicer may request that any such Person not a party hereto enter into a confidentiality agreement reasonably acceptable to the Servicer prior to permitting such Person to view such information.

 

Section 5.08.   Satisfaction of Collateral and Release of Loan Files.

 

(a)     Upon the payment in full of any Loan, the receipt by the Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes or the deposit into the Collection Account of the purchase price of any Loan acquired by the Trust Depositor, the Servicer or another Person pursuant to this Agreement, or any other Transaction Document, the Servicer will immediately notify the Trustee by a certification in the form of Exhibit M attached hereto (which certification shall include a statement to the effect that all amounts received or to be received in connection with such payment which are required to be deposited in the Collection Account pursuant to Section 7.03(b) have been or will be so deposited) of a Servicing Officer and shall request delivery to it of the Loan File. Upon receipt of such certification and request, the Trustee in accordance with Section 2.11(c), shall release, within two (2) Business Days (if such request was received by 2:00 p.m. Eastern time), the related Loan File to the Servicer. Expenses incurred in connection with any instrument of satisfaction or deed of reconveyance shall be payable by the Servicer and shall not be chargeable to the Collection Account or the Distribution Account; provided that the Servicer may collect and retain such expenses from the underlying Obligor.

 

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(b)     From time to time and as appropriate for the servicing or foreclosure of any Loan, the Trustee shall, upon request of the Servicer and delivery to the Trustee of a certification in the form of Exhibit M attached hereto signed by a Servicing Officer, release the related Loan File to the Servicer within two (2) Business Days (if such request was received by 2:00 p.m. Eastern time). The Servicer shall return the Loan File to the Trustee when the need therefor by the Servicer no longer exists, unless the Loan has been liquidated and the Liquidation Proceeds relating to the Loan have been deposited in the Lockbox Account, for further credit to the Collection Account, and remitted to the Trustee for deposit in the Distribution Account or the Loan File or such document has been delivered to an attorney, or to a public trustee or other public official as required by law, for purposes of initiating or pursuing legal action or other proceedings for the foreclosure or repossession of Related Property either judicially or non-judicially, and the Servicer has delivered to the Trustee a certificate of a Servicing Officer certifying as to the name and address of the Person to whom such Loan File or such document was delivered and the purpose or purposes of such delivery. Upon receipt of a certificate of a Servicing Officer stating that such Loan was liquidated, the servicing receipt relating to such Loan shall be released by the Trustee to the Servicer.

 

(c)     The Trustee shall execute and deliver to the Servicer any court pleadings, requests for trustee’s sale or other documents provided to it necessary to the servicing or foreclosure or trustee’s sale in respect of Related Property or to any legal action brought to obtain judgment against any Obligor on the related loan agreement (including any Underlying Note or other agreement securing Related Property) or to obtain a deficiency judgment, or to enforce any other remedies or rights provided by the related loan agreement (including any Underlying Note or other agreement securing Related Property) or otherwise available at law or in equity. Together with such documents or pleadings, the Servicer shall deliver to the Trustee a certificate of a Servicing Officer requesting that such pleadings or documents be executed by the Trustee and certifying as to the reason such documents or pleadings are required and that the execution and delivery thereof by the Trustee will not invalidate or otherwise adversely affect the Lien of the agreement securing Related Property, except for the termination of such a Lien upon completion of the foreclosure or trustee’s sale. The Trustee shall, upon receipt of a written request from a Servicing Officer, execute any document provided to the Trustee by the Servicer or take any other action requested in such request, that is, in the opinion of the Servicer as evidenced by such request, required by any state or other jurisdiction or appropriate to discharge the Lien securing Related Property upon the satisfaction thereof and the Trustee will sign and post, but will not guarantee receipt of, any such documents to the Servicer, or such other party as the Servicer may direct, within five (5) Business Days of the Trustee’s receipt of such certificate or documents. Such certificate or documents shall state that the related Loan has been paid in full by or on behalf of the Obligor (or subject to a deficiency claim against such Obligor) and that such payment has been deposited in the Collection Account.

 

(d)     Notwithstanding anything contained in this Section 5.08 to the contrary, in no event may the Servicer possess in excess of ten (10) Loan Files (excluding Loan Files for Loans which have been paid in full, sold or repurchased) at any given time.

 

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Section 5.09.   Scheduled Payment Advances; Servicing Advances and Nonrecoverable Advances.

 

(a)     With respect to each Collection Period, the Servicer will determine: (i) on or before the related Record Date, the amount of Available Funds described in clauses (a) and (b) of the definition thereof for the following Payment Date, and (ii) the amount required to be paid on the related Payment Date pursuant to clauses 1 through 4 of Section 7.06(a) (the amounts described in this clause (ii), the “Scheduled Amount”). If the Servicer determines that any Scheduled Payments (or portion thereof) that were due and payable pursuant to one or more Loans in the Collateral during the related Collection Period were not received prior to the end of such Collection Period and determines that, as a result of this, the Scheduled Amount for the related Payment Date exceeds the amount of Available Funds described in clauses (a) and (b) of the definition thereof for such Payment Date, then, subject to Section 5.09(b), the Servicer has the right to elect, at its option, but is not obligated, to make a Scheduled Payment Advance in an amount up to lesser of (1) the amount of such excess and (2) the amount of such delinquent Scheduled Payments (or portion thereof). The Servicer will deposit any Scheduled Payment Advances into the Collection Account on or prior to 11:00 a.m. (New York City time) on the related Reference Date, in immediately available funds. The Servicer will be entitled to be reimbursed for Scheduled Payment Advances, together with accrued and unpaid interest thereon at the rate published in The Wall Street Journal from time to time as the prime rate in the United States pursuant to Section 5.09(c), Section 7.03 or the Priority of Payments, as applicable. In addition, the Servicer may, at its option, make Servicing Advances in the performance of its servicing duties, unless it believes in good faith that the advance plus interest expected to accrue thereon will be a Nonrecoverable Advance. The Servicer will be entitled to reimbursement for Servicing Advances, with interest thereon to accrue at the rate published in The Wall Street Journal from time to time as the prime rate in the United States, from the Collections received from the Loan to which the Servicing Advance relates as well as pursuant to Section 5.09(c), Section 7.03 or the Priority of Payments, as applicable.

 

(b)     The Servicer will not make a Scheduled Payment Advance or a Servicing Advance if the Servicer has determined in its sole discretion, exercised in good faith and consistent with the Servicing Standard, that the amount of such Scheduled Payment Advance or Servicing Advance proposed to be advanced plus interest expected to accrue thereon will be a Nonrecoverable Advance. Absent bad faith, the Servicer’s determination as to whether any Scheduled Payment Advance or Servicing Advance is expected to be a Nonrecoverable Advance or whether, once advanced, it is a Nonrecoverable Advance shall be conclusive and binding on the Issuer and on the Noteholders. Any such determination shall be made by the Servicer and shall be evidenced by an Officer's Certificate delivered promptly to the Trustee, setting forth the basis for such determination. For the avoidance of doubt, the Servicer has the right to elect, at its sole option, but is not obligated, to make a Scheduled Payment Advance.

 

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(c)     The Servicer will be entitled to recover any Scheduled Payment Advance made by it, together with accrued interest due thereon, from Collections; provided that if at any time any Scheduled Payment Advance, together with accrued interest thereon, made by the Servicer is subsequently determined to be a Nonrecoverable Advance, the Servicer will be entitled to recover the amount of such Nonrecoverable Advance on a Payment Date to the extent then permitted in accordance with the Priority of Payments. The Servicer will be entitled to recover the amount of any Servicing Advance, together with accrued interest thereon in accordance with the Priority of Payments.

 

(d)     The Servicer shall be entitled to an annual rate of interest payable at the rate specified in Section 5.09(a) with respect to each Scheduled Payment Advance and each Servicing Advance from and including the date such advance is made by the Servicer to but not including the date of reimbursement of such advance to the Servicer.

 

Section 5.10.   Title, Management and Disposition of Foreclosed Property.

 

(a)     Except for Agented Loans, Co-Agented Loans and Third Party Agented Loans (in which case, the provisions of the Underlying Loan Agreement relating to taking title to collateral shall apply) in the event that title to Related Property is acquired by the Servicer hereunder in foreclosure or by deed in lieu of foreclosure or by other legal process, the deed, certificate of sale, or Repossessed Property may be taken in the name of the Issuer or in the name of a subsidiary of the Issuer, the equity securities of which will be pledged as Collateral by the Issuer to the Trustee pursuant to the Indenture. Any such Issuer subsidiary shall be serviced by the Servicer, which may perform such services through a nominee or agent as set forth in Section 5.02(b).

 

(b)     [Reserved].

 

(c)     The Servicer, subject to the provisions of this Article V, shall manage, conserve, protect and operate each such Foreclosed Property or other Repossessed Property for the Issuer or such Issuer subsidiary, as applicable, solely for the purpose of its prudent and prompt disposition and sale. The Servicer shall, either itself or through an agent selected by the Servicer, manage, conserve, protect and operate the Foreclosed Property or other Repossessed Property in a manner consistent with the Credit and Collection Policy and the Servicing Standard. The Servicer shall attempt to sell the same (and may temporarily rent the same) on such terms and conditions as the Servicer deems to be in the best interest of the Issuer.

 

(d)     Subject to Section 5.10(e), the Servicer shall cause to be deposited in the Lockbox Account, no later than two (2) Business Days after the receipt thereof, all revenues received by the Issuer with respect to the conservation and disposition of the related Foreclosed Property or other Repossessed Property net of Liquidation Expenses or received by the Issuer as distributions from any Issuer subsidiary. Any Issuer subsidiary formed pursuant to Section 5.10(b) may utilize and set aside revenues received in respect of such real estate Related Property to pay for the normal operations of the business of such Issuer subsidiary and of such real estate Related Property, and for such other fees, costs and expenses relating thereto as are deemed appropriate to maximize value or reduce or prevent loss with respect thereto by the Servicer, consistent with the Credit and Collection Policy and the Servicing Standard, and establish and maintain such cash reserves as the Servicer (or its agent) deem reasonably necessary with respect thereto; provided that no other funds of the Issuer shall be expended in connection with such Issuer subsidiary.

 

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(e)     Pursuant to the Priority of Payments, the Servicer shall receive reimbursement for any related unreimbursed Scheduled Payment Advances and Servicing Advances, together with accrued and unpaid interest due thereon relating to the related Loan or such Foreclosed Property or Repossessed Property, and the Servicer shall deposit in the Lockbox Account the net cash proceeds of the sale of any Foreclosed Property or other Repossessed Property to be distributed in accordance with Section 7.06 hereof.

 

(f)     Notwithstanding any provision to the contrary contained in this Agreement, the Servicer shall not cause the Issuer or any Issuer subsidiary to foreclose on and obtain title to any Related Property pursuant to Section 5.10(b) or otherwise take any other action with respect to any such Related Property if, as a result of any such action, such Issuer subsidiary would be considered to hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or “operator” of, such Related Property within the meaning of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, or any comparable state or local environmental law, unless the Servicer has previously determined in accordance with the Servicing Standard and the Credit and Collection Policy that:

 

(i)     such Related Property is in compliance in all material respects with applicable environmental laws or, if not, after consultation with an environmental consultant, that it would be in the best economic interest of the Issuer and such Issuer subsidiary to take such actions as are necessary to bring such Related Property in compliance therewith, and

 

(ii)     there are no circumstances present at such Related Property relating to the use, management or disposal of any hazardous materials for which investigation, testing, monitoring, containment, clean-up or remediation would reasonably be expected to be required by the owner, occupier or operator of the Related Property under applicable federal, state or local law or regulation, or that, if any such hazardous materials are present for which such action would reasonably be expected to be required, after consultation with an environmental consultant, it would be in the best economic interest of the Issuer and the Issuer subsidiary to take such actions with respect to the affected Related Property.

 

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Section 5.11.   Servicing Compensation.

 

(a)     As compensation for its servicing activities hereunder and reimbursement for its expenses, the Servicer shall be entitled to receive a servicing fee (the “Servicing Fee”) calculated and payable monthly in arrears on each Payment Date prior to the termination of the Issuer. The Servicing Fee shall be equal to the sum of the product of: (i) one-twelfth of 2.00% (or, with respect to the first Collection Period, a fraction equal to the number of days from and including the Cutoff Date through and including February 20, 2019 over 360) and (ii) the Aggregate Outstanding Loan Balance as of the beginning of the related Collection Period. If Backup Servicer becomes the Successor Servicer, servicing shall be subject to a monthly minimum of $10,000. In addition to the Servicing Fee, the Backup Servicer, upon becoming the Servicer shall be entitled to be reimbursed for all Servicing Transfer Costs. If any entity other than Hercules or the Backup Servicer becomes the Servicer, the Servicing Fee may be adjusted as agreed upon by the Majority Noteholders and such Successor Servicer, provided that if no Event of Default, Rapid Amortization Event, Servicer Default, or Reinvestment Period Early Termination Event is then occurring and continuing, the Issuer shall have received confirmation that the ratings provided by KBRA will not be lowered or withdrawn as a result of such adjustment to the Servicing Fee. The Servicing Fee is payable out of Collections pursuant to the Priority of Payments. For the avoidance of doubt, the Backup Servicer shall have no obligation to assume or accept any obligations as Successor Servicer unless and until it receives payment of its one-time servicer engagement fee of $125,000.

 

(b)     In addition to the Servicing Fee, the Servicer shall be entitled to retain for itself as additional servicing compensation: (i) reimbursement for Scheduled Payment Advances on the Loans, together with accrued interest thereon, (ii) reimbursement for Servicing Advances on the Loans, together with accrued interest thereon, and (iii) any mistaken deposits or other related amounts due on Loans that the Servicer is entitled to retain, including without limitation any amounts payable as additional servicing compensation pursuant to Section 5.02(e)(iv).

 

Section 5.12.    Assignment; Resignation.

 

The Servicer shall not assign its rights and duties under this Agreement (other than in connection with a subservicing arrangement or other arrangement permitted under this Agreement) or resign from the obligations and duties imposed on it pursuant to this Agreement, in each case except (a) upon a determination by the Servicer that its performance of its duties as Servicer is no longer permissible under Applicable Law or administrative determination and such incapacity cannot be cured by commercially reasonable efforts of the Servicer, or (b) an assignment in connection with a merger, conversion, consolidation or sale of substantially all of the Servicer’s business or substantially all of the Servicer’s lending business permitted pursuant to Section 5.13 (in which case the Person resulting from the merger, conversion or consolidation shall be the successor of the Servicer). Any such determination pursuant to clause (a) permitting the resignation of the Servicer shall be evidenced by a written Opinion of Counsel (who may be counsel for the Servicer) to such effect delivered to the Trustee, which Opinion of Counsel shall be in form and substance reasonably acceptable to the Trustee. No such resignation shall become effective until a successor has been appointed pursuant to Section 8.02(b) and has assumed the Servicer’s responsibilities and obligations in accordance with Section 8.03.

 

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Section 5.13.    Merger or Consolidation of Servicer.

 

Any Person into which the Servicer may be merged or consolidated, or any Person resulting from such merger, conversion or consolidation to which the Servicer is a party, or any Person succeeding to substantially all of the business or substantially all of the investment management business of the Servicer, which Person assumes the obligations of the Servicer, shall be the successor to the Servicer hereunder, notwithstanding any provision in Section 8.02 or Section 8.03 and without execution or filing of any paper or any further act on the part of any of the parties hereto, notwithstanding anything herein to the contrary; provided that no such entity resulting from the merger, conversion or consolidation of the Servicer or the sale of all or substantially all of the Servicer’s assets or business or substantially all of the Servicer’s lending business shall be the successor Servicer hereunder unless either (i) such Person has assets of at least $50,000,000 and such Person’s regular business includes the servicing of assets similar to the Loan Assets or (ii) the Majority Noteholders shall have consented thereto in writing. Such Successor Servicer shall be a permitted assignee of the Servicer. The provisions of Section 8.03(c) and (e) shall apply to any such servicing transfer.

 

Section 5.14.    Limitation on Liability of the Servicer and Others.

 

The Servicer and any stockholder, partner, member, manager, director, officer, employee or agent of the Servicer may rely on any document of any kind which it in good faith reasonably believes to be genuine and to have been adopted or signed by the proper authorities or persons respecting any matters arising hereunder. Except as otherwise provided in Section 5.02(b), the Servicer shall not be liable for any errors, inaccuracies or omissions of any Person not affiliated with the Servicer contained in any information, report, certificate, data or other document delivered to the Servicer or on which the Servicer reasonably relies in order to perform its obligations hereunder and under the other Transaction Documents except to the extent that a Responsible Officer of the Servicer has actual knowledge of any such material error, inaccuracy or omission. The Servicer shall not be in default hereunder or incur any liability, except as provided in the proviso in the last sentence of this Section 5.14, for any failure, error or delay in carrying out its duties hereunder or under any other Transaction Document if such failure, error or delay results from the Servicer acting in accordance with information prepared or supplied by a Person other than the Servicer or any of its Affiliates or the failure or delay of any such Person to prepare or provide such information. The Servicer shall not be in default and shall incur no liability for any act or failure to act by any servicer primarily responsible for servicing Third Party Agented Loans. Subject to the terms of Section 12.01 herein, the Servicer shall have no obligation to appear with respect to, prosecute or defend any legal action which is not incidental to the Servicer’s duty to service the Loans in accordance with this Agreement, and that, in its opinion, may cause the Servicer to incur any expense or liability. The Servicer shall not be responsible for the payment of any taxes imposed on or with respect to the Issuer or for the fees of any Successor Servicer. Except as provided herein, neither the Servicer nor any of its directors, officers, employees or agents shall be under any liability to any other party to this Agreement, any Noteholder, any Certificateholder or any other Person for any action taken or for refraining from taking any action pursuant to this Agreement, whether arising from express or implied duties under this Agreement or any other Transaction Document, or for errors in judgment; provided that, notwithstanding anything to the contrary contained herein, neither the Servicer nor any of its directors, officers, employees or agents shall be protected against any liability that would otherwise be imposed by reason of willful misconduct, bad faith or gross negligence in the performance of the Servicer’s duties or by reason of its reckless disregard of its obligations and duties hereunder; provided, however, that the Servicer will not indemnify any party for any costs, expenses, losses, claims, damages or liabilities arising from its breach of any covenant for which the purchase of the affected Loans is specified as the sole remedy hereunder. The Servicer is not required to indemnify any Person for any costs, expenses, losses, claims, damages or liabilities arising from its breach of any covenant for which the purchase of the affected Loans is specified as the sole remedy hereunder.

 

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Section 5.15.    Determination of Reserve Account Required Balance.

 

The Servicer shall deposit funds into and withdraw funds from the Reserve Account in accordance with Sections 7.02 and 7.06. The Servicer shall maintain a complete and accurate record of the amount of funds on deposit in the Reserve Account. Prior to each Payment Date, the Servicer shall determine the Reserve Account Required Balance applicable to such Payment Date.

 

Section 5.16.    Rights of and Limitation of Liability of Backup Servicer.

 

The Backup Servicer and any stockholder, partner, member, manager, director, officer, employee or agent of the Backup Servicer may rely on any document of any kind which it in good faith reasonably believes to be genuine and to have been adopted or signed by the proper authorities or persons respecting any matters arising hereunder. In the performance of its duties hereunder, the Backup Servicer is entitled to rely conclusively, and shall be fully protected in so relying, on the contents of each Tape, including, but not limited to, the completeness and accuracy thereof, provided by the Servicer. The Backup Servicer shall have no liability for any errors in the content of such Tape, and, except as specifically provided herein, shall not be required to verify, recompute, reconcile or recalculate any such information or data. Without limiting the generality of any terms of the foregoing, the Backup Servicer shall have no liability for any failure, inability or unwillingness on the part of the Servicer to provide accurate and complete information on a timely basis to the Backup Servicer, or otherwise on the part of any such party to comply with the terms of this Agreement, or other Transaction Document, and shall have no liability for any inaccuracy or error in the performance or observance on the Backup Servicer’s part of any of its duties hereunder that is caused by or results from any such inaccurate, incomplete or untimely information received by it, or other failure on the part of any such other party to comply with the terms hereof. The Backup Servicer undertakes to perform only such duties and obligations as are specifically set forth in this Agreement, it being expressly understood by all parties hereto that there are no implied duties or obligations of the Backup Servicer hereunder. Without limiting the generality of the foregoing, the Backup Servicer, except as expressly set forth herein, shall have no obligation to supervise, verify, monitor or administer the performance of the Servicer, the Trust Depositor or Seller and shall have no liability for any action taken or omitted by the Servicer (including any successor to the Servicer other than U.S. Bank) or the Trust Depositor or Seller. The Backup Servicer may act through its agents, attorneys and custodians in performing any of its duties and obligations under this Agreement. Neither the Backup Servicer nor any of its officers, directors, employees or agents shall be liable, directly or indirectly, for any damages or expenses arising out of the services performed under this Agreement other than damages or expenses that result from the gross negligence or willful misconduct of it or them or the failure to perform materially in accordance with this Agreement. If any party is prevented from fulfilling its obligations hereunder as a result of government actions, regulations, fires, strikes, accidents, acts of God or other causes beyond the control of either party, all parties’ obligations shall be suspended for a reasonable time during which such conditions exist. In no event will the Backup Servicer (in its capacity as such or as Successor Servicer) be liable for indirect, special, consequential or incidental damages. The Backup Servicer may resign, either as Backup Servicer or as Successor Servicer, upon ninety (90) days prior written notice to the Trustee, the Issuer, the Servicer (in the case of a resignation as the Backup Servicer) and the Trust Depositor; provided, however, such resignation shall not become effective until there is a replacement Successor Servicer or Backup Servicer in place that is acceptable to, unless an Event of Default shall have occurred and be continuing, the Servicer and the Issuer, in each case, in their sole discretion, and a Majority Noteholders, which acceptance, in each case, shall not be unreasonably withheld. Upon the resignation of the Backup Servicer, the Servicer shall appoint a successor Backup Servicer (subject to the previous sentence) and if it does not do so within thirty (30) days of the Backup Servicer's resignation, the Backup Servicer may petition a court of competent jurisdiction for the appointment of a successor.

 

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ARTICLE 6.

COVENANTS OF THE TRUST DEPOSITOR

 

Section 6.01.    Legal Existence.

 

During the term of this Agreement, the Trust Depositor will keep in full force and effect its existence, rights and franchises as a limited liability company under the laws of the jurisdiction of its organization and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Transaction Documents and each other instrument or agreement necessary or appropriate for the proper administration of this Agreement and the transactions contemplated hereby. In addition, all transactions and dealings between the Trust Depositor and its Affiliates will be conducted on an arm’s-length basis.

 

Section 6.02.    [Reserved].

 

Section 6.03.    Security Interests.

 

The Trust Depositor will not sell, pledge, assign or transfer to any Person other than the Issuer, or grant, create, incur, assume or suffer to exist any Lien on any Loan in the Collateral or its interest in any Related Property, other than the Lien granted to the Issuer, whether now existing or hereafter transferred to the Issuer, or as otherwise expressly contemplated by this Agreement. The Trust Depositor will promptly notify the Owner Trustee and the Trustee upon obtaining knowledge of the existence of any Lien on any Loan in the Collateral or its interest in any Related Property; and the Trust Depositor shall defend the right, title and interest of the Issuer in, to and under the Loans in the Collateral and the Issuer’s interest in any Related Property, against all claims of third parties; provided that nothing in this Section 6.03 shall prevent or be deemed to prohibit the Trust Depositor from suffering to exist Permitted Liens upon any of the Loans in the Collateral or its interest in any Related Property.

 

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Section 6.04.    Delivery of Collections.

 

The Trust Depositor agrees to pay to the Servicer promptly (but in no event later than two Business Days after receipt) all Collections received by the Trust Depositor in respect of the Loans and Related Property, for application in accordance with this Agreement.

 

Section 6.05.    Regulatory Filings.

 

The Trust Depositor shall make any filings, reports, notices, applications and registrations with, and seek any consents or authorizations from, the Commission and any state securities authority on behalf of the Issuer as may be necessary or that the Trust Depositor deems advisable to comply with any federal or state securities or reporting requirements laws.

 

Section 6.06.    Compliance with Law.

 

The Trust Depositor hereby agrees to comply in all material respects with all Applicable Law applicable to the Trust Depositor except where the failure to do so would not reasonably be expected to have a material adverse effect on the Issuer.

 

Section 6.07.    Activities; Transfers of Notes or Certificates by Trust Depositor.

 

Except as contemplated by the Trust Depositor LLC Agreement, this Agreement or the other Transaction Documents, the Trust Depositor shall not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, which is not directly related to the transactions contemplated and authorized by this Agreement or the other Transaction Documents. Notwithstanding anything to the contrary contained herein, the Trust Depositor may assign, transfer, convey or finance all or any portion of any Notes or Certificates owned by it.

 

Section 6.08.    Indebtedness.

 

The Trust Depositor shall not create, incur, assume or suffer to exist any Indebtedness or other liability whatsoever, except (a) obligations incurred under this Agreement or the other Transaction Documents or to the Seller and (b) liabilities incident to the maintenance of its limited liability company existence in good standing.

 

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Section 6.09.    Guarantees.

 

The Trust Depositor shall not become or remain liable, directly or contingently, in connection with any Indebtedness or other liability of any other Person, whether by guarantee, endorsement (other than endorsements of negotiable instruments for deposit or collection in the ordinary course of business), agreement to purchase or repurchase, agreement to supply or advance funds, or otherwise.

 

Section 6.10.    Investments.

 

Except as contemplated by the Trust Depositor LLC Agreement, the Trust Depositor shall not make or suffer to exist any loans or advances to, or extend any credit to, or make any investments (by way of transfer of property, contributions to capital, purchase of stock or securities or evidences of indebtedness, acquisition of the business or assets, or otherwise) in, any Person except for transfers of Loan Assets to the Issuer as contemplated by the Transaction Documents. Without limiting the generality of the foregoing or restricting the ability of the Trust Depositor to make capital contributions to the Issuer, the Trust Depositor shall not (i) provide credit to any other Securityholder for the purpose of enabling such Securityholder to purchase any Securities or (ii) lend any money to the Issuer.

 

Section 6.11.    Merger; Sales.

 

The Trust Depositor shall not enter into any transaction of merger or consolidation, or liquidate or dissolve itself (or suffer any liquidation or dissolution) or acquire or be acquired by any Person, or (other in connection with the transfer of assets to a special purpose subsidiary in connection with a financing transaction) convey, sell, lease or otherwise dispose of all or substantially all of its property or business, except that the Trust Depositor shall sell Loan Assets to the Issuer as contemplated by this Agreement.

 

Section 6.12.    Distributions.

 

The Trust Depositor shall not declare or pay, directly or indirectly, any dividend or make any other distribution (whether in cash or other property) with respect to the profits, assets or capital of the Trust Depositor or any Person’s interest therein, or purchase, redeem or otherwise acquire for value any of its members’ interests now or hereafter outstanding, except that, so long as no Event of Default has occurred and is continuing and no Event of Default would occur as a result thereof or after giving effect thereto and the Trust Depositor would continue to be Solvent as a result thereof and after giving effect thereto, the Trust Depositor may declare and pay distributions to its members.

 

Section 6.13.    Other Agreements.

 

Except as provided in the Trust Depositor LLC Agreement, this Agreement or the other Transaction Documents, the Trust Depositor shall not become a party to, or permit any of its properties to be bound by, any indenture, mortgage, instrument, contract, agreement, lease or other undertaking, except this Agreement and the other Transaction Documents to which it is a party; nor shall it amend or modify the provisions of its organizational documents which relate to its bankruptcy remote nature or separateness covenants as required in connection with the true sale and substantive nonconsolidation opinions delivered on the Closing Date, or issue any power of attorney except to the Owner Trustee, the Trustee or the Servicer in accordance with the Transaction Documents.

 

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Section 6.14.    Separate Legal Existence.

 

The Trust Depositor shall (a) maintain compliance with the covenants set forth in Section 9(j) of the Trust Depositor LLC Agreement, and (b) to the extent in addition to the covenants referred to in clause (a) of this Section 6.14, take or refrain from taking, as applicable, each of the activities specified in the “substantive consolidation” opinion of Dechert LLP, on the Closing Date, upon which the conclusions expressed therein are based.

 

Section 6.15.    Location; Records.

 

The Trust Depositor shall (a) not move its location outside the State of California or its jurisdiction of formation outside of the State of Delaware without 30 days’ prior written notice to the Owner Trustee and the Trustee and (b) will promptly take all actions (if any) required (including, but not limited to, all filings and other acts necessary or advisable under the UCC of each relevant jurisdiction) in order to continue the first priority perfected security interest of the Trustee in all Collateral.

 

Section 6.16.    Liability of Trust Depositor.

 

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

 

Section 6.17.    Bankruptcy Limitations.

 

The Trust Depositor shall not, without the prior unanimous written consent of its member and all of the Independent managers of the Trust Depositor (a) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent, (b) consent to the institution of bankruptcy or insolvency proceedings against it, (c) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, (d) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the limited liability company or a substantial part of its property, (e) make a general assignment for the benefit of creditors, (f) admit in writing its inability to pay its debts generally as they become due, or (g) take any limited liability company action in furtherance of the actions set forth in clauses (a) through (f) above; provided that no Independent manager may be required by any member of the Trust Depositor to consent to the institution of bankruptcy or insolvency proceedings against the Trust Depositor so long as it is Solvent.

 

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Section 6.18.    Limitation on Liability of Trust Depositor and Others.

 

The Trust Depositor and any director, officer, employee or agent of the Trust Depositor may rely in good faith on any document of any kind, prima facie properly executed and submitted by the appropriate Person respecting any matters arising hereunder. The Trust Depositor and any director, officer, employee or agent of the Trust Depositor shall be reimbursed by the Trustee for any liability or expense incurred by reason of the Trustee’s willful misfeasance, bad faith or gross negligence (except errors in judgment) in the performance of its duties hereunder, or by reason of the Trustee’s material breach of the obligations and duties under this Agreement or the Transaction Documents. The Trust Depositor shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability.

 

Section 6.19.    Payments from Obligors.

 

The Trust Depositor agrees not to make, or consent to, any change in the direction of, or instructions with respect to, any payments to be made by an Obligor in any manner that would diminish, impair, delay or otherwise adversely affect the timing or receipt of such payments into the Lockbox Account or otherwise without (a) the prior written consent of the Trustee and the consent of the Majority Noteholders and (b) delivery of prior written notice of such change to the Rating Agency.

 

ARTICLE 7.

ESTABLISHMENT OF ACCOUNTS;

DISTRIBUTIONS;

 

Section 7.01.   Distribution Account; Lockbox Account and Other Accounts.

 

(a)     Distribution Account and Lockbox Account. On or before the Closing Date, the Trustee shall establish and maintain the Distribution Account as a non-interest bearing trust account in the name of the Issuer, for the benefit of the Trustee and the Noteholders. On or before the Closing Date, the Issuer shall establish the Lockbox Account as a non-interest bearing, segregated account with U.S. Bank National Association (the “Lockbox Bank”) and in the name of the Issuer, for the benefit of the Trustee and the Noteholders. The Servicer is, and so long as such accounts are maintained with the Trustee and the Lockbox Bank, the Trustee and the Lockbox Bank are, hereby required to ensure that each of the Distribution Account and the Lockbox Account is established and maintained as an Eligible Deposit Account with a Qualified Institution. The Servicer will monitor the Lockbox Account on a daily basis and review the previous day’s Lockbox Account activity. If any institution with which any of the accounts established pursuant to this Section 7.01(a) and pursuant to Section 7.03 ceases to be a Qualified Institution, the Servicer, or if the Servicer fails to do so, the Trustee or the Lockbox Bank (as the case may be) shall within ten (10) Business Days of actual knowledge of such failure by a Responsible Officer establish a replacement account at a Qualified Institution after notice of such event. In no event shall the Trustee or the Lockbox Bank, as appropriate, be responsible for monitoring whether such institution shall remain a Qualified Institution. Each Qualified Institution maintaining an Eligible Deposit Account shall agree in writing to comply with all instructions originated by the Trustee or Lockbox Bank, as applicable.

 

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(b)     [Reserved].

 

(c)     [Reserved].

 

(d)     Alternative Collection Practices. With respect to certain Loans, the Servicer may make Collections thereon by debiting the appropriate amounts from designated accounts of the related Obligor. Within two (2) Business Days of receipt by the Servicer of the amounts so debited, the Servicer will cause the amounts so received belonging to the Issuer to be deposited into the Lockbox Account, and thereupon credited to the Collection Account.

 

(e)     Other Accounts. Amounts representing payments sent by Obligors and by paying agents under Agented Loans, Co-Agented Loans and Third Party Agented Loans with respect to Loans pledged to the Trustee as well as with respect to Loans not pledged to the Trustee may be deposited into accounts other than the Lockbox Account. Within two (2) Business Days of receipt by the Seller or the Issuer of any amounts representing payments sent by Obligors and/or by paying agents under Agented Loans, Co-Agented Loans and Third Party Agented Loans with respect to Loans pledged to the Trustee, the Servicer, as agent for the Issuer, and the Seller will cause the amounts so received belonging to the Issuer to be deposited into the Lockbox Account, and thereupon credited to the Collection Account.

 

Section 7.02.   Reserve Account.

 

(a)     The Trustee shall establish and maintain the Reserve Account in the name of the Issuer for the benefit of the Trustee and the Noteholders. The Reserve Account shall be held in one Eligible Deposit Account with a Qualified Institution in the form of an interest-bearing trust account wherein the moneys therein are invested in Permitted Investments. The Servicer will monitor the Reserve Account in accordance with its customary policies and procedures.

 

(b)     Deposits to the Reserve Account shall be made in accordance with Section 7.06(b).

 

(c)     Subject to Sections 7.02(d) and (e) below, if on any Payment Date, Interest Collections, Principal Collections and any other amounts on deposit in the Collection Account (without giving effect to any deposit from the Reserve Account) would be insufficient to pay any portion of the Required Payments on such Payment Date, the Servicer shall direct the Trustee to withdraw from the Reserve Account an amount equal to the lesser of such insufficiency and the amount on deposit in the Reserve Account and deposit such amount in the Distribution Account on the Business Day immediately preceding such Payment Date.

 

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(d)     Upon the occurrence of an Event of Default, the Servicer shall direct the Trustee to withdraw all amounts on deposit in the Reserve Account and deposit such amounts to the Distribution Account for distribution in accordance with Section 7.06(c).

 

(e)     On the earlier to occur of the Legal Final Payment Date and the Payment Date on which the Outstanding Principal Balance of the Notes is reduced to zero, the Servicer shall direct the Trustee to withdraw all amounts on deposit in the Reserve Account and deposit such amounts to the Distribution Account.

 

(f)     Unless an Event of Default shall have occurred and is continuing, on any Payment Date, if amounts on deposit in the Reserve Account are greater than the Reserve Account Required Balance (after giving effect to all other distributions and disbursements on such Payment Date), the Servicer shall direct the Trustee to withdraw funds in excess of the Reserve Account Required Balance from the Reserve Account and disburse such amounts in accordance with Section 7.06(a).

 

(g)     Upon the occurrence of a Rapid Amortization Event, the Servicer shall provide written notice thereof to the Trustee and shall direct the Trustee to (and the Trustee shall) withdraw all amounts on deposit in the Reserve Account and deposit such amounts to the Distribution Account for distribution in accordance with Section 7.06(b).

 

Section 7.03.   Collection Account.

 

(a)     The Trustee shall establish and maintain the Collection Account in the name of the Issuer for the benefit of the Trustee and the Noteholders. The Collection Account shall be held in one or more Eligible Deposit Accounts with a Qualified Institution in the form of interest-bearing trust accounts wherein the moneys therein are invested in Permitted Investments. The Servicer will monitor the Collection Account in accordance with its customary policies and procedures.

 

(b)     The Servicer shall deposit or cause to be deposited into the Collection Account within two (2) Business Days of the deposit thereof into the Lockbox Account all Collections (including, for the avoidance of doubt, amounts received from co-lenders, collateral agents or paying agents under Agented Loans, Co-Agented Loans and Third Party Agented Loans and amounts debited from Obligor accounts as described in Section 7.01(d)) so deposited into the Lockbox Account. The Servicer will retain in the Collection Account, subject to withdrawal as permitted by this Section 7.03, the following amounts received by the Servicer, without duplication:

 

(i)       all Collections accruing and received on or after the Cutoff Date, the Additional Loan Cutoff Date or Substitute Loan Cutoff Date, as applicable;

 

(ii)     any other proceeds from any other Related Property securing the Loans (other than amounts released to the Obligor, other creditors or any other Person in accordance with Applicable Law, the Required Loan Documents, the Credit and Collection Policy and the Servicing Standard) and any disbursements, payments or proceeds from any other Collateral;

 

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(iii)    any amounts paid in connection with the purchase or repurchase of any Loan;

 

(iv)    any amount required to be deposited in the Collection Account pursuant to Section 5.10 or this Section 7.03; and

 

(v)     the amount of any gains and interest earned in connection with investments in Permitted Investments.

 

(c)     The Servicer shall have no obligation to deposit into the Collection Account any Excluded Amounts.

 

(d)     Not later than the close of business on each Reference Date immediately preceding a Payment Date, the Servicer will remit to the Lockbox Account any Scheduled Payment Advance that the Servicer determines to make at its option. The application of Scheduled Payment Advances will not prevent a Loan from being or becoming a Defaulted Loan.

 

(e)     Notwithstanding Section 7.03(b), if (i) the Servicer makes a deposit into the Lockbox Account in respect of a Collection of a Loan in the Collateral and such Collection was received by the Servicer in the form of a check that is not honored for any reason or (ii) the Servicer makes a mistake with respect to the amount of any Collection and deposits an amount that is less than or more than the actual amount of such Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the Lockbox Account to reflect such dishonored check or mistake. Any Scheduled Payment in respect of which a dishonored check is received shall be deemed not to have been paid.

 

(f)     The foregoing requirements for deposit in the Collection Account and the Lockbox Accounts shall be exclusive, it being understood and agreed that, without limiting the generality of the foregoing, payments with respect to Liquidation Expenses and Excluded Amounts may not be deposited by the Servicer in the Collection Account.

 

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(g)     Prior to the occurrence of a Servicer Default or an Event of Default and acceleration of the Notes, to the extent there are uninvested available amounts deposited in the Collection Account on or before 3:00 p.m. (New York, New York time), all such amounts shall be invested by the Trustee in Permitted Investments selected by the Servicer in written instructions (which may be in the form of standing instructions) delivered to the Trustee and, if other than the Trustee in its corporate capacity, the Qualified Institution holding such Transaction Account, that mature no later than the Business Day immediately preceding the next Payment Date; to the extent that there are uninvested available funds deposited after 3:00 p.m. (New York, New York time), such funds shall be swept into the overnight funds investment which shall be a Permitted Investment selected by the Servicer in written instructions (which may be in the form of standing instructions) delivered to the Trustee and, if applicable, the Qualified Institution holding such Transaction Account. From and after the occurrence of a Servicer Default or an Event of Default and acceleration of the Notes, to the extent there are uninvested amounts in the Collection Account (net of losses and investment expenses), all amounts may be invested in Permitted Investments of the type described in clause (iv) of the definition of Permitted Investments and if any such Transaction Account is held by a Qualified Institution other than the Trustee, then upon written instructions (which may be in the form of standing instructions) from the Trustee to such Qualified Institution, that mature no later than the Business Day immediately preceding the next Payment Date. Once such funds are invested, the Trustee shall not change, or instruct the Qualified Institution to change, the investment of such funds other than in connection with the withdrawal or liquidation of such investments and the transfer of such funds as provided herein on or prior to the next succeeding Payment Date. Funds in the Distribution Account must be insured to the extent and the amount permitted by law by the FDIC. Subject to the restrictions herein, the Servicer or Trustee may purchase a Permitted Investment from itself or an Affiliate with respect to investment of funds in the Transaction Accounts. Any investment earnings (net of losses and investment expenses) on funds held in the Collection Account shall be treated as Interest Collections and shall be deposited therein pursuant to this Section 7.03 and distributed on the next Payment Date pursuant to Section 7.06. All investment earnings (net of losses and investment expenses) on investments of funds in the Transaction Accounts shall be deposited in the Collection Account pursuant to Section 7.03 and distributed on the next Payment Date pursuant to Section 7.06. The Trust Depositor and the Issuer agree and acknowledge that the Trustee is to have “control” (within the meaning of the UCC) of collateral composed of “Investment Property” (within the meaning of the UCC) for all purposes of this Agreement.

 

(h)     The Servicer may (and, for the purposes of clause (i) below, shall), at any time upon one (1) Business Day’s notice to the Trustee or, if different, the depository institution then holding the Collection Account, make withdrawals from the Collection Account for the following purposes:

 

(i)      to remit to the Trustee on the Business Day immediately preceding any Payment Date, for deposit in the Distribution Account, Collections received during the immediately preceding Collection Period (other than any Transfer Deposit Amounts still available to invest in Substitute Loans pursuant to Section 11.01) and all amounts deposited into the Collection Account from the Reserve Account pursuant to Section 7.02;

 

(ii)     [Reserved];

 

(iii)    to withdraw any amount received from an Obligor that is recoverable and sought to be recovered as a voidable preference by a trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction;

 

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(iv)     [Reserved];

 

(v)      to make investments in Permitted Investments;

 

(vi)     to withdraw any funds deposited in the Collection Account that were not required or permitted to be deposited therein or were deposited therein in error;

 

(vii)    at any time during the Reinvestment Period, to acquire Additional Loans as contemplated by Section 2.07;

 

(viii)   to acquire Substitute Loans as contemplated by Section 2.07 to the extent funds have been deposited by the Seller for such purpose pursuant to Section 11.01;

 

(ix)     to clear and terminate the Collection Account upon the termination of this Agreement.

 

Section 7.04.   Reinvestment Account.

 

(a)     The Trustee shall establish and maintain the Reinvestment Account in the name of the Issuer for the benefit of the Trustee and the Noteholders. The Reinvestment Account shall be held in one Eligible Deposit Account with a Qualified Institution in the form of an interest-bearing trust account wherein the moneys therein are invested in Permitted Investments. The Servicer will monitor the Reinvestment Account in accordance with its customary policies and procedures.

 

(b)     Deposits to the Reinvestment Account shall be made in accordance with Section 7.06(b).

 

(c)     On or prior to any Payment Date, the Servicer may elect to transfer funds from the Reinvestment Account to the Distribution Account to be treated as Principal Collections and applied on such Payment Date in accordance with Section 7.06(b).

 

(d)     Upon the first Payment Date following the Reinvestment Period Termination Date, the Servicer shall direct the Trustee to withdraw all amounts on deposit in the Reinvestment Account and deposit such amounts to the Distribution Account for distribution in accordance with Section 7.06(b).

 

(e)     On the earlier to occur of the Legal Final Payment Date and the Payment Date on which the Outstanding Principal Balance of the Notes is reduced to zero, the Servicer shall direct the Trustee to withdraw all amounts on deposit in the Reinvestment Account and deposit such amounts to the Distribution Account for distribution in accordance with the Priority of Payments.

 

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(f)     Upon the occurrence of an Event of Default, the Servicer shall direct the Trustee to withdraw all amounts on deposit in the Reinvestment Account and deposit such amounts to the Distribution Account for distribution in accordance with Section 7.06(c).

 

Section 7.05.   Securityholder Distributions.

 

(a)     Each Securityholder as of the related Record Date shall be paid on the next succeeding Payment Date by wire transfer to the account directed by such Securityholder if such Securityholder provides written instructions to the Trustee or Owner Trustee, respectively, at least ten (10) days prior to such Payment Date, which instructions may be in the form of a standing order, or if no such instructions are provided, by check mailed to such Securityholder at the address for such Securityholder appearing on the Note Register or Certificate Register.

 

(b)     The Trustee shall serve as the paying agent hereunder and shall make the payments to the Securityholders required hereunder. The Trustee hereby agrees that all amounts held by it for payment hereunder will be held in trust for the benefit of the Securityholders.

 

Section 7.06.   Allocations and Distributions.

 

(a)     Allocations of Interest Collections. On the Business Day immediately preceding each Payment Date, the Trustee, upon written instructions from the Servicer, will transfer (i) all Interest Collections on deposit in the Collection Account and (ii) any amounts required to be transferred from the Reserve Account to the Distribution Account. Such amounts will remain uninvested while deposited in the Distribution Account. On each Payment Date (other than a Payment Date following an Event of Default and acceleration of the Notes), the Trustee, upon written instructions from the Servicer, will distribute Interest Collections on deposit in the Distribution Account to the following parties in the order of priority set forth below; provided that amounts, if any, transferred from the Reserve Account will be distributed solely with respect to items 1 through 4 below. With respect to the Notes then Outstanding, payments shall be made pro rata to the Holders of Notes based on their respective Percentage Interests.

 

1.     first, to the Trustee, the Backup Servicer (including in its capacity as Successor Servicer), the Custodian, the Owner Trustee, the Split Loan Agent (if U.S. Bank), if any, the Paying Agent and the Lockbox Bank, fees, expenses and indemnities then due, in each case subject to the Administrative Expense Cap and Owner Trustee Cap and second, pro rata, based on amounts due and owing to such Persons under this clause 1, to the Owner Trustee, solely with respect to amounts in excess of the Owner Trustee Cap, the Trust Depositor, the Split Loan Agent, if any, the Paying Agent and the Lockbox Bank (in each case, if other than U.S. Bank or an affiliate thereof), any accrued and unpaid fees (other than the Servicing Fee), expenses and indemnities then due in each case subject to the Administrative Expense Cap; provided that, pursuant to this clause 1, the Trust Depositor shall only be entitled to the fees of the independent manager of the Trust Depositor and any indemnity amounts owing to the Backup Servicer as Successor Servicer shall not be subject to the Administrative Expense Cap and shall instead be paid in accordance with clause 2 below and provided further that (for the avoidance of doubt) on the Payment Date occurring in December of each calendar year (and on an Optional Redemption Date), any unused portion of the $100,000 allocated to the Owner Trustee will be available to be applied to other accrued and unpaid fees, expenses and indemnities payable under this clause 1;

 

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2.     pro rata based on amounts owing to such Persons under this clause 2, (i) to the Servicer or any Successor Servicer (including for the avoidance of doubt the Backup Servicer in such capacity), any previously unreimbursed Scheduled Payment Advances, together with accrued interest thereon (calculated at a rate equal to 5.0%), Servicing Advances, together with accrued interest thereon (calculated at a rate equal to 5.0%), the Servicing Fee for the related calendar month payable pursuant to this Agreement for the related calendar month, any reimbursements for mistaken deposits, any accrued and unpaid fees (other than the Servicing Fee), expenses and indemnities then due to the initial Servicer (such expenses and indemnities in each case subject to a rolling twelve-month limit of $50,000) and any indemnities then due to the Backup Servicer in its capacity as Successor Servicer (such indemnities subject to a rolling twelve-month limit of $250,000) and other related amounts and certain other amounts due on the Loans that the Servicer is entitled to retain; (ii) to the Seller, amounts deposited into the Lockbox Account but not related to interest or principal due on the Loans or fees, reimbursements or indemnities payable to the Issuer in respect of the Loans; (iii) to the Backup Servicer, the Successor Servicer Engagement Fee; and (iv) costs and expenses, if any, incurred by the Trustee or by any Successor Servicer (including the Backup Servicer) in connection with the transfer of servicing to any Successor Servicer, subject to the Transition Expense Cap;

 

3.     to the Noteholders, the Interest Amount for the related Interest Period, if any, plus the Interest Shortfall, if any, plus interest on any such Interest Shortfall at the Interest Rate for the related Interest Period(s) (to the extent permitted by Applicable Law);

 

4.     unless Principal Collections (after giving effect to all prior interest payments and assuming no draws on the Reserve Account or redirection of Principal Collections to pay interest) are sufficient to make the payments in clause 2 of Section 7.06(b) and the Servicer notifies the Trustee by the related Record Date to make such payment solely from Principal Collections pursuant to Section 7.06(b), on a pro rata basis to the Noteholders, all amounts required by clause 2 of Section 7.06(b);

 

5.     if the amount on deposit in the Reserve Account is less than the Reserve Account Required Balance, to the Reserve Account, the lesser of (i) 50% of any remaining Interest Collections and (ii) the amount required so that the amount on deposit in the Reserve Account equals the Reserve Account Required Balance;

 

6.     to pay each of the Trustee, the Owner Trustee, the Backup Servicer, any Successor Servicer, the Custodian, the Split Loan Agent, if any, the Paying Agent and the Lockbox Bank, pro rata based on the amounts due and owing thereto, any fees, expenses and indemnities then due to such party that are in excess of the Administrative Expense Cap or Transition Expense Cap, as applicable; and

 

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7.     to pay all remaining Interest Collections to or at the direction of the Certificateholder.

 

To the extent that any fees of the Owner Trustee or the Trustee (in all capacities hereunder (including for avoidance of doubt as Backup Servicer or Successor Servicer)) are not paid on a Payment Date due to insufficiency of funds, such unpaid fees shall be paid on the next Payment Date on which funds are available to pay such fees in accordance with the priority of payments set forth above in this Section 7.06(a).

 

(b)     Allocations of Principal Collections and Reserve Available Funds. On the Business Day immediately preceding each Payment Date, the Trustee, upon written instructions from the Servicer, will transfer (i) all Principal Collections on deposit in the Collection Account, (ii) all amounts, if any, required to be transferred pursuant to Section 7.02(g) to the Distribution Account, (iii) any amounts transferred from the Reinvestment Account at the direction of the Servicer pursuant to Section 7.04(c), and (iv) on the Business Day immediately preceding the first Payment Date following the Reinvestment Period Termination Date, all amounts, if any, on deposit the Reinvestment Account, to the Distribution Account. Such amounts will remain uninvested while deposited in the Distribution Account. On each Payment Date (other than a Payment Date following an Event of Default or acceleration of the Notes or following the institution of Proceedings for foreclosure of the Indenture and liquidation of the Collateral), the Trustee, upon written instructions from the Servicer, will distribute the Principal Collections, any Reserve Available Funds on deposit in the Distribution Account and any amounts transferred from the Reinvestment Account to the following parties in the order of priority set forth below. With respect to the Notes then Outstanding, payments shall be made pro rata to the Holders of Notes based on their respective Percentage Interests.

 

1.     to pay any unpaid amounts referred to in clauses 1 through 3 of Section 7.06(a) (in the priority stated therein) after the application of Interest Collections;

 

2.     (I) for so long as no Rapid Amortization Event has occurred, the Principal Distribution Amount (x) on or prior to the Reinvestment Period Termination Date, to the Reinvestment Account and (y) after the Reinvestment Period Termination Date, on a pro rata basis to the Noteholders, to pay outstanding principal on the Notes and (II) following the occurrence of any Rapid Amortization Event, or on the Legal Final Payment Date, on a pro rata basis to the Noteholders, until the Outstanding Note Balance is reduced to zero;

 

3.     to pay any unpaid amounts referred to in clause 6 of Section 7.06(a), after the application of Interest Collections;

 

4.     on or prior to the Reinvestment Period Termination Date, to the extent of amounts on deposit in (or to be deposited to) the Reinvestment Account, the amount determined by the Servicer, at its option, (i) upon prior notice thereof to the Trustee, the Rating Agency and the Noteholders, to be applied as a prepayment of principal on the Notes on a pro rata basis, in each case together with the Applicable Premium, and (ii) otherwise all remaining funds to be deposited in the Reinvestment Account; and

 

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5.     to pay all remaining Principal Collections to or at the direction of the Certificateholder.

 

6.     To the extent that any fees of the Owner Trustee or the Trustee (in all capacities hereunder (including for avoidance of doubt as Backup Servicer or Successor Servicer)) are not paid on a Payment Date due to insufficiency of funds, such unpaid fees shall be paid on the next Payment Date on which funds are available to pay such fees in accordance with the priority of payments set forth above in this Section 7.06(b).

 

(c)     Default Allocations. On each Payment Date (or such other date as selected by the Trustee pursuant to the Indenture) (i) following the occurrence of an Event of Default, (ii) following an acceleration of the Notes pursuant to Section 5.02 of the Indenture that has not been rescinded and annulled in accordance with the terms of the Indenture, or (iii) following the institution of Proceedings for the foreclosure of the Indenture and the liquidation of the Collateral pursuant to Section 5.04(a)(ii) of the Indenture, the Trustee will transfer all Collections on deposit in the Collection Account as of the end of the applicable Collection Period, including Proceeds from the liquidation of the Collateral, to the Distribution Account. On each Payment Date (or such other date as selected by the Trustee pursuant to the Indenture), the Trustee will distribute such amounts together with Available Funds and all other funds available for distributions on the Notes, to the extent there are sufficient funds, to the following parties in the order of priority set forth below. With respect to the Notes then Outstanding, payments shall be made pro rata to the Holders of Notes based on their respective Percentage Interests.

 

1.     to the Trustee, the Owner Trustee, the Servicer, the Backup Servicer (including in its capacity as Successor Servicer), the Custodian, the Split Loan Agent, if any, the Paying Agent and the Lockbox Bank amounts due and owing to such entities pursuant to the priorities in clauses 1 and 2 of Section 7.06(a), and without regard to the cap set forth in clauses 1 and 2 of Section 7.06(a);

 

2.     to the Holders of the Notes, on a pro rata basis, for any unpaid amounts on such Notes for interest;

 

3.     to the Holders of the Notes, on a pro rata basis, for any unpaid amounts on such Notes for principal, until such Notes are paid in full; and

 

4.     to pay all remaining amounts to the Certificateholder.

 

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ARTICLE 8.

SERVICER DEFAULT; SERVICER TRANSFER

 

Section 8.01.   Servicer Default.

 

“Servicer Default” means the occurrence of any of the following:

 

(a)     any failure by the Servicer to remit or cause to be remitted when due any payment, transfer or deposit required to be remitted by the Servicer to the Trustee under the terms of this Agreement or the other Transaction Documents and such failure continues unremedied for a period of two (2) Business Days, it being understood that the Servicer shall not be responsible for the failure of either the Issuer or the Trustee to remit funds that were received by the Issuer or the Trustee from or on behalf of the Servicer in accordance with this Agreement or the other Transaction Documents; or

 

(b)     failure by the Servicer duly to observe or perform any other covenants or agreements of the Servicer set forth in this Agreement or the other Transaction Documents, which failure materially and adversely affects the rights of the Issuer or the Noteholders and continues unremedied for a period of 60 days (if such failure or breach can be cured) after the first to occur of (i) the date on which written notice of such failure requiring the same to be remedied shall have been given to a Responsible Officer of the Servicer by the Trustee or to a Responsible Officer of the Servicer and the Trustee by any Noteholder or the Certificateholder or (ii) the date the Servicer shall assign any of its duties hereunder other than as expressly permitted hereby (which includes the ability of the Servicer to assign such duties to any Affiliate); or

 

(c)     any representation or warranty of the Servicer in this Agreement or any other Transaction Document or in any certificate delivered under this Agreement or any other Transaction Document (other than any representation or warranty relating to a Loan that has been purchased by the Servicer) shall prove to have been incorrect when made, which has a material adverse effect on the Noteholders and which continues unremedied for 30 days after discovery thereof by a Responsible Officer of the Servicer or after the date on which written notice of such failure, requiring the same to be remedied, shall have been delivered to the Servicer by the Trustee; or

 

(d)     a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any Insolvency Proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force, undischarged or unstayed for a period of 60 consecutive days; or

 

(e)     the Servicer shall consent to the appointment of a conservator or receiver or liquidator in any Insolvency Proceedings of or relating to the Servicer or of or relating to all or substantially all of the Servicer’s property; or

 

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(f)     the Servicer shall cease to be eligible to continue as Servicer under this Agreement pursuant to Section 5.12(a); or

 

(g)     the Servicer shall file a petition to take advantage of any applicable Insolvency Laws, make an assignment for the benefit of its creditors or generally fail to pay its debts as they become due.

 

Notwithstanding the foregoing, a delay in or failure of performance referred to under Section 8.01(a) above for a period of five Business Days or referred to under Section 8.01(b) above for a period of sixty (60) days (in addition to the 60-day period provided therein) shall not constitute a Servicer Default until the expiration of such additional five (5) Business Days or sixty (60) days, respectively, if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or other events beyond the Servicer’s control.

 

Section 8.02.   Servicer Transfer.

 

(a)     If a Servicer Default has occurred and is continuing, the Trustee or the Issuer may, upon direction of a Supermajority of the Noteholders, terminate all of the rights and obligations of the Servicer hereunder by notice to the Servicer (a “Termination Notice”), whereupon the Backup Servicer will succeed to all of the Servicer’s management, administrative, servicing, custodial and collection functions as Servicer hereunder within sixty (60) days of receiving a Termination Notice.

 

(b)     If the Backup Servicer is unable to assume the role of the Servicer after a Termination Notice is delivered pursuant to Section 8.02(a), and the Trustee is unwilling or unable to act as the successor servicer as provided in Section 8.03 (the “Successor Servicer”), the Trustee (i) will provide the Trust Depositor with written notice of such circumstances (and the Trust Depositor shall promptly forward a copy of such notice to the Rating Agency) and (ii) may appoint a Successor Servicer with assets of at least $50,000,000 and whose regular business includes the servicing of assets similar to the Loan Assets. Such proposed Successor Servicer shall become the Successor Servicer once it assumes the Servicer’s responsibilities and obligations in accordance with Section 8.03. If such proposed Successor Servicer is unable to assume the responsibilities and obligations of the Servicer, the Trustee shall propose an alternative established servicing institution to serve as the Successor Servicer. Such other proposed Successor Servicer shall become the Successor Servicer once it assumes the Servicer’s responsibilities and obligations in accordance with this Agreement. If no Successor Servicer has been appointed and approved following the above procedures within 120 days of the delivery of a Termination Notice or notice of resignation by the Servicer, then any of the Issuer, Trustee, removed or resigning Servicer or any Securityholder may petition any court of competent jurisdiction for the appointment of a Successor Servicer, which appointment will not require the consent of, nor be subject to the approval of the Issuer, the Trustee or any Securityholder.

 

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(c)     On the date that a Successor Servicer (including for the avoidance of doubt the Backup Servicer acting as such) shall have been appointed and accepted such appointment pursuant to Section 8.03 (such appointment being herein called a “Servicer Transfer”), all rights, benefits, fees, indemnities, authority and power of the Servicer under this Agreement, whether with respect to the Loans, the Loan Files or otherwise, shall pass to and be vested in such Successor Servicer pursuant to and under this Section 8.02; and, without limitation, the Successor Servicer is authorized and empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do any and all acts or things necessary or appropriate to effect the purposes of such notice of termination. The Servicer agrees to cooperate with the Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer hereunder, including, without limitation, the transfer to the Successor Servicer for administration by it of all cash amounts which shall at the time be held by the Servicer for deposit, or have been deposited by the Servicer, in the Collection Account and the Reserve Account, or thereafter received with respect to the Loans and Related Property. The Servicer shall transfer to the Successor Servicer (i) all records held by the Servicer relating to the Loans and Related Property in such electronic form as the Successor Servicer may reasonably request and (ii) any Loan Files in the Servicer’s possession. In addition, the Servicer shall permit access to its premises (including all computer records and programs) to the Successor Servicer or its designee, and shall pay the reasonable transition expenses of the Successor Servicer. Upon a Servicer Transfer, the Successor Servicer shall also be entitled to receive the Servicing Fee thereafter payable for performing the obligations of the Servicer and any additional amounts payable to the Servicer hereunder. Any indemnities provided in this Agreement or the other Transaction Documents in favor of the Servicer, any Servicing Fee (together with accrued interest thereon), any other fees, costs and expenses and any Scheduled Payment Advances, Servicing Advances and Nonrecoverable Advances (in each case together with accrued interest due the Servicer thereon), in any case, that have accrued and/or are due and unpaid or unreimbursed to the Servicer shall survive the termination of the Servicer and its replacement with a Successor Servicer and the Servicer being replaced shall remain entitled thereto until paid hereunder out of the Collection Account or the Distribution Account in accordance with the Priority of Payments.

 

Section 8.03.   Acceptance by Successor Servicer; Reconveyance; Successor Servicer to Act.

 

(a)     Subject to Section 8.04, no appointment of a Successor Servicer (other than the Backup Servicer) shall be effective until the Successor Servicer shall have executed and delivered to the Issuer and the Trustee a written acceptance of such appointment and of the duties of Servicer hereunder, subject to Section 8.03(d). The Servicer shall continue to perform all servicing functions under this Agreement until the date the Successor Servicer shall have so executed and delivered such written acceptance.

 

(b)     [Reserved].

 

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(c)     As compensation, a Successor Servicer (including for the avoidance of doubt, the Backup Servicer acting as such) so appointed shall be entitled to receive the Servicing Fee, together with any other servicing compensation in the form of assumption fees, late payment charges or otherwise as provided in the Transaction Documents that thereafter are payable under this Agreement, including, without limitation, all reasonable costs (including reasonable attorneys’ fees) incurred in connection with transferring the servicing obligations under this Agreement and amending this Agreement (if necessary) to reflect such transfer. None of the Trustee, the Backup Servicer, nor any Successor Servicer shall be held liable by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Servicer to deliver, or any delay in delivering, cash, documents or records to it, or (ii) restrictions imposed by any regulatory authority having jurisdiction over the Servicer. To the extent that the Trustee or the Backup Servicer incurs any extraordinary expenses in connection with a servicing transfer, it shall be entitled to reimbursement therefor as an Administrative Expense pursuant to the Priority of Payments.

 

(d)     On or after a Servicer Transfer, the Successor Servicer shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein with respect to servicing of the Collateral and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof (except, for the avoidance of doubt, any obligations stated to be imposed solely on the “initial Servicer”), and the terminated Servicer shall be relieved of such responsibilities, duties and liabilities arising after such Servicer Transfer; provided that (i) the Successor Servicer will not assume any obligations of the Servicer described in Section 8.02(c), (ii) the Successor Servicer shall not be liable for any acts or omissions of the Servicer occurring prior to such Servicer Transfer or for any breach by the Servicer of any of its representations and warranties contained herein or in any other Transaction Document, (iii) other than in respect of Servicing Advances relating to taxes, the Successor Servicer shall have no obligation to pay any taxes required to be paid by the Servicer (provided, that the Successor Servicer shall pay any income taxes for which it is liable), (iv) the Successor Servicer shall have no obligation to pay any of the fees and expenses of any other party to the transactions contemplated hereby, (v) the Successor Servicer shall have no liability or obligation with respect to any Servicer indemnification obligations of any prior Servicer, including the initial Servicer, and (vi) the Successor Servicer shall have no liability or obligation to perform any repurchase or advancing obligations of the Servicer. Notwithstanding anything else herein to the contrary, in no event shall the Trustee be liable for any Servicing Fee or for any differential in the amount of the servicing fee paid hereunder and the amount necessary to induce any Successor Servicer to act as Successor Servicer under this Agreement and the transactions set forth or provided for herein, including any Servicing Transfer Costs. The Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. The terminated Servicer shall remain entitled to payment and reimbursement of the amounts set forth in the last sentence of Section 8.02(b) notwithstanding its termination hereunder, to the same extent as if it had continued to service the Loans hereunder. The Backup Servicer, as Backup Servicer or Successor Servicer, shall not be required to expend or risk its own funds.

 

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(e)     Notwithstanding anything contained in this Agreement or the Indenture to the contrary, in the event that U.S. Bank becomes Successor Servicer pursuant to this Agreement, U.S. Bank shall not be responsible for the accounting, records (including computer records) and work of Hercules Capital, Inc. or any other predecessor Servicer relating to the Loans (collectively, the “Predecessor Servicer Work Product”). If any error, inaccuracy, omission or incorrect or non-standard practice or procedure (collectively, “Errors”) exists in any Predecessor Servicer Work Product and such Errors make it materially more difficult to service or should cause or materially contribute to U.S. Bank making or continuing any Errors (collectively, “Continued Errors”), U.S. Bank shall have no liability for such Continued Errors; provided, however, that U.S. Bank agrees to use commercially reasonable efforts to prevent Continued Errors. In the event that U.S. Bank becomes aware of Errors or Continued Errors, U.S. Bank shall, with the prior consent of the Trustee, use commercially reasonable efforts to reconstruct and reconcile such data to correct such Errors and Continued Errors and to prevent future Continued Errors. U.S. Bank shall be entitled to recover its costs thereby expended in accordance with the Priority of Payments.

 

(f)     The Successor Servicer is authorized to accept and rely on all accounting records (including computer records) and work product of the prior Servicer hereunder relating to the Collateral without any audit or other examination.

 

(g)     With respect to any Loan that relates to a foreign Obligor that is not registered to do business in the United States or Canada (excluding Quebec), does not have contact information in the United States or Canada (excluding Quebec) or the collateral securing such Loan is located outside of the United States or Canada (excluding Quebec) (in each case, a “Foreign Loan”), the Backup Servicer acting as successor Servicer shall only be responsible for invoicing (unless such Foreign Loan relates to a foreign Obligor that is registered to do business in Quebec or secured by collateral located in Quebec, in which case the Backup Servicer shall not be responsible for invoicing) and acting as system of record with respect to such Loan and will not be responsible for exercising the Issuer’s rights and remedies with respect to such Foreign Loan.

 

Section 8.04.   Notification to Securityholders.

 

(a)     Promptly following the occurrence of any Servicer Default, the Servicer shall give written notice thereof to the Trustee, the Backup Servicer, the Owner Trustee, the Trust Depositor and the Rating Agency at the addresses described in Section 13.04 hereof and the Trustee shall promptly forward such notice to the Noteholders and Certificateholder at their respective addresses appearing on the Note Register and the Certificate Register, respectively.

 

(b)     Within ten (10) days following receipt of a Termination Notice or notice of appointment of a Successor Servicer pursuant to this Article VIII, the Trustee shall give written notice thereof to the Trust Depositor (and the Trust Depositor shall promptly forward a copy of such notice to the Rating Agency) at the addresses described in Section 13.04 hereof and to the Noteholders and Certificateholder at their respective addresses appearing on the Note Register and the Certificate Register, respectively.

 

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Section 8.05.   Effect of Transfer.

 

(a)     After a Servicer Transfer, the terminated Servicer shall have no further obligations with respect to the management, administration, servicing, custody or collection of the Loans as Servicer hereunder and, subject to Section 8.03(d), the Successor Servicer appointed pursuant to Section 8.03 shall have all of such obligations, except that the terminated Servicer will transmit or cause to be transmitted directly to the Successor Servicer promptly on receipt and in the same form in which received, any amounts (properly endorsed where required for the Successor Servicer to collect them) received as Collections upon or otherwise in connection with the Collateral.

 

(b)     A Servicer Transfer shall not affect the rights and duties of the parties hereunder (including but not limited to the obligations and indemnities of the Servicer) other than those relating to the management, administration, servicing, custody or collection of the Loans.

 

Section 8.06.   Database File.

 

Upon reasonable request by the Trustee or the Successor Servicer, the Servicer will provide the Successor Servicer with a magnetic tape or Microsoft Excel or similar spreadsheet file containing the database file for each Loan on and as of the Business Day before the actual commencement of servicing functions by the Successor Servicer following the occurrence of a Servicer Default.

 

Section 8.07.   Waiver of Defaults.

 

The Majority Noteholders may, on behalf of all the Securityholders, waive any default by the Servicer of its obligations hereunder and all consequences of such default, except a default in making any required deposits to the Collection Account or the Distribution Account. No such waiver or cure shall extend to any subsequent or other default or impair any right consequent thereto except to the extent expressly so waived.

 

ARTICLE 9.

REPORTS

 

Section 9.01.   Monthly Reports.

 

(a)     With respect to each Payment Date and the related Collection Period, the Servicer shall prepare a statement (a “Monthly Report”) containing the information set forth in Exhibit H-2 hereto with respect to the preceding Collection Period and will deliver a copy of such Monthly Report to the Trustee and the Backup Servicer no later than the related Reference Date.

 

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(b)     In the first Monthly Servicer Report delivered after the Closing Date, the following additional information will be provided by the Servicer to the Trustee: (i) the fair value (expressed as a percentage of the fair value of all Notes and the Certificate and as a dollar amount) of the actual principal amount of the Certificate acquired and retained by the Trust Depositor as of the Closing Date (based on actual initial Loans, sale prices and finalized class size for the Notes); (ii) the fair value (expressed as a percentage of the fair value of all Notes and the Certificate and dollar amount) of the Certificate that the Trust Depositor is required to retain pursuant to the U.S. credit risk retention requirements set forth in Section 941 of the Dodd-Frank Act and the joint final implementation rules promulgated thereunder; (iii) to the extent that the valuation methodology or any of the key inputs and assumptions on the Closing Date are materially different than those disclosed under the Offering Memorandum, a description of any such material differences; and (iv) confirmation of compliance, as of the Closing Date, with the EU Retention Undertaking Letter substantially in the form of Exhibit E attached hereto (the “EU Retention Undertaking Letter”).

 

(c)     On or before each Payment Date, the Trustee will provide or make available at its website at https://pivot.usbank.com (or at such other address as the Trustee shall notify the Issuer, the Servicer, the Trust Depositor, the Backup Servicer, the Owner Trustee, the Initial Purchaser, the Rating Agency and the Noteholders) the Monthly Report received by it on the related Reference Date to the Issuer, the Servicer, the Backup Servicer, the Initial Purchaser, the Rating Agency and the Securityholders in accordance with Section 3.29 of the Indenture.

 

Section 9.02.   Quarterly Reports.

 

(a)     The Servicer shall prepare a quarterly statement (a “Quarterly Report”) containing the information set forth in Exhibit H-1 hereto with respect to the three (3) most recently preceding Collection Periods.

 

(b)     [Reserved].

 

(c)     Within 45 days of the end of each Fiscal Quarter, beginning on the Reference Date occurring in April 2019, the Servicer will provide to the Trustee and the Backup Servicer a Quarterly Report relating to the calendar quarter immediately preceding the calendar quarter in which such Reference Date occurs. Not later than the Payment Date relating to such Reference Date, the Trustee will provide or make available at its website at https://pivot.usbank.com (or at such other address as the Trustee shall notify the Issuer, the Servicer, the Trust Depositor, the Backup Servicer, the Owner Trustee, the Initial Purchaser, the Rating Agency and the Noteholders) such Quarterly Report to the Issuer, the Servicer, the Backup Servicer, the Initial Purchaser, the Rating Agency and the Noteholders in accordance with Section 3.29 of the Indenture.

 

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Section 9.03.   Preparation of Reports; Officer’s Certificate.

 

(a)     The Servicer shall cooperate with the Trustee in connection with the delivery of the Monthly Reports and Quarterly Reports. Without limiting the generality of the foregoing and the obligation of the Servicer to deliver Monthly Reports and Quarterly Reports to the Trustee, the Servicer shall supply in a timely fashion any information as to any determinations required to be made by the Servicer hereunder or under the Indenture and such other information as is maintained by the Servicer that the Trustee may from time to time request with respect to the Collateral. Nothing herein shall obligate the Trustee to determine independently any characteristic of a Loan, including without limitation whether any item of Collateral is an Agented Loan, Co-Agented Loan, Third Party Agented Loan or Participated Loan, any such determination being based exclusively upon notification the Trustee receives from the Servicer, and except as otherwise specifically set forth in any of the Transaction Documents, nothing in this Article IX shall obligate the Trustee to review or examine any underlying instrument or contract evidencing, governing or guaranteeing or securing any Loan in order to verify, confirm, audit or otherwise determine any characteristic thereof.

 

(b)     In performing its duties hereunder to provide the Monthly Reports and Quarterly Reports, the Trustee shall in no event have any liability for the actions or omissions of the Servicer or any other Person, and shall have no liability for any inaccuracy or error in any Monthly Report or Quarterly Report it distributes pursuant to Sections 9.01 and 9.02, except to the extent that such inaccuracies or errors are caused by the Trustee’s own fraud, bad faith, willful misfeasance, gross negligence or reckless disregard of its duties hereunder. The Trustee shall not be liable for failing to perform or delay in performance of its specified duties hereunder that results from or is caused by a failure or delay on the part of the Servicer or another Person in furnishing necessary, timely and accurate information to the Trustee or the Servicer or a review by the Independent Accountants of a Monthly Report or a Quarterly Report.

 

Section 9.04.   Other Data; Obligor Financial Information.

 

(a)     Not later than 4:00 p.m. (Eastern Time) on the Reference Date, the Servicer shall provide to the Trustee (in a format agreed to by the Trustee and the Servicer) and the Backup Servicer such information (the “Tape”) the Servicer relied upon to prepare the Monthly Report and Quarterly Report, as applicable, for such month. Each Tape shall include, but not be limited to, the information set forth in Exhibit H-2 (in the case of Monthly Reports) and Exhibit H-1 (in the case of Quarterly Reports). The Backup Servicer shall use such tape or diskette (or other electronic transmission acceptable to the Trustee and the Backup Servicer) to (i) confirm that such tape, diskette or other electronic transmission is in readable form, and (ii) calculate and confirm (A) the aggregate amount distributable as principal on the related Payment Date to the Notes, (B) the aggregate amount distributable as interest on the related Payment Date to the Notes, (C) the outstanding principal amount of the Notes after giving effect to all distributions made pursuant to clause (A), above, and (D) the aggregate amount of principal and interest to be carried over on such Payment Date after giving effect to all distributions made pursuant to clauses (A) and (B), above, respectively. The Backup Servicer shall certify to the Trustee that it has verified the Monthly Report or the Quarterly Report in accordance with this Section and shall notify the Servicer and the Trustee of any discrepancies, in each case, on or before the fifth Business Day following the related Payment Date. In the event that the Backup Servicer reports any discrepancies, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancies prior to the next succeeding Payment Date, but in the absence of reconciliation, the Monthly Report or the Quarterly Report shall control for the purpose of calculations and distributions with respect to the next succeeding Payment Date. In the event that the Backup Servicer and the Servicer are unable to reconcile discrepancies with respect to a Monthly Report or Quarterly Report by the next succeeding Payment Date, the Servicer shall cause the Independent Accountants, at the Servicer's expense, to perform agreed-upon procedures to the information within the Tape in connection with such Monthly Report or the Quarterly Report and, prior to the last day of the month after the month in which such Monthly Report or Quarterly Report was delivered, reconcile the discrepancies. The effect, if any, of such reconciliation shall be reflected in the Monthly Report for such next succeeding Payment Date following the last date of the Collection Period. In addition, upon the occurrence of a Servicer Default the Servicer shall deliver to the Backup Servicer or any successor Servicer its files within 15 days after demand therefor and a computer tape containing as of the close of business on the date of demand all of the data maintained by the Servicer in computer format in connection with servicing the Loans. Other than the duties specifically set forth in this Agreement, the Backup Servicer shall have no obligations hereunder, including, without limitation, to supervise, verify, monitor or administer the performance of the Servicer. The Backup Servicer shall have no liability for any actions taken or omitted by the Servicer.

 

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(b)     In addition, the Servicer shall, upon the request of the Trustee or any Rating Agency, furnish the Trustee, the Backup Servicer, the Issuer or Rating Agency, as the case may be, such underlying data in the possession of the Servicer used to generate a Monthly Report or Quarterly Report as may be reasonably requested. The initial Servicer will also forward to the Trustee and the Rating Agency (i) within sixty (60) days after each fiscal quarter of the Servicer (except the fourth fiscal quarter), commencing with the quarter ending March 31, 2019, the unaudited quarterly financial statements of the Servicer and (ii) within 120 days after each fiscal year of the initial Servicer, commencing with the fiscal year ending December 31, 2019, the audited annual financial statements of the Servicer; provided that so long as the Servicer is required under the Securities Act to file its financial statements with the Securities and Exchange Commission, the foregoing requirement to provide such financial statements to the Trustee, the Issuer, the Backup Servicer, the Rating Agency and the Initial Purchaser shall not apply.

 

(c)     [Reserved].

 

(d)     [Reserved].

 

(e)     The Servicer will forward to the Rating Agency promptly upon request any additional financial information in the Servicer’s possession or reasonably obtainable by the Servicer as the Rating Agency shall reasonably request with respect to an Obligor as to which any Scheduled Payment is past due for at least ten (10) days.

 

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Section 9.05.   Annual Report of Accountants.

 

The initial Servicer shall cause a firm of nationally recognized independent certified public accountants (the “Independent Accountants”), who may also render other services to the Servicer or its Affiliates, to furnish to the Servicer and the Trustee, upon signature of an acknowledgment letter, one hundred twenty (120) days following the end of each fiscal year beginning with the calendar year ending December 31, 2019, a report addressed to the Servicer and the Trustee indicating that the Independent Accountants have performed certain procedures as agreed by the Servicer and the Trustee. As a part of such review, the Independent Accountants will obtain the Monthly Report with respect to two (2) Collection Periods during the 12 months ended the immediately preceding December 31 and, for each such Monthly Report, the Independent Accountants will reconcile certain amounts in the Monthly Report to the Servicer’s computer, accounting and other reports. The Independent Accountants will include in such report any unreconciled amounts in such records that are not in agreement with the amounts in the Quarterly Reports. In the event the Independent Accountants require the Trustee to agree to the procedures performed by the Independent Accountants the Servicer shall direct the Trustee in writing to so agree; it being understood and agreed that the Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Servicer, and the Trustee will not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures. Without limiting the generality of the foregoing, the Trustee shall have no responsibility to make any inquiry or investigation as to, and shall have no obligation in respect of, the terms of any engagement of the Independent Accountants by the Servicer or the terms of any agreed upon procedures in respect of such engagement; provided, however that the Trustee shall be authorized, at the direction of the Servicer, to execute any acknowledgement or other agreement with the Independent Accountants required for the Trustee to receive any of the reports or instructions provided for herein, which acknowledgement or agreement may include, among other things, (i) acknowledgement that the Servicer has agreed that the procedures to be performed by the Independent Accountants are sufficient for the purposes of this Section 9.05, (ii) releases by the Trustee (on behalf of itself and the Holders) of claims against the Independent Accountants and acknowledgement of other limitations of liability in favor of the Independent Accountants and (iii) restrictions or prohibitions on the disclosure of information or documents provided to it by such firm of Independent Accountants (including to the Holders). Notwithstanding the foregoing, in no event shall the Trustee be required to execute any agreement in respect of the Independent Accountants that the Trustee reasonably determines adversely affects it. The Independent Accountants’ report shall also indicate that the firm is independent of the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. If the Backup Servicer becomes the Successor Servicer it shall be entitled to reimbursement (as Administrative Expenses) for its expenses incurred in connection with this Section 9.05.

 

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Section 9.06.   Statements of Compliance from Servicer.

 

The Servicer will deliver to the Trustee, the Backup Servicer and KBRA within 120 days of the end of each fiscal year commencing with the year ending December 31, 2019, an Officer’s Certificate stating that (a) the Servicer has fully complied in all material respects with certain provisions of the Agreement relating to servicing of the Loans and payments on the Notes, (b) a review of the activities of the Servicer during the prior calendar year and of its performance under this Agreement was made under the supervision of the officer signing such certificate and (c) to the best of such officer’s knowledge, based on such review, the Servicer and Issuer have fully performed or caused to be performed in all material respects all their obligations under this Agreement for such year, or, if there has been a default in any of their respective obligations specifying each such default known to such officer and the nature and status thereof including the steps being taken by the Servicer to remedy such event.

 

Section 9.07.   [Reserved].

 

Section 9.08.   Notices of Event of Default, Servicer Default or Rapid Amortization Event.

 

Promptly, but in any case no later than within two (2) Business Days of discovery by a Responsible Officer of the Servicer or Issuer (or receipt of notice thereof by the Servicer or the Issuer, as applicable), such Person shall furnish to the Trustee (with a copy to the Backup Servicer) (i) in the case of any proposed or pending litigation or investigation relating to it by any governmental authority or any legal proceeding which involve or may involve the possibility of materially and adversely affecting the Issuer, a written notice specifying the nature of such litigation, investigation or proceeding and what action the Issuer is taking or proposes to take with respect thereto, (ii) written notice of the occurrence of any condition or event which constitutes an Event of Default, Rapid Amortization Event or Servicer Default, including a description of its nature and period of existence and what action the Servicer or Issuer is taking or proposes to take with respect thereto and (iii) written notice of any event or occurrence (including changes in applicable law) of which the Servicer or Issuer (as applicable) has knowledge that may reasonably affect, materially and adversely, the ability of the Servicer to service the Loans or to otherwise perform and carry out its duties, responsibilities and obligations under the Transaction Documents; provided, that in the case of any notice required pursuant to (ii) or (iii) above, the Servicer or the Issuer, as applicable, shall provide a copy of such notice to KBRA. The Trustee shall make available (including by posting to its website) to Holders any notice delivered to it pursuant to (i), (ii) or (iii) above, but shall not be under any obligation to review or evaluate any such notice, or to investigate or inquire further into any matter described therein.

 

Section 9.09.   Trustee’s Right to Examine Servicer Records, Audit Operations and Deliver Information to Noteholders.

 

The Trustee shall have the right upon reasonable prior notice, during normal business hours, in a manner that does not unreasonably interfere with the Servicer’s normal operations or customer or employee relations, no more often than once a year unless an Event of Default or Servicer Default shall have occurred and be continuing in which case as often as reasonably required, to examine and audit any and all of the books, records or other information of the Servicer, whether held by the Servicer or by another on behalf of the Servicer, which may be relevant to the performance or observance by the Servicer of the terms, covenants or conditions of this Agreement. No amounts payable in respect of the foregoing shall be paid from the Loan Assets except that after an Event of Default, fees and expenses of the Trustee not paid by the Servicer shall be reimbursed to the Trustee as an Administrative Expense.

 

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The Trustee shall have the right, in accordance with the Indenture, to deliver information provided by the Servicer to any Noteholder requesting the same; provided that the Servicer may request that any such Noteholder not a party hereto enter into a confidentiality agreement reasonably acceptable to the Servicer prior to permitting such Noteholder to view such information.

 

ARTICLE 10.

TERMINATION

 

Section 10.01.   Optional Redemption of Notes; Rights of Certificateholders Following Satisfaction and Discharge of Indenture.

 

(a)       Optional Redemption.

 

(i)     If, as of the last day of any Collection Period, the Aggregate Outstanding Principal Balance shall be less than or equal to 10% of the Aggregate Outstanding Principal Balance as of the Cutoff Date, the Notes may be redeemed in whole, but not in part, at the direction of the Trust Depositor on any succeeding Payment Date. To exercise such option, the Trust Depositor shall furnish notice of such election to the Rating Agency and the Noteholders. If the Notes are to be so redeemed, the Trust Depositor shall also furnish notice of such election to the Trustee at least 15 Business Days prior to the proposed Redemption Date. To effect an Optional Redemption, the Trust Depositor shall deposit in the Distribution Account an amount equal to the Redemption Price and shall comply with the Optional Redemption provisions set forth in Section 10.01 and Section 10.04 of the Indenture.

 

(ii)     Notice of an Optional Redemption shall be provided by the Trust Depositor to the Trustee, the Owner Trustee and the Rating Agency in accordance with the Indenture.

 

(b)     [Reserved].

 

(c)     Following the satisfaction and discharge of the Indenture, the payment in full of the principal of and interest on the Notes, and payment of fees and expenses and other amounts owing to Trustee, the Certificateholders will succeed to the rights of the Noteholders hereunder.

 

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Section 10.02.  Termination.

 

(a)     This Agreement shall terminate upon notice to the Trustee of the earlier of the following events: (i) the final payment on or the disposition or other liquidation by the Issuer of the last Loan (including, without limitation, in connection with a redemption by the Issuer of all outstanding Notes pursuant to Section 10.01) or the disposition of all other Collateral, including property acquired upon foreclosure or deed in lieu of foreclosure of any Loan and the remittance of all funds due thereunder with respect thereto, (ii) mutual written consent of the Servicer, the Backup Servicer, the Trust Depositor, the Issuer, the Trustee, the Seller and all Outstanding Securityholders or (iii) the payment in full of all amounts owing in respect of the Notes.

 

(b)     Notice of any termination, specifying the Payment Date upon which the Issuer will terminate and that the Noteholders shall surrender their Notes to the Trustee for payment of the final distribution and cancellation shall be given promptly by the Servicer to the Trustee and by the Trustee to all Noteholders and the Rating Agency during the month of such final distribution before the Reference Date in such month, specifying (i) the Payment Date upon which final payment of the Notes (or Redemption Price) will be made upon presentation and surrender of Notes at the office of the Trustee 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 Notes at the office of the Trustee therein specified.

 

ARTICLE 11.

REMEDIES UPON MISREPRESENTATION;

REPURCHASE OPTION

 

Section 11.01.  Repurchases of, or Substitution for, Loans for Breach of Representations and Warranties.

 

Upon a discovery by a Responsible Officer of the Trust Depositor, a Responsible Officer of the Servicer or any subservicer, a Responsible Officer of the Backup Servicer or a Responsible Officer of the Trustee of (i) a breach of a representation or warranty as set forth in Section 3.01, Section 3.02, or Section 3.04 or as made or deemed made in any notice relating to Substitute Loans, as applicable, that materially and adversely affects the interests of the Securityholders (each such Loan with respect to which such breach exists, an “Ineligible Loan”), the party discovering such breach or failure shall give prompt written notice to the other parties to this Agreement; provided that neither the Trustee nor the Backup Servicer shall have a duty or obligation (i) to discover or make an attempt to discover, inquire about or investigate the breach of any of such representations or warranties or any duty to provide such notice unless a Responsible Officer of the Trustee or Backup Servicer, as applicable, receives written notice of breach or alleged breach (without regard to whether such breach or alleged breach is a material breach as set forth in Section 3.01, Section 3.02, or Section 3.04 or (ii) to determine if such breach materially and adversely affects the interests of the Securityholders. Within 30 days of the earlier of (x) its discovery or (y) its receipt of notice of any breach of a representation or warranty, the Trust Depositor shall, or shall require the Seller pursuant to the Sale and Contribution Agreement to, and the Seller shall, (a) promptly cure such breach in all material respects, (b) repurchase each such Ineligible Loan by depositing in the Lockbox Account, for further credit to the Collection Account, within such 30 day period, an amount equal to the Transfer Deposit Amount for such Ineligible Loan, or (c) remove such Loan from the Collateral, deposit the Transfer Deposit Amount with respect to such Loan into the Lockbox Account, for further credit to the Collection Account, and, not later than the date a repurchase of such affected Loan would be required hereunder, effect a substitution for such affected Loan with a Substitute Loan in accordance with the substitution requirements set forth in Sections 2.07 and 2.06.

 

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Section 11.02.  Reassignment of Repurchased or Substituted Loans.

 

Upon receipt by the Trustee for deposit in the Collection Account of the amounts described in Section 11.01 (or upon the Substitute Loan Cutoff Date related to a Substitute Loan described in Section 11.01), and upon receipt of an Officer’s Certificate of the Servicer in the form attached hereto as Exhibit F, the Trustee and the Issuer shall assign to the Trust Depositor and the Trust Depositor shall assign to the Seller all of the Trustee’s and the Issuer’s (or Trust Depositor’s, as applicable) right, title and interest in the Loans being repurchased or substituted for the related Loan Assets without recourse, representation or warranty. Such reassigned Loan shall no longer thereafter be included in any calculations of Outstanding Loan Balances required to be made hereunder or otherwise be deemed a part of the Collateral.

 

ARTICLE 12.

INDEMNITIES

 

Section 12.01.  Indemnification by Servicer.

 

The initial Servicer agrees to indemnify, defend and hold harmless the Trustee (as such and in its individual capacity), the Custodian (as such and in its individual capacity), the Owner Trustee (as such and in its individual capacity), the Backup Servicer (as such, in its individual capacity and in its capacity as Successor Servicer) and any Successor Servicer (as such and in its individual capacity) and each of their officers, directors, employees and agents for and from and against any and all claims, losses, penalties, fines, forfeitures, judgments (provided that any indemnification for damages is limited to actual damages, not consequential, special or punitive damages), reasonable documented and out-of-pocket legal fees and related costs and any other reasonable costs, fees and expenses that such Person may sustain (including the reasonable costs and expenses of enforcing the indemnity against the Servicer) as a result of the Servicer’s fraud or the failure of the Servicer to perform its duties and service the Loans in compliance in all material respects with the terms of this Agreement, except to the extent arising from gross negligence, willful misconduct or fraud by the Person claiming indemnification. Any Person seeking indemnification hereunder shall promptly notify the Servicer if such Person receives a complaint, claim, compulsory process or other notice of any loss, claim, damage or liability giving rise to a claim of indemnification hereunder but failure to provide such notice shall not relieve the Servicer of its indemnification obligations hereunder unless the Servicer is deprived of material substantive or procedural rights or defenses as a result thereof. The Servicer shall assume (with the consent of the indemnified party, such consent not to be unreasonably withheld) the defense and any settlement of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the indemnified party in respect of such claim; provided that any settlement of a claim shall include an unconditional release of the indemnified Person from all liability respecting such claim and shall not include any statement as to, or an admission of fault, culpability or a failure to act on behalf of the indemnified party without the indemnified party’s consent. If the consent of the indemnified party required in the immediately preceding sentence is unreasonably withheld, the Servicer shall be relieved of its indemnification obligations hereunder with respect to such Person. The parties agree that the provisions of this Section 12.01 shall not be interpreted to provide recourse to the Servicer against loss by reason of the bankruptcy, insolvency or lack of creditworthiness of an Obligor with respect to a Loan. The Servicer shall have no liability for making indemnification hereunder to the extent any such indemnification constitutes recourse for uncollectible or uncollected Loans.

 

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Section 12.02.  Indemnification by Trust Depositor.

 

The Trust Depositor agrees to indemnify, defend, and hold the Trustee (as such and in its individual capacity), the Custodian (as such and in its individual capacity), the Owner Trustee (as such and in its individual capacity), the Backup Servicer (as such, in its individual capacity and in its capacity as Successor Servicer), any Successor Servicer (as such and in its individual capacity) and each of their officers, directors, employees and agents and each Securityholder harmless from and against any and all claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments (provided that any indemnification for damages is limited to actual damages, not consequential, special or punitive damages), and any other reasonable costs, fees and expenses that such Person may sustain (including the reasonable costs and expenses of enforcing the indemnity against the Trust Depositor) as a result of the Trust Depositor’s fraud or the failure of the Trust Depositor to perform its duties in compliance in all material respects with the terms of this Agreement and in the best interests of the Issuer, except to the extent arising from the gross negligence, willful misconduct or fraud by the Person claiming indemnification. Any Person seeking indemnification hereunder shall promptly notify the Trust Depositor if such Person receives a complaint, claim, compulsory process or other notice of any loss, claim, damage or liability giving rise to a claim of indemnification hereunder but failure to provide such notice shall not relieve the Trust Depositor of its indemnification obligations hereunder unless the Trust Depositor is deprived of material substantive or procedural rights or defenses as a result thereof. The Trust Depositor shall assume (with the consent of the indemnified party, such consent not to be unreasonably withheld) the defense and any settlement of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the indemnified party in respect of such claim; provided that any settlement of a claim shall include an unconditional release of the indemnified Person from all liability respecting such claim and shall not include any statement as to, or an admission of fault, culpability or a failure to act on behalf of the indemnified party without the indemnified party’s consent. If the consent of the indemnified party required in the immediately preceding sentence is unreasonably withheld, the Trust Depositor is relieved of its indemnification obligations hereunder with respect to such Person.

 

107

 

 

Section 12.03.  Survival.

 

The indemnities provided in this Article 12 shall survive the discharge and termination of this Agreement or earlier resignation or removal of the indemnitee.

 

ARTICLE 13.

MISCELLANEOUS

 

Section 13.01.  Amendment.

 

(a)     This Agreement may be amended from time to time by the Issuer, the Trust Depositor, the Seller and the Servicer, with the consent of the Trustee and the Backup Servicer, by written agreement, with notice to the Owner Trustee and the Rating Agency but without the consent of any Securityholder, to (i) cure any ambiguity or to correct or supplement any provisions herein that may be inconsistent with any other provisions in this Agreement or in the Offering Memorandum, (ii) comply with any changes in the Code, USA PATRIOT Act, or U.S. securities laws (including the regulations implementing such laws), (iii) evidence the succession of another Person to the Issuer, a Successor Servicer or a successor Trustee, and the assumption by any such successor of the applicable covenants therein, (iv) add to the covenants of any party hereto for the benefit of the Securityholders, (v) amend any provision to this Agreement to reflect any written change to the guidelines, methodology or standards established by any Rating Agency that are applicable to this Agreement, (vi) modify Exhibit G, (vii) to amend, modify or otherwise accommodate changes to this Agreement relating to compliance with Rule 17g-5 under the Exchange Act or to permit compliance with the Dodd-Frank Act (including, without limitation, the Volcker Rule), as applicable to the Issuer, the Servicer or the Notes, or to comply with any rule or regulation enacted by regulatory agencies of the United States federal government after the Closing Date that are applicable to the Notes or the transactions contemplated by this Agreement, or (viii) add any new provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement; provided that no such amendment shall materially and adversely affect the interests of any Noteholder. Notice of any proposed amendment must be sent to all Securityholders at least ten (10) Business Days prior to the execution of such amendment. Any amendment shall not be deemed to materially and adversely affect the interests of any Noteholder if the Person requesting such amendment obtains an Opinion of Counsel addressed to the Owner Trustee and the Trustee to that effect.

 

108

 

 

(b)     Except as provided in Section 13.01(a) hereof, this Agreement may be amended from time to time by the Issuer, the Trust Depositor, the Seller and the Servicer, with the consent of the Trustee and the Majority Noteholders and with prior notice to the Owner Trustee and the Rating Agency, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Securityholders; provided that (i) no such amendment shall, without the consent of each Noteholder that may be adversely affected, reduce the percentage of the principal balance of the Notes that is required to consent to any amendment to this Agreement and (ii) no such amendment shall increase or reduce in any manner the amount of, or accelerate or delay the timing of, or change the allocation or priority of, collections of payments on or in respect of the Loans or distributions that are required to be made for the benefit of the Noteholders or change the interest rate applicable to the Notes, without the consent of all adversely affected Noteholders.

 

(c)     Promptly after the execution of any such amendment or consent, written notification of the substance of such amendment or consent shall be furnished by the Trustee to the Noteholders and by the Issuer to the Certificateholders. It shall not be necessary for the consent of any Securityholders required pursuant to Section 13.01(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization by the Securityholders of the execution thereof shall be subject to such reasonable requirements as the Trustee may prescribe for the Noteholders and as the Issuer may prescribe for the Certificateholders. Notwithstanding anything contained herein, any amendment which affects the Owner Trustee, the Custodian or the Backup Servicer shall require the Owner Trustee’s, the Custodian’s or the Backup Servicer’s, as applicable, written consent. Any amendment shall be accompanied by an Officer’s Certificate and an Opinion of Counsel addressed to the Owner Trustee and the Trustee to the effect that such amendment is permitted hereunder and under the other Transaction Documents, has been duly authorized by all necessary action, and all conditions precedent to such amendment have been satisfied.

 

Section 13.02.  [Reserved].

 

Section 13.03.  Governing Law.

 

(a)     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

109

 

 

(b)     EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.03(b).

 

Section 13.04.  Notices.

 

All notices, demands, certificates, requests and communications hereunder (“notices”) shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to a Responsible Officer of the party to which sent, or (d) on the date transmitted by legible telecopier or electronic mail transmission with a confirmation of receipt, in all cases addressed to the recipient as follows:

 

	 	
			(a)

				
			if to the Servicer or the Seller:

			

			Hercules Capital, Inc.

			400 Hamilton Avenue, Suite 310

			Palo Alto, California 94301

			Attention: Chief Financial Officer

			Re: Hercules Capital Funding Trust 2019-1

			Telephone: (650) 289-3060

			Facsimile No.: (650) 473-9194

			

 

with a copy to:

 

Hercules Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, California 94301

Attention: General Counsel

Re: Hercules Capital Funding Trust 2019-1

Telephone: (650) 289-3060

Facsimile No.: (650) 473-9194

 

	 	
			(b)

				
			if to the Trust Depositor:

			

			Hercules Capital Funding 2019-1 LLC

			c/o Hercules Capital, Inc.

			400 Hamilton Avenue, Suite 310

			

 

Palo Alto, California 94301

Attention: Chief Financial Officer

Re: Hercules Capital Funding Trust 2019-1

Telephone: (650) 289-3060

Facsimile No.: (650) 473-9194

 

110

 

 

with a copy to:

 

Hercules Capital Funding 2019-1 LLC

c/o Hercules Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, California 94301

Attention: General Counsel

Re: Hercules Capital Funding Trust 2019-1

Telephone: (650) 289-3060

Facsimile No.: (650) 473-9194

 

	 	
			(c)

				
			if to the Trustee:

			

			U.S. Bank National Association

			Global Corporate Trust

			

One Federal Street 3rd Floor

Boston, MA 02110

Attention: Jack Lindsay

Ref: Hercules Capital Funding Trust 2019-1

Tel: (617) 603-6789

Fax: (855) 869-2187

 

	 	
			(d)

				
			if to the Backup Servicer:

			

			U.S. Bank National Association

			60 Livingston Avenue

			St. Paul, MN 55107

			Attention: Deborah Jones Franco

			Ref: Hercules Capital Funding Trust 2019-1

			

Facsimile No.: (651) 466-7365

Telephone: (651) 466-5032

 

	 	
			(e)

				
			if to the Custodian with respect to Loan Files

			

			U.S. Bank National Association

			

Document Custody Services

1719 Otis Way

Florence, South Carolina 29501

Attention: Steven Garrett

E-mail:steven.garrett@usbank.com

Telephone: 843-676-8901

Facsimile: 843-673-0162

Ref: Hercules Capital Funding Trust 2019-1

 

111

 

 

	 	
			(f)

				
			if to the Owner Trustee:

			

			Wilmington Trust, National Association

			1100 North Market Street

			Wilmington, Delaware 19890

			Attention: Corporate Trust Administration

			Facsimile No.: (302) 636-4140

			

			with a copy to:

			the Seller and the Servicer as provided in clause (a) above

			

 

	 	
			(g)

				
			if to the Issuer:

			

			Hercules Capital Funding Trust 2019-1

			c/o Wilmington Trust, National Association

			1100 North Market Street

			Wilmington, Delaware 19890

			Attention: Corporate Trust Administration

			Facsimile No.: (302) 636-4140

			

			with a copy to:

			the Seller and the Servicer as provided in clause (a) above

			

 

	 	
			(h)

				
			if to the Rating Agency:

			

			Kroll Bond Rating Agency, Inc.

			805 Third Avenue, 29th Floor

			New York, New York 10022

			Attn: ABS Surveillance

			

 

 

	 	
			(i)

				
			if to the Initial Purchaser:

			

			Guggenheim Securities, LLC

			330 Madison Avenue

			New York, New York 10017

			Attention: Chief Operating Officer / General Counsel

			Re: Hercules Capital Funding Trust 2019-1

			Facsimile No.: (646) 786-4931

			

 

112

 

 

	 	(k)	if to the Co-Managers:

 

MUFG Securities Americas Inc.

1221 Ave of the Americas, 6th Floor

New York, New York 10020

Re: Hercules Capital Funding Trust 2019-1

 

 

Wells Fargo Securities, LLC

550 South Tryon Street

Charlotte, North Carolina 28202

Re: Hercules Capital Funding Trust 2019-1

 

Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent.

 

Section 13.05.  Severability of Provisions.

 

If one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever prohibited or held invalid or unenforceable, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement, the Notes or Certificates or the rights of the Securityholders, and any such prohibition, invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenants, agreements, provisions or terms in any other jurisdiction.

 

Section 13.06.  Third Party Beneficiaries.

 

The Owner Trustee is an express third-party beneficiary of this Agreement and, as such, shall have full power and authority to enforce the provisions of this Agreement against the parties hereto. Except as otherwise specifically provided herein, the parties hereto hereby manifest their intent that no third party shall be deemed a third party beneficiary of this Agreement, and specifically that the Obligors are not third party beneficiaries of this Agreement.

 

Section 13.07.  Counterparts.

 

This Agreement may be executed by facsimile signature and in several counterparts, each of which shall be an original and all of which shall together constitute but one and the same instrument.

 

113

 

 

Section 13.08.  Headings.

 

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

 

Section 13.09.  No Bankruptcy Petition; Disclaimer.

 

(a)     Each of the Seller, the Trustee, the Custodian, the Backup Servicer, the Trust Depositor, the Servicer, the Issuer (acting through the Owner Trustee) and each Holder (by acceptance of the applicable Securities) covenants and agrees that, prior to the date that is one year and one day (or, if longer, the then applicable preference period and one day) after the payment in full of all amounts owing in respect of all outstanding Notes, it will not institute against the Trust Depositor or the Issuer, or join any other Person in instituting against the Trust Depositor or the Issuer, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of the United States or any state of the United States; provided that nothing herein shall prohibit the Trustee from filing proofs of claim or otherwise participating in any such proceedings instituted by any other Person.

 

(b)     The Issuer acknowledges and agrees that the Certificates represent ownership of a beneficial interest in the Issuer and Loan Assets only and the Securities do not represent an interest in any assets (other than the Loan Assets) of the Trust Depositor (including by virtue of any deficiency claim in respect of obligations not paid or otherwise satisfied from the Loan Assets, other Collateral and proceeds thereof).

 

(c)     The provisions of this Section 13.09 shall be for the third party benefit of those entitled to rely thereon, including the Securityholders, and shall survive the termination of this Agreement.

 

Section 13.10.  Jurisdiction.

 

Any legal action or proceeding with respect to this Agreement may be brought in the courts of the United States for the Southern District of New York, and by execution and delivery of this Agreement, each party hereto consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each such party irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any document related hereto.

 

Section 13.11.  Tax Characterization.

 

Notwithstanding the provisions of Section 2.01, Section 2.04 and Section 2.07 hereof, the Trust Depositor and the Issuer agree that, pursuant to Treasury Regulations Section 301.7701-3(b)(1) and for federal, state and local income tax purposes, in the event that the Certificates are owned by more than one beneficial owner for federal income tax purposes, the Issuer will be treated as a partnership the partners of which are the beneficial owners of the Certificates, and in the event that the Certificates are owned by a single beneficial owner for federal income tax purposes, the Issuer will be disregarded as an entity separate from such beneficial owner.

 

114

 

 

Section 13.12.  [Reserved].

 

Section 13.13.  Limitation of Liability of Owner Trustee.

 

It is expressly understood and agreed by the parties hereto that (i) this Agreement is executed and delivered by Wilmington Trust, National Association, not individually or personally but solely as Owner Trustee on behalf of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by Wilmington Trust, National Association but is made and intended for the purpose of binding only the Issuer, (iii) nothing herein contained shall be construed as creating any liability on Wilmington Trust, National Association individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties to this Agreement and by any person claiming by, through or under them and (iv) under no circumstances shall Wilmington Trust, National Association be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaking by the Issuer under this Agreement or any related documents. For the purposes of this Agreement, in the performance of its duties or obligations hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement.

 

Section 13.14.  [Reserved].

 

Section 13.15.  No Partnership.

 

Nothing herein contained shall be deemed or construed to create a co-partnership or joint venture between the parties hereto, and the services of the Servicer shall be rendered as an independent contractor and not as agent or as a fiduciary for any party hereto or for the Securityholders.

 

Section 13.16.  Successors and Assigns.

 

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

Section 13.17.  Acts of Holders.

 

Except as otherwise specifically provided herein, whenever Holder action, consent or approval is required under this Agreement or any other Transaction Document, such action, consent or approval shall be deemed to have been taken or given on behalf of, and shall be binding upon, all Holders if the Majority Noteholders agree to take such action or give such consent or approval. In all cases except where otherwise required by law or regulation, any act by a Holder of a Note may be taken by the Beneficial Owner of such Note.

 

115

 

 

Section 13.18.  Duration of Agreement.

 

This Agreement shall continue in existence and effect until terminated as herein provided.

 

Section 13.19.  Limited Recourse.

 

Notwithstanding any other provisions of the Notes, this Agreement or any other Transaction Document, the obligations of the Issuer under the Notes, this Agreement and any other Transaction Document are limited recourse obligations of the Issuer payable solely from the Collateral in accordance with the Priority of Payments and, following realization of the Collateral and distribution in accordance with the Priority of Payments, any claims of the Noteholders and the other Secured Parties, and any other parties to any Transaction Document shall be extinguished. The obligations of the Trust Depositor, the Seller, the Issuer and the Servicer under this Agreement and the other Transaction Documents are solely the obligations of the Trust Depositor, the Seller, the Issuer and the Servicer, respectively. No recourse shall be had for the payment of any amount owing by the Trust Depositor, the Seller, the Issuer or the Servicer or otherwise under this Agreement or under the other Transaction Documents or for the payment by the Trust Depositor, the Seller, the Issuer or the Servicer of any fee in respect hereof or thereof or any other obligation or claim of or against the Trust Depositor, the Seller, the Issuer or the Servicer arising out of or based upon this Agreement or on any other Transaction Document, against any Affiliate, shareholder, partner, manager, member, director, officer, employee, representative or agent of the Trust Depositor, the Seller, the Issuer or the Servicer or of any Affiliate of such Person. The provisions of this Section 13.19 shall survive termination of this Agreement.

 

Section 13.20.  Confidentiality.

 

Each of the Issuer, the Trust Depositor, the Servicer (if other than Hercules) and the Trustee shall maintain and shall cause each of its employees, officers, agents and Affiliates to maintain the confidentiality of material non-public information concerning Hercules and its Affiliates or about the Obligors obtained by it or them in connection with the structuring, negotiating, execution and performance of the transactions contemplated by the Transaction Documents, except that each such party and its employees, officers, agents and Affiliates may disclose such information to other parties to the Transaction Documents and to its external accountants, attorneys, any potential subservicers and the agents of such Persons provided such Persons expressly agree to maintain the confidentiality of such information, and as required by an applicable law or order of any judicial or administrative proceeding. This Section 13.20 shall constitute a confidentiality agreement for purposes of Regulation FD under the Exchange Act. Notwithstanding any other provision of this Agreement, the Servicer shall not be required to disclose any confidential information it is restricted from disclosing by law or contract; provided that the Servicer will use its commercially reasonable efforts to enter into, or cause the Issuer to enter into, a confidentiality agreement permitting such disclosure satisfactory to the Servicer with any Person to whom such information is required to be delivered.

 

116

 

 

Section 13.21.  Non-Confidentiality of Tax Treatment.

 

All parties hereto agree that each of them and each of their managers, officers, employees, representatives, and other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure. “Tax treatment” and “tax structure” shall have the same meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

117

 

 

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

 

	 	
			HERCULES CAPITAL FUNDING TRUST 

			2019-1, as the Issuer

			
	 	 	 	 
	 	 	 	 
	 	By:	 	
			WILMINGTON TRUST, NATIONAL

			ASSOCIATION, not in its individual

			capacity, but solely as Owner Trustee on

			behalf of the Issuer

			
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 
	 	Title:	 
	 	 	 	 
	 	
			HERCULES CAPITAL FUNDING 2019-1 LLC,

			as the Trust Depositor

			
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 
	 	Title:	 
	 	 	 	 
	 	
			HERCULES CAPITAL, INC., as the Seller and as

			the Servicer

			
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 
	 	Title:	 

 

[Signatures Continued on the Following Page]

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Sale and Servicing Agreement

 

 

 

 

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

 

	 	
			U.S. BANK NATIONAL ASSOCIATION, not in

			its individual capacity but as the Trustee

			
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 
	 	Title:	 
	 	 	 	 
	 	 
	 	
			U.S. BANK NATIONAL ASSOCIATION, not in

			its individual capacity but as Custodian

			
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 
	 	Title:	 
	 	 	 	 
	 	
			U.S. BANK NATIONAL ASSOCIATION, not in

			its individual capacity but as the Backup Servicer

			
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 
	 	Title:	 
	 	 	 	 
	 	 	 	 
	 	
			U.S. BANK NATIONAL ASSOCIATION, not in

			its individual capacity but as the Paying Agent

			
	 	 
	 	 
	 	By:	 	 
	 	Name:	 
	 	Title:	 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Sale and Servicing Agreement

 

 

 

 

Exhibit A

to Sale and

Servicing Agreement

 

FORM OF ASSIGNMENT

 

January 22, 2019

 

Pursuant to and in accordance with the Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), dated as of January 22, 2019, made by and among Hercules Capital Funding 2019-1 LLC, as the trust depositor (the “Trust Depositor” or “Assignor”), Hercules Capital, Inc., as the seller and as the servicer, U.S. Bank National Association, as the trustee, the backup servicer, the paying agent and the custodian and Hercules Capital Funding Trust 2019-1, as the issuer (the “Issuer” or “Assignee”), the undersigned does hereby sell, transfer, assign, set over and otherwise convey to the Issuer all right, title and interest of the Trust Depositor in and to the following: (i) the Initial Loans listed in the initial List of Loans and all monies due, to become due or paid in respect thereof accruing on and after the Cutoff Date and all Insurance Proceeds, Liquidation Proceeds, Released Mortgaged Property Proceeds and other recoveries thereon, in each case as they arise after the Cutoff Date; (ii) all security interests and Liens and Related Property subject thereto from time to time purporting to secure payment by Obligors under such Loans; (iii) all guaranties, indemnities and warranties, and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Loans; (iv) the Transaction Accounts, together with all cash and investments in each of the foregoing; (v) all collections and records (including Computer Records) with respect to the foregoing; (vi) all documents relating to the applicable Loan Files; and (vii) all income, payments, proceeds and other benefits of any and all of the foregoing, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the foregoing, provided, however, that all right, title and interest, if any, of Hercules Capital Funding 2019-1 LLC in and to each Excluded Amount and any proceeds of any Excluded Amount shall be excluded from the foregoing transfer by Hercules Capital Funding 2019-1 LLC.

 

This Assignment shall be governed by the laws of the State of New York applicable to agreements made and to be performed therein. Capitalized terms used herein have the meaning given such terms in the Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

 

 

 

A-1

 

 

IN WITNESS WHEREOF, the undersigned have caused this Assignment to be duly executed as of the date first written above.

 

	 	
			HERCULES CAPITAL FUNDING 

			2019-1 LLC, as Assignor

			
	 	 	
			 

			
	 	 	 
	 	By:	
			 

			
	 	 	
			Name:

			Title:

			

 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Assignment

 

A-2

 

 

Exhibit B

to Sale and

Servicing Agreement

 

FORM OF CLOSING CERTIFICATE OF TRUST DEPOSITOR

 

January 22, 2019

 

The undersigned certifies that she/he is an authorized officer of Hercules Capital, Inc., the sole Member of Hercules Capital Funding 2019-1 LLC, a Delaware limited liability company (the “Trust Depositor”), and that, in the capacity as such officer and not individually, is duly authorized to execute and deliver this certificate on behalf of the Trust Depositor in connection with the Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), dated as of January 22, 2019, by and among Hercules Capital Funding Trust 2019-1, as the Issuer, the Trust Depositor, U.S. Bank National Association, as the Trustee, the Backup Servicer, the Custodian, the Paying Agent and Hercules Capital, Inc., as the Seller and as the Servicer (all capitalized terms used herein without definition have the respective meanings set forth in the Agreement), and further certifies in his capacity as such officer and not individually as follows as of the date hereof (it being understood that these certifications are being relied upon by, among others, the Initial Purchaser, the Co-Managers and its counsel in connection with the Initial Purchaser’s and the Co-Managers undertakings in connection with the subject transactions):

 

1.      Attached hereto as Annex I is a true, correct and complete copy of the Certificate of Formation of the Trust Depositor, together with all amendments thereto as in effect on the date hereof, which documents were in full force and effect on the date hereof, and at all times subsequent thereto, and no other amendments have been authorized by the members or managers of the Trust Depositor.

 

2.      Attached hereto as Annex II is a Certificate of the Secretary of State of the State of Delaware, dated [_____], 2019, stating that the Trust Depositor is duly formed under the laws of the State of Delaware and is in good standing.

 

3.      Attached hereto as Annex III is a true, correct and complete copy of the Limited Liability Company Agreement of the Trust Depositor (providing for the authorization, execution, delivery and performance of (among other things) the Agreement and the other Transaction Documents), together with all amendments thereto in effect on the date hereof, which documents are in full force and effect on the date hereof.

 

4.     Each person named on Annex IV attached hereto is a duly elected, qualified and incumbent officer of the Trust Depositor, and the signature set forth opposite his or her name on such Annex IV is that person’s genuine signature.

 

5.     Attached hereto as Annex V is a true, correct and complete copy of the written resolutions duly adopted by the board of managers of the Trust Depositor relating to the authorization, execution, delivery and performance of (among other things) the Agreement and the other Transaction Documents. Said resolutions have not been amended, modified, annulled or revoked, are in full force and effect on the date hereof and at all times subsequent thereto, and are the only resolutions relating to these matters which have been adopted by the sole member.

 

B-1

 

 

6.      In connection with the sale of certain of the Notes, Hercules Capital, Inc. has prepared a preliminary offering memorandum dated January 7, 2019 (including any exhibits, amendments or supplements thereto and all information incorporated therein by reference, the “Preliminary Memorandum”), and a final offering memorandum dated January 22, 2019 (including any exhibits, amendments or supplements thereto and all information incorporated therein by reference, the “Final Memorandum”, and each of the Preliminary Memorandum and the Final Memorandum, a “Memorandum” or together the “Memoranda”) including a description of the terms of the Notes, the terms of the offering, and the Trust. Hercules Capital, Inc. has also posted information relating to the performance of the Loans, one or more marketing books, and certain additional information and documents concerning the Notes, the Loans and Hercules Capital, Inc. to a password protected Internet site accessible by potential investors (such information the “Additional Offering Materials”). It is understood and agreed that [    ]:[    ] [a/p].m. New York time on January [    ], 2019 constitutes the time of the contract of sale of certain of the Notes for purposes of Rule 159 under the Securities Act (the “Time of Sale”). It is further understood and agreed that the Preliminary Offering Memorandum and the Additional Offering Materials as of the Time of Sale shall be the entirety of the information conveyed to investors as of the Time of Sale, and that “Time of Sale Information” shall refer exclusively to such information, in either case in such form that has not been superseded by any amendment or supplement thereto.

 

7.     I have carefully examined the Final Memorandum and the Transaction Documents.

 

8.      No event with respect to the Trust Depositor has occurred and is continuing that constitutes an Event of Default or an event that, with notice or the passage of time or both, would become an Event of Default as defined in the Transaction Documents. To my knowledge after reasonable investigation, there has been no material adverse change in the condition, financial or otherwise, or the earnings, business affairs or business prospects, of the Trust Depositor, whether or not arising in the ordinary course of business, since the respective dates as of which information is given in the Time of Sale Information and except as set forth therein or since the Time of Sale.

 

9.      All federal, state and local taxes of the Trust Depositor due and owing as of the date hereof have been paid or adequate provisions for the payment thereof have been made.

 

10.     All representations and warranties of the Trust Depositor contained in the Transaction Documents or any other related documents, or in any document, certificate or financial or other statement delivered in connection therewith, are true and correct in all material respects as of the date hereof.

 

11.     There is no action, investigation or proceeding pending or, to my knowledge, threatened against the Trust Depositor before any court, administrative agency or other tribunal (a) asserting the invalidity of the Transaction Documents; (b) seeking to prevent the consummation of any of the transactions contemplated by the Transaction Documents; or (c) seeking any determination or ruling that is would reasonably be expected to materially and adversely affect the Trust Depositor’s performance of its obligations under, or the validity or enforceability of, the Transaction Documents.

 

B-2

 

 

12.     The Trust Depositor is not required to obtain the consent of any other party (other than those that it has already obtained) or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority (other than (i) the filing of UCC financing statements and (ii) those that it has already obtained) in connection with the execution, delivery, performance, validity or enforceability of the Sale and Servicing Agreement or the other Transaction Documents to which it is a party.

 

13.     The Trust Depositor is not a party to any agreements or instruments evidencing or governing indebtedness for money borrowed or by which the Trust Depositor or its property is bound (other than the Transaction Documents).

 

14.     The execution, delivery and performance of the Sale and Servicing Agreement and the other Transaction Documents to which it is a party by the Trust Depositor, and the consummation of the transactions contemplated hereby and thereby, will not violate in any material respect any Applicable Law applicable to the Trust Depositor, or conflict with, result in a default under or constitute a breach of the Trust Depositor’s organizational documents or material Contractual Obligations to which the Trust Depositor is a party or by which the Trust Depositor or any of the Trust Depositor’s properties may be bound, or result in the creation or imposition of any Lien of any kind upon any of its properties pursuant to the terms of any such material Contractual Obligations, other than as contemplated by the Transaction Documents.

 

15.     In connection with the transfer of the Initial Loan Assets contemplated in the Transaction Documents, the Trust Depositor (a) has not made such transfer with the actual intent to hinder, delay or defraud any creditor of the Trust Depositor; (b) has not received less than a reasonably equivalent value in exchange for such transfer; (c) at the time of and after giving effect to the conveyance of Loan Assets as of the date hereof, is Solvent; and (d) does not intend to incur or believe it will incur debts beyond its ability to pay when matured.

 

16.     Each of the agreements and conditions of the Trust Depositor to be performed on or before the Closing Date pursuant to the Transaction Documents have been performed in all material respects.

 

17.     The Trust Depositor has not authorized for filing any UCC financing statements listing the Initial Loan Assets as collateral other than (a) financing statements relating to the transactions contemplated in the Agreement and (b) financing statements that will be terminated on or before the Closing Date.

 

18.     Since the respective dates as of which information is given in the Time of Sale Information, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, results of operations, business affairs or business prospects of the Trust Depositor, whether or not arising in the ordinary course of business, or in the ability of the Trust Depositor to perform its obligations under the Transaction Documents or in the characteristics of the Initial Loans.

 

B-3

 

 

19.     Nothing has come to the attention of the Trust Depositor that would lead it to believe that the Final Memorandum at the date thereof contained or contains an untrue statement of material fact or omitted or omits to state a material fact necessary in order to make the statements in each, in light of the circumstances under which they were made, not misleading.

 

****

 

 

 

 

 

B-4

 

 

IN WITNESS WHEREOF, I have affixed my signature hereto as of the date written above.

 

	 	
			Hercules Capital Funding 2019-

			1 LLC, as trust depositor 

			 

			By: Hercules Capital, Inc., its sole

			member

			
	 	 	 
	 	 	 
	 	By:	
			 

			
	 	 	
			Name:

			
	 	 	
			Title:

			

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Closing Certificate of the Trust Depositor

 

B-5

 

 

ANNEX I

to Closing Certificate of

Trust Depositor

 

CERTIFICATE OF FORMATION

 

 

 

 

 

 

 

 

B-6

 

 

ANNEX II

to Closing Certificate of

Trust Depositor

 

CERTIFICATE OF GOOD STANDING

 

 

 

 

 

 

 

 

B-7

 

 

ANNEX III

to Closing Certificate of

Trust Depositor

 

LIMITED LIABILITY COMPANY AGREEMENT

 

 

 

 

 

 

 

 

B-8

 

 

ANNEX IV

to Closing Certificate of

Trust Depositor

 

INCUMBENCY OF SIGNING OFFICERS

 

	
			Name of Officer

				
			Title

				
			Signature

			
	 	 	 
	
			1. [_________]

				
			[_________]

				
			 

			
	 	 	 
	
			2. [_________]

				
			[_________]

				
			 

			
	 	 	 
	
			3. [_________]

				
			[_________]

				
			 

			

 

 

 

 

 

 

B-9

 

 

ANNEX V

to Closing Certificate of

Trust Depositor

 

WRITTEN RESOLUTIONS

 

 

 

 

 

 

 

B-10

 

 

Exhibit C

to Sale and

Servicing Agreement

 

FORM OF CLOSING CERTIFICATE OF SERVICER/SELLER

 

January 22, 2019

 

THIS OFFICER’S CERTIFICATE is executed and delivered as of date first set forth above, pursuant to the Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), dated as of the date hereof, by and among Hercules Capital, Inc., as the Seller and as the Servicer (“Hercules” or the “Company”), Hercules Capital Funding 2019-1 LLC, as the Trust Depositor, U.S. Bank National Association, as the Trustee, the Custodian, the Paying Agent and the Backup Servicer, and Hercules Capital Funding Trust 2019-1, as the Issuer. All capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.

 

I, [_____], do herby certify that I am the Chief Financial Officer of the Company and that, as such, I am authorized to execute this certificate on behalf of the Company and do further certify that:

 

1.     Attached hereto as Annex I is a true, correct and complete copy of the Certificate of Incorporation of the Company, as amended, together with all amendments thereto, and as in effect on the date hereof, which documents were in full force and effect in such form on the date hereof, and at all times subsequent thereto, without modification or amendment in any respect.

 

2.     Attached hereto as Annex II is a Certificate of the Secretary of State of the State of Maryland, dated [______], 2019, stating that Hercules is duly incorporated under the laws of the State of Maryland and is in good standing and a Certificate of the Secretary of State of the State of California, dated [______], 2019, stating that Hercules is in good standing as a foreign corporation in the State of California.

 

3.     Attached hereto as Annex III is a true, correct and complete copy of the By-Laws of Hercules, together with all amendments thereto in effect on the date hereof, which documents are in full force and effect on the date hereof.

 

4.     Attached hereto as Annex IV is a true, correct and complete copy of the written resolutions duly adopted by the board of directors of Hercules relating to the authorization, execution, delivery and performance of (among other things) the Agreement and the other Transaction Documents. Said resolutions have not been amended, modified, annulled or revoked, are in full force and effect on the date hereof and at all times subsequent thereto, and are the only resolutions relating to these matters which have been adopted by the sole member.

 

5.     Each person named on Annex V attached hereto is a duly elected, qualified and incumbent officer of Hercules and the signature set forth opposite his or her name on such Annex V is that person’s genuine signature.

 

C-1

 

 

6.     In connection with the sale of certain of the Notes, the Company has prepared a preliminary offering memorandum dated January 7, 2019 (including any exhibits, amendments or supplements thereto and all information incorporated therein by reference, the “Preliminary Memorandum”), and a final offering memorandum dated January [    ], 2019 (including any exhibits, amendments or supplements thereto and all information incorporated therein by reference, the “Final Memorandum”, and each of the Preliminary Memorandum and the Final Memorandum, a “Memorandum” or together the “Memoranda”) including a description of the terms of the Notes, the terms of the offering, and the Trust. The Company has also posted information relating to the performance of the Loans, one or more marketing books, and certain additional information and documents concerning the Notes, the Loans and the Company to a password protected Internet site accessible by potential investors (such information the “Additional Offering Materials”). It is understood and agreed that [    ]:[    ] [a/p].m. New York time on January [    ], 2019 constitutes the time of the contract of sale of certain of the Notes for purposes of Rule 159 under the Securities Act (the “Time of Sale”). It is further understood and agreed that the Preliminary Offering Memorandum and the Additional Offering Materials as of the Time of Sale shall be the entirety of the information conveyed to investors as of the Time of Sale, and that “Time of Sale Information” shall refer exclusively to such information, in either case in such form that has not been superseded by any amendment or supplement thereto.

 

7.      I have carefully examined the Final Memorandum and the Transaction Documents.

 

8.     No event with respect to Hercules has occurred and is continuing that constitutes an Event of Default or Servicer Default or an event that, with notice or the passage of time, would constitute an Event of Default or Servicer Default as defined in the Transaction Documents. To the best of my knowledge after reasonable investigation, there has been no material adverse change in the condition, financial or otherwise, or the earnings, business affairs or business prospects, of Hercules, whether or not arising in the ordinary course of business, since the respective dates as of which information is given in the Time of Sale Information and except as set forth therein or since the Time of Sale.

 

9.     All federal, state and local taxes of Hercules due and owing as of the date hereof have been paid or adequate provisions for the payment thereof have been made.

 

10.    All representations and warranties of Hercules contained in the Transaction Documents or in any document, certificate or financial or other statement delivered in connection therewith are true and correct in all material respects as of the date hereof.

 

11.    There is no action, investigation or proceeding pending or, to my knowledge, threatened against Hercules before any court, administrative agency or other tribunal (a) asserting the invalidity of any Transaction Document to which Hercules is a party; (b) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by the Transaction Documents; or (c) seeking any determination or ruling that would reasonably be expected to materially and adversely affect Hercules’s performance of its obligations under, or the validity or enforceability of, the Transaction Documents.

 

C-2

 

 

12.     Hercules is not required to obtain the consent of any other party (other than those that it has already obtained) or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority (other than (i) the filing of UCC financing statements and (ii) those that it has already obtained) in connection with the execution, delivery, performance, validity or enforceability of the Sale and Service Agreement or the other Transaction Documents to which it is a party.

 

13.    Hercules’s (a) transfer and assignment of the Loan Assets to the Trust Depositor; (b) Hercules’s entering into of the Transaction Documents; and (c) consummation of any of the transactions contemplated in the Transaction Documents, in each case will not violate or conflict with any agreement or instrument to which Hercules is a party or by which it or its property is otherwise bound.

 

14.    In connection with the transfers of the Initial Loan Assets contemplated in the Transaction Documents, Hercules (a) has not made such transfer with actual intent to hinder, delay or defraud any creditor of Hercules; (b) has not received less than a reasonably equivalent value in exchange for such transfer; (c) at the time of and after giving effect to the conveyance of Loan Assets as of the date hereof, is Solvent; (d) is not engaged (or about to engage) in a business or transaction for which it has unreasonably small capital; and (e) does not intend to incur or believe it will incur debts beyond its ability to pay when matured.

 

15.    Each of the agreements and conditions of Hercules to be performed or satisfied on or before the Closing Date under the Transaction Documents has been performed or satisfied in all material respects.

 

16.    Hercules has not authorized for filing any UCC financing statements listing the Initial Loan Assets as collateral other than financing statements relating to the transactions contemplated in the Agreement.

 

17.    Since the respective dates as of which information is given in the Time of Sale Information, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, results of operations, business affairs or business prospects of Hercules, whether or not arising in the ordinary course of business, or in the ability of Hercules to perform its obligations under the Purchase Agreement or under the Transaction Documents or in the characteristics of the Initial Loans.

 

18.    Nothing has come to the attention of Hercules that would lead it to believe that the Final Memorandum at the date thereof contained or contains an untrue statement of material fact or omitted or omits to state a material fact necessary in order to make the statements in each, in light of the circumstances under which they were made, not misleading.

 

******

 

 

 

C-3

 

 

IN WITNESS WHEREOF, I have affixed my signature hereto as of the date written above.

 

	 	Hercules Capital, Inc.
	 	 	 
	 	 	 
	 	By:	
			 

			
	 	 	
			Name:

			
	 	 	
			Title:

			

 

 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Closing Certificate of the Seller/Servicer

 

C-4

 

 

ANNEX I

to Closing Certificate of

Servicer/Seller

 

CERTIFICATE OF INCORPORATION

 

 

 

 

 

 

 

 

C-5

 

 

ANNEX II

to Closing Certificate of

Servicer/Seller

 

CERTIFICATES OF GOOD STANDING

 

 

 

 

 

 

 

 

C-6

 

 

ANNEX III

to Closing Certificate of

Servicer/Seller

 

BY-LAWS

 

 

 

 

 

 

 

 

C-7

 

 

ANNEX IV

to Closing Certificate of

Servicer/Seller

 

WRITTEN RESOLUTIONS

 

 

 

 

 

 

 

 

C-8

 

 

ANNEX V

to Closing Certificate of

Servicer/Seller

 

INCUMBENCY OF SIGNING OFFICERS

 

	
			Name of Officer

				
			Title

				
			Signature

			
	
			1. [___________]

				
			 

			[____________]

				 
	
			 

			2. [___________]

				
			 

			[____________]

				 
	
			 

			3. [___________]

				
			 

			[____________]

				 

 

 

 

 

 

 

 

C-9

 

 

Exhibit D

to Sale and

Servicing Agreement

 

FORM OF LIQUIDATION REPORT

 

Obligor Name:

Account number:

Original Outstanding Loan Balance:

 

	1.	
			Amounts received or receivable

				 	 	 
	 	 	 	 	 
	 	
			Principal Prepayment

				 	 	
			$_______________

			
	 	
			Property Sale Proceeds

				 	 	
			$_______________

			
	 	
			Other (Itemize)

				 	 	
			$_______________

			
	 	 	 	 	 
	2.	
			Liquidation Expenses

				
			$_______________

				 	 
	 	 	 	 	 
	3.	
			Line 1 minus Line 2

				
			$_______________

				 	 
	 	 	 	 	 
	4.	
			Nonrecoverable Advances

				
			$_______________

				 	 
	 	 	 	 	 
	5.	
			Scheduled Payment Advances, Servicing Advances and interest thereon reimbursed

				
			$_______________

				 	 
	 	 	 	 	 
	6.	
			Insurance Proceeds

				
			$_______________

				 	 
	 	 	 	 	 
	7.	
			Outstanding Loan Balance of the Loan on date of liquidation

				
			$_______________

				 	 
	 	 	 	 	 
	8.	
			Realized (Loss) or Gain (Line 3 minus Line 4 minus Line 5 plus line 6 minus line 7)

				
			$_______________

				 	 

 

 

 

 

D-1

 

 

Exhibit E

to Sale and

Servicing Agreement

 

EU RETENTION UNDERTAKING LETTER

 

See attached

 

 

 

 

 

 

 

 

E-1

 

 

Hercules Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, California 94301

 

Hercules Capital Funding 2019-1 LLC

c/o Hercules Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, California 94301

 

EU RISK RETENTION LETTER

 

 

January 22, 2019

 

Hercules Capital Funding Trust 2019-1

c/o Wilmington Trust, National Association

Rodney Square North, 1100 North Market Street

Wilmington, Delaware 19890

Re: Hercules Capital Funding Trust 2019-1

Facsimile No.: (302) 636-4140

 

 

U.S. Bank National Association,

as the Trustee

Global Corporate Trust

One Federal Street 3rd Floor

Boston, Massachusetts 02110

Attn: Hercules Capital Funding Trust 2019-1

Facsimile No.: (855) 869-2187

 

Guggenheim Securities, LLC,

as Initial Purchaser

330 Madison Avenue

New York, NY 10017

Re: Hercules Capital Funding Trust 2019-1

Facsimile No.: (646)-786-4931

Re:        Retention of Net Economic Interest

 

Dear Ladies and Gentlemen,

 

This letter is being delivered in connection with the issue of notes (the “Notes”) by Hercules Capital Funding Trust 2019-1, as issuer (the “Issuer”) pursuant to the terms of the Indenture (the “Indenture”), dated as of the date hereof, between the Issuer and U.S. Bank National Association, as the trustee (the “Trustee”). Reference is made to the Sale and Servicing Agreement (the “Sale and Servicing Agreement”), dated as of the date hereof, by and among Hercules Capital, Inc. (the “Company”), as the seller and as the servicer, Hercules Capital Funding 2019-1 LLC, as the trust depositor (the “Trust Depositor”), U.S. Bank National Association, as the trustee, custodian, backup servicer and paying agent, and the Issuer. All capitalized terms used but not defined herein have the respective meanings given to such terms in the Sale and Servicing Agreement.

 

E-2

 

 

The Issuer will acquire certain Loan Assets for its own account from the Trust Depositor (in such capacity, the “Retention Holder”), pursuant to the Sale and Servicing Agreement. The Retention Holder will acquire certain Loan Assets for its own account from the Company pursuant to a sale and contribution agreement, dated as of the date hereof (together with any amendment or modification permitted thereunder, the “Sale and Contribution Agreement”). The Company will originate such Loan Assets or acquire them in the secondary market for its own account. The internal books and records of the Company, the Retention Holder and the Issuer will reflect such transfers of Loan Assets. In addition, so long as the applicable conditions set forth in the Sale and Servicing Agreement are met, each of the Retention Holder and the Issuer may acquire Additional Loan Assets and Substitute Loan Assets.

 

The Company, as sole equity owner of the Retention Holder (or any commonly-controlled transferee of the Company’s equity interest in the Retention Holder as permitted under clause 1(a) below, the “Retention Parent”), represents and warrants to the Issuer, the Trustee (for the benefit of the Affected Noteholders) and the Initial Purchaser that the Retention Parent is the sole owner, directly or indirectly, of the Retention Holder. The Retention Parent and, by their acceptance of the benefits of this letter, the Issuer, the Trustee (for the benefit of the Affected Noteholders) and the Initial Purchaser, as applicable, each hereby agrees as follows:

 

So long as any of the Notes remain outstanding, the Retention Parent will not transfer ownership of its equity interest in the Retention Holder other than to an entity that is then under 100% common control with the Company that acts as a holding company, integral to the overall operations of the consolidated group, that owns assets (excluding the equity of the Retention Holder) with a value at least equal to the amount of the Retention Interest then held by the Retention Holder and that enters into an agreement that it delivers to the Issuer, the Trustee (for the benefit of the Affected Noteholders) and the Initial Purchaser whereby it assumes all past, current or future obligations of “Retention Parent” hereunder. Upon delivery of such assumption agreement, the transferring entity shall cease for all purposes to be the “Retention Parent” for purposes of this letter and shall be, and hereby is, released from its obligations under this letter.

 

The Retention Holder and the Retention Parent agree for the benefit of the Issuer, the Trustee (for the benefit of the Affected Noteholders) and the Initial Purchaser, so long as any Notes remain Outstanding, that:

 

the Retention Holder will, and the Retention Parent will cause the Retention Holder to, retain a material net economic interest, which will be comprised of an interest in the first loss tranche within the meaning of paragraph (d) of Article 405(1) of the CRR, paragraph (d) of Article 51(1) of the AIFMD Level 2 Regulation and paragraph 2(d) of Article 254 of the Solvency II Level 2 Regulation in effect on the Closing Date, by way of holding, subject to the provisions hereof, at least the minimum amount of Interests currently required by the applicable Retention Requirement Law, being an amount equal to 5% (or such lower amount, including 0%, if such lower amount is required or allowed under the then applicable Retention Requirement Law as a result of amendment, repeal or otherwise and in no event an amount in excess of 5%) of the nominal value of the Loan Assets (the “Retention Interest”, and the requirement to hold the Retention Interest in accordance with this paragraph 2, the “Retention Requirement”); and

 

E-3

 

 

the Retention Interest will not be sold, the subject of any credit risk mitigation, any short positions or any other credit hedge relating to the Retention Interest (in each case, to the extent not permitted by the applicable Retention Requirement Law).

 

The Retention Holder agrees that:

 

for the purposes of the Retention Requirements, it is holding the Retention Interest as an “originator” as such term is defined in Article 4(1)(13) of the CRR as in effect on the Closing Date in accordance with the provisions of this letter agreement;

 

it will confirm in writing to the Trustee (for the benefit of the Affected Noteholders), upon written request therefor by the Issuer delivered as a result of a material change in (i) the performance of the Notes, (ii) the risk characteristics of the transaction or (iii) the Loan Assets, its continued compliance with the requirements set forth in paragraph 2 above;

 

it will, promptly upon a Responsible Officer of the Retention Holder becoming aware of the occurrence thereof, provide a written notice to the Issuer, the Trustee (for the benefit of the Affected Noteholders) and the Initial Purchaser of any failure by it to satisfy at any time the provisions of paragraph 2 above; and

 

it will use its commercially reasonable efforts, upon the request of an Affected Noteholder and subject to any applicable confidentiality or regulatory restrictions applicable to it or the Retention Parent, to make materially relevant information (including, but not limited to, the credit quality and performance of the Loan Assets and cash flows) available as may reasonably be required and requested by such Affected Noteholder so that it may ensure compliance with the provisions of the Retention Requirements applicable to it provided such information is in the possession or the Retention Holder or reasonably obtainable by the Retention Holder at the expense of the requesting Affected Noteholder and provided further that such Affected Noteholder agrees to keep confidential such information provided to it by the Retention Holder in accordance with the terms and conditions of a mutually agreeable confidentiality agreement to be entered into by such Affected Noteholder with the Retention Holder prior to its receipt of such information (provided that such Affected Noteholder may share such information with any applicable regulatory authority as may be necessary for it to ensure compliance with the provisions of the Retention Requirements applicable to it).

 

As used in this letter,

 

“Affected Noteholder” means each Noteholder subject to a Retention Requirement Law.

 

“AIFMD” means European Union Directive 2011/61/EU on Alternative Investment Fund Managers;

 

“AIFMD Level 2 Regulation” means Section 5 of the European Union Commission Delegated Regulation (EU) 231/2013 supplementing Article 17 of the AIFMD;

 

E-4

 

 

“Articles 404-410” means Articles 404-410 of the CRR;

 

“Co-Managers” means MUFG Securities Americas Inc. and Wells Fargo Securities, LLC.

 

“CRR” means the EU Capital Requirements Regulation (Regulation (EU) 575/2013) as published on June 27, 2013;

 

“EBA” means the European Banking Authority and/or its predecessor, the Committee of European Banking Supervisors and any successor or replacement agency or authority.

 

“net economic interest”, shall have the meaning given thereto in the applicable Retention Requirement Laws;

 

“Retention Requirement Laws” means the Solvency II Level 2 Regulation, the AIFMD Level 2 Regulation and Articles 404-410, together with any applicable guidelines, technical standards and related documents published by the EBA or the European Commission;

 

“Solvency II” means Article 135(2) of European Union Directive 2009/138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance; and

 

“Solvency II Level 2 Regulation” means Article 254 of European Union Commission Delegated Regulation (EU) 2015/35 supplementing Solvency II.

 

For the avoidance of doubt, the purchase by the Retention Parent or by the Retention Holder of assets for its own account may include commitments or other agreements to purchase assets for its own account, which may be settled with it or at its direction.

 

Notwithstanding any other provision of this letter, each of the Trustee, the Issuer and the Initial Purchaser, by accepting the benefit of this letter, agrees that it may not, prior to the date which is one year and one day (or if longer, any applicable preference period then in effect plus one day) after the payment in full of all Notes of the Issuer, and all notes issued by or other debt obligations of the Retention Holder, institute against, or join any other Person in instituting against, the Retention Holder any bankruptcy, reorganization, arrangement, insolvency, winding-up, moratorium or liquidation proceedings, or other proceedings under U.S. federal or state bankruptcy or similar laws. Nothing in this paragraph 6 shall preclude, or be deemed to stop, the Trustee (for the benefit of the Affected Noteholders):

 

from taking any action prior to the expiration of the aforementioned period in (i) any case or proceeding voluntarily filed or commenced by the Retention Holder, or (ii) any involuntary insolvency proceeding filed or commenced by a Person other than the Retention Holder; or

 

from commencing against the Retention Holder or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, winding-up, moratorium or liquidation proceeding.

 

The provisions of this paragraph 6 shall survive the termination of this letter, the Indenture and the transactions contemplated hereby and thereby.

 

E-5

 

 

Notwithstanding any other provision of this letter, each party hereto and each of the Trustee, the Issuer and the Initial Purchaser, by accepting the benefit of this letter, agrees that:

 

The obligations of each party to this letter are at all times limited recourse obligations of such party payable solely from such party’s assets available at such time, and, following realization of such assets and application of the proceeds thereof, all obligations of and any claims against such party hereunder or in connection herewith after such realization shall be extinguished and shall not thereafter revive.

 

No recourse shall be had against any officer, director, employee, shareholder, member, manager, partner, authorized person or incorporator of any party hereto, of its manager, of its affiliates, or of its successors or assigns for any amounts payable under this letter.

 

The foregoing provisions of this paragraph 8 shall not:

 

prevent recourse by the Trustee (for the benefit of the Affected Noteholders) to such party’s assets for amounts due, if any, by such party hereunder;

 

constitute a waiver, release or discharge of any obligation of such party under this letter until all such assets have been realized; or

 

limit the right of the Trustee (for the benefit of the Affected Noteholders) to name either party hereto as a party defendant in any proceeding or in the exercise of any other remedy under this letter, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any Person referred to in paragraph 7(b).

 

The provisions of this paragraph 7 shall survive the termination of this letter, the Indenture and the transactions contemplated hereby and thereby.

 

This letter is binding on the parties hereto, their successors and permitted assigns, and is for the benefit of the Issuer, the Trustee (for the benefit of the Affected Noteholders) and the Initial Purchaser, their successors and permitted assigns as provided herein. No other Person shall be deemed a third party beneficiary of this letter.

 

This letter shall be governed by, and construed in accordance with, the internal laws of the State of New York.

 

 

 

[Remainder of page intentionally left blank]

 

 

 

 

 

E-6

 

 

	 	Very Truly Yours,
	 	 	 	 	 
	 	 	 	 	 
	 	 	HERCULES CAPITAL, INC.,

			as the Seller and Servicer
	 	 	 	 	 
	 	 	By:	 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	
			HERCULES CAPITAL FUNDING 2019-1 

			LLC, as Retention Holder

			
	 	 	 	 	 
	 	 	By:	 	 
	 	 	Name:	 
	 	 	Title:	 

 

 

 

 

 

 

E-7

 

 

Exhibit F

to Sale and

Servicing Agreement

 

HERCULES CAPITAL FUNDING TRUST 2019-1

 

SERVICER OFFICER’S CERTIFICATE 

 

[●], 201[_]

 

Reference is made to the Sale and Servicing Agreement, dated as of January 22, 2019 (the “Servicing Agreement”), by and among Hercules Capital Funding Trust 2019-1, as the Issuer, Hercules Capital Funding 2019-1 LLC, as the Trust Depositor, Hercules Capital, Inc., as the Seller and the Servicer (in such capacity, the “Servicer”) and U.S. Bank National Association as the Trustee (in such capacity, the “Trustee”) and the Backup Servicer relating to the Hercules Capital Funding Trust 2019-1 Asset Backed Notes. Terms defined by the Servicing Agreement, wherever used herein, unless otherwise defined herein, shall have the same meanings as are prescribed by the Servicing Agreement.

 

OPTION 1:

 

Pursuant to Section 5.02(e), the undersigned, in its capacity as Servicer, hereby requests the documents described on Schedule A hereto in connection with its servicing activities.

 

OPTION 2:

 

The undersigned, in its capacity as Servicer, hereby certifies that the Loan described on Schedule A hereto is required to be repurchased or substituted pursuant to and in accordance with Section 11.01 of the Servicing Agreement. Enclosed herewith is a completed Request for

 

Release of Documents in the form of Exhibit M to the Servicing Agreement with respect such Loan.

 

Executed as of the date set forth above.

 

	 	
			HERCULES CAPITAL, INC.,

			as Servicer

			
	 	 	 
	 	 	 
	 	By:	 
	 	Name:
	 	Title:

 

 

 

 

 

 

F-1

 

 

Schedule A

 

 

 

 

 

 

 

 

 

F-2

 

 

Exhibit G

to Sale and

Servicing Agreement

 

List of Loans

 

 

See below

 

 

 

 

 

	
			Accounting

			System

			Number /

			Collateral ID

				
			Outstanding

			Balance at 

			Cutoff Date

				
			Funding 

			Maturity 

			Date

				
			Loan Type

				
			Agent Status

				
			Agent

				
			Note 

			Status

				
			UCC Filing in

			Seller’s Name

			
	
			 

			 

			 

			 

			 

				 	 	 	 	 	 	 

 

 

 

 

 

 

 

G-1

 

 

Exhibit H-1

to Sale and

Servicing Agreement

 

FORM OF QUARTERLY REPORT

 

 

[On file with the Servicer.]

 

 

 

 

 

 

 

H-1-1

 

 

Exhibit H-2

to Sale and

Servicing Agreement

 

FORM OF MONTHLY REPORT

 

 

 

[On file with the Servicer.]

 

 

 

 

 

 

 

H-2-1

 

 

Exhibit I

to Sale and

Servicing Agreement

 

[reserved]

 

 

 

 

 

 

 

 

I-1

 

 

Exhibit J

to Sale and

Servicing Agreement

 

[RESERVED]

 

 

 

 

 

 

 

 

J-1

 

 

Exhibit K

to Sale and

Servicing Agreement

 

FORM OF ANNUAL CERTIFICATION REGARDING REQUIRED LOAN DOCUMENTS

 

	 	 	
			[●], 20[__]

			
	
			Hercules Capital Funding 2019-1 LLC,

			  as the Trust Depositor

			c/o Hercules Capital, Inc. 

			Palo Alto, California 94301

			Re: Hercules Capital Funding Trust 2019-1

			Telephone: (650) 289-3060

				 	 
	 	 	 
	
			Hercules Capital, Inc., as Seller and Servicer

			Palo Alto, California 94301

			Re: Hercules Capital Funding Trust 2019-1

			Telephone: (650) 289-3060

				 	 

 

 

	
			Re:

				
			Sale and Servicing Agreement dated as of January 22, 2019 – Hercules Capital Funding Trust 2019-1

			

 

Ladies and Gentlemen:

 

In accordance with Section 2.11(e) of the above–captioned Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), the undersigned, as the Custodian, hereby certifies that during the calendar year ended December 31, 20[__] (the “Certification Period”): (i) in accordance with the terms of the Agreement, the Custodian held the Required Documents for each of the Loans identified on Annex I hereto, (ii) during the Certification Period, the Custodian released from its custody the Required Loan Documents relating to the Loans identified on the release report, attached to the list of Loans attached as Annex I hereto, and (iii) the reason given for the release, as applicable, of all Required Loan Documents relating to the Loans described in clause (ii) above are described in Annex I.

 

The Custodian has made no independent examination of any such documents beyond the review specifically required in the Agreement.

 

****

 

 

 

 

K-1

 

 

	 	
			U.S. BANK NATIONAL 

			ASSOCIATION, as the Custodian

			
	 	 	 
	 	 	 
	 	By:	
			 

			
	 	 	
			Name:

			Title:

			

 

 

 

 

 

 

 

 

K-2

 

 

Annex I

 

 

 

LOANS FOR WHICH REQUIRED DOCUMENTS WERE HELD IN CUSTODY

 

(January 1, 20[__] to December 31, 20[__])

 

	
			Loan Number

			 

				
			Obligor’s Name

				
			Address

				
			Required Documents

			
	
			 

			 

			 

				 	 	 
	
			 

			 

			 

				 	 	 
	
			 

			 

			 

				 	 	 

 

 

 

 

 

 

K-3

 

 

Exhibit L-1

to Sale and

Servicing Agreement

 

FORM OF INITIAL CERTIFICATION

 

	 	 	
			January 22, 2019

			
	 	 	 
	
			Hercules Capital Funding 2019-1 LLC,

			  as the Trust Depositor

			c/o Hercules Capital, Inc. 

			Palo Alto, California 94301

			Re: Hercules Capital Funding Trust 2019-1

			Telephone: (650) 289-3060

				 	
			Guggenheim Securities, LLC,

			as Initial Purchaser (the “Initial Purchaser”)

			330 Madison Avenue

			New York, NY 10017

			Re: Hercules Capital Funding Trust 2019-1

			Facsimile No.: (704) 374 6495

			
	 	 	 
	
			Hercules Capital, Inc., as Seller and Servicer

			Palo Alto, California 94301

			Re: Hercules Capital Funding Trust 2019-1

			Telephone: (650) 289-3060

				 	 

 

 

	
			Re:

				
			Sale and Servicing Agreement dated as of January 22, 2019 – Hercules Capital Funding Trust 2019-1

			

 

Ladies and Gentlemen:

 

In accordance with Section 2.11(a) of the above–captioned Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), the undersigned, as the Custodian, hereby certifies that, except as noted on the attachment hereto, if any (the “Loan Exception Report”), it has received each of the Required Loan Documents required to be delivered to it pursuant to Section 2.08 of the Agreement with respect to each Loan listed in the List of Loans and the documents contained therein appear to be properly executed (if applicable) and related to such Loan and bear original signatures to the extent required under the definition of Required Loan Documents. Capitalized terms used but not defined herein have the meanings set forth in the Agreement.

 

The Custodian has made no independent examination of any such documents beyond the review specifically required in the Agreement.

 

 

****

 

 

 

 

L-1-1

 

 

The Custodian makes no representations as to: (i) the validity, legality, sufficiency, enforceability or genuineness of any such documents or any of the Loans identified on the List of Loans, or (ii) the collectibility, insurability, effectiveness or suitability of any such Loan.

 

 

	 	
			U.S. BANK NATIONAL 

			ASSOCIATION, as the Custodian

			
	 	 	 
	 	By:	
			 

			
	 	 	
			Name:

			Title:

			

 

 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Initial Certification of the Custodian

 

L-1-2

 

 

LOAN EXCEPTION REPORT

 

[________]

 

 

 

 

 

 

 

 

 

L-1-3

 

 

Exhibit L-2

to Sale and

Servicing Agreement

FORM OF FINAL CERTIFICATION

	 	 	
			[______], 2019

			
	 	 	 
	
			Hercules Capital Funding 2019-1 LLC,

			  as the Trust Depositor

			c/o Hercules Capital, Inc. 

			Palo Alto, California 94301

			Re: Hercules Capital Funding Trust 2019-1

			Telephone: (650) 289-3060

				 	
			Guggenheim Securities, LLC,

			as Initial Purchaser (the “Initial Purchaser”)

			330 Madison Avenue

			New York, NY 10017

			Re: Hercules Capital Funding Trust 2019-1

			Facsimile No.: (704) 374 6495

			
	 	 	 
	
			Hercules Capital, Inc., as Seller and Servicer

			Palo Alto, California 94301

			Re: Hercules Capital Funding Trust 2019-1

			Telephone: (650) 289-3060

				 	 
	 	 	 

	
			Re:

				
			Sale and Servicing Agreement dated January 22, 2019 – Hercules Capital Funding Trust 2019-1

			

 

Ladies and Gentlemen:

 

In accordance with Section 2.11 of the above-captioned Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), the undersigned, as the Custodian, hereby certifies that, except as noted on the attachment hereto, if any (the “Loan Exception Report”) as to each Loan listed on the List of Loans (other than any Loan paid in full or listed on the attachment hereto), it has reviewed the documents identified on the related List of Loans and required to be delivered to it pursuant to Section 2.08 of the Agreement and has determined that all such documents are in its possession, and relate to such Loan. Capitalized terms used but not defined herein have the same meanings set forth in the Agreement.

 

The Custodian has made no independent examination or inquiry of such documents beyond the review specifically required in the Agreement.

 

The Custodian makes no representations as to: (i) the validity, legality, enforceability or genuineness of any such documents contained in each or any of the Loans identified on the List of Loans, (ii) the collectibility, insurability, effectiveness or suitability of any such Loan, or (iii) the compliance by such documents with statutory or regulatory guidelines.

 

****

 

 

 

L-2-1

 

 

	 	
			U.S. BANK NATIONAL 

			ASSOCIATION, as the Custodian

			
	 	 	 
	 	
			By:

				 
	 	
			Name:

				 
	 	
			Title:

				 
	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

Hercules Capital Funding Trust 2019-1

Final Certification

 

L-2-2

 

 

LOAN EXCEPTION REPORT

 

[________]

 

 

 

 

 

 

 

 

L-2-3

 

 

Exhibit M

to Sale and

Servicing Agreement

 

REQUEST FOR RELEASE OF DOCUMENTS

 

	
			To:

				
			U.S. Bank National Association,

			

as the Trustee

One Federal Street, 3rd Floor

Boston, Massachusetts 02110

Attn: Jack Lindsay

Ref: Hercules 2019-1

 

U.S. Bank National Association,

as the Custodian

1719 Otis Way

Florence, South Carolina 29501

Attention: Steven Garrett

Ref: Hercules Capital Funding Trust 2019-1

 

	
			Re:

				
			Sale and Servicing Agreement dated January 22, 2019 – Hercules Capital Funding Trust 2019-1

			

 

In connection with the administration of the pool of Loans held by you, we request the release, and acknowledge receipt, of the (Loan File/[specify document]) for the Loan described below, for the reason indicated.

 

Obligor’s Name, Address & Zip Code:

 

Loan Number:

 

Reason for Requesting Documents (check one)

 

	
			______1.

				
			Loan paid in full

			
	 	
			(Servicer hereby certifies that all amounts received in connection therewith have been credited to the Principal and Interest Account.)

			
	 	 
	
			______2.

				
			Loan liquidated

			
	 	
			(Servicer hereby certifies that all proceeds of foreclosure, insurance or other liquidation have been finally received and credited to the Principal and Interest Account.)

			
	 	 
	
			______3.

				
			Loan in foreclosure

			
	 	 
	
			______4.

				
			Loan sold, repurchased or substituted pursuant to Article II or XI of the Sale and Servicing Agreement (Servicer hereby certifies that the repurchase price to the extent required has been credited to the Principal and Interest Account and/or remitted to the Trustee for deposit into the Note Distribution Account pursuant to the Sale and Servicing Agreement.)

			

 

M-1

 

 

	
			______5.

				
			Collateral being released pursuant to Sections 2.10 or 5.02 of the Sale and Servicing Agreement.

			
	 	 
	
			______6.

				
			Loan Collateral or associated loan document being substituted, released, revised or subordinated.

			
	 	 
	
			______7.

				
			Other [Specify.]

			

 

If box 1, 2 or 4 above is checked, and if all or part of the Trustee’s document file was previously released to us, please release to us our previous receipt on file with you, as well as any additional documents in your possession relating to the above specified Loan.

 

If box 3, 5 or 6 above is checked, upon our return of all of the above documents (or the appropriate substitutes therefor, if applicable) to you, please acknowledge your receipt by signing in the space indicated below, and returning this form.

 

	 	 	 	
			HERCULES CAPITAL, INC., as the

			Servicer

			
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	
			By:

				 
	 	 	 	
			Name:

				 
	 	 	 	
			Title:

				 
	 	 	 	
			Date:

				 
	 	 	 	 	 
	
			Documents returned to Trustee:

				 	 	 
	 	 	 	 
	
			U.S. BANK NATIONAL

			ASSOCIATION, as the Trustee

				 	 	 
	 	 	 	 
	 	 	 	 
	
			By:

				 	 	 	 
	
			Name:

				 	 	 	 
	
			Title:

				 	 	 	 
	
			Date:

				 	 	 	 

 

 

M-2

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