UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2017
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-35503
Enova International, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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45-3190813 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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175 West Jackson Blvd. |
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Chicago, Illinois |
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60604 |
(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code:
(312) 568-4200
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class |
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Name of Each Exchange on Which Registered |
Common Stock, $.00001 par value per share |
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New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of 32,745,031 shares of the registrant’s common stock, par value $0.00001 per share, held by non-affiliates on June 30, 2017 was approximately $486,263,710.
At February 22, 2018 there were 33,648,496 shares of the registrant’s Common Stock, $0.00001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
YEAR ENDED DECEMBER 31, 2017
INDEX TO FORM 10-K
PART I |
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Item 1. |
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1 |
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Item 1A. |
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18 |
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Item 1B. |
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39 |
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Item 2. |
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39 |
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Item 3. |
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39 |
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Item 4. |
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39 |
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PART II |
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Item 5. |
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40 |
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Item 6. |
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43 |
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Item 7. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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45 |
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Item 7A. |
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76 |
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Item 8. |
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77 |
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Item 9. |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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125 |
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Item 9A. |
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125 |
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Item 9B. |
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125 |
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PART III |
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Item 10. |
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126 |
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Item 11. |
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126 |
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Item 12. |
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Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
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126 |
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Item 13. |
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Certain Relationships and Related Transactions, and Director Independence |
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126 |
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Item 14. |
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127 |
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PART IV |
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Item 15. |
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128 |
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Item 16. |
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132 |
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133 |
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CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of senior management with respect to the business, financial condition, operations and prospects of Enova International, Inc. and its subsidiaries (collectively, the “Company”). When used in this report, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecast,” “project” and similar expressions or variations as they relate to the Company or its management are intended to identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties that are beyond the ability of the Company to control and, in some cases, predict. Accordingly, there are or will be important factors that could cause the Company’s actual results to differ materially from those indicated in these statements. Key factors that could cause the Company’s actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following:
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the effect of laws and regulations targeting our industry that directly or indirectly regulate or prohibit our operations or render them unprofitable or impractical; |
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the effect of and compliance with domestic and international consumer credit, tax (including the newly enacted Tax Cuts and Jobs Act) and other laws and government rules and regulations applicable to our business, including changes in such laws, rules and regulations, or changes in the interpretation or enforcement thereof, and the regulatory and examination authority of the Consumer Financial Protection Bureau with respect to providers of consumer financial products and services in the United States and the Financial Conduct Authority in the United Kingdom; |
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changes in our U.K. business practices in response to the requirements of the Financial Conduct Authority; |
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the effect of and compliance with enforcement actions, orders and agreements issued by applicable regulators, such as the November 2013 Consent Order issued by the Consumer Financial Protection Bureau; |
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our ability to process or collect loans and finance receivables through the Automated Clearing House system; |
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the deterioration of the political, regulatory or economic environment in countries where we operate or in the future may operate; |
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the actions of third parties who provide, acquire or offer products and services to, from or for us; |
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public and regulatory perception of the consumer loan business, small business financing and our business practices; |
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the effect of any current or future litigation proceedings and any judicial decisions or rulemaking that affects us, our products or the legality or enforceability of our arbitration agreements; |
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changes in demand for our services, changes in competition and the continued acceptance of the online channel by our customers; |
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changes in our ability to satisfy our debt obligations or to refinance existing debt obligations or obtain new capital to finance growth; |
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a prolonged interruption in the operations of our facilities, systems and business functions, including our information technology and other business systems; |
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our ability to maintain an allowance or liability for estimated losses that is adequate to absorb credit losses; |
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compliance with laws and regulations applicable to our international operations, including anti-corruption laws such as the Foreign Corrupt Practices Act and the U.K. Bribery Act 2010 and international anti-money laundering, trade and economic sanctions laws; |
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our ability to attract and retain qualified officers; |
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cyber-attacks or security breaches; |
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acts of God, war or terrorism, pandemics and other events; |
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the ability to successfully integrate newly acquired businesses into our operations; |
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interest rate and foreign currency exchange rate fluctuations; |
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changes in the capital markets, including the debt and equity markets; |
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the effect of any of the above changes on our business or the markets in which we operate; and |
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other risks and uncertainties described herein. |
The foregoing list of factors is not exhaustive and new factors may emerge or changes to these factors may occur that would impact the Company’s business and cause actual results to differ materially from those expressed in any of our forward looking statements. Additional information regarding these and other factors may be contained in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including on Forms 10-Q and 8-K. Readers of this report are encouraged to review all of the Risk Factors contained in Part I, Item 1A. Risk Factors to obtain more detail about the Company’s risks and uncertainties. All forward-looking statements involve risks, assumptions and uncertainties. The occurrence of the events described, and the achievement of the expected results, depends on many events, some or all of which are not predictable or within the Company’s control. If one or more events related to these or other risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. The forward-looking statements in this report are made as of the date of this report, and the Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this report. All forward-looking statements in this report are expressly qualified in their entirety by the foregoing cautionary statements.
Overview
We are a leading technology and analytics company focused on providing online financial services. In 2017, we extended approximately $2.1 billion in credit or financing to borrowers. As of December 31, 2017, we offered or arranged loans or draws on lines of credit to consumers in 33 states in the United States and in the United Kingdom and Brazil. We also offered financing to small businesses in all 50 states and Washington D.C. in the United States. We use our proprietary technology, analytics and customer service capabilities to quickly evaluate, underwrite and fund loans or provide financing, allowing us to offer consumers and small businesses credit or financing when and how they want it. Our customers include the large and growing number of consumers who and small businesses which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. We were an early entrant into online lending, launching our online business in 2004, and through December 31, 2017, we have completed over 43.2 million customer transactions and collected approximately 22 terabytes of currently accessible consumer behavior data, allowing us to better analyze and underwrite our specific customer base. We have significantly diversified our business over the past several years having expanded the markets we serve and the financing products we offer. These financing products include short-term loans, line of credit accounts, installment loans and receivables purchase agreements (“RPAs”).
We believe our customers highly value our products and services as an important component of their personal or business finances because our products are convenient, quick and often less expensive than other available alternatives. We attribute the success of our business to our advanced and innovative technology systems, the proprietary analytical models we use to predict the performance of loans and finance receivables, our sophisticated customer acquisition programs, our dedication to customer service and our talented employees.
We have developed proprietary underwriting systems based on data we have collected over our more than 13 years of experience. These systems employ advanced risk analytics to decide whether to approve financing transactions, to structure the amount and terms of the financings we offer pursuant to jurisdiction-specific regulations and to provide customers with their funds quickly and efficiently. Our systems closely monitor collection and portfolio performance data that we use to continually refine the analytical models and statistical measures used in making our credit, purchase, marketing and collection decisions.
Our flexible and scalable technology platforms allow us to process and complete customers’ transactions quickly and efficiently. In 2017, we processed approximately 3.9 million transactions, and we continue to grow our loan and finance receivables portfolio and increase the number of customers we serve through desktop, tablet and mobile platforms. Our highly customizable technology platforms allow us to efficiently develop and deploy new products to adapt to evolving regulatory requirements and consumer preference, and to enter new markets quickly. In 2012, we launched a new product in the United States designed to serve near-prime customers, and in April 2014 we introduced a similar product in the United Kingdom. In June 2014, we launched our business in Brazil, where we arrange financing for borrowers through a third-party lender. In addition, in July 2014, we introduced a new line of credit product in the United States to serve the needs of small businesses. In June 2015, we further expanded our product offering by acquiring certain assets of a company that provides financing to small businesses by offering RPAs (see Note 2 in the Notes to Consolidated Financial Statements). These new products have allowed us to further diversify our product offerings, customer base and geographic scope. In 2017, we derived 84.1% of our total revenue from the United States and 15.9% of our total revenue internationally, with 85.6% of international revenue (representing 13.6% of our total revenue) generated in the United Kingdom.
We have been able to consistently acquire new customers and successfully generate repeat business from returning customers when they need financing. We believe our customers are loyal to us because they are satisfied with our products and services. We acquire new customers from a variety of sources, including visits to our own websites, mobile sites or applications, and through direct marketing, affiliate marketing, lead providers and relationships with other lenders. We believe that the online convenience of our products and our 24/7 availability to accept applications with quick approval decisions are important to our customers.
Once a potential customer submits an application, we quickly provide a credit or purchase decision. If a loan or financing is approved, we or our lending partner typically fund the loan or financing the next business day or, in some cases, the same day. During the entire process, from application through payment, we provide access to our well-trained customer service team. All of our operations, from customer acquisition through collections, are structured to build customer satisfaction and loyalty, in the event that a customer has a need for our products in the future. We have developed a series of sophisticated proprietary scoring models to support our various products. We believe that these models are an integral component of our operations and they allow us to complete a high volume of customer transactions while actively managing risk and the related credit quality of our loan and finance receivable portfolios. We believe our successful application of these technology innovations differentiates our capabilities relative to competitive platforms as evidenced by our history of strong growth and stable credit quality.
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Our online financing products and services provide customers with a deposit of funds to their bank account in exchange for a commitment to repay the amount deposited plus fees, interest and/or revenue on the receivables purchased. We originate, arrange, guarantee or purchase short-term consumer loans, line of credit accounts, installment loans and RPAs. We also offer an analytics-as-a-service solution for businesses. We have one reportable segment that includes all of our online financial services.
Short-term consumer loans . Short-term consumer loans are unsecured loans written by us or by a third-party lender through our credit services organization and credit access business programs, which we refer to as our CSO programs, that we arrange and guarantee. As of December 31, 2017, we offered or arranged short-term consumer loans in 18 states in the United States and the United Kingdom. Short-term consumer loans generally have terms of seven to 90 days, with proceeds typically deposited promptly in the customer’s bank account in exchange for a pre-authorized debit from their account or debit card. Due to the credit risk and high transaction costs of serving our customer segment, the interest and/or fees we charge are generally considered to be higher than the interest or fees charged to consumers with superior credit histories by banks and similar lenders who are typically unwilling to make unsecured loans to non-prime credit consumers. Our short-term consumer loans contributed approximately 23.4% of our total revenue in 2017, 26.3% in 2016, and 31.4% in 2015.
Line of credit accounts . We offer new consumer line of credit accounts in six states (and continue to service existing line of credit accounts in one additional state) in the United States and business line of credit accounts in 30 states in the United States, which allow customers to draw on their unsecured line of credit in increments of their choosing up to their credit limit. Customers may pay off their account balance in full at any time or make required minimum payments in accordance with their terms of the line of credit account. As long as the customer’s account is in good standing and has credit available, customers may continue to borrow on their line of credit. Our line of credit accounts contributed approximately 31.1% of our total revenue in 2017, 29.6% in 2016, and 28.4% in 2015.
Installment loans . Installment loans are longer-term loans that generally require the outstanding principal balance to be paid down in multiple installments. We offer, or arrange through our CSO Programs or market and purchase through our Bank Program, multi-payment unsecured consumer installment loan products in 29 states in the United States and small business installment loans in 10 states. We also offer or arrange multi-payment unsecured consumer installment loan products in the United Kingdom and Brazil. Terms for our installment loan products range between two and 60 months. These loans generally have higher principal amounts than short-term loans. The loan may be repaid early at any time with no prepayment charges. Our installment loans contributed approximately 43.6% of our total revenue in 2017, 42.9% in 2016, and 44.3% in 2015.
We have been investing and will continue to invest in the growth of our near-prime installment lending portfolio, particularly loans with an annual percentage rate (“APR”), at or below 36%, and those through loan programs that we are establishing with a small number of banks.
Receivables purchase agreements . Under RPAs, small businesses receive funds in exchange for a portion of the business’s future receivables at an agreed upon discount. In contrast, lending is a commitment to repay principal and interest and/or fees. A small business customer who enters into a RPA commits to delivering a percentage of its receivables through ACH or wire debits or by splitting credit card receipts until all purchased receivables are delivered. We offer RPAs in all 50 states and in Washington D.C. in the United States. RPAs contributed approximately 1.8% of our total revenue in 2017, 2.5% in 2016, and 1.1% in 2015.
CSO Programs . Through our CSO programs, we provide services related to third-party lenders’ short-term and installment loan products by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under our CSO programs include credit-related services such as arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents (“CSO loans”). When a consumer executes an agreement with us under our CSO programs, we agree, for a fee payable to us by the consumer, to provide certain services, one of which is to guarantee the consumer’s obligation to repay the loan received by the consumer from the third-party lender if the consumer fails to do so. For CSO loans, each lender is responsible for providing the criteria by which the consumer’s application is underwritten and, if approved, determining the amount of the consumer loan. We, in turn, are responsible for assessing whether or not we will guarantee such loan. The guarantee represents an obligation to purchase specific short-term loans, which generally have terms of less than 90 days, and specific installment loans, which have terms of four to 12 months, if they go into default.
As of December 31, 2017, 2016 and 2015, the outstanding amount of active short-term consumer loans originated by third-party lenders under the CSO programs was $28.9 million, $26.1 million and $25.2 million, respectively, which were guaranteed by us. The outstanding amount of active installment loans originated by third-party lenders under the CSO programs was $5.2 million, $6.1 million and $9.0 million as of December 31, 2017, 2016 and 2015, respectively, which were guaranteed by us.
Bank program . In March 2016, we launched a program with a state-chartered bank where we provide technology, loan servicing and marketing services to the bank (the “Bank Program”). Our bank partner offers unsecured consumer installment loans with an APR at or below 36%. We also have the ability to purchase loans originated through this program. We plan to grow this program through
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expanding to more states and adding additional partners. Revenue generated from this program for the years ended December 31, 2017 and 2016 was 2.1% and 0.6% of our total revenue, respectively.
Analytics-as-a-Service. In 2016, we launched a product that uses our proprietary technology and analytics capabilities to offer businesses a solution for real-time decisioning at scale.
Our Markets
We currently provide our services in the following countries:
United States. We began our online business in the United States in May 2004. As of December 31, 2017, we provided services in all 50 states and Washington D.C. We market our financing products under the names CashNetUSA at www.cashnetusa.com, NetCredit at www.netcredit.com, Headway Capital at www.headwaycapital.com and The Business Backer at www.businessbacker.com. The United States represented 84.1% of our total revenue in 2017 and 83.6% of our total revenue in 2016.
United Kingdom . We provide services in the United Kingdom under the names QuickQuid at www.quickquid.co.uk, Pounds to Pocket at www.poundstopocket.co.uk and On Stride Financial at www.onstride.co.uk. We began our QuickQuid short-term consumer loan business in July 2007, our Pounds to Pocket installment loan business in September 2010, and our On Stride near-prime installment loan business in April 2014. The United Kingdom represented 13.6% of our total revenue in 2017 and 13.9% of our total revenue in 2016.
Brazil. In June 2014, we launched our business in Brazil where we arrange installment loans for a third party lender under the name Simplic at www.simplic.com.br. We plan to continue to invest in and expand our lending in Brazil. Brazil represented 2.2% of total revenue in 2017 and 1.6% of total revenue in 2016.
Exiting Australia and Canada Markets
We previously provided services under the name DollarsDirect at www.dollarsdirect.com.au in Australia, and we began providing services there in May 2009. We previously provided services in Canada in the provinces of Ontario, British Columbia, Alberta and Saskatchewan under the name DollarsDirect at www.dollarsdirect.ca, and we began providing services there in October 2009. Due to the small size of the Australian and Canadian markets and our limited operations there, we decided to exit those markets in 2016 and reallocate our resources to our other existing businesses. As a result, we have stopped lending activities and have wound down our loan portfolios.
Key Financial and Operating Metrics
We have achieved significant growth since we began our online business as we have expanded both our product offerings and the geographic markets we serve. We measure our business using several financial and operating metrics. Our key metrics include domestic and international combined loans and finance receivables outstanding, in addition to other measures described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
This growth in product offerings and geographic markets has resulted in significant revenue diversification, as set forth below:
Additional financial information regarding our operating segment and each of the geographic areas in which we do business is provided in “Note 17. Operating Segment Information—Geographic Information” to our Audited Consolidated Financial Statements in Part II, Item 8 of this report.
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The internet has transformed how consumers and small businesses shop for and acquire products and services. According to a study by the United Nations, 48% of the world’s population had access to the internet in 2017, a 4% increase from 2015. International Data Corporation reported that global internet usage is expected to increase at a pace of 2% annually through 2020. Accompanying the rise in internet usage is the continued disruption of storefront retail by e-commerce companies like Amazon, as consumers flock to purchase goods and interact with businesses online. According to the U.S. Census Bureau, U.S. e-commerce sales as a percent of total quarterly retail sales increased nearly threefold from the first quarter of 2007 to the third quarter of 2017, reaching 9.1%. In addition, a number of traditional financial services such as banking, bill payment and investing have become widely available online. A March 2016 report by the Consumer and Community Development Research Section of the Federal Reserve Board’s Division of Consumer and Community Affairs found that approximately 71% of bank customers in a U.S. sample have used online banking as a means of accessing banking services. This level of use highlights the extent to which consumers now accept the internet for conducting their financial transactions and are willing to entrust their financial information to online companies. We believe the increased acceptance of online financial services has led to an increased demand for online lending and financing, the benefits of which include customer privacy, easy access, security, 24/7 availability to apply for a loan or financing, speed of funding and transparency of fees and interest.
We use the internet to serve the large and growing number of underbanked consumers who and small businesses which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. Demand from consumers has been fueled by several demographic and socioeconomic trends, including an overall increase in the population and stagnant to declining growth in the household income for working-class individuals. The necessity for alternative financial services was highlighted by a May 2017 report from the Federal Reserve, which found that 44% of respondents could not cover an emergency expense of $400, or would cover it by selling something or borrowing money. The report also found a sizeable portion of the population (26%) is unbanked or underbanked, with over half of unbanked consumers turning to alternative financial services options in the prior year. Approximately 55% of respondents had been denied credit, were offered less credit than they desired, or desired credit but did not apply for fear of denial.
Small businesses are also suffering from lack of access to credit from traditional lenders. Among a sample of small businesses surveyed for the National Small Business Association’s 2017 Mid-Year Economic Report, 20% reported that lack of available capital is one of the three most significant challenges to the future growth and survival of their business. Similarly, according to a 2017 study by the Federal Reserve Banks, only 47% of small employer firms that were approved for financing received the full amount requested. Online lending and funding options are emerging as a solution for small businesses which are seeking capital. According to data provided by small business credit tracker Paynet Inc. for a November 2015 Wall Street Journal article, banks issued only 43% of business loans up to $1 million through August of 2015, a decrease of 15% from 2009. Conversely, nonbank lenders increased their market share from 10% to 26%, and the Federal Reserve found that 21 percent of small businesses surveyed applied for credit from online lenders. Aside from the need for capital, businesses seek out online lenders for their often faster, easier application process. In the Federal Reserve study, approved applicants cited the long wait for a credit decision and the difficult application process as top reasons for their dissatisfaction with banks, whereas online lenders performed the best in these areas.
We believe that consumers and small businesses seek online lending services for numerous reasons, including because they often:
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prefer the simplicity, transparency and convenience of these services; |
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require access to financial services outside of normal financial services storefront hours; |
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have an immediate need for cash for financial challenges and unexpected expenses; |
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have been unable to access certain traditional lending or other credit services; |
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seek an alternative to the high cost of bank overdraft fees, credit card and other late payment fees and utility late payment fees or disconnect and reconnection fees; and |
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wish to avoid potential negative credit consequences of missed payments with traditional creditors. |
With increasing competition across industries, tightening regulations and higher expectations from consumers, businesses are seeking solutions for faster, more accurate decision making. In 2016, we launched a product that uses our proprietary technology and analytics capabilities to offer businesses a solution for real-time decisioning at scale. Based on our own analysis, the market size for analytics-as-a-service was approximately $4 billion in 2014 . The market has since expanded to more than $7 billion, and, according to a report by Orbis Research, the market is expected to experience a CAGR of 30.39% between 2017 and 2022, reaching a value of $49.27 billion by the end of 2022.
Our Customers
Our U.S. sub-prime consumer customer base is comprised largely of individuals living in households that earn an average annual income of $41,000 in the United States and £25,000 in the United Kingdom, and our U.S. near-prime customers earn an average
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annual income of $61,000. Based on our analysis of industry data, we believe our addressable markets are approximately 68 million and 7 million individuals in the United States and the United Kingdom, respectively. The short-term lending market is sizable in the United States, the United Kingdom and Brazil. We estimate there is a $69 billion consumer lending opportunity market in the United States and a $9 billion lending market in the United Kingdom. In Brazil, we estimate there to be 74 million class C and D consumers and a $42 billion consumer loans market. Small business lending is also an attractive market opportunity, with a total U.S. small business loan market of $82 billion. Tighter banking regulations forced banks to vacate the market for loans under $1 million. Loans under $100 thousand are the fastest growing loan segment and 66% of all small business loan growth. Our small business customers who enter into RPAs average approximately $1.5 million in annual sales and 10 years of operating history while those who obtain a line of credit account average approximately $450 thousand in annual sales and 7 years of operating history. In 2016, we launched an analytics-as-a-service business that we believe has applications for multiple industries, including finance, insurance, education, and real estate.
Our Competitive Strengths
We believe that the following competitive strengths position us well for continued growth:
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Significant operating history and first mover advantage. As an early entrant in the online lending sector, we have accumulated approximately 22 terabytes of currently accessible consumer behavior data from more than 43 million transactions in our more than thirteen years of experience. This database allows us to market to a customer base with an established borrowing history as well as to better evaluate and underwrite new customers, leading to better loan performance. In order to develop a comparable database, we believe that competitors would need to incur high marketing and customer acquisition costs, overcome customer brand loyalties and have sufficient capital to withstand higher early losses associated with unseasoned loan portfolios. Additionally, we are licensed in all jurisdictions which require licensing and believe that it would be difficult and time consuming for a new entrant to obtain such licenses. We have also created strong brand recognition over our more than thirteen years of operating history and we continue to invest in our brands, such as CashNetUSA, NetCredit, Pounds to Pocket, QuickQuid, On Stride Financial, Headway Capital, The Business Backer and Simplic, to further increase our visibility. |
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Proprietary analytics, data and underwriting . We have developed a fully integrated decision engine that evaluates and rapidly makes credit and other determinations throughout the customer relationship, including automated decisions regarding marketing, underwriting, customer contact and collections. Our decision engine currently handles more than 100 algorithms and over 1,000 variables. These algorithms are constantly monitored, validated, updated and optimized to continuously improve our operations. Our proprietary models are built on over thirteen years of lending history, using advanced statistical methods that take into account our experience with the millions of transactions we have processed during that time and the use of data from numerous third-party sources. Since we designed our system specifically for our specialized products, we believe our system provides more predictive assessments of future loan behavior than traditional credit assessments, such as the Fair Isaac Corporation score (“FICO score”), and therefore, results in better evaluation of our customer base. |
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Scalable and flexible technology platforms. Our proprietary technology platforms are designed to be powerful enough to handle the large volume of data required to evaluate customer applications and flexible enough to capitalize on changing customer preferences, market trends and regulatory requirements. These platforms have enabled us to achieve significant growth over more than thirteen years as we have expanded both our product offerings and the geographic markets we serve. We began offering installment loans in the United States and United Kingdom in 2008 and 2010, respectively, and added line of credit products in the United States in 2010. We have experienced significant growth in these products, with revenue contribution from installment and line of credit products increasing from 11.7% of total revenue in 2010 to 76.5% of total revenue in 2017. Similarly, total revenue contribution from our international operations, primarily in the United Kingdom, grew from $40.5 million, or 15.9% of total revenue in 2009, to $335.1 million, or 41.4% of total revenue in 2014, before declining to $142.4 million, or 21.8% of total revenue in 2015 and $122.6 million, or 16.4% of total revenue in 2016 due to regulatory changes in the United Kingdom. International revenue was $134.2 million, or 15.9% of total revenue in 2017. Due to the scalability of our platform, we were able to achieve this growth without significant investment in additional infrastructure, and over the past three years, capital expenditures have averaged only 2.9% of revenue per year. We expect our advanced technology and underwriting platform to help continue to drive significant growth in our business. |
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Focus on customer experience. We believe that non-prime credit consumers and small businesses are not adequately served by traditional lenders. To better serve these consumers and small businesses, we use customer-focused business practices, including extended-hours availability of our customer service team by phone, email, fax and web chat. We continuously work to improve customer satisfaction by evaluating information from website analytics, customer surveys, call center feedback and focus groups. Our call center teams receive training on a regular basis and are monitored by quality assurance managers. We believe customers who wish to access credit or financing again often return to us because of our dedication to customer service, the transparency of our fees and interest charges and our adherence to trade association “best practices.” |
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of each of the jurisdictions in which we operate, including laws and regulations relating to fees, loan durations and renewals or extensions, loan amounts, disclosures and underwriting requirements. Our compliance experience and proprietary technology platform allow us to launch new products and to enter new geographic regions with a focus on compliance with applicable laws and customer protection. We are members of industry trade groups, including the Online Lenders Alliance in the United States and the Consumer Finance Association in the United Kingdom, which have promulgated “best practices” for our industry that we have adopted. The flexibility of our online platform enables us to rapidly adapt our products as necessary to comply with changes in regulation, without the need for costly and time consuming retraining of store-based employees and other expenses faced by our storefront competitors. |
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Proven history of growth and profitability. Over the last seven years, we grew our net loan and finance receivables, which are the gross outstanding balances for our loan and finance receivables carried on the consolidated balance sheets net of the allowance for estimated losses, at a compound annual growth rate of 27.6%, from $163.0 million as of December 31, 2011 to $704.7 million as of December 31, 2017. Over the same period, our revenue grew at a compound annual growth rate of 9.8%, from $480.3 million in 2011 to $843.7 million in 2017, while Adjusted EBITDA grew at a compound annual growth rate of 10.3%, from $87.7 million to $157.8 million. Adjusted EBITDA margin has likewise improved, increasing from 18.3% of revenue in 2011 to 18.7% of revenue in 2017. See note (a) in “Selected Financial Data—Part II, Item 6” of this report for a reconciliation of Adjusted EBITDA to net income and Adjusted EBITDA as a percentage of total revenue (which is Adjusted EBITDA margin). |
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Talented, highly educated employees. We believe we have one of the most skilled and talented teams of professionals in the industry. Our employees have exceptional educational backgrounds, with numerous post-graduate and undergraduate degrees in science, technology, engineering and mathematics fields. We hire and develop top talent from graduate and undergraduate programs at institutions such as Carnegie Mellon University, Northwestern University and the University of Chicago. The extensive education of our team is complemented by the experience our leadership team obtained at leading financial services companies and technology firms such as optionsXpress, HSBC, Discover Financial Services, First American Bank, JPMorgan Chase and Groupon. |
Our Growth Strategy
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Increase penetration in existing markets through direct marketing . We believe that we have reached only a small number of the potential customers for our products and services in the markets in which we currently operate. We continue to focus on our direct customer acquisition channels, with direct marketing (traditional and digital) generating approximately 50% of our new consumer transactions in 2017, as compared to 32% in 2009. We believe these channels will ultimately allow us to reach a larger customer base at a lower acquisition cost than the traditional online lead purchasing model. Additionally, as our smaller and less sophisticated competitors, both online and storefront, struggle to adapt to both regulatory developments and evolving customer preference, we believe we have the opportunity to gain significant market share. |
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Expand globally to reach new markets . We are building on our global reach by entering new markets. In June 2014, we launched our business in Brazil, where we arrange loans for borrowers through a third party lender. We also operated a pilot program in China in 2014 and 2015 where we arranged loans for borrowers through a third party lender but in 2016 decided to address the Chinese market as an analytics provider going forward. We believe that these countries have significant populations of underserved consumers. When pursuing geographic expansion, factors we consider include, among others, whether there is (i) widespread internet usage, (ii) an established and interconnected banking system and (iii) government policy that promotes the extension of credit. Our business in Brazil and our previous pilot in China, as well as our launches into the United Kingdom in 2007 and Australia and Canada in 2009, demonstrate that we can quickly and efficiently enter and explore new markets. Our revenue from international operations has increased from $1.6 million in 2007, or 0.9% of our total revenue, to $335.1 million, or 41.4% of total revenue in 2014, before declining to $142.4 million, or 21.8% of total revenue in 2015 and $122.6 million, or 16.4% of total revenue in 2016 due to regulatory changes in the United Kingdom. International revenue was $134.2 million, or 15.9% of our total revenue in 2017. |
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We intend to continue to evaluate and offer new products and services that complement our online specialty financial services in order to meet the growing needs of our consumers and small businesses. |
Online Financing Process
Our consumer and small business financing transactions are conducted almost exclusively online. When a customer is approved for a new loan or RPA, nearly all customers choose to have funds promptly deposited in their bank account and choose to use a pre-authorized debit for repayment from their bank account or debit card. Where permitted by law and approved by us, a customer may choose to renew a short-term consumer loan before payment becomes due by agreeing to pay an additional finance charge. If a loan is renewed or refinanced, the renewal or refinanced loan is considered a new loan.
We have created a quick and simple process for customers to apply for an online loan or RPA, as shown below:
Technology Platform
Our proprietary technology platforms are built for scalability and flexibility and are based on proven open source software. The technology platforms were designed to be powerful enough to handle the large volumes of data required to evaluate consumer and small business applications and flexible enough to capitalize on changing customer preferences, market trends and regulatory changes. The scalability and flexibility of our technology platforms allow us to enter new markets and launch new products quickly, typically within three to six months from conception to launch.
We continually employ technological innovations to improve our technology platforms, which perform a variety of integrated and core functions, including:
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Front-end system , which includes external websites, landing pages and mobile sites and applications that customers use when applying for loans or financing and managing their accounts; |
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Back-end and customer relationship management (“CRM, systems”) , which maintain customer-level data and are used by our call center employees to provide real-time information for all inquiries. Our back-end system and CRM system includes, among other things, our contact management system, operational and marketing management system, automated phone system, Interactive Voice Response and call center performance management system; |
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Decision engine , which rapidly evaluates and makes credit and financing decisions throughout the customer relationship; and |
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Financial system , which manages the external interface for funds transfers and provides daily accounting, reconciliation and reporting functions. |
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The key elements of our technology platforms include:
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Scalable Information Technology infrastructure. Our Information Technology infrastructure allows us to meet customer demand and accommodate business growth. Our services rely on accessing, evaluating and creating large volumes of data including, for example, information collected from approximately 70 million credit reports during 2017. This rich dataset has grown significantly over our more than thirteen-year history and will continue to grow as our business expands. We believe that our scalable IT infrastructure enables us to meet substantial growth demands. |
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Flexible software and integration systems. Our software system is designed to allow us to enter new markets and launch new products rapidly, modify our business operations quickly and account for complex regulatory requirements imposed in the jurisdictions in which we operate. We have developed a proprietary software solution that allows us to innovate quickly and to improve the customer experience. Our integration system allows us to easily interface with banks and other strategic partners in order to deliver the best financial products and services possible. Our software and integration systems and their flexibility allow us much more control over the continually evolving aspects of our business. |
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Rapid development processes. Our software development life cycle is rapid and iterative to increase the efficiency of our platform. We are able to implement software updates while maintaining our system stability. |
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Security. We collect and store personally identifiable customer information, including names, addresses, social security numbers and bank account information. We have safeguards designed to protect this information. We also created controls to limit employee access to that information and to monitor that access. Our safeguards and controls have been independently verified through regular and recurring audits and assessments. |
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Redundant disaster recovery. Certain key parts of our technology platform, such as our phone system for handling U.S. and U.K. customer service on consumer loans, are distributed across two different locations. In addition, critical components of our platform are redundant. This provides redundancy, fault tolerance and disaster recovery functionality in case of a catastrophic outage. |
Proprietary Data and Analytics
Decision Engine
We have developed a fully integrated decision engine that evaluates and rapidly makes credit and other determinations throughout the customer relationship, including automated decisions regarding marketing, underwriting, customer contact and collections. Our decision engine currently handles more than 100 algorithms and over 1,000 variables. The algorithms in use are constantly monitored, validated, updated and optimized to continuously improve our operations. In order to support the daily running and ongoing improvement of our decision engine, we have assembled a highly skilled team of over 60 data and analytics professionals as of December 31, 2017.
Proprietary Data, Models and Underwriting
Our proprietary models are built on more than thirteen years of history, using advanced statistical methods that take into account our experience with the millions of transactions we have processed during that time and the use of data from numerous third-party sources. We continually update our underwriting models to manage risk of defaults and to structure loan and financing terms. Our system completes these assessments within seconds of receiving the customer’s data.
Our underwriting system is able to assess risks associated with each customer individually based on specific customer information and historical trends in our portfolio. We use a combination of numerous factors when evaluating a potential customer, which can include a consumer’s income, rent or mortgage payment amount, employment history, external credit reporting agency scores, amount and status of outstanding debt and other recurring expenditures, fraud reports, repayment history, charge-off history and the length of time the customer has lived at his or her current address. While the relative weight or importance of the specific variables that we consider when underwriting a loan changes from product to product, generally, the key factors that we consider for loans include monthly gross income, disposable income, length of employment, duration of residency, credit report history and prior loan performance history if the applicant is a returning customer. Similar factors are considered for small business applicants and also include length of time in business, online business reviews, and sales volumes. Our customer base for consumer loans is predominantly in the low to fair range of FICO scores, with scores generally between 500 and 680 for most of our loan products. We generally do not take into account a potential customer’s FICO score when deciding whether to make a loan. A Vantage score is one of the factors in our credit models for our near-prime installment product in the United States. Since we designed our system specifically for our specialized products, we believe our system provides more predictive assessments of future payment behavior and results in better evaluation of our customer base when compared to traditional credit assessments, such as a FICO score.
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Our robust fraud prevention system is built from in-depth analysis of previous fraud incidences and information from third party data sources. To ensure sustainable growth, our fraud prevention team has built rigorous systems and processes to detect fraud trends, identify fraudulent applications and learn from past fraudulent cases.
Working together with multiple vendors, our systems first determine whether customer information submitted matches other indicia regarding the application and that the applicant can authorize transactions for the submitted bank account. To prevent more organized and systematic fraud, we have developed predictive models that incorporate signals from various sources that we have found to be useful in identifying fraud. These models utilize advanced data mining algorithms and recent technologies to effectively identify fraudulent applications with a very low false positive rate. In addition, we have built strong loan processing teams that handle suspicious activities efficiently while minimizing friction in customer experience. Our fraud prevention system incorporates algorithms to differentiate customers in an effort to identify suspected fraudulent activity and to reduce our risks of loss from fraud.
We continuously develop and implement ongoing improvements to these systems and, while no system can completely protect against losses from fraud, we believe our systems provide protection against significant fraud losses.
Marketing
We use a multi-channel approach to marketing our online loans and financing products, with both broad-reach and highly-targeted channels, including television, digital, direct mail, telemarketing and partner marketing (which includes lead providers, independent brokers and marketing affiliates). The goal of our marketing is to promote our brands and products in the online lending marketplace and to directly acquire new customers at low cost. Our marketing has successfully built strong awareness of and preference for our brands, as our products have achieved market leadership through the following:
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Traditional advertising . We use television, direct mail, radio and outdoor advertisements, supported by technology infrastructure and key vendors, to drive and optimize website traffic and loan volume. We believe our investments through these channels have helped create strong brand awareness and preference in the customer segments and markets we serve. |
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Digital acquisition . Our online marketing efforts include pay-per-click, keyword advertising, search engine optimization, marketing affiliate partnerships, social media programs and mobile advertising integrated with our operating systems and technology from vendors that allow us to optimize customer acquisition tactics within the daily operations cycle. |
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Partner Marketing . We purchase qualified leads for prospective new customers from a number of online lead providers and independent brokers and through marketing affiliate partnerships. We believe that our rapid decision making on lead purchases, strong customer conversion rate and significant scale in each of our markets make us a preferred partner for lead providers, brokers and affiliates while at the same time our technology and analytics help us determine the right price for the right leads. |
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User experience and conversion. We measure and monitor website visitor usage metrics and regularly test website design strategies to improve customer experience and conversion rates. |
Our brand, technology and analytics-powered approach to marketing has enabled us to increase the percentage of consumer loans sourced through direct marketing (where we have more visibility and control than in the lead purchase or affiliate channels) from approximately 32% in 2009 to 50% in 2017, and we believe we have also improved customer brand loyalty during the same period.
Customer Service
We believe that our in-house call center and our emphasis on superior customer service are significant contributors to our growth. To best serve our consumers and small businesses, we use customer-oriented business practices, such as offering extended-hours customer service. We continuously work to improve our customers’ experience and satisfaction by evaluating information from website analytics, customer satisfaction surveys, call center feedback, call monitoring and focus groups. Our call center teams receive training on a regular basis, are monitored by quality assurance managers and adhere to rigorous internal service-level agreements. We do not outsource our call center operations, except in Brazil. We have two call center facilities to support our U.S. and U.K. operations, one in our corporate offices in Chicago and another in Gurnee, Illinois, a Chicago suburb. As of December 31, 2017, we had over 500 employees in our call centers supporting our customers.
Collections
We operate centralized collection teams within our two call centers to coordinate a consistent approach. We have implemented loan and financing collection policies and practices designed to optimize regulatory compliant loan and financing repayment, while also providing excellent customer service. Our collections employees are trained to help the customer understand available payment alternatives and make arrangements to repay the loan or financing. We use a variety of collection strategies to satisfy a delinquent loan, such as settlements and payment plans, or to adjust the delivery of finance receivables.
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Call center employees contact customers following the first missed payment and periodically thereafter. Our primary methods of contacting past due customers are through phone calls, letters and emails. At times, we sell loans that we are unable to collect to debt collection companies or place the debt for collection with debt collection companies.
Competition
We have many competitors. Our principal competitors are consumer loan and finance companies, CSOs, online lenders, credit card companies, auto title lenders, pawnshops and other financial institutions that offer similar financial products and services, including loans on an unsecured as well as a secured basis. We believe that there is also indirect competition to some of our products, including bank overdraft facilities and banks’ and retailers’ insufficient funds policies, many of which may be more expensive alternative approaches for consumers and small businesses to cover their bills and expenses than the consumer and small business loan and financing products we offer. Some of our U.S. competitors operate using other business models, including a “tribal model” where the lender follows the laws of a Native American tribe regardless of the state in which the customer resides.
We believe that the principal competitive factors in the consumer and small business loan and financing industry consist of the ability to provide sufficient loan or financing size to meet customers’ financing requests, speed of funding, customer privacy, ease of access, transparency of fees and interest and customer service. We believe we have a significant competitive advantage as an early mover in many of the markets that we serve. New entrants face obstacles typical to launching new lending operations, such as successfully implementing underwriting and fraud prevention processes, incurring high marketing and customer acquisition costs, overcoming customer brand loyalty and having or obtaining sufficient capital to withstand early losses associated with unseasoned loan portfolios. In addition, there are substantial regulatory and compliance costs, including the need for expertise to customize products and obtain licenses to lend in various states in the United States and in international jurisdictions. Our proprietary technology, analytics expertise, scale, international reach, brand recognition and regulatory compliance would be difficult for a new competitor to duplicate.
Because numerous competitors offer consumer and small business loan and financing products, and many of our competitors are privately held, it is difficult for us to determine our exact competitive position in the market. However, we believe our principal online competitors in the United States include Avant, Curo, Elevate, and LendUp. Storefront consumer loan lenders that offer loans online or in storefronts are also a source of competition in some of the markets where we offer consumer loans, including Advance America, Ace Cash Express, Check Into Cash, Check ‘n Go and One Main Financial. For online small business financing, we believe our main competitors are CAN Capital, OnDeck and Kabbage. In the United Kingdom, we believe that our principal online competitors include 118 118 Money, Amigo, Avant, Lending Stream, Mr. Lender, PaydayUK, Satsuma, Elevate and Wonga.
Intellectual Property
Protecting our rights to our intellectual property is critical, as it enhances our ability to offer distinctive services and products to our customers, which differentiates us from our competitors. We rely on a combination of trademark laws and trade secret protections in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect the intellectual property rights related to our proprietary analytics, predictive underwriting models and software systems. We have several registered trademarks, including CashNetUSA, QuickQuid and our “e” logo. These trademarks have varying expiration dates, and we believe they are materially important to us and we anticipate maintaining them and renewing them.
Seasonality
Demand for our consumer loan products and services in the United States has historically been highest in the third and fourth quarters of each year, corresponding to the holiday season, and lowest in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds. Typically, our cost of revenue for our consumer loan products, which represents our loan loss provision, is lowest as a percentage of revenue in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds, and increases as a percentage of revenue for the remainder of each year. Consequently, we experience seasonal fluctuations in our domestic operating results and cash needs.
Financial Information on Segments and Areas
Additional financial information regarding our operating segment and each of the geographic areas in which we do business is provided in “Item 8. Financial Statements and Supplementary Data—Note 17” of this report.
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Management and Personnel
Executive Officers
Our executive officers, and information about each as of December 31, 2017, are listed below.
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POSITION WITH ENOVA |
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AGE |
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David Fisher |
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Chief Executive Officer |
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Greg Zeeman |
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Chief Operating Officer |
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49 |
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Kirk Chartier |
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Chief Marketing Officer |
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54 |
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Steven Cunningham |
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Chief Financial Officer |
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48 |
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Lisa M. Young |
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General Counsel & Secretary |
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There are no family relationships among any of the officers named above. Each officer of Enova holds office from the date of appointment until removal or termination of employment with Enova. Set forth below is additional information regarding the executive officers identified above.
David Fisher has served as our Chief Executive Officer since January 29, 2013 when he joined Enova. Mr. Fisher has also served as our Director since February 11, 2013. Prior to joining Enova, Mr. Fisher was Chief Executive Officer of optionsXpress Holdings, Inc., or optionsXpress, from October 2007 until The Charles Schwab Corporation (“Schwab”), acquired the business in September 2011. Following the acquisition, Mr. Fisher served as President of optionsXpress until March 2012. Mr. Fisher also served as the President of optionsXpress from March 2007 to October 2007 and as the Chief Financial Officer of optionsXpress from August 2004 to March 2007. Prior to joining optionsXpress, Mr. Fisher served as Chief Financial Officer of Potbelly Sandwich Works from February 2001 to July 2004, and before that in the roles of Chief Financial Officer and General Counsel for Prism Financial Corporation. In addition, Mr. Fisher has served on the Board of Directors of InnerWorkings, Inc. since November 2011 and has served on the Board of Directors of GrubHub, Inc. since May 2012. Mr. Fisher also served on the Boards of Directors of optionsXpress from October 2007 until September 2011 and CBOE Holdings, Inc. from January 2007 until October 2011. Mr. Fisher received a Bachelor of Science degree in Finance from the University of Illinois and a law degree from Northwestern University School of Law.
Greg Zeeman has served as our Chief Operating Officer since October 2015. From September 2014 to October 2015, Mr. Zeeman served as Chief Executive Officer of Main Street Renewal, a firm specializing in the acquisition and leasing of single-family properties. From March 2012 to July 2014, Mr. Zeeman served as Chief Operating Officer and Senior Executive Vice President of HSBC USA. From March 2011 to March 2012, Mr. Zeeman served as Executive Vice President and Head, Change Delivery, HSBC Americas, and from January 2009 to March 2011, Mr. Zeeman served as Deputy Chief Executive Officer, HSBC Singapore. From 1999 to 2010, Mr. Zeeman held various roles with Household Credit Card Services and HSBC Consumer & Mortgage Lending. From 1995 to 1999, Mr. Zeeman was a consultant with Boston Consulting Group. Mr. Zeeman holds a Master of Business Administration degree from Harvard University and a Bachelor of Arts degree in Economics and Political Science from the University of North Carolina – Chapel Hill.
Kirk Chartier has served as our Chief Marketing Officer since he joined Enova in April 2013. Prior to joining Enova, Mr. Chartier was the Executive Vice President & Chief Marketing Officer of optionsXpress Holdings from January 2010 until Schwab acquired the business in September 2011. Following the acquisition, Mr. Chartier served as Vice President of Schwab through May 2012. From 2004 to 2010, Mr. Chartier was the Senior Managing Principal and Business Strategy Practice Leader for the Zyman Group, a marketing and strategy consultancy owned by MDC Partners, where he also served in interim senior marketing executive roles for Fortune 500 companies, including Safeco Insurance. Mr. Chartier has held executive roles at technology companies including as Senior Vice President of Business Services & eCommerce for CommerceQuest, as Vice President of Online Marketing & Strategy for THINK New Ideas and as a Corporate Auditor for the General Electric Company. He started his career as a combat pilot with the U.S. Marine Corps and is a veteran of Desert Storm. Mr. Chartier received a Master of Business Administration from Syracuse University, a Bachelor of Arts in Economics from the College of the Holy Cross, and a Bachelor of Science in Engineering from Worcester Polytechnic Institute.
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Steven Cunningham has served as our Chief Financial Officer since he joined Enova in June 2016. Mr. Cunningham joined Enova from Discover Financial Services, where he most recently served as Executive Vice President and Chief Risk Officer for Discover’s $8.7 billion direct banking and payment services business. He joined Discover as its Corporate Treasurer in 2010. Prior to Discover, Mr. Cunningham was the CFO of Harley-Davidson Financial Services, a $7 billion receivables business, and spent eight years at Capital One Financial in various corporate and line of business finance leadership positions, including CFO for the Auto Finance segment, a $20 billion receivables business, and CFO for the company’s banking segment. Mr. Cunningham also has experience as a bank regulator with the FDIC. Mr. Cunningham received a bachelor’s degree in Corporate Finance and Investment Management from the University of Alabama and a Master of Business Administration from George Washington University. He also holds the professional designation of Chartered Financial Analyst.
Lisa M. Young has served as our General Counsel and Secretary since September 2011. Ms. Young joined Enova (then known as CashNetUSA) in June 2009 as General Counsel and became Vice President—General Counsel in August 2011. Ms. Young previously served as Vice President—Assistant General Counsel of JPMorgan Chase following the merger of Bank One and JPMorgan Chase in July 2004, and she served in this position until she joined us in 2009. From May 2003 to June 2004, she served as Senior Counsel with Bank One. Prior to joining Bank One, Ms. Young served as an attorney in the Consumer Financial Services Litigation practice groups of McGuireWoods LLP and Lovells LLP (currently known as Hogan Lovells US LLP) and as a litigation attorney at Goldberg Kohn Ltd. She received a Bachelor of Science degree in Electrical Engineering from the University of Notre Dame and a Juris Doctor from Northwestern University.
Personnel
As of December 31, 2017, we had 1,109 employees.
Market and Industry Data
The market and industry data contained in this Annual Report on Form 10-K, including trends in our markets and our position within such markets, are based on a variety of sources, including our good faith estimates, which are derived from our review of internal surveys, information obtained from customers and publicly available information, as well as from independent industry publications, reports by market research firms and other published independent sources. Although we believe these sources are reliable, we have not independently verified the information. None of the independent industry publications used in this report were prepared on our behalf.
REGULATION
Our operations are subject to extensive regulation, supervision and licensing under various federal, state, local and international statutes, ordinances and regulations.
U.S. Federal Regulation
Consumer Lending Laws. Our consumer loan business is subject to the federal Truth in Lending Act (“TILA”), and its underlying regulations, known as Regulation Z, and the Fair Credit Reporting Act (“FCRA”). These laws require us to provide certain disclosures to prospective borrowers and protect against unfair credit practices. The principal disclosures required under TILA are intended to promote the informed use of consumer credit. Under TILA, when acting as a lender, we are required to disclose certain material terms related to a credit transaction, including, but not limited to, the annual percentage rate, finance charge, amount financed, total of payments, the number and amount of payments and payment due dates to repay the indebtedness. The FCRA regulates the collection, dissemination and use of consumer information, including consumer credit information. The federal Equal Credit Opportunity Act (“ECOA”), prohibits us from discriminating against any credit applicant on the basis of any protected category, such as race, color, religion, national origin, sex, marital status or age, and requires us to notify credit applicants of any action taken on the individual’s credit application.
Consumer Reports and Information. The use of consumer reports and other personal data used in credit underwriting is governed by the FCRA and similar state laws governing the use of consumer credit information. The FCRA establishes requirements that apply to the use of “consumer reports” and similar data, including certain notifications to consumers where their loan application has been denied because of information contained in their consumer report. The FCRA requires us to promptly update any credit information reported to a credit reporting agency about a consumer and to allow a process by which consumers may inquire about credit information furnished by us to a consumer reporting agency.
Information-Sharing Laws. We are also subject to the federal Fair and Accurate Credit Transactions Act, which limits the sharing of information with affiliates for marketing purposes and requires us to adopt written guidance and procedures for detecting, preventing and responding appropriately to mitigate identity theft and to adopt various policies and procedures and provide training and materials that address the importance of protecting non-public personal information and aid us in detecting and responding to suspicious activity, including suspicious activity that may suggest a possible identity theft red flag, as appropriate.
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Marketing Laws. Our advertising and marketing activities are subject to several federal laws and regulations including the Federal Trade Commission Act (the “FTC Act”), which prohibits unfair or deceptive acts or practices and false or misleading advertisements in all aspects of our business. As a financial services company, any advertisements related to our products must also comply with the advertising requirements set forth in TILA. Also, any of our telephone marketing activities must comply with the Telephone Consumer Protection Act (the “TCPA”) and the Telephone Sales Rule (the “TSR”). The TCPA prohibits the use of automatic telephone dialing systems for communications with wireless phone numbers without express consent of the consumer, and the TSR established the Do Not Call Registry and sets forth standards of conduct for all telemarketing. Our advertising and marketing activities are also subject to the CAN-SPAM Act of 2003 which establishes certain requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to the source of content.
Protection of Military Members and Dependents. The Military Lending Act (“MLA”) is a federal law that limits the annual percentage rate to 36% on certain consumer loans made to active duty members of the U.S. military, reservists and members of the National Guard and their immediate families. The MLA’s implementing regulation also contains various disclosure requirements, limitations on renewals and refinancing, as well as restrictions on the use of prepayment penalties, arbitration provisions and certain waivers of rights. The 36% annual percentage rate cap applies to a variety of consumer loan products, including short-term consumer loans. Therefore, due to these rate restrictions, we are unable to offer certain short-term consumer loans to active duty military personnel, active reservists and members of the National Guard and their immediate dependents. Federal law also limits the annual percentage rate on existing loans when the borrower, or spouse of the borrower, becomes an active-duty member of the military during the life of a loan. Pursuant to federal law, the interest rate must be reduced to 6% per year on amounts outstanding during the time in which the servicemember is on active duty.
Funds Transfer and Signature Authentication Laws. The consumer loan business is also subject to the federal Electronic Funds Transfer Act (“EFTA”), and various other laws, rules and guidelines relating to the procedures and disclosures required in debiting or crediting a debtor’s bank account relating to a consumer loan (i.e., Automated Clearing House (“ACH”) funds transfer). Furthermore, we are subject to various state and federal e-signature rules mandating that certain disclosures be made and certain steps be followed in order to obtain and authenticate e-signatures.
Debt Collection Practices. Additionally, our collection activities related to our CSO programs and our Bank Program are required to comply with the federal Fair Debt Collection Practices Act (“FDCPA”), and we also use the FDCPA as a guide in connection with operating our other collection activities. We are also required to comply with all applicable state collection practices laws.
Privacy and Security of Non-Public Customer Information. We are also subject to various federal and state laws and regulations relating to privacy and data security. Under these laws, including the federal Gramm-Leach-Bliley Act (“GLBA”), we must disclose to consumers our privacy policy and practices, including those policies relating to the sharing of consumers’ nonpublic personal information with third parties. This disclosure must be made to consumers when the customer relationship is established and, in some cases, at least annually thereafter. These regulations also require us to ensure that our systems are designed to protect the confidentiality of consumers’ nonpublic personal information. These regulations also dictate certain actions that we must take to notify consumers if their personal information is disclosed in an unauthorized manner.
Anti-Money Laundering and Economic Sanctions. We are also subject to certain provisions of the USA PATRIOT Act and the Bank Secrecy Act under which we must maintain an anti-money laundering compliance program covering certain of our business activities. In addition, the Office of Foreign Assets Control (“OFAC”), prohibits us from engaging in financial transactions with specially designated nationals. Certain of our subsidiaries are also registered as money services businesses with the U.S. Department of the Treasury (“Treasury Department”) and must re-register with the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) at least every two years if conducting money services business.
Anticorruption. We are also subject to the U.S. Foreign Corrupt Practices Act, (the “FCPA”), which generally prohibits companies and their agents or intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits.
CFPB
In July 2010, the U.S. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and Title X of the Dodd-Frank Act created the Consumer Financial Protection Bureau (the “CFPB”), which regulates consumer financial products and services, including consumer loans that we offer. The CFPB has regulatory, supervisory and enforcement powers over providers of consumer financial products and services, including explicit supervisory authority to examine and require registration of such providers. Pursuant to these powers, the CFPB has examined our lending products, services and practices, and we expect to continue to be examined on a regular basis by the CFPB.
On November 20, 2013, Cash America International, Inc. (“Cash America”), our parent company at the time, consented to the issuance of a Consent Order by the CFPB pursuant to which it agreed, without admitting or denying any of the facts or conclusions
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made by the CFPB from its 2012 examination of Cash America and us, to pay a civil money penalty of $5 million. The Consent Order relates in part to issues self-disclosed to the CFPB by us, including the making of a limited number of loans to consumers who may have been active-duty members of the military at the time of the loan at rates in excess of the annual percentage rate permitted by the federal Military Lending Act, and for which made refunds of approximately $33,500, and for certain failures to timely provide and preserve records and information in connection with the CFPB’s examination of us. In addition, as a result of the CFPB’s review, we enhanced and continue to enhance our compliance management system and implemented additional policies and procedures to address the issues identified by the CFPB. These policies, procedures and other initiatives are in many cases subject to review and potential objection by the CFPB. We remain subject to the restrictions and obligations of the Consent Order, including the CFPB’s order that we ensure compliance with federal consumer financial laws and develop more robust compliance policies and procedures.
On May 5, 2016, the CFPB issued proposed rules prohibiting the use of mandatory arbitration clauses and class action waiver provisions in consumer financial services contracts. On July 10, 2017, the CFPB issued a final rule consistent with its proposed rule. On November 1, 2017, President Trump signed a joint resolution passed by the House and Senate pursuant to the Congressional Review Act disapproving the CFPB arbitration rule and blocking it from taking effect. The joint resolution also precludes an agency from reissuing a rule in substantially the same form unless the reissued rule is specifically authorized by a law enacted subsequent to the President signing the joint resolution of disapproval.
On October 6, 2017, the CFPB issued its Final Rule (the “Final Rule”) on Payday, Vehicle Title, and Certain High-Cost Installment Loans. The Final Rule would impose significant limitations on all short-term loans and longer-term loans with balloon payments . Among other provisions, the Final Rule requires lenders to conduct a specific assessment regarding a borrower’s ability to repay, including a requirement to verify borrowers’ income and major financial obligations. The Final Rule also includes limitations on the number of loans that certain borrowers can have within a specified time frame and requires additional disclosures in loan documents and notices and limitations regarding payments. The Final Rule was published in the Federal Register on November 17, 2017 and will apply to loan contracts entered into beginning August 19, 2019. However, under the Congressional Review Act, Congress has 60 legislative days after publication of the rule in the Federal Register to overturn it by a majority vote in both Houses of Congress. On January 16, 2018, the CFPB issued a statement that it intends to engage in a rulemaking process to reconsider the Final Rule. We do not currently know which portions of the Final Rule will be subject to reconsideration or the nature and extent of the final rule that the CFPB will adopt. It is also likely that there will be legal challenges to the final rule if it does not change before it goes into effect.
On July 28, 2016, the CFPB, pursuant to the authority provided in the Dodd-Frank Act, issued an outline of proposals pertaining to third-party debt collectors and others covered by the FDCPA that is intended to increase consumer protection during debt collection (“Debt Collection Outline”). In the Debt Collection Outline, the CFPB is considering substantive rules under the FDCPA that would, among other proposals: (i) require collectors to substantiate the debt and confirm that they have sufficient consumer information before starting collection; (ii) limit communication attempts to six per week through any point of contact; (iii) make it easier for consumers to stop specific ways collectors are contacting them; (iv) prohibit collectors from communicating with certain parties for 30 days after a consumer’s death; (v) make it easier for consumers to dispute debts by, among other proposals, requiring collectors to include more specific information about the debt in the initial collection notices sent to consumers as well as a “tear-off” portion of the notice that consumers could send back to the collector; (vi) require collectors to verify a debt through a written report if the debt is disputed in writing by a consumer; (vii) prohibit collectors from continuing collection efforts or suing for the debt until the necessary documentation is checked if a consumer disputes the debt; and (viii) require a subsequent holder of a debt to resolve any outstanding dispute about the debt before attempting to collect.
The proposals in the Debt Collection Outline would apply to our collection of debt originated by other lenders, including under our CSO programs and our Bank Program. The proposals in the Debt Collection Outline would not apply to our collection of debt that we originate; however, the CFPB has announced that it plans to address consumer protection issues involving first-party debt collectors and creditors separately. The CFPB published its Debt Collection Outline in preparation for convening a Small Business Review Panel to determine whether its proposal could have a significant economic impact on small businesses. The Debt Collection Outline does not include proposed or final rules, and any future rules could be significantly different from those in the Debt Collection Outline. The CFPB has not yet defined a date for any proposed rules related to debt collection nor has it defined the effective date for the implementation of final rules.
For further discussion of the CFPB and its regulatory, supervisory and enforcement powers, see “Risk Factors—Risks Related to Our Business and Industry— The Consumer Financial Protection Bureau has examination authority over our U.S. consumer lending business that could have a significant impact on our U.S. business ” in Part I, Item 1A of this report.
U.S. State Regulation
Our consumer lending business is regulated under a variety of enabling state statutes, all of which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our business. As of the date of this report, we offer or arrange consumer loans in 33 states that have specific statutes and regulations that enable us to offer economically viable products. We currently do not offer consumer loans in the remaining states or in the District of Columbia because we do not believe it is
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economically feasible to operate in those jurisdictions due to specific statutory or regulatory restrictions, such as interest rate ceilings, caps on the fees that may be charged, or costly operational requirements. However, we may later offer our consumer products or services in any of these states or the District of Columbia if we believe doing so may become economically viable because of changes in applicable statutes or regulations or if we determine we can broaden our product offerings to operate under existing laws and regulations.
The scope of state regulation of consumer loans, including the fees and terms of our products and services, varies from state to state. The terms of our products and services vary from state to state in order to comply with the laws and regulations of the states in which we operate. In addition, our advertising and marketing activities and disclosures are subject to review under various state consumer protection laws and other applicable laws and regulations. The states with laws that specifically regulate our consumer products and services may limit the principal amount of a consumer loan and set maximum fees or interest rates customers may be charged. Some states also limit a customer’s ability to renew a short-term consumer loan and require various disclosures to consumers. State statutes often specify minimum and maximum maturity dates for short-term consumer loans such as ours and, in some cases, specify mandatory cooling-off periods between transactions. Our collection activities regarding past due amounts are subject to consumer protection laws and state regulations relating to debt collection practices. In addition, some states require certain disclosures or content to accompany our advertising or marketing materials. Also, some states require us to report short-term consumer loan activity to state-wide databases and restrict the number and/or principal amount of loans a consumer may have outstanding at any particular time or over the course of a particular period of time, typically twelve months.
In Texas and Ohio, where we offer our CSO programs, we comply with the applicable jurisdiction’s Credit Services Organization Act or a similar statute. These laws generally define the services that we can provide to consumers and require us to provide a contract to the customer outlining our services and the cost of those services to the customer. In addition, these laws may require additional disclosures to consumers and may require us to be registered with the jurisdiction and/or be bonded.
We must also comply with state restrictions on the use of lead providers. Over the past few years, several states have taken actions that have caused us to discontinue the use of lead providers in those states. Other states may propose or enact similar restrictions on lead providers in the future.
Over the last few years, legislation that prohibits or severely restricts our consumer loan products and services has been introduced or adopted in a number of states. As a result, we have ceased making consumer loans in several states where we formerly made such loans, and we have also modified our business operations in other states where restrictive legislation has been enacted. For example, Maryland passed a law in 2017 that limits the total fees, charges and interest that can be assessed on unsecured revolving credit plans with Maryland consumers to an effective rate of 33% per year. The law went into effect on July 1, 2017 with regard to new revolving credit plans. Additional legislation or regulations targeting or otherwise directly affecting our products and services have also been recently passed in several states. We regularly monitor proposed legislation or regulations that could affect our business.
Local Regulation—United States
In addition to state and federal laws and regulations, the short-term loan industry is subject to various local rules and regulations. These local rules and regulations are subject to change and vary widely from city to city. Local jurisdictions’ efforts to restrict short-term lending have been increasing. Typically, these local ordinances apply to storefront operations, however, local jurisdictions could attempt to enforce certain business conduct and registration requirements on online lenders lending to residents of that jurisdiction. Actions taken in the future by local governing bodies to impose other restrictions on short-term lenders such as us could impact our business.
International Regulation
United Kingdom
In the United Kingdom, we are subject to regulation by the Financial Conduct Authority, (“FCA”), and must comply with the FCA’s rules and regulations set forth in the FCA Handbook, the Financial Services and Markets Act 2000 (“FSMA”), the Consumer Credit Act 1974, as amended (the “CCA”), and secondary legislation passed under the CCA, among other rules and regulations. We must also follow the Irresponsible Lending Guidance, or the Guidance, of the Office of Fair Trading (the “OFT”), which provides greater clarity for lenders as to business practices that the OFT (and the FCA) believes constitute irresponsible lending under the CCA. In January 2016, we received full authorization from the FCA to provide consumer credit and to perform related activities. We will be required to continue to satisfy certain minimum standards set out in the FSMA, which will result in additional costs to us.
The FCA regulates consumer credit and related activities in accordance with the guidance of the FSMA and the FCA Handbook, which includes prescriptive regulations and carries across many of the standards set out in the CCA and its secondary legislation as well as the Guidance. The FSMA gives the FCA the power to authorize, supervise, examine and bring enforcement actions against providers of consumer credit such as us, as well as to make rules for the regulation of consumer credit. On February 28, 2014, the FCA issued the Consumer Credit Sourcebook (“CONC”), which incorporates prescriptive regulations for lenders such as us, including
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mandatory affordability checks on borrowers, limiting the number of rollovers on short-term loans to two, restricting how lenders can advertise, banning advertisements that the FCA deems misleading, and introducing a limit of two unsuccessful attempts on the use of continuous payment authority (which provides a creditor the ability to directly debit a customer’s account for payment when authorized by the customer to do so) to pay off a loan. Certain provisions of the CONC took effect on April 1, 2014, and other provisions for high cost short-term credit providers such as us, such as the limits on rollovers, continuous payment authority and advertising, took effect on July 1, 2014.
On January 2, 2015, the FCA implemented a cap on the total cost of high-cost short-term credit, which includes a maximum rate of 0.8% of principal per day, and limits the total fees, interest (including post-default interest) and charges (including late fees which are capped at £15) to an aggregate amount not to exceed 100% of the principal amount loaned. The final rule required us to make changes to all of our high-cost short-term products in the United Kingdom. As a result of the final rule, we discontinued offering line of credit accounts to new customers in the United Kingdom in late 2014 and effective January 1, 2015, we discontinued draws on existing line of credit accounts in the United Kingdom.
Due to the concerns expressed about our business by the FCA and the implementation of the rate cap, we made significant modifications to many of our business practices to address the FCA’s expectations. These modifications included adjustments to our affordability assessment practices and underwriting standards that govern who will qualify for a loan from us, reductions in certain maximum loan amounts, alterations to our advertising practices and adjustments to our collections processes (including our practices relating to continuous payment authority) and debt forbearance processes (or our practices regarding customers who have indicated that they are experiencing financial difficulties), all of which resulted in a significant year-over-year decrease in our U.K. consumer loan volume, U.K. loan balances and U.K. revenue for the second half of 2014 and the first half of 2015 as a result of our adapting our U.K. business practices in response to the expectations of the FCA. The implementation of stricter affordability assessments and underwriting standards resulted in a decrease in the number of consumer loans written, the average consumer loan amount and the total amount of consumer loans written to new and returning customers. Additionally, the changes we made to our collections and debt forbearance practices in the United Kingdom resulted in lower collection rates on delinquent loans, and we have experienced and will continue to experience an increase in compliance- and administrative-related costs for our U.K. operations.
The FCA conducted a consultation in 2015 and published its response on September 28, 2015, allowing firms to use continuous payment authority to collect repayments where a customer is in arrears or default and the lender is exercising forbearance. The FCA also imposed a number of regulatory changes on credit brokers and lenders operating in the high-cost-short-term credit market in the United Kingdom. The FCA also implemented a provision that requires providers of high-cost short-term credit include a risk warning in all financial promotions, including previously exempted size-limited ads like SMS text messages and pay-per-click ads. The majority of these changes came into force on November 2, 2015.
In June 2013, the OFT referred the payday lending industry in the United Kingdom to the Competition Commission, which is now the Competition & Markets Authority (“CMA”), for a market investigation. The CMA gathered data from industry participants, including us, in connection with its review of the U.K. payday lending industry to determine whether certain features of the payday lending industry prevent, restrict or distort competition (which is also referred to as having an adverse effect on competition) and, if so, what remedial action should be taken. On August 13, 2015, the CMA published its final order which required online lenders to provide details of their products on at least one price comparison website which is authorized by the FCA once the FCA published rules concerning price comparison websites. The CMA also required online and storefront lenders to provide existing customers with a summary of their cost of borrowing as of August 13, 2016.
On November 29, 2016, the FCA issued a Call for Input, seeking evidence and feedback to further inform its previous reviews of the high-cost credit market, including a review of the payday loan price cap. The Call for Input covered all high-cost products, including payday loans, rent-to-own, pawnbroking loans, guarantor loans, credit cards and installment loans, as well as overdrafts. The CMA previously identified a number of competition issues with overdrafts, including poor price transparency and the nature and level of charges, especially for unarranged overdrafts. The FCA looked in more detail at overdrafts from a consumer protection and a competition perspective. The FCA also reviewed the price cap that was implemented on January 2, 2015 to assess whether there is evidence that suggests the price cap should be changed and to determine whether there is any evidence of consumers turning to illegal money lenders as a result of being excluded from the high-cost credit market because of the price cap. The FCA will also continue to monitor the impact that repeat and multiple borrowing has on the market and consumers. The FCA issued its findings to the Call for Input on July 31, 2017 deciding to maintain the high cost short-term credit price cap at its current level and committing to review it within three years to ensure that it remains effective. The FCA found that regulation of high-cost short-term credit, including the price cap, has led to substantial benefits to consumers. The FCA also highlighted its priorities for the next stage of the review, which will focus on overdrafts, rent-to-own, home-collected credit and catalog credit.
In 2014, the FCA published a policy statement which set out its concerns about the practices of some credit brokers which charge upfront fees to consumers. It also introduced new rules targeted at ensuring that key features of brokers’ relationships with consumers are transparent, which came into effect in 2015. In addition, in its report regarding the payday industry, the CMA recommended that the FCA take steps to ensure that lead generators explain how they operate much more clearly to customers, including that lead
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generators be required to state that application details are referred to the lender that offers the lead generator the best commercial deal rather than to the lender that offers the most suitable loan for the customer’s needs. In September 2015, the FCA published its policy statement confirming its retention of the credit broking rules previously introduced as well as imposing minor changes to CONC rules on credit brokers, which became effective in 2016.
The FCA previously stated that measures taken by it with respect to the payday loan industry would likely force about a quarter of the firms out of the industry in the United Kingdom. For recent developments related to the FCA, including serious concerns that were previously expressed by the FCA regarding our compliance with U.K. legal and regulatory requirements, such as the requirement that our business be capable of being effectively supervised by the FCA and compliance with FCA rules and principles and our affordability assessment and debt forbearance practices, see “Risk Factors—Risks Related to Our Business and Industry— Our primary regulators in the United Kingdom previously expressed serious concerns about our compliance with applicable U.K. regulations, which caused us to make significant changes to our U.K. business that negatively impacted our operations and results, and future changes to our operations as a result of regulator concerns could have a material adverse effect on our U.K. business. ,” “— The United Kingdom has imposed, and continues to impose, increased regulation of the short-term high-cost credit industry and previously stated its expectation that some firms will exit the market,” and “— Competition regulators in the United Kingdom have reviewed and may in the future again review our industry and, together with the FCA, could require lenders to implement changes to their operations, which could have a negative effect on our operations in the United Kingdom. in Part I, Item 1A of this report.
Furthermore, we are subject to the Bribery Act, which prohibits the giving or receiving of a bribe to any person, including but not limited to public officials, and makes failing to prevent bribery by relevant commercial organizations a criminal offense. This offense applies when any person associated with the organization offers or accepts bribes anywhere in the world intending to obtain or retain a business advantage for the organization or in the conduct of business. The Bribery Act is applicable to businesses that operate in the United Kingdom such as us. The Bribery Act is broader in scope than the FCPA in the United States in that it directly addresses commercial bribery in addition to bribery of government officials and it does not recognize certain exceptions, notably facilitation payments that are permitted by the U.S. FCPA.
In the United Kingdom, we are also subject to the requirements of the Data Protection Act 1988 (“DPA”) and are required to be fully registered as a data-controller under the DPA. The DPA controls how organizations, businesses and/or the government use personal data and how they should process it. The current Data Protection regime will be strengthened by changes from the EU General Data Protection Regulation (“GDPR”), a regulation by which the European Parliament, the European Council and the European Commission intend to strengthen and unify data protection for individuals within the European Union (“EU”). It also addresses export of personal data outside the EU. The primary objectives of the GDPR are to give citizens back the control of their personal data and to simplify the regulatory environment for international business by unifying the regulation within the EU. When the GDPR takes effect, it will replace the previous data protection directive. The GDPR contains a number of new protections for EU data subjects and threatens significant fines and penalties for non-compliant data controllers and processors once it comes into effect. The regulation was adopted on April 27, 2016. It is effective May 25, 2018 after a two-year transition period and, unlike a directive, it does not require any enabling legislation to be passed by national governments.
On October 6, 2015, the European Court of Justice invalidated the so-called “Safe Harbor” framework, which previously evidenced compliance with the U.K. Data Protection Act and the European Union Data Protection Directive and allowed companies to pass European Union data to non-European Union countries if certain certification requirements were met by the company. Although many companies, including us, had Safe Harbor certification, the European Union and the United Kingdom provide other guidance regarding compliance with data protection laws and regulations for companies who pass data outside the European Union. In addition, there are circumstances under which a company is exempt from complying with those laws and regulations. Despite the invalidation of the Safe Harbor framework, we believe we are exempt from and/or in compliance with all E.U. and U.K. privacy laws and regulations.
On February 2, 2016, the European Commission and the United States agreed on a new framework for transatlantic data flows, the “EU-US Privacy Shield”, which will replace the invalidated Safe Harbor framework. The EU-US Privacy Shield is a framework designed by the U.S. Department of Commerce (the “Commerce Department”) and European Commission to provide companies on both sides of the Atlantic with a mechanism to comply with EU personal data from the European Union to the United States in support of transatlantic commerce. On July 12, 2016, the European Commission adopted the EU-US Privacy Shield, which consists of four components: (i) the privacy shield principles, which is a code of conduct outlining protections for the handling of personal data; (ii) oversight and enforcement; (iii) ombudsperson mechanism; and (iv) safeguards and limitations. The Commerce Department began accepting certifications to the EU-US Privacy Shield on August 1, 2016. We do not expect to apply for certification to the EU-US Privacy Shield, as we believe we are exempt from and/or are in compliance with all E.U. and U.K. privacy laws and regulations and will continue to be so under the GDPR.
In the United Kingdom, we are also subject to specific anti-money laundering and counter terrorist financing requirements that require us to develop and maintain anti-money laundering and counter terrorist financing policies and procedures including reporting suspicious activity, pursuant to the Proceeds of Crime Act 2002 and the Terrorism Act 2000. The National Crime Agency (“NCA”) is
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a law enforcement agency created in 2013 to reduce the harm caused to people and communities in the UK by serious and organized crime. The NCA replaced the Serious Organised Crime Agency (“SOCA”) and is charged with strengthening the UK’s borders, fighting fraud and cyber-crime and protecting children and young people from sexual abuse and exploitation. The NCA has the mandate and powers to work in partnership with other law enforcement organizations and has an international role of liaising with overseas law enforcement agencies. It has a “four pillars” approach to fighting crime: pursue, prevent, protect and prepare. On June 26, 2017, the European Union’s Fourth Anti-Money Laundering Directive came into force, with an emphasis on employing a risk-based approach to money laundering.
Our U.K. operations are also overseen by the Financial Ombudsman Service (“FOS”), a public body established by the U.K. Parliament to carry out statutory functions on a non-commercial, not-for-profit basis. The FOS is the statutory dispute-resolution scheme set up under the FSMA. The FOS works closely with other U.K. regulators governing the financial services market.
On June 23, 2016, the United Kingdom voted to exit the European Union. On March 29, 2017, UK Prime Minister Theresa May invoked Article 50 of the Lisbon Treaty, thereby setting March 29, 2019 as the date the United Kingdom will leave the European Union. This date can be extended if all European Union members agree to such extension. No further details of the exit have been finalized. When the United Kingdom exits the European Union, it is expected that the United Kingdom will establish a new framework for data flow between the United Kingdom and the United States or will agree to continue the protections of the GDPR for the transfer of personal data into and out of the United Kingdom. We expect to comply with any framework established by the United Kingdom for the transfer of personal data into and out of the United Kingdom.
In international jurisdictions where we operate, our advertising and marketing activities and disclosures are subject to regulation under various consumer protection laws and other applicable laws and regulations.
Company and Website Information
Our principal executive offices are located at 175 West Jackson Blvd., Chicago, Illinois 60604, and our telephone number is (312) 568-4200.
Our website is located at www.enova.com . Through our website, we provide free access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. These reports may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov .
Our business and future results may be affected by a number of risks and uncertainties that should be considered carefully in evaluating us. In addition, this report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including the risks faced by us described below. The occurrence of one or more of the events listed below could also have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Risks Related to Our Business and Industry
Our business is highly regulated, and if we fail to comply with applicable laws, regulations, rules and guidance, our business could be adversely affected.
Our products and services are subject to extensive regulation, supervision and licensing under various federal, state, local and international statutes, ordinances, regulations, rules and guidance. For example, our loan products may be subject to requirements that generally mandate licensing or authorization as a lender or as a credit services organization or credit access business (“CSO”), establish limits on the amount, duration, renewals or extensions of and charges for (including interest rates and fees) various categories of loans, direct the form and content of our loan contracts and other documentation, restrict collection practices, outline underwriting requirements and subject us to periodic examination and ongoing supervision by regulatory authorities, among other things. We must comply with federal laws, such as TILA, ECOA, FCRA, EFTA, GLBA and Title X of the Dodd-Frank Act and the FDCPA, among other laws, as well as regulations adopted to implement those laws. In addition, our marketing and disclosure efforts and the representations made about our products and services are subject to unfair and deceptive practice statutes, including the FTC Act, the TCPA and the CAN-SPAM Act of 2003 in the United States and analogous state statutes under which the Federal Trade Commission (the “FTC”), the CFPB, state attorneys general or private plaintiffs may bring legal actions.
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We are also subject to various international laws, licensing or authorization requirements in connection with the products or services we offer in Brazil and the United Kingdom, which are discussed below. Compliance with applicable laws, regulations, rules and guidance requires forms, processes, procedures, training, controls and the infrastructure to support these requirements. Compliance may also create operational constraints, be costly or adversely affect operating results. See “Business—Regulation” of Part I, Item 1 of this report for further discussion of the laws applicable to us.
The regulatory environment in which we conduct our business is extensive and complex. From time to time we become aware of instances where our products and services have not fully complied with requirements under applicable laws and regulations or applicable contracts. Determinations of compliance with applicable requirements or contracts, such as those discussed above, can be highly technical and subject to varying interpretations. When we become aware of such an instance, whether as a result of our compliance reviews, regulator inquiry, customer complaint or otherwise, we generally conduct a review of the activity in question and determine how to address it, such as modifying the product, making customer refunds or providing additional disclosure. We also evaluate whether reports or other notices to regulators are required and provide notice to regulators whenever required. In some cases we have decided and will decide to take corrective action even after applicable statutory or regulatory cure periods have expired, and in some cases we have notified regulators even where such notification may not have been required. Regulators or customers reviewing such incidents or remedial activities may interpret the laws, regulations and customer contracts differently than we have, or may choose to take regulatory action against us or bring private litigation against us notwithstanding the corrective measures we have taken. This may be the case even if we no longer offer the product or service in question.
State, federal and international regulators, as well as the plaintiffs’ bars, have subjected our industry to intense scrutiny in recent years. In addition, our contracts for certain products and services are governed by the law applicable in a state other than the state in which the customer resides. If a court were to reject our choice of law and determine that a contract was governed by the laws of another state, the contract may be unenforceable. Failure to comply with applicable laws, regulations, rules and guidance, or any finding that our past forms, practices, processes, procedures, controls or infrastructure were insufficient or not in compliance, could subject us to regulatory enforcement actions, result in the assessment against us of civil, monetary, criminal or other penalties (some of which could be significant in the case of knowing or reckless violations), result in the issuance of cease and desist orders (which can include orders for restitution, as well as other kinds of affirmative relief), require us to refund payments, interest or fees, result in a determination that certain financial products are not collectible, result in a suspension or revocation of licenses or authorization to transact business, result in a finding that we have engaged in unfair and deceptive practices, limit our access to services provided by third-party financial institutions or cause damage to our reputation, brands and valued customer relationships. We may also incur additional, substantial expenses to bring those products and services into compliance with the laws of various jurisdictions or stop offering certain products and services in certain jurisdictions.
Our failure to comply with any regulations, rules or guidance applicable to our business could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows and could prohibit or directly or indirectly impair our ability to continue current operations.
The lending and financing industry continues to be targeted by new laws or regulations in many jurisdictions that could restrict the lending and financing products and services we offer, impose additional compliance costs on us, render our current operations unprofitable or even prohibit our current operations.
Governments at the national, state and local levels, as well as international governments, may seek to impose new laws, regulatory restrictions or licensing requirements that affect the products or services we offer, the terms on which we may offer them, and the disclosure, compliance and reporting obligations we must fulfill in connection with our lending and financing business. They may also interpret or enforce existing requirements in new ways that could restrict our ability to continue our current methods of operation or to expand operations, impose significant additional compliance costs, and may have a negative effect on our business, prospects, results of operations, financial condition and cash flows. In some cases, these measures could even directly prohibit some or all of our current business activities in certain jurisdictions, or render them unprofitable and/or impractical to continue.
In recent years, consumer loans, and in particular the category commonly referred to as “payday loans,” which includes certain of our short-term loan products, have come under increased regulatory scrutiny that has resulted in increasingly restrictive regulations and legislation that makes offering such loans in certain states in the United States or the international countries where we operate (as further described below) less profitable or unattractive. Laws or regulations in some states in the United States require that all borrowers of certain short-term loan products be reported to a centralized database and limit the number of loans a borrower may receive or have outstanding. Other laws prohibit us from providing some of our consumer loan products in the United States to active duty military personnel, active members of the National Guard or members on active reserve duty and their spouses and immediate dependents.
Certain consumer advocacy groups and federal and state legislators and regulators have advocated that laws and regulations should be tightened so as to severely limit, if not eliminate, the type of loan products and services we offer to consumers, and this has resulted in both the executive and legislative branches of the U.S. federal government and state governmental bodies exhibiting an interest in
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debating legislation that could further regulate consumer loan products and services such as those that we offer. The U.S. Congress, as well as other similar federal, state and local bodies and similar international governmental authorities, have debated, and may in the future adopt, legislation or regulations that could, among other things, place a cap (or decrease a current cap) on the interest or fees that we can charge or a cap on the effective annual percentage rate that limits the amount of interest or fees that may be charged, ban or limit loan renewals or extensions of short-term loans (where the customer agrees to pay the current finance charge on a loan for the right to make payment of the outstanding principal balance of such loan at a later date plus an additional finance charge), including the rates to be charged for loan renewals or extensions, require us to offer an extended payment plan, limit origination fees for loans, require changes to our underwriting or collections practices, require lenders to be bonded or to report consumer loan activity to databases designed to monitor or restrict consumer borrowing activity, impose “cooling off” periods between the time a loan is paid off and another loan is obtained or prohibit us from providing any of our consumer loan products in the United States to active duty members of the U.S. military, reservists and members of the National Guard and their immediate families.
We cannot currently assess the likelihood of any future unfavorable federal, state, local or international legislation or regulations being proposed or enacted that could affect our products and services. We closely monitor proposed legislation in jurisdictions where we offer our loan products. Additional legislative or regulatory provisions could be enacted that could severely restrict, prohibit or eliminate our ability to offer a consumer or small business loan or financing product. In addition, under statutory authority, U.S. state regulators have broad discretionary power and may impose new licensing requirements, interpret or enforce existing regulatory requirements in different ways or issue new administrative rules, even if not contained in state statutes, that could adversely affect the way we do business and may force us to terminate or modify our operations in particular states or affect our ability to obtain new licenses or renew the licenses we hold.
Significant new laws and regulations have also been adopted in the United Kingdom, and further new laws and regulations will continue to be imposed. See “— The United Kingdom has imposed, and continues to impose, increased regulation of the short-term high-cost credit industry and previously stated its expectation that some firms will exit the market ” for additional information. Furthermore, legislative or regulatory actions may be influenced by negative perceptions of us and our industry, even if such negative perceptions are inaccurate, attributable to conduct by third parties not affiliated with us (such as other industry members), or attributable to matters not specific to our industry.
Any of these or other legislative or regulatory actions that affect our lending and financing business at the national, state, international and local level could, if enacted or interpreted differently, have a material adverse impact on our business, prospects, results of operations, financial condition and cash flows and could prohibit or directly or indirectly impair our ability to continue current operations.
The Consumer Financial Protection Bureau has examination authority over our U.S. consumer lending business that could have a significant impact on our U.S. business.
In July 2010, the U.S. Congress passed the Dodd-Frank Act, and Title X of the Dodd-Frank Act created the CFPB, which regulates U.S. consumer financial products and services, including consumer loans offered by us. The CFPB has regulatory, supervisory and enforcement powers over providers of consumer financial products and services, such as us, including explicit supervisory authority to examine and require registration of such providers.
The CFPB exercises supervisory review over and examines certain non-bank providers of consumer financial products and services, including providers of consumer loans such as us. The CFPB has examined our lending products, services and practices, and we expect to continue to be examined on a regular basis by the CFPB. The CFPB’s examination authority permits CFPB examiners to inspect the books and records of providers of short-term, small dollar lenders, and ask questions about their business practices, and the examination procedures include specific modules for examining marketing activities; loan application and origination activities; payment processing activities and sustained use by consumers; collections, accounts in default, and consumer reporting activities as well as third-party relationships. As a result of these examinations, we could be required to change our products, services or practices, whether as a result of another party being examined or as a result of an examination of us, or we could be subject to monetary penalties, which could materially adversely affect us.
Furthermore, because the CFPB is a relatively new entity, its practices and procedures regarding examination, enforcement and other matters relevant to us and other CFPB-regulated entities are subject to further development and change. Where the CFPB holds powers previously assigned to other regulators, the CFPB may not continue to apply such powers or interpret relevant concepts consistent with previous regulators’ practice. This may adversely affect our ability to anticipate the CFPB’s expectations or interpretations in our interaction with the CFPB.
The CFPB also has broad authority to prohibit unfair, deceptive and abusive acts and practices and to investigate and penalize financial institutions that violate this prohibition. In addition to having the authority to obtain monetary penalties for violations of applicable federal consumer financial laws (including the CFPB’s own rules), the CFPB can require remediation of practices, pursue administrative proceedings or litigation and obtain cease and desist orders (which can include orders for restitution or rescission of
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contracts, as well as other kinds of affirmative relief). Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations implemented thereunder, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations of state law. If the CFPB or one or more state attorneys general or state regulators believe that we have violated any of the applicable laws or regulations, they could exercise their enforcement powers in ways that could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
We are subject to a Consent Order issued by the Consumer Financial Protection Bureau, and any noncompliance would materially adversely affect our business.
On November 20, 2013, Cash America, our parent company at the time, consented to the issuance of a Consent Order by the CFPB pursuant to which it agreed, without admitting or denying any of the facts or conclusions made by the CFPB from its 2012 review of Cash America and us, to pay a civil money penalty of $5 million. The Consent Order also relates, in part, to issues self-disclosed to the CFPB during its 2012 examination of us, including the making of a limited number of loans to consumers who may have been active duty members of the military at the time of the loan at rates in excess of the interest rate permitted by the federal Military Lending Act, for which we made refunds of approximately $33,500, and for certain failures to timely provide and preserve records and information in connection with the CFPB’s examination of us. In addition, as a result of the CFPB’s review, we enhanced our compliance management system and implemented additional policies and procedures to address the issues identified by the CFPB. We remain subject to the restrictions and obligations of the Consent Order, including the CFPB’s order that we ensure compliance with federal consumer financial laws and develop more robust compliance policies and procedures. These new policies, procedures and other initiatives are in many cases subject to review and potential objection by the CFPB, and no guarantee can be made regarding the timing, substance or effect of any such measures the CFPB may decide to take. Furthermore, the compliance plan mandated by the Consent Order requires us to perform a formal consumer protection compliance risk review before introducing or implementing new or changed products or services. This requirement could result in additional delay or cost when introducing or implementing new or changed products or services, or a decision not to proceed with such initiatives. Any noncompliance with the Consent Order or similar orders or agreements from other regulators could lead to further regulatory penalties and could have a material adverse impact on our business, prospects, results of operations, financial condition and cash flows and could prohibit or directly or indirectly impair our ability to continue current operations.
The CFPB recently finalized a new rule that may affect the consumer lending industry, and this rule could have a material adverse effect on our U.S. consumer lending business.
On October 6, 2017, the CFPB issued its final rule on payday and certain high-cost installment loans, which would cover some of the loans we offer. The rule requires that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay the loans according to their terms before issuing the loans. The rule also introduces new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed payment attempts. The rule will apply to loan contracts entered into beginning August 19, 2019 . However, under the Congressional Review Act, Congress has 60 legislative days after publication of the rule in the Federal Register (which occurred on November 17, 2017 ) to overturn it by a majority vote in both Houses of Congress. On January 16, 2018, the CFPB issued a statement that it intends to engage in a rulemaking process to reconsider the final rule. It is also likely that there will be legal challenges to the final rule if it does not change before it goes into effect. We cannot currently assess the likelihood that the CFPB will make changes to the rule, nor whether the rule will become effective. If the rule does become effective in its current form, we will need to make certain changes to our underwriting, payment processes and customer notifications in our U.S. consumer lending business. If we are not able to execute these changes effectively because of unexpected complexities, costs or otherwise, we cannot guarantee that the final rule will not have a material adverse impact on our business, prospects, results of operations, financial condition and cash flows.
Election of a new U.S. president supported by a majority of the U.S. Congress from the same political party could significantly change regulatory, legal or other policies that could affect our business.
In January 2017, the Republican Party took control of a majority of both the U.S. House of Representatives and the U.S. Senate. In addition, a Republican was sworn in as the 45th President of the United States. The President and certain Republicans in the U.S. Congress have made statements regarding the desire to lessen the regulatory burden on businesses to create job growth and regarding the status of the Dodd-Frank Act and the many rules adopted thereunder. The Dodd-Frank Act created the CFPB, which regulates consumer financial products and services including consumer loans that we offer. Until specific laws are passed, executive actions are taken or federal regulatory action is taken, it is unclear what impact changes to regulatory, legal or other policies will have on our business.
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The United Kingdom has imposed, and continues to impose, increased regulation of the short-term high-cost credit industry and previously stated its expectation that some firms will exit the market.
In the United Kingdom, the FCA regulates consumer credit and related activities pursuant to the FSMA and the FCA Handbook, which includes prescriptive rules and regulations and carries across many of the standards set out in the CCA and its secondary legislation as well as previous guidance initially set out by the OFT. The regulations under the FCA consumer credit regime are more prescriptive than the former U.K. consumer credit regime. The FSMA gives the FCA the power to authorize, supervise, examine and bring enforcement actions against providers of consumer credit, as well as to make rules for the regulation of consumer credit.
In 2014, the FCA issued the CONC contained in the FCA Handbook. The CONC incorporates prescriptive regulations for consumer loans such as those that we offer, including mandatory affordability checks on borrowers, limiting the number of rollovers on short-term loans to two, restricting how lenders can advertise, banning advertisements that the FCA deems misleading, and introducing a limit of two unsuccessful attempts on the use of continuous payment authority (which provides a creditor the ability to directly debit a customer’s account for payment when authorized by the customer to do so) to pay off a loan. The provisions of the CONC took effect in 2014. As a result of the FCA’s requirements, we made significant adjustments to many of our business practices in the United Kingdom, as discussed below under “— Our primary regulators in the United Kingdom previously expressed serious concerns about our compliance with applicable U.K. regulations, which caused us to make significant changes to our U.K. business that negatively impacted our operations and results, and future changes to our operations as a result of regulator concerns could have a material adverse effect on our U.K. business. ”
On January 2, 2015, the FCA implemented a cap on the total cost of high-cost short-term credit. In 2015, the FCA also conducted a consultation and implemented a provision that requires providers of high-cost short-term credit include a risk warning in all financial promotions. In 2016, the FCA reviewed the loan price cap that was implemented in 2015 and decided not to change the price cap but to review it again in three years. In July 2017, the FCA issued a Consultation Paper on proposed changes to its rules and guidance on assessing creditworthiness in consumer credit. The FCA requested responses to the consultation by October 31, 2017 and expects to publish its findings in the second quarter of 2018. We do not currently know whether or how the FCA may amend its rules and guidance on assessing creditworthiness in consumer credit or how it will affect our business operations. If any new rules or guidance significantly restrict the conduct of our business, such implementation could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
The FCA also plans to investigate unarranged overdrafts, the long-term use of high-cost credit, rent-to-own, home-collected credit and catalog credit markets and to issue a Consultation Paper on proposed solutions in the spring of 2018. We do not currently know what solutions the FCA may implement as a result or how any changes may affect our business operations. If any new rules or guidance significantly restrict the conduct of our business, such implementation could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
The changes that we have implemented or are required to implement in the future as a result of such legislative and regulatory activities could have a material adverse effect on our U.K. business, as further described below under “— Our primary regulators in the United Kingdom previously expressed serious concerns about our compliance with applicable U.K. regulations, which caused us to make significant changes to our U.K. business that negatively impacted our operations and results, and future changes to our operations as a result of regulator concerns could have a material adverse effect on our U.K. business. ” and “— Due to restructuring of the consumer credit regulatory framework in the United Kingdom, we are required to obtain full authorization from our U.K. regulators to continue providing consumer credit and perform related activities in the United Kingdom, and there is no guarantee that we will receive full authorization to continue offering consumer loans in the United Kingdom .” We cannot give any assurances that the result of the FCA’s review of the high-cost credit market and the payday loan rate cap and any potential new rules will not have a material impact on our U.K. products and services.
Our primary regulators in the United Kingdom previously expressed serious concerns about our compliance with applicable U.K. regulations, which caused us to make significant changes to our U.K. business that negatively impacted our operations and results, and future changes to our operations as a result of regulator concerns could have a material adverse effect on our U.K. business.
In February 2012, the OFT launched a review of the payday lending sector and conducted examinations of a number of payday lenders in the United Kingdom, including us. In May 2013, the OFT sent us a letter of findings related to its examination of our U.K. short term consumer loan (or payday) business, which indicated that we may not have been in full compliance with all relevant laws and guidance. In July 2013, we provided the OFT with an independent audit report setting out the steps taken to address each concern the OFT had identified.
On April 1, 2014, the FCA assumed the supervision and regulation of us, and we are subject to ongoing examination and review by the FCA. In 2014, the FCA informed us that it had serious concerns regarding our compliance with the FCA’s rules and principles, including those with respect to our affordability assessment process and our debt forbearance practices (or our practices regarding customers who have indicated they are experiencing financial difficulty). The FCA also noted concerns regarding certain of our
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advertising practices. The FCA appointed an independent auditor to undertake a review of certain of our practices as well as our ability to be effectively supervised. That review identified activities that were deemed to have potentially caused consumer detriment or were not in full compliance with the FCA’s rules and guidance. On November 4, 2015, the FCA announced the final redress program, in which we provided 3,940 customers total redress of approximately $2.6 million through a combination of loan balance waivers and cash refunds of interest and fees paid. The skilled person oversaw the execution of the redress program, which was concluded in the fourth quarter of 2015.
We made significant adjustments to many of our business practices, including modifying our affordability assessments and underwriting standards, reducing certain maximum loan amounts, changing our collections processes (including our practices relating to continuous payment authority) and debt forbearance practices and altering certain advertising practices, all of which resulted in a significant year-over-year decrease in our U.K. loan volume, U.K. loan balances and U.K. revenue in the second half of 2014 and the first half of 2015. The implementation of stricter affordability assessments and underwriting standards resulted in a decrease in the number of consumer loans written, the average consumer loan amount and the total amount of consumer loans written to new and returning customers. Additionally, we experienced and will continue to experience an increase in compliance- and administrative-related costs for our U.K. operations. In addition, the FCA, in its supervisory role, could subject us to periodic or ongoing examination and review by the FCA, and as such, the FCA could require us to make additional changes to our business that could further negatively affect future results for our U.K. operations. We are continuing to assess the impact of the changes we have made to our U.K. operations, but the impact of these changes was significant, and future changes to our operations as a result of FCA oversight of our business could result in a material adverse effect on our U.K. business and our prospects, results of operation, financial condition and cash flows.
Competition regulators in the United Kingdom have reviewed and may in the future again review our industry and, together with the FCA, could require lenders to implement changes to their operations, which could have a negative effect on our operations in the United Kingdom.
In June 2013, the OFT referred the payday lending industry in the United Kingdom to the Competition Commission, which is now the Competition & Markets Authority (“CMA”), for a market investigation. The CMA gathered data from industry participants, including us, in connection with its review of the U.K. payday lending industry to determine whether certain features of the payday lending industry prevent, restrict or distort competition (which is also referred to as having an adverse effect on competition) and, if so, what remedial action should be taken.
On June 11, 2014, the CMA released a provisional findings report in which it indicated that it believed that many payday lenders fail to compete on price and that it would look at potential ways to increase price competition. On August 13, 2015, the CMA published its final order which required online lenders to provide details of their products on at least one price comparison website. The CMA also required online and storefront lenders to provide existing customers with a summary of their cost of borrowing as of August 13, 2016.
The impact of the CMA’s August 13, 2015 order on our operations has not been significant. However, we do not know whether future actions by the CMA and the FCA could impact consumer acceptance of our products or the consumer experience in obtaining loans or if any future actions could otherwise significantly restrict the conduct of our business or otherwise have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Customer complaints to the Financial Ombudsman Service (“FOS”) could increase, which could have a negative effect on our operations in the United Kingdom.
We have experienced an increased volume of complaints about loans issued prior to changes we implemented in 2014, and the FOS has taken a very consumer friendly approach to its complaint handling process and in dispute resolutions. We have been required to make significant payments to customers to resolve these complaints. If the FOS continues to issue findings in favor of consumers, and we are required to continue to make significant payments to resolve the complaints, such findings could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Our advertising and marketing materials and disclosures have been and continue to be subject to regulatory scrutiny, particularly in the United Kingdom.
In the jurisdictions where we operate, our advertising and marketing activities and disclosures are subject to regulation under various industry standards, consumer protection laws, and other applicable laws and regulations. Consistent with the consumer lending industry as a whole, our advertising and marketing materials have come under increased scrutiny. In the United Kingdom, for example, consumer credit firms are subject to the financial promotions regime set out in the FSMA (Financial Promotions) Order 2005 and specific rules in the CONC, such as the inclusion of a risk warning on certain advertising materials. The FCA has also decided to adopt certain elements of industry codes as FCA rules on a case by case basis. Our advertising and marketing materials in the United Kingdom are reviewed both by the FCA and the Advertising Standards Authority. We have in some cases been ordered to withdraw, amend or add disclosures to such materials, or have done so voluntarily in response to inquiries or complaints. In addition, the FCA
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now requires that providers of high-cost short-term credit include a risk warning in all financial promotions, including previously exempted size-limited ads like SMS text messages and pay-per-click ads.
Going forward, there can be no guarantee that we will be able to advertise and market our business in the United Kingdom or elsewhere in a manner we consider effective. Any inability to do so could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Significant changes in international laws or regulations or a deterioration of the political, regulatory or economic environment of the United Kingdom or Brazil, or any other country in which we begin operations, could affect our operations in these countries.
We offer, arrange and/or service online consumer loans to customers in Brazil and the United Kingdom. The United Kingdom regularly evaluates the regulation of our industry and introduces new regulations and is likely to continue to do so. New legislation or regulations could further restrict the consumer loan products we offer.
Significant changes in international laws or regulations or a deterioration of the political, regulatory or economic environment of Brazil or the United Kingdom could restrict our ability to sustain or expand our operations in these countries. Similarly, a significant change in laws, regulations or overall treatment (including an interpretation or application of such laws and regulations not anticipated when exploring or initiating business) or a deterioration of the political, regulatory or economic environment of any other country in which we may decide to do business, could also materially adversely affect our prospects and could restrict our ability to initiate a pilot program or develop a pilot program into full business operations.
We have previously ceased business in certain jurisdictions due to regulatory restrictions and, if we are forced to exit many key jurisdictions due to regulatory restrictions, it could adversely affect our business as a whole.
In the past we have ceased business in, restricted our operations in, or chosen not to begin business in, certain jurisdictions due to regulatory restrictions which render our operations impermissible, unprofitable or impractical. In addition, because we are in some cases subject to state/provincial and local regulation in addition to federal/national regulation, we may restrict or discontinue business in certain jurisdictions within countries where we are otherwise active. For example, as of December 31, 2017, we did not offer or arrange consumer loans in 17 U.S. states because we do not believe it is economically feasible to operate in those jurisdictions due to specific statutory or regulatory restrictions, such as interest rate ceilings or caps on the fees that may be charged.
The adoption of state regulatory measures cannot be predicted, but we expect that other states may propose or enact similar restrictions on our consumer or small business loan or financing products in the future, which could affect our operations in such states. Legislation or regulations targeting or otherwise directly affecting our products and services have been introduced or adopted in a number of states over the last few years, and we regularly monitor proposed legislation or regulations that could affect our business. For more information, see “Regulation and Legal Proceedings—U.S. State Regulation.”
If we are forced to exit many key jurisdictions due to such concerns, we cannot guarantee that we will be able to find suitably attractive additional business opportunities elsewhere, which could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Our access to payment processing systems to disburse and collect loan and financing proceeds and repayments, including the Automated Clearing House, is critical to our business, and any interruption or limitation on our ability to utilize any of the available means of processing deposits or payments could materially adversely affect our business.
When making loans and providing financing in the United States, we use several means of depositing proceeds into and collecting repayments from our customers’ bank accounts, including the use of ACH and remotely-created check processing. Our business, including loans made through the CSO programs and the Bank Program, depends on payment processing systems to collect amounts due by repayments from our customers’ bank accounts when we have obtained authorization to do so from the customer. Our transactions are processed by banks, and if these banks cease to provide any of the available means of payment processing services, we would have to materially alter, or possibly discontinue, some or all of our business if alternative processing methods are not as effective or not available.
Previous heightened regulatory scrutiny by the U.S. Department of Justice, the Federal Deposit Insurance Corporation and other regulators, in an action referred to as Operation Choke Point, caused banks and ACH payment processors to cease doing business with certain short-term consumer lenders who were operating legally, without regard to whether those lenders were complying with applicable laws, simply to avoid the risk of heightened scrutiny or even litigation.
In addition, in 2014, the National Automated Clearinghouse Association (“NACHA”) (which oversees the ACH network) amended its operating rules that govern the use of the ACH system, which amendments became effective in 2015 and 2016. These amendments, among other things, established certain ACH return rate levels, enhanced limitations on certain ACH reinitiation activities, imposed
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fees on certain unauthorized ACH returns and allowed for increased flexibility in how NACHA rules violation investigations can be initiated. The revised rules provide clarification that certain industries deal with customers who are more likely to experience an insufficient funds scenario. We implemented processes and procedures to address the amendments to the ACH operating rules.
Our access to payment processing systems could be impaired as a result of actions by regulators to cut off the access to payment processing systems to payday lenders or the NACHA rule amendments. The limited number of financial institutions we depend on may choose to discontinue providing ACH processing, remotely created check processing and similar services to us. If our access to any of these means of payment processing is impaired, we may find it difficult or impossible to continue some or all of our business, which could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows. If we are unable to maintain access to needed services on favorable terms, we would have to materially alter, or possibly discontinue, some or all of our business if alternative processors are not available.
The failure to comply with debt collection regulations could subject us to fines and other liabilities, which could harm our reputation and business.
The FDCPA regulates persons who regularly collect or attempt to collect, directly or indirectly, consumer debts owed or asserted to be owed to another person. Many states impose additional requirements on persons collecting or attempting to collect consumer debts owed to them and on debt collection communications, and some of those requirements may be more stringent than the federal requirements. Moreover, regulations governing debt collection are subject to changing interpretations that differ from jurisdiction to jurisdiction.
In addition, in 2016, the CFPB issued an outline of proposals intended to increase consumer protection pertaining to third-party debt collectors and others covered by the FDCPA, which would apply to our attempts to collect debt originated by other lenders, including under our CSO programs and our Bank Program. The proposals would not apply to our attempts to collect debt that we originate; however, the CFPB has announced that it plans to address consumer protection issues involving first-party debt collectors and creditors separately. The CFPB outline does not include proposed or final rules, and any future rules could be significantly different from those in the outline. The CFPB has not yet defined a date for any proposed rules related to debt collection nor has it defined the effective date for the implementation of final rules. We cannot give any assurances that the effect of such rules will not have a material impact on our U.S. products and services.
Non-U.S. jurisdictions also regulate debt collection. For example, in the United Kingdom, due to changes to rules under the CONC, we previously made adjustments to our collections processes, which resulted in lower collections on loans made by us. In addition, the concerns previously expressed to us by the OFT and the FCA related in part to debt collection. We could be subject to fines, written orders or other penalties if we, or parties working on our behalf, are determined to have violated the FDCPA, the CONC or analogous state or international laws, which could have a material adverse effect on our reputation, business, prospects, results of operations, financial condition and cash flows.
We use lead providers and marketing affiliates to assist us in obtaining new customers, and if lead providers or marketing affiliates do not comply with an increasing number of applicable laws and regulations, or if our ability to use such lead providers or marketing affiliates is otherwise impaired, it could adversely affect our business.
We are dependent on third parties, referred to as lead providers (or lead generators) and marketing affiliates, as a source of new customers. Our marketing affiliates place our advertisements on their websites that direct potential customers to our websites. Generally, lead providers operate, and also work with their own marketing affiliates who operate, separate websites to attract prospective customers and then sell those “leads” to online lenders. As a result, the success of our business depends substantially on the willingness and ability of lead providers or marketing affiliates to provide us customer leads at acceptable prices.
If regulatory oversight of lead providers or marketing affiliates is increased, through the implementation of new laws or regulations or the interpretation of existing laws or regulations, our ability to use lead providers or marketing affiliates could be restricted or eliminated. For example, the CFPB has indicated its intention to examine compliance with federal laws and regulations by lead providers and to scrutinize the flow of non-public, private consumer information between lead providers and lead buyers, such as us. Over the past few years, several states have taken actions that have caused us to discontinue the use of lead providers in those states. While these discontinuations did not have a material adverse effect on us, other states may propose or enact similar restrictions on lead providers and potentially on marketing affiliates in the future, and if other states adopt similar restrictions, our ability to use lead providers or marketing affiliates in those states would also be interrupted. We also expect that the ongoing regulatory review of consumer lending in the United Kingdom may lead to increased restrictions on the operations and/or use of lead providers.
Lead providers’ or marketing affiliates’ failure to comply with applicable laws or regulations, or any changes in laws or regulations applicable to lead providers or marketing affiliates’ or changes in the interpretation or implementation of such laws or regulations, could have an adverse effect on our business and could increase negative perceptions of our business and industry. Additionally, the use of lead providers and marketing affiliates could subject us to additional regulatory cost and expense. If our ability to use lead
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generators or marketing affiliates were to be impaired, our business, prospects, results of operations, financial condition and cash flows could be materially adversely affected.
The use of personal data for credit underwriting is highly regulated.
In the United States, the FCRA regulates the collection, dissemination and use of consumer information, including consumer credit information. Compliance with the FCRA and related laws and regulations concerning consumer reports has recently been under regulatory scrutiny. The FCRA requires us to provide a Notice of Adverse Action to a consumer loan applicant when we deny an application for credit, which, among other things, informs the applicant of the action taken regarding the credit application and the specific reasons for the denial of credit. The FCRA also requires us to promptly update any credit information reported to a consumer reporting agency about a consumer and to allow a process by which consumers may inquire about credit information furnished by us to a consumer reporting agency. Historically, the FTC has played a key role in the implementation, oversight, enforcement and interpretation of the FCRA. Pursuant to the Dodd-Frank Act, the CFPB has primary supervisory, regulatory and enforcement authority of FCRA issues, although the FTC also retains its enforcement role regarding the FCRA. The CFPB has taken a more active approach than the FTC, including with respect to regulation, enforcement and supervision of the FCRA. Changes in the regulation, enforcement or supervision of the FCRA may materially affect our business if new regulations or interpretations by the CFPB or the FTC require us to materially alter the manner in which we use personal data in our credit underwriting.
In the United Kingdom, we are also subject to the requirements of the Data Protection Act 1988 (the “DPA”) and are required to be fully registered as a data-controller under the DPA. The DPA controls how organizations, businesses and/or the government use personal data and how they should process it. The current Data Protection regime will be strengthened by changes from the EU General Data Protection Regulation (“GDPR”), a regulation by which the European Parliament, the European Council and the European Commission intend to strengthen and unify data protection for individuals within the European Union (“EU”). It also addresses export of personal data outside the EU. The GDPR contains a number of new protections for EU data subjects and threatens significant fines and penalties for non-compliant data controllers and processors once it comes into effect on May 25, 2018. When the United Kingdom exits the European Union, it is expected that the United Kingdom will establish a new framework for data flow between the United Kingdom and the United States or will agree to continue the protections of the GDPR for the transfer of personal data into and out of the United Kingdom. We expect to comply with any framework established by the United Kingdom for the transfer of personal data into and out of the United Kingdom.
We previously had Safe Harbor certification, which evidenced compliance with the DPA and the European Union Data Protection Directive and allowed companies to pass European Union data to non-European Union countries if certain certification requirements were met by the company. Although the European Court of Justice invalidated the Safe Harbor framework in 2015, there are other circumstances under which a company is exempt from complying with those laws and regulations. In addition, in 2016, the European Commission and the United States agreed on a new framework for transatlantic data flows: the “EU-US Privacy Shield”, which will replace the invalided Safe Harbor framework. We do not expect to apply for certification to the EU-US Privacy Shield and, despite the invalidation of the Safe Harbor framework, we believe that we are exempt from and/or are in compliance with all E.U. and U.K. privacy laws and regulations and will continue to be so under the GDPR.
The oversight of the FCRA by both the CFPB and the FTC and any related investigation or enforcement activities or our failure to comply with the DPA may have a material adverse impact on our business, including our operations, our mode and manner of conducting business and our financial results.
Negative public perception of our business could cause demand for our products to significantly decrease.
In recent years, consumer advocacy groups and some media reports have advocated governmental action to prohibit or place severe restrictions on short-term and high-cost consumer loans. Such consumer advocacy groups and media reports generally focus on the annual percentage rate for this type of consumer loan, which is compared unfavorably to the interest typically charged by banks to consumers with top-tier credit histories. The fees and/or interest charged by us and others in the industry attract media publicity about the industry and can be perceived as controversial. If the negative characterization of these types of loans becomes increasingly accepted by consumers, demand for any or all of the consumer loan products that we offer could significantly decrease, which could materially affect our business, prospects, results of operations, financial condition and cash flows. Additionally, if the negative characterization of these types of loans is accepted by legislators and regulators, we could become subject to more restrictive laws and regulations applicable to short-term loans or other consumer loan products that we offer that could materially adversely affect our business, prospects, results of operations, financial condition and cash flows and could impair our ability to continue current operations.
In addition, our ability to attract and retain customers is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities. Negative perceptions or publicity regarding these matters—even if related to seemingly isolated incidents, or even if related to practices not specific to short-term loans, such as debt collection—could erode trust and confidence and damage our reputation among existing and potential customers, which could
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make it difficult for us to attract new customers and retain existing customers and could significantly decrease the demand for our products, could materially adversely affect our business, prospects, results of operations, financial condition and cash flows and could impair our ability to continue current operations.
Current and future litigation or regulatory proceedings could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
We have been and are currently subject to lawsuits (including purported class actions) that could cause us to incur substantial expenditures, generate adverse publicity and could significantly impair our business, force us to cease doing business in one or more jurisdictions or cause us to cease offering or alter one or more products. We are also likely to be subject to further litigation in the future. An adverse ruling in or a settlement of any current or future litigation against us or another provider or loans or financings could cause us to have to refund fees and/or interest collected, forego collection of the principal amount of loans or the delivery of purchased receivables, pay treble or other multiple damages, pay monetary penalties and/or modify or terminate our operations in particular jurisdictions.
Defense of any lawsuit, even if successful, could require substantial time and attention of our management and could require the expenditure of significant amounts for legal fees and other related costs. We and others are also subject to regulatory proceedings, and we could suffer losses as a result of interpretations of applicable laws, rules and regulations in those regulatory proceedings, even if we are not a party to those proceedings. Any of these events could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows and could impair our ability to continue current operations.
Judicial decisions, CFPB rulemaking or amendments to the Federal Arbitration Act could render the arbitration agreements we use illegal or unenforceable.
We include arbitration provisions in our consumer and business loan and financing agreements. These provisions are designed to allow us to resolve any customer disputes through individual arbitration rather than in court and explicitly provide that all arbitrations will be conducted on an individual and not on a class basis. Thus, our arbitration agreements, if enforced, have the effect of shielding us from class action liability. Our arbitration agreements do not generally have any impact on regulatory enforcement proceedings. We take the position that the arbitration provisions in loan and financing agreements, including class action waivers, are valid and enforceable; however, the enforceability of arbitration provisions is often challenged in court. If those challenges are successful, our arbitration and class action waiver provisions could be unenforceable, which could subject us to additional litigation, including additional class action litigation.
In addition, the U.S. Congress has considered legislation that would generally limit or prohibit mandatory arbitration agreements in consumer contracts and has enacted legislation with such a prohibition with respect to certain mortgage loan agreements and also certain consumer loan agreements to members of the military on active duty and their dependents. Further, the Dodd-Frank Act directed the CFPB to study consumer arbitration and report to the U.S. Congress, and it authorized the CFPB to adopt rules limiting or prohibiting consumer arbitration, consistent with the results of its study.
The CFPB did issue a final rule on arbitration, which would have prohibited class action waivers in certain consumer financial services contracts. However the House and Senate each passed a resolution of disapproval of the rule, pursuant to their powers under the Congressional Review Act, and the President signed the bill. Because the rule was disapproved, it cannot be reissued in substantially the same form, and the CFPB cannot issue a substantially similar rule unless the new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.
Any judicial decisions, legislation or other rules or regulations that impair our ability to enter into and enforce consumer arbitration agreements and class action waivers will increase our exposure to class action litigation as well as litigation in plaintiff-friendly jurisdictions, which would be costly and could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
The failure of third parties who provide products, services or support to us to maintain their products, services or support could disrupt our operations or result in a loss of revenue.
A portion of our short-term consumer loan and installment loan revenue depends in part on the willingness and ability of unaffiliated third-party lenders, through the CSO programs and the Bank Program, to make loans to customers. We also utilize many other third parties to provide services to facilitate our lending and financing, including in our underwriting and payment processing. In addition, we rely on a third party lender in connection with our lending business in Brazil. The loss of the relationship with any of these third parties, and an inability to replace them or the failure of these third parties to maintain quality and consistency in their programs or services or to have the ability to provide their products and services, could cause us to lose customers and substantially decrease the revenue and earnings of our business. Our revenue and earnings could also be adversely affected if any of those third-party providers make material changes to the products or services that we rely on. We also use third parties to support and maintain certain of our
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communication systems and information systems. If a third-party provider fails to provide its products or services, makes material changes to such products and services, does not maintain its quality and consistency or fails to have the ability to provide its products and services, our operations could be disrupted. Any of these events could result in a loss of revenue and could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Our business depends on the uninterrupted operation of our systems and business functions, including our information technology and other business systems, as well as the ability of such systems to support compliance with applicable legal and regulatory requirements.
Our business is highly dependent upon our employees’ ability to perform, in an efficient and uninterrupted fashion, necessary business functions, such as internet support, call center activities, and processing and servicing of our loans and receivables purchase agreements. A shut-down of or inability to access the facilities in which our internet operations and other technology infrastructure are based, such as a power outage, a failure of one or more of our information technology, telecommunications or other systems, or sustained or repeated disruptions of such systems could significantly impair our ability to perform such functions on a timely basis and could result in a deterioration of our ability to underwrite, approve and process loans and finance receivables, provide customer service, perform collections activities, or perform other necessary business functions. Any such interruption could have a materially adverse effect on our business, prospects, results of operations, financial condition and cash flows.
In addition, our systems and those of third parties on whom we rely must consistently be capable of compliance with applicable legal and regulatory requirements and timely modification to comply with new or amended requirements. For example, we believe that the federal Military Lending Act compliance issues involved in the CFPB’s Consent Order were related in part to system errors. Any such systems problems going forward could have a material adverse effect on our business, prospects, results of operations, financial conditions and cash flows and could impair or prohibit our ability to continue current operations.
Decreased demand for our products and specialty financial services and our failure to adapt to such decrease could result in a loss of revenue and could have a material adverse effect on us.
The demand for a particular product or service may decrease due to a variety of factors, such as regulatory restrictions that reduce customer access to particular products, the availability of competing or alternative products or changes in customers’ financial conditions. Should we fail to adapt to a significant change in our customers’ demand for, or access to, our products, our revenue could decrease significantly. For example, on December 22, 2017, a law commonly known as the U.S. Tax Cuts and Jobs Act (the "Tax Act") was enacted, lowering the tax rates applicable to many businesses and individuals. The perceived financial benefits of the Tax Act could adversely impact the demand for our products. Even if we make adaptations or introduce new products to fulfill customer demand, customers may resist or may reject products whose adaptations make them less attractive or less available. In any event, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time. In particular, we have changed, and will continue to change, some of our operations and the products we offer. Any of these events could result in a loss of revenue and could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Potential union activities could have an adverse effect on our relationship with our workforce.
None of our employees are currently covered by a collective bargaining agreement or represented by an employee union. Occasionally we experience union organizing activities. In addition, in 2015, the National Labor Relations Board enacted new representation election rules, which may make it easier for unions to organize. If our employees become represented by an employee union or become subject to a collective bargaining agreement, it may make it more difficult for us to manage our business and to attract and retain new employees and may increase our cost of doing business. Having our employees become represented by an employee union, having a collective bargaining agreement or having additional requirements related to our employees imposed on us could result in work stoppages and higher employee costs and could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows and could impair our ability to continue current operations.
If our allowance for losses and liability for estimated losses on third-party lender-owned consumer loans is not adequate to absorb losses or if we do not successfully manage our credit risk for our unsecured loans or financings, our business, prospects, results of operations, financial condition and cash flows may be adversely affected.
As more fully described under Note 1 to our consolidated financial statements for the year ended December 31, 2017 included in Part II, Item 8, Financial Statements and Supplementary Data in this report, we utilize a variety of underwriting criteria, monitor the performance of our loan portfolios and maintain either an allowance or liability for estimated losses on loans (including fees and interest) at a level estimated to be adequate to absorb credit losses inherent in the receivables portfolio and expected losses from loans guaranteed under the CSO programs. The allowance deducted from the carrying value of consumer loans was $123.0 million at December 31, 2017, and the liability for estimated losses on third-party lender-owned consumer loans was $2.3 million at December 31, 2017. These reserves are estimates, and if actual loan losses or losses on our receivables purchase agreements are
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materially greater than our reserves, our results of operations and financial condition could be adversely affected. In addition, if we do not successfully manage credit risk for our unsecured loans and receivables purchase agreements through our underwriting, we could incur substantial credit losses due to customers being unable to repay their loans or financings. Any failure to manage credit risk could materially adversely affect our business, prospects, results of operations, financial condition and cash flows.
We are subject to impairment risk.
At December 31, 2017, we had goodwill totaling $267.0 million on our consolidated balance sheets, all of which represents assets capitalized in connection with acquisitions and business combinations. Accounting for goodwill requires significant management estimates and judgment. Events may occur in the future, and we may not realize the value of our goodwill. Management performs periodic reviews of the carrying values of our goodwill to determine whether events and circumstances indicate that impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill or an intangible asset to become impaired. Should a review indicate impairment, a write-down of the carrying value of the goodwill or intangible asset would occur, resulting in a non-cash charge, which could adversely affect our results of operations and could also lead to our inability to comply with certain covenants in our financing documents, which could cause a default under those agreements.
We are subject to anticorruption laws including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, anti-money laundering laws and economic sanctions laws, and our failure to comply therewith, particularly as we continue to expand internationally, could result in penalties that could harm our reputation and have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Anticorruption Laws . We are subject to the FCPA, which generally prohibits companies and their agents or intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits. Although we have policies and procedures designed to ensure that we, our employees, agents and intermediaries comply with the FCPA and other anticorruption laws, such policies or procedures may not work effectively all of the time or protect us against liability for actions taken by our employees, agents and intermediaries with respect to our business or any businesses that we may acquire. In the event that we believe, or have reason to believe, that our employees, agents or intermediaries have or may have violated applicable anti-corruption laws, including the FCPA, we may be required to investigate or have a third party investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Our continued operation and expansion outside the United States could increase the risk of such violations in the future.
We are subject to other anti-corruption laws, such as the Bribery Act, which prohibit the giving or receiving of a bribe to any person, including but not limited to public officials, and make failing to prevent bribery by relevant commercial organizations a criminal offense. This offense applies when any person associated with the organization offers or accepts bribes anywhere in the world intending to obtain or retain a business advantage for the organization or in the conduct of business. The Bribery Act is applicable to businesses that operate in the United Kingdom such as us. The Bribery Act is broader in scope than the FCPA in that it directly addresses commercial bribery in addition to bribery of government officials and it does not allow certain exceptions, notably facilitation payments that are permitted by the FCPA.
Other countries in which we operate or have operated, including Brazil and other countries where we intend to operate also have anticorruption laws, which we are, have been or will be subject to.
If we are not in compliance with the FCPA, the Bribery Act and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse effect on our business, reputation, results of operations and financial condition. Any investigation of any potential violations of the FCPA, the Bribery Act or other anticorruption laws by U.S. or foreign authorities could harm our reputation and could have a material adverse effect on our business, reputation, prospects, results of operations, financial condition and cash flows.
Anti–Money Laundering Laws . We are also subject to anti-money laundering laws and related compliance obligations in the United States and other jurisdictions in which we do business. In the United States, the USA PATRIOT Act and the Bank Secrecy Act require us to maintain an anti-money laundering compliance program covering certain of our business activities. The program must include: (1) the development of internal policies, procedures and controls; (2) designation of a compliance officer; (3) an ongoing employee training program; and (4) an independent audit function to test the program. Furthermore, certain of our subsidiaries are registered as money services businesses with the Treasury Department and must re-register with the Financial Crimes Enforcement Network (“FinCEN”) at least every two years. If we are not in compliance with U.S. or other anti-money laundering laws, we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse effect on our business, results of operations, financial condition and cash flows. Any investigation of any potential violations of anti-money laundering laws by U.S. or international authorities could harm our reputation and could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows. In the United Kingdom, we are also subject to specific anti-money laundering and counter terrorist financing requirements that require us to develop and maintain anti-money laundering and counter terrorist financing policies and procedures, including reporting suspicious activity to the National Crime Agency pursuant to the Proceeds of Crime Act
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2002 and the Terrorism Act 2000. On June 26, 2017, the European Union’s Fourth Anti-Money Laundering Directive came into force, with an emphasis on employing a risk-based approach to money laundering.
Economic Sanctions Laws . The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. In particular, the United States prohibits U.S. persons from engaging with individuals and entities identified as “Specially Designated Nationals,” such as terrorists and narcotics traffickers. These prohibitions are administered by the Treasury Department’s Office of Foreign Assets Control (“OFAC”). OFAC rules prohibit U.S. persons from engaging in financial transactions with or relating to the prohibited individual, entity or country, require the blocking of assets in which the individual, entity or country has an interest. Blocked assets (e.g., property or bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Other countries in which we operate also maintain economic and financial sanctions regimes. In the event that we believe, or have reason to believe, that our employees, agents or intermediaries have or may have violated applicable laws or regulations, we may be required to investigate or have a third party investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. If we are not in compliance with OFAC regulations and other economic and financial sanctions regulations, we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse effect on our business, prospects, results of operations, financial condition and cash flows. Any investigation of any potential violations of OFAC regulations or other economic sanctions by U.S. or foreign authorities could harm our reputation and could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Our continued international expansion could increase the risk of violations of FCPA, the Bribery Act, anti-money laundering laws, OFAC regulations, or similar applicable laws and regulations in the future.
Increased competition from banks, credit card companies, other consumer lenders, and other entities offering similar financial products and services could adversely affect our business, prospects, results of operations, financial condition and cash flows.
We have many competitors. Our principal competitors are consumer loan and finance companies, CSOs, online lenders, credit card companies, consumer finance companies, pawnshops and other financial institutions that offer similar financial services. Many other financial institutions or other businesses that do not now offer products or services directed toward our traditional customer base, many of whom may be much larger than us, could begin doing so. Significant increases in the number and size of competitors for our business could result in a decrease in the number of loans that we fund, resulting in lower levels of revenue and earnings in these categories.
Competitors of our business may operate, or begin to operate, under business models less focused on legal and regulatory compliance, which could put us at a competitive disadvantage. Some of our U.S. competitors operate using other business models, including a “tribal model” where the lender follows the laws of a Native American tribe regardless of the state in which the customer resides. Competitors using these models may be able to lend in jurisdictions where we do not and may have higher revenue per customer and significantly less burdensome compliance requirements, among other advantages. Additionally, negative perceptions about these models could cause legislators or regulators to pursue additional industry restrictions that could affect the business model under which we operate. To the extent that these models or other new lending models gain acceptance among consumers, small businesses and investors or that they face less onerous regulatory restrictions than we do, we may be unable to replicate their business practices or otherwise compete with them effectively, which could cause demand for our products to decline substantially. We may be unable to compete successfully against any or all of our current or future competitors. As a result, we could lose market share and our revenue could decline, thereby affecting our ability to generate sufficient cash flow to service our indebtedness and fund our operations. Any such changes in our competition could materially adversely affect our business, prospects, results of operations, financial condition and cash flows.
Our success is dependent, in part, upon our officers, and if we are not able to attract and retain qualified officers, our business could be materially adversely affected.
Our success depends, in part, on our officers, which are a relatively small group of individuals. Many members of the senior management team have significant industry experience, and we believe that our senior management would be difficult to replace, if necessary. Because the market for qualified individuals is highly competitive, we may not be able to attract and retain qualified officers or candidates. In addition, increasing regulations on and negative publicity about the consumer financial services industry could affect our ability to attract and retain qualified officers. If we are unable to attract or retain qualified officers, it could materially adversely affect our business.
Our international operations subject us to foreign exchange risk.
We are subject to the risk of unexpected changes in foreign currency exchange rates by virtue of our loans to residents of Brazil and the United Kingdom. In 2017, 15.9% of our total revenue was derived from our international operations. Our results of operations and certain of our intercompany balances associated with our Brazil and United Kingdom businesses are denominated in their respective
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currencies and are, as a result, exposed to foreign exchange rate fluctuations. Upon consolidation, as exchange rates vary, gross profit and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances.
A sustained deterioration in the economy could reduce demand for our products and services and result in reduced earnings.
A sustained deterioration in the economy could cause deterioration in the performance of our loan and finance receivables portfolios. An economic slowdown could result in a decreased number of loans and financing being made to customers due to higher unemployment or an increase in defaults in our products. During an economic slowdown, we could be required to tighten our underwriting standards, which would likely reduce loan and finance receivable balances, and we could face more difficulty in collecting defaulted receivables, which could lead to an increase in losses.
We may be unable to protect our proprietary technology and analytics or keep up with that of our competitors.
The success of our business depends to a significant degree upon the protection of our software, fraud defenses, underwriting algorithms and other proprietary intellectual property rights. We may be unable to deter misappropriation of our proprietary information, detect unauthorized use or take appropriate steps to enforce our intellectual property rights. In addition, competitors could, without violating our proprietary rights, develop technologies that are as good as or better than our technology. Our failure to protect our software and other proprietary intellectual property rights or to develop technologies that are as good as our competitors’ could put us at a disadvantage relative to our competitors. Any such failures could have a material adverse effect on our business.
We may be subject to intellectual property disputes, which are costly to defend and could harm our business and operating results.
From time to time, we face, and we expect to face in the future, allegations that we have infringed the trademarks, copyrights, patents or other intellectual property rights of third parties, including from our competitors or non-practicing entities. Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict and may require us to stop offering certain products or product features, acquire licenses, which may not be available at a commercially reasonable price or at all, or modify our products, product features, processes or websites while we develop non-infringing substitutes.
In addition, we use open source software in our technology platform and plan to use open source software in the future. From time to time, we may face claims from parties claiming ownership of, or demanding release of, the source code, potentially including our valuable proprietary code, or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our platform, any of which could have a negative effect on our business and operating results.
We are subject to cyber security risks and security breaches and may incur increasing costs in an effort to minimize those risks and to respond to cyber incidents.
Our business involves the storage and transmission of consumers’ and businesses’ proprietary information, and security breaches could expose us to a risk of loss or misuse of this information, litigation, and potential liability. We are entirely dependent on the secure operation of our websites and systems as well as the operation of the internet generally. While we have incurred no material cyber-attacks or security breaches to date, a number of other companies have disclosed cyber-attacks and security breaches, some of which have involved intentional attacks. Attacks may be targeted at us, our customers, or both. Although we devote significant resources to maintain and regularly upgrade our systems and processes that are designed to protect the security of our computer systems, software, networks and other technology assets and the confidentiality, integrity and availability of information belonging to us and our customers, our security measures may not provide absolute security. Despite our efforts to ensure the integrity of our systems, it is possible that we may not be able to anticipate or to implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently or are not recognized until launched, and because cyber-attacks can originate from a wide variety of sources, including third parties outside the company such as persons who are involved with organized crime or associated with external service providers or who may be linked to terrorist organizations or hostile foreign governments. These risks may increase in the future as we continue to increase our mobile and other internet-based product offerings and expand our internal usage of web-based products and applications or expand into new countries. If an actual or perceived breach of security occurs, customer and/or supplier perception of the effectiveness of our security measures could be harmed and could result in the loss of customers, suppliers or both. Actual or anticipated attacks and risks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third party experts and consultants.
A successful penetration or circumvention of the security of our systems could cause serious negative consequences, including significant disruption of our operations, misappropriation of our confidential information or that of our customers, or damage to our computers or systems or those of our customers and counterparties, and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation
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exposure, and harm to our reputation, all of which could have a material adverse effect on us. In addition, our applicants provide sensitive information, including bank account information when applying for loans or financing. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication to effectively secure transmission of confidential information, including customer bank account and other personal information. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by us to protect transaction data being breached or compromised. Data breaches can also occur as a result of non-technical issues.
Our servers are also vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions, including denial-of-service attacks. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches, including any breach of our systems or by persons with whom we have commercial relationships that result in the unauthorized release of consumers’ personal information or businesses’ proprietary information, could damage our reputation and expose us to a risk of loss or litigation and possible liability. In addition, many of the third parties who provide products, services or support to us could also experience any of the above cyber risks or security breaches, which could impact our customers and our business and could result in a loss of customers, suppliers or revenue.
Any of these events could result in a loss of revenue and could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
If internet search engine providers change their methodologies for organic rankings or paid search results, or our organic rankings or paid search results decline for other reasons, our new customer growth or volume from returning customers could decline.
Our new customer acquisition marketing and our returning customer relationship management is partly dependent on search engines such as Google, Bing and Yahoo! to direct a significant amount of traffic to our desktop and mobile websites via organic ranking and paid search advertising. Our competitors’ paid search activities, pay per click or search engine marketing may result in their sites receiving higher paid search results than ours and significantly increasing the cost of such advertising for us.
Our paid search activities may not produce (and in the past have not always produced) the desired results. Internet search engines often revise their methodologies, which could adversely affect our organic rankings or paid search results, resulting in a decline in our new customer growth or existing customer retention, difficulty for our customers in using our web and mobile sites, more successful organic rankings, paid search results or tactical execution efforts for our competitors than for us, a slowdown in overall growth in our customer base and the loss of existing customers, and higher costs for acquiring returning customers, which could adversely impact our business. In addition, search engines could implement policies that restrict the ability of consumer finance companies such as us to advertise their services and products, which could preclude companies in our industry from appearing in a favorable location or any location in the organic rankings or paid search results when certain search terms are used by the consumer. For example, in 2016, Google implemented a new policy that prohibits lenders, lead providers and affiliates from advertising certain financial products on Google AdWords. Advertisements for personal loans which require repayment within 60 days, or U.S. loans with an APR of 36 percent or more, are no longer allowed on Google paid search advertising. In addition, Google requires that advertisements for personal loans contain or link to information about the features, fees, risks and benefits of the advertised loan product.
Our online marketing efforts are also susceptible to actions by third parties that could negatively impact our search results. Our sites have experienced meaningful fluctuations in organic rankings and paid search results in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of consumers or small businesses directed to our web and mobile sites could harm our business and operating results.
Our operations could be subject to natural disasters and other business disruptions, which could adversely impact our future revenue and financial condition and increase our costs and expenses.
Our services and operations are vulnerable to damage or interruption from tornadoes, hurricanes, earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors and similar events. A significant natural disaster, such as a tornado, hurricane, earthquake, fire or flood, could have a material adverse impact on our ability to conduct business, and our insurance coverage may be insufficient to compensate for losses that may occur. Acts of terrorism, war, civil unrest, violence or human error could cause disruptions to our business or the economy as a whole. Any of these events could cause consumer and small business confidence to decrease, which could result in a decreased number of loans and financing being made to customers. Any of these occurrences could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Failure to keep up with the rapid changes in e-commerce and the uses and regulation of the internet could harm our business.
The business of providing products and services such as ours over the internet is dynamic and relatively new. We must keep pace with rapid technological change, consumer and small business use habits, internet security risks, risks of system failure or inadequacy, and
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governmental regulation and taxation, and each of these factors could adversely impact our business. In addition, concerns about fraud, computer security and privacy and/or other problems may discourage additional consumers and small businesses from adopting or continuing to use the internet as a medium of commerce. In countries such as the United States and the United Kingdom, where e-commerce generally has been available for some time and the level of market penetration of our online financial services is relatively high, acquiring new customers for our services may be more difficult and costly than it has been in the past. In order to expand our customer base, we must appeal to and acquire customers who historically have used traditional means of commerce to conduct their financial services transactions. If these customers prove to be less profitable than our previous customers, and we are unable to gain efficiencies in our operating costs, including our cost of acquiring new customers, our business could be adversely impacted.
Our business is subject to complex and evolving U.S. and international laws and regulations regarding privacy, data protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
Our business is subject to a variety of laws and regulations in the United States and internationally that involve user privacy issues, data protection, advertising, marketing, disclosures, distribution, electronic contracts and other communications, consumer protection and online payment services. The introduction of new products or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. In addition, international data protection, privacy, and other laws and regulations can be more restrictive than those in the United States. U.S. federal and state and international laws and regulations, which can be enforced by private parties or government entities, are constantly evolving and can be subject to significant change, and the U.S. government, including the FTC and the Department of Commerce, has announced that it is reviewing the need for greater regulation of the collection of information concerning consumer behavior on the internet, including regulation aimed at restricting certain targeted advertising practices. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving e-commerce industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current or past policies and practices. A number of proposals are pending before federal, state, and international legislative and regulatory bodies that could significantly affect our business. There have been a number of recent legislative proposals in the United States, at both the federal and state level, that could impose new obligations in areas such as privacy. In addition, some countries are considering legislation requiring local storage and processing of data that, if enacted, would increase the cost and complexity of delivering our services. These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, the expansion into new markets, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or investigations, claims or other remedies, including demands that we modify or cease existing business practices or pay fines, penalties or other damages.
Growth may place significant demands on our management and our infrastructure and could be costly.
We have experienced substantial growth in our business. This growth has placed and may continue to place significant demands on our management and our operational and financial infrastructure. Expanding our products or entering into new jurisdictions with new or existing products can be costly and require significant management time and attention. Additionally, as our operations grow in size, scope and complexity and our product offerings increase, we will need to enhance and upgrade our systems and infrastructure to offer an increasing number of enhanced solutions, features and functionality. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase. Continued growth could also strain our ability to maintain reliable service levels for our customers, develop and improve our operational, financial and management controls, develop and enhance our legal and compliance controls and processes, enhance our reporting systems and procedures and recruit, train and retain highly skilled personnel. Competition for these personnel is intense and is particularly intense for technology and analytics professionals. We may not be successful in attracting and retaining qualified personnel. We have from time to time in the past experienced, and we expect to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources or more attractive compensation mixes than we have had. Managing our growth will require significant expenditures and allocation of valuable management resources. Failure to achieve the necessary level of efficiency in our organization as it grows could materially adversely affect our business, prospects, results of operations, financial condition and cash flows and could impair our ability to continue current operations.
New top level domain names may allow the entrance of new competitors or dilution of our brands, which may reduce the value of our domain name assets.
We have invested heavily in promoting our brands, including our website addresses. The Internet Corporation for Assigned Names and Numbers, the entity responsible for administering internet protocol addresses, has introduced additional new domain name suffixes in different formats, many of which may be more attractive than the formats held by us and which may allow the entrance of new competitors at limited cost. It may also permit other operators to register websites with addresses similar to ours, causing customer confusion and dilution of our brands, which could materially adversely affect our business, prospects, results of operations,
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financial condition and cash flows. Any defensive domain registration strategy or attempts to protect our trademarks or brands could become a large and recurring expense and may not be successful.
Future acquisitions could disrupt our business and harm our financial condition and operating results.
Our success will depend, in part, on our ability to expand our product and service offerings and markets and grow our business in response to changing customer demands, regulatory environments, technologies and competitive pressures. In some circumstances, we may expand our offerings through the acquisition of complementary businesses, solutions or technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. Furthermore, even if we successfully complete an acquisition, we may not be able to successfully assimilate and integrate the business, technologies, solutions, personnel or operations of the business that we acquire, particularly if key personnel of an acquired company decide not to work for us. In addition, we may issue equity securities to complete an acquisition, which would dilute our stockholders’ ownership and could adversely affect the price of our common stock. Acquisitions may also involve the entry into geographic or business markets in which we have little or no prior experience or may expose us to additional material liabilities. Consequently, we may not achieve anticipated benefits of the acquisitions, which could harm our operating results.
We may incur property, casualty or other losses not covered by insurance.
We maintain a program of insurance coverage for various types of property, casualty and other risks. The types and amounts of insurance that we obtain will vary from time to time, depending on availability, cost and management’s decisions with respect to risk retention. The policies are subject to deductibles and exclusions that could result in our retention of a level of risk on a self-insurance basis. Losses not covered by insurance could be substantial and may increase our expenses, which could harm our results of operations and financial condition.
The preparation of our financial statements and certain tax positions taken by us require the judgment of management, and we could be subject to risks associated with these judgments or could be adversely affected by the implementation of new, or changes in the interpretation of existing, accounting principles, financial reporting requirements or tax rules.
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. In addition, management’s judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. Management’s judgment is also required in evaluating whether tax benefits meet the more-likely-than-not threshold for recognition under Accounting Standards Codification 740-10-25, Income Taxes . Upon audit, if the ultimate determination of the taxes owed by us is for an amount in excess of amounts previously accrued, we could be required to make certain additional tax payments, which could materially adversely affect our results of operations and cash flows.
On December 22, 2017, the U.S. government enacted comprehensive Federal tax legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act makes changes to the corporate tax rate, business-related deductions, among others, that will generally be effective for taxable years beginning after December 31, 2017. We are continuing to evaluate the Tax Act and its requirements, as well as its application to our business and its impact on our effective tax rate. At this stage, it is unclear how many U.S. states will incorporate these federal law changes, or portions thereof, into their tax codes. Overall, the impact of U.S. tax reform should reduce our effective tax rate; however, additional guidance or interpretations of the Tax Act could negatively impact our financial results.
In addition, we prepare our financial statements in accordance with generally accepted accounting principles (“GAAP”) and its interpretations are subject to change over time. If new rules or interpretations of existing rules require us to change our financial reporting, our results of operations and financial condition could be materially adversely affected, and we could be required to restate historical financial reporting.
Our U.S. consumer loan businesses are seasonal in nature, which causes our revenue and earnings to fluctuate.
Our U.S. consumer loan businesses are affected by fluctuating demand for our products and services and fluctuating collection rates throughout the year. Demand for our consumer loan products in the United States has historically been highest in the third and fourth quarters of each year, corresponding to the holiday season, and lowest in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds. Typically, our cost of revenue for our consumer loan products in the United States, which represents our loan loss provision, is lowest as a percentage of revenue in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds, and increases as a percentage of revenue for the remainder of each year. This seasonality requires us to manage our cash flows over the course of the year. If our revenue or collections were to fall substantially below what we
34
would normally expect during certain periods, our ability to service debt and meet our other liquidity requirements may be adversely affected, which could have a material adverse effect on our business, prospects, results of operations, and financial condition.
Risks Related to the Spin-Off
Enova International, Inc. was formed on September 7, 2011. Prior to November 13, 2014, we were a wholly-owned subsidiary of Cash America. Since 2011, we have owned all of the assets and incurred all of the liabilities related to Cash America’s e-commerce business, with some limited exceptions, in which case such assets were transferred to us and such liabilities were assumed by us pursuant to a separation and distribution agreement upon completion of a tax-free spin-off (the “Spin-off”), which occurred on November 13, 2014. Following the Spin-off, we became an independent, publicly traded company, and our shares of common stock are listed on the New York Stock Exchange under the symbol “ENVA.” On September 1, 2016, Cash America merged with First Cash Financial Services, Inc. and is now known as FirstCash, Inc. (“First Cash”).
.In connection with our Spin-off from Cash America, we and Cash America (and our successors) agreed to indemnify each other for certain liabilities. If we are required to act on our indemnities, we may need to divert cash to meet those obligations, and Cash America’s (or its successors) indemnity could be insufficient or Cash America (or its successors) could be unable to satisfy its indemnification obligations.
Pursuant to the Separation and Distribution Agreement and other agreements with Cash America, Cash America (and any successor) agreed to indemnify us for certain liabilities related to tax, regulatory, litigation or other liabilities, and we agreed to indemnify Cash America (and any successor) for certain similar liabilities, in each case for uncapped amounts. Indemnities that we may be required to provide Cash America (and any successor) are not subject to any cap, may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the distribution. Third parties could also seek to hold us responsible for any of the liabilities that Cash America (and any successor) agreed to retain. Further, the indemnity from Cash America (and any successor) could be insufficient to protect us against the full amount of such liabilities, or Cash America (and any successor) may be unable to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Cash America (and any successor) any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves and could suffer reputational risks if the losses are related to regulatory, litigation or other matters. Each of these risks could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
The Spin-off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements.
The Spin-off could be challenged under various state and federal fraudulent conveyance laws. An unpaid creditor or an entity vested with the power of such creditor (such as a trustee or debtor-in-possession in a bankruptcy) could claim that the distribution left Cash America insolvent or with unreasonably small capital or that Cash America intended or believed it would incur debts beyond its ability to pay such debts as they mature and that Cash America did not receive fair consideration or reasonably equivalent value in the Spin-off. If a court were to agree with such a claim, then such court could void the distribution as a fraudulent transfer and could impose a number of different remedies, including without limitation, returning our assets or the distributed shares of our stock to Cash America, voiding our liens and claims against Cash America, or providing Cash America with a claim for money damages against us in an amount equal to the difference between the consideration received by Cash America and the fair market value of our Company at the time of the distribution.
The measure of insolvency for purposes of the fraudulent conveyance laws will vary depending on which jurisdiction’s law is applied. Generally, however, an entity would be considered insolvent if either the fair saleable value of its assets is less than the amount of its liabilities (including the probable amount of contingent liabilities), or it is unlikely to be able to pay its liabilities as they become due. We do not know what standard a court would apply to determine insolvency. Further, a court could determine that Cash America was insolvent at the time of or after giving effect to the distribution of Enova common stock.
Under the Separation and Distribution Agreement, we are responsible for the debts, liabilities and other obligations related to the business or businesses which we own and operate. Although we do not expect to be liable for any obligations not expressly assumed by us pursuant to the Separation and Distribution Agreement, it is possible that we could be required to assume responsibility for certain obligations retained by Cash America should Cash America (or its successor) fail to pay or perform its retained obligations.
35
Risks Related to our Indebtedness
We have incurred significant indebtedness, which could adversely affect our financial condition and prevent us from fulfilling our obligations under anticipated agreements governing our indebtedness.
As of December 31, 2017 we had approximately $788.5 million of total debt outstanding. Interest expense on our indebtedness totaled $75.8 million during the year ended December 31, 2017. Our level of debt could have important consequences to our stockholders, including:
|
• |
limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements; |
|
• |
requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; |
|
• |
increasing our vulnerability to general adverse economic and industry conditions; |
|
• |
exposing us to the risk of increased interest rates to the extent that our borrowings are at variable rates of interest; |
|
• |
limiting our flexibility in planning for and reacting to changes in the industry in which we compete; |
|
• |
placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt and more favorable terms and thereby affecting our ability to compete; and |
|
• |
increasing our cost of borrowing. |
We and our subsidiaries may incur significant additional indebtedness in the future. If new indebtedness is added to our current indebtedness levels, the related risks that we face would increase.
The terms of the agreements governing our indebtedness restrict our current and future operations, particularly our ability to respond to changes or to take certain actions, which could harm our long-term interests.
The agreements governing our indebtedness (including the indenture governing the 2021 Senior Notes, 2024 Senior Notes and the 2017 Credit Agreement, as defined under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in Part II, Item 7 of this report) contain various restrictive covenants and, in the case of the 2017 Credit Agreement, require that we maintain certain financial ratios that impose operating and financial restrictions on us and limit our ability to engage in actions that may be in our long-term best interests. These restrictive covenants, among other things, restrict our ability to:
|
• |
incur additional debt; |
|
• |
incur or permit certain liens to exist; |
|
• |
make certain investments; |
|
• |
merge or consolidate with or into, or convey, transfer, lease or dispose of all or substantially all of our assets to, another company; |
|
• |
make certain dispositions; |
|
• |
make certain payments; and |
|
• |
engage in certain transactions with affiliates. |
As a result of all of these covenants and restrictions, we may be:
|
• |
limited in how we conduct our business; |
|
• |
unable to raise additional debt or equity financing to operate during general economic or business downturns; or |
|
• |
unable to compete effectively or to take advantage of new business opportunities. |
Any failure to comply with any of these financial and other affirmative and negative covenants could constitute an event of default under our debt agreements, entitling the lenders to, among other things, terminate future credit availability under our 2017 Credit Agreement, and/or increase the interest rate on outstanding debt, and/or accelerate the maturity of outstanding obligations under our debt agreements. Any such default could materially adversely affect our business, prospects, results of operations, financial condition and cash flows and could impair our ability to continue current operations. See “Management’s Discussion and Analysis of Financial
36
Condition and Results of Operations—Liquidity and Capital Resources” in Part II, Item 7 of this report for additional information concerning our indebtedness.
We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations will depend on our financial condition and operating performance and our ability to enter into other debt financings, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory, capital markets and other factors beyond our control. We might not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. For information regarding the risks to our business that could impair our ability to satisfy our obligations under our indebtedness, see “Risk Factors—Risks Related to Our Business and Industry.” If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. If we cannot make scheduled payments on our debt, we will be in default, and lenders could declare all outstanding principal and interest to be due and payable, the lenders under our 2017 Credit Agreement could terminate their commitments to loan money and we could be forced into bankruptcy or liquidation. The agreements governing our indebtedness restrict our ability to dispose of assets and use the proceeds from those dispositions and also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial condition, liquidity, results of operations and cash flows and our ability to satisfy our obligations under our indebtedness.
Changes in our financial condition or a potential disruption in the capital markets could reduce available capital.
If funds are not available from our operations and any excess cash or from our 2017 Credit Agreement, we will be required to rely on the banking and credit markets to meet our financial commitments and short-term liquidity needs. We also expect to periodically access the debt capital markets to obtain capital to finance growth. Efficient access to the debt capital markets will be critical to our ongoing financial success; however, our future access to the debt capital markets could become restricted due to a variety of factors, including a deterioration of our earnings, cash flows, balance sheet quality, or overall business or industry prospects, adverse regulatory changes, a disruption to or deterioration in the state of the capital markets or a negative bias toward our industry by market participants. Disruptions and volatility in the capital markets may cause banks and other credit providers to restrict availability of new credit. Due to the negative bias toward our industry, commercial banks and other lenders have restricted access to available credit to participants in our industry, and we may have more limited access to commercial bank lending than other businesses. Our ability to obtain additional financing in the future will depend in part upon prevailing capital market conditions, and a potential disruption in the capital markets may adversely affect our efforts to arrange additional financing on terms that are satisfactory to us, if at all. If adequate funds are not available, or are not available on acceptable terms, we may not have sufficient liquidity to fund our operations, make future investments, take advantage of acquisitions or other opportunities, or respond to competitive challenges and this, in turn, could adversely affect our ability to advance our strategic plans. Additionally, if the capital and credit markets experience volatility, and the availability of funds is limited, third parties with whom we do business may incur increased costs or business disruption and this could adversely affect our business relationships with such third parties.
Risks Related to our Common Stock and the Securities Market
Certain provisions of our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law may discourage takeovers.
Our amended and restated certificate of incorporation authorizes our Board of Directors to issue preferred stock and to determine the designations, powers, preferences, and relative, participating, optional, or other special rights, if any, and the qualifications, limitations, or restrictions of our preferred stock, including the number of shares, in any series, without any further vote or action by the stockholders. The rights of the holders of our common stock will be subject to the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock could delay, deter, or prevent a change in control and could adversely affect the voting power or economic value of our stock.
In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including:
|
• |
limitations on the ability of our stockholders to call special meetings; |
|
• |
limitations on the ability of our stockholders to act by written consent; |
37
|
• |
a separate vote of 80% of the voting power of the outstanding shares of capital stock in order for stockholders to amend the bylaws; and |
|
• |
advance notice provisions for stockholder proposals and nominations for elections to the Board of Directors to be acted upon at meetings of stockholders. |
The market price of our shares may fluctuate widely.
The market price of our common stock may be influenced by many factors, some of which are beyond our control, including, among other things:
|
• |
changes in federal, state or international laws and regulations affecting our industry; |
|
• |
actual or anticipated variations in quarterly and annual operating results; |
|
• |
changes in financial estimates and recommendations by research analysts following our common stock or the failure of research analysts to cover our common stock; |
|
• |
actual or anticipated changes in the United States or international economies; |
|
• |
terrorist acts or wars; |
|
• |
announcements by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures, or other strategic initiatives; |
|
• |
the trading volume of our common stock; and |
|
• |
the other risks and uncertainties described herein. |
The stock markets have experienced price and volume fluctuations that have affected and continue to affect the market price of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of these companies. These broad market fluctuations, as well as general economic, systemic, political, and market conditions, such as recessions, loss of investor confidence, or interest rate changes, may negatively affect the market price of our common stock.
If securities or industry analysts publish research that is unfavorable about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. We currently have a limited number of analysts who are publishing research about us. In the event that one or more of our analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price could decline. If one or more of these analysts ceases coverage of our company, demand for our stock may decrease, which could cause our stock price or trading volume to decline.
We do not anticipate paying any dividends on our common stock in the foreseeable future. As a result, stockholders will need to sell their shares of common stock to receive any income or realize a return on their investment.
We do not anticipate paying any dividends on our common stock in the foreseeable future. Any declaration and payment of future dividends to holders of our common stock may be limited by the provisions of the Delaware General Corporation Law (“DGCL”) and are limited by the terms of the 2017 Credit Agreement, 2021 Senior Notes and 2024 Senior Notes. The future payment of dividends, if permitted by our 2017 Credit Agreement and the indentures governing the 2021 Senior Notes and 2024 Senior Notes, will be at the sole discretion of our Board of Directors and will depend on many factors, including our earnings, capital requirements, financial condition, and other considerations that our Board of Directors deem relevant. As a result, to receive any income or realize a return on their investment, our stockholders will need to sell their shares of common stock.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the DGCL or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. Our stockholders are deemed to have notice of and have consented to the provisions of our amended and restated certificate of
38
incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
None.
We lease our corporate headquarters, which is located in Chicago, Illinois. We also maintain a leased office in Gurnee, Illinois for one of our call center operations, a leased office in Blue Ash, Ohio for The Business Backer operations, and leased office space in London, United Kingdom for our U.K. operations and São Paulo, Brazil for our Brazil operations. We believe that our leased facilities are adequate to support our operations and that, as needed, we will be able to obtain suitable additional facilities on commercially reasonable terms.
On March 8, 2013, Flemming Kristensen, on behalf of himself and others similarly situated, filed a purported class action lawsuit in the U.S. District Court of Nevada against us and other unaffiliated lenders and lead providers. The lawsuit alleges that the lead provider defendants sent unauthorized text messages to consumers on behalf of us and the other lender defendants in violation of the Telephone Consumer Protection Act. The complaint seeks class certification. On March 26, 2014, the Court granted class certification. On July 20, 2015, the court granted our motion for summary judgment, denied Plaintiff’s motion for summary judgment and, on July 21, 2015, entered judgment in favor of us. Plaintiff filed a motion for reconsideration, which was denied. On May 3, 2016, Plaintiff filed a notice of appeal of the order granting summary judgment for us, the judgment in favor of us, and the order denying Plaintiff’s motion to reconsider. On January 10, 2018, the Ninth Circuit filed an opinion affirming the district court's entry of summary judgment for us and the other defendants. The plaintiff has 90 days from the date of the opinion (until April 10, 2018) to petition the United States Supreme Court to review the matter. Neither the likelihood of an unfavorable appellate decision nor the ultimate liability, if any, with respect to this matter can be determined at this time, and we are currently unable to estimate a range of reasonably possible losses, as defined by Accounting Standards Codification 450-20-20, Contingencies–Loss Contingencies–Glossary, for this litigation. We believe that the plaintiff’s claims in the complaint are without merit and intend to vigorously defend this lawsuit.
We are also involved in certain routine legal proceedings, claims and litigation matters encountered in the ordinary course of our business. Certain of these matters may be covered to an extent by insurance or by indemnification agreements with third parties. We have recorded accruals in our financial statements for those matters in which it is probable that we have incurred a loss and the amount of the loss, or range of loss, can be reasonably estimated. In the opinion of management, the resolution of these matters will not have a material adverse effect on our financial position, results of operations or liquidity.
Not Applicable.
39
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Principal Market
The principal market for our common stock is the New York Stock Exchange (“NYSE”). The following table sets forth the high and low intra-day sales prices per share for our common stock on the NYSE.
|
|
2017 |
|
|
2016 |
|
||||||||||
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
||||
First Quarter |
|
$ |
15.40 |
|
|
$ |
12.55 |
|
|
$ |
7.13 |
|
|
$ |
4.64 |
|
Second Quarter |
|
|
15.50 |
|
|
|
13.00 |
|
|
|
9.54 |
|
|
|
5.43 |
|
Third Quarter |
|
|
16.80 |
|
|
|
11.15 |
|
|
|
10.44 |
|
|
|
6.47 |
|
Fourth Quarter |
|
|
16.25 |
|
|
|
12.70 |
|
|
|
13.90 |
|
|
|
8.68 |
|
Stockholders
There were 332 registered stockholders of record of Enova common stock as of February 22, 2018.
Dividends
We do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain our future earnings for use in the operation and expansion of our business. The declaration and amount of any future dividends, however, will be determined by our Board of Directors and will depend on our financial condition, earnings and capital requirements, covenants associated with our debt obligations and any other factors that our Board of Directors believes are relevant. There can be no assurance, however, that we will pay any cash dividends on our common stock in the future. In addition, the terms of the indentures governing the 2021 Senior Notes and 2024 Senior Notes and our 2017 Credit Agreement limit our ability to pay future dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in Part II, Item 7 of this report.
40
The following graph shows a comparison of the cumulative total shareholder return for our common stock to the total shareholder return for the S&P SmallCap 600® Index and with our peer group from November 13, 2014 (the date our common stock began trading on the NYSE) through December 31, 2017. This data assumes an investment of $100 in each of our common stock and the two indices on November 13, 2014 and that all dividends were reinvested. Our peer group index is comprised of CBOE Holdings, Inc., CoreLogic, Inc., CoStar Group Inc., EZCORP, Inc., Fair Isaac Corporation, Green Dot Corporation, Investment Technology Group Inc., Liquidity Services, Inc., Nelnet, Inc., OneMain Holdings, Inc., Regional Management Corp., Shutterfly, Inc., SS&C Technologies Holdings, Inc., TripAdvisor Inc. and World Acceptance Corp.
Unregistered Sales of Equity Securities
We did not sell any unregistered securities during the three years ended December 31, 2017.
Issuer Purchases of Equity Securities
The following table provides the information with respect to purchases made by us of shares of our common stock.
Period |
|
Total Number of Shares Purchased (a) |
|
|
Average Price Paid Per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan (b) |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (b) (in thousands) |
|
||||
October 1 – October 31, 2017 |
|
|
150,915 |
|
|
$ |
14.04 |
|
|
|
150,915 |
|
|
$ |
21,804.00 |
|
November 1 – November 30, 2017 |
|
|
13,367 |
|
|
|
13.95 |
|
|
|
5,000 |
|
|
|
21,732 |
|
December 1 – December 31, 2017 |
|
|
43,779 |
|
|
|
15.02 |
|
|
|
18,525 |
|
|
|
21,454 |
|
Total |
|
|
208,061 |
|
|
$ |
14.24 |
|
|
|
174,440 |
|
|
$ |
21,454 |
|
(a) |
Includes shares withheld from employees as tax payments for shares issued under the Company’s stock-based compensation plans of 8,367 and 25,254 shares for the months of November and December, respectively. See Note 12 in the Notes to Consolidated Financial Statements for additional details on the Company’s stock-based compensation plans. |
41
Authorization”). All share repurchases made under the September 2017 Authorization have been through open market transactions. |
42
(In thousands, except per share) |
|
Year Ended December 31, |
|
|||||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|||||
Statement of Income Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
843,741 |
|
|
$ |
745,569 |
|
|
$ |
652,600 |
|
|
$ |
809,837 |
|
|
$ |
765,323 |
|
Cost of Revenue |
|
|
396,632 |
|
|
|
327,966 |
|
|
|
216,858 |
|
|
|
266,787 |
|
|
|
315,052 |
|
Gross Profit |
|
|
447,109 |
|
|
|
417,603 |
|
|
|
435,742 |
|
|
|
543,050 |
|
|
|
450,271 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
101,429 |
|
|
|
97,404 |
|
|
|
116,882 |
|
|
|
127,862 |
|
|
|
135,336 |
|
Operations and technology |
|
|
95,155 |
|
|
|
85,202 |
|
|
|
74,012 |
|
|
|
73,573 |
|
|
|
70,776 |
|
General and administrative |
|
|
101,723 |
|
|
|
97,956 |
|
|
|
102,073 |
|
|
|
107,875 |
|
|
|
84,420 |
|
Depreciation and amortization |
|
|
14,388 |
|
|
|
15,564 |
|
|
|
18,388 |
|
|
|
18,732 |
|
|
|
17,143 |
|
Total Expenses |
|
|
312,695 |
|
|
|
296,126 |
|
|
|
311,355 |
|
|
|
328,042 |
|
|
|
307,675 |
|
Income from Operations |
|
|
134,414 |
|
|
|
121,477 |
|
|
|
124,387 |
|
|
|
215,008 |
|
|
|
142,596 |
|
Interest expense, net |
|
|
(74,003 |
) |
|
|
(65,603 |
) |
|
|
(52,883 |
) |
|
|
(38,474 |
) |
|
|
(19,788 |
) |
Foreign currency transaction income (loss), net |
|
|
384 |
|
|
|
1,562 |
|
|
|
(985 |
) |
|
|
(35 |
) |
|
|
(1,176 |
) |
Loss on early extinguishment of debt |
|
|
(22,895 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Income before Income Taxes |
|
|
37,900 |
|
|
|
57,436 |
|
|
|
70,519 |
|
|
|
176,499 |
|
|
|
121,632 |
|
Provision for income taxes |
|
|
8,660 |
|
|
|
22,834 |
|
|
|
26,527 |
|
|
|
64,828 |
|
|
|
43,594 |
|
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
|
$ |
111,671 |
|
|
$ |
78,038 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.87 |
|
|
$ |
1.04 |
|
|
$ |
1.33 |
|
|
$ |
3.38 |
|
|
$ |
2.36 |
|
Diluted |
|
$ |
0.86 |
|
|
$ |
1.03 |
|
|
$ |
1.33 |
|
|
$ |
3.38 |
|
|
$ |
2.36 |
|
Dividends declared per common share |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3.71 |
|
|
$ |
— |
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
33,523 |
|
|
|
33,192 |
|
|
|
33,006 |
|
|
|
33,000 |
|
|
|
33,000 |
|
Diluted |
|
|
34,132 |
|
|
|
33,462 |
|
|
|
33,026 |
|
|
|
33,008 |
|
|
|
33,000 |
|
Other Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (a) |
|
$ |
157,751 |
|
|
$ |
142,263 |
|
|
$ |
155,675 |
|
|
$ |
235,819 |
|
|
$ |
162,489 |
|
Capital expenditures |
|
$ |
16,528 |
|
|
$ |
14,396 |
|
|
$ |
32,241 |
|
|
$ |
13,284 |
|
|
$ |
14,872 |
|
Gross profit margin |
|
|
53.0 |
% |
|
|
56.0 |
% |
|
|
66.8 |
% |
|
|
67.1 |
% |
|
|
58.8 |
% |
Adjusted EBITDA margin (a) |
|
|
18.7 |
% |
|
|
19.1 |
% |
|
|
23.9 |
% |
|
|
29.1 |
% |
|
|
21.2 |
% |
Domestic revenue |
|
$ |
709,537 |
|
|
$ |
622,991 |
|
|
$ |
510,242 |
|
|
$ |
474,715 |
|
|
$ |
395,549 |
|
International revenue |
|
$ |
134,204 |
|
|
$ |
122,578 |
|
|
$ |
142,358 |
|
|
$ |
335,122 |
|
|
$ |
369,774 |
|
Number of employees (at period end) |
|
|
1,109 |
|
|
|
1,099 |
|
|
|
1,132 |
|
|
|
1,151 |
|
|
|
1,027 |
|
Balance Sheet Data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
68,684 |
|
|
$ |
39,934 |
|
|
$ |
42,066 |
|
|
$ |
75,106 |
|
|
$ |
47,480 |
|
Loans and finance receivables, net |
|
|
704,705 |
|
|
|
561,550 |
|
|
|
434,633 |
|
|
|
323,611 |
|
|
|
303,467 |
|
Total assets |
|
|
1,159,460 |
|
|
|
977,879 |
|
|
|
840,537 |
|
|
|
721,315 |
|
|
|
661,238 |
|
Long-term debt |
|
|
788,542 |
|
|
|
649,911 |
|
|
|
541,909 |
|
|
|
480,726 |
|
|
|
424,133 |
|
Total stockholders' equity |
|
|
281,687 |
|
|
|
241,699 |
|
|
|
205,968 |
|
|
|
153,984 |
|
|
|
173,048 |
|
Other Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined loans and finance receivables, gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans (b) |
|
$ |
102,547 |
|
|
$ |
89,097 |
|
|
$ |
83,944 |
|
|
$ |
92,561 |
|
|
$ |
122,165 |
|
Line of credit accounts |
|
|
170,068 |
|
|
|
144,183 |
|
|
|
100,855 |
|
|
|
118,680 |
|
|
|
125,802 |
|
Installment loans and RPAs (b) |
|
|
589,268 |
|
|
|
459,414 |
|
|
|
351,279 |
|
|
|
213,588 |
|
|
|
179,230 |
|
Total combined loans and finance receivables, gross (b) |
|
$ |
861,883 |
|
|
$ |
692,694 |
|
|
$ |
536,078 |
|
|
$ |
424,829 |
|
|
$ |
427,197 |
|
Combined loan and finance receivable originations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans |
|
$ |
1,127,790 |
|
|
$ |
1,115,891 |
|
|
$ |
1,178,359 |
|
|
$ |
1,303,231 |
|
|
$ |
1,846,024 |
|
Line of credit accounts |
|
|
301,255 |
|
|
|
318,385 |
|
|
|
237,325 |
|
|
|
439,562 |
|
|
|
311,649 |
|
Installment loans and RPAs |
|
|
712,002 |
|
|
|
622,877 |
|
|
|
516,953 |
|
|
|
461,432 |
|
|
|
438,405 |
|
Total combined originations |
|
$ |
2,141,047 |
|
|
$ |
2,057,153 |
|
|
$ |
1,932,637 |
|
|
$ |
2,204,225 |
|
|
$ |
2,596,078 |
|
43
(a) |
The table below shows a reconciliation of Adjusted EBITDA, a non-GAAP measure, to Net Income and Adjusted EBITDA as a percentage of total revenue, which is Adjusted EBITDA margin (dollars in thousands): |
|
|
Year Ended December 31, |
|
|||||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|||||
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
|
$ |
111,671 |
|
|
$ |
78,038 |
|
Depreciation and amortization expenses |
|
|
14,388 |
|
|
|
15,564 |
|
|
|
18,388 |
|
|
|
18,732 |
|
|
|
17,143 |
|
Interest expense, net |
|
|
74,003 |
|
|
|
65,603 |
|
|
|
52,883 |
|
|
|
38,474 |
|
|
|
19,788 |
|
Foreign currency transaction (gain) loss, net |
|
|
(384 |
) |
|
|
(1,562 |
) |
|
|
985 |
|
|
|
35 |
|
|
|
1,176 |
|
Provision for income taxes |
|
|
8,660 |
|
|
|
22,834 |
|
|
|
26,527 |
|
|
|
64,828 |
|
|
|
43,594 |
|
Stock-based compensation expense |
|
|
11,307 |
|
|
|
8,522 |
|
|
|
9,630 |
|
|
|
664 |
|
|
|
250 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt (1) |
|
|
22,895 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Acquisition related costs (2) |
|
|
(2,358 |
) |
|
|
(3,300 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Lease termination and relocation costs (3) |
|
|
— |
|
|
|
— |
|
|
|
3,270 |
|
|
|
1,415 |
|
|
|
— |
|
Regulatory Penalty (4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,500 |
|
Adjusted EBITDA |
|
$ |
157,751 |
|
|
$ |
142,263 |
|
|
$ |
155,675 |
|
|
$ |
235,819 |
|
|
$ |
162,489 |
|
Adjusted EBITDA margin calculated as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
843,741 |
|
|
|
745,569 |
|
|
|
652,600 |
|
|
|
809,837 |
|
|
|
765,323 |
|
Adjusted EBITDA |
|
|
157,751 |
|
|
|
142,263 |
|
|
|
155,675 |
|
|
|
235,819 |
|
|
|
162,489 |
|
Adjusted EBITDA as a percentage of total revenue |
|
|
18.7 |
% |
|
|
19.1 |
% |
|
|
23.9 |
% |
|
|
29.1 |
% |
|
|
21.2 |
% |
|
(1) |
For the year ended December 31, 2017, the Company recorded $22.9 million ($17.7 million net of tax) losses on early extinguishment of debt related to the repurchase of $155.0 million principal amount of senior notes and the redemption of $160.9 million of securitization notes. |
|
(2) |
For the years ended December 31, 2017 and 2016, the Company recorded a $2.4 million ($1.8 million net of tax) and a $3.3 million ($2.0 million net of tax) fair value adjustment to contingent consideration, respectively, related to a prior year acquisition. |
|
(3) |
In May 2015, the Company relocated its headquarters and as a result incurred $3.3 million of facility cease-use charges ($2.1 million net of tax) consisting of remaining lease obligations and disposal costs on its prior headquarters. In June 2014 the Company incurred $1.4 million ($0.9 million net of tax) of early lease termination charges on our prior headquarters. |
|
(4) |
For the year ended December 31, 2013, represents the amount paid in connection with the Regulatory Penalty, which is nondeductible for tax purposes. |
(b) |
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Disclosure—Combined Consumer Loans” in Part II, Item 7 of this report for additional information about combined consumer loans. The table below shows combined consumer loan balances, a non-GAAP measure, which is composed of Company-owned consumer loan balances as reported on our consolidated balance sheets and consumer loans originated by third party lenders through the CSO programs that are not included in our financial statements but are disclosures required by GAAP (in thousands): |
|
|
Year Ended December 31, |
|
|||||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|||||
Short-term loan balances, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
73,672 |
|
|
$ |
63,005 |
|
|
$ |
58,793 |
|
|
$ |
56,298 |
|
|
$ |
80,753 |
|
Guaranteed by the Company |
|
|
28,875 |
|
|
|
26,092 |
|
|
|
25,151 |
|
|
|
36,263 |
|
|
|
41,412 |
|
Combined |
|
$ |
102,547 |
|
|
$ |
89,097 |
|
|
$ |
83,944 |
|
|
$ |
92,561 |
|
|
$ |
122,165 |
|
Installment loan and finance receivable balances, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
584,009 |
|
|
$ |
453,307 |
|
|
$ |
342,307 |
|
|
$ |
213,581 |
|
|
$ |
179,230 |
|
Guaranteed by the Company |
|
|
5,259 |
|
|
|
6,107 |
|
|
|
8,972 |
|
|
|
7 |
|
|
|
— |
|
Combined |
|
$ |
589,268 |
|
|
$ |
459,414 |
|
|
$ |
351,279 |
|
|
$ |
213,588 |
|
|
$ |
179,230 |
|
Total loan and finance receivable balances, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
827,749 |
|
|
$ |
660,495 |
|
|
$ |
501,955 |
|
|
$ |
388,559 |
|
|
$ |
385,785 |
|
Guaranteed by the Company |
|
|
34,134 |
|
|
|
32,199 |
|
|
|
34,123 |
|
|
|
36,270 |
|
|
|
41,412 |
|
Combined |
|
$ |
861,883 |
|
|
$ |
692,694 |
|
|
$ |
536,078 |
|
|
$ |
424,829 |
|
|
$ |
427,197 |
|
44
RECENT REGULATORY DEVELOPMENTS
Consumer Financial Protection Bureau
On October 6, 2017, the CFPB issued its final rule on payday and certain high-cost installment loans, which would cover some of the loans we offer. The rule requires that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay the loans according to their terms before issuing the loans. The rule also introduces new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed payment attempts. The rule will apply to loan contracts entered into beginning in mid-2019. However, under the Congressional Review Act, Congress has 60 legislative days after publication of the rule in the Federal Register (which occurred on November 17, 2017) to overturn it by a majority vote in both Houses of Congress. On January 16, 2018, the CFPB issued a statement that it intends to engage in a rulemaking process to reconsider the Final Rule. We do not currently know which portions of the Final Rule will be subject to reconsideration or the nature and extent of the final rule that the CFPB will adopt. It is also likely that there will be legal challenges to the final rule if it does not change before it goes into effect.
Tax Cuts and Jobs Act
On December 22, 2017, the Tax Cuts and Jobs Acts was enacted into law. The new tax legislation contains several key tax provisions including the reduction of the corporate income tax rate to 21% effective January 1, 2018 as well as a variety of other changes including the acceleration of expensing of certain business assets and reductions in the amount of executive pay that could qualify as a tax deduction. We have recorded an estimated net tax benefit of $7.5 million from the remeasurement of deferred tax assets and liabilities at lower enacted corporate tax rates. ASC 740, Income Taxes (“ASC 740”) requires us to recognize the effect of the tax law changes in the period of enactment. Adjustments to deferred tax expense could arise when deferred taxes are trued-up to the amounts reported on the tax returns through the return-to-provision process. In addition, the legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury Department and Internal Revenue Service (“IRS”), any of which could affect the estimates included in the provision. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. If any adjustment is required, it will be reflected as an additional expense or benefit in the 2018 financial statements, as allowed by SEC Staff Accounting Bulletin No. 118.
BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES
Enova International, Inc. was formed on September 7, 2011. Prior to November 13, 2014, we were a wholly-owned subsidiary of Cash America. Since 2011, we have owned all of the assets and incurred all of the liabilities related to Cash America’s e-commerce business, with some limited exceptions, in which case such assets were transferred to us and such liabilities were assumed by us pursuant to a separation and distribution agreement upon completion of a tax-free spin-off (the “ Spin-off”), which occurred on November 13, 2014. Following the Spin-off, we became an independent, publicly traded company, and our shares of common stock are listed on the New York Stock Exchange under the symbol “ENVA.” On September 1, 2016, Cash America merged with First Cash Financial Services, Inc. and is now known as FirstCash, Inc. (“First Cash”).
As of December 31, 2017, Enova offered, arranged or purchased consumer and small business loans and receivables purchase agreements (collectively referred to as “loans and finance receivables” throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations) through a number of its subsidiaries to customers in all 50 states and Washington D.C. in the United States, United Kingdom and Brazil.
Out-of-Period Adjustment
In a review of our revenue recognition policy during 2015, we determined that certain fees on our line of credit product should be deferred over the period the draw is outstanding rather than recognized as revenue when assessed. We recorded a $2.5 million reduction to revenue in the fourth quarter of 2015 as an out-of-period adjustment. This adjustment included a $2.8 million reduction of revenue associated with periods prior to 2015. We believe this adjustment was not material to any of the prior years’ consolidated financial statements.
45
We recognize revenue based on the financing products and services we offer and on loans we acquire. “Revenue” in the consolidated statements of income includes: interest income, finance charges, fees for services provided through the CSO programs (“CSO fees”), revenue on RPAs, draw fees, minimum billing fees, late fees and nonsufficient funds fees as permitted by applicable laws and pursuant to the agreement with the borrower. For short-term loans that we offer, interest and finance charges are recognized on an effective yield basis over the term of the loan. For line of credit accounts, interest is recognized over the reporting period based upon the balance outstanding and the contractual interest rate, draw fees are recognized on an effective yield basis over the estimated outstanding period of the draw, and minimum billing fees are recognized when assessed to the customer. For installment loans, interest is recognized on an effective yield basis over the term of the loan. For RPAs, revenue is recognized on an effective yield basis over the projected delivery term of the agreements and fees are recognized when assessed. CSO fees are recognized on an effective yield basis over the term of the loan. Late and nonsufficient funds fees are recognized when assessed to the customer. Direct costs associated with originating loans or RPAs and purchasing installment loans, such as third-party customer acquisition costs or purchase premiums, are deferred and amortized against revenue on an effective yield basis over the term of the loan or the projected delivery term of the finance receivable. Unpaid and accrued interest and fees and unamortized deferred origination costs are included in “loans and finance receivables, net” in the consolidated balance sheets.
Current and Delinquent Loan and Finance Receivables
We classify our loans and finance receivables as either current or delinquent. Short-term loans are considered delinquent when payment of an amount due is not made as of the due date. If a line of credit account or installment loan customer misses one payment, that payment is considered delinquent and the balance of the loan is considered current. We do not accrue interest on the delinquent payment portion of the loan but do continue to accrue interest on the remaining portion of the loan. If a line of credit account or installment loan customer does not make two consecutive payments, the entire account or loan is classified as delinquent and placed on a non-accrual status. We allow for normal payment processing time before considering a payment or a loan delinquent but do not provide for any additional grace period.
Where permitted by law and as long as a loan is not considered delinquent, a customer may choose to renew a short-term loan or installment loan or extend the due date on a short-term loan. In order to renew or extend a short-term loan, a customer must agree to pay the current finance charge for the right to make a later payment of the outstanding principal balance plus an additional finance charge. In order to renew an installment loan, the customer enters into a new installment loan contract and agrees to pay the principal balance and finance charge in accordance with the terms of the new loan contract. If a short-term loan is renewed, but the customer fails to pay that loan’s current finance charge as of the due date, the unpaid finance charge is classified as delinquent. References throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations to renewed loans include both renewals and extensions made by customers to their existing loans as discussed above.
We generally do not accrue interest on delinquent loans and do not resume accrual of interest on a delinquent loan unless it is returned to current status. In addition, delinquent loans generally may not be renewed, and if, during an attempt to collect on a delinquent loan, we allow additional time for payment through a payment plan or a promise to pay, it is still considered delinquent. Generally, all payments received are first applied against accrued but unpaid interest and fees and then against the principal balance of the loan.
Allowance and Liability for Estimated Losses on Loans and Finance Receivables
We monitor the performance of our loan and finance receivable portfolios and maintain either an allowance or liability for estimated losses on loans and finance receivables (including revenue, fees and/or interest) at a level estimated to be adequate to absorb losses inherent in the portfolio. The allowance for losses on our owned loans and finance receivables reduces the outstanding loans and finance receivables balance in the consolidated balance sheets. The liability for estimated losses related to loans guaranteed under the CSO programs is initially recorded at fair value and is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
In determining the allowance or liability for estimated losses on loans and finance receivables, we apply a documented systematic methodology. In calculating the allowance or liability for receivable losses, outstanding loans and finance receivables are divided into discrete groups of short-term loans, line of credit accounts, installment loans and RPAs and are analyzed as current or delinquent. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as a “Cost of revenue” in the consolidated statements of income.
The allowance or liability for short-term loans classified as current is based on historical loss rates adjusted for recent default trends for current loans. For delinquent short-term loans, the allowance or liability is based on a six month rolling average of loss rates by stage of collection. For line of credit account, installment loan and RPA portfolios, we generally use either a migration analysis or roll-rate based methodology to estimate losses inherent in the portfolio. The allowance or liability calculation under the migration analysis and roll-rate methodology is based on historical charge-off experience and the loss emergence period, which represents the average
46
amount of time between the first occurrence of a loss event and the charge-off of a loan or RPA. The factors we consider to assess the adequacy of the allowance or liability include past due performance, historical behavior of monthly vintages, underwriting changes, delinquency status, payment history and recency factors.
We fully reserve for loans and finance receivables once the receivable or a portion of the receivable has been classified as delinquent for 60 consecutive days and generally charge-off loans and finance receivables between 60 – 65 days delinquent. If a loan or finance receivable is deemed uncollectible before it is fully reserved, it is charged off at that point. Loans and finance receivables classified as delinquent generally have an age of one to 64 days from the date any portion of the loan became delinquent, as defined above. Recoveries on loans and finance receivables previously charged to the allowance are credited to the allowance when collected.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with Accounting Standards Codification (“ASC”) 350, Goodwill , we test goodwill and intangible assets with an indefinite life for potential impairment annually as of June 30 and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount.
We first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In assessing the qualitative factors, we consider relevant events and circumstances including but not limited to macroeconomic conditions, industry and market environment, our overall financial performance, cash flow from operating activities, market capitalization and stock price. If we determine that the two-step quantitative impairment test is required, we use the income approach to complete our annual goodwill assessment. The income approach uses future cash flows and estimated terminal values that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint. We completed our annual assessment of goodwill as of June 30, 2017 based on qualitative factors and determined that the fair value of our goodwill exceeded carrying value, and, as a result, no impairment existed at that date. A 10% decrease in the estimated fair value for the June 2017 assessment would not have resulted in a goodwill impairment. Although no goodwill impairment was noted, there can be no assurances that future goodwill impairments will not occur.
Long-lived Assets Other Than Goodwill
An evaluation of the recoverability of property and equipment and intangible assets subject to amortization is performed whenever the facts and circumstances indicate that the carrying value may be impaired. An impairment loss is recognized if the future undiscounted cash flows associated with the asset and the estimated fair value of the asset are less than the asset’s corresponding carrying value. The amount of the impairment loss, if any, is the excess of the asset’s carrying value over its estimated fair value.
We amortize finite-lived intangible assets subject to amortization on the basis of their expected periods of benefit, generally three to 20 years. The costs of start-up activities and organization costs are charged to expense as incurred.
Marketing Expenses
Marketing expenses consist of digital costs, lead purchase costs and offline marketing costs such as television and direct mail advertising. Marketing costs directly related to loan and RPA originations are deferred and amortized against revenue. Marketing costs not directly resulting in loan and RPA originations are expensed as incurred. The production costs associated with offline marketing are expensed as incurred.
In 2015 and 2016, we also had an agreement with an independent third party pursuant to which we paid a portion of the net revenue received from the customers referred to us by such third party. These referral fees were included in “Marketing” in the consolidated statements of income.
Operations and Technology Expenses
Operations and technology expenses include all expenses related to the direct operations and technology infrastructure related to loan underwriting and processing. This includes call center and operations personnel costs, software maintenance expense, underwriting data from third-party vendors, and telephony costs.
General and Administrative Expenses
General and Administrative expenses primarily include corporate personnel costs, as well as legal, occupancy, and other related costs.
47
We account for income taxes under ASC 740. As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax expense together with assessing temporary differences in recognition of income for tax and accounting purposes. These differences result in deferred tax assets and liabilities and are included within the consolidated balance sheets. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. An expense or benefit is included within the tax provision in the statement of operations for any increase or decrease in the valuation allowance for a given period.
We perform an evaluation of the recoverability of our deferred tax assets on a quarterly basis. We establish a valuation allowance if it is more-likely-than-not (greater than 50 percent) that all or some portion of the deferred tax asset will not be realized. We analyze several factors, including the nature and frequency of operating losses, our carryforward period for any losses, the reversal of future taxable temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning strategies to protect against the loss of deferred tax assets.
We account for uncertainty in income taxes in accordance with ASC 740, which requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the consolidated financial statements and prescribes how such benefit should be measured. We must evaluate tax positions taken on our tax returns for all periods that are open to examination by taxing authorities and make a judgment as to whether and to what extent such positions are more likely than not to be sustained based on merit. We record interest and penalties related to tax matters as income tax expense in the consolidated statement of income.
Our judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. Our judgment is also required in evaluating whether tax benefits meet the more-likely-than-not threshold for recognition under ASC 740.
Recent Accounting Pronouncements
See Note 1 in the Notes to the Audited Consolidated Financial Statements in Part II, Item 8 “Financial Statements and Supplementary Data” in this report for a discussion of recent accounting pronouncements.
RESULTS OF OPERATIONS
HIGHLIGHTS
Our financial results for the year ended December 31, 2017 (“2017”) are summarized below.
|
• |
Consolidated total revenue increased $98.1 million, or 13.2%, to $843.7 million in 2017 compared to $745.6 million in the year ended December 31, 2016 (“2016”). An $86.5 million, or 13.9%, increase in domestic revenue to $709.5 million in 2017 from $623.0 million for 2016 and an $11.6 million, or 9.5%, increase in international revenue to $134.2 million in 2017 from $122.6 million in 2016 both contributed to the total increase. |
|
• |
Consolidated gross profit increased $29.5 million, or 7.1%, to $447.1 million in 2017 compared to $417.6 million in 2016. |
|
• |
Consolidated income from operations increased $12.9 million, or 10.6%, to $134.4 million in 2017, compared to $121.5 million in 2016. |
|
• |
Consolidated net income was $29.2 million in 2017, compared to $34.6 million in 2016. Consolidated diluted earnings per share were $0.86 in 2017 compared to $1.03 in 2016. |
48
The following tables reflect our results of operations for the periods indicated, both in dollars and as a percentage of total revenue (dollars in thousands, except per share data):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables revenue |
|
$ |
842,851 |
|
|
$ |
744,092 |
|
|
$ |
650,921 |
|
Other |
|
|
890 |
|
|
|
1,477 |
|
|
|
1,679 |
|
Total Revenue |
|
|
843,741 |
|
|
|
745,569 |
|
|
|
652,600 |
|
Cost of Revenue |
|
|
396,632 |
|
|
|
327,966 |
|
|
|
216,858 |
|
Gross Profit |
|
|
447,109 |
|
|
|
417,603 |
|
|
|
435,742 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
101,429 |
|
|
|
97,404 |
|
|
|
116,882 |
|
Operations and technology |
|
|
95,155 |
|
|
|
85,202 |
|
|
|
74,012 |
|
General and administrative |
|
|
101,723 |
|
|
|
97,956 |
|
|
|
102,073 |
|
Depreciation and amortization |
|
|
14,388 |
|
|
|
15,564 |
|
|
|
18,388 |
|
Total Expenses |
|
|
312,695 |
|
|
|
296,126 |
|
|
|
311,355 |
|
Income from Operations |
|
|
134,414 |
|
|
|
121,477 |
|
|
|
124,387 |
|
Interest expense, net |
|
|
(74,003 |
) |
|
|
(65,603 |
) |
|
|
(52,883 |
) |
Foreign currency transaction gain (loss), net |
|
|
384 |
|
|
|
1,562 |
|
|
|
(985 |
) |
Loss on early extinguishment of debt |
|
|
(22,895 |
) |
|
|
— |
|
|
|
— |
|
Income before Income Taxes |
|
|
37,900 |
|
|
|
57,436 |
|
|
|
70,519 |
|
Provision for income taxes |
|
|
8,660 |
|
|
|
22,834 |
|
|
|
26,527 |
|
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
Diluted earnings per share |
|
$ |
0.86 |
|
|
$ |
1.03 |
|
|
$ |
1.33 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables revenue |
|
|
99.9 |
% |
|
|
99.8 |
% |
|
|
99.7 |
% |
Other |
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.3 |
|
Total Revenue |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Cost of Revenue |
|
|
47.0 |
|
|
|
44.0 |
|
|
|
33.2 |
|
Gross Profit |
|
|
53.0 |
|
|
|
56.0 |
|
|
|
66.8 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
12.0 |
|
|
|
13.1 |
|
|
|
17.9 |
|
Operations and technology |
|
|
11.3 |
|
|
|
11.4 |
|
|
|
11.4 |
|
General and administrative |
|
|
12.1 |
|
|
|
13.1 |
|
|
|
15.6 |
|
Depreciation and amortization |
|
|
1.7 |
|
|
|
2.1 |
|
|
|
2.8 |
|
Total Expenses |
|
|
37.1 |
|
|
|
39.7 |
|
|
|
47.7 |
|
Income from Operations |
|
|
15.9 |
|
|
|
16.3 |
|
|
|
19.1 |
|
Interest expense, net |
|
|
(8.7 |
) |
|
|
(8.8 |
) |
|
|
(8.1 |
) |
Foreign currency transaction gain (loss), net |
|
|
0.0 |
|
|
|
0.2 |
|
|
|
(0.2 |
) |
Loss on early extinguishment of debt |
|
|
(2.7 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
Income before Income Taxes |
|
|
4.5 |
|
|
|
7.7 |
|
|
|
10.8 |
|
Provision for income taxes |
|
|
1.0 |
|
|
|
3.1 |
|
|
|
4.1 |
|
Net Income |
|
|
3.5 |
% |
|
|
4.6 |
% |
|
|
6.7 |
% |
NON-GAAP DISCLOSURE
In addition to the financial information prepared in conformity with generally accepted accounting principles (“GAAP”), we provide historical non-GAAP financial information. We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting our business.
We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
49
In addition to reporting financial results in accordance with GAAP, we have provided adjusted earnings and adjusted earnings per share (collectively, the “Adjusted Earnings Measures”), which are non-GAAP measures. We believe that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of our financial performance, competitive position and prospects for the future. We also believe that investors regularly rely on non-GAAP financial measures, such as the Adjusted Earnings Measures, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. In addition, we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items.
The following table provides reconciliations between net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Earnings Measures, which are shown net of tax (in thousands, except per share data):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt (a) |
|
|
22,895 |
|
|
|
— |
|
|
|
— |
|
Acquisition related costs (b) |
|
|
(2,358 |
) |
|
|
(3,300 |
) |
|
|
— |
|
Lease termination and relocation costs (c) |
|
|
— |
|
|
|
— |
|
|
|
3,270 |
|
Intangible asset amortization |
|
|
1,080 |
|
|
|
1,137 |
|
|
|
494 |
|
Stock-based compensation expense |
|
|
11,307 |
|
|
|
8,522 |
|
|
|
9,630 |
|
Foreign currency transaction (gain) loss, net |
|
|
(384 |
) |
|
|
(1,562 |
) |
|
|
985 |
|
Cumulative tax effect of adjustments |
|
|
(7,435 |
) |
|
|
(1,907 |
) |
|
|
(5,373 |
) |
Impact of U.S. Tax Cuts and Jobs Act (d) |
|
|
(7,452 |
) |
|
|
— |
|
|
|
— |
|
Adjusted earnings |
|
$ |
46,893 |
|
|
$ |
37,492 |
|
|
$ |
52,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.86 |
|
|
$ |
1.03 |
|
|
$ |
1.33 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt (a) |
|
|
0.67 |
|
|
|
— |
|
|
|
— |
|
Acquisition related costs (b) |
|
|
(0.07 |
) |
|
|
(0.10 |
) |
|
|
— |
|
Lease termination and relocation costs (c) |
|
|
— |
|
|
|
— |
|
|
|
0.10 |
|
Intangible asset amortization |
|
|
0.03 |
|
|
|
0.04 |
|
|
|
0.01 |
|
Stock-based compensation expense |
|
|
0.33 |
|
|
|
0.26 |
|
|
|
0.29 |
|
Foreign currency transaction (gain) loss, net |
|
|
(0.01 |
) |
|
|
(0.05 |
) |
|
|
0.03 |
|
Cumulative tax effect of adjustments |
|
|
(0.22 |
) |
|
|
(0.06 |
) |
|
|
(0.16 |
) |
Impact of U.S. Tax Cuts and Jobs Act (d) |
|
|
(0.22 |
) |
|
|
— |
|
|
|
— |
|
Adjusted earnings per share |
|
$ |
1.37 |
|
|
$ |
1.12 |
|
|
$ |
1.60 |
|
(a) |
For the year ended December 31, 2017, we recorded $22.9 million ($17.7 million net of tax) losses on early extinguishment of debt related to the repurchase of $155.0 million principal amount of senior notes and the redemption of $160.9 million of securitization notes. |
(b) |
For the years ended December 31, 2017 and 2016, we recorded a $2.4 million ($1.8 million net of tax) and a $3.3 million ($2.0 million net of tax) fair value adjustment to contingent consideration, respectively, related to a prior year acquisition. |
(c) |
In May 2015, we relocated our headquarters and as a result incurred $3.3 million of facility cease-use charges ($2.1 million net of tax) consisting of remaining lease obligations and disposal costs on its prior headquarters. |
(d) |
In the fourth quarter of 2017, the Company recorded a one-time estimated $7.5 million income tax benefit from the U.S. Tax Cuts and Jobs Act |
Adjusted EBITDA
The table below shows Adjusted EBITDA, which is a non-GAAP measure that we define as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes and stock-based compensation expense. We believe Adjusted EBITDA is used by investors to analyze operating performance and evaluate our ability to incur and service debt and our capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. In addition, we believe that the adjustments for loss on early extinguishment of debt, acquisition-related costs and the lease termination and relocation costs shown below are useful to investors in order to allow them to compare our financial results during the periods shown
50
without the effect of the income or expense items. The computation of Adjusted EBITDA as presented below may differ from the computation of similarly-titled measures provided by other companies (dollars in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
Depreciation and amortization expenses |
|
|
14,388 |
|
|
|
15,564 |
|
|
|
18,388 |
|
Interest expense, net |
|
|
74,003 |
|
|
|
65,603 |
|
|
|
52,883 |
|
Foreign currency transaction (gain) loss, net |
|
|
(384 |
) |
|
|
(1,562 |
) |
|
|
985 |
|
Provision for income taxes |
|
|
8,660 |
|
|
|
22,834 |
|
|
|
26,527 |
|
Stock-based compensation expense |
|
|
11,307 |
|
|
|
8,522 |
|
|
|
9,630 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt (a) |
|
|
22,895 |
|
|
|
— |
|
|
|
— |
|
Acquisition related costs (b) |
|
|
(2,358 |
) |
|
|
(3,300 |
) |
|
|
— |
|
Lease termination and relocation costs (c) |
|
|
— |
|
|
|
— |
|
|
|
3,270 |
|
Adjusted EBITDA |
|
$ |
157,751 |
|
|
$ |
142,263 |
|
|
$ |
155,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin calculated as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
843,741 |
|
|
|
745,569 |
|
|
|
652,600 |
|
Adjusted EBITDA |
|
|
157,751 |
|
|
|
142,263 |
|
|
|
155,675 |
|
Adjusted EBITDA as a percentage of total revenue |
|
|
18.7 |
% |
|
|
19.1 |
% |
|
|
23.9 |
% |
(a) |
For the year ended December 31, 2017, we recorded $22.9 million ($17.7 million net of tax) losses on early extinguishment of debt related to the repurchase of $155.0 million principal amount of senior notes and the redemption of $160.9 million of securitization notes. |
(b) |
For the years ended December 31, 2017 and 2016, we recorded a $2.4 million ($1.8 million net of tax) and a $3.3 million ($2.0 million net of tax) fair value adjustment to contingent consideration, respectively, related to a prior year acquisition. |
(c) |
In May 2015, we relocated our headquarters and as a result incurred $3.3 million of facility cease-use charges ($2.1 million net of tax) consisting of remaining lease obligations and disposal costs on its prior headquarters. In June 2014 we incurred $1.4 million ($0.9 million net of tax) of early lease termination charges on our prior headquarters. |
Constant Currency Basis
In addition to reporting financial results in accordance with GAAP, we have provided certain other non-GAAP financial information on a constant currency basis. We currently operate in the United Kingdom and Brazil. During 2017, 2016 and 2015, 15.9%, 16.4% and 21.8% of our revenue, respectively, originated in currencies other than the U.S. Dollar, principally the British Pound Sterling. As a result, changes in our reported revenue and profits include the impacts of changes in foreign currency exchange rates. As additional information to the reader, we provide constant currency assessments in the following discussion and analysis to remove and/or quantify the impact of the fluctuation in foreign exchange rates and utilize constant currency results in our analysis of performance. Our constant currency assessment assumes foreign exchange rates in the current fiscal periods remained the same as in the prior fiscal year periods. All conversion rates below are based on the U.S. Dollar equivalent to one of the applicable foreign currency:
|
|
|
|
|
|
|
|
|||||
|
|
Year Ended December 31, |
|
|
|
|
|
|||||
|
|
2017 |
|
|
2016 |
|
|
% Change |
|
|||
British Pound |
|
|
1.2891 |
|
|
|
1.3554 |
|
|
|
(4.9 |
)% |
Brazilian Real |
|
|
0.3134 |
|
|
|
0.2884 |
|
|
|
8.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Year Ended December 31, |
|
|
|
|
|
|||||
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
|||
British Pound |
|
|
1.3554 |
|
|
|
1.5289 |
|
|
|
(11.3 |
)% |
Brazilian Real |
|
|
0.2884 |
|
|
|
0.3057 |
|
|
|
(5.7 |
)% |
We believe that our non-GAAP constant currency assessments are a useful measure, indicating the actual growth and profitability of our operations.
51
Combined Loans and Finance Receivables
Combined loans and finance receivables is a non-GAAP measure that includes both loans and RPAs we own and loans we guarantee, which are either GAAP items or disclosures required by GAAP. See “—Basis of Presentation and Critical Accounting Policies—Allowance and Liability for Estimated Losses on Loans and Finance Receivables.”
We believe this non-GAAP measure provides investors with important information needed to evaluate the magnitude of potential receivable losses and the opportunity for revenue performance of the loans and finance receivables portfolio on an aggregate basis. We also believe that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on our balance sheet since both revenue and cost of revenue are impacted by the aggregate amount of receivables we own and those we guarantee as reflected in our financial statements.
YEAR ENDED 2017 COMPARED TO YEAR ENDED 2016
Revenue and Gross Profit
Revenue increased $98.1 million, or 13.2%, to $843.7 million for 2017 as compared to $745.6 million for 2016. On a constant currency basis, revenue increased by $102.2 million, or 13.7%, for 2017 compared to 2016. The change in revenue was driven by an increase in revenue of $86.5 million from our domestic operations, primarily resulting from a 19.5% increase in domestic line of credit accounts revenue in 2017 and a 16.9% increase in domestic installment loan and RPA revenue compared to 2016 driven by growth in these products. Additionally, revenue from international operations increased $11.6 million (or an increase of $15.6 million on a constant currency basis), primarily due to a 17.1% increase in international installment loan revenue and a 4.9% increase in international short-term loan revenue in 2017 compared to 2016.
Our gross profit increased by $29.5 million or 7.1% to $447.1 million for 2017 from $417.6 million for 2016. On a constant currency basis, gross profit increased by $33.1 million for 2017 compared to 2016. Our consolidated gross profit as a percentage of revenue (“gross profit margin”) decreased to 53.0% in 2017 from 56.0% in 2016. The decrease in gross profit margin was primarily driven by the strong new customer growth of our domestic and international installment portfolios resulting in a higher mix of new customers overall, which require higher loss provisions as new customers default at a higher rate than returning customers with a successful history of loan performance. Although the growth in our domestic near-prime installment portfolio contributed to the lower gross profit margin, as the portfolio continues to scale and the underlying longer term loans continue to season we expect to achieve increased marginal profitability.
The following tables set forth the components of revenue and gross profit, separated between domestic and international for 2017 and 2016 (dollars in thousands):
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|
|||||
|
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenue by product: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans |
|
$ |
197,408 |
|
|
$ |
196,255 |
|
|
$ |
1,153 |
|
|
|
0.6 |
% |
Line of credit accounts |
|
|
262,760 |
|
|
|
220,462 |
|
|
|
42,298 |
|
|
|
19.2 |
% |
Installment loans and RPAs |
|
|
382,683 |
|
|
|
327,375 |
|
|
|
55,308 |
|
|
|
16.9 |
% |
Total loan and finance receivable revenue |
|
|
842,851 |
|
|
|
744,092 |
|
|
|
98,759 |
|
|
|
13.3 |
% |
Other |
|
|
890 |
|
|
|
1,477 |
|
|
|
(587 |
) |
|
|
(39.7 |
)% |
Total revenue |
|
$ |
843,741 |
|
|
$ |
745,569 |
|
|
$ |
98,172 |
|
|
|
13.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by product (% to total): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans |
|
|
23.4 |
% |
|
|
26.3 |
% |
|
|
|
|
|
|
|
|
Line of credit accounts |
|
|
31.1 |
% |
|
|
29.6 |
% |
|
|
|
|
|
|
|
|
Installment loans and RPAs |
|
|
45.4 |
% |
|
|
43.9 |
% |
|
|
|
|
|
|
|
|
Total loan and finance receivable revenue |
|
|
99.9 |
% |
|
|
99.8 |
% |
|
|
|
|
|
|
|
|
Other |
|
|
0.1 |
% |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
Total revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
52
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|
||||||
|
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|
||||
Domestic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
709,537 |
|
|
$ |
622,991 |
|
|
$ |
86,546 |
|
|
|
13.9 |
% |
Cost of revenue |
|
|
335,454 |
|
|
|
291,264 |
|
|
|
44,190 |
|
|
|
15.2 |
% |
Gross profit |
|
$ |
374,083 |
|
|
$ |
331,727 |
|
|
$ |
42,356 |
|
|
|
12.8 |
% |
Gross profit margin |
|
|
52.7 |
% |
|
|
53.2 |
% |
|
|
(0.5 |
)% |
|
|
(0.9 |
)% |
International: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
134,204 |
|
|
$ |
122,578 |
|
|
$ |
11,626 |
|
|
|
9.5 |
% |
Cost of revenue |
|
|
61,178 |
|
|
|
36,702 |
|
|
|
24,476 |
|
|
|
66.7 |
% |
Gross profit |
|
$ |
73,026 |
|
|
$ |
85,876 |
|
|
$ |
(12,850 |
) |
|
|
(15.0 |
)% |
Gross profit margin |
|
|
54.4 |
% |
|
|
70.1 |
% |
|
|
(15.7 |
)% |
|
|
(22.4 |
)% |
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
843,741 |
|
|
$ |
745,569 |
|
|
$ |
98,172 |
|
|
|
13.2 |
% |
Cost of revenue |
|
|
396,632 |
|
|
|
327,966 |
|
|
|
68,666 |
|
|
|
20.9 |
% |
Gross profit |
|
$ |
447,109 |
|
|
$ |
417,603 |
|
|
$ |
29,506 |
|
|
|
7.1 |
% |
Gross profit margin |
|
|
53.0 |
% |
|
|
56.0 |
% |
|
|
(3.0 |
)% |
|
|
(5.4 |
)% |
Loan and Finance Receivable Balances
The outstanding combined portfolio balance of loans and finance receivables, net of allowance and liability for estimated losses, increased $144.8 million, or 24.5%, to $736.6 million as of December 31, 2017 from $591.8 million as of December 31, 2016, primarily due to increased demand for our domestic near-prime installment product and an increase in international loan balances (up 23.7% on a constant currency basis). The outstanding loan balance for our domestic near-prime product increased 32.9% as of December 31, 2017 compared to December 31, 2016, resulting in a domestic near-prime portfolio balance that comprises approximately 43% of our total loan and finance receivables portfolio balance while short-term loans comprise approximately 12%. We expect this trend to continue as we expand our near-prime installment product offering in 2018. We expect the loan balances for our domestic near-prime installment loan product will continue to comprise a larger percentage of the total loan and finance receivable portfolio, due to consumer demand for the product and its longer loan term. See “—Non-GAAP Disclosure—Combined Loans and Finance Receivables” above for additional information related to combined loans and finance receivables.
The combined loan and finance receivable balance includes $827.7 million and $660.5 million as of December 31, 2017 and 2016, respectively, of our owned receivables balances before the allowance for losses of $123.0 million and $98.9 million provided in the consolidated financial statements for December 31, 2017 and 2016, respectively. The combined loan and finance receivable balance also includes $34.1 million and $32.2 million as of December 31, 2017 and 2016, respectively, of loan and finance receivable balances that are guaranteed by us, which are not included in our financial statements, before the liability for estimated losses of $2.3 million and $2.0 million provided in “Accounts payable and accrued expenses” in the consolidated financial statements for December 31, 2017 and 2016, respectively.
The following tables summarize loan and finance receivable balances outstanding as of December 31, 2017 and 2016 (dollars in thousands):
|
|
As of December 31, |
|
|||||||||||||||||||||
|
|
2017 |
|
|
2016 |
|
||||||||||||||||||
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
||
|
|
Company |
|
|
by the |
|
|
|
|
|
|
Company |
|
|
by the |
|
|
|
|
|
||||
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
||||||
Ending loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans |
|
$ |
73,672 |
|
|
$ |
28,875 |
|
|
$ |
102,547 |
|
|
$ |
63,005 |
|
|
$ |
26,092 |
|
|
$ |
89,097 |
|
Line of credit accounts |
|
|
170,068 |
|
|
|
— |
|
|
|
170,068 |
|
|
|
144,183 |
|
|
|
— |
|
|
|
144,183 |
|
Installment loans and RPAs |
|
|
584,009 |
|
|
|
5,259 |
|
|
|
589,268 |
|
|
|
453,307 |
|
|
|
6,107 |
|
|
|
459,414 |
|
Total ending loans and finance receivables, gross |
|
|
827,749 |
|
|
|
34,134 |
|
|
|
861,883 |
|
|
|
660,495 |
|
|
|
32,199 |
|
|
|
692,694 |
|
Less: Allowance and liabilities for losses (a) |
|
|
(123,044 |
) |
|
|
(2,258 |
) |
|
|
(125,302 |
) |
|
|
(98,945 |
) |
|
|
(1,996 |
) |
|
|
(100,941 |
) |
Total ending loans and finance receivables, net |
|
$ |
704,705 |
|
|
$ |
31,876 |
|
|
$ |
736,581 |
|
|
$ |
561,550 |
|
|
$ |
30,203 |
|
|
$ |
591,753 |
|
Allowance and liability for losses as a % of loans and finance receivables, gross |
|
|
14.9 |
% |
|
|
6.6 |
% |
|
|
14.5 |
% |
|
|
15.0 |
% |
|
|
6.2 |
% |
|
|
14.6 |
% |
53
|
As of December 31, |
|
||||||||||||||||||||||
|
|
2017 |
|
|
2016 |
|
||||||||||||||||||
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
||
|
|
Company |
|
|
by the |
|
|
|
|
|
|
Company |
|
|
by the |
|
|
|
|
|
||||
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
||||||
Ending loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total domestic, gross |
|
$ |
716,555 |
|
|
$ |
34,134 |
|
|
$ |
750,689 |
|
|
$ |
576,992 |
|
|
$ |
32,199 |
|
|
$ |
609,191 |
|
Total international, gross |
|
|
111,194 |
|
|
|
— |
|
|
|
111,194 |
|
|
|
83,503 |
|
|
|
— |
|
|
|
83,503 |
|
Total ending loans and finance receivables, gross |
|
$ |
827,749 |
|
|
$ |
34,134 |
|
|
$ |
861,883 |
|
|
$ |
660,495 |
|
|
$ |
32,199 |
|
|
$ |
692,694 |
|
(a) |
GAAP measure. The loans and finance receivables balances guaranteed by us relate to loans originated by third-party lenders through the CSO programs and are not included in our financial statements. |
(b) |
Except for allowance and liability for estimated losses, amounts represent non-GAAP measures. |
Average Amount Outstanding per Loan
The average amount outstanding per loan is calculated as the total combined loans, gross balance at the end of the period divided by the total number of combined loans outstanding at the end of the period. The following table shows the average amount outstanding per loan by product at December 31, 2017 and 2016:
|
|
As of December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Average amount outstanding per loan (in ones) (a) |
|
|
|
|
|
|
|
|
Short-term loans (b) |
|
$ |
492 |
|
|
$ |
484 |
|
Line of credit accounts |
|
|
1,384 |
|
|
|
1,289 |
|
Installment loans (b)(c) |
|
|
2,174 |
|
|
|
1,888 |
|
Total loans (b)(c) |
|
$ |
1,431 |
|
|
$ |
1,254 |
|
(a) |
The disclosure regarding the average amount per loan is statistical data that is not included in our financial statements. |
(b) |
Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our financial statements. |
(c) |
Excludes RPAs. |
The average amount outstanding per loan increased to $1,431 from $1,254 during 2017 compared to 2016, mainly due to a greater mix of installment loans, which have higher average amounts per loan relative to short-term loans, in 2017 compared to 2016.
Average Loan Origination
The average loan origination amount is calculated as the total amount of combined loans originated, renewed and purchased for the period divided by the total number of combined loans originated, renewed and purchased for the period. The following table shows the average loan origination amount by product for 2017 compared to 2016:
|
|
Year Ended |
|
|||||
|
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Average loan origination amount (in ones) (a) |
|
|
|
|
|
|
|
|
Short-term loans (b) |
|
$ |
457 |
|
|
$ |
454 |
|
Line of credit accounts (c) |
|
|
303 |
|
|
|
306 |
|
Installment loans (b)(d) |
|
|
1,651 |
|
|
|
1,734 |
|
Total loans (b)(d) |
|
$ |
537 |
|
|
$ |
517 |
|
(a) |
The disclosure regarding the average loan origination amount is statistical data that is not included in our financial statements. |
(b) |
Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our financial statements. |
(c) |
Represents the average amount of each incremental draw on line of credit accounts. |
(d) |
Excludes RPAs. |
The average loan origination amount increased to $537 from $517 during 2017 compared to 2016, mainly due to a greater mix of installment loans, which have a higher origination amount than short-term loans and line of credit accounts.
54
LOANS AND FINANCE RECEIVABLES LOSS EXPERIENCE
The allowance and liability for estimated losses as a percentage of combined loans and RPAs remained relatively flat at 14.5% as of December 31, 2017 compared to 14.6% as of December 31, 2016.
The cost of revenue in 2017 was $396.6 million, which was composed of $396.4 million related to our owned loans and finance receivables and a $0.2 million increase in the liability for estimated losses related to loans we guaranteed through the CSO programs. The cost of revenue in 2016 was $328.0 million, which was composed of $327.7 million related to our owned loans and finance receivables, and a $0.3 million increase in the liability for estimated losses related to loans we guaranteed through the CSO programs. Total charge-offs, net of recoveries, were $373.4 million and $295.5 million in 2017 and 2016, respectively.
The following tables show loans and finance receivable balances and fees receivable and the relationship of the allowance and liability for losses to the combined balances of loans and finance receivables for each of the last eight quarters (dollars in thousands):
|
|
2017 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross - Company owned |
|
$ |
598,717 |
|
|
$ |
647,835 |
|
|
$ |
742,796 |
|
|
$ |
827,749 |
|
Gross - Guaranteed by the Company (a) |
|
|
22,546 |
|
|
|
28,013 |
|
|
|
28,943 |
|
|
|
34,134 |
|
Combined loans and finance receivables, gross (b) |
|
|
621,263 |
|
|
|
675,848 |
|
|
|
771,739 |
|
|
|
861,883 |
|
Allowance and liability for losses on loans and finance receivables |
|
|
84,441 |
|
|
|
85,780 |
|
|
|
107,077 |
|
|
|
125,302 |
|
Combined loans and finance receivables, net (b) |
|
$ |
536,822 |
|
|
$ |
590,068 |
|
|
$ |
664,662 |
|
|
$ |
736,581 |
|
Allowance and liability for losses as a % of loans and finance receivables, gross (b) |
|
|
13.6 |
% |
|
|
12.7 |
% |
|
|
13.9 |
% |
|
|
14.5 |
% |
|
|
2016 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross - Company owned |
|
$ |
495,906 |
|
|
$ |
563,810 |
|
|
$ |
637,612 |
|
|
$ |
660,495 |
|
Gross - Guaranteed by the Company (a) |
|
|
27,114 |
|
|
|
31,227 |
|
|
|
29,700 |
|
|
|
32,199 |
|
Combined loans and finance receivables, gross (b) |
|
|
523,020 |
|
|
|
595,037 |
|
|
|
667,312 |
|
|
|
692,694 |
|
Allowance and liability for losses on loans and finance receivables |
|
|
68,886 |
|
|
|
75,653 |
|
|
|
96,474 |
|
|
|
100,941 |
|
Combined loans and finance receivables, net (b) |
|
$ |
454,134 |
|
|
$ |
519,384 |
|
|
$ |
570,838 |
|
|
$ |
591,753 |
|
Allowance and liability for losses as a % of loans and finance receivables, gross (b) |
|
|
13.2 |
% |
|
|
12.7 |
% |
|
|
14.5 |
% |
|
|
14.6 |
% |
(a) |
Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements. |
(b) |
Non-GAAP measure. |
Loans and Finance Receivables Loss Experience by Product
We evaluate loss rates for all financing products in our portfolio to determine credit quality and evaluate trends. For our products, we evaluate loans and finance receivables losses as a percentage of the average loan and finance receivable balance outstanding or the average combined loan and finance receivable balance outstanding, whichever is applicable, for each portfolio.
Short-term Loans
Demand for our short-term loan product in the United States has historically been highest in the third and fourth quarters of each year, and lowest in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds. The higher allowance and liability for losses as a percentage of combined loan balance in 2017 was attributable to strong customer demand for short-term loans in both the United States and the United Kingdom. This led to higher short-term consumer loan balances, which also led to year-over-year increases in the average and ending short-term loan balances for much of 2017 .
Our gross profit margin for short-term loans is typically highest in the first quarter of each year, corresponding to the seasonal decline in consumer loan balances outstanding. The cost of revenue as a percentage of the average combined loan balance for short-term loans outstanding is typically lower in the first quarter and generally peaks in the second half of the year with higher loan demand.
55
The following table includes information related only to short-term loans and shows our loss experience trends for short-term loans for each of the last eight quarters (dollars in thousands):
|
|
2017 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Short-term loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
15,602 |
|
|
$ |
16,584 |
|
|
$ |
23,849 |
|
|
$ |
22,129 |
|
Charge-offs (net of recoveries) |
|
|
18,975 |
|
|
|
15,539 |
|
|
|
20,439 |
|
|
|
21,201 |
|
Average short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
58,729 |
|
|
|
57,653 |
|
|
|
65,949 |
|
|
|
70,040 |
|
Guaranteed by the Company (a)(b) |
|
|
23,153 |
|
|
|
21,368 |
|
|
|
25,787 |
|
|
|
26,785 |
|
Average short-term combined loan balance, gross (a)(c) |
|
$ |
81,882 |
|
|
$ |
79,021 |
|
|
$ |
91,736 |
|
|
$ |
96,825 |
|
Ending short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
53,205 |
|
|
$ |
61,565 |
|
|
$ |
67,719 |
|
|
$ |
73,672 |
|
Guaranteed by the Company (b) |
|
|
18,854 |
|
|
|
24,123 |
|
|
|
24,248 |
|
|
|
28,875 |
|
Ending short-term combined loan balance, gross (c) |
|
$ |
72,059 |
|
|
$ |
85,688 |
|
|
$ |
91,967 |
|
|
$ |
102,547 |
|
Ending allowance and liability for losses |
|
$ |
16,205 |
|
|
$ |
17,449 |
|
|
$ |
21,047 |
|
|
$ |
22,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average short-term combined loan balance, gross (a)(c) |
|
|
19.1 |
% |
|
|
21.0 |
% |
|
|
26.0 |
% |
|
|
22.9 |
% |
Charge-offs (net of recoveries) as a % of average short-term combined loan balance, gross (a)(c) |
|
|
23.2 |
% |
|
|
19.7 |
% |
|
|
22.3 |
% |
|
|
21.9 |
% |
Gross profit margin |
|
|
67.1 |
% |
|
|
64.5 |
% |
|
|
52.2 |
% |
|
|
58.5 |
% |
Allowance and liability for losses as a % of combined loan balance, gross (c)(d) |
|
|
22.5 |
% |
|
|
20.4 |
% |
|
|
22.9 |
% |
|
|
21.5 |
% |
|
|
2016 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Short-term loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
13,276 |
|
|
$ |
14,214 |
|
|
$ |
20,531 |
|
|
$ |
21,600 |
|
Charge-offs (net of recoveries) |
|
|
16,540 |
|
|
|
11,720 |
|
|
|
15,956 |
|
|
|
21,021 |
|
Average short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
55,839 |
|
|
|
54,324 |
|
|
|
60,761 |
|
|
|
59,728 |
|
Guaranteed by the Company (a)(b) |
|
|
25,151 |
|
|
|
21,443 |
|
|
|
24,678 |
|
|
|
24,709 |
|
Average short-term combined loan balance, gross (a)(c) |
|
$ |
80,990 |
|
|
$ |
75,767 |
|
|
$ |
85,439 |
|
|
$ |
84,437 |
|
Ending short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
52,381 |
|
|
$ |
58,798 |
|
|
$ |
60,124 |
|
|
$ |
63,005 |
|
Guaranteed by the Company (b) |
|
|
20,534 |
|
|
|
24,451 |
|
|
|
23,379 |
|
|
|
26,092 |
|
Ending short-term combined loan balance, gross (c) |
|
$ |
72,915 |
|
|
$ |
83,249 |
|
|
$ |
83,503 |
|
|
$ |
89,097 |
|
Ending allowance and liability for losses |
|
$ |
12,598 |
|
|
$ |
14,746 |
|
|
$ |
19,184 |
|
|
$ |
19,486 |
|
Short-term loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average short-term combined loan balance, gross (a)(c) |
|
|
16.4 |
% |
|
|
18.8 |
% |
|
|
24.0 |
% |
|
|
25.6 |
% |
Charge-offs (net of recoveries) as a % of average short-term combined loan balance, gross (a)(c) |
|
|
20.4 |
% |
|
|
15.5 |
% |
|
|
18.7 |
% |
|
|
24.9 |
% |
Gross profit margin |
|
|
72.1 |
% |
|
|
69.5 |
% |
|
|
60.5 |
% |
|
|
56.8 |
% |
Allowance and liability for losses as a % of combined loan balance, gross (c)(d) |
|
|
17.3 |
% |
|
|
17.7 |
% |
|
|
23.0 |
% |
|
|
21.9 |
% |
(a) |
The average short-term combined loan balance is the average of the month-end balances during the period. |
(b) |
Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements. |
(c) |
Non-GAAP measure. |
(d) |
Allowance and liability for losses as a % of combined loan balance, gross, is determined using period-end balances. |
56
The cost of revenue as a percentage of average loan balance for line of credit accounts exhibits a similar quarterly seasonal trend to short-term loan loss rates as the ratio is typically lower in the first quarter and increases throughout the remainder of the year, peaking in the second half of the year with higher loan demand.
The gross profit margin is generally lower for line of credit accounts as compared to short-term loans because the highest levels of default are exhibited in the early stages of the account, while the revenue is recognized over the term of the account. As a result, particularly in periods of higher growth for line of credit account portfolios, the gross profit margin will be lower for this product than for our short-term loan products. Our gross margin, as well as, our cost of revenue as a percentage of average loan balance have demonstrated consistent year-over-year improvement as the portfolio has shown stable credit quality through strong loan growth in 2017.
The following table includes information related only to line of credit accounts and shows our loss experience trends for line of credit accounts for each of the last eight quarters (dollars in thousands):
|
|
2017 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Line of credit accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
19,831 |
|
|
$ |
19,868 |
|
|
$ |
23,439 |
|
|
$ |
30,278 |
|
Charge-offs (net of recoveries) |
|
|
24,660 |
|
|
|
18,786 |
|
|
|
19,476 |
|
|
|
25,940 |
|
Average loan balance (a) |
|
|
135,621 |
|
|
|
128,348 |
|
|
|
145,398 |
|
|
|
161,905 |
|
Ending loan balance |
|
|
124,498 |
|
|
|
134,154 |
|
|
|
154,689 |
|
|
|
170,068 |
|
Ending allowance for losses balance |
|
$ |
21,765 |
|
|
$ |
22,847 |
|
|
$ |
26,810 |
|
|
$ |
31,148 |
|
Line of credit account ratios : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average loan balance (a) |
|
|
14.6 |
% |
|
|
15.5 |
% |
|
|
16.1 |
% |
|
|
18.7 |
% |
Charge-offs (net of recoveries) as a % of average loan balance (a) |
|
|
18.2 |
% |
|
|
14.6 |
% |
|
|
13.4 |
% |
|
|
16.0 |
% |
Gross profit margin |
|
|
66.6 |
% |
|
|
66.2 |
% |
|
|
66.0 |
% |
|
|
59.9 |
% |
Allowance for losses as a % of loan balance (b) |
|
|
17.5 |
% |
|
|
17.0 |
% |
|
|
17.3 |
% |
|
|
18.3 |
% |
|
|
2016 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Line of credit accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
16,471 |
|
|
$ |
17,251 |
|
|
$ |
29,739 |
|
|
$ |
25,028 |
|
Charge-offs (net of recoveries) |
|
|
16,914 |
|
|
|
14,506 |
|
|
|
20,973 |
|
|
|
25,229 |
|
Average loan balance (a) |
|
|
100,648 |
|
|
|
105,553 |
|
|
|
126,371 |
|
|
|
138,259 |
|
Ending loan balance |
|
|
98,351 |
|
|
|
118,030 |
|
|
|
132,388 |
|
|
|
144,183 |
|
Ending allowance for losses balance |
|
$ |
15,284 |
|
|
$ |
18,029 |
|
|
$ |
26,795 |
|
|
$ |
26,594 |
|
Line of credit account ratios : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average loan balance (a) |
|
|
16.4 |
% |
|
|
16.3 |
% |
|
|
23.5 |
% |
|
|
18.1 |
% |
Charge-offs (net of recoveries) as a % of average loan balance (a) |
|
|
16.8 |
% |
|
|
13.7 |
% |
|
|
16.6 |
% |
|
|
18.2 |
% |
Gross profit margin |
|
|
66.4 |
% |
|
|
65.7 |
% |
|
|
49.7 |
% |
|
|
59.7 |
% |
Allowance for losses as a % of loan balance (b) |
|
|
15.5 |
% |
|
|
15.3 |
% |
|
|
20.2 |
% |
|
|
18.4 |
% |
(a) |
The average loan balance for line of credit accounts is the average of the month-end balances during the period. |
(b) |
Allowance for losses as a % of loan balance is determined using period-end balances. |
Installment Loans and RPAs
For installment loans and RPAs, the cost of revenue as a percentage of average loan and finance receivable balance is typically more consistent throughout the year as compared to short-term loans and line of credit accounts. Due to the scheduled regular payments that are inherent with installment loans and RPAs, we do not experience the higher level of repayments in the first quarter for these receivables as we experience with short-term loans and, to a lesser extent, line of credit accounts.
The gross profit margin is generally lower for the installment loan and RPA products than for other products, primarily because the highest levels of default are exhibited in the early stages of the loan or RPA, while revenue is recognized over the term of the loan or estimated delivery term. In addition, installment loans and RPAs typically have higher average amounts per receivable. Another factor
57
contributing to the lower gross profit margin is that the yield for installment loans and RPAs is typically lower than the yield for the other products we offer. As a result, particularly in periods of higher growth for the installment loan and RPA portfolios, which has been the case in recent years, the gross profit margin is typically lower for this product than for our short-term loan products. Our installment loan and RPA portfolio balance outstanding at December 31, 2017 increased $129.9 million, or 28.3%, compared to December 31, 2016. During 2017, we experienced lower gross profit margin than we experienced in the prior year quarters as a result of the continued growth in our domestic near-prime installment and RPA portfolios.
The following table includes information related only to our installment loans and shows our loss experience trends for installment loans for each of the last eight quarters (dollars in thousands):
|
|
2017 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Installment loans and RPAs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
46,451 |
|
|
$ |
43,410 |
|
|
$ |
60,053 |
|
|
$ |
75,138 |
|
Charge-offs (net of recoveries) |
|
|
55,179 |
|
|
|
44,443 |
|
|
|
46,598 |
|
|
|
62,116 |
|
Average installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
440,886 |
|
|
|
433,698 |
|
|
|
487,436 |
|
|
|
552,003 |
|
Guaranteed by the Company (a)(b) |
|
|
4,874 |
|
|
|
3,631 |
|
|
|
4,628 |
|
|
|
5,025 |
|
Average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
$ |
445,760 |
|
|
$ |
437,329 |
|
|
$ |
492,064 |
|
|
$ |
557,028 |
|
Ending installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
421,014 |
|
|
$ |
452,116 |
|
|
$ |
520,388 |
|
|
$ |
584,009 |
|
Guaranteed by the Company (b) |
|
|
3,692 |
|
|
|
3,890 |
|
|
|
4,695 |
|
|
|
5,259 |
|
Ending installment and RPA combined loan and finance receivable balance, gross (c) |
|
$ |
424,706 |
|
|
$ |
456,006 |
|
|
$ |
525,083 |
|
|
$ |
589,268 |
|
Ending allowance and liability for losses |
|
$ |
46,471 |
|
|
$ |
45,484 |
|
|
$ |
59,220 |
|
|
$ |
72,132 |
|
Installment and RPA loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
10.4 |
% |
|
|
9.9 |
% |
|
|
12.2 |
% |
|
|
13.5 |
% |
Charge-offs (net of recoveries) as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
12.4 |
% |
|
|
10.2 |
% |
|
|
9.5 |
% |
|
|
11.2 |
% |
Gross profit margin |
|
|
45.4 |
% |
|
|
48.4 |
% |
|
|
39.3 |
% |
|
|
34.4 |
% |
Allowance and liability for losses as a % of combined loan and finance receivable balance, gross (c)(d) |
|
|
10.9 |
% |
|
|
10.0 |
% |
|
|
11.3 |
% |
|
|
12.2 |
% |
58
|
2016 |
|
||||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Installment loans and RPAs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
39,830 |
|
|
$ |
33,988 |
|
|
$ |
45,121 |
|
|
$ |
50,917 |
|
Charge-offs (net of recoveries) |
|
|
36,541 |
|
|
|
32,332 |
|
|
|
37,383 |
|
|
|
46,411 |
|
Average installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
344,330 |
|
|
|
362,222 |
|
|
|
419,225 |
|
|
|
448,953 |
|
Guaranteed by the Company (a)(b) |
|
|
7,476 |
|
|
|
6,094 |
|
|
|
6,600 |
|
|
|
6,093 |
|
Average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
$ |
351,806 |
|
|
$ |
368,316 |
|
|
$ |
425,825 |
|
|
$ |
455,046 |
|
Ending installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
345,174 |
|
|
$ |
386,982 |
|
|
$ |
445,100 |
|
|
$ |
453,307 |
|
Guaranteed by the Company (b) |
|
|
6,580 |
|
|
|
6,776 |
|
|
|
6,321 |
|
|
|
6,107 |
|
Ending installment and RPA combined loan and finance receivable balance, gross (c) |
|
$ |
351,754 |
|
|
$ |
393,758 |
|
|
$ |
451,421 |
|
|
$ |
459,414 |
|
Ending allowance and liability for losses |
|
$ |
41,004 |
|
|
$ |
42,878 |
|
|
$ |
50,495 |
|
|
$ |
54,861 |
|
Installment and RPA loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
11.3 |
% |
|
|
9.2 |
% |
|
|
10.6 |
% |
|
|
11.2 |
% |
Charge-offs (net of recoveries) as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
10.4 |
% |
|
|
8.8 |
% |
|
|
8.8 |
% |
|
|
10.2 |
% |
Gross profit margin |
|
|
48.6 |
% |
|
|
54.7 |
% |
|
|
46.8 |
% |
|
|
43.5 |
% |
Allowance and liability for losses as a % of combined loan and finance receivable balance, gross (c)(d) |
|
|
11.7 |
% |
|
|
10.9 |
% |
|
|
11.2 |
% |
|
|
11.9 |
% |
(a) |
The average loan and finance receivable balance for installment loans is the average of the month-end balances during the period. |
(b) |
Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements. |
(c) |
Non-GAAP measure. |
(d) |
Allowance and liability for losses as a % of combined loan and finance receivable balance, gross, is determined using period-end balances. |
Total Expenses
Total expenses increased $16.6 million, or 5.6%, to $312.7 million in 2017, compared to $296.1 million in 2016. On a constant currency basis, total expenses increased $17.4 million, or 5.9%, to $313.5 million for 2017 compared to 2016.
Marketing expense increased $4.0 million, or 4.1%, to $101.4 million in 2017 compared to $97.4 million in 2016. Higher direct mail and lead purchase costs were partially offset by lower digital marketing and revenue-sharing costs .
Operations and technology expense increased to $95.2 million in 2017 from $85.2 million in 2016, primarily due to underwriting and transaction costs and software costs primarily related to growth in loan originations.
General and administrative expense increased $3.7 million, or 3.8%, to $101.7 million in 2017 compared to $98.0 million in 2016, primarily due to higher personnel and incentive expenses from an increase in corporate headcount.
Depreciation and amortization expense decreased to $14.4 million in 2017 compared to $15.5 million in 2016 primarily due to the acceleration of depreciation in the prior year resulting from our exit from the Australian and Canadian markets and the relocation of a datacenter in 2016.
59
Interest expense, net increased $8.4 million, or 12.8%, to $74.0 million in 2017 compared to $65.6 million in 2016. The increase was due to an increase in the average amount of debt outstanding, resulting from additional principal amounts outstanding under our securitization facilities (see “—Liquidity and Capital Resources—Consumer Loan Securitization” below for further information) and the issuance of the 8.50% Senior Unsecured Notes Due 2024 on September 1, 2017 (see “—Liquidity and Capital Resources—8.50% Senior Unsecured Notes Due 2024” below for further information), which increased the average amount of debt outstanding by $79.3 million to $694.5 million during 2017 from $615.2 million during 2016, partially offset by a decrease in the weighted average interest rate on our outstanding debt to 10.63% in 2017 from 10.71% in 2016.
Provision for Income Taxes
Provision for income taxes decreased $14.1 million, or 62.1%, to $8.7 million in 2017 compared to $22.8 million in 2016. The decrease was primarily due to a 34.0% decrease in income before income taxes, and a decrease in the effective tax rate to 22.9% in 2017 from 39.8% in 2016. The decrease in the effective tax rate is mainly due to the Tax Cuts and Jobs Act, See “—Recent Regulatory Developments—Tax Cuts and Jobs Act” above for additional information, and an adjustment related to share based compensation deferred tax.
The balance of unrecognized tax benefits as of December 31, 2017 and 2016 was $727 thousand ($679 thousand net of the federal benefit of state matters) and $351 thousand ($320 thousand net of the federal benefit of state matters), respectively, all of which, if recognized, would favorably affect the effective tax rate in any future periods. We had no unrecognized tax benefits as of December 31, 2015. We do not believe it is reasonably possible that, within the next twelve months, unrecognized domestic tax benefits will change by a significant amount. We record interest and penalties related to tax matters as income tax expense in the consolidated statement of income.
Our U.S. tax returns are subject to examination by federal and state taxing authorities. The IRS audits for tax years 2011 through 2014 were concluded with no adjustments to the financial statements. The 2016 and 2015 tax years are open to examination by the IRS. The years open to examination by state, local, and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed.
YEAR ENDED 2016 COMPARED TO YEAR ENDED 2015
Revenue and Gross Profit
Revenue increased $93.0 million, or 14.2%, to $745.6 million for 2016 as compared to $652.6 million for 2015. On a constant currency basis, revenue increased by $107.5 million, or 16.5%, for 2016 compared to 2015. The change in revenue is driven by an increase in revenue of $112.8 million from our domestic operations, primarily resulting from a 32.2% increase in domestic installment loan and RPA revenue and a 40.2% increase in domestic line of credit accounts revenue in 2016 compared to 2015 driven by growth in these products. The increase in revenue from domestic operations was partially offset by a decrease in revenue of $19.8 million (or an increase of $5.3 million on a constant currency basis) from our international operations, primarily due to regulatory changes in the United Kingdom and weakness in the British pound sterling since the U.K. vote to leave the European Union.
Our gross profit decreased by $18.1 million to $417.6 million for 2016 from $435.7 million for 2015. On a constant currency basis, gross profit decreased by $9.4 million for 2016 compared to 2015. Our gross profit margin decreased to 56.0% in 2016 from 66.8% in 2015. The decrease in gross profit margin was primarily driven by the growth of our domestic near-prime installment portfolio and a higher mix of new customers in all products, which require higher loss provisions as new customers default at a higher rate than returning customers with a successful history of loan performance. In addition, our international gross profit margin decreased due to the continued wind down of the U.K. line of credit portfolio and lower margins from our other U.K. products due to regulatory changes.
60
The following tables set forth the components of revenue and gross profit, separated between domestic and international for 2016 and 2015 (dollars in thousands):
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|
|||||
|
|
2016 |
|
|
2015 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenue by product: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans |
|
$ |
196,255 |
|
|
$ |
204,893 |
|
|
$ |
(8,638 |
) |
|
|
(4.2 |
)% |
Line of credit accounts |
|
|
220,462 |
|
|
|
185,521 |
|
|
|
34,941 |
|
|
|
18.8 |
% |
Installment loans and RPAs |
|
|
327,375 |
|
|
|
260,507 |
|
|
|
66,868 |
|
|
|
25.7 |
% |
Total loan and finance receivable revenue |
|
|
744,092 |
|
|
|
650,921 |
|
|
|
93,171 |
|
|
|
14.3 |
% |
Other |
|
|
1,477 |
|
|
|
1,679 |
|
|
|
(202 |
) |
|
|
(12.0 |
)% |
Total revenue |
|
$ |
745,569 |
|
|
$ |
652,600 |
|
|
$ |
92,969 |
|
|
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by product (% to total): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans |
|
|
26.3 |
% |
|
|
31.4 |
% |
|
|
|
|
|
|
|
|
Line of credit accounts |
|
|
29.6 |
% |
|
|
28.4 |
% |
|
|
|
|
|
|
|
|
Installment loans and RPAs |
|
|
43.9 |
% |
|
|
39.9 |
% |
|
|
|
|
|
|
|
|
Total loan and finance receivable revenue |
|
|
99.8 |
% |
|
|
99.7 |
% |
|
|
|
|
|
|
|
|
Other |
|
|
0.2 |
% |
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
Total revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|
|||||
|
|
2016 |
|
|
2015 |
|
|
$ Change |
|
|
% Change |
|
||||
Domestic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
622,991 |
|
|
$ |
510,242 |
|
|
$ |
112,749 |
|
|
|
22.1 |
% |
Cost of revenue |
|
|
291,264 |
|
|
|
196,963 |
|
|
|
94,301 |
|
|
|
47.9 |
% |
Gross profit |
|
$ |
331,727 |
|
|
$ |
313,279 |
|
|
$ |
18,448 |
|
|
|
5.9 |
% |
Gross profit margin |
|
|
53.2 |
% |
|
|
61.4 |
% |
|
|
(8.2 |
)% |
|
|
(13.4 |
)% |
International: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
122,578 |
|
|
$ |
142,358 |
|
|
$ |
(19,780 |
) |
|
|
(13.9 |
)% |
Cost of revenue |
|
|
36,702 |
|
|
|
19,895 |
|
|
|
16,807 |
|
|
|
84.5 |
% |
Gross profit |
|
$ |
85,876 |
|
|
$ |
122,463 |
|
|
$ |
(36,587 |
) |
|
|
(29.9 |
)% |
Gross profit margin |
|
|
70.1 |
% |
|
|
86.0 |
% |
|
|
(15.9 |
)% |
|
|
(18.5 |
)% |
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
745,569 |
|
|
$ |
652,600 |
|
|
$ |
92,969 |
|
|
|
14.2 |
% |
Cost of revenue |
|
|
327,966 |
|
|
|
216,858 |
|
|
|
111,108 |
|
|
|
51.2 |
% |
Gross profit |
|
$ |
417,603 |
|
|
$ |
435,742 |
|
|
$ |
(18,139 |
) |
|
|
(4.2 |
)% |
Gross profit margin |
|
|
56.0 |
% |
|
|
66.8 |
% |
|
|
(10.8 |
)% |
|
|
(16.2 |
)% |
Loan and Finance Receivable Balances
The outstanding combined portfolio balance of loans and finance receivables, net of allowance and liability for estimated losses, increased $124.8 million, or 26.7%, to $591.8 million as of December 31, 2016 from $467.0 million as of December 31, 2015, primarily due to increased demand for our domestic near-prime installment product and growth of our loan and finance receivable portfolios serving the needs of small businesses, and an increase in international loan balances (up 17.6% on a constant currency basis). The outstanding loan balance for our domestic near-prime product increased 43.1% as of December 31, 2016 compared to December 31, 2015, resulting in a domestic near-prime portfolio balance that comprises approximately 40% of our total loan and finance receivables portfolio balance while domestic short-term loans comprise approximately 9%. Additionally, our portfolio of loans and finance receivables serving the needs of small businesses has grown quickly over the last year and has exceeded 12% of our total loan and finance receivables portfolio. See “—Non-GAAP Disclosure—Combined Loans and Finance Receivables” above for additional information related to combined loans and finance receivables.
61
The combined loan and finance receivable balance includes $660.5 million and $502.0 million as of December 31, 2016 and 2015 , respectively, of our owned receivables balances before the allowance for losses of $98.9 million and $67.3 million provided in the consolidated financial statements for December 31, 2016 and 2015 , respectively. The combined loan and finance receivable balance also includes $32.2 million and $34.1 million as of December 31, 2016 and 2015 , respectively, of loan and finance receivable balances that are guaranteed by us, which are not included in our financial statements, before the liability for estimated losses of $2.0 million and $1.7 million provided in “Accounts payable and accrued expenses” in the consolidated financial statements for December 31, 2016 and 2015 , respectively.
The following tables summarize loan and finance receivable balances outstanding as of December 31, 2016 and 2015 (dollars in thousands):
|
|
As of December 31, |
|
|||||||||||||||||||||
|
|
2016 |
|
|
2015 |
|
||||||||||||||||||
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
||
|
|
Company |
|
|
by the |
|
|
|
|
|
|
Company |
|
|
by the |
|
|
|
|
|
||||
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
||||||
Ending loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans |
|
$ |
63,005 |
|
|
$ |
26,092 |
|
|
$ |
89,097 |
|
|
$ |
58,793 |
|
|
$ |
25,151 |
|
|
$ |
83,944 |
|
Line of credit accounts |
|
|
144,183 |
|
|
|
— |
|
|
|
144,183 |
|
|
|
100,855 |
|
|
|
— |
|
|
|
100,855 |
|
Installment loans and RPAs |
|
|
453,307 |
|
|
|
6,107 |
|
|
|
459,414 |
|
|
|
342,307 |
|
|
|
8,972 |
|
|
|
351,279 |
|
Total ending loans and finance receivables, gross |
|
|
660,495 |
|
|
|
32,199 |
|
|
|
692,694 |
|
|
|
501,955 |
|
|
|
34,123 |
|
|
|
536,078 |
|
Less: Allowance and liabilities for losses (a) |
|
|
(98,945 |
) |
|
|
(1,996 |
) |
|
|
(100,941 |
) |
|
|
(67,322 |
) |
|
|
(1,756 |
) |
|
|
(69,078 |
) |
Total ending loans and finance receivables, net |
|
$ |
561,550 |
|
|
$ |
30,203 |
|
|
$ |
591,753 |
|
|
$ |
434,633 |
|
|
$ |
32,367 |
|
|
$ |
467,000 |
|
Allowance and liability for losses as a % of loans and finance receivables, gross |
|
|
15.0 |
% |
|
|
6.2 |
% |
|
|
14.6 |
% |
|
|
13.4 |
% |
|
|
5.1 |
% |
|
|
12.9 |
% |
|
|
As of December 31, |
|
|||||||||||||||||||||
|
|
2016 |
|
|
2015 |
|
||||||||||||||||||
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
|
|
|
|
|
Guaranteed |
|
|
|
|
|
||
|
|
Company |
|
|
by the |
|
|
|
|
|
|
Company |
|
|
by the |
|
|
|
|
|
||||
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
|
Owned (a) |
|
|
Company (a) |
|
|
Combined (b) |
|
||||||
Ending loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total domestic, gross |
|
$ |
576,992 |
|
|
$ |
32,199 |
|
|
$ |
609,191 |
|
|
$ |
422,399 |
|
|
$ |
34,123 |
|
|
$ |
456,522 |
|
Total international, gross |
|
|
83,503 |
|
|
|
— |
|
|
|
83,503 |
|
|
|
79,556 |
|
|
|
— |
|
|
|
79,556 |
|
Total ending loans and finance receivables, gross |
|
$ |
660,495 |
|
|
$ |
32,199 |
|
|
$ |
692,694 |
|
|
$ |
501,955 |
|
|
$ |
34,123 |
|
|
$ |
536,078 |
|
(a) |
GAAP measure. The loans and finance receivables balances guaranteed by us relate to loans originated by third-party lenders through the CSO programs and are not included in our financial statements. |
(b) |
Except for allowance and liability for estimated losses, amounts represent non-GAAP measures. |
Average Amount Outstanding per Loan
The average amount outstanding per loan is calculated as the total combined loans, gross balance at the end of the period divided by the total number of combined loans outstanding at the end of the period. The following table shows the average amount outstanding per loan by product at December 31, 2016 and 2015:
|
|
As of December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Average amount outstanding per loan (in ones) (a) |
|
|
|
|
|
|
|
|
Short-term loans (b) |
|
$ |
484 |
|
|
$ |
485 |
|
Line of credit accounts |
|
|
1,289 |
|
|
|
1,046 |
|
Installment loans (b)(c) |
|
|
1,888 |
|
|
|
1,841 |
|
Total loans (b)(c) |
|
$ |
1,254 |
|
|
$ |
1,132 |
|
(a) |
The disclosure regarding the average amount per loan is statistical data that is not included in our financial statements. |
(b) |
Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our financial statements. |
(c) |
Excludes RPAs. |
62
The average amount outstanding per loan increased to $1,254 from $1,132 during 2016 compared to 2015, mainly due to a greater mix of installment loans, which have higher average amounts per loan relative to short-term loans, in 2016 compared to 2015.
Average Loan Origination
The average loan origination amount is calculated as the total amount of combined loans originated and renewed for the period divided by the total number of combined loans originated and renewed for the period. The following table shows the average loan origination amount by product for 2016 compared to 2015:
|
|
Year Ended |
|
|||||
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Average loan origination amount (in ones) (a) |
|
|
|
|
|
|
|
|
Short-term loans (b) |
|
$ |
454 |
|
|
$ |
467 |
|
Line of credit accounts (c) |
|
|
306 |
|
|
|
300 |
|
Installment loans (b)(d) |
|
|
1,734 |
|
|
|
1,630 |
|
Total loans (b)(d) |
|
$ |
517 |
|
|
$ |
528 |
|
(a) |
The disclosure regarding the average loan origination amount is statistical data that is not included in our financial statements. |
(b) |
Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our financial statements. |
(c) |
Represents the average amount of each incremental draw on line of credit accounts. |
(d) |
Excludes RPAs. |
The average loan origination amount decreased to $517 from $528 during 2016 compared to 2015, mainly due to a greater mix of line of credit draws, which have lower average amounts per loan relative short-term and installment loans.
LOANS AND FINANCE RECEIVABLES LOSS EXPERIENCE
The allowance and liability for estimated losses as a percentage of combined loans and RPAs increased to 14.6% as of December 31, 2016 from 12.9% as of December 31, 2015, primarily due to a greater concentration of loans to new customers in the short-term and line of credit portfolios.
The cost of revenue in 2016 was $328.0 million, which was composed of $327.7 million related to our owned loans and finance receivables and a $0.3 million increase in the liability for estimated losses related to loans we guaranteed through the CSO programs. The cost of revenue in 2015 was $216.9 million, which was composed of $216.7 million related to our owned loans and finance receivables, and a $0.2 million increase in the liability for estimated losses related to loans we guaranteed through the CSO programs. Total charge-offs, net of recoveries, were $295.5 million and $213.3 million in 2016 and 2015, respectively.
The following tables show loans and finance receivable balances and fees receivable and the relationship of the allowance and liability for losses to the combined balances of loans and finance receivables for each of the last eight quarters (dollars in thousands):
|
|
2016 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross - Company owned |
|
$ |
495,906 |
|
|
$ |
563,810 |
|
|
$ |
637,612 |
|
|
$ |
660,495 |
|
Gross - Guaranteed by the Company (a) |
|
|
27,114 |
|
|
|
31,227 |
|
|
|
29,700 |
|
|
|
32,199 |
|
Combined loans and finance receivables, gross (b) |
|
|
523,020 |
|
|
|
595,037 |
|
|
|
667,312 |
|
|
|
692,694 |
|
Allowance and liability for losses on loans and finance receivables |
|
|
68,886 |
|
|
|
75,653 |
|
|
|
96,474 |
|
|
|
100,941 |
|
Combined loans and finance receivables, net (b) |
|
$ |
454,134 |
|
|
$ |
519,384 |
|
|
$ |
570,838 |
|
|
$ |
591,753 |
|
Allowance and liability for losses as a % of loans and finance receivables, gross (b) |
|
|
13.2 |
% |
|
|
12.7 |
% |
|
|
14.5 |
% |
|
|
14.6 |
% |
63
|
2015 |
|
||||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross - Company owned |
|
$ |
330,275 |
|
|
$ |
368,715 |
|
|
$ |
445,547 |
|
|
$ |
501,955 |
|
Gross - Guaranteed by the Company (a) |
|
|
25,355 |
|
|
|
31,539 |
|
|
|
36,684 |
|
|
|
34,123 |
|
Combined loans and finance receivables, gross (b) |
|
|
355,630 |
|
|
|
400,254 |
|
|
|
482,231 |
|
|
|
536,078 |
|
Allowance and liability for losses on loans and finance receivables |
|
|
52,165 |
|
|
|
52,689 |
|
|
|
66,718 |
|
|
|
69,078 |
|
Combined loans and finance receivables, net (b) |
|
$ |
303,465 |
|
|
$ |
347,565 |
|
|
$ |
415,513 |
|
|
$ |
467,000 |
|
Allowance and liability for losses as a % of loans and finance receivables, gross (b) |
|
|
14.7 |
% |
|
|
13.2 |
% |
|
|
13.8 |
% |
|
|
12.9 |
% |
(a) |
Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements. |
(b) |
Non-GAAP measure. |
Loans and Finance Receivables Loss Experience by Product
Short-term Loans
Demand for our short-term loan product in the United States has historically been highest in the third and fourth quarters of each year, and lowest in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds. Softer demand for short-term loans in the United States combined with tighter underwriting standards in the United Kingdom due to changes in the regulatory environment during 2014 resulted in lower year-over-year average balances during the second and third quarters of 2016. The higher allowance and liability for losses as a percentage of combined loan balance in the second half of the year was attributable to an increase in originations to new customers, which also led to year-over-year increases in the average and ending short-term loan balances for the fourth quarter of 2016 .
Our gross profit margin for short-term loans is typically highest in the first quarter of each year, corresponding to the seasonal decline in consumer loan balances outstanding. The cost of revenue as a percentage of the average combined loan balance for short-term loans outstanding is typically lower in the first quarter and generally peaks in the second half of the year with higher loan demand.
The following table includes information related only to short-term loans and shows our loss experience trends for short-term loans for each of the last eight quarters (dollars in thousands):
|
|
2016 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Short-term loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
13,276 |
|
|
$ |
14,214 |
|
|
$ |
20,531 |
|
|
$ |
21,600 |
|
Charge-offs (net of recoveries) |
|
|
16,540 |
|
|
|
11,720 |
|
|
|
15,956 |
|
|
|
21,021 |
|
Average short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
55,839 |
|
|
|
54,324 |
|
|
|
60,761 |
|
|
|
59,728 |
|
Guaranteed by the Company (a)(b) |
|
|
25,151 |
|
|
|
21,443 |
|
|
|
24,678 |
|
|
|
24,709 |
|
Average short-term combined loan balance, gross (a)(c) |
|
$ |
80,990 |
|
|
$ |
75,767 |
|
|
$ |
85,439 |
|
|
$ |
84,437 |
|
Ending short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
52,381 |
|
|
$ |
58,798 |
|
|
$ |
60,124 |
|
|
$ |
63,005 |
|
Guaranteed by the Company (b) |
|
|
20,534 |
|
|
|
24,451 |
|
|
|
23,379 |
|
|
|
26,092 |
|
Ending short-term combined loan balance, gross (c) |
|
$ |
72,915 |
|
|
$ |
83,249 |
|
|
$ |
83,503 |
|
|
$ |
89,097 |
|
Ending allowance and liability for losses |
|
$ |
12,598 |
|
|
$ |
14,746 |
|
|
$ |
19,184 |
|
|
$ |
19,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average short-term combined loan balance, gross (a)(c) |
|
|
16.4 |
% |
|
|
18.8 |
% |
|
|
24.0 |
% |
|
|
25.6 |
% |
Charge-offs (net of recoveries) as a % of average short-term combined loan balance, gross (a)(c) |
|
|
20.4 |
% |
|
|
15.5 |
% |
|
|
18.7 |
% |
|
|
24.9 |
% |
Gross profit margin |
|
|
72.1 |
% |
|
|
69.5 |
% |
|
|
60.5 |
% |
|
|
56.8 |
% |
Allowance and liability for losses as a % of combined loan balance, gross (c)(d) |
|
|
17.3 |
% |
|
|
17.7 |
% |
|
|
23.0 |
% |
|
|
21.9 |
% |
64
|
2015 |
|
||||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Short-term loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
11,843 |
|
|
$ |
14,299 |
|
|
$ |
18,315 |
|
|
$ |
17,837 |
|
Charge-offs (net of recoveries) |
|
|
13,908 |
|
|
|
12,683 |
|
|
|
17,226 |
|
|
|
18,125 |
|
Average short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
52,307 |
|
|
|
52,677 |
|
|
|
60,399 |
|
|
|
59,298 |
|
Guaranteed by the Company (a)(b) |
|
|
28,626 |
|
|
|
25,699 |
|
|
|
26,761 |
|
|
|
24,215 |
|
Average short-term combined loan balance, gross (a)(c) |
|
$ |
80,933 |
|
|
$ |
78,376 |
|
|
$ |
87,160 |
|
|
$ |
83,513 |
|
Ending short-term combined loan balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
49,012 |
|
|
$ |
58,315 |
|
|
$ |
62,208 |
|
|
$ |
58,793 |
|
Guaranteed by the Company (b) |
|
|
24,394 |
|
|
|
27,717 |
|
|
|
25,966 |
|
|
|
25,151 |
|
Ending short-term combined loan balance, gross (c) |
|
$ |
73,406 |
|
|
$ |
86,032 |
|
|
$ |
88,174 |
|
|
$ |
83,944 |
|
Ending allowance and liability for losses |
|
$ |
13,650 |
|
|
$ |
15,472 |
|
|
$ |
16,380 |
|
|
$ |
15,950 |
|
Short-term loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average short-term combined loan balance, gross (a)(c) |
|
|
14.6 |
% |
|
|
18.2 |
% |
|
|
21.0 |
% |
|
|
21.4 |
% |
Charge-offs (net of recoveries) as a % of average short-term combined loan balance, gross (a)(c) |
|
|
17.2 |
% |
|
|
16.2 |
% |
|
|
19.8 |
% |
|
|
21.7 |
% |
Gross profit margin |
|
|
76.7 |
% |
|
|
70.5 |
% |
|
|
66.4 |
% |
|
|
65.0 |
% |
Allowance and liability for losses as a % of combined loan balance, gross (c)(d) |
|
|
18.6 |
% |
|
|
18.0 |
% |
|
|
18.6 |
% |
|
|
19.0 |
% |
(a) |
The average short-term combined loan balance is the average of the month-end balances during the period. |
(b) |
Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements. |
(c) |
Non-GAAP measure. |
(d) |
Allowance and liability for losses as a % of combined loan balance, gross, is determined using period-end balances. |
Line of Credit Accounts
The cost of revenue as a percentage of average loan balance for line of credit accounts exhibits a similar quarterly seasonal trend to short-term loan loss rates as the ratio is typically lower in the first quarter and increases throughout the remainder of the year, peaking in the second half of the year with higher loan demand.
The gross profit margin is generally lower for line of credit accounts as compared to short-term loans because the highest levels of default are exhibited in the early stages of the account, while the revenue is recognized over the term of the account. As a result, particularly in periods of higher growth for line of credit account portfolios, the gross profit margin will be lower for this product than for our short-term loan products. Conversely, in periods of declining originations and portfolio contraction, as was the case in the first half of 2015, the gross profit margin will be higher for this product. The year-over-year increase in the allowance for losses as a percentage of loan balance was primarily due to the decline during 2015 in the average line of credit balance as a result of changes in business practices in the United Kingdom, partially offset by very strong demand for domestic line of credit accounts in the second half of 2016. In the fourth quarter of 2014, we discontinued offering line of credit accounts to new customers in the United Kingdom, and effective January 1, 2015, we discontinued offering draws on existing line of credit accounts in the United Kingdom due to a cap implemented by the Financial Conduct Authority, our primary regulator in the United Kingdom, on the total cost of high-cost short-term credit that went into effect on January 2, 2015. The U.K. line of credit portfolio performed very well as it wound down during 2015 given its seasoned experience level.
65
The following table includes information related only to line of credit accounts and shows our loss experience trends for line of credit accounts for each of the last eight quarters (dollars in thousands):
|
|
2016 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Line of credit accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
16,471 |
|
|
$ |
17,251 |
|
|
$ |
29,739 |
|
|
$ |
25,028 |
|
Charge-offs (net of recoveries) |
|
|
16,914 |
|
|
|
14,506 |
|
|
|
20,973 |
|
|
|
25,229 |
|
Average loan balance (a) |
|
|
100,648 |
|
|
|
105,553 |
|
|
|
126,371 |
|
|
|
138,259 |
|
Ending loan balance |
|
|
98,351 |
|
|
|
118,030 |
|
|
|
132,388 |
|
|
|
144,183 |
|
Ending allowance for losses balance |
|
$ |
15,284 |
|
|
$ |
18,029 |
|
|
$ |
26,795 |
|
|
$ |
26,594 |
|
Line of credit account ratios : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average loan balance (a) |
|
|
16.4 |
% |
|
|
16.3 |
% |
|
|
23.5 |
% |
|
|
18.1 |
% |
Charge-offs (net of recoveries) as a % of average loan balance (a) |
|
|
16.8 |
% |
|
|
13.7 |
% |
|
|
16.6 |
% |
|
|
18.2 |
% |
Gross profit margin |
|
|
66.4 |
% |
|
|
65.7 |
% |
|
|
49.7 |
% |
|
|
59.7 |
% |
Allowance for losses as a % of loan balance (b) |
|
|
15.5 |
% |
|
|
15.3 |
% |
|
|
20.2 |
% |
|
|
18.4 |
% |
|
|
2015 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Line of credit accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
7,813 |
|
|
$ |
4,870 |
|
|
$ |
13,048 |
|
|
$ |
17,816 |
|
Charge-offs (net of recoveries) |
|
|
14,926 |
|
|
|
8,231 |
|
|
|
9,262 |
|
|
|
14,962 |
|
Average loan balance (a) |
|
|
95,777 |
|
|
|
72,584 |
|
|
|
81,511 |
|
|
|
94,532 |
|
Ending loan balance |
|
|
76,196 |
|
|
|
73,539 |
|
|
|
89,142 |
|
|
|
100,855 |
|
Ending allowance for losses balance |
|
$ |
12,340 |
|
|
$ |
9,091 |
|
|
$ |
12,873 |
|
|
$ |
15,727 |
|
Line of credit account ratios : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average loan balance (a) |
|
|
8.2 |
% |
|
|
6.7 |
% |
|
|
16.0 |
% |
|
|
18.8 |
% |
Charge-offs (net of recoveries) as a % of average loan balance (a) |
|
|
15.6 |
% |
|
|
11.3 |
% |
|
|
11.4 |
% |
|
|
15.8 |
% |
Gross profit margin |
|
|
86.0 |
% |
|
|
88.1 |
% |
|
|
70.2 |
% |
|
|
60.5 |
% |
Allowance for losses as a % of loan balance (b) |
|
|
16.2 |
% |
|
|
12.4 |
% |
|
|
14.4 |
% |
|
|
15.6 |
% |
(a) |
The average loan balance for line of credit accounts is the average of the month-end balances during the period. |
(b) |
Allowance for losses as a % of loan balance is determined using period-end balances. |
Installment Loans and RPAs
For installment loans and RPAs, the cost of revenue as a percentage of average loan and finance receivable balance is typically more consistent throughout the year as compared to short-term loans and line of credit accounts. Due to the scheduled regular payments that are inherent with installment loans and RPAs, we do not experience the higher level of repayments in the first quarter for these receivables as we experience with short-term loans and, to a lesser extent, line of credit accounts.
The gross profit margin is generally lower for the installment loan and RPA products than for other products, primarily because the highest levels of default are exhibited in the early stages of the loan or RPA, while revenue is recognized over the term of the loan or estimated delivery term. In addition, installment loans and RPAs typically have higher average amounts per receivable. Another factor contributing to the lower gross profit margin is that the yield for installment loans and RPAs is typically lower than the yield for the other products we offer. As a result, particularly in periods of higher growth for the installment loan and RPA portfolios, which has been the case in recent years, the gross profit margin is typically lower for this product than for our short-term loan products. Our installment loan and RPA portfolio balance outstanding at December 31, 2016 increased $108.1 million, or 30.8%, compared to December 31, 2015. During 2016, we experienced lower gross profit margin than we experienced in the prior year quarters as a result of the growth in our domestic near-prime installment portfolio and RPAs.
66
The following table includes information related only to our installment loans and shows our loss experience trends for installment loans for each of the last eight quarters (dollars in thousands):
|
|
2016 |
|
|||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Installment loans and RPAs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
39,830 |
|
|
$ |
33,988 |
|
|
$ |
45,121 |
|
|
$ |
50,917 |
|
Charge-offs (net of recoveries) |
|
|
36,541 |
|
|
|
32,332 |
|
|
|
37,383 |
|
|
|
46,411 |
|
Average installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
344,330 |
|
|
|
362,222 |
|
|
|
419,225 |
|
|
|
448,953 |
|
Guaranteed by the Company (a)(b) |
|
|
7,476 |
|
|
|
6,094 |
|
|
|
6,600 |
|
|
|
6,093 |
|
Average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
$ |
351,806 |
|
|
$ |
368,316 |
|
|
$ |
425,825 |
|
|
$ |
455,046 |
|
Ending installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
345,174 |
|
|
$ |
386,982 |
|
|
$ |
445,100 |
|
|
$ |
453,307 |
|
Guaranteed by the Company (b) |
|
|
6,580 |
|
|
|
6,776 |
|
|
|
6,321 |
|
|
|
6,107 |
|
Ending installment and RPA combined loan and finance receivable balance, gross (c) |
|
$ |
351,754 |
|
|
$ |
393,758 |
|
|
$ |
451,421 |
|
|
$ |
459,414 |
|
Ending allowance and liability for losses |
|
$ |
41,004 |
|
|
$ |
42,878 |
|
|
$ |
50,495 |
|
|
$ |
54,861 |
|
Installment and RPA loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
11.3 |
% |
|
|
9.2 |
% |
|
|
10.6 |
% |
|
|
11.2 |
% |
Charge-offs (net of recoveries) as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
10.4 |
% |
|
|
8.8 |
% |
|
|
8.8 |
% |
|
|
10.2 |
% |
Gross profit margin |
|
|
48.6 |
% |
|
|
54.7 |
% |
|
|
46.8 |
% |
|
|
43.5 |
% |
Allowance and liability for losses as a % of combined loan and finance receivable balance, gross (c)(d) |
|
|
11.7 |
% |
|
|
10.9 |
% |
|
|
11.2 |
% |
|
|
11.9 |
% |
67
|
2015 |
|
||||||||||||||
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
Installment loans and RPAs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
18,914 |
|
|
$ |
22,367 |
|
|
$ |
34,251 |
|
|
$ |
35,485 |
|
Charge-offs (net of recoveries) |
|
|
23,302 |
|
|
|
20,627 |
|
|
|
24,553 |
|
|
|
35,470 |
|
Average installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned (a) |
|
|
208,668 |
|
|
|
217,121 |
|
|
|
265,253 |
|
|
|
318,400 |
|
Guaranteed by the Company (a)(b) |
|
|
327 |
|
|
|
2,281 |
|
|
|
7,822 |
|
|
|
10,667 |
|
Average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
$ |
208,995 |
|
|
$ |
219,402 |
|
|
$ |
273,075 |
|
|
$ |
329,067 |
|
Ending installment and RPA combined loan and finance receivable balance, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned |
|
$ |
205,067 |
|
|
$ |
236,861 |
|
|
$ |
294,197 |
|
|
$ |
342,307 |
|
Guaranteed by the Company (b) |
|
|
961 |
|
|
|
3,822 |
|
|
|
10,718 |
|
|
|
8,972 |
|
Ending installment and RPA combined loan and finance receivable balance, gross (c) |
|
$ |
206,028 |
|
|
$ |
240,683 |
|
|
$ |
304,915 |
|
|
$ |
351,279 |
|
Ending allowance and liability for losses |
|
$ |
26,175 |
|
|
$ |
28,126 |
|
|
$ |
37,465 |
|
|
$ |
37,401 |
|
Installment and RPA loan ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
9.0 |
% |
|
|
10.2 |
% |
|
|
12.5 |
% |
|
|
10.8 |
% |
Charge-offs (net of recoveries) as a % of average installment and RPA combined loan and finance receivable balance, gross (a)(c) |
|
|
11.1 |
% |
|
|
9.4 |
% |
|
|
9.0 |
% |
|
|
10.8 |
% |
Gross profit margin |
|
|
67.8 |
% |
|
|
60.4 |
% |
|
|
48.4 |
% |
|
|
55.0 |
% |
Allowance and liability for losses as a % of combined loan and finance receivable balance, gross (c)(d) |
|
|
12.7 |
% |
|
|
11.7 |
% |
|
|
12.3 |
% |
|
|
10.6 |
% |
(a) |
The average loan and finance receivable balance for installment loans is the average of the month-end balances during the period. |
(b) |
Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements. |
(c) |
Non-GAAP measure. |
(d) |
Allowance and liability for losses as a % of combined loan and finance receivable balance, gross, is determined using period-end balances. |
Total Expenses
Total expenses decreased $15.3 million, or 4.9%, to $296.1 million in 2016, compared to $311.4 million in 2015. On a constant currency basis, total expenses decreased $10.3 million, or 3.3%, for 2016 compared to 2015.
Marketing expense decreased $19.5 million, or 16.7%, to $97.4 million in 2016 compared to $116.9 million in 2015. Lower digital marketing costs, revenue-sharing costs and television advertising costs across both domestic and international brands were partially offset by higher direct mail costs and lead generation costs .
Operations and technology expense increased to $85.2 million in 2016 from $74.0 million in 2015, primarily due to higher underwriting and transaction costs for our installment and RPA products in our domestic operations and higher software costs.
General and administrative expense decreased $4.1 million, or 4.0%, to $98.0 million in 2016 compared to $102.1 million in 2015, primarily due to an adjustment to recognize the change in fair value of the acquisition - related contingent consideration and lower occupancy costs in 2016, partially offset by higher personnel and incentive expenses.
Depreciation and amortization expense decreased to $15.5 million in 2016 compared to $18.4 million in 2015 primarily due to the acceleration of depreciation in the prior year resulting from the early termination of our lease for the relocation of our headquarters that occurred in 2015.
68
Interest expense, net increased $12.7 million, or 24.1%, to $65.6 million in 2016 compared to $52.9 million in 2015. The increase was due to the securitization facilities we entered into during 2016 (See “—Liquidity and Capital Resources—Consumer Loan Securitization” below for further information), which increased the average amount of debt outstanding by $126.4 million to $615.2 million during 2016 from $488.8 million during 2015, and an increase in the weighted average interest rate on our outstanding debt to 10.71% in 2016 from 10.59% in 2015.
Provision for Income Taxes
Provision for income taxes decreased $3.7 million, or 13.9%, to $22.8 million in 2016 compared to $26.5 million in 2015. The decrease was primarily due to an 18.6% decrease in income before income taxes, partially offset by an increase in the effective tax rate to 39.8% in 2016 from 37.6% in 2015. The increase in the effective tax rate is mainly due to an adjustment related to share based compensation deferred tax which was partially offset by lower nondeductible executive compensation and lobbying expenses in the current year compared to the prior year.
The balance of unrecognized tax benefits as of December 31, 2016 was $351 thousand ($320 thousand net of the federal benefit of state matters), all of which, if recognized, would favorably affect the effective tax rate in any future periods. We had no unrecognized tax benefits as of December 31, 2015 and 2014. We do not believe it is reasonably possible that, within the next twelve months, unrecognized domestic tax benefits will change by a significant amount. We record interest and penalties related to tax matters as income tax expense in the consolidated statement of income.
Our U.S. tax returns are subject to examination by federal and state taxing authorities. The IRS audits for tax years 2011 through 2014 were concluded with no adjustments to the financial statements. The 2015 and 2016 tax years are open to examination by the IRS. The years open to examination by state, local, and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three to four years from the date the tax return is filed.
LIQUIDITY AND CAPITAL RESOURCES
Capital Funding Strategy
Historically, we have generated significant cash flow through normal operating activities for funding both long-term and short-term needs. Our near-term liquidity is managed to ensure that adequate resources are available to fund our seasonal working capital growth, which is driven by demand for our loan and financing products, and to meet the continued growth in the demand for our near-prime installment products. On May 30, 2014, we issued and sold $500.0 million in aggregate principal amount of 9.75% Senior Notes due 2021 (the “2021 Senior Notes”), as further discussed below under “9.75% Senior Unsecured Notes Due 2021.” On September 1, 2017, we issued and sold $250.0 million in aggregate principal amount of 8.50% Senior Notes due 2024 (the “2024 Senior Notes”) and used the net proceeds, in part, to retire $155.0 million in 2021 Senior Notes. On June 30, 2017, we entered into a secured revolving credit agreement (the “2017 Credit Agreement”) which replaced our previous credit agreement (the “2014 Credit Agreement”) that was terminated on June 30, 2017, as further described below under “Revolving Credit Facilities.” As of February 22, 2018, our available borrowings under the 2017 Credit Agreement were $8.0 million. On January 15, 2016 and December 1, 2016, we entered into the 2016‑1 and 2016‑2 Securitization Facilities, respectively, as further described below under “Consumer Loan Securitization.” As of February 22, 2018, the outstanding balance under our securitization facilities was $218.3 million. We expect that our operating needs, including satisfying our obligations under our debt agreements and funding our working capital growth, will be satisfied by a combination of cash flows from operations, borrowings under the 2017 Credit Agreement, or any refinancing, replacement thereof or increase in borrowings thereunder, and securitization or sale of loans and finance receivables under our consumer loan securitization facilities.
As of December 31, 2017, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. To the extent we experience short-term or long-term funding disruptions, we have the ability to adjust our volume of lending and financing to consumers and small businesses that would reduce cash outflow requirements while increasing cash inflows through repayments. Additional alternatives may include the securitization or sale of assets, increased borrowings under the 2017 Credit Agreement, or any refinancing or replacement thereof, and reductions in capital spending which could be expected to generate additional liquidity.
8.50% Senior Unsecured Notes Due 2024
On September 1, 2017, we issued and sold the 2024 Senior Notes. The 2024 Senior Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and outside the United States pursuant to Regulation S under the Securities Act. The 2024 Senior Notes bear interest at a rate of 8.50% annually on the principal amount payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2018. The 2024 Senior
69
Notes were sold at a price of 100%. The 2024 Senior Notes will mature on September 1, 2024. The 2024 Senior Notes are unsecured debt obligations of ours, and are unconditionally guaranteed by certain of our domestic subsidiaries .
The 2024 Senior Notes are redeemable at our option, in whole or in part, (i) at any time prior to September 1, 2020 at 100% of the aggregate principal amount of 2024 Senior Notes redeemed plus the applicable “make whole” premium specified in the 2024 Senior Notes Indenture, plus accrued and unpaid interest, if any, to the redemption date and (ii) at any time on or after September 1, 2020 at the premium, if any, specified in the 2024 Senior Notes Indenture that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, prior to September 1, 2020, at our option, we may redeem up to 40% of the aggregate principal amount of the 2024 Senior Notes at a redemption price of 108.5% of the aggregate principal amount of 2024 Senior Notes redeemed, plus accrued and unpaid interest, if any, to the redemption date, with the proceeds of certain equity offerings as described in the 2024 Senior Notes Indenture.
The 2024 Senior Notes and the related guarantees have not been and will not be registered under the Securities Act, or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities or blue sky laws and foreign securities laws.
We used the net proceeds of the 2024 Senior Notes offering to retire a portion of our outstanding 9.75% senior notes due 2021, to pay the related accrued interest, premiums, fees and expenses associated therewith and for general corporate purposes, which may include working capital and future repurchases of our outstanding debt securities.
Consumer Loan Securitization
2016-1 Facility
On January 15, 2016, we and certain of our subsidiaries entered into a receivables securitization (as amended, the “2016‑1 Securitization Facility”) with certain purchasers, Jefferies Funding LLC, as administrative agent (the “Administrative Agent”) and Bankers Trust Company, as indenture trustee and securities intermediary (the “Indenture Trustee”). The 2016‑1 Securitization Facility securitizes unsecured consumer installment loans (“Receivables”) that have been, or will be, originated or acquired under our NetCredit brand and that meet specified eligibility criteria. Under the 2016‑1 Securitization Facility, Receivables are sold to a wholly-owned special purpose subsidiary (the “Issuer”) and serviced by another subsidiary.
The Issuer issued an initial term note of $107.4 million (the “Initial Term Note”), which was secured by $134 million in unsecured consumer loans, and variable funding notes (the “Variable Funding Notes”) with an aggregate availability of $20 million per month. As described below, the Issuer has issued and will subsequently issue term notes (the “Term Notes” and, together with the Initial Term Note and the Variable Funding Notes, the “Securitization Notes”). The maximum principal amount of the Securitization Notes that could be outstanding at any time under the 2016‑1 Securitization Facility was originally limited to $175 million.
At the end of each month during the nine-month revolving period, the Receivables funded by the Variable Funding Notes will be refinanced through the creation of two Term Notes, which Term Notes will be issued to the holders of the Variable Funding Notes. The non-recourse Securitization Notes mature at various dates, the latest of which will be October 15, 2020 (the “Final Maturity Date”). The 2016‑1 Securitization Facility has been amended to extend the revolving period to October 2017 and the latest maturity to October 2021, as discussed below.
The Securitization Notes are issued pursuant to an indenture, dated as of January 15, 2016 (the “Closing Date”). The Securitization Notes bear interest at an annual rate equal to the one month London Interbank Offered Rate (“LIBOR”) rate (subject to a floor of 1%) plus 7.75%, which rate is initially 8.75%. In addition, the Issuer paid certain customary upfront closing fees and will pay customary annual commitment and other fees to the purchasers under the 2016‑1 Securitization Facility. The Issuer is permitted to voluntarily prepay any outstanding Securitization Notes, subject to an optional redemption premium. Interest and principal payments on outstanding Securitization Notes are made monthly. Any remaining amounts outstanding will be payable no later than the Final Maturity Date. The Securitization Notes are supported by the cash flows from the underlying Receivables. The holders of the Securitization Notes have no recourse to us if the cash flows from the underlying Receivables are not sufficient to pay all of the principal and interest on the Securitization Notes unless the underlying Receivables breach the representations and warranties made by us as of the related sale date as described below. Additionally, the Receivables will be held by the Issuer at least until the obligations under the Securitization Notes are satisfied. For so long as the Receivables are owned by the Issuer, the outstanding Receivables will not be available to satisfy our other debts and obligations.
All amounts due under the Securitization Notes are secured by all of the Issuer’s assets, which include the Receivables transferred to the Issuer, related rights under the Receivables, specified bank accounts, and certain other related collateral.
70
The 2016‑1 Securitization Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters and other subjects; and default and termination provisions which provide for the acceleration of the Securitization Notes under the 2016‑1 Securitization Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables, defaults under other material indebtedness and certain regulatory matters.
The agreements evidencing the 2016‑1 Facility, all dated as of the Closing Date, include (i) an Indenture between the Issuer and the Indenture Trustee, (ii) a Note Purchase Agreement among the Issuer, NetCredit Loan Services, LLC (f/k/a Enova Lending Services, LLC), as the Master Servicer, the Administrative Agent and certain purchasers, and (iii) a Receivables Purchase Agreement between us and Enova Finance 5, LLC. On July 26, 2016, we and certain of our subsidiaries entered into a First Omnibus Amendment (the “First Amendment”) of the 2016‑1 Facility that was established on the Closing Date, pursuant to various agreements with certain purchasers, the Administrative Agent and the Indenture Trustee. The First Amendment effected a variety of minor technical changes to the Indenture, the Note Purchase Agreement, the Receivables Purchase Agreement and the servicing agreement for the 2016‑1 Facility. These changes included revised procedures under the Note Purchase Agreement for the disbursement to the Issuer of proceeds from draws under the Variable Funding Notes and clarification of modifications that the servicer is permitted to effect to the terms of the Receivables that have been transferred into the EFR 2016‑1 Facility.
On August 17, 2016, we and one of our subsidiaries entered into an Amendment to the Receivables Purchase Agreement. This amendment modified an eligibility criterion for Receivables that we sell under the Agreement.
On September 12, 2016, we and certain of our subsidiaries entered into a Second Omnibus Amendment (the “Second Amendment”) to amend the Indenture and the Receivables Purchase Agreement. The Second Amendment authorized us to include in the 2016‑1 Facility Receivables originated by a state-chartered bank and acquired by a subsidiary of us from that bank, and it adjusted the Investment Pool Cumulative Net Loss Trigger for the Initial Term Note Investment Pool (as such terms are defined in the Indenture), which was the seasoned pool of receivables securitized under the 2016‑1 Facility on the Closing Date.
On October 20, 2016, we and certain of our subsidiaries entered into a Third Amendment and Limited Waiver (the “Third Amendment”) to amend the Indenture. The Third Amendment increased the maximum principal amount of the 2016‑1 Facility to $275 million, increased the Variable Funding Notes maximum principal amount to $40 million until December 31, 2016, and $30 million thereafter, and extended the term of the facility to October 2017. The Third Amendment also adjusted the Note Interest Rate on Term Notes issued after, and amounts outstanding under the Variable Funding Notes after, the date of the Third Amendment (as such terms are defined in the Indenture). The weighted average interest rate on such adjusted Notes will be 9.5%.
On November 14, 2016, we and certain of our subsidiaries entered into a Fourth Amendment (the “Fourth Amendment”) to amend the Indenture and Receivables Purchase Agreement. The Fourth Amendment adjusted the Investment Pool Cumulative Delinquency Trigger (as such term is defined in the Indenture), with an effective date of October 31, 2016.
On December 14, 2016, we and certain of our subsidiaries entered into a Fifth Amendment (the “Fifth Amendment”) to amend the Indenture and Receivables Purchase Agreement. The Fifth Amendment adjusted the Investment Pool Cumulative Delinquency Trigger (as such term is defined in the Indenture) for the Initial Term Notes, with an effective date of November 30, 2016, expanded the categories of Receivables that could be financed through the 2016‑1 Facility and made certain other minor changes. These changes will provide us with additional flexibility under the 2016‑1 Facility.
On October 20, 2017 (the “Amendment Closing Date”), we and certain of our subsidiaries amended and restated the 2016‑1 Securitization Facility (the “Amended Facility”). The counterparties to the Amended Facility included certain purchasers, the Administrative Agent and the Indenture Trustee. The Amended Facility relates to Receivables that have been and will be originated or acquired under our NetCredit brand by the Originators and that meet specified eligibility criteria. The eligible Receivables that were owned by the Issuer remained in the Amended Facility and ineligible Receivables were removed. Under the Amended Facility, additional eligible Receivables may be sold to the Issuer and serviced by another subsidiary of ours. As of the Amendment Closing Date, the Issuer owned eligible Receivables with an outstanding principal balance equal to $226.4 million.
In connection with the amendment and restatement, all of the outstanding notes issued by the Issuer prior to the Amendment Closing Date were redeemed and the Issuer issued an initial term note with an initial principal amount of $181.1 million (the “2017 Initial Term Note”) and variable funding notes (the “2017 Variable Funding Notes”) with an aggregate committed availability of $75 million per quarter with an option to increase the commitment to $90 million with the consent of the holders of the 2017 Variable Funding Notes. As described below, the Issuer will subsequently issue term notes (the “2017 Term Notes” and, together with the 2017 Initial Term Note and the 2017 Variable Funding Notes the “2017 Securitization Notes”) at the end of each calendar quarter. The maximum principal amount of the 2017 Securitization Notes that may be outstanding at any time under the Amended Facility is $275 million.
71
On each of January 2, 2018, April 2, 2018, July 2, 2018, October 1, 2018, December 31, 2018 and April 1, 2019, the Receivables financed under the 2017 Variable Funding Notes will be allocated to a 2017 Term Note, which 2017 Term Note will be issued to the holders of the 2017 Variable Funding Notes and the 2017 Variable Funding Note on such date will be reduced to zero. The 2017 Securitization Notes are non-recourse to us and mature at various dates, the latest of which will be April 15, 2022 (the “2017 Final Maturity Date”).
The 2017 Securitization Notes are issued pursuant to an amended and restated indenture, dated as of the Amendment Closing Date, between the Issuer and the Indenture Trustee. The 2017 Securitization Notes bear interest at a rate per annum equal to One-Month LIBOR (subject to a floor) plus 7.50%. In addition, the Issuer paid certain customary upfront closing fees to the Administrative Agent and will pay customary annual commitment and other fees to the purchasers under the Amended Facility. Subject to certain exceptions, the Issuer is not permitted to prepay or redeem any of the 2017 Securitization Notes prior to April 15, 2019 except for a one-time prepayment of the 2017 Securitization Notes related to a removal of Receivables in an amount no greater than $100 million. Following such date, the Issuer is permitted to voluntarily prepay any of the 2017 Securitization Notes, subject to an optional redemption premium. Interest and principal payments on the 2017 Securitization Notes will be made monthly. Any remaining amounts outstanding will be payable no later than the 2017 Final Maturity Date.
All amounts due under the 2017 Securitization Notes are secured by all of the Issuer’s assets, which include the Receivables transferred to the Issuer, related rights under the Receivables, specified bank accounts and certain other related collateral.
The Amended Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters and other subjects; and default and termination provisions which provide for the acceleration of the 2017 Securitization Notes under the Amended Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables, and defaults under other material indebtedness.
On October 25, 2017, the Issuer and the Indenture Trustee amended the Amended Facility to permit a holder of a 2017 Term Note or the 2017 Initial Term Note to exchange such notes for notes with an alternative structure with terms not materially different to the Issuer than the exchanged Term Notes or Initial Term Notes.
2016-2 Facility
On December 1, 2016, we and certain of our subsidiaries entered into a receivables securitization (the “2016‑2 Facility”) with Redpoint Capital Asset Funding, LLC, as lender (the “Lender”). The 2016‑2 Facility securitizes unsecured consumer installment loans (“Redpoint Receivables”) that have been and will be originated or acquired under our NetCredit brand by several of our subsidiaries (the “Originators”) and that meet specified eligibility criteria, including that the annual percentage rate for each securitized consumer loan is greater than or equal to 90%. Under the 2016‑2 Facility, Redpoint Receivables are sold to a wholly-owned special purpose subsidiary of ours (the “Debtor”) and serviced by another subsidiary of ours.
The Debtor has issued a revolving note with an initial maximum principal balance of $20.0 million (the “Initial Facility Size”), which is required to be secured by $25.0 million in unsecured consumer loans. The Initial Facility Size may be increased under the 2016‑2 Facility to $40 million. The 2016‑2 Facility is non-recourse to us and matures on December 1, 2019.
The 2016‑2 Facility is governed by a loan and security agreement, dated as of December 1, 2016, between the Lender and the Debtor. The 2016‑2 Facility bears interest at a rate per annum equal to LIBOR (subject to a floor) plus an applicable margin, which rate per annum was initially 12.50%. In addition, the Debtor paid certain customary upfront closing fees to the Lender. Interest payments on the 2016‑2 Facility will be made monthly. Subject to certain exceptions, the Debtor is not permitted to prepay the 2016‑2 Facility prior to October 1, 2018. Following such date, the Debtor is permitted to voluntarily prepay the 2016‑2 Facility without penalty. Any remaining amounts outstanding will be payable no later than December 1, 2019.
All amounts due under the 2016‑2 Facility are secured by all of the Debtor’s assets, which include the Redpoint Receivables transferred to the Debtor, related rights under the Redpoint Receivables, a bank account and certain other related collateral.
The 2016‑2 Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Redpoint Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay the related Receivables; and default and termination provisions which provide for the acceleration of the 2016‑2 Facility in circumstances including, but not limited to, failure to make payments when due certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables and defaults under other material indebtedness of the Debtor.
72
2017 Credit Agreement
On June 30, 2017, we and certain of our operating subsidiaries entered into a secured revolving credit agreement with a syndicate of banks including TBK Bank, SSB (“TBK”), as Administrative Agent and Collateral Agent, Jefferies Finance LLC and TBK as Joint Lead Arrangers and Joint Lead Bookrunners, and Green Bank, N.A., as Lender.
The 2017 Credit Agreement is secured by domestic receivables and replaced the 2014 Credit Agreement (as described below). The borrowing limit in the 2017 Credit Agreement increased to $40 million from $35 million in the 2014 Credit Agreement, and its maturity date is May 1, 2020. We had no borrowings under the 2017 Credit Agreement as of December 31, 2017.
The 2017 Credit Agreement provides for a revolving credit line with interest on borrowings under the facility at prime rate plus 1.00%. In addition, the 2017 Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the line, and ranges from 0.30% per annum to 0.50% per annum depending on usage. A portion of the revolving credit facility, up to a maximum of $20 million, is available for the issuance of letters of credit. We had outstanding letters of credit under the 2017 Credit Agreement of $8.0 million as of December 31, 2017. The 2017 Credit Agreement provides for certain prepayment penalties if it is terminated on or before its first and second anniversary date, subject to certain exceptions.
The 2017 Credit Agreement contains certain limitations on the incurrence of additional indebtedness, investments, the attachment of liens to our property, the amount of dividends and other distributions, fundamental changes to us or our business and certain other of our activities. The 2017 Credit Agreement contains standard financial covenants for a facility of this type based on a leverage ratio and a fixed charge coverage ratio. The 2017 Credit Agreement also provides for customary affirmative covenants, including financial reporting requirements, and certain events of default, including payment defaults, covenant defaults and other customary defaults.
2014 Credit Agreement
On May 14, 2014, the Company and its domestic subsidiaries as guarantors entered the 2014 Credit Agreement. The 2014 Credit Agreement provided for an unsecured revolving credit facility of up to $75.0 million, including a multi-currency sub-facility that gives the Company the ability to borrow up to $25.0 million that may be specified in foreign currencies subject to the terms and conditions of the 2014 Credit Agreement.
On March 25, 2015, we and certain of our subsidiaries, as guarantors, entered into an amendment to the 2014 Credit Agreement with Jefferies Finance LLC, as administrative agent. The amendment reduced our unsecured revolving line of credit to $65.0 million (from $75.0 million) and increased an additional senior secured indebtedness basket to the greater of $20.0 million or 2.75% of consolidated total assets (as defined in the 2014 Credit Agreement) (from $15.0 million or 2% of consolidated total assets). In addition, the March 25, 2015 amendment revised certain definitions and provisions relating to limitations on indebtedness, investments, dispositions, fundamental changes and burdensome agreements to allow certain of our foreign subsidiaries, which opt to become guarantors of our obligations under the 2014 Credit Agreement, to be treated as domestic subsidiaries for purposes of those provisions.
On December 29, 2015, we and certain of our subsidiaries, as guarantors, entered into an amendment to the 2014 Credit Agreement, which temporarily increased our unsecured revolving line of credit to $75.0 million, an increase of $15.0 million ($5.0 million on December 29, 2015 and $10.0 million on January 4, 2016). Once we received the proceeds from the 2016‑1 Securitization Facility, we repaid the outstanding balance on the revolving line of credit in full and, in accordance with the terms of the amendment, the revolving commitment amount was reduced to $40.0 million.
On June 30, 2016, we and certain of our subsidiaries, as guarantors, entered into an amendment to the 2014 Credit Agreement, which increased the maximum allowable leverage ratio (as defined in the 2014 Credit Agreement) for the fiscal quarter ended June 30, 2016 to 4.00 to 1.00 (from 3.00 to 1.00) and for the fiscal quarters ended September 30, 2016 and December 31, 2016 to 3.50 to 1.00 (in each case, from 3.00 to 1.00).
On September 30, 2016, we and certain of our subsidiaries, as guarantors, entered into an amendment to the 2014 Credit Agreement, which increased the maximum allowable leverage ratio (as defined in the 2014 Credit Agreement) for the fiscal quarters ended September 30, 2016 and thereafter to 4.25 to 1.00 (from 3.50 to 1.00) and decreased our unsecured revolving line of credit to $35.0 million.
Our 2014 Credit Agreement was terminated on June 30, 2017.
9.75% Senior Unsecured Notes Due 2021
On May 30, 2014, we issued and sold the 2021 Senior Notes . The 2021 Senior Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States pursuant to Regulation S under the Securities Act.
73
We used all of the net proceeds, or $479.0 million, of the 2021 Senior Notes offering to repay all of our intercompany indebtedness due to Cash America, which was $361.4 million as of May 30, 2014, and the remaining net proceeds were used to pay a significant portion of the $122.4 million in cash dividends to Cash America, of which $120.7 million was paid on May 30, 2014 and $1.7 million was paid on June 30, 2014.
The 2021 Senior Notes are governed by an indenture (“the 2021 Senior Notes Indenture”), dated May 30, 2014, between us, our domestic subsidiaries, as Guarantors, and the trustee. The 2021 Senior Notes bear interest at a rate of 9.75% per year on the principal amount of the 2021 Senior Notes , payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2014. The 2021 Senior Notes will mature on June 1, 2021. The 2021 Senior Notes are senior unsecured debt obligations of Enova and are unconditionally guaranteed by our domestic subsidiaries.
The 2021 Senior Notes Indenture contains certain covenants that, among other things, limit our and certain of our subsidiaries’ ability to incur additional debt, acquire or create new subsidiaries, create liens, engage in certain transactions with affiliates and consolidate or merge with or into other companies.
The 2021 Senior Notes Indenture provides for customary events of default, including nonpayment of interest and principal when due and failure to comply with covenants or other agreements in the 2021 Senior Notes Indenture.
Cash Flows
Our cash flows and other key indicators of liquidity are summarized as follows (dollars in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Cash flows provided by operating activities |
|
$ |
447,173 |
|
|
$ |
393,373 |
|
|
$ |
283,921 |
|
Cash flows used in investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables |
|
|
(509,845 |
) |
|
|
(450,149 |
) |
|
|
(322,811 |
) |
Change in restricted cash |
|
|
(2,565 |
) |
|
|
(20,126 |
) |
|
|
— |
|
Acquisitions |
|
|
— |
|
|
|
— |
|
|
|
(17,735 |
) |
Purchases of property and equipment |
|
|
(16,528 |
) |
|
|
(14,396 |
) |
|
|
(32,241 |
) |
Investment in unconsolidated investee |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other investing activities |
|
|
1,805 |
|
|
|
95 |
|
|
|
618 |
|
Total cash flows used in investing activities |
|
|
(527,133 |
) |
|
|
(484,576 |
) |
|
|
(372,169 |
) |
Cash flows provided by financing activities |
|
|
104,582 |
|
|
|
99,880 |
|
|
|
56,617 |
|
Total debt to Adjusted EBITDA (a) |
|
|
5.0 |
x |
|
|
4.6 |
x |
|
|
3.5 |
x |
(a) |
Total debt to Adjusted EBITDA, a non-GAAP measure, is calculated using Adjusted EBITDA for the twelve months ended for the respective period indicated. See “—Non-GAAP Disclosure—Adjusted EBITDA.” |
Cash Flows from Operating Activities
2017 comparison to 2016
Net cash provided by operating activities increased $53.8 million, or 13.7%, to $447.2 million for 2017 from $393.4 million for 2016. The increase was primarily driven by a $68.6 million increase in cost of revenue, a non-cash expense, partially offset by a $5.4 million decrease in net income, which reflects $22.9 million of losses on early extinguishment of debt in 2017.
Other significant changes in net cash provided by operating activities for 2017 compared to 2016 included cash flows from the following activities:
|
• |
changes in accounts payable and accrued expenses resulted in a decrease of $13.8 million due primarily to changes in accrued rent and accrued interest and |
|
• |
changes in current income taxes payable resulted in a $10.2 million decrease in cash provided by operating activities, due primarily to less estimated tax paid at both a federal and state level, and utilization of 2016 tax return carryforwards. |
2016 comparison to 2015
Net cash provided by operating activities increased $109.5 million, or 38.6%, to $393.4 million for 2016 from $283.9 million for 2015. The increase was primarily driven by a $111.1 million increase in cost of revenue, a non-cash expense, partially offset by a $9.4 million decrease in net income.
74
Other significant changes in net cash provided by operating activities for 2016 compared to 2015 included cash flows from the following activities:
|
• |
Changes in current income taxes payable resulted in an $18.1 million increase in cash provided by operating activities, due primarily to 2015 tax overpayments being utilized to offset 2016 estimated tax liabilities, as well as 2016 estimated tax payments more closely matching expected tax liabilities for the period ; |
|
• |
changes in finance and service charges on loans and finance receivables resulted in a decrease of $15.8 million due primarily to strong line of credit account and installment originations in 2016 ; an d |
|
• |
changes in other receivables and prepaid expenses resulted in a $4.6 million increase in net cash provided by operating activities, due primarily to lower prepaid expenses in 2016 compared to 2015. |
We believe cash flows from operations and available cash balances and borrowings under our 2017 Credit Agreement and our Securitization Facilities will be sufficient to fund our future operating liquidity needs.
Cash Flows from Investing Activities
2017 comparison to 2016
Net cash used in investing activities increased $42.6 million, or 8.8%, for 2017 compared to 2016, primarily due to a $59.7 million increase in net cash invested in loans and finance receivables, due to a 8.5% increase in loans and finance receivables originated or purchased, a $17.5 million decrease in the amount invested in restricted cash resulting from activity related to the Securitization Facilities and a. $2.1 million increase in property and equipment expenditures.
2016 comparison to 2015
Net cash used in investing activities increased $112.4 million, or 30.2%, for 2016 compared to 2015, primarily due to a $127.3 million increase in net cash invested in loans and finance receivables, due to a 11.6% increase in loans and finance receivables originated or purchased as well as a $20.1 million increase in the restricted cash balance resulting from activity related to the 2016-1 Securitization Facility. These increases were partially offset by a $17.8 million decrease in property and equipment expenditures to $14.4 million in 2016 compared to $32.2 million in 2015, primarily related to the finish out and relocation of our headquarters in 2015, and $17.7 million in payments in 2015 related to the acquisition of certain assets of a company operating as The Business Backer.
Cash Flows from Financing Activities
2017 comparison to 2016
Net cash provided by financing activities in 2017 was $104.6 million compared to net cash used in financing activities of $99.9 million in 2016.
Cash flows provided by financing activities for 2017 primarily reflects $95.0 million in net borrowings under our senior notes facilities, $46.0 million in net borrowings under our securitization facilities, a $16.7 million penalty paid in connection with the early payment of our 2021 Senior Notes and the 2016-1 Securitization Facility and $14.7 million of debt issuance costs paid in connection with the 2017 Credit Agreement, 2024 Senior Notes and the 2017 Securitization Facility. Additionally, in 2017 we announced the Board of Directors had authorized a share repurchase program for the repurchase of up to $25.0 million of our common stock through December 31, 2019 (the “2017 Authorization”). During 2017, we paid $3.5 million to repurchase common stock under the 2017 Authorization.
2016 comparison to 2015
Net cash provided by financing activities in 2016 was $99.9 million compared to net cash used in financing activities of $56.6 million in 2015.
Cash flows provided by financing activities for 2016 primarily reflects $165.4 million in net borrowings under our securitization facilities, partially offset by $58.4 million of net repayments under our unsecured revolving line of credit under the 2014 Credit Agreement and $6.7 million of debt issuance costs primarily paid in connection with the consumer loan securitization financing transactions.
75
Contractual Obligations and Commitments
The following table summarizes our contractual obligations at December 31, 2017 , and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
Thereafter |
|
|
Securitizations |
|
|
Total |
|
||||||||
Long-term debt (a) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
345,000 |
|
|
$ |
— |
|
|
$ |
250,000 |
|
|
$ |
— |
|
|
$ |
595,000 |
|
Interest on long-term debt (b) |
|
|
54,888 |
|
|
|
54,888 |
|
|
|
54,888 |
|
|
|
38,069 |
|
|
|
21,250 |
|
|
|
42,500 |
|
|
|
— |
|
|
|
266,483 |
|
Securitization facilities (c) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
211,406 |
|
|
|
211,406 |
|
Non-cancelable leases (d) |
|
|
6,020 |
|
|
|
6,875 |
|
|
|
6,719 |
|
|
|
6,922 |
|
|
|
6,970 |
|
|
|
30,378 |
|
|
|
— |
|
|
|
63,884 |
|
Other liabilities (e) |
|
|
3,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,000 |
|
Total |
|
$ |
63,908 |
|
|
$ |
61,763 |
|
|
$ |
61,607 |
|
|
$ |
389,991 |
|
|
$ |
28,220 |
|
|
$ |
322,878 |
|
|
$ |
211,406 |
|
|
$ |
1,139,773 |
|
(a) |
Represents obligations under the 2021 Senior Notes and 2024 Senior Notes. See “—Liquidity and Capital Resources—8.50% Senior Unsecured Notes Due 2024” and “—Liquidity and Capital Resources—9.75% Senior Unsecured Notes Due 2021.” |
(b) |
Represents cash payments for interest on the 2021 Senior Notes and 2024 Senior Notes. See “—Liquidity and Capital Resources—8.50% Senior Unsecured Notes Due 2024” and “—Liquidity and Capital Resources—9.75% Senior Unsecured Notes Due 2021 . |
(d) |
Represents obligations due under long-term operating leases. See Note 10 in the Notes to Consolidated Financial Statements in Part II, Item 8 “Financial Statements and Supplementary Data” in this report for further discussion of our operating lease obligations. |
(e) |
Represents obligations under a promissory note issued in conjunction with our acquisition of certain assets of a company operating as The Business Backer. See Note 2 in the Notes to Consolidated Financial Statements in Part II, Item 8 “Financial Statements and Supplementary Data” in this report for further discussion of our acquisition. |
Off-Balance Sheet Arrangements
In certain markets, we arrange for consumers to obtain consumer loan products from independent third-party lenders through our CSO programs. For consumer loan products originated by third-party lenders under the CSO programs, each lender is responsible for providing the criteria by which the customer’s application is underwritten and, if approved, determining the amount of the consumer loan. We are responsible for assessing whether or not we will guarantee such loan. When a customer executes an agreement with us under our CSO programs, we agree, for a fee payable to us by the customer, to provide certain services to the customer, one of which is to guarantee the customer’s obligation to repay the loan received by the customer from the third-party lender if the customer fails to do so. The guarantee represents an obligation to purchase specific loans if they go into default, which generally occurs after one payment is missed. As of December 31, 2017 and 2016, the outstanding amount of active consumer loans originated by third-party lenders under the CSO programs was $34.1 million and $32.2 million, respectively, which were guaranteed by us.
Market risks relating to our operations result primarily from changes in foreign currency exchange rates, specifically for our U.K. and Brazil operations. The net assets of our U.K. and Brazil operations are exposed to foreign currency translation gains and losses, which are generally included as a component of accumulated other comprehensive income or loss in shareholders’ equity . Currently, we periodically use forward currency exchange contracts to minimize risk of foreign currency exchange rate fluctuations for certain transactions in Brazil. Our forward currency exchange contracts are non-designated derivatives. Any gain or loss resulting from these contracts is recorded as income or loss and is included in “Foreign currency transaction gain (loss), net” in our consolidated statements of income. The following table sets forth, by each foreign currency hedged, the notional amounts of forward currency exchange contracts as of December 31, 2017, the total gains or losses recorded in 2017, and sensitivity analysis of hypothetical 10% declines in the exchange rates of the currencies (U.S. dollars in thousands).
|
|
Notional amount of outstanding contracts as of December 31, 2017 |
|
|
Gain/(loss) recorded in 2017 (a) |
|
|
Sensitivity Analysis (b) |
|
|||
Brazilian Real |
|
$ |
12,039 |
|
|
$ |
(55 |
) |
|
$ |
(954 |
) |
Total |
|
$ |
12,039 |
|
|
$ |
(55 |
) |
|
$ |
(954 |
) |
(a) |
The gains (losses) on these derivatives substantially offset the (losses) gains on the hedged portion of international intercompany balances. |
(b) |
Represents the decrease to net income attributable to us due to a hypothetical 10% weakening of the foreign currency against the U.S. dollar. |
76
77
R EPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Enova International, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Enova International, Inc. and its subsidiaries as of December 31, 2017 and December 31, 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and December 31, 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting, appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Chicago, IL
February 26, 2018
We have served as the Company’s auditor since 2011.
78
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
|
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
68,684 |
|
|
$ |
39,934 |
|
Restricted cash and cash equivalents (includes restricted cash of consolidated VIEs of $21,696 and $19,468 as of December 31, 2017 and 2016, respectively) |
|
|
29,460 |
|
|
|
26,306 |
|
Loans and finance receivables, net (includes loans of consolidated VIEs of $282,724 and $234,497 and allowance for losses of $22,728 and $17,731 as of December 31, 2017 and 2016, respectively) |
|
|
704,705 |
|
|
|
561,550 |
|
Income taxes receivable |
|
|
4,092 |
|
|
|
— |
|
Other receivables and prepaid expenses |
|
|
23,817 |
|
|
|
19,524 |
|
Property and equipment, net |
|
|
48,525 |
|
|
|
47,100 |
|
Goodwill |
|
|
267,015 |
|
|
|
267,010 |
|
Intangible assets, net |
|
|
4,325 |
|
|
|
5,404 |
|
Other assets |
|
|
8,837 |
|
|
|
11,051 |
|
Total assets |
|
$ |
1,159,460 |
|
|
$ |
977,879 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
77,123 |
|
|
$ |
71,671 |
|
Income taxes currently payable |
|
|
— |
|
|
|
282 |
|
Deferred tax liabilities, net |
|
|
12,108 |
|
|
|
14,316 |
|
Long-term debt (includes long-term debt of consolidated VIEs of $211,406 and $165,419 and debt issuance costs of $3,271 and $1,869 as of December 31, 2017 and 2016, respectively) |
|
|
788,542 |
|
|
|
649,911 |
|
Total liabilities |
|
|
877,773 |
|
|
|
736,180 |
|
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock, $0.00001 par value, 250,000,000 shares authorized, 33,932,673 and 33,364,525 shares issued and 33,504,555 and 33,293,100 outstanding as of December 31, 2017 and 2016, respectively |
|
|
— |
|
|
|
— |
|
Preferred stock, $0.00001 par value, 25,000,000 shares authorized, no shares issued and outstanding |
|
|
— |
|
|
|
— |
|
Additional paid in capital |
|
|
29,781 |
|
|
|
18,446 |
|
Retained earnings |
|
|
264,695 |
|
|
|
235,455 |
|
Accumulated other comprehensive loss |
|
|
(7,086 |
) |
|
|
(11,578 |
) |
Treasury stock, at cost (428,118 and 71,425 shares as of December 31, 2017 and 2016, respectively) |
|
|
(5,703 |
) |
|
|
(624 |
) |
Total stockholders' equity |
|
|
281,687 |
|
|
|
241,699 |
|
Total liabilities and stockholders' equity |
|
$ |
1,159,460 |
|
|
$ |
977,879 |
|
See Notes to Consolidated Financial Statements
79
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Revenue |
|
$ |
843,741 |
|
|
$ |
745,569 |
|
|
$ |
652,600 |
|
Cost of Revenue |
|
|
396,632 |
|
|
|
327,966 |
|
|
|
216,858 |
|
Gross Profit |
|
|
447,109 |
|
|
|
417,603 |
|
|
|
435,742 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
101,429 |
|
|
|
97,404 |
|
|
|
116,882 |
|
Operations and technology |
|
|
95,155 |
|
|
|
85,202 |
|
|
|
74,012 |
|
General and administrative |
|
|
101,723 |
|
|
|
97,956 |
|
|
|
102,073 |
|
Depreciation and amortization |
|
|
14,388 |
|
|
|
15,564 |
|
|
|
18,388 |
|
Total Expenses |
|
|
312,695 |
|
|
|
296,126 |
|
|
|
311,355 |
|
Income from Operations |
|
|
134,414 |
|
|
|
121,477 |
|
|
|
124,387 |
|
Interest expense, net |
|
|
(74,003 |
) |
|
|
(65,603 |
) |
|
|
(52,883 |
) |
Foreign currency transaction gain (loss), net |
|
|
384 |
|
|
|
1,562 |
|
|
|
(985 |
) |
Loss on early extinguishment of debt |
|
|
(22,895 |
) |
|
|
— |
|
|
|
— |
|
Income before Income Taxes |
|
|
37,900 |
|
|
|
57,436 |
|
|
|
70,519 |
|
Provision for income taxes |
|
|
8,660 |
|
|
|
22,834 |
|
|
|
26,527 |
|
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.87 |
|
|
$ |
1.04 |
|
|
$ |
1.33 |
|
Diluted |
|
$ |
0.86 |
|
|
$ |
1.03 |
|
|
$ |
1.33 |
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
33,523 |
|
|
|
33,192 |
|
|
|
33,006 |
|
Diluted |
|
|
34,132 |
|
|
|
33,462 |
|
|
|
33,026 |
|
See Notes to Consolidated Financial Statements
80
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
Other comprehensive gain (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss) (1) |
|
|
4,492 |
|
|
|
(6,956 |
) |
|
|
(1,451 |
) |
Total other comprehensive gain (loss), net of tax |
|
|
4,492 |
|
|
|
(6,956 |
) |
|
|
(1,451 |
) |
Comprehensive Income |
|
$ |
33,732 |
|
|
$ |
27,646 |
|
|
$ |
42,541 |
|
(1) |
Net of tax (provision) benefit of $(2,517), $3,939 and $592 for the years ended December 31, 2017, 2016 and 2015, respectively. |
See Notes to Consolidated Financial Statements
81
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Treasury Stock, |
|
|
Total |
|
||||||||
|
|
Common Stock |
|
|
Paid in |
|
|
Retained |
|
|
Comprehensive |
|
|
at cost |
|
|
Stockholders' |
|
||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
(Loss) Income |
|
|
Shares |
|
|
Amount |
|
|
Equity |
|
||||||||
Balance at December 31, 2014 |
|
|
33,000 |
|
|
$ |
— |
|
|
$ |
294 |
|
|
$ |
156,861 |
|
|
$ |
(3,171 |
) |
|
|
— |
|
|
$ |
— |
|
|
$ |
153,984 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
9,630 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,630 |
|
Shares issued under stock-based plans |
|
|
151 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
43,992 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
43,992 |
|
Foreign currency translation loss, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,451 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,451 |
) |
Purchases of treasury shares, at cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(29 |
) |
|
|
(187 |
) |
|
|
(187 |
) |
Balance at December 31, 2015 |
|
|
33,151 |
|
|
$ |
— |
|
|
$ |
9,924 |
|
|
$ |
200,853 |
|
|
$ |
(4,622 |
) |
|
|
(29 |
) |
|
$ |
(187 |
) |
|
$ |
205,968 |
|
Stock-based compensation expense |
|
|
— |
|
|
$ |
— |
|
|
|
8,522 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,522 |
|
Shares issued under stock-based plans |
|
|
214 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
34,602 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
34,602 |
|
Foreign currency translation loss, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,956 |
) |
|
|
— |
|
|
|
— |
|
|
|
(6,956 |
) |
Purchases of treasury shares, at cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(42 |
) |
|
|
(437 |
) |
|
|
(437 |
) |
Balance at December 31, 2016 |
|
|
33,365 |
|
|
$ |
— |
|
|
$ |
18,446 |
|
|
$ |
235,455 |
|
|
$ |
(11,578 |
) |
|
|
(71 |
) |
|
$ |
(624 |
) |
|
$ |
241,699 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
11,307 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,307 |
|
Shares issued under stock-based plans |
|
|
568 |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29,240 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29,240 |
|
Foreign currency translation gain, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,492 |
|
|
|
— |
|
|
|
— |
|
|
|
4,492 |
|
Purchases of treasury shares, at cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(357 |
) |
|
|
(5,079 |
) |
|
|
(5,079 |
) |
Balance at December 31, 2017 |
|
|
33,933 |
|
|
$ |
— |
|
|
$ |
29,781 |
|
|
$ |
264,695 |
|
|
$ |
(7,086 |
) |
|
|
(428 |
) |
|
$ |
(5,703 |
) |
|
$ |
281,687 |
|
See Notes to Consolidated Financial Statements
82
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
14,388 |
|
|
|
15,564 |
|
|
|
18,388 |
|
Amortization of deferred loan costs and debt discount |
|
|
7,196 |
|
|
|
6,913 |
|
|
|
3,371 |
|
Cost of revenue |
|
|
396,632 |
|
|
|
327,966 |
|
|
|
216,858 |
|
Stock-based compensation expense |
|
|
11,307 |
|
|
|
8,522 |
|
|
|
9,630 |
|
Fair value changes in contingent purchase consideration |
|
|
2,358 |
|
|
|
3,300 |
|
|
|
— |
|
Loss on early extinguishment of debt |
|
|
22,895 |
|
|
|
— |
|
|
|
— |
|
Deferred income taxes, net |
|
|
(4,742 |
) |
|
|
(2,201 |
) |
|
|
(1,399 |
) |
Other |
|
|
(55 |
) |
|
|
(151 |
) |
|
|
984 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Finance and service charges on loans and finance receivables |
|
|
(19,056 |
) |
|
|
(16,232 |
) |
|
|
(467 |
) |
Other receivables and prepaid expenses |
|
|
(3,310 |
) |
|
|
843 |
|
|
|
(3,804 |
) |
Accounts payable and accrued expenses |
|
|
(5,306 |
) |
|
|
8,462 |
|
|
|
8,673 |
|
Current income taxes payable |
|
|
(4,374 |
) |
|
|
5,785 |
|
|
|
(12,305 |
) |
Net cash provided by operating activities |
|
|
447,173 |
|
|
|
393,373 |
|
|
|
283,921 |
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables originated or acquired |
|
|
(1,419,399 |
) |
|
|
(1,308,197 |
) |
|
|
(1,172,169 |
) |
Loans and finance receivables repaid |
|
|
909,554 |
|
|
|
858,048 |
|
|
|
849,358 |
|
Change in restricted cash |
|
|
(2,565 |
) |
|
|
(20,126 |
) |
|
|
— |
|
Acquisitions, net of cash acquired |
|
|
— |
|
|
|
— |
|
|
|
(17,735 |
) |
Purchases of property and equipment |
|
|
(16,528 |
) |
|
|
(14,396 |
) |
|
|
(32,241 |
) |
Other investing activities |
|
|
1,805 |
|
|
|
95 |
|
|
|
618 |
|
Net cash used in investing activities |
|
|
(527,133 |
) |
|
|
(484,576 |
) |
|
|
(372,169 |
) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under revolving line of credit |
|
|
30,000 |
|
|
|
58,400 |
|
|
|
63,400 |
|
Repayments under revolving line of credit |
|
|
(30,000 |
) |
|
|
(116,800 |
) |
|
|
(5,000 |
) |
Borrowings under securitization facility |
|
|
359,842 |
|
|
|
280,075 |
|
|
|
— |
|
Repayments under securitization facility |
|
|
(313,853 |
) |
|
|
(114,656 |
) |
|
|
— |
|
Issuance of senior notes |
|
|
250,000 |
|
|
|
— |
|
|
|
— |
|
Repayments of senior notes |
|
|
(155,000 |
) |
|
|
— |
|
|
|
— |
|
Debt issuance costs paid |
|
|
(14,662 |
) |
|
|
(6,702 |
) |
|
|
(1,596 |
) |
Debt prepayment penalty paid |
|
|
(16,694 |
) |
|
|
— |
|
|
|
— |
|
Proceeds from exercise of stock options |
|
|
28 |
|
|
|
— |
|
|
|
— |
|
Treasury shares purchased |
|
|
(5,079 |
) |
|
|
(437 |
) |
|
|
(187 |
) |
Net cash provided by financing activities |
|
|
104,582 |
|
|
|
99,880 |
|
|
|
56,617 |
|
Effect of exchange rates on cash |
|
|
4,128 |
|
|
|
(10,809 |
) |
|
|
(1,409 |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
28,750 |
|
|
|
(2,132 |
) |
|
|
(33,040 |
) |
Cash and cash equivalents at beginning of year |
|
|
39,934 |
|
|
|
42,066 |
|
|
|
75,106 |
|
Cash and cash equivalents at end of period |
|
$ |
68,684 |
|
|
$ |
39,934 |
|
|
$ |
42,066 |
|
See Notes to Consolidated Financial Statements
83
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Nature of the Company
Enova International, Inc., formed on September 7, 2011, is an independent, publicly traded company, and the Company’s shares of common stock are listed on the New York Stock Exchange under the symbol “ENVA.” The Company operates an internet-based lending platform to serve customers in need of cash to fulfill their financial responsibilities. Through a network of direct and indirect marketing channels, the Company offers funds to its customers through a variety of unsecured loan and finance receivable products. The business is operated primarily through the internet to provide convenient, fully-automated financial solutions to its customers. As of December 31, 2017, the Company offered or arranged loans to consumers under the names “CashNetUSA” and “NetCredit” in 33 states in the United States, under the names “QuickQuid,” “Pounds to Pocket” and “On Stride Financial” in the United Kingdom, and under the name “Simplic” in Brazil. The Company also offered financing to small businesses in all 50 states and Washington D.C. in the United States under the names “Headway Capital” and “The Business Backer.” During 2016, the Company also launched “Enova Decisions” its analytics as a service business that leverages existing tools and technologies in order to help companies make decisions about their own customers.
The Company originates, guarantees or purchases consumer loans. Consumer loans provide customers with cash in their bank account, typically in exchange for an obligation to repay the amount advanced plus fees and/or interest. Consumer loans include short-term loans, line of credit accounts and installment loans. The Company provides financing to small businesses through either a line of credit account, installment loan or a receivables purchase agreement product (“RPAs”). RPAs represent a right to receive future receivables from a small business. Small businesses receive funds in exchange for a portion of the business’ future receivables at an agreed upon discount. In contrast, lending is a commitment to repay principal and interest. “Loans and finance receivables” include consumer loans, small business loans and RPAs.
Short-term loans include unsecured short-term loans written by the Company or by a third-party lender through the Company’s credit services organization and credit access business programs (“CSO programs” as further described below) that the Company guarantees. Line of credit accounts include draws made through the Company’s line of credit product. Installment loans are longer-term multi-payment loans that generally require the outstanding principal balance to be paid down in multiple installments and are written by the Company, by a third-party lender through the CSO programs or by a bank partner.
Through the Company’s CSO programs, the Company provides services related to a third-party lender’s consumer loan products in some markets by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under the CSO programs include credit-related services such as arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents (“CSO loans”). Under the CSO programs, the Company guarantees consumer loan payment obligations to the third-party lender in the event that the customer defaults on the loan. CSO loans are not included in the Company’s financial statements, but the Company has established a liability for the estimated losses related to the guarantee on these loans in its consolidated balance sheets.
The Company operates a program with a bank to provide technology, marketing services, and loan servicing for near-prime unsecured consumer installment loans. Under the program, the Company receives marketing and servicing fees while the bank receives an origination fee. The bank has the ability to sell the loans it originates to the Company. The Company does not guarantee the performance of the loans originated by the bank.
Basis of Presentation
The consolidated financial statements of the Company reflect the historical results of operations and cash flows of the Company during each respective period. The financial statements include goodwill and intangible assets arising from businesses previously acquired. The financial information included herein may not be indicative of the consolidated financial position, operating results, changes in stockholders’ equity and cash flows of the Company in the future. Intercompany transactions are eliminated.
The Company consolidates any variable interest entity (“VIE”) where it has determined the Company is the primary beneficiary. The primary beneficiary is the entity which has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.
84
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for losses on loans and finance receivables, goodwill, long-lived and intangible assets, income taxes, contingencies and litigation. Management bases its estimates on historical experience, empirical data and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.
Out-of-Period Adjustment
In a review of its revenue recognition policy during 2015, the Company determined that certain fees on its line of credit product should be deferred over the period the draw is outstanding rather than recognized as revenue when assessed. The Company recorded a $2.5 million reduction to revenue in the fourth quarter of 2015 as an out-of-period adjustment. This adjustment included a $2.8 million reduction of revenue associated with periods prior to 2015. The Company believes this adjustment was not material to any of the prior years’ financial statements.
Foreign Currency Translations
The functional currencies for the Company’s subsidiaries that serve or have served residents of the United Kingdom, Australia, Canada and Brazil are the British pound, the Australian dollar, the Canadian dollar and the Brazilian real, respectively. The assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, and the resulting adjustments are recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) as a separate component of stockholders’ equity. Revenue and expenses are translated at the monthly average exchange rates occurring during each period.
Cash and Cash Equivalents
The Company considers deposits in banks and short-term investments with original maturities of 90 days or less as cash and cash equivalents.
Restricted Cash
The Company includes funds to be used for future debt payments relating to its securitization transactions and escrow deposits in restricted cash and cash equivalents.
Revenue Recognition
The Company recognizes revenue based on the financing products and services it offers and on loans it acquires. “Revenue” in the consolidated statements of income includes: interest income, finance charges, fees for services provided through the Company’s credit services organization and credit access business programs (“ CSO programs”) (“CSO fees”), revenue on RPAs, draw fees, minimum billing fees, purchase fees, late fees and non-sufficient funds fees as permitted by applicable laws and pursuant to the agreement with the customer. For short-term loans that the Company offers, interest and finance charges are recognized on an effective yield basis over the term of the loan. For line of credit accounts, interest is recognized over the reporting period based upon the balance outstanding and the contractual interest rate, draw fees are recognized on an effective yield basis over the estimated outstanding period of the draw, and minimum billing fees are recognized when assessed to the customer. For installment loans, interest is recognized on an effective yield basis over the term of the loan. For RPAs, revenue and purchase fees are recognized on an effective yield basis over the projected delivery term of the agreements and fees are recognized when assessed. CSO fees are recognized on an effective yield basis over the term of the loan. Late and nonsufficient funds fees are recognized when assessed to the customer. Direct costs associated with originating loans or RPAs and purchasing installment loans, such as third-party customer acquisition costs or purchase premiums, are deferred and amortized against revenue on an effective yield basis over the term of the loan or the projected delivery term of the finance receivable. Short-term loans, line of credit accounts, installment loans, RPAs, unpaid and accrued interest, fees and revenue and deferred origination costs are included in “Loans and finance receivables, net” in the consolidated balance sheets.
85
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Current and Delinquent Loans and Finance Receivables
The Company classifies its loans and finance receivables as either current or delinquent. Short-term loans are considered delinquent when payment of an amount due is not made as of the due date. If a line of credit account or installment loan customer misses one payment, that payment is considered delinquent and the balance of the loan is considered current. If a line of credit account or installment loan customer does not make two consecutive payments, the entire account or loan is classified as delinquent and placed on a non-accrual status. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.
Where permitted by law and as long as a loan is not considered delinquent, a customer may choose to renew a short-term loan or installment loan or extend the due date on a short-term loan. In order to renew or extend a short-term loan, a customer must agree to pay the current finance charge for the right to make a later payment of the outstanding principal balance plus an additional finance charge. In order to renew an installment loan, the customer enters into a new installment loan contract and agrees to pay the principal balance and finance charge in accordance with the terms of the new loan contract. If a short-term loan is renewed, but the customer fails to pay that loan’s current finance charge as of the due date, the unpaid finance charge is classified as delinquent.
The Company does not accrue interest on delinquent loans and does not resume accrual of interest on a delinquent loan unless it is returned to current status. In addition, delinquent loans generally may not be renewed, and if, during its attempt to collect on a delinquent loan, the Company allows additional time for payment through a payment plan or a promise to pay, it is still considered delinquent. Generally, all payments received are first applied against accrued but unpaid interest and fees and then against the principal balance of the loan.
Allowance and Liability for Estimated Losses on Loans and Finance Receivables
The Company monitors the performance of its loan and finance receivable portfolios and maintains either an allowance or liability for estimated losses on loans and finance receivables (including revenue, fees and/or interest) at a level estimated to be adequate to absorb losses inherent in the portfolio. The allowance for losses on the Company’s owned loans and finance receivables reduces the outstanding loans and finance receivables balance in the consolidated balance sheets. The liability for estimated losses related to loans guaranteed under its CSO programs is initially recorded at fair value and is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
In determining the allowance or liability for estimated losses on loans and finance receivables, the Company applies a documented systematic methodology. In calculating the allowance or liability for receivable losses, outstanding loans and finance receivables are divided into discrete groups of short-term loans, line of credit accounts, installment loans and RPAs and are analyzed as current or delinquent. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as a “Cost of revenue” in the consolidated statements of income.
The allowance or liability for short-term loans classified as current is based on historical loss rates adjusted for recent default trends for current loans. For delinquent short-term loans, the allowance or liability is based on a six-month rolling average of loss rates by stage of collection. For line of credit account, installment loan and RPA portfolios, the Company generally uses either a migration analysis or roll-rate based methodology to estimate losses inherent in the portfolio. The allowance or liability calculation under the migration analysis and roll-rate methodology is based on historical charge-off experience and the loss emergence period, which represents the average amount of time between the first occurrence of a loss event and the charge-off of a loan or RPA. The factors the Company considers to assess the adequacy of the allowance or liability include past due performance, historical behavior of monthly vintages, underwriting changes, delinquency status, payment history and recency factors.
The Company fully reserves for loans and finance receivables once the receivable or a portion of the receivable has been classified as delinquent for 60 consecutive days and generally charges off loans and finance receivables between 60 – 65 days delinquent. If a loan or finance receivable is deemed uncollectible before it is fully reserved, it is charged off at that point. Loans and finance receivables classified as delinquent generally have an age of one to 64 days from the date any portion of the receivable became delinquent, as defined above. Recoveries on loans and finance receivables previously charged to the allowance are credited to the allowance when collected.
Property and Equipment
Property and equipment is recorded at cost. The cost of property retired or sold and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the consolidated statements of income. Costs associated with repair
86
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and maintenance activities are expensed as incurred. Depreciation expense is generally provided on a straight-line basis, using the following estimated useful lives:
Computer hardware and software |
|
3 to 5 years |
Furniture, fixtures and equipment |
|
3 to 7 years |
Leasehold improvements (1) |
|
3 to 10 years |
(1) |
Leasehold improvements are depreciated over the lesser of the estimated useful life, remaining lease term, or 10 years. |
Software Development Costs
The Company applies Accounting Standards Codification (“ASC”) 350-40, Internal Use Software (“ASC 350-40”), to its software purchase and development activities. Under ASC 350-40, eligible internal and external costs incurred for the development of computer software applications, as well as for upgrades and enhancements that result in additional functionality of the applications, are capitalized to “Property and equipment” on the consolidated balance sheets. Internal and external training and maintenance costs are charged to expense as incurred or over the related service period. When a software application is placed in service, the Company begins amortizing the related capitalized software costs using the straight-line method based on its estimated useful life, which currently ranges from one to five years.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), the Company tests goodwill and intangible assets with an indefinite life for potential impairment annually as of June 30 and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
The Company first assesses qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In assessing the qualitative factors, management considers relevant events and circumstances including but not limited to macroeconomic conditions, industry and market environment, overall financial performance of the Company, cash flow from operating activities, market capitalization and stock price. If the Company determines that the two-step quantitative impairment test is required, management uses the income approach to complete its annual goodwill assessment. The income approach uses future cash flows and estimated terminal values for the Company that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint. The Company completed its annual assessment of goodwill as of June 30, 2017 based on qualitative factors and determined that the fair value of its goodwill exceeded carrying value, and, as a result, no impairment existed at that date. Although no goodwill impairment was noted, there can be no assurances that future goodwill impairments will not occur.
As of December 31, 2017, the Company had $267.0 million of goodwill, all of which is expected to be deductible for tax purposes.
Long-Lived Assets Other Than Goodwill
An evaluation of the recoverability of property and equipment and intangible assets subject to amortization is performed whenever the facts and circumstances indicate that the carrying value may be impaired. An impairment loss is recognized if the future undiscounted cash flows associated with the asset and the estimated fair value of the asset are less than the asset’s corresponding carrying value. The amount of the impairment loss, if any, is the excess of the asset’s carrying value over its estimated fair value.
The Company amortizes intangible assets subject to amortization on the basis of their expected periods of benefit, generally three to 20 years. The costs of start-up activities and organization costs are charged to expense as incurred.
Hedging and Derivatives Activity
The Company periodically uses foreign currency forward contracts, which are considered derivative instruments, to minimize the effects of foreign currency risk in Brazil and the United Kingdom related to the operations of the Company. The forward contracts are not designated as hedges as defined by ASC 815, Derivatives and Hedging; therefore, any changes in the fair value of the forward contracts are recognized in “Foreign currency transaction gain (loss), net” in the consolidated statements of income. See Note 13.
87
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investment in Unconsolidated Investee
The Company accounts for its investments in unconsolidated investees in accordance with ASC 325, Investments—Other Investments are recorded on a cost basis. The Company evaluates investments for impairment if an event occurs or circumstances change that would more likely than not reduce the fair value of the investment below carrying value. If an impairment of an investment is determined to be other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary-impairment is identified. The Company’s investments in unconsolidated investees are held in “Other assets” on the consolidated balance sheets.
As of December 31, 2017, the Company owned a $6.7 million investment in the preferred stock of a privately-held developing financial services entity. The Company’s impairment evaluation of this investment as of December 31, 2017 determined that an impairment loss was not probable as of that date.
Marketing Expenses
Marketing expenses consist of digital costs, lead purchase costs and offline marketing costs such as television and direct mail advertising. Marketing costs directly related to loan and RPA originations are deferred and amortized against revenue. Marketing costs not directly resulting in loan and RPA originations are expensed as incurred. The production costs associated with offline marketing are expensed as incurred.
In 2015 and 2016, the Company also had an agreement with an independent third party pursuant to which the Company paid a portion of the net revenue received from the customers referred to the Company by such third party.
Operations and Technology Expenses
Operations and technology expenses include all expenses related to the direct operations and technology infrastructure related to loan underwriting and processing. This includes call center and operations personnel costs, software maintenance expense, underwriting data from third-party vendors, bank and transaction fees and telephony costs.
General and Administrative Expenses
General and Administrative expenses primarily include the Company’s corporate personnel costs, as well as legal, occupancy, and other related costs.
Stock-Based Compensation
The Company accounts for its stock-based employee compensation plans in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”) and recognizes compensation expense based on the grant date fair value over the remaining vesting periods for stock-based awards.
Under applicable accounting standards, the fair value of share-based compensation is determined at the grant date and the recognition of the related expense is recorded over the period in which the share-based compensation vests. However, with respect to income taxes, the related deduction from taxes payable is based on the award’s intrinsic value at the time of exercise (for an option) or on the fair value upon vesting of the award (for RSUs), which can be either greater (creating an excess tax benefit) or less (creating a tax deficiency) than the deferred tax benefit recognized as compensation cost is recognized in the financial statements. Pursuant to Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) , these excess tax benefits/deficiencies are recognized as income tax benefit/expense in the statement of income and, within the statement of cash flows, are classified in operating activities in the same manner as other cash flows related to income taxes. The extent of excess tax benefits/deficiencies is subject to variation in the Company’s stock price and timing/extent of RSU vestings and employee stock option exercises.
Income Taxes
The provision for income taxes is based on income before income taxes as reported for financial statement purposes. Deferred income taxes are provided for in accordance with the assets and liability method of accounting for income taxes in order to recognize the tax effects of temporary differences between financial statement and income tax accounting.
88
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company accounts for uncertainty in income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 requires that a more-likely-than-not threshold (greater than 50 percent) be met before the benefit of a tax position may be recognized in the consolidated financial statements and prescribes how such benefit should be measured. It also provides guidance on recognition adjustment, classification, accrual of interest and penalties, accounting in interim periods, disclosure and transition. The Company records interest and penalties related to tax matters as income tax expense in the consolidated statements of income.
The Company performs an evaluation of the recoverability of its deferred tax assets on a quarterly basis. The Company establishes a valuation allowance if it is more likely than not that all or some portion of the deferred tax asset will not be realized. The Company analyzes several factors, including the nature and frequency of operating losses, the Company’s carryforward period for any losses, the reversal of future taxable temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning strategies to protect against the loss of deferred tax assets. See Note 9 for further discussion.
Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the year. Restricted stock units issued under the Company’s stock-based employee compensation plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.
The following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share computations for the years ended December 31, 2017 , 2016 and 2015 (in thousands, except per share amounts):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
29,240 |
|
|
$ |
34,602 |
|
|
$ |
43,992 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average basic shares |
|
|
33,523 |
|
|
|
33,192 |
|
|
|
33,006 |
|
Shares applicable to stock-based compensation |
|
|
609 |
|
|
|
270 |
|
|
|
20 |
|
Total weighted average diluted shares |
|
|
34,132 |
|
|
|
33,462 |
|
|
|
33,026 |
|
Earnings per share – basic |
|
$ |
0.87 |
|
|
$ |
1.04 |
|
|
$ |
1.33 |
|
Earnings per share – diluted |
|
$ |
0.86 |
|
|
$ |
1.03 |
|
|
$ |
1.33 |
|
For the years ended December 31, 2017, 2016 and 2015, 1,563,975, 1,622,331 and 1,700,296 shares of common stock underlying stock options, respectively, and 182,008, 464,500 and 368,111 shares of common stock underlying restricted stock units, respectively, were excluded from the calculation of diluted net income per share because their effect would have been antidilutive.
Adopted Accounting Standards
In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09. The amendments in ASU 2016-09 simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2016-09 on January 1, 2017. The adoption of ASU 2016-09 did not have a material impact on the Company’s financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”). The amendments in ASU 2016-15 provide guidance on eight specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, distributions received from equity method investees and beneficial interests in securitization transactions. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company early-adopted ASU 2016-15 on July 1, 2017. The adoption of ASU 2016-15 did not have a material impact on the Company’s financial statements.
Accounting Standards to be Adopted in Future Periods
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income , (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”) which allows a
89
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate under the Tax Cuts and Jobs Act. The amount of the reclassification would be the difference between the historical corporate income tax rate and the newly enacted 21 percent corporate income tax rate. ASU 2018-02 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2018 with early adoption in any interim period permitted. The Company will adopt this ASU in the first quarter of 2018. The adoption of ASU 2018-02 is not expected to have a material impact on the Company’s financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”) clarifying when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The new guidance is effective on a prospective basis for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption permitted. The adoption of ASU 2017-09 is not expected to have a material impact on the Company’s financial statements.
In January 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”) to clarify the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective at the same time as the amendments in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Therefore, for public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company does not expect that the adoption of ASU 2017-05 will have a material effect on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) to simplify the accounting for goodwill impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact ASU 2017-04 will have on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805) – Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides a screen to determine when an asset or group of assets acquired is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. ASU 2017-01 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The Company does not expect that the adoption of ASU 2017-01 will have a material effect on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash (“ASU 2016-18”). ASU 2016-18 clarifies certain existing principles in ASC 230, Statement of Cash Flows, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2016-18 will modify the Company's current disclosures and classifications within the consolidated statement of cash flows and the presentation of its restricted cash activity.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company does not expect that the adoption of ASU 2016-16 will have a material effect on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016‑13”). The amendments in ASU 2016‑13 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016‑13 is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within those fiscal
90
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
years. The Company is assessing the impact of ASU 2016 ‑13, which at the date of adoption is expected to increase the allowance for credit losses with a resulting negative adjustment to retained earnings.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessee recognition on the balance sheet of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. It further requires recognition in the income statement of a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis. Finally, it requires classification of all cash payments within operating activities in the statement of cash flows. ASU 2016-02 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted for all entities upon issuance. Upon adoption of ASU 2016-02, the Company expects to report higher assets and liabilities as a result of including additional leases on the consolidated balance sheet. The Company does not expect the adoption of ASU 2016-02 to have a material impact on the consolidated statements of income or the consolidated statements of stockholders' equity.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016‑01”), which requires that equity investments, except for those accounted for under the equity method or those that result in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. ASU 2016-01 also impacts the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted only for certain provisions. The Company does not expect that the adoption of ASU 2016-01 will have a material effect on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The Company will adopt this ASU under the modified-prospective method effective January 1, 2018. The Company has completed its assessment of the guidance and determined its loan and finance receivables are excluded from the scope of ASU 2014-09. As a result of this scope exception, the Company has concluded the impact will not be material to its consolidated financial statements.
2. Acquisitions
On June 23, 2015, the Company completed the purchase of certain assets and assumed certain liabilities of a company operating as The Business Backer, LLC, which purchases discounted future accounts receivables from small businesses throughout the United States through RPAs, which provide working capital for small businesses. The total consideration of $26.4 million was comprised of $17.7 million in cash at closing, a $3.0 million promissory note (included in “Accounts payable and accrued expenses” in the consolidated balance sheets) and estimated contingent consideration of $5.7 million based on future earn-out opportunities. The contingent purchase consideration was recorded at its estimated fair value at the date of acquisition based upon the Company’s assessment of the probable earnings attributable to the business as defined in the purchase agreement. To the extent operating results exceed the Company’s estimate, additional contingent consideration would be due, however the total consideration paid may not exceed $71 million. The contingent purchase consideration is revalued each reporting period with changes in fair value of the contingent consideration obligations recognized as a gain or loss on fair value remeasurement in the Company’s consolidated statements of income. The fair value of the contingent purchase consideration was remeasured as of December 31, 2016 a gain from the fair value remeasurement of $3.3 million was recognized in “General and administrative expenses” in the consolidated statements of income . Based on future expected earnings, the Company did not expect to pay any additional contingent consideration and recorded an adjustment to write-off the remaining liability of $2.7 million in 2017.
91
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Loans and Finance Receivables, Credit Quality Information and Allowances and Liabilities for Estimated Losses on Loans and Finance Receivables
Revenue generated from the Company’s loans and finance receivables for the years ended December 31, 2017, 2016 and 2015 was as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Short-term loans |
|
$ |
197,408 |
|
|
$ |
196,255 |
|
|
$ |
204,893 |
|
Line of credit accounts |
|
|
262,760 |
|
|
|
220,462 |
|
|
|
185,521 |
|
Installment loans and RPAs |
|
|
382,683 |
|
|
|
327,375 |
|
|
|
260,507 |
|
Total loans and finance receivables revenue |
|
|
842,851 |
|
|
|
744,092 |
|
|
|
650,921 |
|
Other |
|
|
890 |
|
|
|
1,477 |
|
|
|
1,679 |
|
Total Revenue |
|
$ |
843,741 |
|
|
$ |
745,569 |
|
|
$ |
652,600 |
|
The components of Company-owned loans and finance receivables at December 31, 2017 and 2016 were as follows (in thousands):
|
|
As of December 31, 2017 |
|
|||||||||||||
|
|
Short-term |
|
|
Line of Credit |
|
|
Installment Loans and |
|
|
|
|
|
|||
|
|
Loans |
|
|
Accounts |
|
|
RPAs |
|
|
Total |
|
||||
Current receivables |
|
$ |
45,552 |
|
|
$ |
161,070 |
|
|
$ |
537,634 |
|
|
$ |
744,256 |
|
Delinquent receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent payment amounts (1) |
|
|
— |
|
|
|
7,696 |
|
|
|
3,635 |
|
|
|
11,331 |
|
Receivables on non-accrual status |
|
|
28,120 |
|
|
|
1,302 |
|
|
|
42,740 |
|
|
|
72,162 |
|
Total delinquent receivables |
|
|
28,120 |
|
|
|
8,998 |
|
|
|
46,375 |
|
|
|
83,493 |
|
Total loans and finance receivables, gross |
|
|
73,672 |
|
|
|
170,068 |
|
|
|
584,009 |
|
|
|
827,749 |
|
Less: Allowance for losses |
|
|
(19,917 |
) |
|
|
(31,148 |
) |
|
|
(71,979 |
) |
|
|
(123,044 |
) |
Loans and finance receivables, net |
|
$ |
53,755 |
|
|
$ |
138,920 |
|
|
$ |
512,030 |
|
|
$ |
704,705 |
|
|
|
As of December 31, 2016 |
|
|||||||||||||
|
|
Short-term |
|
|
Line of Credit |
|
|
Installment Loans and |
|
|
|
|
|
|||
|
|
Loans |
|
|
Accounts |
|
|
RPAs |
|
|
Total |
|
||||
Current receivables |
|
$ |
35,516 |
|
|
$ |
130,576 |
|
|
$ |
413,638 |
|
|
$ |
579,730 |
|
Delinquent receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent payment amounts (1) |
|
|
— |
|
|
|
4,560 |
|
|
|
2,110 |
|
|
|
6,670 |
|
Receivables on non-accrual status |
|
|
27,489 |
|
|
|
9,047 |
|
|
|
37,559 |
|
|
|
74,095 |
|
Total delinquent receivables |
|
|
27,489 |
|
|
|
13,607 |
|
|
|
39,669 |
|
|
|
80,765 |
|
Total loans and finance receivables, gross |
|
|
63,005 |
|
|
|
144,183 |
|
|
|
453,307 |
|
|
|
660,495 |
|
Less: Allowance for losses |
|
|
(17,770 |
) |
|
|
(26,594 |
) |
|
|
(54,581 |
) |
|
|
(98,945 |
) |
Loans and finance receivables, net |
|
$ |
45,235 |
|
|
$ |
117,589 |
|
|
$ |
398,726 |
|
|
$ |
561,550 |
|
(1) |
Represents the delinquent portion of installment loans and line of credit account balances for customers that have only missed one payment. See Note 1 “Significant Accounting Policies-Current and Delinquent Loans and Finance Receivables” for additional information. |
92
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Changes in the allowance for losses for the Company-owned loans and finance receivables and the liability for estimated losses on the Company’s guarantees of third-party lender-owned loans through the CSO programs for the years ended December 31, 2017 , 2016 and 2015 were as follows (in thousands):
|
|
Year Ended December 31, 2017 |
|
|||||||||||||
|
|
Short-term |
|
|
Line of Credit |
|
|
Installment Loans and |
|
|
|
|
|
|||
|
|
Loans |
|
|
Accounts |
|
|
RPAs |
|
|
Total |
|
||||
Allowance for losses for Company-owned loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
17,770 |
|
|
$ |
26,594 |
|
|
$ |
54,581 |
|
|
$ |
98,945 |
|
Cost of revenue |
|
|
77,775 |
|
|
|
93,416 |
|
|
|
225,179 |
|
|
|
396,370 |
|
Charge-offs |
|
|
(98,243 |
) |
|
|
(102,725 |
) |
|
|
(254,109 |
) |
|
|
(455,077 |
) |
Recoveries |
|
|
22,089 |
|
|
|
13,863 |
|
|
|
45,773 |
|
|
|
81,725 |
|
Effect of foreign currency translation |
|
|
526 |
|
|
|
— |
|
|
|
555 |
|
|
|
1,081 |
|
Balance at end of period |
|
$ |
19,917 |
|
|
$ |
31,148 |
|
|
$ |
71,979 |
|
|
$ |
123,044 |
|
Liability for third-party lender-owned loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
1,716 |
|
|
$ |
— |
|
|
$ |
280 |
|
|
$ |
1,996 |
|
Increase (decrease) in liability |
|
|
389 |
|
|
|
— |
|
|
|
(127 |
) |
|
|
262 |
|
Balance at end of period |
|
$ |
2,105 |
|
|
$ |
— |
|
|
$ |
153 |
|
|
$ |
2,258 |
|
|
|
Year Ended December 31, 2016 |
|
|||||||||||||
|
|
Short-term |
|
|
Line of Credit |
|
|
Installment Loans and |
|
|
|
|
|
|||
|
|
Loans |
|
|
Accounts |
|
|
RPAs |
|
|
Total |
|
||||
Allowance for losses for Company-owned loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
14,652 |
|
|
$ |
15,727 |
|
|
$ |
36,943 |
|
|
$ |
67,322 |
|
Cost of revenue |
|
|
69,202 |
|
|
|
88,489 |
|
|
|
170,035 |
|
|
|
327,726 |
|
Charge-offs |
|
|
(85,599 |
) |
|
|
(92,044 |
) |
|
|
(182,471 |
) |
|
|
(360,114 |
) |
Recoveries |
|
|
20,362 |
|
|
|
14,422 |
|
|
|
29,804 |
|
|
|
64,588 |
|
Effect of foreign currency translation |
|
|
(847 |
) |
|
|
— |
|
|
|
270 |
|
|
|
(577 |
) |
Balance at end of period |
|
$ |
17,770 |
|
|
$ |
26,594 |
|
|
$ |
54,581 |
|
|
$ |
98,945 |
|
Liability for third-party lender-owned loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
1,298 |
|
|
$ |
— |
|
|
$ |
458 |
|
|
$ |
1,756 |
|
Increase (decrease) in liability |
|
|
418 |
|
|
|
— |
|
|
|
(178 |
) |
|
|
240 |
|
Balance at end of period |
|
$ |
1,716 |
|
|
$ |
— |
|
|
$ |
280 |
|
|
$ |
1,996 |
|
|
|
Year Ended December 31, 2015 |
|
|||||||||||||
|
|
Short-term |
|
|
Line of Credit |
|
|
Installment Loans and |
|
|
|
|
|
|||
|
|
Loans |
|
|
Accounts |
|
|
RPAs |
|
|
Total |
|
||||
Allowance for losses for Company-owned loans and finance receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
14,324 |
|
|
$ |
19,749 |
|
|
$ |
30,875 |
|
|
$ |
64,948 |
|
Cost of revenue |
|
|
62,571 |
|
|
|
43,547 |
|
|
|
110,560 |
|
|
|
216,678 |
|
Charge-offs |
|
|
(83,316 |
) |
|
|
(68,075 |
) |
|
|
(129,537 |
) |
|
|
(280,928 |
) |
Recoveries |
|
|
21,374 |
|
|
|
20,694 |
|
|
|
25,585 |
|
|
|
67,653 |
|
Effect of foreign currency translation |
|
|
(301 |
) |
|
|
(188 |
) |
|
|
(540 |
) |
|
|
(1,029 |
) |
Balance at end of period |
|
$ |
14,652 |
|
|
$ |
15,727 |
|
|
$ |
36,943 |
|
|
$ |
67,322 |
|
Liability for third-party lender-owned loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
1,575 |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
1,576 |
|
(Decrease) increase in liability |
|
|
(277 |
) |
|
|
— |
|
|
|
457 |
|
|
|
180 |
|
Balance at end of period |
|
$ |
1,298 |
|
|
$ |
— |
|
|
$ |
458 |
|
|
$ |
1,756 |
|
93
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase specific loans that go into default. As of December 31, 2017 and 2016, the amount of consumer loans guaranteed by the Company was $34.1 million and $32.2 million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO programs. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company of $2.3 million and $2.0 million as of December 31, 2017 and 2016, respectively, is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
4. Property and Equipment
As a leading technology and analytics company, a significant amount of capital is invested in developing computer software and systems infrastructure.
Major classifications of property and equipment at December 31, 2017 and 2016 were as follows (in thousands):
|
|
As of December 31, 2017 |
|
|||||||||
|
|
Cost |
|
|
Accumulated Depreciation |
|
|
Net |
|
|||
Computer software |
|
$ |
82,757 |
|
|
$ |
(56,282 |
) |
|
$ |
26,475 |
|
Furniture, fixtures and equipment |
|
|
33,834 |
|
|
|
(25,912 |
) |
|
|
7,922 |
|
Leasehold improvements |
|
|
25,196 |
|
|
|
(11,068 |
) |
|
|
14,128 |
|
Total |
|
$ |
141,787 |
|
|
$ |
(93,262 |
) |
|
$ |
48,525 |
|
|
|
As of December 31, 2016 |
|
|||||||||
|
|
Cost |
|
|
Accumulated Depreciation |
|
|
Net |
|
|||
Computer software |
|
$ |
72,277 |
|
|
$ |
(48,680 |
) |
|
$ |
23,597 |
|
Furniture, fixtures and equipment |
|
|
30,974 |
|
|
|
(22,159 |
) |
|
|
8,815 |
|
Leasehold improvements |
|
|
24,267 |
|
|
|
(9,579 |
) |
|
|
14,688 |
|
Total |
|
$ |
127,518 |
|
|
$ |
(80,418 |
) |
|
$ |
47,100 |
|
The Company capitalized internal software development costs of $12.0 million, $8.1 million and $9.8 million during 2017, 2016 and 2015, respectively.
The Company recognized depreciation expense of $13.3 million, $14.4 million and $17.9 million during 2017, 2016 and 2015, respectively.
5. Goodwill and Other Intangible Assets
Goodwill is tested for impairment at least annually. See Note 1 for further discussion.
Goodwill
Changes in the carrying value of goodwill for the years ended December 31, 2017 and 2016 were as follows (in thousands):
Balance as of January 1, 2016 |
|
$ |
267,008 |
|
Effect of foreign currency translation |
|
|
2 |
|
Balance as of December 31, 2016 |
|
$ |
267,010 |
|
Effect of foreign currency translation |
|
|
5 |
|
Balance as of December 31, 2017 |
|
$ |
267,015 |
|
Acquisitions represent the original goodwill allocation and final adjustments to purchase price allocations during the measurement period subsequent to the acquisition date. The impact of final purchase price allocation adjustments on the Company’s results of operations and financial position were immaterial.
94
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Acquired intangible assets that are subject to amortization as of December 31, 2017 and 2016, were as follows (in thousands):
|
|
As of December 31, 2017 |
|
|||||||||
|
|
Cost |
|
|
Accumulated Amortization |
|
|
Net |
|
|||
Customer relationships |
|
$ |
3,536 |
|
|
$ |
(3,136 |
) |
|
$ |
400 |
|
Lead provider and broker relationships |
|
|
5,689 |
|
|
|
(4,089 |
) |
|
|
1,600 |
|
Trademarks |
|
|
2,595 |
|
|
|
(670 |
) |
|
|
1,925 |
|
Non-competition agreements |
|
|
800 |
|
|
|
(400 |
) |
|
|
400 |
|
Total |
|
$ |
12,620 |
|
|
$ |
(8,295 |
) |
|
$ |
4,325 |
|
|
|
As of December 31, 2016 |
|
|||||||||
|
|
Cost |
|
|
Accumulated Amortization |
|
|
Net |
|
|||
Customer relationships |
|
$ |
3,533 |
|
|
$ |
(2,973 |
) |
|
$ |
560 |
|
Lead provider and broker relationships |
|
|
5,689 |
|
|
|
(3,449 |
) |
|
|
2,240 |
|
Trademarks |
|
|
2,590 |
|
|
|
(546 |
) |
|
|
2,044 |
|
Non-competition agreements |
|
|
800 |
|
|
|
(240 |
) |
|
|
560 |
|
Total |
|
$ |
12,612 |
|
|
$ |
(7,208 |
) |
|
$ |
5,404 |
|
Non-competition agreements are amortized over the applicable terms of the contract. Customer, lead provider and broker relationships are generally amortized over three to five years based on the pattern of economic benefits provided. Trademarks are generally amortized over three to 20 years on a straight-line basis.
Amortization
Amortization expense for acquired intangible assets was $1.1 million, $1.1 million and $0.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Estimated future amortization expense for the years ended December 31, is as follows (in thousands):
Year |
|
Amount |
|
|
2018 |
|
$ |
1,070 |
|
2019 |
|
|
1,070 |
|
2020 |
|
|
590 |
|
2021 |
|
|
110 |
|
2022 |
|
|
110 |
|
95
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2017, 2016 were as follows (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Trade accounts payable |
|
$ |
25,579 |
|
|
$ |
25,420 |
|
Accrued payroll and fringe benefits |
|
|
14,877 |
|
|
|
14,165 |
|
Accrued interest payable |
|
|
11,064 |
|
|
|
5,043 |
|
Deferred finish out allowance |
|
|
7,979 |
|
|
|
8,939 |
|
Deferred fees on third-party consumer loans |
|
|
7,074 |
|
|
|
6,869 |
|
Accrual for consumer loan payments rejected for non-sufficient funds |
|
|
5,096 |
|
|
|
3,680 |
|
Promissory note |
|
|
3,000 |
|
|
|
3,000 |
|
Liability for losses on third-party lender owned consumer loans |
|
|
2,258 |
|
|
|
1,996 |
|
Contingent consideration |
|
|
— |
|
|
|
2,358 |
|
Other accrued liabilities |
|
|
196 |
|
|
|
201 |
|
Total |
|
$ |
77,123 |
|
|
$ |
71,671 |
|
7. Marketing Expenses
Marketing expenses for the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Advertising |
|
$ |
64,186 |
|
|
$ |
66,184 |
|
|
$ |
80,526 |
|
Customer procurement expense including lead purchase costs |
|
|
37,224 |
|
|
|
30,551 |
|
|
|
29,327 |
|
Customer referral and revenue sharing expense |
|
|
19 |
|
|
|
669 |
|
|
|
7,029 |
|
Total |
|
$ |
101,429 |
|
|
$ |
97,404 |
|
|
$ |
116,882 |
|
See Note 1 for further discussion.
8. Long-term debt
The Company’s long-term debt instruments and balances outstanding as of December 31, 2017 and 2016 were as follows (in thousands):
|
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
|
|
|
|
|
|
|
|
|
Securitization notes |
|
$ |
211,406 |
|
|
$ |
165,419 |
|
9.75% senior notes due 2021 |
|
|
342,558 |
|
|
|
495,622 |
|
8.50% senior notes due 2024 |
|
|
250,000 |
|
|
|
— |
|
Subtotal |
|
|
803,964 |
|
|
|
661,041 |
|
Less: Long-term debt issuance costs |
|
|
(15,422 |
) |
|
|
(11,130 |
) |
Total long-term debt |
|
$ |
788,542 |
|
|
$ |
649,911 |
|
8.50% Senior Unsecured Notes Due 2024
On September 1, 2017, the Company issued and sold $250.0 million in aggregate principal amount of 8.50% Senior Notes due 2024 (the “2024 Senior Notes”) . The 2024 Senior Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and outside the United States pursuant to Regulation S under the Securities Act. The 2024 Senior Notes bear interest at a rate of 8.50% annually on the principal amount payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2018. The 2024 Senior Notes were sold at a price of 100%. The 2024 Senior Notes will mature on September 1, 2024. The 2024 Senior Notes are unsecured debt obligations of the Company, and are unconditionally guaranteed by certain of its domestic subsidiaries .
96
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The 2024 Senior Notes are redeemable at the Company’s option, in whole or in part, (i) at any time prior to September 1, 2020 at 100% of the aggregate principal amount of 2024 Senior Notes redeemed plus the applicable “make whole” premium specified in the 2024 Senior Notes Indenture, plus accrued and unpaid interest, if any, to the redemption date and (ii) at any time on or after September 1, 2020 at the premium, if any, specified in the 2024 Senior Notes Indenture that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, prior to September 1, 2020, at its option, the Company may redeem up to 40% of the aggregate principal amount of the 2024 Senior Notes at a redemption price of 108.5% of the aggregate principal amount of 2024 Senior Notes redeemed, plus accrued and unpaid interest, if any, to the redemption date, with the proceeds of certain equity offerings as described in the 2024 Senior Notes Indenture.
The 2024 Senior Notes and the related guarantees have not been and will not be registered under the Securities Act, or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities or blue sky laws and foreign securities laws.
The Company used the net proceeds of the 2024 Senior Notes offering to retire a portion of its outstanding 9.75% senior notes due 2021, to pay the related accrued interest, premiums, fees and expenses associated therewith and for general corporate purposes, which may include working capital and future repurchases of its outstanding debt securities.
As of December 31, 2017, the carrying amount of the 2024 Senior Notes was $242.8 million, which included unamortized issuance costs of $7.2 million. The issuance costs are being amortized to interest expense over a period of seven years, through the maturity date of September 1, 2024. For the year ended December 31, 2017 the total interest expense recognized was $7.4 million of which $0.4 million represented the non-cash amortization of the issuance costs.
Consumer Loan Securitization
2016-1 Facility
On January 15, 2016, the Company and certain of its subsidiaries entered into a receivables securitization (as amended, the “2016-1 Securitization Facility”) with certain purchasers, Jefferies Funding LLC, as administrative agent (the “Administrative Agent”) and Bankers Trust Company, as indenture trustee and securities intermediary (the “Indenture Trustee”). The 2016-1 Securitization Facility securitizes unsecured consumer installment loans (“Receivables”) that have been, or will be, originated or acquired under the Company’s NetCredit brand and that meet specified eligibility criteria. Under the 2016-1 Securitization Facility, Receivables are sold to EFR 2016-1, LLC, a wholly-owned special purpose subsidiary (the “Issuer”), and serviced by another subsidiary.
The Issuer issued an initial term note of $107.4 million (the “Initial Term Note”), which was secured by $134 million in unsecured consumer loans, and variable funding notes (the “Variable Funding Notes”) with an aggregate availability of $20 million per month; the 2016-1 Securitization Facility has been amended to increase the availability to $40 million until December 31, 2016, and $30 million thereafter, as discussed below . As described below, the Issuer has issued and will subsequently issue term notes (the “Term Notes” and, together with the Initial Term Note and the Variable Funding Notes, the “Securitization Notes”). The maximum principal amount of the Securitization Notes that may be outstanding at any time under the 2016-1 Securitization Facility was limited to $175 million; the 2016-1 Securitization Facility has been amended to increase the maximum principal amount to $275 million, as discussed below .
At the end of each month during the nine-month revolving period, the Receivables funded by the Variable Funding Notes have been and will be refinanced through the creation of two Term Notes, which Term Notes have been and will be issued to the holders of the Variable Funding Notes. The non-recourse Securitization Notes mature at various dates, the latest of which will be October 15, 2020 (the “Final Maturity Date”).
The Securitization Notes are issued pursuant to an indenture, dated as of January 15, 2016 (the “Closing Date”). The Securitization Notes bear interest at an annual rate equal to the one month London Interbank Offered Rate (“LIBOR”) (subject to a floor of 1%) plus 7.75%, which rate is initially 8.75%. In addition, the Issuer paid certain customary upfront closing fees and will pay customary annual commitment and other fees to the purchasers under the 2016-1 Securitization Facility. The Issuer is permitted to voluntarily prepay any outstanding Securitization Notes, subject to an optional redemption premium. Interest and principal payments on outstanding Securitization Notes will be made monthly. Any remaining amounts outstanding will be payable no later than the Final Maturity Date. The Securitization Notes are supported by the expected cash flows from the underlying Receivables. The holders of the Securitization Notes have no recourse to the Company if the cash flows from the underlying Receivables are not sufficient to pay all of the principal and interest on the Securitization Notes. Additionally, the Receivables will be held by the Issuer at least until the obligations under the Securitization Notes are extinguished. For so long as they are held by the Issuer, the outstanding Receivables will not be available to satisfy the debts and other obligations of the Company.
97
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All amounts due under the Securitization Notes are secured by all of the Issuer’s assets, which include the Receivables transferred to the Issuer, related rights under the Receivables, specified bank accounts, and certain other related collateral.
The 2016-1 Securitization Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters and other subjects; and default and termination provisions which provide for the acceleration of the Securitization Notes under the 2016-1 Securitization Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables, defaults under other material indebtedness and certain regulatory matters.
On July 26, 2016, the Company and certain of its subsidiaries entered into a First Omnibus Amendment (the “First Amendment”) of the 2016-1 Facility that was established on the Closing Date, pursuant to various agreements with certain purchasers, the Administrative Agent and the Indenture Trustee. The agreements evidencing the 2016-1 Facility, all dated as of the Closing Date, include (i) an Indenture between the Issuer and the Indenture Trustee, (ii) a Note Purchase Agreement among the Issuer, NetCredit Loan Services, LLC (f/k/a Enova Lending Services, LLC), as the Master Servicer, the Administrative Agent and certain purchasers, and (iii) a Receivables Purchase Agreement between the Company and Enova Finance 5, LLC. The First Amendment effected a variety of minor technical changes to the Indenture, the Note Purchase Agreement, the Receivables Purchase Agreement and the servicing agreement for the 2016-1 Facility. These changes include revised procedures under the Note Purchase Agreement for the disbursement to the Issuer of proceeds from draws under the Variable Funding Notes and clarification of modifications that the servicer is permitted to effect to the terms of consumer installment loans that have been transferred into the EFR 2016-1 Facility.
On August 17, 2016, the Company and one of its subsidiaries entered into an Amendment to the Receivables Purchase Agreement. This amendment modified an eligibility criterion for receivables that the Company sells under the Agreement.
On September 12, 2016, the Company and certain of its subsidiaries entered into a Second Omnibus Amendment (the “Second Amendment”) to amend the Indenture and Receivables Purchase Agreement. The Second Amendment authorized the Company to include in the 2016-1 Facility receivables originated by a state-chartered bank and acquired by a subsidiary of the Company from that bank, and it adjusted the Investment Pool Cumulative Net Loss Trigger for the Initial Term Note Investment Pool (as such terms are defined in the Indenture), which was the seasoned pool of receivables securitized under the 2016-1 Facility on the Closing Date.
On October 20, 2016, the Company and certain of its subsidiaries entered into a Third Amendment and Limited Waiver (the “Third Amendment”) to amend the Indenture and Receivables Purchase Agreement. The Third Amendment increased the maximum principal amount to $275 million, increased the Variable Funding Notes maximum principal amount to $40 million until December 31, 2016, and $30 million thereafter, and extended the revolving period of the facility to October 2017. The Third Amendment also adjusted the Note Interest Rate on Term Notes issued after, and amounts outstanding under the Variable Funding Notes after, the date of the Third Amendment (as such terms are defined in the Indenture) . The weighted average interest rate on such adjusted Notes is 9.5%.
On November 14, 2016, the Company and certain of its subsidiaries entered into a Fourth Amendment (the “Fourth Amendment”) to amend the Indenture and Receivables Purchase Agreement . The Fourth Amendment adjusted the Investment Pool Cumulative Delinquency Trigger (as such term is defined in the Indenture), with an effective date of October 31, 2016.
On December 14, 2016, the Company and certain of its subsidiaries entered into a Fifth Amendment (the “Fifth Amendment”) to amend the Indenture and Receivables Purchase Agreement. The Fifth Amendment adjusted the Investment Pool Cumulative Delinquency Trigger for the Initial Term Notes (as such terms are defined in the Indenture), with an effective date of November 30, 2016, expanded the categories of receivables that could be financed through the securitization facility and made certain other minor changes. These changes provide the Company with additional flexibility under the securitization facility.
On October 20, 2017 (the “Amendment Closing Date”), the Company and certain of its subsidiaries amended and restated the 2016‑1 Securitization Facility (the “Amended Facility”). The counterparties to the Amended Facility included certain purchasers, the Administrative Agent and the Indenture Trustee. The Amended Facility relates to Receivables that have been and will be originated or acquired under the Company’s NetCredit brand by the Originators and that meet specified eligibility criteria. The eligible Receivables that were owned by the Issuer remained in the Amended Facility and the ineligible Receivables were removed. Under the Amended Facility, additional eligible Receivables may be sold to the Issuer and serviced by another subsidiary of the Company. As of the Amendment Closing Date, the Issuer owned eligible Receivables with an outstanding principal balance equal to $226.4 million.
In connection with the amendment and restatement, all of the outstanding notes issued by the Issuer prior to the Amendment Closing Date were redeemed and the Issuer issued an initial term note with an initial principal amount of $181.1 million (the “2017 Initial
98
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Term Note”) and variable funding notes (the “2017 Variable Funding Notes”) with an aggregate committed availability of $75 million per quarter with an option to increase the commitment to $90 million with the consent of the holders of the 2017 Variable Funding Notes. As described below, the Issuer will subsequently issue term notes (the “2017 Term Notes” and, together with the 2017 Initial Term Note and the 2017 Variable Funding Notes the “2017 Securitization Notes”) at the end of each calendar quarter. The maximum principal amount of the 2017 Securitization Notes that may be outstanding at any time under the Amended Facility is $275 million.
On each of January 2, 2018, April 2, 2018, July 2, 2018, October 1, 2018, December 31, 2018 and April 1, 2019, the Receivables financed under the 2017 Variable Funding Notes will be allocated to a 2017 Term Note, which 2017 Term Note will be issued to the holders of the 2017 Variable Funding Notes and the 2017 Variable Funding Note on such date will be reduced to zero. The 2017 Securitization Notes are non-recourse to the Company and mature at various dates, the latest of which will be April 15, 2022 (the “2017 Final Maturity Date”).
The 2017 Securitization Notes are issued pursuant to an amended and restated indenture, dated as of the Amendment Closing Date, between the Issuer and the Indenture Trustee. The 2017 Securitization Notes bear interest at a rate per annum equal to One-Month LIBOR (subject to a floor) plus 7.50%. In addition, the Issuer paid certain customary upfront closing fees to the Administrative Agent and will pay customary annual commitment and other fees to the purchasers under the Amended Facility. Subject to certain exceptions, the Issuer is not permitted to prepay or redeem any of the 2017 Securitization Notes prior to April 15, 2019 except for a one-time prepayment of the 2017 Securitization Notes related to a removal of Receivables in an amount no greater than $100 million. Following such date, the Issuer is permitted to voluntarily prepay any of the 2017 Securitization Notes, subject to an optional redemption premium. Interest and principal payments on the 2017 Securitization Notes will be made monthly. Any remaining amounts outstanding will be payable no later than the 2017 Final Maturity Date.
All amounts due under the 2017 Securitization Notes are secured by all of the Issuer’s assets, which include the Receivables transferred to the Issuer, related rights under the Receivables, specified bank accounts and certain other related collateral.
The Amended Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters and other subjects; and default and termination provisions which provide for the acceleration of the 2017 Securitization Notes under the Amended Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables, and defaults under other material indebtedness.
On October 25, 2017, the Issuer and the Indenture Trustee amended the Amended Facility to permit a holder of a 2017 Term Note or the 2017 Initial Term Note to exchange such notes for notes with an alternative structure with terms not materially different to the Issuer than the exchanged Term Notes or Initial Term Notes.
As of December 31, 2017, the carrying amount of the Amended Facility was $193.0 million, which included unamortized issuance costs of $3.3 million. The issuance costs are being amortized to interest expense over a period of three years. The total interest expense recognized related to the 2016-1 Securitization facility and the Amended Facility was $16.6 million, of which $2.1 million represented the non-cash amortization of the issuance costs, and $13.5 million, of which $3.2 million represented the non-cash amortization of the issuance costs for the years ended December 31, 2017 and 2016, respectively.
2016-2 Facility
On December 1, 2016, the Company and certain of its subsidiaries entered into a receivables securitization (the “2016-2 Facility”) with Redpoint Capital Asset Funding, LLC, as lender (the “Lender”). The 2016-2 Facility securitizes unsecured consumer installment loans (“Redpoint Receivables”) that have been and will be originated or acquired under the Company’s NetCredit brand by several of the Company’s subsidiaries (the “Originators”) and that meet specified eligibility criteria, including that the annual percentage rate for each securitized consumer loan is greater than or equal to 90%. The average annual percentage rate for loans securitized under the 2016-2 Facility in 2016 was approximately 135%. Under the 2016-2 Facility, Redpoint Receivables are sold to a wholly-owned special purpose subsidiary of the Company (the “Debtor”) and serviced by another subsidiary of the Company.
The Debtor has issued a revolving note with an initial maximum principal balance of $20.0 million (the “Initial Facility Size”), which is required to be secured by $25.0 million in unsecured consumer loans. The Initial Facility Size may be increased under the 2016-2 Facility to $40 million. The 2016-2 Facility is non-recourse to the Company and matures on December 1, 2019.
The 2016-2 Facility is governed by a loan and security agreement, dated as of December 1, 2016, between the Lender and the Debtor. The 2016-2 Facility bears interest at a rate per annum equal to LIBOR (subject to a floor) plus an applicable margin, which rate per
99
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
annum is initially 12.50%. In addition, the Debtor paid certain customary upfront closing fees to the Lender. Interest payments on the 2016-2 Facility will be made monthly. Subject to certain exceptions, the Debtor is not permitted to prepay the 2016-2 Facility prior to October 1, 2018. Following such date, the Debtor is permitted to voluntarily prepay the 2016-2 Facility without penalty. Any remaining amounts outstanding will be payable no later than December 1, 2019.
All amounts due under the 2016-2 Facility are secured by all of the Debtor’s assets, which include the Redpoint Receivables transferred to the Debtor, related rights under the Redpoint Receivables, a bank account and certain other related collateral.
The 2016-2 Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Redpoint Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters; and default and termination provisions which provide for the acceleration of the 2016-2 Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables and defaults under other material indebtedness of the Debtor.
As of December 31, 2017 and 2016, the carrying amount of the 2016-2 Facility was $15.1 million and $12.1 million, respectively. In connection with the issuance of the 2016-2 Facility, the Company incurred debt issuance costs of approximately $0.2 million. The unamortized balance of these costs as of December 31, 2017 is included in “Other assets” in the consolidated balance sheets. These costs are being amortized to interest expense over a period of 36 months, the term of the 2016-2 Facility. The total interest expense recognized was $1.9 million and $0.1 million for the years ended December 31, 2017 and 2016, respectively.
Revolving Credit Facilities
2017 Credit Agreement
On June 30, 2017, the Company and certain of its operating subsidiaries entered into a secured revolving credit agreement with a syndicate of banks including TBK Bank, SSB (“TBK”), as Administrative Agent and Collateral Agent, Jefferies Finance LLC and TBK as Joint Lead Arrangers and Joint Lead Bookrunners, and Green Bank, N.A., as Lender (the “2017 Credit Agreement”).
The 2017 Credit Agreement is secured by domestic receivables and replaced the 2014 Credit Agreement (as described below). The borrowing limit in the 2017 Credit Agreement increased to $40 million from $35 million in the 2014 Credit Agreement, and its maturity date is May 1, 2020. The Company had no borrowings outstanding under the 2017 Credit Agreement as of December 31, 2017.
The 2017 Credit Agreement provides for a revolving credit line with interest on borrowings under the facility at prime rate plus 1.00%. In addition, the 2017 Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the line, and ranges from 0.30% per annum to 0.50% per annum depending on usage. A portion of the revolving credit facility, up to a maximum of $20 million, is available for the issuance of letters of credit. The Company had outstanding letters of credit under the 2017 Credit Agreement of $8.0 million as of December 31, 2017. The 2017 Credit Agreement provides for certain prepayment penalties if it is terminated on or before its first and second anniversary date, subject to certain exceptions.
The 2017 Credit Agreement contains certain limitations on the incurrence of additional indebtedness, investments, the attachment of liens to the Company’s property, the amount of dividends and other distributions, fundamental changes to the Company or its business and certain other activities of the Company. The 2017 Credit Agreement contains standard financial covenants for a facility of this type based on a leverage ratio and a fixed charge coverage ratio. The 2017 Credit Agreement also provides for customary affirmative covenants, including financial reporting requirements, and certain events of default, including payment defaults, covenant defaults and other customary defaults.
In connection with the issuance of the 2017 Credit Agreement, as amended, the Company incurred debt issuance costs of approximately $2.2 million, which primarily consisted of underwriting fees and legal expenses. The unamortized balance of these costs as of December 31, 2017 is included in “Other assets” in the consolidated balance sheets. These costs are being amortized to interest expense over a period of 34 months, the term of the 2017 Credit Agreement.
2014 Credit Agreement
On May 14, 2014, the Company and its domestic subsidiaries as guarantors entered into a credit agreement among the Company, the guarantors, Jefferies Finance LLC as administrative agent and Jefferies Group LLC as lender (the “2014 Credit Agreement”). The 2014 Credit Agreement provided for an unsecured revolving credit facility of up to $75.0 million, including a multi-currency sub-
100
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
facility that gives the Company the ability to borrow up to $25.0 million that may be specified in foreign currencies subject to the terms and conditions of the 2014 Credit Agreement. On March 25, 2015, an amendment to the 2014 Credit Agreement reduced the Company’s unsecured revolving line of credit to $65.0 million (from $75.0 million) and increased an additional senior secured indebtedness basket to the greater of $20.0 million or 2.75% of consolidated total assets (as defined in the credit agreement) (from $15.0 million or 2% of consolidated total assets). In addition, the March 25, 2015 amendment revised certain definitions and provisions relating to limitations on indebtedness, investments, dispositions, fundamental changes and burdensome agreements to allow certain of the Company’s foreign subsidiaries, which opt to become guarantors of its obligations under the credit agreement, to be treated as domestic subsidiaries for purposes of those provisions. On November 5, 2015 the Company and certain of its domestic subsidiaries, as guarantors, entered into an amendment to the 2014 Credit Agreement, which further reduced the Company’s unsecured revolving line of credit to $60.0 million (from $65.0 million) and increased the maximum allowable leverage ratio as defined in the 2014 Credit Agreement to 3.75 to 1.00 (from 3.00 to 1.00) solely for the fiscal quarters ending December 31, 2015 and March 31, 2016. In addition, the November 5, 2015 amendment (i) revised certain definitions and provisions to clarify the treatment of securitization subsidiaries as defined in the credit, and (ii) clarified the treatment of operating leases under the credit agreement in light of contemplated changes to accounting treatment concerning such operating leases.
On December 29, 2015, the Company and certain of its domestic subsidiaries, as guarantors, entered into an amendment to the 2014 Credit Agreement, which temporarily increased the Company’s revolving line of credit to $75 million, an increase of $15.0 million ($5.0 million on December 29, 2015 and $10.0 million on January 4, 2016). Once the Company received the proceeds from the consumer loan securitization financing in January 2016, it repaid the outstanding balance on the revolving line of credit in full and, in accordance with the terms of the amendment, the revolving commitment amount was reduced to $40.0 million.
On June 30, 2016, the Company and certain of its domestic subsidiaries, as guarantors, entered into a fourth amendment to the 2014 Credit Agreement, which increased the maximum allowable leverage ratio (as defined in the credit agreement) for the fiscal quarter ended June 30, 2016 to 4.00 to 1.00 (from 3.00 to 1.00) and for the fiscal quarters ended September 30, 2016 and December 31, 2016 to 3.50 to 1.00 (in each case, from 3.00 to 1.00).
On September 30, 2016, the Company and certain of its domestic subsidiaries, as guarantors, entered into a fifth amendment to the 2014 Credit Agreement, which increased the maximum allowable leverage ratio (as defined in the credit agreement) for the fiscal quarters ended September 30, 2016 and thereafter to 4.25 to 1.00 (from 3.50 to 1.00) and decreased the Company’s unsecured revolving line of credit by $5.0 million from $40.0 million to $35.0 million.
Interest on the amounts borrowed was charged, at the Company’s option, at either LIBOR for one week or one-, two-, three- or six-month periods, as selected by the Company, plus a margin varying from 2.50% to 3.75% or at the agent’s base rate plus a margin varying from 1.50% to 2.75%. The margin for the borrowings under the 2014 Credit Agreement was dependent on the Company’s cash flow leverage ratios. The weighted average interest rate (including margin) on the revolving line of credit was 4.18% at December 31, 2016. The Company was also required to pay a fee on the unused portion of the line of credit ranging from 0.25% to 0.50% (0.50% as of December 31, 2016) based on the Company’s cash flow leverage ratios. The 2014 Credit Agreement matured on June 30, 2017. The Company had no outstanding borrowings under the 2014 Credit Agreement as of December 31, 2016.
The 2014 Credit Agreement also included a sub-limit of up to $20.0 million for standby or commercial letters of credit that was guaranteed by the Company’s domestic subsidiaries. In the event that an amount was paid by the issuing bank under a letter of credit, it was due and payable by the Company on demand. Pursuant to the terms of the 2014 Credit Agreement, the Company agreed to pay fees equal to the LIBOR margin per annum on the undrawn amount of each outstanding standby letter of credit plus a one-time commercial letter of credit fee of 0.20% of the face amount of each commercial letter of credit plus 0.25% per annum on the average daily amount of the total letter of credit exposure. The Company had outstanding letters of credit of $6.6 million under its 2014 Credit Agreement as of December 31, 2016.
In connection with the issuance of the 2014 Credit Agreement, the Company incurred debt issuance costs of approximately $1.6 million, which primarily consisted of underwriting fees and legal expenses. The unamortized balance of these costs were included in “Other assets” in the consolidated balance sheets. These costs were amortized to interest expense over a period of 37 months, the term of the 2014 Credit Agreement.
$500.0 Million 9.75% Senior Unsecured Notes
On May 30, 2014, the Company issued and sold $500.0 million in aggregate principal amount of 9.75% Senior Notes due 2021 (the “2021 Senior Notes”). The 2021 Senior Notes bear interest at a rate of 9.75% annually on the principal amount payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2014. The 2021 Senior Notes were sold at a discount of the principal amount to yield 10.0% to maturity and will mature on June 1, 2021. The 2021 Senior Notes are unsecured debt
101
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
obligations of the Company, and are unconditionally guaranteed by all of the Company’s domestic subsidiaries, except for designated securitization subsidiaries. The 2021 Senior Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act, and outside the United States pursuant to Regulation S under the Securities Act. As required by a registration rights agreement that the Company entered into with the initial purchaser when the 2021 Senior Notes were issued, the Company completed an exchange offer in April 2015. All of the unregistered 2021 Senior Notes have been exchanged for identical new notes registered under the Securities Act.
The 2021 Senior Notes are governed by an indenture (the “2021 Senior Notes Indenture”), dated May 30, 2014, between the Company, the Company’s domestic subsidiaries, as guarantors, and the trustee. The 2021 Senior Notes Indenture contains certain covenants that, among other things, limit the Company’s, and certain of its subsidiaries’, ability to incur additional debt, acquire or create new subsidiaries, create liens, engage in certain transactions with affiliates and consolidate or merge with or into other companies. The 2021 Senior Notes Indenture provides for customary events of default, including non-payment and failure to comply with covenants or other agreements in the 2021 Senior Notes Indenture.
The 2021 Senior Notes are redeemable at the Company’s option, in whole or in part, (i) at any time prior to June 1, 2017 at 100% of the aggregate principal amount of 2021 Senior Notes redeemed plus the applicable “make whole” redemption price specified in the 2021 Senior Notes Indenture, plus accrued and unpaid interest, if any, to the redemption date and (ii) at any time on or after June 1, 2017 at a premium specified in the 2021 Senior Notes Indenture that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, prior to June 1, 2017, at its option, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Senior Notes at a redemption price equal to 109.75% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the proceeds of certain equity offerings as described in the 2021 Senior Notes Indenture. If a change of control occurs, as that term is defined in the 2021 Senior Notes Indenture, the holders of the 2021 Senior Notes will have the right, subject to certain conditions, to require the Company to repurchase their 2021 Senior Notes at a purchase price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, as of the date of repurchase. The Spin-off did not constitute a change of control under the 2021 Senior Notes Indenture.
The Company used all of the net proceeds of the 2021 Senior Notes offering, or $479.0 million, to repay all of its intercompany indebtedness due to Cash America, which was $361.4 million as of May 30, 2014, and the remaining net proceeds were used to pay a significant portion of the $122.4 million in cash dividends to Cash America.
During the year ended December 31, 2017 the Company repurchased $155.0 million principal amount of the 2021 Senior Notes for aggregate cash consideration of $166.3 million plus accrued interest. In connection with these purchases, the Company recorded a loss on extinguishment of debt of approximately $14.9 million ($9.2 million net of tax), which is included in “Loss on early extinguishment of debt” in the consolidated statements of income.
As of December 31, 2017 and 2016, the carrying amount of the 2021 Senior Notes was $337.6 million and $486.4 million, respectively, which included an unamortized discount of $2.4 million and $4.4 million, respectively and unamortized issuance costs of $4.9 million and $9.3 million, respectively. The discount and issuance costs are being amortized to interest expense over a period of seven years, through the maturity date of June 1, 2021. For the years ended December 31, 2017 and 2016 the total interest expense recognized was $46.9 million, of which $0.8 million represented the non-cash amortization of the discount and $1.9 million represented the non-cash amortization of the issuance costs, and $51.6 million of which $0.7 million represented the non-cash amortization of the discount and $2.1 million represented the non-cash amortization of the issuance costs, respectively.
Weighted-average interest rates on long-term debt were 10.63% and 10.71% during 2017 and 2016, respectively.
As of December 31, 2017 and 2016, the Company was in compliance with all covenants and other requirements set forth in the prevailing long-term debt agreements.
102
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2017 , required principal payments under the terms of the long-term debt for each of the five years after December 31, 2017 are as follows (in thousands):
Year |
|
Amount |
|
|
|
|
|
2018 |
|
$ |
— |
|
|
|
|
2019 |
|
|
— |
|
|
|
|
2020 |
|
|
— |
|
|
|
|
2021 |
|
|
345,000 |
|
|
(1 |
) |
2022 |
|
|
— |
|
|
|
|
Thereafter |
|
|
250,000 |
|
|
(2 |
) |
Securitization |
|
|
211,406 |
|
|
(3 |
) |
Total |
|
$ |
806,406 |
|
|
|
|
(1) The $345.0 million 9.75% Senior Unsecured Notes mature June 1, 2021.
(2) The $250.0 million 8.50% Senior Unsecured Notes mature September 1, 2024
(3) |
The 2016-1 Securitization Facility matures at various dates, the latest of which will be April 15, 2021, and the 2016-2 Facility matures on December 1, 2019. |
9. Income Taxes
The components of the Company’s deferred tax assets and liabilities as of December 31, 2017 and 2016 were as follows (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Loans and finance receivables, net |
|
$ |
27,444 |
|
|
$ |
38,275 |
|
Compensation and benefits |
|
|
4,423 |
|
|
|
7,397 |
|
Translation adjustments |
|
|
2,531 |
|
|
|
6,726 |
|
Accrued rent and deferred finish out allowance |
|
|
2,786 |
|
|
|
4,372 |
|
Foreign net operating loss carryforward |
|
|
2,164 |
|
|
|
1,449 |
|
Other |
|
|
1,441 |
|
|
|
1,960 |
|
Total deferred tax assets |
|
$ |
40,789 |
|
|
$ |
60,179 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Amortizable intangible assets |
|
$ |
42,334 |
|
|
$ |
60,762 |
|
Property and equipment |
|
|
7,760 |
|
|
|
11,443 |
|
Other |
|
|
153 |
|
|
|
483 |
|
Total deferred tax liabilities |
|
$ |
50,247 |
|
|
$ |
72,688 |
|
Net deferred tax liabilities before valuation allowance |
|
$ |
(9,458 |
) |
|
$ |
(12,509 |
) |
Valuation allowance |
|
|
(2,650 |
) |
|
|
(1,807 |
) |
Net deferred tax liabilities |
|
$ |
(12,108 |
) |
|
$ |
(14,316 |
) |
103
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the provision for income taxes and the income to which it relates for the years ended December 31, 2017 , 2016 and 2015 are shown below (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Income before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
37,900 |
|
|
$ |
57,422 |
|
|
$ |
70,519 |
|
International |
|
|
— |
|
|
|
14 |
|
|
|
— |
|
Income before income taxes |
|
$ |
37,900 |
|
|
$ |
57,436 |
|
|
$ |
70,519 |
|
Current provision (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
11,366 |
|
|
$ |
22,656 |
|
|
$ |
25,601 |
|
International |
|
|
(3 |
) |
|
|
94 |
|
|
|
114 |
|
State and local |
|
|
2,045 |
|
|
|
2,347 |
|
|
|
2,211 |
|
Total current provision for income taxes |
|
$ |
13,408 |
|
|
$ |
25,097 |
|
|
$ |
27,926 |
|
Deferred benefit: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(4,461 |
) |
|
$ |
(2,152 |
) |
|
$ |
(1,360 |
) |
International |
|
|
— |
|
|
|
— |
|
|
|
— |
|
State and local |
|
|
(287 |
) |
|
|
(111 |
) |
|
|
(39 |
) |
Total deferred benefit for income taxes |
|
$ |
(4,748 |
) |
|
$ |
(2,263 |
) |
|
$ |
(1,399 |
) |
Total provision for income taxes |
|
$ |
8,660 |
|
|
$ |
22,834 |
|
|
$ |
26,527 |
|
The effective tax rate on income differs from the federal statutory rate of 35% for the following reasons (dollars in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Tax provision computed at the federal statutory income tax rate |
|
$ |
13,265 |
|
|
$ |
20,103 |
|
|
$ |
24,682 |
|
Deferred tax impact of tax reform |
|
|
(7,491 |
) |
|
|
— |
|
|
|
— |
|
State and local income taxes, net of federal tax benefits |
|
|
1,440 |
|
|
|
1,401 |
|
|
|
1,408 |
|
Share based compensation |
|
|
(1,005 |
) |
|
|
1,656 |
|
|
|
— |
|
Foreign exchange gain |
|
|
724 |
|
|
|
— |
|
|
|
— |
|
Other |
|
|
1,727 |
|
|
|
(326 |
) |
|
|
437 |
|
Total provision |
|
$ |
8,660 |
|
|
$ |
22,834 |
|
|
$ |
26,527 |
|
Effective tax rate |
|
|
22.9 |
% |
|
|
39.8 |
% |
|
|
37.6 |
% |
On December 22, 2017, the Tax Cuts and Jobs Acts was enacted into law. The new tax legislation contains several key tax provisions including the reduction of the corporate income tax rate to 21% effective January 1, 2018 as well as a variety of other changes including the acceleration of expensing of certain business assets and reductions in the amount of executive pay that could qualify as a tax deduction. The Company has recorded an estimated net tax benefit of $7.5 million from the remeasurement of deferred tax assets and liabilities at lower enacted corporate tax rates. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment. Adjustments to deferred tax expense could arise when deferred taxes are trued-up to the amounts reported on the tax returns through the return-to-provision process. In addition, the legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service (“IRS”), any of which could affect the estimates included in the provision. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. If any adjustment is required, it will be reflected as an additional expense or benefit in the 2018 financial statements, as allowed by SEC Staff Accounting Bulletin No. 118.
The Company has gross foreign net operating loss carryforwards from Brazilian operations of $10.7 million as of December 31, 2017, $4.3 million as of December 31, 2016, and $2.8 million as of December 31, 2015. These net operating loss carryforwards are subject to annual limitations and have an unlimited carryforward period. The Company has recorded a full valuation allowance related to the foreign net operating loss carryforwards, as well as other foreign deferred tax assets, as they are not more likely than not to be utilized.
104
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the valuation account activity for the years ended December 31, 2017 , 2016 and 2015 (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Balance at beginning of period |
|
$ |
1,807 |
|
|
$ |
1,220 |
|
|
$ |
670 |
|
Additions |
|
|
843 |
|
|
|
587 |
|
|
|
550 |
|
Deductions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at end of period |
|
$ |
2,650 |
|
|
$ |
1,807 |
|
|
$ |
1,220 |
|
A reconciliation of the activity related to unrecognized tax benefits follows for the fiscal years indicated (in thousands):
|
|
Year Ended December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Balance at beginning of period |
|
$ |
351 |
|
|
$ |
— |
|
Additions based on tax positions related to the current year |
|
|
229 |
|
|
|
118 |
|
Additions for tax positions of prior years |
|
|
147 |
|
|
|
233 |
|
Balance at end of period |
|
$ |
727 |
|
|
$ |
351 |
|
The Company does not believe it is reasonably possible that, within the next twelve months, unrecognized domestic tax benefits will change by a significant amount. The Company recorded no expense for interest and penalties related to tax matters as of December 31, 2017.
The Company’s U.S. tax returns are subject to examination by federal and state taxing authorities. The IRS audits for tax years 2011 through 2014 were concluded with no adjustments to the financial statements. The 2015 and 2016 tax years are open to examination by the IRS. The years open to examination by state, local, and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed.
10. Commitments and Contingencies
Leases
The Company leases its headquarters in Chicago, Illinois, a call center facility in Gurnee, Illinois, and office space in Blue Ash, Ohio and London, United Kingdom under operating leases with remaining terms ranging from two to ten years with certain rights to extend for additional periods. The operating expenses and real estate taxes are not included in the table below. Future minimum rentals due under non-cancelable leases as of December 31, 2017 are as follows for each of the years ending December 31 (in thousands):
Year |
|
Amount |
|
|
2018 |
|
$ |
6,020 |
|
2019 |
|
|
6,875 |
|
2020 |
|
|
6,719 |
|
2021 |
|
|
6,922 |
|
2022 |
|
|
6,970 |
|
Thereafter |
|
|
30,378 |
|
Total |
|
$ |
63,884 |
|
Rent expense was $5.2 million, $5.8 million and $6.8 million for the years ended December 31, 2017, 2016 or 2015, respectively.
Headquarters Relocation
The Company provided notice in the second quarter of 2014 to the landlord at 200 W. Jackson Boulevard in Chicago, Illinois that it was accelerating the lease expiration date for approximately 86,000 rentable square feet effective June 30, 2015. In July 2014, the Company entered into a lease agreement for its current headquarters office space at 175 W. Jackson Boulevard in Chicago as part of its plans to relocate from its former headquarters. In the second quarter of 2015, the Company ceased using the 200 W. Jackson location and, as a result, recognized additional expense of $3.7 million for the year ended December 31, 2015, which was included as “General and administrative expense” and consisted of a lease exit liability of $2.9 million for the remaining lease payments, net of
105
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
estimated sublease income of $1.7 million, and $0.8 million for the removal of property and restoration costs related to the 200 W. Jackson lease. The Company did not incur further material costs related to the relocation.
The following table is a summary of the exit and disposal activity and liability balances as a result of the headquarters relocation (in thousands):
|
|
Lease Termination Costs |
|
|
Other Exit Costs |
|
|
Total |
|
|||
Balance at January 1, 2016 |
|
$ |
1,425 |
|
|
$ |
204 |
|
|
$ |
1,629 |
|
Payments |
|
|
(1,132 |
) |
|
|
— |
|
|
|
(1,132 |
) |
Adjustments |
|
|
344 |
|
|
|
(69 |
) |
|
|
275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
637 |
|
|
$ |
135 |
|
|
$ |
772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2017 |
|
$ |
637 |
|
|
$ |
135 |
|
|
$ |
772 |
|
Payments |
|
|
(554 |
) |
|
|
(9 |
) |
|
|
(563 |
) |
Adjustments |
|
|
(83 |
) |
|
|
(126 |
) |
|
|
(209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Guarantees of Consumer Loans
In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans and is required to purchase any defaulted loans it has guaranteed. As of December 31, 2017 and 2016, the amount of consumer loans guaranteed by the Company was $34.1 million and $32.2 million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO programs. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company of $2.3 million and $2.0 million, as of December 31, 2017 and 2016, respectively, is included in “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets.
Litigation
On March 8, 2013, Flemming Kristensen, on behalf of himself and others similarly situated, filed a purported class action lawsuit in the U.S. District Court of Nevada against the Company and other unaffiliated lenders and lead providers. The lawsuit alleges that the lead provider defendants sent unauthorized text messages to consumers on behalf of the Company and the other lender defendants in violation of the Telephone Consumer Protection Act. The complaint seeks class certification, statutory damages, an injunction against “wireless spam activities,” and attorneys’ fees and costs. The Company filed an answer to the complaint denying all liability. On March 26, 2014, the Court granted class certification. On July 20, 2015, the court granted the Company’s motion for summary judgment, denied Plaintiff’s motion for summary judgment and, on July 21, 2015, entered judgment in favor of the Company. Plaintiff filed a motion for reconsideration, which was denied. On May 3, 2016, Plaintiff filed a notice of appeal of the order granting summary judgment for the Company, the judgment in favor of the company, and the order denying Plaintiff’s motion to reconsider. On January 10, 2018, the Ninth Circuit filed an opinion affirming the district court's entry of summary judgment for us and the other defendants. The plaintiff has 90 days from the date of the opinion (until April 10, 2018) to petition the United States Supreme Court to review the matter. Neither the likelihood of an unfavorable appellate decision nor the ultimate liability, if any, with respect to this matter can be determined at this time, and the Company is currently unable to estimate a range of reasonably possible losses, as defined by ASC 450-20-20, Contingencies–Loss Contingencies–Glossary, for this litigation. The Company believes that the Plaintiff’s claims in the complaint are without merit and intends to vigorously defend this lawsuit.
The Company is also a defendant in certain routine litigation matters encountered in the ordinary course of its business. Certain of these matters may be covered to an extent by insurance. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.
11. Employee Benefit Plans
The Company sponsors the Enova International, Inc. 401(k) Savings Plan (the “401(k) Plan”), which is open to all U.S. employees of the Company and its subsidiaries. New employees are automatically enrolled in this plan unless they elect not to participate. Prior to January 1, 2015, the Company made matching cash contributions of 50% of each participant’s contributions, based on participant
106
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
contributions of up to 5% of compensation. Effective January 1, 2015, t he Company makes matching contributions of 100% of the first 1% of pay and 50% of the next 5% of pay that each employee contributes to the 401(k) Plan. Company contributions made prior to January 1, 2015 vest at the rate of 20% each year after one year of service; thus a participant is 100% vested after five years of service. The Company’s matching contributions subsequent to January 1, 2015 fully vest after a participant’s second year of service with the Company. The Company also offers the Enova International, Inc. Nonqualified Savings Plan (the “NQSP”) for certain members of Company management. The Company’s consolidated contributions to the 401(k) Plan and the NQSP were $1.9 million, $2.2 million and $1.4 million for the years ended December 31, 2017 , 2016 and 2015, respectively.
The Company sponsors the Enova International, Inc. Supplemental Executive Retirement Plan (“SERP”) in which certain officers and certain other employees of the Company participate. Under this defined contribution plan, the Company makes an annual supplemental cash contribution to the SERP based on the objectives of the plan as approved by the Company’s Management Development and Compensation Committee of the Board of Directors. The Company recorded compensation expense of $0.5 million, $0.2 million and $0.4 million for SERP contributions for the years ended December 31, 2017, 2016 and 2015, respectively.
The NQSP and the SERP are non-qualified deferred compensation plans. Benefits under the NQSP and the SERP are unfunded. As of December 31, 2017, 2016 and 2015, the Company held securities in rabbi trusts to pay benefits under these plans. These securities are classified as trading securities, and the unrealized gains and losses on these securities are netted with the costs of the plans in “General and administrative expenses” in the consolidated statements of income.
Amounts included in the consolidated balance sheets relating to the NQSP and the SERP were as follows (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Prepaid expenses and other assets |
|
$ |
1,460 |
|
|
$ |
1,590 |
|
Accounts payable and accrued expenses |
|
$ |
1,993 |
|
|
$ |
1,860 |
|
12. Stock-Based Compensation
Enova Awards
Under the Enova International, Inc. 2014 First Amended and Restated Long-Term Incentive Plan (the “Enova LTIP”), the Company is authorized to issue 8,000,000 shares of Common Stock pursuant to “Awards” granted as incentive stock options (intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended), nonqualified stock options, restricted stock units (“RSUs”), restricted stock, performance shares, stock appreciation rights or other stock-based awards. Since 2014, nonqualified stock options and RSU awards are the only stock-based awards granted under the Plan. As of December 31, 2017, there were 2,924,099 shares available for future grants under the Enova LTIP.
During the year ended December 31, 2017, the Company received 102,253 shares of its common stock valued at approximately $1.5 million as partial payment of taxes required to be withheld upon issuance of shares under RSUs.
Restricted Stock Units
During the years ended December 31, 2017 , 2016 and 2015 , the Company granted RSUs to Company officers, certain employees and to the non-management members of the Board of Directors under the Enova LTIP. Each vested RSU entitles the holder to receive a share of the common stock of the Company. For Company officers and certain employees, the shares are to be issued upon vesting of the RSUs generally over a period of three or four years. Shares for vested RSU awards granted to members of the Board of Directors are issued twelve months after the grant date.
In accordance with ASC 718, the grant date fair value of RSUs is generally based on the Company’s closing stock price on the day before the grant date and is amortized to expense over the vesting periods. The agreements relating to awards provide that the vesting and payment of awards would be accelerated if there is a change in control of the Company.
107
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the Company’s restricted stock unit activity during 2017, 2016 and 2015 :
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||||||||||||||
|
|
Units |
|
|
Weighted Average Fair Value at Date of Grant |
|
|
Units |
|
|
Weighted Average Fair Value at Date of Grant |
|
|
Units |
|
|
Weighted Average Fair Value at Date of Grant |
|
||||||
Outstanding at beginning of year |
|
|
1,359,057 |
|
|
$ |
9.49 |
|
|
|
641,878 |
|
|
$ |
20.55 |
|
|
|
549,707 |
|
|
$ |
23.04 |
|
Units granted |
|
|
763,727 |
|
|
|
14.70 |
|
|
|
1,189,136 |
|
|
|
6.67 |
|
|
|
356,064 |
|
|
|
18.39 |
|
Shares issued |
|
|
(563,689 |
) |
|
|
9.68 |
|
|
|
(213,437 |
) |
|
|
19.65 |
|
|
|
(151,088 |
) |
|
|
22.62 |
|
Units forfeited |
|
|
(133,212 |
) |
|
|
11.62 |
|
|
|
(258,520 |
) |
|
|
15.65 |
|
|
|
(112,805 |
) |
|
|
23.04 |
|
Outstanding at end of year |
|
|
1,425,883 |
|
|
$ |
12.00 |
|
|
|
1,359,057 |
|
|
$ |
9.49 |
|
|
|
641,878 |
|
|
$ |
20.55 |
|
Compensation expense related to these RSUs totaling $7.3 million ($5.6 million net of related taxes), $5.2 million ($3.1 million net of related taxes) and $4.9 million ($3.1 million net of related taxes) was recognized for the years ended December 31, 2017 , 2016 and 2015 , respectively. Total unrecognized compensation cost related to these RSUs at December 31, 2017 was $12.7 million, which will be recognized over a weighted average period of approximately 2.4 years. The outstanding RSUs had an aggregate intrinsic value of $21.7 million at December 31, 2017 .
On May 21, 2015, in connection with the resignation of a certain executive, the Company entered into an employment agreement pursuant to which the executive would become vested on January 1, 2016 in 50% of his RSU Award granted under the RSU award agreement rather than 25% as previously agreed under the RSU award agreement. The acceleration of the vesting was a modification of the plan and required that the fair value be reestablished on the date of the modification. The modification resulted in additional expense in 2015 of approximately $0.3 million.
Stock Options
During the years ended December 31, 2017 , 2016 and 2015 , the Company granted stock options to purchase Company stock to Company officers and certain employees under the Enova LTIP. Stock options would allow the holder to purchase shares of the Company’s common stock at a price not less than the fair market value of the shares as of the grant date, or the exercise price.
Stock options granted under the Enova LTIP become exercisable in equal increments on the first, second and third anniversaries of their date of grant, and expire on the 7th anniversary of their date of grant. Exercise prices of these stock options are equal to the closing stock price on the day before the grant date. In accordance with ASC 718, compensation expense on stock options is based on the fair value of the stock options on the day before the grant date and is amortized to expense over the vesting periods. For the year ended December 31, 2017, the Company estimated the fair value of the stock option grants using the Black-Scholes option-pricing model based on the following assumptions: risk-free interest rate of 1.9%, expected term (life) of options of 4.5 years, expected volatility of 52.3% and no expected dividends.
Determining the fair value of stock-based awards at their respective grant dates requires considerable judgment, including estimating expected volatility and expected term (life). The Company based its expected volatility on a weighted average of the historical volatility of the Company and the historical volatility of comparable public companies over the option’s expected term. The Company calculated its expected term based on the simplified method, which is the mid-point between the weighted-average graded-vesting term and the contractual term. The simplified method was chosen as a means to determine expected term as the Company has limited historical option exercise experience as a public company. The Company derived the risk-free rate from a weighted-average yield for the three-and five-year zero-coupon U.S. Treasury Strips. The Company estimates forfeitures at the grant date based on its historical forfeiture rate, which is based on activity of cash-based long-term incentive units granted and outstanding prior to the Spin-off, and will revise the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
108
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the Company’s stock option activity during 2017, 2016 and 2015 :
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||||||||||||||
|
|
Units |
|
|
Weighted Average Exercise Price |
|
|
Units |
|
|
Weighted Average Exercise Price |
|
|
Units |
|
|
Weighted Average Exercise Price |
|
||||||
Outstanding at beginning of year |
|
|
1,587,056 |
|
|
$ |
17.98 |
|
|
|
1,891,153 |
|
|
$ |
21.44 |
|
|
|
1,425,196 |
|
|
$ |
23.04 |
|
Options granted |
|
|
590,988 |
|
|
|
14.80 |
|
|
|
337,081 |
|
|
|
6.29 |
|
|
|
785,294 |
|
|
|
19.19 |
|
Options exercised |
|
|
(4,459 |
) |
|
|
6.29 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Options forfeited |
|
|
(119,493 |
) |
|
|
21.02 |
|
|
|
(641,178 |
) |
|
|
22.01 |
|
|
|
(319,337 |
) |
|
|
23.04 |
|
Outstanding at end of year |
|
|
2,054,092 |
|
|
$ |
16.92 |
|
|
|
1,587,056 |
|
|
$ |
17.98 |
|
|
|
1,891,153 |
|
|
$ |
21.44 |
|
Options vested at end of year |
|
|
1,165,837 |
|
|
|
19.94 |
|
|
|
734,896 |
|
|
|
21.67 |
|
|
|
475,127 |
|
|
|
23.05 |
|
The weighted average fair value of options granted in 2017 was $6.60. Compensation expense related to stock options totaling $4.0 million ($3.1 million net of related taxes), $3.3 million ($2.0 million net of related taxes) and $4.7 million ($2.9 million net of related taxes) was recognized for the years ended December 31, 2017, 2016 and 2015 , respectively. Total unrecognized compensation cost related to stock options at December 31, 2017 was $3.2 million, which will be recognized over a period of approximately 1.9 years. At December 31, 2017 , the intrinsic value of stock options outstanding was $4.2 million and the intrinsic value of stock options exercisable was $1.8 million, respectively.
On May 21, 2015, in connection with the resignation of a certain executive, the Company entered into an employment agreement pursuant to which the executive would become vested on January 1, 2016 in 66.6% of his stock options granted under the stock options award agreement rather than 33.3% as previously agreed under the stock option award agreement. The acceleration of the vesting was a modification of the plan and required that the fair value be reestablished on the date of the modification. The modification resulted in additional expense in 2015 of approximately $0.3 million.
13. Derivative Instruments
The Company periodically uses derivative instruments to manage risk from changes in market conditions that may affect the Company’s financial performance. The Company primarily uses derivative instruments to manage its primary market risks, which are interest rate risk and foreign currency exchange rate risk.
The Company periodically uses forward currency exchange contracts to minimize the effects of foreign currency risk in Brazil and the United Kingdom. The forward currency exchange contracts are non-designated derivatives. Any gain or loss resulting from these contracts is recorded as income or loss and is included in “Foreign currency transaction gain (loss), net” in the Company’s consolidated statements of income.
The Company’s derivative instruments are presented in its financial statements on a net basis. The Company had no outstanding derivative instruments as of December 31, 2016 . The following table presents information related to the Company’s derivative instruments as of December 31, 2017 (in thousands):
Non-designated derivatives:
|
|
As of December 31, 2017 |
|
|||||||||||||
|
|
|
|
|
|
Gross Amounts |
|
|
Gross Amounts |
|
|
Net Amounts of Assets |
|
|||
|
|
|
|
|
|
of Recognized |
|
|
Offset in the |
|
|
Presented in the |
|
|||
|
|
Notional |
|
|
Financial |
|
|
Consolidated |
|
|
Consolidated Balance |
|
||||
Forward currency exchange contracts |
|
Amount |
|
|
Instruments |
|
|
Balance Sheets (1) |
|
|
Sheets (2) |
|
||||
Assets |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Liabilities |
|
$ |
12,039 |
|
|
$ |
55 |
|
|
$ |
— |
|
|
$ |
55 |
|
109
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) |
As of December 31, 2017, the Company had no gross amounts of recognized derivative instruments that the Company makes an accounting policy election not to offset. In addition, there was no financial collateral related to the Company’s derivatives. The Company has no assets or liabilities that are subject to an enforceable master netting agreement or similar arrangement. |
(2) |
Represents the fair value of forward currency contracts, which is recorded in “Accounts payable and accrued expenses” in the consolidated balance sheets. |
The following table presents information on the effect of derivative instruments on the consolidated results of operations and AOCI for years ended December 31, 2017, 2016 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) |
|
||||||||||||||
|
|
Gains (Losses) |
|
|
Gains (Losses) |
|
|
Reclassified From |
|
|||||||||||||||||||||||||||
|
|
Recognized in Income |
|
|
Recognized in AOCI |
|
|
AOCI into Income |
|
|||||||||||||||||||||||||||
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|||||||||||||||||||||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||||||||
Non-designated derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts (1) |
|
$ |
(55 |
) |
|
$ |
3,020 |
|
|
$ |
4,525 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total |
|
$ |
(55 |
) |
|
$ |
3,020 |
|
|
$ |
4,525 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
(1) |
The gains (losses) on these derivatives substantially offset the (losses) gains on the hedged portion of the foreign intercompany balances. |
14. Related Party Transactions
A current officer of the Company has an ongoing ownership interest in the small business from which the Company acquired certain assets and assumed certain liabilities in June 2015 (see Note 2 for additional information). In the normal course of business, the Company has attained certain customer relationships from the small business by entering into transactions with the customers to obtain additional RPA financing. In these transactions, the Company satisfies the customer’s existing RPA balance with the small business which terminates such customer’s responsibilities to the small business. During the year ended December 31, 2017, the Company did not attain any additional relationships through these transactions with the small business. During the years ended December 31, 2016 and 2015, the Company paid $0.4 million and $7.7 million, respectively, to the small business to satisfy customers’ existing RPA balances. Pursuant to the acquisition, a subsidiary of the Company issued a promissory note to the small business in the amount of $3.0 million (the “Promissory Note”) and granted the company an opportunity to earn certain contingent purchase consideration (see Note 2 for additional information), both of which are guaranteed by the Company. The Promissory Note accrues interest at a rate of 4.0% per annum and will mature on June 23, 2018. The Company incurred interest expense related to the Promissory Note of $0.1 million in each of the years ended December 31, 2017 , 2016 and 2015. In addition, as a condition precedent to the acquisition, a subsidiary of the Company executed a Transition Services Agreement with the small business from which the Company acquired certain assets whereby it agreed to provide certain transition services to the business for three years following the acquisition. During the years ended December 31, 2017 , 2016 and 2015, the Company was paid $33 thousand, $34 thousand and $0.1 million, respectively, for such services. The subsidiary of the Company also entered into a short-term employee leasing agreement whereby it leased employees at cost from the small business until such employees could be formally hired, under which the Company paid a total of $0.2 million during the year ended December 31, 2015; no additional payments will be made under this agreement.
After the Spin-off, Cash America charged the Company a transition services fee related to utilization of financial reporting systems and accounts payable processing that is included in general and administrative expenses. The Company recorded $0.4 million in expense for these services for the year ended December 31, 2015. The Company transitioned to its own financial reporting system in late 2015 and the transition services agreement with Cash America ended on December 31, 2015.
The Company and Cash America entered into an agreement for the Company to administer the consumer loan underwriting model utilized by Cash America’s Retail Services Division in exchange for fee per transaction paid to the Company as well as the reimbursement of the Company’s direct third-party costs incurred in providing the service. The Company received $0.8 million, $1.0 million and $1.2 million for the years ended December 31, 2017 , 2016 and 2015, respectively pursuant to this agreement.
Since May 30, 2014, amounts due to Cash America or First Cash have been settled a month in arrears. The balance due from First Cash of $0.1 million as of each of December 31, 2017 and 2016 is included in “Other receivables and prepaid expenses” in the consolidated balance.
110
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On December 8, 2016, Cash America completed the sale of its entire holding in the Company and no longer has any ownership interest in the Company.
In October 2017, the Company entered into an agreement for direct mail services with a marketing agency where David Fisher, the Company’s Chief Executive Officer and Chairman of the Board, also serves as a member of the marketing agency’s Board of Directors. As of December 31, 2017, there were no amounts due or paid to the agency.
15. |
Variable Interest Entities |
As part of the Company’s overall funding strategy and as part of its efforts to support its liquidity from sources other than its traditional capital market sources, the Company has established a securitization program through the 2016-1 and 2016-2 Securitization Facilities. The Company transfers certain consumer loan receivables to wholly owned, bankruptcy-remote special purpose subsidiaries (VIEs), which issue term notes backed by the underlying consumer loan receivables and are serviced by another wholly owned subsidiary. The cash flows from the loans held by the VIEs are used to repay obligations under the notes.
The Company is required to evaluate the VIEs for consolidation. The Company has the ability to direct the activities of the VIEs that most significantly impact the economic performance of the entities as the servicer of the securitized loan receivables. Additionally, the Company has the right to returns related to servicing fee revenue from the VIEs and to receive residual payments, which expose it to potentially significant losses and returns. Accordingly, the Company determined it is the primary beneficiary of the VIEs and is required to consolidate them.
The assets and liabilities related to the VIEs are included in the Company’s consolidated financial statements and are accounted for as secured borrowings.
The Company parenthetically discloses on its consolidated balance sheets the VIE’s assets that can only be used to settle the VIE’s obligations and the VIE liabilities if the VIE’s creditors have no recourse against the Company’s general credit. The carrying amounts of consolidated VIE assets and liabilities associated with the Company’s securitization entities were as follows (in thousands):
|
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Assets |
|
|
|
|
|
|
|
|
Restricted cash and cash equivalents |
|
$ |
21,696 |
|
|
$ |
19,468 |
|
Loans and finance receivables, net |
|
|
259,996 |
|
|
|
216,766 |
|
Other receivables and prepaid expenses |
|
|
— |
|
|
|
3 |
|
Other assets |
|
|
178 |
|
|
|
2,459 |
|
Total assets |
|
$ |
281,870 |
|
|
$ |
238,696 |
|
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
1,671 |
|
|
$ |
1,350 |
|
Long-term debt |
|
|
208,135 |
|
|
|
163,550 |
|
Total liabilities |
|
$ |
209,806 |
|
|
$ |
164,900 |
|
16. Supplemental Disclosures of Cash Flow Information
The following table sets forth certain cash and non-cash activities for the years ended December 31, 2017, 2016 and 2015 (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
63,529 |
|
|
$ |
59,609 |
|
|
$ |
49,390 |
|
Income taxes paid |
|
|
17,263 |
|
|
|
19,213 |
|
|
|
40,759 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables renewed |
|
$ |
322,648 |
|
|
$ |
310,425 |
|
|
$ |
253,279 |
|
Liabilities assumed in acquisitions |
|
|
— |
|
|
|
— |
|
|
|
8,658 |
|
111
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. Operating Segment Information
The Company provides online financial services to non-prime credit consumers and small businesses in the United States, United Kingdom, and Brazil and has one reportable segment, which is composed of the Company’s domestic and international operations and corporate services. The Company has aggregated all components of its business into a single operating segment based on the similarities of the economic characteristics, the nature of the products and services, the nature of the production and distribution methods, the type of customer and the nature of the regulatory environment.
The following tables present information on the Company’s domestic and international operations as of and for the years ended December 31, 2017, 2016 and 2015 (in thousands).
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
709,537 |
|
|
$ |
622,991 |
|
|
$ |
510,242 |
|
International |
|
|
134,204 |
|
|
|
122,578 |
|
|
|
142,358 |
|
Total revenue |
|
$ |
843,741 |
|
|
$ |
745,569 |
|
|
$ |
652,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
233,065 |
|
|
$ |
204,084 |
|
|
$ |
183,582 |
|
International |
|
|
6,147 |
|
|
|
19,787 |
|
|
|
42,787 |
|
Corporate services |
|
|
(104,798 |
) |
|
|
(102,394 |
) |
|
|
(101,982 |
) |
Total income from operations |
|
$ |
134,414 |
|
|
$ |
121,477 |
|
|
$ |
124,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
6,769 |
|
|
$ |
6,005 |
|
|
$ |
7,920 |
|
International |
|
|
1,539 |
|
|
|
2,167 |
|
|
|
2,254 |
|
Corporate services |
|
|
6,080 |
|
|
|
7,392 |
|
|
|
8,214 |
|
Total depreciation and amortization |
|
$ |
14,388 |
|
|
$ |
15,564 |
|
|
$ |
18,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
6,449 |
|
|
$ |
6,955 |
|
|
$ |
6,268 |
|
International |
|
|
4,589 |
|
|
|
3,158 |
|
|
|
3,797 |
|
Corporate services |
|
|
5,490 |
|
|
|
4,283 |
|
|
|
22,176 |
|
Total expenditures for property and equipment |
|
$ |
16,528 |
|
|
$ |
14,396 |
|
|
$ |
32,241 |
|
|
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Property and equipment, net |
|
|
|
|
|
|
|
|
Domestic |
|
$ |
25,732 |
|
|
$ |
19,734 |
|
International |
|
|
7,670 |
|
|
|
5,410 |
|
Corporate services |
|
|
15,123 |
|
|
|
21,956 |
|
Total property and equipment, net |
|
$ |
48,525 |
|
|
$ |
47,100 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Domestic |
|
$ |
964,697 |
|
|
$ |
823,390 |
|
International |
|
|
133,449 |
|
|
|
96,606 |
|
Corporate services |
|
|
61,314 |
|
|
|
57,883 |
|
Total assets |
|
$ |
1,159,460 |
|
|
$ |
977,879 |
|
112
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the Company’s revenue by geographic region for the years ended December 31, 2017, 2016 and 2015 (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
709,537 |
|
|
$ |
622,991 |
|
|
$ |
510,242 |
|
United Kingdom |
|
|
114,838 |
|
|
|
103,478 |
|
|
|
129,703 |
|
Other international countries |
|
|
19,366 |
|
|
|
19,100 |
|
|
|
12,655 |
|
Total revenue |
|
$ |
843,741 |
|
|
$ |
745,569 |
|
|
$ |
652,600 |
|
The Company’s long-lived assets, which consist of the Company’s property and equipment, were $48.5 million and $47.1 million at December 31, 2017 and 2016, respectively. The operations for the Company’s domestic and international businesses are primarily located within the United States, and the value of any long-lived assets located outside of the United States is immaterial.
18. Fair Value Measurements
Recurring Fair Value Measurements
In accordance with ASC 820, certain of the Company’s assets and liabilities, which are carried at fair value, are classified in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
During the years ended December 31, 2017 and 2016, there were no transfers of assets or liabilities in or out of Level 1, Level 2 or Level 3 fair value measurements. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period values.
The Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2017 and 2016 are as follows (in thousands):
|
|
December 31, |
|
|
Fair Value Measurements Using |
|
||||||||||
|
|
2017 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts |
|
$ |
(55 |
) |
|
$ |
— |
|
|
$ |
(55 |
) |
|
$ |
— |
|
Nonqualified savings plan assets (1) |
|
|
1,460 |
|
|
|
1,460 |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
1,405 |
|
|
$ |
1,460 |
|
|
$ |
(55 |
) |
|
$ |
— |
|
|
|
December 31, |
|
|
Fair Value Measurements Using |
|
||||||||||
|
|
2016 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified savings plan assets (1) |
|
$ |
1,590 |
|
|
$ |
1,590 |
|
|
$ |
— |
|
|
$ |
— |
|
Contingent consideration |
|
|
(2,358 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,358 |
) |
Total |
|
$ |
(768 |
) |
|
$ |
1,590 |
|
|
$ |
— |
|
|
$ |
(2,358 |
) |
(1) |
The non-qualified savings plan assets have an offsetting liability of a greater amount, which is included in “Accounts payable and accrued expenses” in the Company’s consolidated balance sheets. |
The Company measures the fair value of its forward currency exchange contracts under Level 2 inputs as defined by ASC 820. For these forward currency exchange contracts, current market rates are used to determine fair value. The significant inputs used in these models are derived from observable market rates. The fair value of the nonqualified savings plan assets are measured under a Level 1 input. These assets are publicly traded equity securities for which market prices are readily observable.
113
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company determined the fair value of the liability for the contingent consideration based on a probability-weighted discounted cash flow analysis. This analysis reflects the contractual terms of the purchase agreement and utilizes assumptions with regard to future earnings, probabilities of achieving such future earnings, the timing of expected payments and a discount rate. Significant increases with respect to assumptions as to future earnings and probabilities of achieving such future earnings would result in a higher fair value measurement while an increase in the discount rate would result in a lower fair value measurement. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in the fair value hierarchy.
The changes in the fair value of the contingent consideration, which is a Level 3 liability measured at fair value on a recurring basis, are summarized in the table below for the years ended December 31, 2017 and 2016 (in thousands):
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|
|||||
|
|
Contingent consideration |
|
|
Total |
|
||
Balance at December 31, 2015 |
|
$ |
5,658 |
|
|
$ |
5,658 |
|
Remeasurement of contingent consideration (see Note 2) |
|
|
(3,300 |
) |
|
|
(3,300 |
) |
Balance at December 31, 2016 |
|
$ |
2,358 |
|
|
$ |
2,358 |
|
Remeasurement of contingent consideration (see Note 2) |
|
|
(2,358 |
) |
|
|
(2,358 |
) |
Balance at December 31, 2017 |
|
$ |
— |
|
|
$ |
— |
|
Fair Value Measurements on a Non-Recurring Basis
The Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a nonrecurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired. At December 31, 2017 and 2016, there were no assets or liabilities recorded at fair value on a nonrecurring basis.
Financial Assets and Liabilities Not Measured at Fair Value
The Company’s financial assets and liabilities as of December 31, 2017 and 2016 that are not measured at fair value in the consolidated balance sheets are as follows (in thousands):
|
|
December 31, |
|
|
Fair Value Measurements Using |
|
||||||||||
|
|
2017 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
68,684 |
|
|
$ |
68,684 |
|
|
$ |
— |
|
|
$ |
— |
|
Short-term loans and line of credit accounts, net (1) |
|
|
192,675 |
|
|
|
— |
|
|
|
— |
|
|
|
192,675 |
|
Installment loans and RPAs, net (1) |
|
|
512,030 |
|
|
|
— |
|
|
|
— |
|
|
|
544,799 |
|
Restricted cash |
|
|
29,460 |
|
|
|
29,460 |
|
|
|
— |
|
|
|
— |
|
Investment in unconsolidated investee (2)(3) |
|
|
6,703 |
|
|
|
— |
|
|
|
— |
|
|
|
6,703 |
|
Total |
|
$ |
809,552 |
|
|
$ |
98,144 |
|
|
$ |
— |
|
|
$ |
744,177 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for estimated losses on consumer loans guaranteed by the Company |
|
$ |
2,258 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,258 |
|
Promissory note |
|
|
3,000 |
|
|
|
— |
|
|
|
— |
|
|
|
3,287 |
|
Securitization Notes |
|
|
211,406 |
|
|
|
— |
|
|
|
215,063 |
|
|
|
— |
|
9.75% senior notes due 2021 |
|
|
342,558 |
|
|
|
— |
|
|
|
365,700 |
|
|
|
— |
|
8.50% senior notes due 2024 |
|
|
250,000 |
|
|
|
— |
|
|
|
255,000 |
|
|
|
— |
|
Total |
|
$ |
809,222 |
|
|
$ |
— |
|
|
$ |
835,763 |
|
|
$ |
5,545 |
|
114
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
December 31, |
|
|
Fair Value Measurements Using |
|
|||||||||||
|
|
2016 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
39,934 |
|
|
$ |
39,934 |
|
|
$ |
— |
|
|
$ |
— |
|
Short-term loans and line of credit accounts, net (1) |
|
|
162,824 |
|
|
|
— |
|
|
|
— |
|
|
|
162,824 |
|
Installment loans and RPAs, net (1) |
|
|
398,726 |
|
|
|
— |
|
|
|
— |
|
|
|
430,895 |
|
Restricted cash |
|
|
26,306 |
|
|
|
26,306 |
|
|
|
— |
|
|
|
— |
|
Investment in unconsolidated investee (2)(3) |
|
|
6,703 |
|
|
|
— |
|
|
|
— |
|
|
|
6,703 |
|
Total |
|
$ |
634,493 |
|
|
$ |
66,240 |
|
|
$ |
— |
|
|
$ |
600,422 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for estimated losses on consumer loans guaranteed by the Company |
|
$ |
1,996 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,996 |
|
Promissory note |
|
|
3,000 |
|
|
|
— |
|
|
|
— |
|
|
|
3,111 |
|
Securitization Notes |
|
|
165,419 |
|
|
|
— |
|
|
|
168,216 |
|
|
|
— |
|
9.75% senior notes due 2021 |
|
|
495,622 |
|
|
|
— |
|
|
|
495,940 |
|
|
|
— |
|
Total |
|
$ |
666,037 |
|
|
$ |
— |
|
|
$ |
664,156 |
|
|
$ |
5,107 |
|
(1) |
Short-term loans, line of credit accounts and installment loans and RPAs are included in “Loans and finance receivables, net” in the consolidated balance sheets. |
(2) |
Investment in unconsolidated investee is included in “Other assets” in the consolidated balance sheets. |
(3) |
See Note 1 for additional information related to the investment in unconsolidated investee. |
Cash and cash equivalents and restricted cash bear interest at market rates and have maturities of less than 90 days. The carrying amount of restricted cash and cash equivalents approximates fair value.
Short-term loans, line of credit accounts, installment loans and RPAs are carried in the consolidated balance sheet net of the allowance for estimated losses, which is calculated by applying historical loss rates combined with recent default trends to the gross receivable balance. Short-term loans and line of credit accounts have relatively short maturity periods that are generally 12 months or less. The unobservable inputs used to calculate the fair value of these receivables include historical loss rates, recent default trends and estimated remaining loan term; therefore, the carrying value approximates the fair value. The fair value of installment loans and RPAs is estimated using discounted cash flow analyses, which consider interest rates on loans and discounts offered for receivables with similar terms to customers with similar credit quality, the timing of expected payments, estimated customer default rates and/or valuations of comparable portfolios. As of December 31, 2017 and 2016, the fair value of the Company’s installment loans and RPAs was greater than the carrying value of these loans and finance receivables. Unsecured installment loans typically have terms between two and 60 months. RPAs typically have estimated delivery terms between six and 18 months.
The Company measures the fair value of its investment in unconsolidated investee using Level 3 inputs. Because the unconsolidated investee is a private company and financial information is limited, the Company estimates the fair value based on the best available information at the measurement date. As of December 31, 2017, the Company estimated the fair value of its investment to be approximately equal to the book value.
In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans the Company arranges for consumers on the third-party lenders’ behalf and is required to purchase any defaulted loans it has guaranteed. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company was $2.3 million and $2.0 million as of December 31, 2017 and 2016, respectively. The Company measures the fair value of its liability for third-party lender-owned consumer loans under Level 3 inputs. The fair value of these liabilities is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value of these liabilities approximates the fair value.
The Company measures the fair value of the Promissory Note using Level 3 inputs. The fair value of the Promissory Note is estimated using a discounted cash flow analysis. As of December 31, 2017 and 2016, the Promissory Note had a higher fair value than the carrying value.
The Company measures the fair value of its Securitization Notes using Level 2 inputs. The fair value of the Company’s Securitization Notes is estimated based on quoted prices in markets that are not active. As of December 31, 2017 and 2016, the Company’s Securitization Notes had a higher fair value than the carrying value.
115
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company measures the fair value of its 9.75% senior notes due 2021 using Level 2 inputs. The fair value of the Company’s 9.75% senior notes due 2021 is estimated based on quoted prices in markets that are not active. As of December 31, 2017 and 2016 , the Company’s 9.75% senior notes due 2021 had a higher fair value than the carrying value.
The Company measures the fair value of its 8.50 % senior notes due 2024 using Level 2 inputs. The fair value of the 8.50 % senior notes due 2024 is estimated based on quoted prices in markets that are not active. As of December 31, 2017, the Company’s 8.50 % senior notes due 2024 had a higher fair value than the carrying value.
19. Condensed Consolidating Financial Statements
The Company’s Senior Notes are unconditionally guaranteed by certain of the Company’s subsidiaries (the “Guarantor Subsidiaries”) and are not secured by its other subsidiaries (the “Non-Guarantor Subsidiaries”). The Guarantor Subsidiaries are 100% owned, all guarantees are full and unconditional, and all guarantees are joint and several. As a result of the guarantee arrangements, we are required to present the following condensed consolidating financial statements.
The condensed consolidating financial statements reflect the investments in subsidiaries of the Company using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Condensed consolidating financial statements of Enova International, Inc. (the “Parent”), its Guarantor Subsidiaries and Non-Guarantor Subsidiaries as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 are shown on the following pages.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2017
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
12,183 |
|
|
$ |
54,659 |
|
|
$ |
1,842 |
|
|
$ |
— |
|
|
$ |
68,684 |
|
Restricted cash |
|
|
— |
|
|
|
7,764 |
|
|
|
21,696 |
|
|
|
— |
|
|
|
29,460 |
|
Loans and finance receivables, net |
|
|
— |
|
|
|
442,516 |
|
|
|
262,189 |
|
|
|
— |
|
|
|
704,705 |
|
Income taxes receivable |
|
|
114,494 |
|
|
|
(110,852 |
) |
|
|
450 |
|
|
|
— |
|
|
|
4,092 |
|
Other receivables and prepaid expenses |
|
|
833 |
|
|
|
20,731 |
|
|
|
2,253 |
|
|
|
— |
|
|
|
23,817 |
|
Property and equipment, net |
|
|
— |
|
|
|
47,965 |
|
|
|
560 |
|
|
|
— |
|
|
|
48,525 |
|
Goodwill |
|
|
— |
|
|
|
267,015 |
|
|
|
— |
|
|
|
— |
|
|
|
267,015 |
|
Intangible assets, net |
|
|
— |
|
|
|
4,325 |
|
|
|
— |
|
|
|
— |
|
|
|
4,325 |
|
Investment in subsidiaries |
|
|
388,538 |
|
|
|
63,956 |
|
|
|
— |
|
|
|
(452,494 |
) |
|
|
— |
|
Intercompany receivable |
|
|
354,457 |
|
|
|
— |
|
|
|
— |
|
|
|
(354,457 |
) |
|
|
— |
|
Other assets |
|
|
1,785 |
|
|
|
6,874 |
|
|
|
178 |
|
|
|
— |
|
|
|
8,837 |
|
Total assets |
|
$ |
872,290 |
|
|
$ |
804,953 |
|
|
$ |
289,168 |
|
|
$ |
(806,951 |
) |
|
$ |
1,159,460 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
10,336 |
|
|
$ |
64,541 |
|
|
$ |
2,246 |
|
|
$ |
— |
|
|
$ |
77,123 |
|
Intercompany payables |
|
|
— |
|
|
|
331,425 |
|
|
|
23,032 |
|
|
|
(354,457 |
) |
|
|
— |
|
Deferred tax liabilities, net |
|
|
(140 |
) |
|
|
12,726 |
|
|
|
(478 |
) |
|
|
— |
|
|
|
12,108 |
|
Long-term debt |
|
|
580,407 |
|
|
|
— |
|
|
|
208,135 |
|
|
|
— |
|
|
|
788,542 |
|
Total liabilities |
|
|
590,603 |
|
|
|
408,692 |
|
|
|
232,935 |
|
|
|
(354,457 |
) |
|
|
877,773 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
281,687 |
|
|
|
396,261 |
|
|
|
56,233 |
|
|
|
(452,494 |
) |
|
|
281,687 |
|
Total liabilities and stockholders' equity |
|
$ |
872,290 |
|
|
$ |
804,953 |
|
|
$ |
289,168 |
|
|
$ |
(806,951 |
) |
|
$ |
1,159,460 |
|
116
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2016
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
— |
|
|
$ |
36,057 |
|
|
$ |
3,877 |
|
|
$ |
— |
|
|
$ |
39,934 |
|
Restricted cash |
|
|
— |
|
|
|
6,838 |
|
|
|
19,468 |
|
|
|
— |
|
|
|
26,306 |
|
Loans and finance receivables, net |
|
|
— |
|
|
|
335,161 |
|
|
|
226,390 |
|
|
|
— |
|
|
|
561,550 |
|
Income taxes receivable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other receivables and prepaid expenses |
|
|
127 |
|
|
|
19,095 |
|
|
|
302 |
|
|
|
— |
|
|
|
19,524 |
|
Property and equipment, net |
|
|
— |
|
|
|
46,507 |
|
|
|
593 |
|
|
|
— |
|
|
|
47,100 |
|
Goodwill |
|
|
— |
|
|
|
267,010 |
|
|
|
— |
|
|
|
— |
|
|
|
267,010 |
|
Intangible assets, net |
|
|
— |
|
|
|
5,400 |
|
|
|
4 |
|
|
|
— |
|
|
|
5,404 |
|
Investment in subsidiaries |
|
|
294,647 |
|
|
|
25,131 |
|
|
|
— |
|
|
|
(319,778 |
) |
|
|
— |
|
Intercompany receivable |
|
|
363,941 |
|
|
|
— |
|
|
|
— |
|
|
|
(363,941 |
) |
|
|
— |
|
Other assets |
|
|
597 |
|
|
|
7,995 |
|
|
|
2,459 |
|
|
|
— |
|
|
|
11,051 |
|
Total assets |
|
$ |
659,312 |
|
|
$ |
749,194 |
|
|
$ |
253,093 |
|
|
$ |
(683,719 |
) |
|
$ |
977,879 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
4,310 |
|
|
$ |
65,714 |
|
|
$ |
1,647 |
|
|
$ |
— |
|
|
$ |
71,671 |
|
Intercompany payables |
|
|
— |
|
|
|
295,764 |
|
|
|
68,179 |
|
|
|
(363,943 |
) |
|
|
— |
|
Income taxes currently payable |
|
|
(72,704 |
) |
|
|
73,006 |
|
|
|
(20 |
) |
|
|
— |
|
|
|
282 |
|
Deferred tax liabilities, net |
|
|
(354 |
) |
|
|
15,156 |
|
|
|
(486 |
) |
|
|
— |
|
|
|
14,316 |
|
Long-term debt |
|
|
486,361 |
|
|
|
— |
|
|
|
163,550 |
|
|
|
— |
|
|
|
649,911 |
|
Total liabilities |
|
|
417,613 |
|
|
|
449,640 |
|
|
|
232,870 |
|
|
|
(363,943 |
) |
|
|
736,180 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
241,699 |
|
|
|
299,554 |
|
|
|
20,223 |
|
|
|
(319,777 |
) |
|
|
241,699 |
|
Total liabilities and stockholders' equity |
|
$ |
659,312 |
|
|
$ |
749,194 |
|
|
$ |
253,093 |
|
|
$ |
(683,720 |
) |
|
$ |
977,879 |
|
117
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Year Ended December 31, 2017
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Revenue |
|
$ |
— |
|
|
$ |
696,446 |
|
|
$ |
151,233 |
|
|
$ |
(3,938 |
) |
|
$ |
843,741 |
|
Cost of Revenue |
|
|
— |
|
|
|
313,815 |
|
|
|
82,817 |
|
|
|
— |
|
|
|
396,632 |
|
Gross Profit |
|
|
— |
|
|
|
382,631 |
|
|
|
68,416 |
|
|
|
(3,938 |
) |
|
|
447,109 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
— |
|
|
|
99,522 |
|
|
|
1,907 |
|
|
|
— |
|
|
|
101,429 |
|
Operations and technology |
|
|
— |
|
|
|
85,899 |
|
|
|
10,660 |
|
|
|
(1,404 |
) |
|
|
95,155 |
|
General and administrative |
|
|
360 |
|
|
|
97,762 |
|
|
|
6,135 |
|
|
|
(2,534 |
) |
|
|
101,723 |
|
Depreciation and amortization |
|
|
— |
|
|
|
14,209 |
|
|
|
179 |
|
|
|
— |
|
|
|
14,388 |
|
Total Expenses |
|
|
360 |
|
|
|
297,392 |
|
|
|
18,881 |
|
|
|
(3,938 |
) |
|
|
312,695 |
|
(Loss) Income from Operations |
|
|
(360 |
) |
|
|
85,239 |
|
|
|
49,535 |
|
|
|
— |
|
|
|
134,414 |
|
Interest expense, net |
|
|
(55,506 |
) |
|
|
(152 |
) |
|
|
(18,345 |
) |
|
|
— |
|
|
|
(74,003 |
) |
Foreign currency transaction gain |
|
|
381 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
384 |
|
(Loss) gain on early extinguishment of debt |
|
|
(14,927 |
) |
|
|
(8,594 |
) |
|
|
626 |
|
|
|
— |
|
|
|
(22,895 |
) |
(Loss) Income before Income Taxes and Equity in Net Earnings of Subsidiaries |
|
|
(70,412 |
) |
|
|
76,496 |
|
|
|
31,816 |
|
|
|
— |
|
|
|
37,900 |
|
(Benefit from) provision for income taxes |
|
|
(16,089 |
) |
|
|
17,479 |
|
|
|
7,270 |
|
|
|
— |
|
|
|
8,660 |
|
(Loss) Income before Equity in Net Earnings of Subsidiaries |
|
|
(54,323 |
) |
|
|
59,017 |
|
|
|
24,546 |
|
|
|
— |
|
|
|
29,240 |
|
Net earnings of subsidiaries |
|
|
83,563 |
|
|
|
24,546 |
|
|
|
— |
|
|
|
(108,109 |
) |
|
|
— |
|
Net Income (Loss) |
|
$ |
29,240 |
|
|
$ |
83,563 |
|
|
$ |
24,546 |
|
|
$ |
(108,109 |
) |
|
$ |
29,240 |
|
Other comprehensive gain (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss) |
|
|
4,492 |
|
|
|
4,963 |
|
|
|
(471 |
) |
|
|
(4,492 |
) |
|
|
4,492 |
|
Total other comprehensive gain (loss), net of tax |
|
|
4,492 |
|
|
|
4,963 |
|
|
|
(471 |
) |
|
|
(4,492 |
) |
|
|
4,492 |
|
Comprehensive Income (Loss) |
|
$ |
33,732 |
|
|
$ |
88,526 |
|
|
$ |
24,075 |
|
|
$ |
(112,601 |
) |
|
$ |
33,732 |
|
118
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Year Ended December 31, 2016
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Revenue |
|
$ |
— |
|
|
$ |
653,517 |
|
|
$ |
95,646 |
|
|
$ |
(3,594 |
) |
|
$ |
745,569 |
|
Cost of Revenue |
|
|
— |
|
|
|
260,996 |
|
|
|
66,970 |
|
|
|
— |
|
|
|
327,966 |
|
Gross Profit |
|
|
— |
|
|
|
392,521 |
|
|
|
28,676 |
|
|
|
(3,594 |
) |
|
|
417,603 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
— |
|
|
|
95,972 |
|
|
|
1,432 |
|
|
|
— |
|
|
|
97,404 |
|
Operations and technology |
|
|
— |
|
|
|
80,999 |
|
|
|
4,203 |
|
|
|
— |
|
|
|
85,202 |
|
General and administrative |
|
|
315 |
|
|
|
95,840 |
|
|
|
5,395 |
|
|
|
(3,594 |
) |
|
|
97,956 |
|
Depreciation and amortization |
|
|
— |
|
|
|
15,464 |
|
|
|
100 |
|
|
|
— |
|
|
|
15,564 |
|
Total Expenses |
|
|
315 |
|
|
|
288,275 |
|
|
|
11,130 |
|
|
|
(3,594 |
) |
|
|
296,126 |
|
(Loss) Income from Operations |
|
|
(315 |
) |
|
|
104,246 |
|
|
|
17,546 |
|
|
|
— |
|
|
|
121,477 |
|
Interest expense, net |
|
|
(53,512 |
) |
|
|
562 |
|
|
|
(12,653 |
) |
|
|
— |
|
|
|
(65,603 |
) |
Foreign currency transaction gain (loss) |
|
|
1,569 |
|
|
|
(7 |
) |
|
|
— |
|
|
|
— |
|
|
|
1,562 |
|
(Loss) Income before Income Taxes and Equity in Net Earnings of Subsidiaries |
|
|
(52,258 |
) |
|
|
104,801 |
|
|
|
4,893 |
|
|
|
— |
|
|
|
57,436 |
|
Provision for income taxes |
|
|
(20,776 |
) |
|
|
41,665 |
|
|
|
1,945 |
|
|
|
— |
|
|
|
22,834 |
|
(Loss) Income before Equity in Net Earnings of Subsidiaries |
|
|
(31,482 |
) |
|
|
63,136 |
|
|
|
2,948 |
|
|
|
— |
|
|
|
34,602 |
|
Net earnings of subsidiaries |
|
|
66,084 |
|
|
|
2,948 |
|
|
|
— |
|
|
|
(69,032 |
) |
|
|
— |
|
Net Income (Loss) |
|
$ |
34,602 |
|
|
$ |
66,084 |
|
|
$ |
2,948 |
|
|
$ |
(69,032 |
) |
|
$ |
34,602 |
|
Other comprehensive (loss) gain, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain |
|
|
(6,956 |
) |
|
|
(8,269 |
) |
|
|
1,331 |
|
|
|
6,938 |
|
|
|
(6,956 |
) |
Total other comprehensive (loss) gain, net of tax |
|
|
(6,956 |
) |
|
|
(8,269 |
) |
|
|
1,331 |
|
|
|
6,938 |
|
|
|
(6,956 |
) |
Comprehensive Income (Loss) |
|
$ |
27,646 |
|
|
$ |
57,815 |
|
|
$ |
4,279 |
|
|
$ |
(62,094 |
) |
|
$ |
27,646 |
|
119
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Year Ended December 31, 2015
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Revenue |
|
$ |
— |
|
|
$ |
650,295 |
|
|
$ |
2,305 |
|
|
$ |
— |
|
|
$ |
652,600 |
|
Cost of Revenue |
|
|
— |
|
|
|
215,637 |
|
|
|
1,221 |
|
|
|
— |
|
|
|
216,858 |
|
Gross Profit |
|
|
— |
|
|
|
434,658 |
|
|
|
1,084 |
|
|
|
— |
|
|
|
435,742 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
— |
|
|
|
116,330 |
|
|
|
552 |
|
|
|
— |
|
|
|
116,882 |
|
Operations and technology |
|
|
— |
|
|
|
71,993 |
|
|
|
2,019 |
|
|
|
— |
|
|
|
74,012 |
|
General and administrative |
|
|
673 |
|
|
|
100,642 |
|
|
|
758 |
|
|
|
— |
|
|
|
102,073 |
|
Depreciation and amortization |
|
|
— |
|
|
|
18,350 |
|
|
|
38 |
|
|
|
— |
|
|
|
18,388 |
|
Total Expenses |
|
|
673 |
|
|
|
307,315 |
|
|
|
3,367 |
|
|
|
— |
|
|
|
311,355 |
|
(Loss) Income from Operations |
|
|
(673 |
) |
|
|
127,343 |
|
|
|
(2,283 |
) |
|
|
— |
|
|
|
124,387 |
|
Interest expense, net |
|
|
(52,816 |
) |
|
|
(71 |
) |
|
|
4 |
|
|
|
— |
|
|
|
(52,883 |
) |
Foreign currency transaction gain (loss) |
|
|
532 |
|
|
|
(1,516 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(985 |
) |
(Loss) Income before Income Taxes and Equity in Net Earnings of Subsidiaries |
|
|
(52,957 |
) |
|
|
125,756 |
|
|
|
(2,280 |
) |
|
|
— |
|
|
|
70,519 |
|
(Benefit from) provision for income taxes |
|
|
(19,921 |
) |
|
|
47,306 |
|
|
|
(858 |
) |
|
|
— |
|
|
|
26,527 |
|
(Loss) Income before Equity in Net Earnings of Subsidiaries |
|
|
(33,036 |
) |
|
|
78,450 |
|
|
|
(1,422 |
) |
|
|
— |
|
|
|
43,992 |
|
Net earnings of subsidiaries |
|
|
77,028 |
|
|
|
(1,422 |
) |
|
|
— |
|
|
|
(75,606 |
) |
|
|
— |
|
Net Income (Loss) |
|
$ |
43,992 |
|
|
$ |
77,028 |
|
|
$ |
(1,422 |
) |
|
$ |
(75,606 |
) |
|
$ |
43,992 |
|
Other comprehensive (loss) gain, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain |
|
|
(1,451 |
) |
|
|
(245 |
) |
|
|
(866 |
) |
|
|
1,111 |
|
|
|
(1,451 |
) |
Total other comprehensive (loss) gain, net of tax |
|
|
(1,451 |
) |
|
|
(245 |
) |
|
|
(866 |
) |
|
|
1,111 |
|
|
|
(1,451 |
) |
Comprehensive Income (Loss) |
|
$ |
42,541 |
|
|
$ |
76,783 |
|
|
$ |
(2,288 |
) |
|
$ |
(74,495 |
) |
|
$ |
42,541 |
|
120
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2017
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Cash Flows from Operating Activities |
|
$ |
(50,319 |
) |
|
$ |
616,042 |
|
|
$ |
(91,660 |
) |
|
$ |
(26,890 |
) |
|
$ |
447,173 |
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables originated or acquired |
|
|
— |
|
|
|
(1,401,302 |
) |
|
|
(29,720 |
) |
|
|
11,623 |
|
|
|
(1,419,399 |
) |
Securitized loans transferred |
|
|
— |
|
|
|
231,863 |
|
|
|
(231,863 |
) |
|
|
— |
|
|
|
— |
|
Loans and finance receivables repaid |
|
|
— |
|
|
|
621,495 |
|
|
|
299,682 |
|
|
|
(11,623 |
) |
|
|
909,554 |
|
Change in restricted cash |
|
|
— |
|
|
|
(337 |
) |
|
|
(2,228 |
) |
|
|
— |
|
|
|
(2,565 |
) |
Purchases of property and equipment |
|
|
— |
|
|
|
(16,375 |
) |
|
|
(153 |
) |
|
|
— |
|
|
|
(16,528 |
) |
Capital contributions to subsidiaries |
|
|
— |
|
|
|
(11,935 |
) |
|
|
— |
|
|
|
11,935 |
|
|
|
— |
|
Other investing activities |
|
|
— |
|
|
|
1,805 |
|
|
|
— |
|
|
|
— |
|
|
|
1,805 |
|
Net cash (used in) provided by investing activities |
|
|
— |
|
|
|
(574,786 |
) |
|
|
35,718 |
|
|
|
11,935 |
|
|
|
(527,133 |
) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Payments for) proceeds from member's equity |
|
|
— |
|
|
|
(26,890 |
) |
|
|
11,935 |
|
|
|
14,955 |
|
|
|
— |
|
Debt issuance costs paid |
|
|
(10,753 |
) |
|
|
— |
|
|
|
(3,909 |
) |
|
|
— |
|
|
|
(14,662 |
) |
Debt prepayment penalty |
|
|
(16,694 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16,694 |
) |
Treasury shares purchased |
|
|
(5,079 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,079 |
) |
Issuance of Senior Notes |
|
|
250,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
250,000 |
|
Repayments of Senior Notes |
|
|
(155,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(155,000 |
) |
Borrowings under revolving line of credit |
|
|
30,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,000 |
|
Repayments under revolving line of credit |
|
|
(30,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,000 |
) |
Borrowings under securitization facility |
|
|
— |
|
|
|
— |
|
|
|
359,842 |
|
|
|
— |
|
|
|
359,842 |
|
Repayments under securitization facility |
|
|
— |
|
|
|
— |
|
|
|
(313,853 |
) |
|
|
— |
|
|
|
(313,853 |
) |
Proceeds from exercise of stock options |
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
Net cash provided by (used in) financing activities |
|
|
62,502 |
|
|
|
(26,890 |
) |
|
|
54,015 |
|
|
|
14,955 |
|
|
|
104,582 |
|
Effect of exchange rates on cash |
|
|
— |
|
|
|
4,236 |
|
|
|
(108 |
) |
|
|
— |
|
|
|
4,128 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
12,183 |
|
|
|
18,602 |
|
|
|
(2,035 |
) |
|
|
— |
|
|
|
28,750 |
|
Cash and cash equivalents at beginning of year |
|
|
— |
|
|
|
36,057 |
|
|
|
3,877 |
|
|
|
— |
|
|
|
39,934 |
|
Cash and cash equivalents at end of period |
|
$ |
12,183 |
|
|
$ |
54,659 |
|
|
$ |
1,842 |
|
|
$ |
— |
|
|
$ |
68,684 |
|
121
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2016
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Cash Flows from Operating Activities |
|
$ |
59,337 |
|
|
$ |
296,876 |
|
|
$ |
37,859 |
|
|
$ |
(699 |
) |
|
$ |
393,373 |
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables originated or acquired |
|
|
— |
|
|
|
(1,293,273 |
) |
|
|
(14,924 |
) |
|
|
— |
|
|
|
(1,308,197 |
) |
Securitized loans transferred |
|
|
— |
|
|
|
359,000 |
|
|
|
(359,000 |
) |
|
|
— |
|
|
|
— |
|
Loans and finance receivables repaid |
|
|
— |
|
|
|
669,088 |
|
|
|
188,960 |
|
|
|
— |
|
|
|
858,048 |
|
Change in restricted cash |
|
|
— |
|
|
|
(658 |
) |
|
|
(19,468 |
) |
|
|
— |
|
|
|
(20,126 |
) |
Purchases of property and equipment |
|
|
— |
|
|
|
(14,007 |
) |
|
|
(389 |
) |
|
|
— |
|
|
|
(14,396 |
) |
Capital contributions to subsidiaries |
|
|
— |
|
|
|
(10,255 |
) |
|
|
— |
|
|
|
10,255 |
|
|
|
— |
|
Other investing activities |
|
|
— |
|
|
|
95 |
|
|
|
— |
|
|
|
— |
|
|
|
95 |
|
Net cash used in investing activities |
|
|
— |
|
|
|
(290,010 |
) |
|
|
(204,821 |
) |
|
|
10,255 |
|
|
|
(484,576 |
) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Payments for) proceeds from member's equity |
|
|
— |
|
|
|
(699 |
) |
|
|
10,255 |
|
|
|
(9,556 |
) |
|
|
— |
|
Debt issuance costs paid |
|
|
(500 |
) |
|
|
— |
|
|
|
(6,202 |
) |
|
|
— |
|
|
|
(6,702 |
) |
Treasury shares purchased |
|
|
(437 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(437 |
) |
Borrowings under revolving line of credit |
|
|
58,400 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
58,400 |
|
Repayments under revolving line of credit, net |
|
|
(116,800 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(116,800 |
) |
Borrowings under securitization facility |
|
|
— |
|
|
|
— |
|
|
|
280,075 |
|
|
|
— |
|
|
|
280,075 |
|
Repayments under securitization facility |
|
|
— |
|
|
|
— |
|
|
|
(114,656 |
) |
|
|
— |
|
|
|
(114,656 |
) |
Net cash provided by (used in) provided by financing activities |
|
|
(59,337 |
) |
|
|
(699 |
) |
|
|
169,472 |
|
|
|
(9,556 |
) |
|
|
99,880 |
|
Effect of exchange rates on cash |
|
|
— |
|
|
|
(11,037 |
) |
|
|
228 |
|
|
|
— |
|
|
|
(10,809 |
) |
Net (decrease) increase in cash and cash equivalents |
|
|
— |
|
|
|
(4,870 |
) |
|
|
2,738 |
|
|
|
— |
|
|
|
(2,132 |
) |
Cash and cash equivalents at beginning of year |
|
|
— |
|
|
|
40,927 |
|
|
|
1,139 |
|
|
|
— |
|
|
|
42,066 |
|
Cash and cash equivalents at end of period |
|
$ |
— |
|
|
$ |
36,057 |
|
|
$ |
3,877 |
|
|
$ |
— |
|
|
$ |
39,934 |
|
122
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2015
(in thousands)
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
||
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Cash Flows from Operating Activities |
|
$ |
31,259 |
|
|
$ |
331,954 |
|
|
$ |
(2,695 |
) |
|
$ |
(76,597 |
) |
|
$ |
283,921 |
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and finance receivables originated or acquired |
|
|
— |
|
|
|
(1,167,107 |
) |
|
|
(5,062 |
) |
|
|
— |
|
|
|
(1,172,169 |
) |
Loans and finance receivables repaid |
|
|
— |
|
|
|
849,638 |
|
|
|
(280 |
) |
|
|
— |
|
|
|
849,358 |
|
Acquisitions |
|
|
— |
|
|
|
(17,735 |
) |
|
|
— |
|
|
|
— |
|
|
|
(17,735 |
) |
Purchases of property and equipment |
|
|
— |
|
|
|
(31,977 |
) |
|
|
(264 |
) |
|
|
— |
|
|
|
(32,241 |
) |
Capital contributions to subsidiaries |
|
|
(87,876 |
) |
|
|
(7,255 |
) |
|
|
— |
|
|
|
95,131 |
|
|
|
— |
|
Other investing activities |
|
|
— |
|
|
|
618 |
|
|
|
— |
|
|
|
— |
|
|
|
618 |
|
Net cash used in investing activities |
|
|
(87,876 |
) |
|
|
(373,818 |
) |
|
|
(5,606 |
) |
|
|
95,131 |
|
|
|
(372,169 |
) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Payments for) proceeds from member's equity |
|
|
— |
|
|
|
11,279 |
|
|
|
7,255 |
|
|
|
(18,534 |
) |
|
|
— |
|
Debt issuance costs paid |
|
|
(1,596 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,596 |
) |
Treasury shares purchased |
|
|
(187 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(187 |
) |
Borrowings under revolving line of credit |
|
|
63,400 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
63,400 |
|
Repayments under revolving line of credit |
|
|
(5,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,000 |
) |
Net cash provided by (used in) financing activities |
|
|
56,617 |
|
|
|
11,279 |
|
|
|
7,255 |
|
|
|
(18,534 |
) |
|
|
56,617 |
|
Effect of exchange rates on cash |
|
|
— |
|
|
|
(855 |
) |
|
|
(554 |
) |
|
|
— |
|
|
|
(1,409 |
) |
Net decrease in cash and cash equivalents |
|
|
— |
|
|
|
(31,440 |
) |
|
|
(1,600 |
) |
|
|
— |
|
|
|
(33,040 |
) |
Cash and cash equivalents at beginning of year |
|
|
— |
|
|
|
72,367 |
|
|
|
2,739 |
|
|
|
— |
|
|
|
75,106 |
|
Cash and cash equivalents at end of period |
|
$ |
— |
|
|
$ |
40,927 |
|
|
$ |
1,139 |
|
|
$ |
— |
|
|
$ |
42,066 |
|
20. Quarterly Financial Data (Unaudited)
The Company’s operations are subject to seasonal fluctuations. Demand has historically been highest in the third and fourth quarters of each year, corresponding to the holiday season, and lowest in the first quarter of each year, corresponding to customers’ receipt of income tax refunds in the United States. Typically, the Company’s cost of revenue, which represents its loan loss provision, is lowest as a percentage of revenue in the first quarter of each year. The following is a summary of the quarterly results of operations for the years ended December 31, 2017 and 2016 (in thousands, except per share data):
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
||||
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
192,263 |
|
|
$ |
189,904 |
|
|
$ |
217,878 |
|
|
$ |
243,696 |
|
Cost of Revenue |
|
|
81,884 |
|
|
|
79,862 |
|
|
|
107,341 |
|
|
|
127,545 |
|
Gross Profit |
|
$ |
110,379 |
|
|
$ |
110,042 |
|
|
$ |
110,537 |
|
|
$ |
116,151 |
|
Net Income (Loss) |
|
$ |
13,852 |
|
|
$ |
11,873 |
|
|
$ |
(3,368 |
) |
|
$ |
6,883 |
|
Diluted earnings per share |
|
$ |
0.41 |
|
|
$ |
0.35 |
|
|
$ |
(0.10 |
) |
|
$ |
0.20 |
|
Diluted weighted average common shares (1) |
|
|
34,036 |
|
|
|
34,125 |
|
|
|
33,670 |
|
|
|
34,172 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
174,653 |
|
|
$ |
172,535 |
|
|
$ |
195,943 |
|
|
$ |
202,438 |
|
Cost of Revenue |
|
|
69,577 |
|
|
|
65,453 |
|
|
|
95,391 |
|
|
|
97,545 |
|
Gross Profit |
|
$ |
105,076 |
|
|
$ |
107,082 |
|
|
$ |
100,552 |
|
|
$ |
104,893 |
|
Net Income |
|
$ |
9,863 |
|
|
$ |
8,188 |
|
|
$ |
7,837 |
|
|
$ |
8,714 |
|
Diluted earnings per share |
|
$ |
0.30 |
|
|
$ |
0.25 |
|
|
$ |
0.23 |
|
|
$ |
0.26 |
|
Diluted weighted average common shares (1) |
|
|
33,187 |
|
|
|
33,335 |
|
|
|
33,558 |
|
|
|
33,767 |
|
(1) |
See Note 1 for Basis of Presentation. |
123
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. Subsequent Events
Subsequent events have been reviewed through the date these financial statements were available to be issued.
On January 22, 2018, the Company redeemed $50,000,000 in principal amount of the outstanding 2021 Senior Notes. The redemption price of the 2021 Senior Notes, as set forth in the 2021 Senior Notes Indenture, was equal to 107.313% of the principal amount of such 2021 Senior Notes redeemed, plus accrued and unpaid interest thereon. In connection with these purchases, the Company recorded a loss on extinguishment of debt of approximately $4.7 million, which will be included in “Loss on early extinguishment of debt” in the consolidated statements of income.
124
None.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2017 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective and provide reasonable assurance (i) that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent or detect all possible misstatements due to error and fraud. Our disclosure controls and procedures and internal control over financial reporting are, however, designed to provide reasonable assurance of achieving their objectives.
Report of Management on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in “Internal Control — Integrated Framework” (2013), management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was effective as of December 31, 2017. The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in this Form 10-K.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the quarter ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
125
The Company plans to file its Proxy Statement for the 2018 Annual Meeting of Stockholders, or the Proxy Statement, within 120 days after December 31, 2017. Information required by this Item 10 relating to our directors and nominees is included under the captions “Proposal 1: Proposal to Elect Directors—Directors to be Elected by our Stockholders” and “Stockholder Proposals and Communications with our Board—Director Nominations” of our Proxy Statement and is incorporated herein by reference.
The information required by this Item 10 regarding our Audit Committee is included under the caption “Structure and Functioning of the Board—Board Committees—Audit Committee” and is incorporated herein by reference.
Information concerning executive officers is contained in this report under “Item 1. Business—Operations—Management and Personnel—Executive Officers.”
Information required by this Item 10 regarding compliance with Section 16(a) of the Exchange Act of 1934 is included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement and is incorporated herein by reference.
The Company has adopted a Code of Business Conduct and Ethics that applies to all of its directors, officers (including all of its executive officers) and employees. This Code of Business Conduct and Ethics is publicly available on the Company’s website at www.enova.com in the Investor Relations section under “Corporate Governance—Code of Conduct”. Amendments to the Code of Business Conduct and Ethics and any grant of a waiver from a provision of the Code of Business Conduct and Ethics requiring disclosure under applicable Securities and Exchange Commission rules will be disclosed on the Company’s website.
Information contained under the caption “Executive Compensation”, “Director Compensation”, “Compensation Committee Interlocks and Insider Participation” and “Executive Compensation—Management Development and Compensation Committee Report” in the Proxy Statement is incorporated into this report by reference in response to this Item 11.
Information contained under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated into this report by reference in response to this Item 12.
Securities Authorized for Issuance Under Equity Compensation Plans
The table below sets forth information, as of December 31, 2017, with respect to shares of common stock of the Company that may be issued under the Company’s existing equity compensation plans.
Plan Category |
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
|
Weighted average exercise price of outstanding options, warrants and rights |
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|
|||
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|||
Equity compensation plans approved by security holders |
|
|
3,479,992 |
|
|
$ |
9.98 |
|
|
|
2,924,099 |
|
Equity compensation plans not approved by security holders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
3,479,992 |
|
|
$ |
9.98 |
|
|
|
2,924,099 |
|
Information contained under the captions “Certain Relationships and Related Transactions”, “Structure and Functioning of the Board—Board Committees” and “Structure and Functioning of the Board—Director Independence” in the Proxy Statement is incorporated into this report by reference in response to this Item 13.
126
Information contained under the caption “Audit and Non-Audit Fees” in the Proxy Statement is incorporated into this report by reference in response to this Item 14.
127
The following consolidated financial statements are filed in Item 8 of Part II of this report:
128
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed
|
|
2.1 |
|
|
8-K |
|
001-35503 |
|
2.1 |
|
11/19/2014 |
|
|
|
|
|
|
|
|
|
|
||||||
3.1 |
|
Enova International, Inc. Amended and Restated Certificate of Incorporation |
|
8-K |
|
001-35503 |
|
3.2 |
|
11/17/2017 |
|
|
|
|
|
|
|
|
|
||||||
3.2 |
|
|
8-K |
|
001-35503 |
|
3.1 |
|
11/17/2017 |
|
|
|
|
|
|
|
|
|
|
||||||
4.1 |
|
|
10-12B |
|
001-35503 |
|
4.1 |
|
10/2/2014 |
|
|
|
|
|
|
|
|
|
|
||||||
4.2 |
|
|
10-12B |
|
001-35503 |
|
4.3 |
|
7/31/2014 |
|
|
|
|
|
|
|
|
|
|
||||||
4.3 |
|
|
10-12B |
|
001-35503 |
|
4.4 |
|
10/2/2014 |
|
|
|
|
|
|
|
|
|
|
||||||
4.4 |
|
|
10-Q |
|
001-35503 |
|
10.1 |
|
5/8/2015 |
|
|
|
|
|
|
|
|
|
|
||||||
4.5 |
|
|
10-K |
|
001-35503 |
|
4.6 |
|
3/7/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6 |
|
|
8-K |
|
001-35503 |
|
4.2 |
|
9/8/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7 |
|
|
10-K |
|
001-35503 |
|
4.7 |
|
2/24/2017 |
|
|
|
|
|
|
|
|
|
|
||||||
4.8 |
|
|
8-K |
|
001-35503 |
|
4.1 |
|
9/8/2017 |
|
|
|
|
|
|
|
|
|
|
||||||
4.9 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
||||||
4.10 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
||||||
10.1 |
|
Tax Matters Agreement between Cash America International, Inc. and Enova International, Inc. |
|
8-K |
|
001-35503 |
|
10.1 |
|
11/19/2014 |
|
|
|
|
|
|
|
|
|
||||||
10.2 |
|
|
10-Q |
|
001-35503 |
|
10.1 |
|
11/14/2014 |
|
|
|
|
|
|
|
|
|
|
129
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed
|
|
|
Enova International, Inc. First Amended and Restated 2014 Long-Term Incentive Plan * |
|
DEF 14A |
|
001-35503 |
|
Appendix A |
|
4/7/2016 |
|
|
|
|
|
|
|
|
|
|
||||||
10.4 |
|
|
DEF 14A |
|
001-35503 |
|
Appendix B |
|
4/7/2016 |
|
|
|
|
|
|
|
|
|
|
||||||
10.5 |
|
|
10-Q |
|
001-35503 |
|
10.1 |
|
11/1/2017 |
|
|
|
|
|
|
|
|
|
|
||||||
10.6 |
|
|
10-12B |
|
001-35503 |
|
10.6 |
|
7/31/2014 |
|
|
|
|
|
|
|
|
|
|
||||||
10.7 |
|
Form of Enova International, Inc. Severance Pay Plan for Executives* |
|
10-12B |
|
001-35503 |
|
10.12 |
|
10/2/2014 |
|
|
|
|
|
|
|
|
|
||||||
10.8 |
|
Form of Enova International, Inc. Senior Executive Bonus Plan* |
|
10-12B |
|
001-35503 |
|
10.13 |
|
10/2/2014 |
|
|
|
|
|
|
|
|
|
||||||
10.9 |
|
Summary of 2014 Terms and Conditions of the Enova International, Inc. Short-Term Incentive Plan* |
|
10-12B |
|
001-35503 |
|
10.14 |
|
10/2/2014 |
|
|
|
|
|
|
|
|
|
||||||
10.10 |
|
|
8-K |
|
001-35503 |
|
10.1 |
|
9/15/2017 |
|
|
|
|
|
|
|
|
|
|
||||||
10.11 |
|
|
8-K |
|
001-35503 |
|
10.2 |
|
9/15/2017 |
|
|
|
|
|
|
|
|
|
|
||||||
10.12 |
|
|
10-12B |
|
001-35503 |
|
10.17 |
|
10/17/2014 |
|
|
|
|
|
|
|
|
|
|
||||||
10.13 |
|
|
10-12B |
|
001-35503 |
|
10.18 |
|
10/17/2014 |
|
|
|
|
|
|
|
|
|
|
||||||
10.14 |
|
|
10-12B |
|
001-35503 |
|
10.19 |
|
10/17/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.15 |
|
|
10-Q |
|
001-35503 |
|
10.2 |
|
8/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16 |
|
|
10-Q |
|
001-35503 |
|
10.2 |
|
8/4/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17 |
|
|
10-Q |
|
001-35503 |
|
10.3 |
|
8/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.18 |
|
Offer letter dated May 19, 2016 between Enova Financial Holdings, LLC and Steven Cunningham* |
|
10-Q |
|
001-35503 |
|
10.1 |
|
8/4/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.19 |
|
|
8-K |
|
001-35503 |
|
10.1 |
|
3/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.20 |
|
|
10-K |
|
001-35503 |
|
10.37 |
|
2/24/2017 |
|
|
130
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.21 |
|
Sale Agreement, dated December 1, 2016, by and between Enova International, Inc. and EFR 2016-2, LLC |
|
10-K |
|
001-35503 |
|
10.38 |
|
2/24/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.22 |
|
Lease Agreement, dated July 25, 2014, between 175 Jackson L.L.C. and Enova International, Inc. |
|
10-12B |
|
001-35503 |
|
10.11 |
|
10/22/2014 |
|
|
|
|
|
|
|
|
|
||||||
10.23 |
|
|
10-Q |
|
001-35503 |
|
10.2 |
|
11/1/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.24 |
|
|
10-Q |
|
001-35503 |
|
10.1 |
|
8/2/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.25 |
|
|
8-K |
|
001-35503 |
|
10.1 |
|
8/24/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.26 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
||||||
10.27 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.1 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
||||||
23.1 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS |
|
XBRL Instance Document (1) |
|
|
|
|
|
|
|
|
|
X (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema Document (1) |
|
|
|
|
|
|
|
|
|
X (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document (1) |
|
|
|
|
|
|
|
|
|
X (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB |
|
XBRL Taxonomy Label Linkbase Document (1) |
|
|
|
|
|
|
|
|
|
X (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131
* |
Indicates management contract or compensatory plan, contract or arrangement. |
(1) |
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2017 and December 31, 2016; (ii) Consolidated Statements of Income for the years ended December 31, 2017, December 31, 2016 and December 31, 2015; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, December 31, 2016 and December 31, 2015; (iv) Consolidated Statements of Equity at December 31, 2017, December 31, 2016 and December 31, 2015; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2017, December 31, 2016 and December 31, 2015; and (vi) Notes to Consolidated Financial Statements. |
(2) |
Submitted electronically herewith. |
(3) |
Portions of this document have been omitted pursuant to a confidential treatment request approved by the Securities and Exchange Commission. |
(4) |
Portions of this document have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. |
None.
132
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
ENOVA INTERNATIONAL, INC. |
|
|
|
|
|
Date: February 26, 2018 |
|
By: |
|
/s/ DAVID FISHER |
|
|
|
|
David Fisher |
|
|
|
|
Chief Executive Officer |
Pursuant to the requirements of the Securities and Exchange Act of 1934, the report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
/s/ DAVID FISHER |
|
Chairman of the Board of Directors, |
|
February 26, 2018 |
David Fisher |
|
Chief Executive Officer and Director |
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
||
/s/ STEVEN CUNNINGHAM |
|
Chief Financial Officer, |
|
February 26, 2018 |
Steven Cunningham |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
|
|
|
||
/s/ ELLEN CARNAHAN |
|
Director |
|
February 26, 2018 |
Ellen Carnahan |
|
|
|
|
|
|
|
|
|
/s/ DANIEL R. FEEHAN |
|
Director |
|
February 26, 2018 |
Daniel R. Feehan |
|
|
|
|
|
|
|
|
|
/s/ WILLIAM M. GOODYEAR |
|
Director |
|
February 26, 2018 |
William M. Goodyear |
|
|
|
|
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/s/ JAMES A. GRAY |
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Director |
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February 26, 2018 |
James A. Gray |
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/s/ GREGG A. KAPLAN |
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Director |
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February 26, 2018 |
Gregg A. Kaplan |
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/s/ MARK MCGOWAN |
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Director |
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February 26, 2018 |
Mark McGowan |
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/s/ MARK A. TEBBE |
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Director |
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February 26, 2018 |
Mark A. Tebbe |
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133
EXHIBIT 4.9
EFR 2016-1, LLC
as Issuer
and
BANKERS TRUST COMPANY
as Indenture Trustee and Securities Intermediary
AMENDED AND RESTATED
INDENTURE +
DATED AS OF OCTOBER 20, 2017
+ Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Securities and Exchange Commission.
***Indicates confidential material redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the redacted material.
TABLE OF CONTENTS
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Page |
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DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION |
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Section 1.01 |
Definitions |
2 |
Section 1.02 |
Compliance Certificates and Opinions |
2 |
Section 1.03 |
Form of Documents Delivered to Indenture Trustee |
3 |
Section 1.04 |
Acts of Noteholders |
3 |
Section 1.05 |
Notices, etc. to Indenture Trustee and Issuer |
5 |
Section 1.06 |
Notices to Noteholders, Waiver |
5 |
Section 1.07 |
Effect of Headings and Table of Contents |
6 |
Section 1.08 |
Successors and Assigns |
6 |
Section 1.09 |
Severability of Provisions |
6 |
Section 1.10 |
Benefits of Indenture |
6 |
Section 1.11 |
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial |
6 |
Section 1.12 |
Counterparts |
7 |
Section 1.13 |
[RESERVED] |
7 |
Section 1.14 |
Legal Holidays |
7 |
ARTICLE II |
||
COLLATERAL |
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Section 2.01 |
Recording, Etc |
8 |
Section 2.02 |
[RESERVED] |
9 |
Section 2.03 |
Suits to Protect the Collateral |
9 |
Section 2.04 |
Purchaser Protected |
9 |
Section 2.05 |
Powers Exercisable by Receiver or Indenture Trustee |
10 |
Section 2.06 |
Determinations Relating to Collateral |
10 |
Section 2.07 |
Release of All Collateral |
10 |
Section 2.08 |
Certain Actions by Indenture Trustee |
11 |
Section 2.09 |
Opinions as to Collateral |
11 |
Section 2.10 |
Certain Commercial Law Representations and Warranties |
11 |
Section 2.11 |
The Securities Intermediary |
12 |
ARTICLE III |
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NOTE FORMS |
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Section 3.01 |
Forms Generally |
14 |
Section 3.02 |
Forms of Notes |
14 |
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TABLE OF CONTENTS
(continued)
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Page |
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Form of Indenture Trustee’s Certificate of Authentication |
14 |
|
Section 3.04 |
Notes Issuable in the Form of a Global Note |
14 |
Section 3.05 |
Beneficial Ownership of Global Notes |
16 |
Section 3.06 |
Notices to Depository |
17 |
Section 3.07 |
CUSIP Numbers |
17 |
Section 3.08 |
Regulation S Global Notes |
17 |
Section 3.09 |
Special Transfer Provisions |
19 |
ARTICLE IV |
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THE NOTES |
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Section 4.01 |
General Title; General Limitations; Terms of Notes |
22 |
Section 4.02 |
Denominations |
22 |
Section 4.03 |
Execution, Authentication and Delivery and Dating |
22 |
Section 4.04 |
Registration, Transfer and Exchange |
23 |
Section 4.05 |
Mutilated, Destroyed, Lost and Stolen Notes |
33 |
Section 4.06 |
Payment of Principal and Interest; Payment Rights Preserved; Withholding Taxes |
33 |
Section 4.07 |
Persons Deemed Owners |
34 |
Section 4.08 |
Cancellation |
34 |
Section 4.09 |
Termination |
34 |
Section 4.10 |
Issuance of Notes |
35 |
Section 4.11 |
Variable Funding Note |
36 |
Section 4.12 |
Term Notes |
37 |
ARTICLE V |
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ISSUER ACCOUNTS; INVESTMENTS; ALLOCATIONS; APPLICATION |
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Section 5.01 |
Collections |
39 |
Section 5.02 |
Collection Account; Distributions from Collection Account |
39 |
Section 5.03 |
Investment of Funds in the Collection Account |
40 |
Section 5.04 |
Application of Available Collections on Deposit in the Collection Account |
41 |
Section 5.05 |
Determination of LIBOR |
43 |
ARTICLE VI |
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SATISFACTION AND DISCHARGE; CANCELLATION OF NOTES HELD BY THE ISSUER |
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Section 6.01 |
Satisfaction and Discharge of Indenture |
45 |
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TABLE OF CONTENTS
(continued)
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Page |
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Application of Money |
45 |
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Section 6.03 |
Cancellation of Notes Held by the Issuer |
45 |
ARTICLE VII |
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EVENTS OF DEFAULT AND REMEDIES |
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Section 7.01 |
Events of Default |
46 |
Section 7.02 |
Acceleration of Maturity |
48 |
Section 7.03 |
Indenture Trustee May File Proofs of Claim |
48 |
Section 7.04 |
Indenture Trustee May Enforce Claims Without Possession of Notes |
49 |
Section 7.05 |
Application of Money Collected |
49 |
Section 7.06 |
Indenture Trustee May Elect to Hold the Collateral |
49 |
Section 7.07 |
Sale of Collateral for Accelerated Notes |
49 |
Section 7.08 |
Noteholders Have the Right to Direct the Time, Method and Place of Conducting Any Proceeding for Any Remedy Available to the Indenture Trustee |
49 |
Section 7.09 |
Limitation on Suits |
50 |
Section 7.10 |
Unconditional Right of Noteholders to Receive Principal and Interest; Limited Recourse |
50 |
Section 7.11 |
Restoration of Rights and Remedies |
50 |
Section 7.12 |
Rights and Remedies Cumulative |
50 |
Section 7.13 |
Delay or Omission Not Waiver |
51 |
Section 7.14 |
Control by Noteholders |
51 |
Section 7.15 |
Waiver of Past Defaults |
51 |
Section 7.16 |
Undertaking for Costs |
51 |
Section 7.17 |
Waiver of Stay or Extension Laws |
52 |
ARTICLE VIII |
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THE INDENTURE TRUSTEE |
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Section 8.01 |
Certain Duties and Responsibilities |
53 |
Section 8.02 |
Notice of Defaults |
54 |
Section 8.03 |
Certain Rights of Indenture Trustee |
54 |
Section 8.04 |
Not Responsible for Recitals or Issuance of Notes |
56 |
Section 8.05 |
May Hold Notes |
56 |
Section 8.06 |
Money Held in Trust |
56 |
Section 8.07 |
Compensation and Reimbursement; Limit on Compensation Reimbursement and Indemnity |
56 |
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TABLE OF CONTENTS
(continued)
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Page |
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[RESERVED] |
57 |
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Section 8.09 |
Corporate Indenture Trustee Required; Eligibility |
57 |
Section 8.10 |
Resignation and Removal; Appointment of Successor |
57 |
Section 8.11 |
Acceptance of Appointment by Successor |
58 |
Section 8.12 |
Merger, Conversion, Consolidation or Succession to Business |
59 |
Section 8.13 |
[RESERVED] |
59 |
Section 8.14 |
Appointment of Authenticating Agent |
59 |
Section 8.15 |
Tax Returns |
61 |
Section 8.16 |
Representations, Warranties and Covenants of the Indenture Trustee |
61 |
Section 8.17 |
Appointment of Co-Trustee or Separate Indenture Trustee |
62 |
ARTICLE IX |
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LISTS, REPORTS BY INDENTURE |
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TRUSTEE AND ISSUER |
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Section 9.01 |
Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders |
64 |
Section 9.02 |
Preservation of Information; Communications to Noteholders |
64 |
ARTICLE X |
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AMENDMENTS |
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Section 10.01 |
Amendments Without Consent of Noteholders |
65 |
Section 10.02 |
Amendments with Consent of Noteholders |
65 |
Section 10.03 |
Execution of Amendments |
67 |
Section 10.04 |
Effect of Amendments |
67 |
Section 10.05 |
Reference in Notes |
67 |
ARTICLE XI |
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER |
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Section 11.01 |
Payment of Principal and Interest |
68 |
Section 11.02 |
Financial Statements and Reports and Other Information |
68 |
Section 11.03 |
Maintenance of Office or Agency |
69 |
Section 11.04 |
Certain Negative Covenants |
69 |
Section 11.05 |
Litigation |
70 |
Section 11.06 |
Money for Note Payments to Be Held in Trust |
70 |
Section 11.07 |
Statement as to Compliance |
71 |
Section 11.08 |
Legal Existence |
72 |
Section 11.09 |
Further Instruments and Acts |
72 |
Section 11.10 |
Compliance with Laws |
72 |
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TABLE OF CONTENTS
(continued)
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Page |
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Notice of Events of Default |
72 |
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Section 11.12 |
Sales of Receivables |
72 |
Section 11.13 |
Investment Company Act |
72 |
Section 11.14 |
Volcker Rule |
73 |
ARTICLE XII |
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OPTIONAL REPURCHASE OF NOTES |
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Section 12.01 |
Optional Redemption or Release |
74 |
Section 12.02 |
Release of Receivables |
75 |
ARTICLE XIII |
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MISCELLANEOUS |
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Section 13.01 |
No Petition |
76 |
Section 13.02 |
Obligations |
76 |
Section 13.03 |
[RESERVED] |
76 |
Section 13.04 |
Tax Treatment |
76 |
Section 13.05 |
[Reserved] |
76 |
Section 13.06 |
Alternate Payment Provisions |
76 |
Section 13.07 |
Termination of Issuer |
76 |
Section 13.08 |
Final Distribution |
76 |
Section 13.09 |
Termination Distributions |
77 |
Section 13.10 |
Third Party Beneficiaries |
77 |
Section 13.11 |
Notices |
77 |
Section 13.12 |
Force Majeure |
78 |
Section 13.13 |
Patriot Act |
78 |
EXHIBITS
EXHIBIT A |
FORM OF VARIABLE FUNDING NOTE |
EXHIBIT B |
FORM OF TERM NOTE |
EXHIBIT C |
FORM OF NOTICE OF CONVERSION |
EXHIBIT D |
FORM OF BORROWING BASE CERTIFICATE |
EXHIBIT E |
FORM OF CERTIFICATE OF VARIABLE FUNDING NOTE NOTEHOLDER |
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TABLE OF CONTENTS
(continued)
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Page |
EXHIBIT F |
FORM OF CERTIFICATE OF TERM NOTE OWNER |
EXHIBIT G |
[FORM OF] TEMPORARY REGULATION S GLOBAL NOTE |
EXHIBIT H |
[FORM OF] PERMANENT REGULATION S GLOBAL NOTE |
EXHIBIT I |
[FORM OF] REGULATION S CERTIFICATE |
EXHIBIT J |
[FORM OF] NON-U.S. CERTIFICATE |
APPENDIX A |
DEFINITIONS/RULES OF CONSTRUCTION/NOTICE INFORMATION |
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This AMENDED AND RESTATED INDENTURE, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, this “ Indenture ”), by and between EFR 2016-1, LLC (the “ Issuer ”), having its principal office at 175 W Jackson Blvd, Suite 1000, Chicago, Illinois 60606, and Bankers Trust Company, in its capacity as Indenture Trustee (the “ Indenture Trustee ”), and as initial Securities Intermediary (the “ Securities Intermediary ”).
W I T N E S S E T H:
WHEREAS, the Issuer duly authorized the execution and delivery of this Indenture to provide for the issuance of its Notes; and
WHEREAS, the Issuer agrees that everything necessary to make this Indenture a valid and legally binding agreement of the Issuer, in accordance with its terms, has been done.
NOW, THEREFORE, to set forth and establish the terms and conditions upon which the Notes are to be authenticated, issued and delivered, and in consideration of the premises and the mutual agreements herein contained, the purchase of Notes by the Holders thereof and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, for the equal and proportionate benefit of all Holders of the Notes, as the case may be, the parties hereto intending to be legally bound hereby agree as follows:
GRANTING CLAUSE
The Issuer hereby grants to the Indenture Trustee, for the benefit and security of the Noteholders and the Indenture Trustee, a first priority security interest in all of its right, title and interest, whether now owned or hereafter acquired, in, to and under the Issuer Estate and all accounts, certificates of deposit, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property (including securities accounts and financial assets credited thereto), letter-of-credit rights, money and supporting obligations, including (a) all ownership interests in the Receivables, (b) all monies received with respect to the Receivables, (c) any and all documents that the Issuer (or its designee) keeps on file relating to the Receivables or the related Obligors, (d) all rights, remedies, powers, privileges and claims of the Issuer under or with respect to the Transaction Documents (whether arising pursuant to the terms of any such agreement or otherwise available to the Issuer at law or in equity), including the rights of the Issuer to enforce the Transaction Documents, and to give or withhold any and all consents, requests, notices, directions, approvals, extensions or waivers under or with respect to any such agreement, (e) the Collection Account, including all amounts and property from time to time held therein or credited thereto, (f) all present and future claims, demands, causes and choses in action in respect of action in respect of any or all of the foregoing, (g) all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all cash and non-cash proceeds, and other property consisting of, arising from or relating to all or any part of any of the foregoing and (h) all other assets owned or acquired by the Issuer.
The property described in the preceding sentence is collectively referred to as the “ Collateral .” The Security Interest in the Collateral is granted to secure the Notes (and the related obligations under this Indenture), equally and ratably without prejudice, priority or distinction
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between any Note by reason of difference in time of issuance or otherwise, except as otherwise expressly provided in this Indenture or in any Note issued pursuant hereto, and to secure (i) the payment of all amounts due on such Notes in accordance with their terms, (ii) the payment of all other sums payable by the Issuer under this Indenture or the Notes and (iii) compliance by the Issuer with the provisions of this Indenture or the Notes. This Indenture, as it may be supplemented, is a security agreement within the meaning of the UCC.
The Indenture Trustee acknowledges the grant of such Security Interest, and accepts the Collateral in trust hereunder in accordance with the provisions hereof and agrees to perform the duties herein such that the interests of the Noteholders may be adequately and effectively protected.
LIMITED RECOURSE
The obligation of the Issuer to make payments of principal, interest and other amounts on the Notes is limited in recourse as set forth in Section 7.10 .
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions . Whenever used in this Indenture and unless the context requires a different meaning, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in Part I of Appendix A. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Indenture.
Section 1.02 Compliance Certificates and Opinions . Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate executed by the Transferor or the Issuer, stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with or waived and (ii) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with or waived, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
It will not be necessary to deliver the Officer’s Certificate and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or before the time of authentication and delivery of any Note issued hereunder. The Indenture Trustee may rely, as to authorization by the Issuer of any Notes, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the delivery of the documents required pursuant to Sections 4.10, 4.11 and 4.12 , as applicable, in connection with the authentication and delivery of any Note issued hereunder.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (except for the statement required by Section 11.07 ) will include:
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(a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that such individual has made such examination or investigation as is reasonably necessary to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
Section 1.03 Form of Documents Delivered to Indenture Trustee . In any case where several matters are required to be certified by, or covered by an opinion of, one or more specified Persons, one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to the other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless the Issuer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations are erroneous. Any such certificate or opinion of, or representation by, counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, the Issuer stating that the information with respect to such factual matters is in the possession of the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
Section 1.04 Acts of Noteholders . (a) Any request, demand, authorization, direction, notice, consent, waiver or other action (collectively, an “ Action ”) provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such Action will become effective when such instrument or instruments or record are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments and any such record (and the Action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent, will be sufficient for any purpose of this Indenture and (subject to Section 8.01 ) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 1.04 .
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness to such execution or by the certificate of any
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notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or limited liability company or a member of a partnership, on behalf of such corporation or limited liability company or partnership, such certificate or affidavit will also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Indenture Trustee deems sufficient.
(c) The ownership of Notes will be proved solely by the Note Register, and the beneficial ownership of any interest in Global Notes will be proved solely by the Book Entry System.
(d) The fact and date of execution of any such instrument or writing, the authority of the Person executing the same and the principal amount may also be proved in any other manner which the Indenture Trustee deems sufficient; and the Indenture Trustee may in any instance require further proof with respect to any of the matters referred to in this Section 1.04 .
(e) If the Issuer will solicit from the Holders any Action, the Issuer may, at its option, by an Officer’s Certificate, fix in advance a record date for the determination of Holders entitled to give such Action, but the Issuer will have no obligation to do so. If the Issuer does not so fix a record date, such record date will be the later of 30 days before the first solicitation of such Action or the date of the most recent list of Noteholders furnished to the Indenture Trustee pursuant to Section 9.01 before such solicitation. Such Action may be given before or after the record date, but only the Holders of record at the close of business on the record date will be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Notes Outstanding have authorized or agreed or consented to such Action, and for that purpose the Notes Outstanding will be computed as of the record date; provided , that no such authorization, agreement or consent by the Holders on the record date will be deemed effective unless it will become effective pursuant to the provisions of this Indenture not later than six months after the record date.
(f) Any Action by the Holder of any Note will bind the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon whether or not notation of such Action is made upon such Note.
(g) Without limiting the foregoing, a Holder entitled hereunder to take any Action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Any notice given or Action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.
(h) Without limiting the generality of the foregoing, unless otherwise specified pursuant to Section 4.01 , a Holder, including a Depository that is the Holder of a Global Note, may make, give or take, by a proxy or proxies duly appointed in writing, any Action provided in
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this Indenture to be made, given or taken by Holders, and a Depository that is the Holder of a Global Note may provide its proxy or proxies to the beneficial owners of interests in or security entitlements to any such Global Note through such Depository’s standing instructions and customary practices.
(i) The Issuer may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in or security entitlements to any Global Note held by a Depository entitled under the procedures of such Depository to make, give or take, by a proxy or proxies duly appointed in writing, any Action provided in this Indenture to be made, given or taken by Holders. If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such Action, whether or not such Holders remain Holders after such record date. No such Action shall be valid or effective if made, given or taken more than 90 days after such record date.
Section 1.05 Notices, etc. to Indenture Trustee and Issuer . Any Action of Noteholders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (i) the Indenture Trustee by any Noteholder or by the Issuer will be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid or sent via electronic transmission to the Indenture Trustee at its Corporate Trust Office, (ii) or the Issuer by the Indenture Trustee or by any Noteholder will be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid or sent via electronic transmission, to the Issuer addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Indenture Trustee by the Issuer.
Section 1.06 Notices to Noteholders, Waiver . Where this Indenture, or any Registered Note provides for notice to Noteholders of any event, such notice will be sufficiently given (unless otherwise herein or in such Registered Note expressly provided) if in writing and mailed, first-class postage prepaid, sent by facsimile, sent by electronic transmission or personally delivered to each Holder of a Registered Note affected by such event, at such Noteholder’s address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Registered Noteholders is given by mail, facsimile, electronic transmission or delivery neither the failure to mail, send by facsimile, send by electronic transmission or deliver such notice, nor any defect in any notice so mailed, to any particular Noteholders will affect the sufficiency of such notice with respect to other Noteholders and any notice that is mailed, sent by facsimile, sent by electronic transmission or delivered in the manner herein provided shall conclusively have been presumed to have been duly given.
Where this Indenture or any Registered Note provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver will be the equivalent of such notice. Waivers of notice by Noteholders will be filed with the Indenture Trustee, but such filing will not be a condition precedent to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or otherwise, it will be impractical to mail notice of any event to any Holder of a Registered Note when such notice is required to be given pursuant to any provision of this
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Indenture, then any method of notification as will be satisfactory to the Indenture Trustee and the Issuer will be deemed to be a sufficient giving of such notice.
Section 1.07 Effect of Headings and Table of Contents . The Article and Section headings herein and the Table of Contents are for purposes of reference only and shall not affect the meaning or interpretation of any provision hereof.
Section 1.08 Successors and Assigns . All covenants and agreements in this Indenture by the Issuer will bind its successors and assigns, whether so expressed or not. All covenants and agreements of the Indenture Trustee in this Indenture shall bind its successors, co-trustees and agents of the Indenture Trustee, whether so expressed or not.
Section 1.09 Severability of Provisions . If any one or more of the covenants, agreements, provisions or terms of this Indenture or the Notes shall for any reason whatsoever be held invalid, illegal or unenforceable then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, and terms of this Indenture or the Notes and shall in no way affect the validity, legality or enforceability of such remaining covenants, agreements, provisions or terms of this Indenture or the Notes.
Section 1.10 Benefits of Indenture . Nothing in this Indenture or in any Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and to the extent expressly provided herein, any Authenticating Agent or Paying Agent, the Note Registrar, any other party secured hereunder and any other Person with an ownership interest in any part of the Issuer Estate and the Holders of Notes (or such of them as may be affected thereby), any benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 1.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial .
(a) THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW, 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.
(b) Each party hereto hereby consents and agrees that the State or federal courts located in the Borough of Manhattan in New York City shall have exclusive jurisdiction to hear and determine any claims or disputes between them pertaining to this Indenture or to any matter arising out of or relating to this Indenture; provided , that each party hereto acknowledges that any appeals from those courts may have to be heard by a court located outside of the Borough of Manhattan in New York City; provided , further , that nothing in this Indenture shall be deemed or operate to preclude the Indenture Trustee from bringing suit or taking other legal action in any other jurisdiction to realize on the Receivables or any security for the obligations of the Issuer arising hereunder or to enforce a judgment or other court order in favor of the Indenture Trustee. Each party hereto submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each party hereto hereby waives any objection that such party may have based upon lack of personal jurisdiction, improper venue or forum non conveniens and
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hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each party hereto hereby waives personal service of the summons, complaint and other process issued in any such action or suit and agrees that service of such summons, complaint, and other process may be made by registered or certified mail addressed to such party at its address, and that service so made shall be deemed completed upon the earlier of such party’s actual receipt thereof or three (3) days after deposit in the United States mail, proper postage prepaid. Nothing in this Section 1.11 shall affect the right of any party hereto to serve legal process in any other manner permitted by law.
(c) Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable State and federal laws to apply, the parties desire that their disputes be resolved by a judge applying such applicable laws. THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, OR IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 1.12 Counterparts . This Indenture may be executed in two (2) or more counterparts (and by different parties on separate counterparts), each of which shall be deemed an original, and all of which when taken together shall constitute one and the same instrument.
Section 1.14 Legal Holidays . In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.
[END OF ARTICLE I]
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(a) The Issuer intends the Security Interest granted pursuant to this Indenture in favor of the Indenture Trustee to be prior to all other liens in respect of the Collateral. The Issuer will take all actions necessary to maintain a perfected first priority lien on and Security Interest in the Collateral in favor of the Indenture Trustee.
(b) The Issuer shall cause each item of the Collateral to be Delivered, and the Indenture Trustee or the Custodian on its behalf, shall hold each item of the Collateral as Delivered, separate and apart from all other property held by the Indenture Trustee, or the Custodian on its behalf, in accordance with the Indenture Trustee’s or the Custodian’s, as applicable, internal policies and procedures. To the extent that such of the Collateral as constitutes a deposit account or a securities account is maintained with Bankers Trust, Bankers Trust hereby makes the agreements required under the UCC in order for such deposit account or securities account to be controlled by Bankers Trust. Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not hold any part of the Collateral through an agent or nominee except as expressly permitted by this Section 2.01(b) .
(c) The Issuer will from time to time execute, authorize and deliver all such supplements and amendments hereto and all such financing statements, amendments thereto, instruments of further assurance and other instruments, all as prepared by the Issuer, and will take such other action reasonably necessary or advisable to:
(i) grant the Security Interest more effectively in all or any portion of the Collateral;
(ii) maintain or preserve the Security Interest (and the priority thereof) created by this Indenture or carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any grant made or to be made by this Indenture;
(iv) enforce the Receivables and each other instrument or agreement designated for inclusion in the Collateral;
(v) preserve and defend title to the Collateral and the rights of the Indenture Trustee in the Collateral against the claims of all persons and parties; or
(vi) pay all taxes or assessments levied or assessed upon the Collateral when due.
(d) The Issuer will from time to time promptly pay and discharge all UCC recording and filing fees, charges and taxes relating to this Indenture, any amendments hereto and any other instruments of further assurance.
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(e) Without limiting the generality of Section 2.01(b) or (c) :
(i) The Issuer will cause this Indenture, all amendments and supplements hereto and all financing statements and all amendments to such financing statements and any other necessary documents covering the Indenture Trustee’s right, title and interest in and to the Collateral to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Indenture Trustee in and to all property comprising the Collateral. The Issuer will deliver to the Indenture Trustee file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, promptly when available following such recording, registration or filing. The Issuer hereby authorizes the filing of financing statements (and amendments of financing statements) that name the Issuer as debtor and the Indenture Trustee as secured party and that cover all personal property of the Issuer; provided , however , that the Indenture Trustee shall have no obligation to file the financing statements or amendments thereto. Such financing statements may describe as the collateral covered thereby “all assets of the debtor, whether now owned or hereafter acquired” or words to that effect notwithstanding that such collateral description may be broader in scope than the collateral described herein. The Issuer also hereby ratifies the filing of any such financing statements (or amendments of financing statements) that were filed prior to the execution hereof.
(ii) The Issuer shall not change its name or its type or jurisdiction of organization unless it has first (A) made all filings and taken all actions in all relevant jurisdictions under the applicable UCC and other applicable law as are necessary to continue and maintain the first priority perfected Security Interest of the Indenture Trustee in the Collateral, and (B) delivered to the Indenture Trustee an Opinion of Counsel to the effect that all necessary filings have been made under the applicable UCC in all relevant jurisdictions as are necessary to continue and maintain the first priority perfected Security Interest of the Indenture Trustee in the Collateral.
Section 2.03 Suits to Protect the Collateral . Subject to the provisions of this Indenture, the Indenture Trustee will have power to institute and to maintain such suits and proceedings as it may deem expedient or as it may be directed by the Majority Holders, to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of this Indenture, and such suits and proceedings as the Indenture Trustee may deem expedient to preserve or protect the interests of the Noteholders and the interests of the Indenture Trustee in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Security Interest or be prejudicial to the interests of the Noteholders or the Indenture Trustee).
Section 2.04 Purchaser Protected . In no event will any purchaser in good faith of any property purported to be released hereunder be bound to ascertain the authority of the
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Indenture Trustee to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor will any purchaser or other transferee of any property or rights permitted by this Article II to be sold be under any obligation to ascertain or inquire into the authority of the Issuer or any other obligor, as applicable, to make any such sale or other transfer.
Section 2.05 Powers Exercisable by Receiver or Indenture Trustee . In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article II upon the Issuer or any other obligor, as applicable, with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Issuer or any other obligor, as applicable, or of any officer or officers thereof required by the provisions of this Article II .
Section 2.06 Determinations Relating to Collateral . In the event (i) the Indenture Trustee shall receive any request from the Issuer or any other obligor for consent or approval with respect to any matter relating to any Collateral or the Issuer’s or any other obligor’s obligations with respect thereto or (ii) there shall be due to or from the Indenture Trustee under the provisions hereof any performance or the delivery of any instrument or (iii) the Indenture Trustee shall become aware of any nonperformance by the Issuer or any other obligor of any covenant or any breach of any representation or warranty of the Issuer or any other obligor set forth in this Indenture or any other Transaction Document, then, in each such event, the Indenture Trustee shall be entitled, at the expense of the Issuer, to hire experts, consultants, agents and attorneys to advise the Indenture Trustee on the manner in which the Indenture Trustee should respond to such request or render any requested performance or response to such nonperformance or breach (the expenses of which will be reimbursed to the Indenture Trustee pursuant to Section 8.07 ). The Indenture Trustee will be fully protected and shall not incur any personal liability in the taking of any action recommended or approved by any such expert, consultant, agent or attorney or agreed to by the Majority Holders.
Section 2.07 Release of All Collateral .
(a) Subject to the payment of its fees, expenses and indemnities (other than indemnities and reimbursement obligations for which a claim has not yet been asserted) pursuant to Section 8.07 and payment in full of all amounts due and payable to the Noteholders (other than indemnities and reimbursement obligations for which a claim has not yet been asserted or except as otherwise permitted by this Indenture), the Indenture Trustee shall, at the request of the Issuer or when otherwise required by the provisions of this Indenture, execute instruments to release property and Collateral from the Lien of this Indenture, or convey the Indenture Trustee’s interest (which is held by the Indenture Trustee for the benefit of the Noteholders) in the same, in a manner and under circumstances which are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article II will be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any funds.
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(b) Upon delivery of an Officer’s Certificate of the Issuer (which shall be acknowledged by the Majority Holders), certifying that the Issuer’s obligations under this Indenture have been satisfied and discharged by complying with the provisions of this Article II , the Indenture Trustee shall execute and deliver such releases, termination statements and other instruments (in recordable form, where appropriate) as the Issuer or any other obligor, as applicable, may reasonably request evidencing the termination of the Security Interest created by this Indenture.
(c) The Master Servicer, each Asset Servicer, the Issuer and the Noteholders shall be entitled to receive at least 10 days prior notice when the Indenture Trustee proposes to take any action pursuant to clause (a) or (b), accompanied by copies of any instruments involved, and the Indenture Trustee shall also be entitled to require, as a condition to such action, an Opinion of Counsel, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with or waived in accordance with the terms of this Indenture and that such action is not inconsistent with any of the provisions of this Indenture. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate, including any Officer’s Certificates, or other instrument delivered to the Indenture Trustee in connection with any such action, unless such counsel knew or in the exercise of reasonable care should have known, any such certificate or other instrument, or any factual matter asserted therein, is erroneous.
Section 2.08 Certain Actions by Indenture Trustee . Any action taken by the Indenture Trustee pursuant to this Article II in respect of the release of any or all of the Collateral will be taken by the Indenture Trustee as its interest in such Collateral may appear, and no provision of this Article II is intended to, or will, excuse compliance with any provision hereof.
Section 2.09 Opinions as to Collateral . (a) On the date hereof, the Issuer shall furnish to the Indenture Trustee, for the benefit of the Noteholders, an Opinion of Counsel stating that, in the opinion of such counsel, such action has been taken as is necessary to perfect the Security Interest created by this Indenture in favor of the Indenture Trustee and reciting the details of such action.
(b) On or before March 31 in each calendar year, beginning in 2018, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel with respect to each UCC financing statement which has been filed by the Issuer with respect to the Collateral either stating that, (i) in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of such financing statements and amendments thereto as are necessary to maintain the first priority perfected Security Interest created by this Indenture and reciting the details of such action or (ii) in the opinion of such counsel, no such action is necessary to maintain such Security Interest. Such Opinion of Counsel will also describe the recording, filing, re-recording and re-filing of such financing statements and amendments thereto that will, in the opinion of such counsel, be required to maintain the Security Interest created by this Indenture until March 31 in the following calendar year.
Section 2.10 Certain Commercial Law Representations and Warranties . The Issuer hereby makes the following representations and warranties on which the Indenture Trustee and each of the Noteholders shall be entitled to rely in connection with the transactions
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contemplated by this Indenture. Such representations and warranties shall survive until the termination of this Indenture. Such representations and warranties speak of the date that a security interest in the Collateral is granted to the Indenture Trustee and shall not be waived by any of the parties to this Indenture.
(a) This Indenture creates a valid and continuing security interest (as defined in the applicable UCC) in favor of the Indenture Trustee, for the benefit of the Noteholders, in the related Collateral, which security interest is perfected and prior to all other Liens, and is enforceable as such against creditors of and purchasers from the Issuer.
(b) Each of the existing Receivables constitutes a “payment intangible.”
(c) At the time of its grant of any security interest in the related Collateral pursuant to this Indenture, the Issuer owned and had good and marketable title to such Collateral free and clear of any lien, claim or encumbrance of any Person (other than the security interest granted to the Indenture Trustee pursuant to this Indenture).
(d) The Issuer has caused or will have caused no later than October 23, 2017, 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 related Collateral granted to the Indenture Trustee pursuant to this Indenture.
(e) [Reserved].
(f) Other than the security interest granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed, the related Collateral. No effective financing statement has been filed against the Issuer that includes a description of the related Collateral other than any financing statement relating to the security interest granted to the Indenture Trustee pursuant to this Indenture or that has been terminated. As of the Closing Date, no judgment has been entered, and no tax Liens have been filed, against the Issuer.
Section 2.11 The Securities Intermediary .
(a) There shall at all times be one or more securities intermediaries appointed for purposes of this Indenture (the “ Securities Intermediary ”). Bankers Trust is hereby appointed as the initial Securities Intermediary hereunder, and Bankers Trust accepts such appointment.
(b) The Securities Intermediary shall be, and Bankers Trust as initial Securities Intermediary hereby represents and warrants that it is as of the date hereof and shall be, for so long as it is the Securities Intermediary hereunder, a corporation, State bank or national bank that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity hereunder. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree with the parties hereto that the Collection Account shall be an account to which financial assets (as defined in the UCC) may be credited and undertake to treat the Indenture Trustee as entitled to exercise the rights that comprise such financial assets. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree with the parties hereto that each item of property credited to the Collection Account shall be treated as a financial
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asset (as defined in the UCC). The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree with the parties hereto that the jurisdiction of the Securities Intermediary with respect to the Collection Account shall be the State of Iowa. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, represent and covenant that it is not and will not be (as long as it is the Securities Intermediary hereunder) a party to any agreement that is inconsistent with the provisions of this Indenture. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, covenant that it will not take any action inconsistent with the provisions of this Indenture applicable to it. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree that any item of property credited to the Collection Account shall not be subject to any security interest, lien, encumbrance or right of setoff in favor of the Securities Intermediary or anyone claiming through the Securities Intermediary (other than the Indenture Trustee).
(c) It is the intent of the Indenture Trustee and the Issuer that the Collection Account shall be a securities account, as to which the Indenture Trustee is the “entitlement holder” (as defined in the UCC). The Securities Intermediary shall covenant that it will not agree with any person or entity other than the Indenture Trustee that it will comply with entitlement orders originated by any person or entity other than the Indenture Trustee, and Bankers Trust as initial Securities Intermediary hereby covenants that, for so long as it is the Securities Intermediary hereunder, it will not agree with any person or entity other than the Indenture Trustee that it will comply with entitlement orders originated by any person or entity other than the Indenture Trustee.
(d) Nothing herein shall imply or impose upon the Securities Intermediary any duties or obligations other than those expressly set forth herein and those applicable to a securities intermediary under the UCC and the United States Regulations (and the Securities Intermediary shall be entitled to all of the protections available to a securities intermediary under the UCC and the United States Regulations). Without limiting the foregoing, nothing herein shall imply or impose upon the Securities Intermediary any duties of a fiduciary nature (such as the fiduciary duties of the Indenture Trustee hereunder).
(e) The Securities Intermediary may at any time resign by notice to the Indenture Trustee and may at any time be removed by notice from the Indenture Trustee, if a different Person than the Securities Intermediary, but if not, then the Issuer; provided , that it shall be the responsibility of the Indenture Trustee, if a different Person than the Securities Intermediary, but if not, then the Issuer, to appoint a successor Securities Intermediary and to cause the Collection Account to be established and maintained with such successor Securities Intermediary in accordance with the terms hereof; and the responsibilities and duties of the retiring Securities Intermediary hereunder shall remain in effect until all of the Collateral credited to the Collection Account held by such retiring Securities Intermediary has been transferred to such successor. Any corporation into which the Securities Intermediary may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which the Securities Intermediary shall be a party, shall be the successor of the Securities Intermediary hereunder, without the execution or filing of any further act on the part of the parties hereto or such Securities Intermediary or such successor corporation.
[END OF ARTICLE II]
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Section 3.01 Forms Generally . The Notes will have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon, as may be required to comply with applicable laws or regulations or with the rules of any securities exchange, or as may, consistently herewith, be determined by the Issuer, as evidenced by the Issuer’s execution of such Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note.
The definitive Notes will be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders) or may be produced in any other manner, all as determined by the Issuer, as evidenced by the Issuer’s execution of such Notes, subject to the rules of any securities exchange on which such Notes are listed.
Section 3.02 Forms of Notes . Each Note will be in one of the forms approved hereby. Before the delivery of a Note to the Indenture Trustee for authentication pursuant to Section 4.03 in any form approved by or pursuant to an Issuer Certificate, the Issuer will deliver to the Indenture Trustee the Issuer Certificate by or pursuant to which such form of Note has been approved, which Issuer Certificate will have attached thereto a true and correct copy of the form of Note which has been approved thereby or, if an Issuer Certificate authorizes a specific officer or officers of the Transferor to approve a form of Note, a certificate of such officer or officers approving the form of Note attached thereto. Any form of Note approved by or pursuant to an Issuer Certificate must be acceptable as to form to the Indenture Trustee, such acceptance to be evidenced by the Indenture Trustee’s authentication of Notes in that form or a certificate signed by an Indenture Trustee Authorized Officer and delivered to the Issuer.
Section 3.03 Form of Indenture Trustee’s Certificate of Authentication . The form of Indenture Trustee’s Certificate of Authentication for any Note issued pursuant to this Indenture will be substantially as follows:
INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
Bankers Trust Company , |
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as Indenture Trustee, |
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By:________________________________ |
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Authorized Signatory |
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Dated: ________________________________ |
Section 3.04 Notes Issuable in the Form of a Global Note .
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(a) If the Issuer establishes pursuant to Section 3.02 and Section 4.01 that the Term Notes are to be issued in whole or in part in the form of one or more Global Notes, then the Issuer will execute and the Indenture Trustee or its agent will, in accordance with Section 4.03 , authenticate and deliver, such Global Note, which (i) will represent, and will be denominated in an amount equal to the aggregate Initial Principal Amount of the Term Notes that are Outstanding to be represented by such Global Note or Notes, or such portion thereof as the Issuer will specify in an Issuer Certificate, (ii) will be registered in the name of the Depository for the beneficial owners of such Global Note or its nominee, (iii) will be delivered by the Indenture Trustee or its agent to the Depository or pursuant to the Depository’s instruction, (iv) if applicable, will bear a legend substantially to the following effect: “Unless this Note is presented by an authorized representative of The Depository Trust Company, a New York corporation (“ DTC ”), to the Issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein” and (v) may bear such other legend as the Issuer, upon advice of counsel, deems to be applicable. DTC will credit interests in any Regulation S Global Note to participant accounts maintained by Clearstream or Euroclear with DTC according to the interests in such Regulation S Global Note maintained by participants in Clearstream or Euroclear, as the case may be.
(b) Notwithstanding any other provisions of this Section 3.04 or Section 4.04 , and subject to the provisions of Section 3.04(c), a Global Note, or beneficial interest therein, may be transferred in the manner provided in Section 3.09 or Section 4.04 , as applicable.
(c) With respect to the Notes:
(i) If at any time the Depository for a Global Note notifies the Issuer that it is unwilling or unable to continue as Depository for such Global Note or if at any time the Depository for the Notes, ceases to be a clearing agency registered under the Securities Exchange Act, or other applicable statute or regulation, the Issuer will appoint a successor Depository with respect to such Global Note. If a successor nominee for such Global Note is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer will execute, and the Indenture Trustee or its agent, upon receipt of an Issuer Certificate requesting the authentication and delivery of individual Notes in exchange for such Global Note, will authenticate and deliver, individual Notes of like tenor and terms in an aggregate Initial Principal Amount equal to the Initial Principal Amount of the Global Note in exchange for such Global Note.
(ii) To the extent permitted by law, the Issuer may at any time and in its sole discretion determine that the Notes or portion thereof issued or issuable in the form of one or more Global Notes will no longer be represented by such Global Note or Notes. In such event the Issuer will execute, and the Indenture Trustee, upon receipt of a request by the Issuer for the authentication and delivery of individual Notes in exchange in whole or in part for such Global Note, will authenticate and deliver individual Notes of like tenor and terms in definitive form in an aggregate Initial Principal Amount equal to the Initial Principal Amount of such Global Note in exchange for such Global Note or Notes.
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(iii) If specified by the Issuer pursuant to Section 3.02 and Section 4.01 with respect to Notes issued or issuable in the form of a Global Note, the Depository for such Global Note may surrender such Global Note in exchange in whole or in part for individual Notes of like tenor and terms in definitive form on such terms as are acceptable to the Issuer and such Depository. Thereupon the Issuer will execute, and the Indenture Trustee or its agent will authenticate and deliver, without service charge, (A) to each Person specified by such Depository a new Note or Notes of like tenor and terms and of any authorized denomination as requested by such Person in aggregate Initial Principal Amount equal to and in exchange for such Person’s beneficial interest in the Global Note; and (B) to such Depository a new Global Note of like tenor and terms and in an authorized denomination equal to the difference, if any, between the Initial Principal Amount of the surrendered Global Note and the aggregate Initial Principal Amount of Notes delivered to the Holders thereof.
(iv) If any Note Owner advises the Indenture Trustee and the Depository that it would prefer to receive an individual Note, such Note Owner may exchange its beneficial interest in such Global Note for individual Notes, to be delivered in electronic or physical form, as requested by the respective Note Owner.
(v) In any exchange provided for in any of the preceding four paragraphs, the Issuer will execute and the Indenture Trustee or its agent will authenticate and deliver individual Notes in definitive registered form in authorized denominations. Upon the exchange of the entire Initial Principal Amount of a Global Note for individual Notes, such Global Note will be canceled by the Indenture Trustee or its agent. Except as provided in the preceding paragraphs, Notes issued in exchange for a Global Note pursuant to this Section 3.04 will be registered in such names and in such authorized denominations as the Depository for such Global Note, pursuant to instructions from its direct or indirect participants or otherwise, will instruct the Indenture Trustee or the Note Registrar. The Indenture Trustee or the Note Registrar will deliver such Notes to the Persons in whose names such Notes are so registered.
(vi) Any Note Owner holding an individual definitive Note may exchange its individual definitive Note for a beneficial interest in a Global Note to be issued in accordance with clause (a) above, upon notice to the Indenture Trustee.
Section 3.05 Beneficial Ownership of Global Notes . Until definitive Notes have been issued to the applicable Note Owners pursuant to Section 3.04 :
(a) the Issuer and the Indenture Trustee may deal with the applicable clearing agency or Depository and the clearing agency’s or Depository’s participants for all purposes (including the making of distributions) as the authorized representatives of the respective Note Owners; and
(b) the rights of the respective Note Owners will be exercised only through the applicable clearing agency or Depository and the clearing agency’s or Depository’s participants and will be limited to those established by law and agreements between such Note Owners and the clearing agency or Depository and/or the clearing agency’s or Depository’s participants. Pursuant
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to the operating rules of the applicable clearing agency, unless and until Notes in definitive form are issued pursuant to Section 3.04 , the clearing agency’s or the Depository’s participants shall receive and transmit distributions of principal and interest on the related Notes to such clearing agency’s or Depository’s participants.
Notwithstanding any other provision of this Indenture, for purposes of any provision of this Indenture requiring or permitting Actions with the consent of, or at the direction of, Noteholders evidencing a specified percentage of the Outstanding Principal Amount of Outstanding Notes, such direction or consent may be given by Note Owners (acting through the clearing agency and the clearing agency’s participants) owning interests in or security entitlements to Notes evidencing the requisite percentage of principal amount of Notes.
Notwithstanding anything to the contrary herein, the right to the principal of, and stated interest on, the Global Notes may be transferred only through a book entry system maintained by the Depository (the “ Book Entry System ”), which for this purpose will be acting as the Issuer’s agent, and the ownership of any interest in the Global Notes shall be reflected in a book entry in the Book Entry System. The Depository shall maintain the Book Entry System in a manner that will ensure that the Book Entry System constitutes a “book entry system” for purposes of Section 871(h) of the Code and the applicable Treasury Regulations thereunder (including Treasury Regulations Section 1.871-14(c)(1)(i)) at all times. The entries in the Book Entry System shall be conclusive absent manifest error. This Section 3.05 shall be construed so that the Global Notes are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations promulgated thereunder.
Section 3.06 Notices to Depository . Whenever any notice or other communication is required to be given to Noteholders with respect to which book-entry Notes have been issued, unless and until Notes in definitive form will have been issued to the related Note Owners, the Indenture Trustee will give all such notices and communications to the applicable clearing agency or Depository.
Section 3.07 CUSIP Numbers . In issuing the Notes, the Issuer may use “CUSIP” numbers (if then generally in use), and, if so, the Indenture Trustee shall use such CUSIP numbers in notices of redemption as a convenience to Holders; provided , that subject to Section 8.01 , any such notice may state that (a) no representation is made as to the correctness of such CUSIP numbers as printed on the related Notes or as contained in any notice of redemption, (b) reliance may be placed only on the other identification numbers, if any, printed on the Notes and (c) any such redemption shall not be affected by any defect in or omission of such CUSIP numbers. The Issuer will promptly notify the Indenture Trustee of any change in the CUSIP numbers for any Outstanding Note.
Section 3.08 Regulation S Global Notes .
(a) Notes issued in reliance on Regulation S under the Securities Act shall initially be in the form of a Temporary Regulation S Global Note. Any beneficial interest in a Note evidenced by the Temporary Regulation S Global Note is exchangeable for a beneficial interest in a Permanent Regulation S Global Note, authenticated and delivered in substantially the
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form attached hereto in Exhibit H (each a “ Permanent Regulation S Global Note ”), upon the later of (i) the Exchange Date and (ii) the furnishing of a Regulation S Certificate.
(b) (i) On or prior to the Exchange Date, each owner of a beneficial interest in a Temporary Regulation S Global Note shall deliver to Euroclear or Clearstream (as applicable) a Regulation S Certificate; provided , however , that any owner of a beneficial interest in a Temporary Regulation S Global Note on the Exchange Date that has previously delivered a Regulation S Certificate hereunder shall not be required to deliver any subsequent Regulation S Certificate (unless the certificate previously delivered is no longer true as of such subsequent date, in which case such owner shall promptly notify Euroclear or Clearstream, as applicable, thereof and shall deliver an updated Regulation S Certificate). Euroclear or Clearstream, as applicable, shall deliver to the Indenture Trustee a certificate substantially in the form of Exhibit J (a “ Non-U.S. Certificate ”) attached hereto promptly upon the receipt of each such Regulation S Certificate, and no such owner (or transferee from such owner) shall be entitled to receive a beneficial interest in a Permanent Regulation S Global Note or any payment of principal or interest on or any other payment with respect to its beneficial interest in a Temporary Regulation S Global Note prior to the Indenture Trustee receiving such Non-U.S. Certificate from Euroclear or Clearstream with respect to the portion of the Temporary Regulation S Global Note owned by such owner (and, with respect to a beneficial interest in the Permanent Regulation S Global Note, prior to the Exchange Date).
(c) Any payments of principal or interest on or any other payment on a Temporary Regulation S Global Note received by Euroclear or Clearstream with respect to any portion of such Regulation S Global Note owned by a Note Owner that has not delivered the Regulation S Certificate required by this Section 3.08 shall be held by Euroclear or Clearstream, as applicable, solely as agents for the Indenture Trustee. Euroclear or Clearstream, as applicable, shall remit such payments to the applicable Note Owner (or to a Euroclear or Clearstream member on behalf of such Note Owner) only after Euroclear or Clearstream has received the requisite Regulation S Certificate and Euroclear or Clearstream, as applicable, has provided the Indenture Trustee a Non-U.S. Certificate. Until the Indenture Trustee has received a Non-U.S. Certificate from Euroclear or Clearstream, as applicable, and it has received the requisite Regulation S Certificate with respect to the ownership of a beneficial interest in any portion of a Temporary Regulation S Global Note, the Indenture Trustee may revoke the right of Euroclear or Clearstream, as applicable, to hold any payments made with respect to such portion of such Temporary Regulation S Global Note. If the Indenture Trustee exercises its right of revocation pursuant to the immediately preceding sentence, Euroclear or Clearstream, as applicable, shall return such payments to the Indenture Trustee and the Indenture Trustee shall hold such payments in the Collection Account until Euroclear or Clearstream, as applicable, has provided the necessary Non-U.S. Certificates to the Indenture Trustee (at which time the Indenture Trustee shall forward such payments to Euroclear or Clearstream, as applicable, to be remitted to the Note Owner that is entitled thereto on the records of Euroclear or Clearstream (or on the records of their respective members)).
(d) Each Note Owner with respect to a Temporary Regulation S Global Note is entitled to exchange its beneficial interest therein for a beneficial interest in a Permanent Regulation S Global Note on or after the Exchange Date upon furnishing to Euroclear or Clearstream, as applicable, the Regulation S Certificate and upon receipt by the Indenture Trustee
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of the Non-U.S. Certificate thereof from Euroclear or Clearstream, as applicable, in each case pursuant to the terms of this Section 3.08 . On and after the Exchange Date, upon receipt by the Indenture Trustee of any Non-U.S. Certificate from Euroclear or Clearstream described in the immediately preceding sentence (i) with respect to the first such certification, the Issuer shall execute, upon receipt of an order to authenticate, and the Indenture Trustee shall authenticate and deliver to the Clearing Agency Custodian, the applicable Permanent Regulation S Global Note and (ii) with respect to the first and all subsequent certifications, the Clearing Agency Custodian shall exchange on behalf of the applicable owners the portion of the applicable Temporary Regulation S Global Note covered by such certification for a comparable portion of the applicable Permanent Regulation S Global Note. Upon any exchange of a portion of a Temporary Regulation S Global Note for a comparable portion of a Permanent Regulation S Global Note, the Clearing Agency Custodian shall endorse on the schedules affixed to each such Regulation S Global Note (or on continuations of such schedules affixed to each such Regulation S Global Note and made parts thereof) appropriate notations evidencing the date of transfer and (x) with respect to the Temporary Regulation S Global Note, a decrease in the principal amount thereof equal to the amount covered by the applicable certification and (y) with respect to the Permanent Regulation S Global Note, an increase in the principal amount thereof equal to the principal amount of the decrease in the Temporary Regulation S Global Note pursuant to clause (x) above.
Section 3.09 Special Transfer Provisions .
(a) If a holder of a beneficial interest in a Rule 144A Global Note wishes at any time to exchange its beneficial interest in such Rule 144A Global Note for a beneficial interest in a Regulation S Global Note, or to transfer a beneficial interest in a Rule 144A Global Note to a person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Note, such holder may, subject to the rules and procedures of the DTC and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of the beneficial interest for an equivalent beneficial interest in a Regulation S Global Note. Upon receipt by the Indenture Trustee of (1) instructions given in accordance with the DTC’s procedures from or on behalf of a Note Owner of any such Rule 144A Global Note, directing the Indenture Trustee (via the Depository’s Deposit/Withdrawal of Custodian System (“ DWAC ”)), as transfer agent, to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged or transferred, (2) a written order in accordance with the DTC’s procedures containing information regarding the Euroclear or Clearstream account to be credited with such increase and the name of such account, and (3) a certificate given by such Note Owner stating that the exchange or transfer of such beneficial interest has been made pursuant to and in accordance with Rule 904 of Regulation S under the Securities Act to a person that such Note Owner reasonably believes is an Institutional Accredited Investor and is obtaining such beneficial interest for its own account or the account of an Institutional Accredited Investor, the Indenture Trustee, as transfer agent, shall promptly deliver appropriate instructions to the DTC (via DWAC), its nominee, or the custodian for the DTC, as the case may be, to reduce or reflect on its records a reduction of such Rule 144A Global Note by the aggregate principal amount of the beneficial interest in the Rule 144A Global Note to be so exchanged or transferred from the relevant participant, and the Indenture Trustee, as transfer agent, shall promptly deliver appropriate instructions (via DWAC) to the DTC, its nominee, or the custodian for the DTC, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the
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principal amount of such Regulation S Global Note by the aggregate principal amount of the beneficial interest in the Rule 144A Global Note to be so exchanged or transferred, and to credit or cause to be credited to the account of the person specified in such instructions (who may be Euroclear Bank S.A./N.V., as operator of Euroclear or Clearstream or another agent member of Euroclear, or Clearstream, or both, as the case may be, acting for and on behalf of them) a beneficial interest in such Regulation S Global Note equal to the reduction in the principal amount of the Rule 144A Global Note.
(b) If a holder of a beneficial interest in a Permanent Regulation S Global Note wishes at any time to exchange its beneficial interest in a Regulation S Global Note for a beneficial interest in the Rule 144A Global Note, or to transfer a beneficial interest in a Regulation S Global Note to a person who wishes to take delivery thereof in the form of beneficial interest in a Rule 144A Global Note, such holder may, subject to the rules and procedures of Euroclear or Clearstream and the DTC, as the case may be, and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such beneficial interest for an equivalent beneficial interest in a Rule 144A Global Note. Upon receipt by the Indenture Trustee, as transfer agent, of (1) instructions given in accordance with the procedures of Euroclear or Clearstream and the DTC, as the case may be, from or on behalf of a Note Owner of a Regulation S Global Note directing the Indenture Trustee, as transfer agent, to credit or cause to be credited a beneficial interest in a Rule 144A Global Note in an amount equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, (2) a written order given in accordance with the procedures of Euroclear or Clearstream and the DTC, as the case may be, containing information regarding the account with the DTC to be credited with such increase and the name of such account, and (3) prior to the expiration of the Distribution Compliance Period, a certificate given by such Note Owner stating that the person transferring such beneficial interest in such Regulation S Global Note reasonably believes that the person acquiring such beneficial interest in the Rule 144A Global Note is a QIB and is obtaining such beneficial interest for its own account or the account of a QIB in a transaction meeting the requirements of Rule 144A under the Securities Act and any applicable securities laws of any State of the United States or any other jurisdiction, the Indenture Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the DTC, its nominee, or the custodian for the DTC, as the case may be, to reduce or reflect on its records a reduction of the applicable Regulation S Global Note by the aggregate principal amount of the beneficial interest in such Regulation S Global Note to be exchanged or transferred, and the Indenture Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the DTC its nominee, or the custodian for the DTC, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the principal amount of the applicable Rule 144A Global Note by the aggregate principal amount of the beneficial interest in the Regulation S Global Note to be so exchanged or transferred, and to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the reduction in the principal amount of the Regulation S Global Note. After the expiration of the Distribution Compliance Period, the certification requirement set forth in clause (3) of the second sentence of this Section 3.09 shall no longer apply to such exchanges and transfers.
(c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of a beneficial interest in the other Global Note shall, upon transfer, cease to be an interest in such Global Note and become a beneficial interest in the other
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Global Note and, accordingly, shall thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such a beneficial interest.
(d) Until the later of the Exchange Date and the provision of the certifications required by Section 4.06(d) , beneficial interests in a Regulation S Global Note may only be held through Euroclear Bank S.A./N.V., as operator of Euroclear or Clearstream, or another agent member of Euroclear and Clearstream acting for and on behalf of them. During the Distribution Compliance Period, beneficial interests in the Regulation S Global Note may be exchanged for beneficial interests in the Rule 144A Global Note only in accordance with the certification requirements described above.
[END OF ARTICLE III]
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Section 4.01 General Title; General Limitations; Terms of Notes . (a) The Notes may be issued up to an aggregate Initial Principal Amount as may be authorized by the Issuer from time to time. All Notes under this Indenture will in all respects be equally and ratably entitled to the benefits hereof without preference, priority or distinction on account of the actual time of the authentication and delivery or their respective maturity.
(b) Payments of principal and interest on each Note issued must be paid in United States dollars.
(c) Any provision relating to or terms of a Term Note not set forth herein, including such Term Note’s Initial Payment Date, Initial Principal Amount, the identity of the related Investment Pool and the related CUSIP number, will be set forth in the related Notice of Conversion.
(d) The form of the Notes will be established pursuant to the provisions of this Indenture. The Notes will be distinguished from each other in such manner reasonably satisfactory to the Indenture Trustee, as the Issuer may determine.
Section 4.02 Denominations . The Notes will be issuable in such denominations as will be provided in the provisions of this Indenture. The currency shall be in United States dollars. In the absence of any such provisions with respect to the Notes, the Notes will be issued in minimum denominations of $100,000 and integral multiples of $1.
Section 4.03 Execution, Authentication and Delivery and Dating . (a) The Notes will be executed on behalf of the Issuer by an Authorized Officer of the Issuer. The signature of any officer of the Issuer on the Notes may be manual or facsimile or may be given by other electronic means.
(b) Notes bearing the manual, facsimile or other electronic signatures of individuals who were at the time of execution an Authorized Officer of the Issuer will bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices before the authentication and delivery of such Notes or did not hold such offices at the date of issuance of such Notes.
(c) At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Notes executed by the Issuer along with an Issuer Certificate requesting authentication to the Indenture Trustee for authentication; and the Indenture Trustee will authenticate and deliver such Notes as in this Indenture provided and not otherwise.
(d) Before any such authentication and delivery, the Indenture Trustee will be entitled to receive any opinion or certificate relating to the issuance of the Notes required to be furnished pursuant to Section 4.10 .
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(e) The Indenture Trustee will not be required to authenticate such Notes if the issue thereof will adversely affect the Indenture Trustee’s own rights, duties or immunities under the Notes and this Indenture.
(f) Unless otherwise provided in the form of Note, all Notes will be dated the date of their authentication.
(g) No Note will be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a Certificate of Authentication substantially in the form provided for herein executed by the Indenture Trustee by manual signature of an authorized signatory, and such certificate upon any Note will be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.
Section 4.04 Registration, Transfer and Exchange . (a) The Indenture Trustee shall maintain at its principal executive office (or such other office or agency as it may designate by notice to each Noteholder), a register for the Notes in which the Indenture Trustee shall record the name and address of the Person in whose name the Notes have been issued (including the name and address of each transferee) and the principal amount (and stated interest) of Notes held by such Person (the “ Note Register ”). The Indenture Trustee shall keep the Note Register open and available at all times during normal business hours for inspection of any Holder or their respective representatives. The Note Register may be maintained in electronic format. The entries in the Note Register shall be conclusive absent manifest error, and the Issuer, the Holders and any assignees shall treat each Person whose name is recorded in the Note Register pursuant to the terms hereof as Holder hereunder for all purposes of this Indenture except as otherwise provided in Section 10.02 .
Notwithstanding anything to the contrary contained herein, the Notes (including Global Notes) and this Indenture are registered obligations and the right, title and interest of each Holder and their assignees in and to such Notes (or any rights under this Indenture) shall be transferable only upon notation of such transfer in the Note Register or in the Book Entry System. The Note Registrar shall make all notations of transfer requested by any Holder promptly, but in any event no later than two (2) Business Days after receiving such a request by a Holder. The Notes shall only evidence a Holder’s or their assignee’s right, title and interest in and to the related Notes, and in no event is any such Note to be considered a bearer instrument or obligation. This Section 4.04 shall be construed so that the Notes are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations promulgated thereunder.
Each Noteholder, or Note Owner that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Issuer, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Notes or other obligations under the Transaction Documents (the “ Participant Register ”); provided , that, no Holder shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans, letters of credit or its other obligations under any Transaction Document) to any Person other than the Issuer except to the extent that such disclosure
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is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations or to the extent required pursuant to Section 4.11 or Section 4.12 and any Certificate of Variable Funding Note Noteholder or Certificate of Term Note Owner required under clause vii of Section 4.04(i) . The entries in the Participant Register shall be conclusive absent manifest error, and such Noteholder or Note Owner shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Indenture notwithstanding any notice to the contrary.
(b) Subject to Section 3.04 , upon surrender for transfer of any Registered Note at the office or agency of the Issuer in a Place of Payment, if the requirements of Section 8-401(a) of the UCC are met, the Issuer will execute, and, upon receipt of such surrendered Note, the Indenture Trustee will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Notes of any authorized denominations, of a like aggregate Initial Principal Amount and (if such Registered Note is a Term Note) Term Note Maturity Date and of like terms.
(c) All Notes issued upon any transfer or exchange of Notes will be the valid and legally binding obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such transfer or exchange.
(d) Every Note presented or surrendered for transfer or exchange will be duly indorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
(e) Unless otherwise provided in the Note to be transferred or exchanged, no service charge will be made on any Noteholder for any transfer or exchange of Notes, but the Issuer and the Indenture Trustee may (unless otherwise provided in such Note) require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Notes before the transfer or exchange will be complete.
(f) None of the Issuer, the Note Registrar or the Indenture Trustee shall be required (i) to issue, register the transfer of or exchange any Notes during a period beginning at the opening of business 15 days before the day of selection of Notes to be redeemed and ending at the close of business on the day of the mailing of the relevant notice of redemption of Registered Notes so selected for redemption or (ii) to register the transfer or exchange of any Notes or portions thereof so selected for redemption.
(g) The Notes have not been registered under the Securities Act or any state securities law. None of the Issuer, the Master Servicer, any Asset Servicer, the Note Registrar or the Indenture Trustee is obligated to register the Notes under the Securities Act or any other securities or “Blue Sky” laws or to take any other action not otherwise required under this Indenture to permit the transfer of any Note without registration.
(h) Each Note issued pursuant to this Indenture shall be fully assignable; provided , however , that no transfer of any Note or any interest therein (including by pledge or
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hypothecation) shall be made except in compliance with the restrictions on transfer set forth in this Section 4.04 (including the applicable legend to be set forth on the face of each Note as provided in the form of Note attached as an exhibit hereto) and in a transaction exempt from the registration requirements of the Securities Act and applicable State securities or “Blue Sky” laws. The transfer of the Notes and of beneficial interests in the Notes shall be restricted to transfers to a person (A)(x) that the transferor reasonably believes is a “qualified institutional buyer” (a “ QIB ”) within the meaning thereof in Rule 144A under the Securities Act (“ Rule 144A ”) in the form of beneficial interests in the 144A Global Note and (y) that is aware that the resale or other transfer is being made in reliance on Rule 144A or (B) that is not a United States Person but that the transferor reasonably believes is an Institutional Accredited Investor or a QIB in an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act, in the form of beneficial interests in the applicable Regulation S Global Note.
(i) Each Noteholder, by its acceptance of its Note, and each Note Owner and other Person who acquires a beneficial interest or participation interest in a Note (each, a “ Note Interest ”), by its acceptance of its Note Interests, shall be deemed to have acknowledged, represented to and agreed with the Issuer as follows:
|
i. |
It understands and acknowledges that the Notes and Note Interests will be offered and may be resold (A) in the United States to QIBs pursuant to Rule 144A in the form of beneficial interests in the Rule 144A Global Note or (B) outside the United States to non-United States Persons pursuant to Regulation S under the Securities Act who are Institutional Accredited Investors or QIBs, initially in the form of beneficial interests in the Temporary Regulation S Global Note. As set forth in Section 3.08 , beneficial interests in the Temporary Regulation S Global Note may be exchanged for beneficial interests in the Permanent Regulation S Global Note. It understands and acknowledges that, if it seeks to effect a transfer to a non-United States Person under Regulation S under the Securities Act, it shall (i) not take any action that would constitute “directed selling efforts” or that would cause it to be or become a “distributor” or to enter into contractual arrangements with a “distributor” (as to each such term, under and as defined in Regulation S under the Securities Act) and (ii) effect such transfer in compliance with Rule 904 of Regulation S under the Securities Act. |
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ii. |
It understands that the Notes have not been and will not be registered under the Securities Act or any State or other applicable securities law and that the Notes and Note Interests, may not be offered, sold, pledged or otherwise transferred unless registered pursuant to, or exempt from registration under, the Securities Act and any State or other applicable securities law. |
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iii. |
It has had access to such financial and other information concerning the Issuer and the Notes as it has deemed necessary in connection with its decision to purchase the Note or Note Interest. |
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iv. |
It acknowledges that the Notes will bear a legend to the following effect unless the Issuer determines otherwise, consistent with applicable law: |
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“THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “
SECURITIES ACT
”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “
QIB
”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “
IAI
”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
THE EMPLOYEE RETIREMENT INCOME
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SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “ CODE ”) THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE COMPANY GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“ PTCE ”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIES ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.”
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v. |
If it is acquiring any Note or Note Interest, as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the acknowledgments, representations and agreements contained herein on behalf of each such account. |
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vi. |
It (A)(i) is a QIB, (ii) is aware that the sale to it is being made in reliance on Rule 144A and if it is acquiring such Note or Note Interest for the account of another QIB, such other QIB is aware that the sale is being made in reliance on Rule 144A and (iii) is acquiring such Note or Note Interest for its own account or for the account of a QIB, or (B) (i) is an IAI or a QIB, (ii) is not a United States Person and is purchasing such Note or Note Interest in an offshore transaction meeting the requirements of Rule 904 of Regulation S and if it is acquiring such Note or Note Interest for the account of another IAI or a QIB, such other IAI or QIB is aware that the sale is being made in reliance on Regulation S and (iii) is acquiring such Note or Note Interest for its own account or for the account of another IAI or a QIB. |
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|
viii. |
It is purchasing the Note or Note Interest for its own account, or for one or more investor accounts for which it is acting as fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject to any requirements of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and subject to its or their ability to resell such Note or any Note Interest pursuant to the provisions of this Indenture. |
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ix. |
It agrees that if in the future it should offer, sell or otherwise transfer such Note or Note Interest, it will do so only (A) to the Issuer or, with the written consent of the Issuer, to an Affiliate of the Issuer, (B) pursuant to Rule 144A to a person it reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, purchasing for its own account or for the account of a QIB, whom it has informed that such offer, sale or other transfer is being made in reliance on Rule 144A, or (C) in an offshore transaction meeting the requirements of Rule 904 of Regulation S under the Securities Act to a person it reasonably believes is an IAI or a QIB, purchasing for its own account or for the account of another IAI or a QIB. |
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x. |
With respect to any foreign purchaser claiming an exemption from United States income or withholding tax, it has delivered to the Indenture Trustee a true and complete Form W-8BEN, W-8BEN-E or W-8ECI, indicating such exemption or any successor or other forms and documentation as may be sufficient under the applicable regulations for claiming such exemption. |
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xi. |
It acknowledges that the Issuer and others will rely on the truth and accuracy of the foregoing certificates, acknowledgments, representations and agreements, and agrees that if any of the foregoing certificates, acknowledgments, representations and agreements deemed to have been made by it are no longer accurate, it shall promptly notify the Issuer. |
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|
xii. |
It acknowledges that transfers of the Notes or any Note Interest shall otherwise be subject in all respects to the restrictions applicable thereto contained in this Indenture. |
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xiii. |
It is not acquiring or holding the Notes with the “plan assets” of (i) an employee benefit plan (as defined in Section 3(3) of ERISA that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, (iii) an entity whose underlying assets include “plan assets” by reason of investment by an employee benefit plan or a plan in such entity other than an insurance company general account (as defined in Prohibited Transaction Class Exemption (“ PTCE ”) 95-60) whose underlying assets include less than 25% “plan assets” and for which the purchase and holding of the Notes is eligible for and satisfies all conditions for relief under PTCE 95-60 or (iv) an employee benefit plan or plan that is not subject to the provisions of Title I of ERISA or Section 4975 of the Code, if such acquisition or holding would result in a non-exempt prohibited transaction under, or a non-exempt violation of, any applicable law that is substantially similar to Title I of ERISA or Section 4975 of the Code. |
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xiv. |
If it is acquiring the Notes or any Note Interest in an “offshore transaction” (as defined in Regulation S under the Securities Act), it acknowledges that the Notes will initially be represented by the Temporary Regulation S Global Note and that transfers thereof or any interest or participation therein are restricted as set forth in this Indenture. |
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xv. |
It understands that the Temporary Regulation S Global Note will bear a legend to the following effect unless the Issuer determines otherwise, consistent with applicable law: |
“THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE REFERRED TO BELOW.”
Any transfer, resale, pledge or other transfer of any of the Notes or any Note Interest contrary to the restrictions set forth above, in any Certificate of Variable Funding Note Noteholder or Certificate of Term Note Owner, and elsewhere in this Indenture shall be deemed void ab initio by the Issuer and the Indenture Trustee.
(j) Each Noteholder of any Notes understands and acknowledges that the Issuer has structured this Indenture and the Notes with the intention that the Notes will qualify under
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applicable tax law as indebtedness of the Issuer, and the Issuer and each Noteholder by acceptance of its Note agree to treat the Notes (or interests therein) as indebtedness for purposes of federal, State, local and foreign income or franchise taxes or any other applicable tax.
(k) Each Noteholder or Note Owner of any Notes, by the purchase of such Note or its acceptance of a beneficial interest therein, acknowledges and agrees that, subject to the provisions of Section 2.07 of the Note Purchase Agreement, interest on the Notes will be treated as United States source interest, and, as such, United States withholding tax may apply. Each such Noteholder or Note Owner further agrees, upon request, to provide any certifications that may be required under applicable law, regulations or procedures to evidence its status and understands that if it ceases to provide requested documentation, payments to it under the Notes may be subject to United States withholding tax and each Noteholder acknowledges and agrees that the Indenture Trustee shall have the right (without liability) to deduct and withhold any required U.S. withholding tax, including under FATCA, pursuant to applicable law. Without limiting the foregoing, if a payment made under this Indenture would be subject to United States federal withholding tax imposed by FATCA if the recipient of such payment were to fail to comply with FATCA (including the requirements of Code Sections 1471(b) or 1472(b), as applicable), such recipient shall deliver to the Issuer, with a copy to the Indenture Trustee, at the time or times prescribed by the Code and at such time or times reasonably requested by the Issuer or the Indenture Trustee, such documentation prescribed by the Code (including as prescribed by Code Section 1471(b)(3)(C)(i)) and such additional documentation reasonably requested by the Issuer or the Indenture Trustee to comply with their respective obligations under FATCA, to determine that such recipient has complied with such recipient’s obligations under FATCA, or to determine the amount to deduct and withhold from such payment. For these purposes, “FATCA” means Section 1471 through 1474 of the Code and any regulations or official interpretations thereof (including any revenue ruling, revenue procedure, notice or similar guidance issued by the U.S. Internal Revenue Service thereunder as a precondition to relief or exemption from taxes under such Sections, regulations and interpretations), any agreements entered into pursuant to Code Section 1471(b)(1), and including any amendments made to FATCA after the date of this Indenture.
(l) None of the Issuer, the Indenture Trustee, any agent of the Indenture Trustee, any Payment Agent or the Note Registrar will have any responsibility or liability for any aspect of the records relating to or payment made on account of beneficial ownership of a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership.
(m) The Issuer initially appoints Bankers Trust to act as Note Registrar for the Registered Notes on its behalf, and Bankers Trust by its execution of this Indenture hereby accepts such appointment. Under no circumstances will the Note Registrar have any responsibility for the Participant Register. The Issuer may at any time and from time to time authorize any Person to act as Note Registrar in place of the Indenture Trustee with respect to any Notes issued under this Indenture.
(n) The Indenture Trustee shall maintain a register of the holders of Notes and Note Interests, based upon the Certificates of Variable Funding Note Noteholders and Certificates of Term Note Owners delivered to the Indenture Trustee as provided in clause vii of Section
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4.04(i) . Upon the request of the Issuer, the Indenture Trustee shall report to the Issuer the aggregate number of Term Note Owners (including for such purpose the maximum number of Term Note Partners (as defined in the Certificate of Term Note Owner) and the aggregate number of Variable Funding Note Noteholders. In monitoring such issuances and transfers and providing such reports, the Indenture Trustee shall rely solely and exclusively (without any duty to make further inquiry, including any duty to inquire whether a holder holds for the account of one or more other persons) on the Certificates of Variable Funding Note Noteholders and Certificates of Term Note Owners received pursuant to the terms of this Indenture and as contemplated herein.
(o) For so long as any of the Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer agrees to provide to any Noteholder and to any prospective purchaser of Notes designated by such Noteholder, upon the request of such Noteholder or prospective purchaser, any information required to be provided to such Holder or prospective purchaser to satisfy the conditions set forth in Rule 144A(d)(4) under the Securities Act.
Notwithstanding anything to the contrary contained herein, each Note and this Indenture may be amended or supplemented to modify the restrictions on and procedures for resale and other transfers of the Notes to reflect any change in applicable law or regulation (or the interpretation thereof) or in practices relating to the resale or transfer of restricted securities generally. Each Noteholder shall, by its acceptance of such Note, have agreed to any such amendment or supplement.
(p) Each Noteholder shall have the right at any time to sell one or more participations to any Person (other than Enova or any of its Affiliates) in all or any part of the Funding Commitment, the Notes or in any other obligation, so long as such Person agrees to be subject to the confidentiality provisions contained in the Transaction Documents. No such participation arrangement shall relieve the Noteholder of any of its obligations under the Transaction Documents, including the Funding Commitment. The holder of any such participation, other than an Affiliate of the Noteholder granting such participation, shall not be entitled to require the Noteholder to take or omit to take any action hereunder except the consent of each participant shall be required to the same extent as if such participant were a Noteholder with respect to any amendment, modification, termination, waiver or consent that would (i) extend the final scheduled maturity of any Funding Commitment or Note in which such participant is participating, or reduce or waive the rate or extend or waive the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce or waive the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that an increase in any Funding Commitment or Note shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Issuer of any of its rights and obligations under this Indenture, (iii) release all or substantially all of the Collateral under the Transaction Documents (except as expressly provided in the Transaction Documents) supporting the Notes hereunder in which such participant is participating, (iv) otherwise be required of any Noteholder under Section 10.02 hereof, (v) waive or declare an Event of Default hereunder without the consent of the Majority Holders or, where applicable, all Noteholders, in either case treating all participants as Holders for such purpose, (vi) result in a change to the priority of payments set forth in Article V hereof in a manner adverse to
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a participant, (vii) increase any fees payable to the Administrative Agent pursuant to Article VI hereof, or (viii) amend any of the affirmative or negative covenants set forth in Article XI hereof, as applicable, in a manner more adverse to a participant than it is to a Noteholder. The Issuer agrees that each participant shall be entitled to the benefits of the Note Purchase Agreement to the same extent as if it were a Noteholder and had acquired its interest by assignment pursuant to clause (h) of this Section 4.04 ; provided , (i) a participant shall not be entitled to receive any greater payment under Sections 2.06 and 2.07 of the Note Purchase Agreement than the applicable Noteholder would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the Issuer’s prior written consent, (ii) a participant shall not be entitled to the benefits of Section 2.07 of the Note Purchase Agreement unless such participant complies with Section 2.07(f) as though it were a Noteholder by providing such documentation to the participating Noteholder and (iii) such participant complies with the certification requirements specified in Section 2.07(b) thereof and the refund requirements in Section 2.07(g) thereof. Notwithstanding any participation made hereunder (i) such selling Noteholder’s obligations under this Indenture shall remain unchanged, (ii) such selling Noteholder shall remain solely responsible to the other parties hereto for the performance of its obligations hereunder, and (iii) except as set forth above, the Enova Parties, the Administrative Agent, the Indenture Trustee and any other Noteholders shall continue to deal solely and directly with such selling Noteholder in connection with such selling Noteholder’s rights and obligations under this Indenture, and such selling Noteholder shall retain the sole right to enforce the obligations of the Enova Parties under this Indenture and to approve, without the consent of or consultation with any participant, any amendment, modification or waiver of any provision of this Indenture; provided , however , if the Issuer is provided notice of the sale of the participation to such participant, then during the occurrence and continuance of an Event of Default, the participant (to the extent of its interest in any Notes) shall have the right to exercise any remedies hereunder and vote any claims with respect to the Issuer or the Notes in any bankruptcy, insolvency or similar type of proceeding of the Issuer.
(q) Notwithstanding any provision to the contrary herein, each Noteholder, by its acceptance of its Note, and each Note Owner and other Person who acquires a Note Interest, by its acceptance of its Note Interests, shall be deemed to have acknowledged, represented and warranted to the Issuer that it is not a Competitor, and, prior to the occurrence and continuance of an Event of Default, shall not transfer a Note or a Note Interest to, or enter into a participation with respect to Note or Note Interests with, any Competitor without the prior written consent of the Issuer.
(r) Notwithstanding anything to the contrary set forth in this Article 4 or the Note Purchase Agreement, (i) FSLF is an accredited investor (as defined under Rule 501(a) of Regulation D under the Securities Act), (ii) all future transfers and assignments made by FSLF shall be made in accordance with (and subject to restrictions of) the terms of this Indenture (including, but not limited to, this Section 4.04 ), and (iii) after FSLF becomes a QIB, it may exchange any definitive Notes in its possession for a beneficial interest in a Global Note to be registered in the name of the Depository (pursuant to and in accordance with the terms of this Indenture). The Issuer and the Indenture Trustee further acknowledge and agree that, (i) in lieu of the certification set forth in Section 4.04(i)(vi) , FSLF, by its acceptance of a Note shall be deemed to have represented and agreed that it is an accredited investor (as defined under Rule 501(a) of Regulation D under the Securities Act) and (ii) for the avoidance of doubt, FSLF, by its acceptance
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of a Note, shall not be deemed to violate the transfer restrictions set forth in this Indenture for purposes of Section 4(d) of the Certificate of Variable Funding Note Noteholder or Section 5(d) of the Certificate of Term Note Owner.
Section 4.05 Mutilated, Destroyed, Lost and Stolen Notes . (a) If (i) any mutilated Note is surrendered to the Indenture Trustee or the Note Registrar, or the Issuer, the Note Registrar or the Indenture Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Issuer, the Note Registrar or the Indenture Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a protected purchaser (as defined in Article 8 of the UCC), the Issuer will execute and upon its request the Indenture Trustee will authenticate and deliver in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of like tenor, Term Note Maturity Date and Initial Principal Amount, bearing a number not contemporaneously Outstanding.
(b) In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer in its discretion may, instead of issuing a new Note, pay such Note in full as provided hereunder.
(c) Upon the issuance of any new Note under this Section 4.05 , the Issuer and the Indenture Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Indenture Trustee) connected therewith.
(d) Every new Note issued pursuant to this Section 4.05 in lieu of any destroyed, lost or stolen Note will constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note will be at any time enforceable by anyone, and will be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
(e) The provisions of this Section 4.05 are exclusive and will preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.06 Payment of Principal and Interest; Payment Rights Preserved; Withholding Taxes . (a) Unless otherwise provided with respect to such Note pursuant to Section 4.01 , principal and interest payable on any Registered Note will be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the most recent Record Date.
(b) Subject to clause (a), each Note delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Note will carry the rights to interest accrued or principal accreted and unpaid, and to accrue or accrete, which were carried by such other Note.
(c) Subject to the provisions of Section 2.07 of the Note Purchase Agreement, the right of any Noteholder to receive interest on or principal of any Note shall be subject to any applicable withholding or deduction imposed pursuant to the Internal Revenue Code or other applicable tax law, including foreign withholding and deduction. Subject to the provisions of
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Section 2.07 of the Note Purchase Agreement, any amounts properly so withheld or deducted shall be treated as actually paid to the appropriate Noteholder.
(d) Holders of a beneficial interest in Notes sold in reliance on Regulation S as Temporary Regulation S Global Notes are prohibited from receiving payments or from exchanging beneficial interests in such Temporary Regulation S Global Notes for Permanent Regulation S Global Notes until the furnishing of a certificate, substantially in the form of Exhibit I attached hereto, certifying that the beneficial owner of the Temporary Regulation S Global Note is a non-United States Person (a “ Regulation S Certificate ”) as provided in Section 3.08(b) .
Section 4.07 Persons Deemed Owners . The Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person who is proved to be the owner of such Note pursuant to Section 1.04(c) as the owner of such Note for the purpose of receiving payment of principal of and (subject to Section 4.06 ) interest on such Note and, subject to Section 10.02 , for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 4.08 Cancellation . All Notes surrendered for payment, redemption, transfer, conversion or exchange will, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee with notification of such surrender, redemption, transfer, conversion or exchange to Issuer and, if not already canceled and if accompanied by such Officer’s Certificate and Opinion of Counsel as Indenture Trustee may require, will be promptly canceled by it simultaneously with such payment, redemption, transfer, conversion or exchange. No Note may be surrendered (including any surrender in connection with any abandonment, donation, gift, contribution or other event or circumstance) except for payment as provided herein, or for registration of transfer, exchange or redemption, or for replacement in connection with any Note mutilated, defaced or deemed lost or stolen. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered will be promptly canceled by the Indenture Trustee. No Note will be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 4.08 , except as expressly permitted by this Indenture. The Indenture Trustee will dispose of all canceled Notes in accordance with its customary procedures and, upon Issuer’s request, will deliver a certificate of such disposition to the Issuer.
Section 4.09 Termination . Each Note shall be considered to be paid in full, the Holders of such Note shall have no further right or claim, and the Issuer shall have no further obligation or liability with respect to such Note on the earliest to occur of (i) the Optional Redemption Date and a payment of the applicable Optional Redemption Amount, (ii) the date on which the Outstanding Principal Amount with respect to such Note, and all Noteholder Monthly Interest on such Note, is paid in full and (iii) the date on which all of the Collateral is sold and the proceeds in respect thereof applied in accordance with Section 7.05 , in each case after giving effect to all deposits, allocations, reimbursements, reallocations, sales of Collateral and payments to be made in connection therewith.
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Section 4.10 Issuance of Notes . (a) The Issuer shall issue the Initial Term Notes and the initial Variable Funding Notes on the Closing Date, so long as the following conditions precedent are satisfied:
(i) on the Closing Date, the Issuer delivers to the Indenture Trustee an Issuer Certificate to the effect that:
(A) all instruments furnished to the Indenture Trustee conform to the requirements of this Indenture and constitute sufficient authority hereunder for the Indenture Trustee to authenticate and deliver such Notes;
(B) the form and terms of the Initial Term Notes and the initial Variable Funding Notes have been established in conformity with the provisions of this Indenture; and
(C) such other matters as the Indenture Trustee may reasonably request;
(ii) on the Closing Date, the Issuer delivers to the Indenture Trustee an Issuer Certificate certifying that all laws and requirements with respect to the execution and delivery by the Issuer of such Notes have been complied with, the Issuer has the power and authority to issue such Notes and such Notes have been duly authorized and delivered by the Issuer and, assuming due authentication and delivery by the Indenture Trustee, constitute legal, valid and binding obligations of the Issuer enforceable in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and entitled to the benefits of this Indenture, equally and ratably with all other Outstanding Notes, if any, subject to the terms of this Indenture;
(iii) on or prior to the Closing Date, the Issuer will have delivered to the Indenture Trustee and the Noteholders an opinion regarding tax matters reasonably acceptable to the Majority Holders, which addresses items including (i) the debt for tax status of the Notes and (ii) that the Issuer will not be treated as an association (or publicly traded partnership) taxable as a corporation; and
(iv) the conditions specified herein are satisfied.
(b) With respect to the issuance of each Quarterly Term Note in connection with a Conversion Date, as contemplated in Section 4.12 , the Issuer and the Indenture Trustee will not be required to provide prior notice to or to obtain the consent of any Noteholder nor will the Issuer be subject to the conditions set forth above in Section 4.10(a)(i)-(iv) .
(c) With respect to the issuance of each Quarterly Term Note in connection with a Conversion Date, as contemplated in Section 4.12 , the Outstanding Principal Amount of all Notes Outstanding (after giving effect to such issuance) shall not exceed the Maximum Principal Amount.
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Section 4.11 Variable Funding Note .
(a) On the Closing Date, upon satisfaction of the conditions set forth in Section 4.10(a) , the Issuer shall execute and deliver to the Indenture Trustee for authentication, the notes designated as the “Variable Funding Notes,” each substantially in the form of Exhibit A hereto.
(b) Each Variable Funding Note shall be delivered in definitive form and registered in the name of a Variable Funding Note Noteholder.
(c) The first Payment Date with respect to the Variable Funding Notes shall be the Initial Payment Date.
(d) During the Revolving Period, pursuant to Section 2.04 of the Note Purchase Agreement, the Variable Funding Note Noteholders shall make Advances.
(e) All Advances shall be remitted to the Issuer pursuant to instructions provided by the Issuer in the applicable Funding Request.
(f) In connection with any Advance made pursuant to the Note Purchase Agreement, the Indenture Trustee, or the Note Registrar if a different Person than the Indenture Trustee, pursuant to an Issuer Certificate setting forth for each Advance, (i) the date on which such Advance was made, (ii) the amount of such Advance, and (iii) the Outstanding Principal Amount of the Variable Funding Notes as of such date after giving effect to such Advance, shall annotate the Note Register to reflect such date, Advance amount and the Outstanding Principal Amount of the Variable Funding Notes as of such date after giving effect to such Advance.
(g) On each Conversion Date during the Revolving Period, the Issuer shall execute and deliver an authenticated Quarterly Term Note in accordance with Section 4.12 . Each Quarterly Term Note shall have an Initial Principal Amount equal to the lesser of (x) the product of (i) the Quarterly Term Note Advance Rate and (ii) the Outstanding Receivable Principal Balance of the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool as of such date of determination and (y) the Outstanding Principal Amount of the Variable Funding Notes as of such Conversion Date. Amounts advanced under the Variable Funding Notes as of such Conversion Date shall be (in full or in part, based on the Initial Principal Amount of the Quarterly Term Note) repaid in kind by the issuance of the Quarterly Term Note, and the excess, if any, of (i) the Outstanding Principal Amount of such Variable Funding Notes as of such Conversion Date (immediately prior to giving effect to the issuance of the related Quarterly Term Note) over (ii) the Initial Principal Amount of such Quarterly Term Note, shall be paid to the Variable Funding Note Noteholders on the final Payment Date of such Quarterly Revolving Period (which Payment Date shall occur approximately fifteen (15) days following the Conversion Date). Each Holder of a Variable Funding Note will receive its allocable share of beneficial interest in the Quarterly Term Notes issued on the related Conversion Date based upon its ratable share of the Outstanding Principal Amount of the Variable Funding Notes as of such Conversion Date. Immediately following each issuance of Quarterly Term Notes the Outstanding Principal Amount of the Variable Funding Notes shall be reduced by the Initial Principal Amount of the Quarterly Term Note. Such reduction shall be annotated by the Indenture Trustee on the Variable Funding Notes. Following the issuance of Quarterly Term Notes on a Conversion Date, no additional
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Eligible Receivables may be allocated to the Term Note Investment Pool applicable to such Quarterly Term Notes created by such conversion.
(h) On each Payment Date, the Indenture Trustee shall apply Variable Funding Note Available Collections pursuant to Section 5.04(b) hereof. Except as provided in Section 13.08 hereof with respect to final distribution, distributions to the Variable Funding Note Noteholder shall be made by wire transfer to a bank account, such bank account to be designated by the Variable Funding Note Noteholders prior to such Payment Date, without presentation or surrender of the Variable Funding Note or the making of any notation thereon.
(i) The Variable Funding Notes shall be secured by the Collateral, and in connection with the sale of Collateral following an Event of Default, the Variable Funding Note Noteholder shall be entitled to its pro rata share of proceeds. Any payment of principal and interest on the Variable Funding Notes, however, shall be based solely on the performance of the Receivables relating to the Variable Funding Note Investment Pool, and, unless otherwise set forth in Section 5.04(b) , shall not be dependent on the Receivables related to any other Investment Pool or market or other credit events that are independent of such Receivables.
(j) There shall at no time be more than one Variable Funding Note Investment Pool outstanding.
(k) The Holder of a Variable Funding Note shall have no further right or claim (unless otherwise expressly set forth in a Transaction Document), and the Issuer shall have no further obligation or liability with respect to such Variable Funding Note on the earlier to occur of (i) the date on which Collateral is sold and the proceeds in respect thereof applied in accordance with Section 7.05 hereof, and (ii) the Funding Period Termination Date, in each case after giving effect to all deposits, allocations, reimbursements, reallocations, sales of Collateral and payments to be made in connection therewith.
(a) On the Closing Date, the Issuer shall issue the Initial Term Note. On each Conversion Date the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool shall be allocated into a Term Note Investment Pool for such Quarterly Term Notes and any Receivable that is not an Eligible Conversion Receivable shall remain in the Variable Funding Note Investment Pool after such Conversion Date and be subject to repurchase pursuant to Section 2.5 of the Sale Agreement. On each Conversion Date, subject to Section 4.12(b) below, a Quarterly Term Note will be delivered in the form of a Global Note substantially in the form of Exhibit B hereto, in each case to be executed and delivered by the Issuer, authenticated by the Indenture Trustee and issued in the Initial Principal Amount determined as specified in Section 4.11(g) .
(b) On each Conversion Date, the Issuer shall deliver, or shall cause to be delivered, a Notice of Conversion to the Indenture Trustee, which will (i) include the schedule of Eligible Conversion Receivables related to the Term Note Investment Pool for such Quarterly Term Notes, and (ii) certify that all laws and requirements with respect to the execution and delivery by the Issuer of such Quarterly Term Notes has been complied with, the Issuer has the
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power and authority to issue such Quarterly Term Notes and such Quarterly Term Notes have been duly authorized and delivered by the Issuer and, assuming due authentication and delivery by the Indenture Trustee, constitutes a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and entitled to the benefits of this Indenture, equally and ratably with all other Outstanding Notes, if any, subject to the terms of this Indenture.
(c) Each Term Note shall be issued in minimum denominations of $100,000 and integral multiples of $1.
(d) Except as otherwise provided in Section 13.08 , distributions hereunder to Term Note Noteholders shall be made pursuant to Section 5.04(a) to the clearing agency with respect to which each Term Note is registered, in immediately available funds.
(e) Following the issuance of a Term Note pursuant to this Section 4.12 , the Issuer may not add any additional Eligible Receivables purchased by the Issuer after the applicable Conversion Date to the related Term Note Investment Pool for such Quarterly Term Notes.
(f) Each Term Note shall be secured by the Collateral, and in connection with the sale of Collateral following an Event of Default, each Term Note Noteholder shall be entitled to its pro rata share of proceeds. The payment of principal and interest on each Term Note, however, shall, except as otherwise provided in Section 5.04(a) , be solely based on the performance of the Receivables included in the related Term Note Investment Pool and shall not be dependent on the Receivables related to any other Investment Pool or market or credit events that are independent of such Receivables.
(g) Subject to any amounts due under any of the other Transaction Documents (other than indemnities and reimbursement obligations for which a claim has not yet been asserted), each Term Note shall be considered to be paid in full, the Holders of such Term Note shall have no further right or claim, and the Issuer shall have no further obligation or liability with respect to such Term Note on the earliest to occur of (i) the Optional Redemption Date and payment of the applicable Optional Redemption Amount, (ii) the date on which the Outstanding Principal Amount (if applicable) with respect to such Term Note and all Term Note Monthly Interest on such Term Note is paid in full, and (iii) the date on which all of the Collateral is sold and the proceeds in respect thereof applied in accordance with Section 7.05 of the Indenture, in each case after giving effect to all deposits, allocations, reimbursements, reallocations, sales of Collateral and payments to be made in connection therewith.
[END OF ARTICLE IV]
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ARTICLE V
ISSUER ACCOUNTS; INVESTMENTS; ALLOCATIONS; APPLICATION
Section 5.01 Collections . Except as otherwise expressly provided in this Indenture, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance from any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture including all funds and other property payable to the Indenture Trustee in connection with the Collateral. The Indenture Trustee will hold all such money and property received by it as part of the Collateral and will apply it as provided in this Indenture.
Section 5.02 Collection Account; Distributions from Collection Account . (a) On or before the date hereof, the Issuer shall cause to be established and maintained an Eligible Deposit Account (the “ Collection Account ”) in the name of the Indenture Trustee as a securities account with the Securities Intermediary in accordance with Section 2.11 , bearing a designation clearly indicating that the funds and other property credited thereto are held for the benefit of the Indenture Trustee and the Noteholders. All collections and distributions received pursuant to Section 2.02 of the Servicing Agreement shall be credited to the Collection Account. The Collection Account shall be under the control of the Securities Intermediary for the benefit of the Indenture Trustee and the Noteholders in accordance with Section 2.11 . If, at any time (i) the institution holding the Collection Account ceases to be an Eligible Institution, the Issuer shall notify the Indenture Trustee, and the Issuer (or the Master Servicer) shall within thirty (30) Business Days establish (or cause to be established) a new Collection Account that is an Eligible Deposit Account and shall transfer (or cause to be transferred) any funds or other property from such Collection Account to such new Collection Account or (ii) the Issuer determines for any reason that the Collection Account should be held at a different Eligible Institution, then upon prior notice to the Indenture Trustee, the Issuer shall establish or cause to be established a new Collection Account that is an Eligible Deposit Account and shall transfer (or cause to be transferred) any funds or other property from such Collection Account to such new Collection Account. From the date each such new Collection Account is established, it shall be the “Collection Account.” Prior to or at the time of the establishment of any Collection Account (whether the initial Collection Account or any successor Collection Account), the Issuer shall (I) deliver to the Indenture Trustee an Officer’s Certificate specifying the Eligible Institution at which the Collection Account is maintained and the account number of the Collection Account, and (II) Deliver the Collection Account to the Indenture Trustee.
(b) All payments to be made from time to time by or on behalf of the Indenture Trustee to Noteholders out of available funds in the Collection Account pursuant to this Indenture will be made by the Indenture Trustee or by the Paying Agent (if a different Person than the Indenture Trustee) not later than 2:00 p.m., New York City time, on the applicable Payment Date or earlier, if necessary, but only to the extent of available funds in the Collection Account at the time the Indenture Trustee or the Paying Agent (if a different Person than the Indenture Trustee) makes payments to Noteholders.
(c) Except as provided in Section 13.08 hereof with respect to final distribution, distributions to a Variable Funding Note Noteholder shall be made by wire transfer to a bank
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account, such bank account to be designated by the Variable Funding Note Noteholder prior to such Payment Date, without presentation or surrender of the Variable Funding Note or the making of any notation thereon.
Section 5.03 Investment of Funds in the Collection Account . (a) Funds credited to the Collection Account may (unless otherwise stated in this Indenture) be invested and reinvested by the Indenture Trustee at the direction of the Issuer in one or more Eligible Investments. The Issuer may authorize the Indenture Trustee to make specific investments pursuant to instructions, in such amounts as the Issuer will specify. Notwithstanding the foregoing, funds held by the Indenture Trustee in the Collection Account will be invested at the direction of the Issuer in Eligible Investments that will mature in each case no later than the Business Day preceding the date on which such funds in the Collection Account are scheduled to be transferred or distributed by the Indenture Trustee pursuant to this Indenture (or as necessary to provide for timely payment of principal or interest on the applicable Payment Date). The Indenture Trustee shall not have any investment discretion with respect to the Collection Account or any funds therein and shall have no liability with respect to the Eligible Investments selected by the Issuer or any losses resulting therein.
(b) All funds from time to time credited to the Collection Account pursuant to this Indenture and all investments made with such funds, if any, will be held by the Indenture Trustee in the Collection Account as part of the Collateral as herein provided, subject to withdrawal by the Indenture Trustee for the purposes specified herein.
(c) Funds and other property in the Collection Account will not be commingled with any other funds or property of the Issuer or the Indenture Trustee.
(d) On the applicable Reporting Date, all interest and earnings (net of losses and investment expenses), if any, on funds credited to the Collection Account will be applied as specified herein. For purposes of determining the availability of funds or the balance in the Collection Account for any reason under this Indenture (other than for the distribution of funds in accordance with Section 5.04 ), investment earnings on such funds, if any, shall be deemed not to be available or on deposit.
Subject to Section 8.01(d) , the Indenture Trustee will not in any way be held liable by reason of any insufficiency in Collection Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee’s own failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity, in accordance with their terms.
(e) The Issuer hereby directs that funds credited to the Collection Account will be invested and reinvested by the Indenture Trustee at the direction of the Issuer, to the fullest extent practicable, in investments described in clause (b) of “Eligible Investments,” upon the occurrence of any of the following events:
(i) the Issuer will have failed to give investment directions to the Indenture Trustee; or
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(ii) an Event of Default will have occurred and is continuing but no Notes have been declared due and payable pursuant to Section 7.02 .
Section 5.04 Application of Available Collections on Deposit in the Collection Account .
(a) With respect to each Term Note, the Master Servicer shall instruct the Indenture Trustee or the Paying Agent (if a Person different than the Indenture Trustee) to apply on each Payment Date, the Term Note Available Collections on deposit in the Collection Account with respect to such Payment Date to make the following distributions allocable to each such Term Note in the following priority:
(i) pro rata to the Indenture Trustee, the Term Note Indenture Trustee Fee attributable to each Term Note, and to the Holder of each Variable Funding Note, its allocable share of the Note Administrative Fee attributable to each Term Note;
(ii) to the Master Servicer, the sum of the Term Note Servicing Fees attributable to each Term Note owing with respect to such Payment Date;
(iii) to the Backup Servicer, an amount equal to the sum of the Term Note Backup Servicing Fees attributable to each Term Note owing with respect to such Payment Date;
(iv) (A) an amount equal to the Term Note Monthly Interest applicable to such Term Note for such Payment Date owing thereunder, for distribution to the applicable Holder of a Term Note (pro rata by and between the Initial Term Notes issued on the Closing Date and pro rata by and between the Quarterly Term Notes issued on the same Conversion Date, as applicable) or (B) if such Payment Date is an Optional Redemption Date, then the applicable Optional Redemption Amount, for distribution to the applicable Holder of a Term Note;
(v) with respect to each Quarterly Term Note, an amount equal to the Term Note Monthly Principal for such Payment Date owing thereunder, for distribution to the applicable Holder of such Term Note;
(vi) with respect to each Quarterly Term Note or the Initial Term Note (A) for which the Term Note Amortization Date has occurred, (B) for which any breach of an Investment Pool Collateral Performance Trigger with respect to the related Term Note Investment Pool has occurred and is continuing, (C) for which any LTV Event has occurred, or (D) for which the Term Note Monthly Interest owing to such Term Note on such Payment Date pursuant to clause (iv) above has not been paid in full (with respect to all Term Notes), all Collections remaining after the payments specified in the foregoing clauses (i) through (v) shall be distributed pro rata on the basis of each such Term Note’s Outstanding Principal Amount (after taking into account all prior distributions made on such Payment Date, and provided , however , that no Collections shall be applied pursuant to clause (vii) below until all amounts due and owing within this clause (vi) are satisfied): (x) to any Term Note which has reached its Term Note Amortization Date or for which any breach of an Investment Pool Collateral Performance Trigger with respect to the related
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Term Note Investment Pool has occurred until the Outstanding Principal Amount of such Term Note equals zero, (y) to any Term Note for which an LTV Event has occurred until the LTV for such Term Note is no longer higher than the LTV as of the prior Payment Date, and (z) to any Term Note for which the Term Note Monthly Interest owing to such Term Note on such Payment Date above has not been paid in full until the Term Note Monthly Interest owing to such Term Note on such Payment Date has been paid in full;
(vii) to the extent the Variable Funding Note Available Collections are insufficient to pay in full the amounts due and payable pursuant to Section 5.04(b)(i) through (iv) , to the payment of such amounts in accordance with Section 5.04(b)(i) through (iv) ;
(viii) an amount equal to that needed to pay any other obligations of the Issuer under the Transaction Documents shall be applied to pay such obligations to each Person to whom such amount is owed, pro rata according to the respective amounts owed, as well as any amounts owed to CUSIP Global Services; and
(ix) to the Issuer, any remaining amounts.
For the avoidance of any doubt, pursuant to Section 4.12(f) (except as set forth in clause (vi) above), any payment of principal and interest on each Term Note shall be based solely on the performance of the Receivables included in the related Term Note Investment Pool and shall not be dependent on the Receivables related to any other Investment Pool or market or other credit events that are independent of such Receivables.
(b) With respect to the Variable Funding Notes, the Master Servicer shall instruct the Indenture Trustee or the Paying Agent (if a Person different than the Indenture Trustee) to apply on each Payment Date, the Variable Funding Note Available Collections on deposit in the Collection Account with respect to such Payment Date to make the following distributions allocable to the Variable Funding Notes in the following priority:
(i) to the Verification Agent, the Variable Funding Note Verification Fee;
(ii) to the Master Servicer, the Variable Funding Note Servicing Fee owing with respect to such Payment Date;
(iii) to the Holder of each Variable Funding Note, its allocable share of, (A) the Variable Funding Note Payment Amount owing with respect to such Payment Date and (B) if such Payment Date is an Optional Redemption Date, then the applicable Optional Redemption Amount, for distribution to the applicable Holder of a Variable Funding Note;
(iv) to the Holder of each Variable Funding Note its allocable share of the Variable Funding Note Monthly Principal for such Payment Date owing thereunder;
(v) (A) if such Payment Date is the first or second Payment Date related to a Quarterly Revolving Period (i.e., prior to the respective Conversion Date), then all Collections remaining shall be allocated to and distributed pursuant to Section 5.04(a)(vi)
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to the extent of a shortfall of any amounts in accordance therewith, and (B) if such Payment Date is the final Payment Date of such Quarterly Revolving Period, then to the Collection Account, any remaining amounts to be distributed to the Quarterly Term Notes created on such respective Conversion Date in accordance with Section 5.04(a) on the Initial Payment Date related to such Quarterly Term Note; and
(vi) to the Issuer, any remaining amounts.
Section 5.05 Determination of LIBOR .
(a) On each LIBOR Determination Date, the Indenture Trustee shall determine the interest rate to use in the definition of One-Month LIBOR for the related Interest Period, which interest rate shall be the per annum interest rate for deposits in United States dollars for a period equal to one-month that appears on Reuters Screen LIBOR01 Page as of 11:00 A.M., London time, on such date. Upon such determination, the Indenture Trustee shall notify the Master Servicer of One-Month LIBOR for such LIBOR Determination Date. If such rate does not appear on Reuters Screen LIBOR01 Page, the rate for the LIBOR Determination Date shall be determined on the basis of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 A.M., London time, on that day to prime banks in the London interbank market for a period equal to one-month commencing on the first day of such Interest Period. The Master Servicer shall request the principal London office of each of the Reference Banks to provide a quotation of its rate. If at least two (2) such quotations are provided, the rate for that LIBOR Determination Date shall be the arithmetic mean of the quotations. If fewer than two (2) quotations are provided as requested, the rate for that LIBOR Determination Date shall be the arithmetic mean of the rates quoted by major banks in New York City, selected by the Master Servicer, at approximately 11:00 A.M., New York City time, on that day for loans in United States dollars to leading European banks for a period equal to one-month commencing on the first day of such Interest Period. If the banks selected by the Master Servicer are not quoting rates as provided in the immediately preceding sentence, LIBOR for such Interest Period shall be LIBOR in effect for the immediately preceding Interest Period. Notwithstanding the foregoing, if the Administrative Agent and the Master Servicer reasonably determine that determination of One-Month LIBOR using the above methodologies is no longer available or is untrustworthy, then One-Month LIBOR for such Interest Period shall be the rate per annum determined by the Administrative Agent and the Master Servicer in their good faith and reasonable discretion to be (x) the rate at which deposits in U.S. dollars for delivery on the first day of such Interest Period in immediately available funds in the approximate amount of the Advance being made and with a term equivalent to such Interest Period would be offered by such other authoritative sources (as selected by the Administrative Agent) to major banks in the London interbank Eurodollar market at their request at approximately 11:00 a.m., London time, on such date and (y) if the methodology described in clause (x) is not available as reasonably determined by the Administrative Agent and the Master Servicer in their good faith discretion, then the Administrative Agent and the Master Servicer shall mutually determine how to calculate such rate (or shall determine to use a replacement rate) in their reasonable and good faith discretion.
(b) The Master Servicer shall determine, as applicable, and promptly notify the Issuer, the Administrative Agent and the Noteholders and the Indenture Trustee of, the Note Interest Rate for the applicable Interest Period. The Note Interest Rate applicable to the then
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current and the immediately preceding Interest Periods may be obtained by any Noteholder by telephoning the Indenture Trustee at its Corporate Trust Office at (855) 829-8068 or by emailing a request to the Indenture Trustee at CorpTrust@BankersTrust.com.
[END OF ARTICLE V]
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ARTICLE VI
SATISFACTION AND DISCHARGE; CANCELLATION OF NOTES HELD BY THE ISSUER
Section 6.01 Satisfaction and Discharge of Indenture . This Indenture will cease to be of further effect with respect to any Notes (except as to any surviving rights of transfer or exchange of Notes expressly provided for herein or in the form of Note), and the Indenture Trustee, on demand of and at the expense of the Issuer, will execute proper instruments acknowledging satisfaction and discharge of this Indenture, when:
(a) the Issuer has paid or caused to be paid all other sums payable under the Indenture with respect to the Notes (including payments to the Indenture Trustee pursuant to Section 8.07 ); and
(b) the Issuer has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Notes have been complied with or waived in accordance with the terms of this Indenture.
Notwithstanding the satisfaction and discharge of this Indenture with respect to any Notes, the obligations of the Issuer to the Indenture Trustee with respect to such Notes under Section 8.07 and the obligations of the Indenture Trustee under Section 6.02 and Section 11.03 will survive such satisfaction and discharge.
Section 6.02 Application of Money . All money and obligations deposited with the Indenture Trustee pursuant to Section 5.01 or Section 5.03 and all money received by the Indenture Trustee in respect of such obligations will be held in trust and applied by it, in accordance with the provisions of Section 5.04 , to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Indenture Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment that money and obligations have been deposited with or received by the Indenture Trustee; but that money and obligations need not be segregated from other funds held by the Indenture Trustee except to the extent required by this Indenture or by law.
Section 6.03 Cancellation of Notes Held by the Issuer . If the Issuer holds any Notes, such Notes shall be automatically cancelled and no longer Outstanding. Further, Notes held by Affiliates of the Issuer shall be deemed to be not Outstanding for all voting purposes.
[END OF ARTICLE VI]
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01 Events of Default . “Event of Default,” wherever used herein, means with respect to any Note any one of the following events (whatever the reason for such Event of Default and whether it will be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) with respect to any Note a failure by the Issuer, an Asset Servicer or the Master Servicer to make any payment or deposit when required pursuant to any Transaction Document, in any case on or before the date occurring two (2) Business Days after the date such payment or deposit is due;
(b) (i) the Issuer shall file a petition or commence a proceeding (A) to take advantage of any Debtor Relief Law or (B) for the appointment of a trustee, conservator, receiver, liquidator, or similar official for or relating to the Issuer or all or substantially all of its property, (ii) the Issuer shall consent or fail to object to any such petition filed or proceeding commenced against or with respect to it or all or substantially all of its property, or any such petition or proceeding shall not have been dismissed or stayed within 90 days of its filing or commencement, or a court, agency, or other supervisory authority with jurisdiction shall have decreed or ordered relief with respect to any such petition or proceeding, (iii) the Issuer shall admit in writing its inability to pay its debts generally as they become due, (iv) the Issuer shall make an assignment generally for the benefit of its creditors, or (v) the Issuer shall voluntarily suspend payment of its obligations;
(c) the Issuer becomes an investment company within the meaning of the Investment Company Act;
(d) any Master Servicer Default or Asset Servicer Default occurs;
(e) any event occurs that could reasonably be expected to have a Material Adverse Effect on (i) the Issuer’s ability to make payments under the terms of this Indenture or fulfill its payment obligations under any of the other Transaction Documents, (ii) the validity, collectability or enforceability of the Receivables, or (iii) the Collateral, the Indenture Trustee’s lien on the Collateral or the priority of such lien;
(f) subject to Section 12.01(c) , a decree or order is entered by an administrative body (including an administrative order of the Consumer Financial Protection Bureau) or by a court of competent jurisdiction that requires an Enova Entity to pay more than $5,000,000 in civil penalties or finds an Enova Entity engaged in reckless or knowing violations of applicable law, whether or not such decree or order is appealable or is being appealed, in connection with a proceeding brought against any Enova Entity;
(g) any representation or warranty made by the Seller, Transferor, Issuer, an Asset Servicer or the Master Servicer under any Transaction Document shall be incorrect (subject to any materiality qualifier that may be contained in such representation or warranty) and remain
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unremedied for a period of fifteen (15) Business Days from the discovery by such party or receipt of notice from the Indenture Trustee, the Administrative Agent or any Noteholder;
(h) the Seller, Transferor or Issuer shall fail to perform or observe any affirmative covenant under any Transaction Document and such failure shall remain unremedied for a period of fifteen (15) Business Days from the discovery by such party or receipt of notice from either the Indenture Trustee, the Administrative Agent or any Noteholder;
(i) the Seller, Transferor or Issuer shall fail to perform or observe any negative covenant under any Transaction Document;
(j) the Indenture Trustee shall fail to hold a valid and perfected first-priority security interest in the Receivables;
(k) any Enova Entity (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $***, or (ii) fails to observe or perform any other agreement or condition relating to any such Indebtedness referred to in clause (i) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise);
(l) the failure to have paid any Term Note in full as of its Term Note Maturity Date;
(m) [Reserved];
(n) the occurrence of a Financial Trigger;
(o) the occurrence of a Regulatory Trigger Event;
(p) unless permitted by Section 7.03 of the Servicing Agreement, Enova, the Issuer, Transferor or the Master Servicer shall enter into any transaction or merger in which it is not the surviving entity, without the prior consent of the Majority Holders;
(q) occurrence of a Material Adverse Effect (as determined by the Majority Holders) with respect to Enova, the Issuer, the Transferor, the Master Servicer and the Originators, taken as a whole;
(r) subject to Section 12.01(c) , the occurrence of a Change of Control; or
(s) subject to Section 5.2(e) of the Receives Purchase Agreement and Section 2.02(f) of the Servicing Agreement, the occurrence of a material change to the Credit Policies or Servicing Policies without the prior consent of the Majority Holders.
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Section 7.02 Acceleration of Maturity . (a) If an Event of Default described in Section 7.01 occurs and is continuing with respect to a Note (other than with respect to clauses (a) or (b)), then, unless the principal of all the Notes shall have already become due and payable, the Indenture Trustee may (but shall not be required to) provided the Indenture Trustee has actual notice of the occurrence of the Event of Default, or, upon the direction of the Majority Holders provided to the Indenture Trustee, shall declare the Outstanding Principal Amount of the Outstanding Notes and all interest accrued or principal accreted and unpaid (if any) thereon to be due and payable immediately, and upon any such declaration the same will become and will be immediately due and payable, anything in this Indenture or in the Notes to the contrary notwithstanding.
(a) If an Event of Default described in clauses (a) or (b) of Section 7.01 occurs and is continuing, then all the Notes will automatically be and become immediately due and payable by the Issuer, without notice or demand to any Person, and the Issuer will automatically and immediately be obligated to pay off the Notes.
Section 7.03 Indenture Trustee May File Proofs of Claim . In case of the pendency of any receivership, insolvency, liquidation, bankruptcy or other similar proceeding relative to the Issuer or any other obligor upon the Notes or the property of the Issuer or of such other obligor, the Indenture Trustee (irrespective of whether the principal of the Notes will then be due and payable as therein expressed or by declaration or otherwise) will be entitled and empowered by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary and advisable in order to have the claims of the Indenture Trustee (including any claim for the reasonable compensation, expenses, indemnity, disbursements and advances of the Indenture Trustee, its agents and counsel and all other amounts due the Indenture Trustee under Section 8.07 ) and of the Noteholders allowed in such judicial proceeding, and
(ii) to collect and receive any funds or other property payable or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator or other similar official in any such proceeding is hereby authorized by each Noteholder to make such payment to the Indenture Trustee, and in the event that the Indenture Trustee will consent to the making of such payments directly to the Noteholders, to pay to the Indenture Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, and any other amounts due the Indenture Trustee under Section 8.07 .
Nothing herein contained will be deemed to authorize the Indenture Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding.
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Section 7.04 Indenture Trustee May Enforce Claims Without Possession of Notes . All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Indenture Trustee will be brought in its own name as trustee, and any recovery of judgment will, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its respective agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.
Section 7.05 Application of Money Collected . Any money or other property collected by the Indenture Trustee with respect to a Note pursuant to this Article VII will be applied according to the priority of payments set forth in Section 5.04 at the date or dates fixed by the Indenture Trustee.
Section 7.06 Indenture Trustee May Elect to Hold the Collateral . Following an acceleration of any Note, the Indenture Trustee may elect to continue to hold the Collateral and apply distributions on the Collateral in accordance with the regular distribution provisions set forth in Section 5.04 , except that principal will be paid on the accelerated Notes to the extent funds are received and allocated to the accelerated Notes.
Section 7.07 Sale of Collateral for Accelerated Notes .
(a) If the Notes are accelerated pursuant to this Indenture following an Event of Default, the Indenture Trustee, at the direction of the Majority Holders, will sell Receivables (or interests therein).
(b) Such a sale will be permitted if at least one of the following conditions is met:
(i) the net proceeds of such sale would be sufficient to pay all amounts due on the Notes together with any unpaid interest and fees; or
(ii) consented to by Holders of at least 66-2/3% of the Outstanding Principal Amount of the Outstanding Notes.
(c) Sale proceeds received with respect to the Notes will be applied as specified in Section 7.05 of this Indenture.
Section 7.08 Noteholders Have the Right to Direct the Time, Method and Place of Conducting Any Proceeding for Any Remedy Available to the Indenture Trustee . The Majority Holders shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any power conferred on the Indenture Trustee, subject to Section 7.07(b) . This right may be exercised only if the Indenture Trustee is adequately indemnified by the Holders of such accelerated Notes and if the Majority Holders provide the Indenture Trustee with an Opinion of Counsel acceptable to the Indenture Trustee upon which Indenture Trustee may conclusively rely that the direction provided by the Noteholders does not conflict with applicable law or this Indenture and the likelihood of the Indenture Trustee incurring liability from acting in reliance thereon, personal or otherwise, is remote.
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Section 7.09 Limitation on Suits . To the fullest extent permitted by applicable law, but subject to Section 7.07(b) and Section 7.08 , no Holder of any Note will have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee or similar official, or for any other remedy hereunder, unless:
(a) such Holder has previously given notice to the Indenture Trustee of a continuing Event of Default with respect to such Notes;
(b) the Majority Holders have made request to the Indenture Trustee to institute proceedings in respect of such Event of Default in the name of the Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; and
(d) the Indenture Trustee, for 30 days after the Indenture Trustee has received such notice, request and offer of indemnity has failed to institute any such proceeding;
it being understood and intended that no one or more Holders of such Notes will have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to obtain or to seek to obtain priority or preference over any other such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and proportionate benefit of all the Holders of all such Notes.
Section 7.10 Unconditional Right of Noteholders to Receive Principal and Interest; Limited Recourse . Notwithstanding any other provisions in this Indenture, the Holder of any Note will have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Note and to institute suit for the enforcement of any such payment, and such right will not be impaired without the consent of such Holder; provided , however , that the obligation to pay principal of or interest on the Notes or any other amount payable to any Noteholder will be without recourse to the Indenture Trustee or any Affiliate, officer, employee, member or director of any of them, and the obligation of the Issuer to pay principal of or interest on the Notes or any other amount payable to any Noteholder will be subject to the allocation and payment provisions of this Indenture, and limited to amounts available from the Collateral.
Section 7.11 Restoration of Rights and Remedies . If the Indenture Trustee or any Noteholder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, then and in every such case the Issuer, the Indenture Trustee and the Noteholders will, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders will continue as though no such proceeding had been instituted.
Section 7.12 Rights and Remedies Cumulative . No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy will, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or
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remedy hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other appropriate right or remedy.
Section 7.13 Delay or Omission Not Waiver . No delay or omission of the Indenture Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VII or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be.
Section 7.14 Control by Noteholders . Subject to Section 7.07(b) and Section 7.08 , the Majority Holders will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any power conferred on the Indenture Trustee with respect to the Notes, provided , that:
(a) the Indenture Trustee will have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, determines that the Action so directed may not lawfully be taken or would conflict with this Indenture or if the Indenture Trustee in good faith determines that the proceedings so directed would involve it in personal liability or be unjustly prejudicial to the Holders not taking part in such direction, and
(b) the Indenture Trustee may take any other action permitted hereunder deemed proper by the Indenture Trustee which is not inconsistent with such direction.
Section 7.15 Waiver of Past Defaults . The Majority Holders may on behalf of the Holders of all the Notes waive any past default hereunder and its consequences, except consent of the Holder of each Outstanding Note is required if (i) there is a default not theretofore cured in the payment of the principal of or interest on any Note, or (ii) in respect of a covenant or provision hereof which under Article X cannot be modified or amended without the consent of the Holder of each Outstanding Note. Until any Event of Default arising from such default is hereunder waived or cured, and during the continuation of any such Event of Default, the Note Interest Rate for each of the Term Notes and the Variable Funding Notes shall be increased by 2.50%.
Upon any such waiver, such default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, for every purpose of this Indenture; but no such waiver will extend to any subsequent or other default or impair any right consequent thereon.
Section 7.16 Undertaking for Costs . All parties to this Indenture agree, and each Holder of any Note by his or her acceptance thereof will be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable and documented attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 7.16 will not apply to any suit instituted by the Indenture Trustee, to any
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suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than 25% in Outstanding Principal Amount of the Outstanding Notes.
Section 7.17 Waiver of Stay or Extension Laws . The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
[END OF ARTICLE VII]
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ARTICLE VIII
THE INDENTURE TRUSTEE
Section 8.01 Certain Duties and Responsibilities . (a) The Indenture Trustee is hereby authorized and directed to enter into the Transaction Documents to which the Indenture Trustee is a party and undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the other Transaction Documents with respect to the Notes, and no implied duties (including fiduciary duties) covenants or obligations will be read into this Indenture against the Indenture Trustee. The permissive right of the Indenture Trustee to do things enumerated in this Indenture shall never be construed as a duty. Bankers Trust and any Indenture Trustee (if a different Person than Bankers Trust) shall only be responsible for the performance of the express duties outlined herein in whatever capacity, whether as Indenture Trustee, Paying Agent, Securities Intermediary, Authenticating Agent, Note Registrar or otherwise, and it shall not be liable for any action reasonably taken or omitted to be taken by it in any capacity hereunder in good faith or be responsible other than for its own gross negligence or willful default in the performance of those express duties.
(b) In the absence of bad faith on its part, the Indenture Trustee may, with respect to Notes, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee will be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein).
(c) In case an Event of Default with respect to any Notes has occurred and is continuing and for which the Indenture Trustee has actual knowledge, the Indenture Trustee will exercise with respect to such Notes such of the rights and powers vested in it by this Indenture, as the Indenture Trustee in its sole discretion determines are consistent with the terms of this Indenture and use the same degree of care and skill in their exercise, as a corporate trustee would exercise or use under the circumstances in the conduct of such corporate trustee’s own affairs. Nothing in this subsection (c) shall be construed to limit the effect of subsection (a) of this Section 8.01 .
(d) Except to the extent otherwise provided in Section 8.03 , no provision of this Indenture will be construed to relieve the Indenture Trustee from liability for its own gross negligence or willful misconduct, except that:
(i) this subsection (d) will not be construed to limit the effect of subsection (a) of this Section 8.01 or Section 8.03 ;
(ii) the Indenture Trustee will not be liable for any error of judgment made in good faith by an Indenture Trustee Authorized Officer;
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(iii) the Indenture Trustee will not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Majority Holders relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any power conferred upon the Indenture Trustee, under this Indenture with respect to the Notes; and
(iv) no provision of this Indenture will require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it will have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to the Indenture Trustee against such risk or liability is not reasonably assured to it.
Section 8.02 Notice of Defaults . Within ten (10) Business Days after the occurrence of any default hereunder with respect any Note of which a Responsible Officer of the Indenture Trustee shall have actual knowledge, the Indenture Trustee will transmit by mail to all Noteholders, as their names and addresses appear in the Note Register, notice of such default hereunder known to the Indenture Trustee. For the purpose of this Section 8.02 , the term “default,” with respect any Note, means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Note.
Section 8.03 Certain Rights of Indenture Trustee .
(a) The Indenture Trustee may conclusively rely and will be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, including any Officer’s Certificate or Opinion of Counsel, whether in its original, facsimile or other electronic form, believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) whenever in the administration of this Indenture the Indenture Trustee deems it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer’s Certificate;
(c) the Indenture Trustee may consult with counsel of its own selection and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(d) the Indenture Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholders shall have offered to the Indenture Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(e) the Indenture Trustee will not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, including facts or
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matters stated in any Officer’s Certificate or Opinion of Counsel, but the Indenture Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Indenture Trustee will determine to make such further inquiry or investigation, it will be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney;
(f) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Indenture Trustee will not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(g) the Indenture Trustee will not be responsible for filing any financing statements or continuation statements in connection with the Notes, but will cooperate with the Issuer in connection with the filing of such financing statements or amendments to such financing statements;
(h) the Indenture Trustee shall not be deemed to have notice of any default (including any Master Servicer Default or Asset Servicer Default under the Servicing Agreement) or Event of Default unless a Responsible Officer of the Indenture Trustee has actual knowledge thereof or unless notice of any event which is in fact such a default is received by a Responsible Officer of the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee, and such notice references the Notes and this Indenture (delivery of reports and other information to the Indenture Trustee shall not constitute actual or constructive knowledge or notice of an Event of Default);
(i) the rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, including its capacity as Indenture Trustee, Paying Agent, Securities Intermediary, Authenticating Agent and Note Registrar, and each agent, custodian and other person employed by the Indenture Trustee to act hereunder;
(j) the Indenture Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;
(k) the right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty;
(l) the Indenture Trustee may conclusively rely on the authority of any Authorized Officer whose signatures and incumbency have been certified to the Indenture Trustee by any Person to sign an Officer’s Certificate or otherwise act on behalf of such Person until Indenture Trustee has received written notice to the contrary and the Indenture Trustee shall have no duty to verify the authenticity of the signature appearing on any Officer’s Certificate or other written document purportedly made on behalf of such Person;
(m) the Indenture Trustee shall be protected in relying on any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond debenture or other paper or document which it, in good faith, believes to be genuine and what it
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purports to be and shall have no duty to inquire or to the genuineness, validity or enforceability thereof; and
(n) to the fullest extent permitted by law and notwithstanding anything in this Indenture to the contrary, the Indenture Trustee shall not be liable under any circumstances for special, indirect, incidental, consequential or punitive damages, however styled, including lost profits, loss of revenue, diminution in value or loss of business.
Section 8.04 Not Responsible for Recitals or Issuance of Notes . The recitals contained herein and in the Notes, except the certificates of authentication, will be taken as the statements of the Issuer, and the Indenture Trustee assumes no responsibility for their correctness. The Indenture Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes. The Indenture Trustee will not be accountable for the use or application by the Issuer of Notes or the proceeds thereof.
Section 8.05 May Hold Notes . The Indenture Trustee, any Paying Agent, the Note Registrar or any other agent of the Issuer, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer with the same rights it would have if it were not Indenture Trustee, Paying Agent, Note Registrar or such other agent and the Issuer and the Noteholders waive any resulting conflict of interest.
Section 8.06 Money Held in Trust . Money held by the Indenture Trustee in trust hereunder need not be segregated from other funds except to the extent required by this Indenture or by law. The Indenture Trustee will be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuer.
Section 8.07 Compensation and Reimbursement; Limit on Compensation Reimbursement and Indemnity . (a) The Issuer agrees:
(i) to pay to the Indenture Trustee from time to time reasonable compensation (or, for so long as Bankers Trust is the Indenture Trustee, such amount as has been mutually agreed upon in writing) for all services rendered by it hereunder (which compensation will not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(ii) to reimburse the Indenture Trustee upon the Indenture Trustee’s request for all reasonable expenses, disbursements and advances incurred or made by the Indenture Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the reasonable expenses and disbursements of the Indenture Trustee’s agents and counsel), except any such expense, disbursement or advance as may be attributable to the Indenture Trustee’s own gross negligence, willful misconduct or bad faith; and
(iii) to indemnify, defend and hold harmless the Indenture Trustee and its officers, directors, employees and agents for, and to hold the Indenture Trustee harmless against, any and all loss, liability, expense, claim, action, suit, damage or injury of any kind and nature whatsoever incurred without gross negligence, willful misconduct or bad faith on the Indenture Trustee’s part, arising out of or in connection with the acceptance or
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administration of this trust, including the costs and expenses of the Indenture Trustee defending itself against any claim or liability (whether asserted by the Issuer, the Master Servicer, any Asset Servicer, any Holder or any other Person) in connection with the exercise or performance of any of its powers or duties hereunder.
The Indenture Trustee will have no recourse to any asset of the Issuer other than funds available pursuant to Section 7.05 .
(b) This Section 8.07 will survive the termination of this Indenture and the resignation, removal or replacement of the Indenture Trustee under Section 8.10 .
Section 8.09 Corporate Indenture Trustee Required; Eligibility . There will at all times be an Indenture Trustee hereunder with respect to each Note, which will be either a bank or a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to exercise corporate trust powers, and having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 8.09 , the combined capital and surplus of such corporation will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Issuer may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Issuer, serve as Indenture Trustee. If at any time the Indenture Trustee with respect to any Note ceases to be eligible in accordance with the provisions of this Section 8.09 , it will, if a Responsible Officer has actual knowledge thereof, resign immediately in the manner and with the effect hereinafter specified in this Article VIII .
Section 8.10 Resignation and Removal; Appointment of Successor . The following provisions shall apply to the resignation or removal of the Indenture Trustee and the appointment of a successor.
(a) No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee pursuant to this Article VIII will become effective until the acceptance of appointment by the successor Indenture Trustee under Section 8.11 .
(b) The Indenture Trustee may resign at any time by giving at least thirty (30) days’ prior notice thereof to the Issuer and Administrative Agent. If an instrument of acceptance by a successor Indenture Trustee shall not have been delivered to the Indenture Trustee within 30 days after the giving of such notice of resignation, the resigning Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(c) The Indenture Trustee may be removed at any time by Action of the Majority Holders, delivered to the Indenture Trustee and to the Issuer and Administrative Agent. If an instrument of acceptance by a successor Indenture Trustee shall not have been delivered to the Indenture Trustee within 30 days after the giving of such notice of removal, the Indenture
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Trustee being removed may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(d) If at any time:
(i) the Indenture Trustee ceases to be eligible under Section 8.09 and fails to resign after request therefor by the Issuer or by any such Noteholder, or
(ii) the Indenture Trustee is adjudged bankrupt or insolvent or a receiver of the Indenture Trustee or of its property is appointed or any public officer takes charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (A) the Issuer may remove the Indenture Trustee, or (B) subject to Section 7.17 , any Noteholder who has been a bona fide Holder of a Note for at least 6 months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee resigns, is removed or becomes incapable of acting, the Issuer will promptly appoint a successor Indenture Trustee. If, within sixty (60) days after such resignation, removal or incapacity, or the occurrence of such vacancy, a successor Indenture Trustee has not been appointed, then an Indenture Trustee may thereupon be appointed by Act of the Majority Holders delivered to the Issuer and the retiring Indenture Trustee. The successor Indenture Trustee so appointed will, forthwith upon its acceptance of such appointment, become the successor Indenture Trustee. If no successor Indenture Trustee shall have been so appointed by the Issuer or the Noteholders and accepted appointment in the manner hereinafter provided, the resigning or removed Indenture Trustee or any Noteholder who has been a bona fide Holder of a Note for at least 6 months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(f) The Issuer will give notice of each resignation and each removal of the Indenture Trustee and each appointment of a successor Indenture Trustee to each Noteholder as provided in Section 1.06 . To facilitate delivery of such notice, upon request by the Issuer, the Note Registrar shall provide to the Issuer a list of the relevant Registered Noteholders. Each notice will include the name of the successor Indenture Trustee and the address of its principal Corporate Trust Office.
Section 8.11 Acceptance of Appointment by Successor . Every successor Indenture Trustee appointed hereunder will execute, acknowledge and deliver to the Issuer and to the predecessor Indenture Trustee an instrument accepting such appointment and thereupon the resignation or removal of the predecessor Indenture Trustee will become effective, and such successor Indenture Trustee, without any further act, deed or conveyance, will become vested with all the rights, powers, trusts and duties of the predecessor Indenture Trustee; but, on request of the Issuer or the successor Indenture Trustee, such predecessor Indenture Trustee will, upon payment of its reasonable charges, if any, execute and deliver an instrument transferring to such successor Indenture Trustee all the rights, powers and trusts of the predecessor Indenture Trustee, and will duly assign, transfer and deliver to such successor Indenture Trustee all property and money held
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by such predecessor Indenture Trustee hereunder, subject nevertheless to its Lien, if any, provided for in Section 8.07 and the payment of all costs, fees and expenses of the Indenture Trustee. Upon request of any such successor Indenture Trustee, the Issuer will execute any and all instruments for more fully and certainly vesting in and confirming to such successor Indenture Trustee all such rights, powers and trusts.
In case of the appointment hereunder of a successor Indenture Trustee with respect to the Notes, the Issuer, the predecessor Indenture Trustee and each successor Indenture Trustee with respect to the Notes will execute and deliver a supplement to this Indenture which will contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Indenture Trustee with respect to the Notes shall be vested in the successor Indenture Trustee.
No successor Indenture Trustee will accept its appointment unless at the time of such acceptance such successor Indenture Trustee will be qualified and eligible under this Article VIII .
Section 8.21 Merger, Conversion, Consolidation or Succession to Business . Any entity into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any entity succeeding to all or substantially all of the corporate trust business of the Indenture Trustee, will be the successor of the Indenture Trustee hereunder, provided such entity shall be otherwise qualified and eligible under this Article VIII , without the execution or filing of any paper or any further act on the part of any of the parties hereto. The Indenture Trustee shall give prompt notice of such merger, conversion, consolidation or succession to the Issuer. In case any Notes shall have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Indenture Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Indenture Trustee had itself authenticated such Notes.
Section 8.14 Appointment of Authenticating Agent . At any time when any of the Notes remain Outstanding the Indenture Trustee, with the approval of the Issuer, may appoint an Authenticating Agent or Agents which will be authorized to act on behalf of the Indenture Trustee to authenticate Notes issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 4.06 , and Notes so authenticated will be entitled to the benefits of this Indenture and will be valid and obligatory for all purposes as if authenticated by the Indenture Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Indenture Trustee or the Indenture Trustee’s Certificate of Authentication, such reference will be deemed to include authentication and delivery on behalf of the Indenture Trustee by an Authenticating Agent and a Certificate of Authentication executed on behalf of the Indenture Trustee by an Authenticating Agent. Each Authenticating Agent will be acceptable to the Issuer and will at all times be an Entity organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as an Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and, if other than the Issuer itself, subject to supervision or examination by federal or State authority. If
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such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 8.14 , the combined capital and surplus of such Authenticating Agent will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent will cease to be eligible in accordance with the provisions of this Section 8.14 , such Authenticating Agent will resign immediately in the manner and with the effect specified in this Section 8.14 . The initial Authenticating Agent for the Notes will be Bankers Trust.
Any entity into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which such Authenticating Agent will be a party, or any entity succeeding to the corporate agency or corporate trust business of an Authenticating Agent, will continue to be an Authenticating Agent, provided such entity will be otherwise eligible under this Section 8.14 , without the execution or filing of any paper or any further act on the part of the Indenture Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Indenture Trustee and to the Issuer. The Indenture Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent will cease to be eligible in accordance with the provisions of this Section 8.14 , the Indenture Trustee, with the approval of the Issuer, may appoint a successor Authenticating Agent and will give notice to each Noteholder as provided in Section 1.06 . Any successor Authenticating Agent upon acceptance of its appointment hereunder will become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent will be appointed unless eligible under the provisions of this Section 8.14 .
The Indenture Trustee agrees to pay to each Authenticating Agent (other than an Authenticating Agent appointed at the request of the Issuer from time to time) reasonable compensation for its services under this Section 8.14 , and the Indenture Trustee will be entitled to be reimbursed for such payments, subject to the provisions of Section 8.07 .
If an appointment of an Authenticating Agent, other than the Indenture Trustee, is made pursuant to this Section 8.14 , the Notes may have endorsed thereon, in lieu of the Indenture Trustee’s Certificate of Authentication, an alternate Certificate of Authentication in the following form:
This is one of the Notes designated therein referred to in the within-mentioned Indenture.
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Bankers Trust Company, as Indenture |
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Trustee |
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By:________________________________ |
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As Authenticating Agent |
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By:________________________________ |
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Authorized Signatory |
Section 8.15 Tax Returns . In the event that the Issuer shall be required to file tax returns, the Issuer shall prepare or shall cause to be prepared and executed such tax returns. The Issuer shall also prepare or shall cause to be prepared all tax information required by law to be distributed to Noteholders and shall deliver such information to the Indenture Trustee at least five days prior to the date it is required by law to be distributed to Noteholders. The Indenture Trustee, upon request, will furnish the Issuer with all such information in the possession of the Indenture Trustee as may be reasonably requested and required in connection with the preparation of all tax returns of the Issuer. In no event shall the Issuer or the Indenture Trustee be personally liable for any liabilities, costs or expenses of the Issuer or any Noteholder arising under any tax law, including federal, State or local income or excise taxes or any other tax imposed on or measured by income (or any interest or penalty with respect thereto arising from a failure to comply therewith).
Section 8.16 Representations, Warranties and Covenants of the Indenture Trustee . The Indenture Trustee represents, warrants and covenants that:
(i) The Indenture Trustee is an entity validly existing in good standing under the applicable laws of the jurisdiction of its organization;
(ii) The Indenture Trustee has full corporate power and authority to execute, deliver and perform its obligations under this Indenture and has taken all necessary corporate action to authorize the execution, delivery and performance by it of this Indenture and other Transaction Documents to which it is a party;
(iii) Each of this Indenture and the other Transaction Documents to which it is a party has been duly executed and delivered by the Indenture Trustee and constitutes its legal, valid and binding obligation in accordance with its terms subject to bankruptcy and equitable principles;
(iv) No consent, approval, license, exemption of or filing or registration with, giving of notice to, or other authorization of or by, any Iowa or federal court, administrative agency or other governmental authority governing the Indenture Trustee’s trust powers is or shall be required in connection with the execution, delivery or performance by the Indenture Trustee of this Indenture and each other Transaction Document to which it is a party for the valid consummation of the transactions contemplated hereby or thereby;
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(v) There is no action, suit, proceeding or investigation pending or, to the knowledge of the Indenture Trustee, threatened against or affecting the Indenture Trustee before or by any court, administrative agency or other governmental authority that brings into question the validity of the transactions contemplated hereby, or that might result in any Material Adverse Effect; and
(vi) The execution, delivery and performance by the Indenture Trustee of this Indenture and each of the Transaction Documents to which it is a party does not and shall not (i) violate any provision of any law, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Indenture Trustee or (ii) violate any provision of its charter documents.
Section 8.17 Appointment of Co-Trustee or Separate Indenture Trustee . (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Issuer Estate may at the time be located, the Indenture Trustee shall have the power and shall execute and deliver all instruments, subject to the prior consent of the Issuer, which consent shall not be unreasonably withheld, conditioned or delayed to appoint one or more Persons reasonably acceptable to the Issuer to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Issuer Estate, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Issuer Estate, or any part thereof, and, subject to the other provisions of this Section 8.17 , such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 8.09 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 8.10 .
(b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture 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 Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture 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 Issuer 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 Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.
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(c) Any notice, request or other writing given to the Indenture 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 Indenture and the conditions of this Article VIII . 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 Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee and an executed copy delivered to the Issuer.
(d) Any separate trustee or co-trustee may at any time appoint the Indenture Trustee, 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 Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.
[END OF ARTICLE VIII]
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ARTICLE IX
LISTS, REPORTS BY INDENTURE
TRUSTEE AND ISSUER
Section 9.01 Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders . The Issuer will furnish or cause to be furnished to the Indenture Trustee:
(a) not more than ten (10) days after each Record Date, in such form as the Indenture Trustee may reasonably require, a list of the names and addresses of the Noteholders as of such date, and
(b) at such other times as the Indenture Trustee may request, within 30 days after the receipt by the Issuer of any such request, a list of similar form and content as of a date not more than fifteen (15) days before the time such list is furnished;
provided , however , that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished.
Section 9.02 Preservation of Information; Communications to Noteholders .
(a) The Indenture Trustee will preserve, in as current a form as is reasonably practicable, the names and addresses of Noteholders contained in the most recent list furnished to the Indenture Trustee as provided in Section 9.01 or in the names and addresses of Noteholders received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 9.01 upon receipt of a new list so furnished.
(b) Every Holder of Notes, by receiving and holding the same, agrees with the Issuer and the Indenture Trustee that neither the Issuer nor the Indenture Trustee will be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Notes in accordance with Section 9.01 , regardless of the source from which such information was derived, and that the Indenture Trustee will not be held accountable by reason of mailing any material pursuant to a request made under Section 9.01 .
[END OF ARTICLE IX]
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Section 10.01 Amendments Without Consent of Noteholders . Without the consent of the Holders of any Notes, at any time and from time to time, upon delivery of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes that such amendment will not have a Material Adverse Effect and is not reasonably expected to have a Material Adverse Effect at any time in the future, the Issuer may amend this Indenture in form reasonably satisfactory to the Indenture Trustee, for any of the following purposes:
(a) to add to the covenants of the Issuer, or to surrender any right or power herein conferred upon the Issuer by the Issuer, for the benefit of the Holders of the Notes (and if such covenants or the surrender of such right or power are to be for the benefit of less than all Notes, stating that such covenants are expressly being included or such surrenders are expressly being made solely for the benefit of one or more specified Notes); or
(b) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein; or
(c) to evidence and provide for the acceptance of appointment by another corporation as a successor Indenture Trustee hereunder and to add to or change any of the provisions of this Indenture as will be necessary or advisable to provide for or facilitate the administration of the trusts hereunder by more than one Indenture Trustee, pursuant to Section 8.11 ; or
(d) [Reserved]; or
(e) to provide for additional forms of credit enhancement for the Notes; or
(f) to comply with any applicable regulatory, accounting, securities or tax laws, rules, regulations or requirements that in the reasonable judgment of the Issuer would otherwise result in a Material Adverse Effect to the Issuer; or
(g) to qualify for sale treatment of the transactions contemplated by the Receivables Purchase Agreement under generally accepted accounting principles.
The Indenture Trustee may, but shall not be obligated to, enter into any amendments which, in its determination, adversely affects the Indenture Trustee’s rights, duties, benefits, protections, indemnities, privileges or immunities under this Indenture or otherwise.
Section 10.02 Amendments with Consent of Noteholders . In addition to any amendment permitted pursuant to Section 10.01 hereof, with the consent of the Majority Holders affected by such amendment of this Indenture by Act of said Holders delivered to the Issuer and the Indenture Trustee, the Issuer, and the Indenture Trustee, as applicable, upon delivery of an Issuer Tax Opinion (unless such delivery is waived by such Majority Holders) may enter into an amendment of this Indenture for the purpose of adding any provisions to, or changing in any
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manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided , however , that no such amendment will, without the consent of the Holder of each Outstanding Note affected thereby:
(a) waive or change the scheduled payment date of any payment of interest on any Note, or change the Term Note Amortization Date or the Term Note Maturity Date of any Term Note;
(b) waive or reduce the Initial Principal Amount of, or the interest rate on any Note, or change the method of computing the Outstanding Principal Amount in a manner that is adverse to the Holder of any Note; or change the provisions of this Indenture relating to the application of proceeds of any Collateral to the payment of principal of or interest on any Notes; or change any place where, or the coin or currency in which, Notes or the principal thereof or interest or any distribution thereon is payable;
(c) impair the right to institute suit for the enforcement of any payment on any Note;
(d) amend the definition of Advance Conditions, Initial Term Note Advance Rate, Quarterly Term Note Advance Rate, Variable Funding Note Advance Rate, Aggregate Collateral Performance, Aggregate Cumulative Delinquency Ratio, Aggregate Cumulative Delinquency Trigger, Aggregate Cumulative Net Loss Ratio, Aggregate Cumulative Net Loss Trigger, Aggregate Original Receivable Principal Balance, Change of Control, Excess Concentration Limits, Eligible Receivable, Ineligible Receivable, Excluded Receivable, Financial Trigger, Net Worth Trigger, Liquidity Trigger, Leverage Debt-to-Income Trigger, Investment Pool Collateral Performance Triggers, Investment Pool Cumulative Delinquency Ratio, Investment Pool Cumulative Delinquency Trigger, Investment Pool Cumulative Net Loss Ratio, Investment Pool Cumulative Net Loss Trigger, Delinquent Receivable, Charged-Off Receivable, Term Note LTV Percentage, Initial Term Note LTV Percentage, Majority Holders, Maximum Advance Amount, Maximum Principal Amount, Performance Trigger, Funding Period Termination Date, Variable Funding Note Borrowing Base, Variable Funding Note Maximum Principal Amount and Regulatory Trigger Event;
(e) modify the percentage in Outstanding Principal Amount of the Outstanding Notes, the consent of whose Holders is required for any such amendment, or the consent of whose Holders is required for any waiver of compliance with the provisions of this Indenture or of defaults hereunder and their consequences, provided for in this Indenture;
(f) modify any of the provisions of this Section 10.02 or Section 7.16 , except to increase any percentage of Holders required to consent to any such amendment or to provide that other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby;
(g) permit the creation of any lien or other encumbrance on the Collateral that is prior to the lien in favor of the Indenture Trustee for the benefit of the Holders of such Notes or permit the release of Collateral except as expressly permitted by this Indenture and the Transaction Documents;
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(h) consent to the assignment by the Issuer of its rights under the Transaction Documents except as expressly permitted under the Transaction Documents;
(i) change any Place of Payment where any principal of, or interest on, any Note is payable; or
(j) change the method of computing the amount of principal of, or interest on, any Note on any date.
Notwithstanding any other provision of this Indenture, (a) the consent of any Holder of any Outstanding Note shall not be required for an amendment of this Indenture (including any amendment listed in clauses (a) through (j) above) if such amendment is with respect to a provision of this Indenture that does not affect such Holder or only affects Notes that are not held by such Holder and (b) an amendment of this Indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of a particular Note, or which modifies the rights of the Holders of such Notes with respect to such covenant or other provision, will be deemed not to affect the rights under this Indenture of the Holders of any other Notes.
It will not be necessary for any Act of Noteholders under this Section 10.02 to approve the particular form of any proposed amendment, but it will be sufficient if such Act will approve the substance thereof.
Section 10.03 Execution of Amendments . In executing or accepting the additional trusts created by any amendment of this Indenture permitted by this Article X or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee will be provided with, and will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Indenture and that all conditions precedent thereto have been satisfied. The Indenture Trustee may, but will not (except to the extent required in the case of an amendment entered into under Section 10.01(f) ) be obligated to, enter into any such amendment which affects the Indenture Trustee’s own rights, duties or immunities under this Indenture or otherwise.
Section 10.04 Effect of Amendments . Upon the execution of any amendment of this Indenture under this Article X , this Indenture will be modified in accordance therewith, and such amendment will form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder will be bound thereby to the extent provided therein.
Section 10.05 Reference in Notes . Notes authenticated and delivered after the execution of any amendment of this Indenture pursuant to this Article X may, and will if required by the Indenture Trustee, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such amendment. If the Issuer will so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such amendment may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.
[END OF ARTICLE X]
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ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER
The Issuer hereby represents, warrants, and covenants to the Indenture Trustee and each of the Noteholders as of the date hereof, and as of (and as a condition to any Advance occurring on) each Advance Date, in each case with reference to the facts and circumstances then existing, as follows:
Section 11.01 Payment of Principal and Interest . With respect to each Note, the Issuer will duly and punctually pay the principal of and interest on such Note in accordance with its terms and this Indenture, and will duly comply with all the other terms, agreements and conditions contained in, or made in this Indenture for the benefit of, the Notes. The payment of principal and interest on each Note will be primarily based on the performance of the Receivables pledged to each respective Investment Pool and will not be contingent on market or credit events that are independent of the Receivables.
Section 11.02 Financial Statements and Reports and Other Information . (a) The Issuer shall deliver, or shall cause to be delivered, or make available, as applicable, the following to the Indenture Trustee who shall deliver to any Noteholder upon request:
(b) unaudited consolidated quarterly financial statements (within 45 days of the end of each fiscal quarter) and audited consolidated annual statements (within 120 days of the end of each fiscal year) of Enova and its Consolidated Subsidiaries.
(c) on each Reporting Date, a report summarizing pool performance, Eligible Receivables and cash flow information, Excess Concentration Limits, Investment Pool Collateral Performance Triggers and Aggregate Collateral Performance and the calculation of the Financial Triggers;
(d) on each Reporting Date, a data tape that includes the performance of all Receivables;
(e) an annual statement of compliance and auditor’s report regarding the servicing platform of the Master Servicer, to be delivered on or before March 31 of each year beginning in 2018;
(f) two days prior to each Advance Date and at such other times as the Majority Holders shall reasonably request, a Borrowing Base Certificate, the execution and delivery of which shall in each instance constitute a representation and warranty by the Issuer that each Eligible Receivable included therein satisfies the Eligibility Criteria as of the related Eligibility Date; and
(g) such financial and other information as the Majority Holders may reasonably request, all of which shall be provided in a format reasonably satisfactory to the Majority Holders, provided , that, any such financial or other information must be publicly available.
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Section 11.03 Maintenance of Office or Agency . The Issuer will maintain an office or agency in each Place of Payment where Notes may be presented or surrendered for payment, where Notes may be surrendered for transfer or exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer will give prompt notice to the Indenture Trustee of the location, and of any change in the location, of such office or agency. If at any time the Issuer will fail to maintain such office or agency or will fail to furnish the Indenture Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints the Indenture Trustee its agent to receive all such presentations, surrenders, notices and demands.
The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all of such purposes specified above and may constitute and appoint one or more Paying Agents for the payments of such Notes, in one or more other cities, and may from time to time rescind such designations and appointments; provided , however , that no such designation, appointment or rescission shall in any matter relieve the Issuer of its obligations to maintain an office or agency in each Place of Payment for any Notes for such purposes. The Issuer will give prompt notice to the Indenture Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless and until the Issuer rescinds one or more of such appointments, the Issuer hereby appoints the Indenture Trustee, at its Corporate Trust Office, as its Paying Agent.
Section 11.04 Certain Negative Covenants . Until the satisfaction and discharge of this Indenture pursuant to Section 6.01 , the Issuer shall not:
(a) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts withheld in good faith from such payments under the Internal Revenue Code or other applicable tax law including foreign withholding);
(b) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien in favor of the Indenture Trustee created by this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby or by the other Transaction Documents;
(c) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than Permitted Liens and the lien in favor of the Indenture Trustee created by this Indenture) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the proceeds thereof;
(d) permit the lien in favor of the Indenture Trustee created by this Indenture not to constitute a valid first priority perfected security interest in the Collateral, subject to Permitted Liens;
(e) voluntarily dissolve or liquidate;
(f) establish or maintain an account that is not the Collection Account, except for as otherwise permitted in the Transaction Documents;
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(g) at any time fail to be wholly owned by the Transferor, unless it obtains the prior consent of the Majority Holders; or
(h) terminate any Servicing Agreement or the Backup Servicing Agreement, or (b) designate a replacement master servicer or an asset servicer other than the Backup Servicer, in each case without the consent of the Majority Holders or as otherwise expressly provided in the Transaction Documents.
Section 11.05 Litigation . The Issuer shall deliver to the Indenture Trustee, and the Noteholders promptly upon obtaining actual knowledge of (i) the institution of, or non-frivolous threat in writing of, an adverse proceeding against the Issuer, or (ii) any material development of any adverse proceeding against the Issuer that, if adversely determined, is reasonably likely to result in a judgment in an amount in excess of $50,000, or which seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, notice thereof together with such other information as may be reasonably available to the Issuer to enable the Indenture Trustee, the Noteholders and their counsel to evaluate such matters.
Section 11.06 Money for Note Payments to Be Held in Trust . The Paying Agent (if a different Person than the Indenture Trustee), on behalf of the Indenture Trustee, will make distributions to Noteholders from the Collection Account and will report the amounts of such distributions to the Indenture Trustee. Any Paying Agent will have the revocable power to withdraw funds from the Collection Account for the purpose of making the distributions referred to above. The Indenture Trustee may revoke such power and remove the Paying Agent if the Indenture Trustee determines in its sole discretion that the Paying Agent has failed to perform its obligations under this Indenture in any material respect. The Paying Agent upon removal will return all funds in its possession to the Indenture Trustee.
The Issuer will cause each Paying Agent (if a different Person than the Indenture Trustee) for any Note to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent will agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it so agrees), subject to the provisions of this Section 11.06 , that such Paying Agent will:
(a) hold all sums held by it for the payment of principal of or interest on such Notes in trust for the benefit of the Persons entitled thereto until such sums will be paid to such Persons or otherwise disposed of as herein provided;
(b) if such Paying Agent is not the Indenture Trustee, give the Indenture Trustee notice of any default by the Issuer (or any other obligor upon such Notes) in the making of any such payment of principal or interest on such Notes;
(c) if such Paying Agent is not the Indenture Trustee, at any time during the continuance of any such default, upon the request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent;
(d) immediately resign as a Paying Agent and, if such Paying Agent is not the Indenture Trustee, forthwith pay to the Indenture Trustee all sums held by it in trust for the payment
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of Notes if at any time it ceases to meet the standards described in this Section 11.06 required to be met by a Paying Agent at the time of its appointment; and
(e) comply with all requirements of the Internal Revenue Code or any other applicable tax law with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture with respect to any Note or for any other purpose, pay, or by an Officer’s Certificate direct any Paying Agent to pay, to the Indenture Trustee all sums held in trust by the Issuer or such Paying Agent in respect of each and every Note as to which it seeks to discharge this Indenture or, if for any other purpose, all sums so held in trust by the Issuer in respect of all Notes, such sums to be held by the Indenture Trustee upon the same trusts as those upon which such sums were held by the Issuer or such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent will be released from all further liability with respect to such money.
Any money deposited with the Indenture Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable will be paid to the Issuer upon request in an Officer’s Certificate, or (if then held by the Issuer) will be discharged from such trust; and the Holder of such Note will thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, will thereupon cease. The Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer give to the Holders of the Notes as to which the money to be repaid was held in trust, as provided in Section 1.06 , a notice that such funds remain unclaimed and that, after a date specified in the notice, which will not be less than 30 days from the date on which the notice was first mailed or published to the Holders of the Notes as to which the money to be repaid was held in trust, any unclaimed balance of such funds then remaining will be paid to the Issuer free of the trust formerly impressed upon it.
Each Paying Agent will at all times have a combined capital and surplus of at least $50,000,000 and be subject to supervision or examination by a United States federal or State authority. If such Paying Agent publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 11.06 , the combined capital and surplus of such Paying Agent will be deemed to be its combined capital and surplus as set forth in its most recent report of condition as so published.
Section 11.07 Statement as to Compliance . The Issuer will deliver to the Indenture Trustee and each Noteholder, on or before March 31 of each year, beginning in 2018, a statement signed by an Authorized Officer of the Issuer stating that:
(a) a review of the activities of the Issuer during the prior year and of the Issuer’s performance under this Indenture and under the terms of the Notes has been made under such Authorized Officer’s supervision; and
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(b) to the best of such Authorized Officer’s knowledge, based on such review, the Issuer has complied in all material respects with all conditions and covenants under this Indenture throughout such year, or, if there has been a material default in the fulfillment of any such condition or covenant (without regard to any grace period or requirement of notice), specifying each such default known to such Authorized Officer and the nature and status thereof.
Section 11.08 Legal Existence . The Issuer shall preserve and maintain its existence, rights, franchises and privileges in the jurisdiction of its organization, and qualify and remain qualified in good standing as a foreign entity, and maintain all necessary licenses and approvals, in each jurisdiction in which it does business, except where the failure to preserve and maintain such existence, rights, franchises, privileges, qualifications, licenses and approvals would not have a Material Adverse Effect.
Section 11.09 Further Instruments and Acts . Upon the reasonable request of the Indenture Trustee or as reasonably necessary, the Issuer will execute and deliver such further instruments and do such further acts (including disclosing or causing to be disclosed information) as may be reasonably necessary or advisable to carry out more effectively the purpose of this Indenture.
Section 11.10 Compliance with Laws . The Issuer will comply with the requirements of all applicable laws the noncompliance with which would, individually or in the aggregate, adversely affect the ability of the Issuer to perform its obligations under the Notes or this Indenture in any material respect.
Section 11.11 Notice of Events of Default . The Issuer agrees to give the Indenture Trustee notice of each Event of Default hereunder promptly following discovery of such Event of Default(s) by the Issuer.
Section 11.12 Sales of Receivables . Notwithstanding anything to the contrary herein or in the other Transaction Documents, the Issuer shall be entitled to sell, transfer or dispose of any Receivable (i) in connection with a repurchase of Receivables pursuant to Section 3.2 of the Receivables Purchase Agreement, Section 2.5 of the Sale Agreement, Section 3.2 of the Sale Agreement or Section 7.01 of the Servicing Agreement, (ii) if the inclusion of such Receivable in the Variable Funding Note Investment Pool would exceed an Excess Concentration Limit or (iii) if such Receivable is a Charged-Off Receivable, provided , however , that the with respect to this clause (iii) any purchaser of a Charged-Off Receivable must be consented to by the Majority Holders (which consent shall not be unreasonably withheld, conditioned or delayed and which consent if not affirmatively granted or denied within fifteen (15) Business Days of any such request for consent shall be deemed given).
Section 11.13 Investment Company Act . The Issuer is not, and will not be as a result of the issuance and sale of the Notes, required to register as an “investment company” or a company “controlled by” a registered investment company within the meaning of the Investment Company Act, and relies on Rule 3a-7 of the Investment Company Act for its exemption from registration under the Investment Company Act, although additional exemptions or exceptions may apply.
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Section 11.14 Volcker Rule . The Issuer is structured so as not to be a “covered fund” under the regulations adopted to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the “Volcker Rule.”
Section 11.15 Modification of Bank Originator Sale Agreements . The Issuer shall ensure that no Bank Originator Sale Agreement (including the Republic Loan Purchase Agreement) is amended, restated, or otherwise modified, without the consent of the Indenture Trustee (at the direction of the Majority Holders), except that following the delivery by the Issuer, Enova, and the Originators to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer, Enova, and the Originators reasonably believe that such amendment will not have a Material Adverse Effect and is not reasonably expected to have a Material Adverse Effect at any time in the future, any Bank Originator Sale Agreement may be amended for any of the following purposes without the consent of the Indenture Trustee (or by the Indenture Trustee at the direction of the Majority Holders):
(a) to add to the covenants of Enova, the Originators and the Bank Originators or to surrender any right or power herein conferred upon Enova, the Originators and the Bank Originators, for the benefit of the Holders of the Notes (and if such covenants or the surrender of such right or power are to be for the benefit of less than all Notes, stating that such covenants are expressly being included or such surrenders are expressly being made solely for the benefit of one or more specified Notes);
(b) to cure any ambiguity, to correct or supplement any provision therein which may be inconsistent with any other provision therein; or
(c) to qualify for the sale treatment of the transactions contemplated by such Bank Originator Sale Agreement under generally accepted accounting principles;
provided , however , that a Bank Originator Sale Agreement may be amended, restated or otherwise modified for any other purpose without the consent of the Indenture Trustee (at the direction of the Majority Holders) if (i) such amendment, restatement or modification does not affect any of the Receivables owned by the Issuer and (ii) the Issuer does not acquire any Receivables originated pursuant to such amended, restated, or otherwise modified Bank Originator Sale Agreement on or after the effective date of such amendment.
[END OF ARTICLE XI]
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ARTICLE XII
OPTIONAL REPURCHASE OF NOTES
Section 12.01 Optional Redemption or Release .
(a) Prior to the Funding Period Termination Date, except as provided in Section 12.01(c) and (e) , as applicable, no Term Note may be redeemed or prepaid in full or in part.
(b) On any Payment Date following the Funding Period Termination Date and upon delivering notice to the Indenture Trustee and the Noteholders no less than fifteen (15) Business Days prior to such prepayment, the Issuer may prepay the Term Notes in full on the first Payment Date following delivery of such notice to the Indenture Trustee and the Noteholders by remitting to the Collection Account an amount equal to the applicable Optional Redemption Amount.
(c) On any Payment Date if an event described under Section 7.01(f) or Section 7.01(r) , as applicable, has occurred, such event will not be an Event of Default for purposes of this Indenture, if the Issuer prepays the Term Notes in full on or prior to the first Payment Date that is at least ten (10) Business Day after such event by remitting to the Collection Account an amount equal to (A) the aggregate Outstanding Principal Amount of the Notes, (B) all accrued and unpaid interest on the Notes owing on such Payment Date, and (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture (other than indemnities and reimbursement obligations for which claim has not yet been asserted); provided , however , that in connection with any such cure five (5) Business Days prior notice shall be delivered to the Indenture Trustee and the Noteholders.
(d) On any Payment Date following the Funding Period Termination Date on which the Outstanding Principal Amount of the Notes is less than 10% of the Outstanding Principal Amount of the Notes as determined as of the Funding Period Termination Date, then the Issuer will have the option to repurchase all of the Notes by remitting to the Collection Account an amount equal to (A) the aggregate Outstanding Principal Amount of the Notes, (B) all accrued and unpaid interest on the Notes owing on such Payment Date, and (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture (other than indemnities and reimbursement obligations for which a claim has not yet been asserted); provided , however , that in connection with any such optional repurchase thirty (30) days prior notice shall be delivered to the Indenture Trustee and the Noteholders.
(e) During the Revolving Period, the Issuer is permitted to repay the Outstanding Principal Amount of the Variable Funding Notes and any Term Note (subject to the proviso below) in an amount equal to the sum of (A) the aggregate Outstanding Principal Amount of such Notes, and (B) all accrued and unpaid interest on such Notes, and (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture or the Note Purchase Agreement (other than indemnities and reimbursement obligations for which a claim has not yet been asserted); provided , however , that only one such repayment is allowed to occur during the Revolving Period and the maximum amount of Eligible Receivables to be
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released from the Variable Funding Note Investment Pool and the applicable Term Note Investment Pools in connection therewith shall be no greater than $100,000,000.
Section 12.02 Release of Receivables . On any Business Day, upon (a) the deposit by the Issuer (or the Transferor on behalf of the Issuer) of an amount equal to the Optional Redemption Amount, the Ineligible Receivables Release Price or Receivable Repurchase Price, as applicable (in each case as certified by the Issuer pursuant to clause (b)) to the Collection Account and (b) the delivery of an Officer’s Certificate complying with the requirements of Section 1.02 by the Issuer to the Indenture Trustee that each of the conditions set forth in Section 3.2 of the Receivables Purchase Agreement, Section 2.5 of the Sale Agreement, Section 3.2 of the Sale Agreement, Sections 2.07 or 7.01 of the Servicing Agreement or Section 12.01 , as applicable, have been satisfied, the Indenture Trustee shall release from the lien of this Indenture any Receivable sold pursuant to and in accordance with Section 11.12 or any other sale expressly authorized by the Transaction Documents (including in connection with any optional redemption).
[END OF ARTICLE XII]
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Section 13.01 No Petition . The Indenture Trustee, by entering into this Indenture, agrees, to the fullest extent permitted by applicable law, that at no time shall it commence, or join in commencing, a bankruptcy case or other insolvency or similar proceeding under the laws of any jurisdiction against the Issuer or the Transferor; provided , that nothing contained herein shall prohibit the Indenture Trustee from filing a proof of claim in any such proceeding.
Section 13.02 Obligations . No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee in its individual capacity or (ii) any holder of a beneficial interest in the Issuer. Except to the extent expressly otherwise provided in this Indenture, neither the Indenture Trustee nor any beneficiary of the Issuer or any of their respective officers, directors, employers or agents will have any liability with respect to this Indenture, and recourse of any Noteholder may be had solely to the Collateral.
Section 13.04 Tax Treatment . The Issuer and the Noteholders agree that the Notes are intended to be debt for federal, State and local income and franchise tax purposes and agree to treat the Notes accordingly for all such purposes, unless otherwise required by a taxing authority. Each Noteholder further agrees that it will cause any Note Owner acquiring an interest in a Note through it to comply with this Indenture as to treatment as indebtedness under applicable tax law as described in this Section 13.04 . The Issuer and the Enova Entities shall use all commercially reasonable efforts, as necessary, to ensure that all the Notes are treated as debt for U.S. federal income tax purposes at all times.
Section 13.06 Alternate Payment Provisions . Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment or notice that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments or notices, as applicable, to be made in accordance with such agreements.
Section 13.07 Termination of Issuer . The Issuer and the respective obligations and responsibilities of the Indenture Trustee created hereby (unless otherwise specified and other than the obligation of the Indenture Trustee to make payments to Noteholders as hereinafter set forth) shall terminate upon payment in full of the Notes and all other amounts due and owing under the Transaction Documents (other than indemnities and reimbursement obligations for which a claim has not yet been asserted).
Section 13.08 Final Distribution . (a) The Issuer shall give the Indenture Trustee at least 45 days’ notice of the Payment Date on which any Noteholders may surrender their Notes
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for payment of the final distribution on and cancellation of such Notes. Not later than the fifth day of the month in which the final distribution in respect of such Note is payable to Noteholders, the Indenture Trustee shall provide notice to Noteholders of such Note specifying (i) the date upon which final payment of such Note will be made upon presentation and surrender of such Note at the office or offices 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 such Notes at the office or offices therein specified. The Indenture Trustee shall give such notice to the Note Registrar and the Paying Agent at the time such notice is given to Noteholders.
(b) Notwithstanding a final distribution to any Noteholders of Notes (or the termination of the Issuer), except as otherwise provided in this paragraph, all funds then on deposit in the Collection Account allocated to such Noteholders shall continue to be held in trust for the benefit of such Noteholders, and the Paying Agent or the Indenture Trustee shall pay such funds to such Noteholders upon surrender of their Notes, if certificated. In the event that all such Noteholders shall not surrender their Notes for cancellation within 6 months after the date specified in the notice from the Indenture Trustee described in paragraph (a), the Indenture Trustee shall give a second notice to the remaining such Noteholders to surrender their Notes for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all such Notes shall not have been surrendered for cancellation, the Indenture Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining such Noteholders concerning surrender of their Notes, and the cost thereof shall be paid out of the funds in the Collection Account. The Indenture Trustee and the Paying Agent shall pay to the Issuer any monies held by them for the payment of principal or interest that remains unclaimed for two years. After payment to the Issuer, Noteholders entitled to the money must look to the Issuer for payment as general creditors unless an applicable abandoned property law designates another Person.
Section 13.09 Termination Distributions . Upon the dissolution of the Issuer, the Indenture Trustee shall release, assign and convey to the members of the Issuer, or any of their designees, without recourse, representation or warranty, all of its right, title and interest in the Collateral, whether then existing or thereafter created, all monies due or to become due and all amounts received or receivable with respect thereto (including all moneys then held in the Collection Account) and all proceeds thereof, except for amounts held by the Indenture Trustee pursuant to Section 13.08(b) . The Indenture Trustee shall execute and deliver such instruments of transfer and assignment provided to it, in each case without recourse, as shall be reasonably requested by the Issuer in order to vest in the members of the Issuer, or any of their designees, all right, title and interest which the Indenture Trustee had in the Collateral.
Section 13.10 Third Party Beneficiaries . Each Noteholder is an express third party beneficiary of this Indenture and shall be entitled to enforce this Indenture as if it were a party hereto; provided , however , that any exercise of such rights by a Noteholder shall be subject to and limited by any conflicting position taken by the Majority Holders.
Section 13.11 Notices . Any notice or other communication to any party in connection with this Indenture shall be in writing and shall be sent by manual delivery, electronic transmission, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to such party at the address specified in Part III of Appendix A.
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Section 13.12 Force Majeure . In no event shall the Indenture Trustee or the Issuer be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Indenture Trustee and the Issuer shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
Section 13.13 Patriot Act . The parties hereto acknowledge that, in accordance with Section 326 of the USA PATRIOT Act, Bankers Trust, in order to fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account. The Issuer agrees that it will provide Bankers Trust with such information as it may reasonably request in order for Bankers Trust to satisfy the requirements of the USA PATRIOT Act.
[END OF ARTICLE XIII]
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
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EFR 2016-1, LLC |
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/s/ Lisa M. Young |
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Name: |
Lisa M. Young |
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Title: |
Vice President and Secretary |
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BANKERS TRUST COMPANY, |
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as Indenture Trustee, Paying Agent and Note |
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Registrar and not in its individual capacity |
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/s/ Minda Barr |
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Name: |
Minda Barr |
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Title: |
Vice President, Institutional |
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Support Service Supervisor |
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BANKERS TRUST COMPANY, |
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as Securities Intermediary |
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/s/ Minda Barr |
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Name: |
Minda Barr |
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Title: |
Vice President, Institutional |
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Support Service Supervisor |
[Signature Page To Indenture]
EAST\146409251.8
[FORM OF VARIABLE FUNDING NOTE]
No. R-[___] $[90,000,000]
EFR 2016-1, LLC
VARIABLE FUNDING NOTE
FOR VALUE RECEIVED, EFR 2016-1, LLC (the “ Issuer ”), hereby promises to pay to [___] (the “ Payee ”), or its registered assigns, on or before [___], an amount up to [NINETY MILLION DOLLARS ($90,000,000)].
Issuer also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of (i) that certain Amended and Restated Note Purchase Agreement, dated as of October 20, 2017 (as it may be further amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “ Note Purchase Agreement ”), by among the Issuer, the Master Servicer, Jefferies Funding LLC, as Administrative Agent, an Initial Term Note Noteholder and as a Variable Funding Note Noteholder, WN 2016-1, LLC, as an Initial Term Note Noteholder and Variable Funding Note Noteholder, FSLF ENV LLC, as an Initial Term Note Noteholder and Variable Funding Note Noteholder, Fortress Credit Co LLC, as an Initial Term Note Noteholder and Variable Funding Note Noteholder and the other Variable Funding Note Noteholders from time to time party thereto, and (ii) that certain Amended and Restated Indenture, dated as of October 20, 2017 (as it may be further amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “ Indenture ”), by and between the Issuer and the Indenture Trustee. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Note Purchase Agreement and the Indenture, as applicable.
This Variable Funding Note is the “Variable Funding Note” referred to in the Indenture and is issued pursuant to and entitled to the benefits of the Indenture, to which reference is hereby made for a more complete statement of the terms and conditions under which the Variable Funding Note evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Variable Funding Note shall be made in lawful money of the United States of America in same day funds at the location in writing for such purpose by the Payee. Unless and until an assignment agreement effecting the assignment or transfer of the obligations evidenced hereby shall have been duly executed and delivered in accordance with the Note Purchase Agreement and accepted by the Variable Funding Note Noteholder and recorded in the Register, the Issuer, each Variable Funding Note Noteholder shall be entitled to deem and treat the Payee as the owner and holder of this Variable Funding Note and the obligations evidenced hereby. The Payee hereby agrees, by its acceptance hereof, that before disposing of this Variable Funding Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided , the failure to make a notation of any payment made on this Variable Funding Note
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shall not limit or otherwise affect the obligations of the Issuer hereunder with respect to payments of principal of or interest on this Variable Funding Note.
This Variable Funding Note is subject to mandatory prepayment as provided in the Note Purchase Agreement and the Indenture, as applicable.
The Issuer, the Indenture Trustee and any agent of the Issuer, shall treat the person in whose name this Note is registered as the owner hereof for all purposes, and none of the Issuer, the Indenture Trustee, nor any agent of the Issuer, shall be affected by notice to the contrary.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, 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.
Upon the occurrence and during the continuation of an Event of Default, the unpaid balance of the principal amount of this Variable Funding Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Indenture.
The terms of this Variable Funding Note are subject to amendment only in the manner provided in the Indenture.
No reference herein to the Indenture and no provision of this Variable Funding Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Variable Funding Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture and the Note Purchase Agreement.
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture or Note Purchase Agreement, as applicable, incurred in connection with the collection and enforcement of this Variable Funding Note. The Issuer and any endorsers of this Variable Funding Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, and demand notice of every kind.
Each Noteholder, by its acceptance of its Note, acknowledges and agrees that the indebtedness and obligations represented by the Notes is solely the obligation of the Issuer and is payable solely from the Collateral.
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IN WITNESS WHEREOF , the Issuer has caused this Variable Funding Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above
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EFR 2016-1, LLC, as Issuer
By: Name: Title: |
Dated: [ ], 20[_]
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INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Variable Funding Note described in the within-mentioned Indenture.
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Bankers Trust Company , as Indenture Trustee
By: Authorized Signatory |
Dated: [ ], 20[_]
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TRANSACTIONS ON
VARIABLE FUNDING NOTE
Date |
Amount of Advance
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Variable Funding
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EXHIBIT B
[FORM OF] TERM NOTE
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, OR (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “ QIB ”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “ IAI ”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “ CODE ”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE, (III) AN ENTITY WHOSE UNDERLYING ASSETS
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INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“ PTCE ”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
PRIOR TO PURCHASING ANY TERM NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE TERM NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE TERM NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
UNLESS THIS TERM NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“ DTC ”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY TERM NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE HOLDER OF THIS TERM NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THE TERM NOTE OR THE TRANSACTION DOCUMENTS.
THE HOLDER OF THIS TERM NOTE, BY ACCEPTANCE OF THIS TERM NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS TERM NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THE TERM NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME.
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$[__________]
CUSIP NO. [______]
[mm/dd/yy]
FOR VALUE RECEIVED, EFR 2016-1, LLC (the “ Issuer ”) promises to pay [NOTEHOLDER] (the “ Payee ”), or its registered assigns, on or before [__][__], 20[__], [DOLLARS] ($[___]).
Issuer also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Amended and Restated Indenture, dated as of October 20, 2017 (as it may be further amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “ Indenture ”), by and between the Issuer and the Indenture Trustee. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in Part I of Appendix A of the Indenture.
This Term Note is one of the “Notes” referred to in the Indenture and is issued pursuant to and entitled to the benefits of the Indenture, to which reference is hereby made for a more complete statement of the terms and conditions under which the Term Note evidenced hereby was made and is to be repaid. Final payment of this Note is due and owing on the Term Note Maturity Date.
All payments of principal and interest in respect of this Term Note shall be made in lawful money of the United States of America. This Term Note is subject to prepayment at the option of the Issuer, each as provided in the Indenture.
THIS TERM NOTE AND THE RIGHTS AND OBLIGATIONS OF THE ISSUER AND THE PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
Upon the occurrence and during the continuation of an Event of Default, the unpaid balance of the principal amount of this Term Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Indenture.
The terms of this Term Note are subject to amendment only in the manner provided in the Indenture.
No reference herein to the Indenture and no provision of this Term Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Term Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture.
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this Term Note. The Issuer and any endorsers of this Term Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, and demand notice of every kind.
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IN WITNESS WHEREOF, the Issuer has caused this Term Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above.
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EFR 2016-1, LLC, as Issuer
By: Authorized Signatory |
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EAST\146409251.8
INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Term Notes described in the within-mentioned Indenture.
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Bankers Trust Company
,
By: Authorized Signatory |
Dated: [ ], 20[_]
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EAST\146409251.8
This Term Note is one of the Term Notes of a duly authorized issue of Term Notes of EFR 2016-1, LLC (the “ Issuer ”), designated as its [__] Note (herein called the “ Note ”), all issued under the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), by and between the Issuer and Bankers Trust Company (the “ Indenture Trustee ”). This Note is subject to all terms of the Indenture. All terms used in this Note that are defined in Part I of Appendix A of the Indenture, shall have the meanings assigned to them in or pursuant to Part I of Appendix A of the Indenture, as so supplemented or amended.
This Note is secured by the Collateral, and in connection with the sale of Collateral following an Event of Default the Noteholder will be entitled to its’ pro rata share of proceeds. The payment of principal and interest on this Note, however, shall be solely based on the performance of the Receivables related to this Notes Investment Pool and, except as otherwise set forth in Section 5.04(a) of the Indenture, shall not be dependent on the Receivables related to any other Investment Pool or market or credit events that are independent of such financial assets.
Interest on this Note shall be determined in accordance with the Indenture and shall accrue at the rate of One-Month LIBOR plus 7.5% per annum and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period.
Principal of this Note will be payable on each Payment Date pursuant to Section 5.04(a) of the Indenture.
“ Payment Date ” means the 15 th day of each calendar month, or, if any such 15 th day is not a Business Day, the next succeeding Business Day, commencing in [December, 2017].
Any installment of interest and principal, if any, or any other amount, payable on this Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name this Note is registered. This Note will be registered in the name of the nominee of the Depository Trust Company (Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by Cede & Co. All reductions in the principal amount of this Note effected by any payments of installments of principal made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not such payment is noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will provide notice of the termination as provided in the Indenture and this Note shall be entitled to the final payment only upon presentation and surrender of this Note at the Indenture Trustee’s principal Corporate Trust Office or at the office of the Indenture Trustee’s agent appointed for such purposes. On any payment of interest or principal being made, details of such payment shall be entered by the Indenture Trustee on behalf of the Issuer in Schedule A hereto.
The principal amount of this Note, to the extent not previously paid, shall be due and payable on the Term Note Maturity Date. Notwithstanding the foregoing, the entire unpaid
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principal amount of this Note may be due and payable, if not previously paid, on the date on which an Event of Default described in Section 7.01 of the Indenture shall have occurred and be continuing, if the Notes have been declared immediately due and payable as provided in Section 7.02 of the Indenture.
This Note may not be redeemed or prepaid, except as provided in the Indenture. If this Note is prepaid prior to the Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the applicable Optional Redemption Amount. If this Note is prepaid after the Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the Outstanding Principal Amount of such Term Note as of the Optional Redemption Date, plus all interest accrued and unpaid as of the date of prepayment.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.
On any redemption, purchase, exchange or cancellation of any of this Note, details of such redemption, purchase, exchange or cancellation shall be entered by the Indenture Trustee in Schedule B hereto recording any such redemption, purchase, exchange or cancellation. Upon any such redemption, purchase, exchange or cancellation, the principal amount of this Note shall be reduced or increased, as appropriate, by the principal amount so redeemed, purchased, exchanged or canceled.
Principal of, interest on and all other amounts payable on or in respect of this Note constitutes limited recourse obligations of the Issuer. The Holders of this Note has recourse to the Issuer only to the extent of the Collateral, and following realization of the Collateral, any claims of the Holders of this Note shall be extinguished and shall not revive thereafter. Neither the Issuer, nor any of its respective agents, members, partners, beneficiaries, officers, directors, employees or any Affiliate of any of them or any of their respective successors or assigns or any other Person or entity shall be personally liable for any amounts payable, or performance due, under this Note or the Indenture. It is understood that the foregoing provisions of this paragraph shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is secured by the Collateral, or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture until such Collateral has been realized whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this paragraph shall not limit the right of any Person to name the Issuer as party defendant in any action, suit or in the exercise of any other remedy under this Note or in the Indenture, 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 the Issuer.
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The Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and the Note Registrar and any agent of the foregoing may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Note Registrar nor any such agent of the foregoing shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of this Note under the Indenture at any time by the Issuer pursuant to Sections 10.01 and 10.02 of the Indenture.
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.
This Note is issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the Indenture Trustee in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have
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been made by the Indenture Trustee for the sole purpose of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture the Holder shall have no claim against any of the entities described in the first sentence of this paragraph for any deficiency, loss or claim therefrom; provided , however , that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the Collateral pledged by the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.
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Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
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(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.
Dated: |
* |
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Signature Guaranteed |
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* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.
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PART I
INTEREST PAYMENTS
Interest Payment Date |
Date of Payment |
Total Amount of Interest Payable |
Amount of Interest Paid |
Confirmation of payment by or on behalf of the Issuer |
[__], 20[__] |
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[__], 20[__] |
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[continue numbering until the appropriate number of interest payment dates for this Note is reached]
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PRINCIPAL PAYMENTS
Principal Payment Date |
Total Amount Payable |
Total Amount Paid |
Confirmation of payment by or on behalf of the Issuer |
[__], 20[__] |
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[__], 20[__] |
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[continue numbering until the appropriate number of installment dates for this Note is reached]
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SCHEDULE OF EXCHANGES OR REDEMPTIONS OR PURCHASES AND
CANCELLATIONS
The following increases or decreases in principal amount of this Note, or redemptions, purchases or cancellations of this Note have been made:
Date of exchange, or redemption or purchase or cancellation |
Increase or decrease in principal amount of this Note due to exchanges |
Remaining principal amount of this Note following such exchange, or redemption or purchase or cancellation |
Notation made by or on behalf of the Issuer |
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FORM OF NOTICE OF CONVERSION
[Date]
Bankers Trust Company
as Indenture Trustee
Attn: EFR 2016-1, LLC
[__]
Telephone No.: [__]
Reference is made to that certain Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), between EFR 2016-1, LLC, as issuer (the “ Issuer ”), and Bankers Trust Company, as indenture trustee (in such capacity, the “ Indenture Trustee ”) and as securities intermediary. Unless otherwise indicated, all terms defined in Part I of Appendix A to the Indenture have the same respective meanings when used herein.
Pursuant to Section 4.12(b) of the Indenture, you are hereby notified as follows:
(a) on the date hereof (the “ Conversion Date ”), the aggregate Outstanding Principal Amount of the Variable Funding Notes relating to the Variable Funding Note Investment Pool identified on Schedule I hereto will be converted into a Quarterly Term Note (the “ Term Note ”) substantially in the form of Exhibit B to the Indenture;
(b) the Initial Payment Date with respect to the Term Notes will be [___], 20[__] 1 ; and
(c) the initial Outstanding Principal Amount with respect to the Term Note will be $[______].
The Issuer hereby certifies that all laws and requirements with respect to the execution and delivery by the Issuer of the Term Notes have been complied with, the Issuer has the trust power and authority to issue the Term Notes and the Term Notes have been duly authorized and delivered by the Issuer and, assuming due authentication and delivery by the Indenture Trustee, constitutes a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and entitled to the benefits of the Indenture, equally and ratably with all other Outstanding Notes, if any, subject
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1 |
The Initial Payment Date shall be the date that is approximately forty-five days after the respective Conversion Date. With respect to a Conversion Date occurring on the last day of a calendar month, the Initial Payment Date shall be the fifteenth (15 th ) day (or, if such 15 th day is not a Business Day, the next succeeding Business Day) of the second calendar month following such Conversion Date and with respect to a Conversion Date occurring on the first Business Day of a calendar month, the fifteenth (15 th ) day (or, if any such 15 th day is not a Business Day, the next succeeding Business Day) of the calendar month following the calendar month in which such Conversion Date occurs. |
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to the terms of the Indenture. If such Term Note is a Global Note, the Issuer has delivered a completed Representations for Rule 144A Securities to the Depository Trust Company (“ DTC ”) Letter of Representations substantially in the form of Exhibit 1 hereto (the “ 144A Rider ”) to DTC and DTC has approved such 144A Rider.
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IN WITNESS WHEREOF, the Issuer has executed this Notice of Conversion on the date set forth above.
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EFR 2016-1, LLC By: Name: Title: |
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Schedule of Receivables
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DTC Issuer Letter of Representations for Rule 144A Securities
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FORM OF BORROWING BASE CERTIFICATE
NetCredit Loan Services, LLC. as Master Servicer - Page 1
Borrowing Base Certificate
By delivery of this certificate, the Issuer hereby certifies the accuracy and completeness of all information included herein
Request Date: |
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[ ] |
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Advance Date: |
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[ ] |
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Conversion Date: |
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[ ] |
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Has the Funding Period Termination Date Occurred? |
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[YES/NO] |
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I.Variable Funding Note Availability / Balance |
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Variable Funding Note Principal Balance (prior) |
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[ ] |
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Paydowns (since prior borrowing base) |
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[ ] |
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Term Note Conversion (since prior borrowing base) |
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[ ] |
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Variable Funding Note Investment Pool |
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[ ] |
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Term Notes Outstanding (entire facility) |
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[ ] |
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Total Facility Amount |
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[ ] |
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Maximum Variable Funding Note Amount |
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[ ] |
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Maximum Facility Amount |
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[ ] |
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Facility Availability |
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[ ] |
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Increase to Variable Funding Note Principal Balance |
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[ ] |
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Breakdown of Variable Funding Note Investors |
% of Variable Funding Note |
Investor Allocation |
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[ ] |
[ ] |
[ ] |
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[ ] |
[ ] |
[ ] |
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[ ] |
[ ] |
[ ] |
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[ ] |
[ ] |
[ ] |
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[ ] |
[ ] |
[ ] |
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Increase to Variable Funding Note Principal Balance |
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[ ] |
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Ending Variable Funding Note Principal Balance |
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[ ] |
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Variable Funding Note Advance Rate |
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***% |
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Outstanding Receivable Principal Balance of Eligible Conversion Receivables |
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Variable Funding Note Borrowing Base |
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II. Receivables Overview |
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Outstanding Receivables Balance (Variable Funding Note Investment Pool) |
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[ ] |
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Reduction in Eligible Receivables due to Excess Concentration Limits |
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[ ] |
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Reduction in Eligible Receivables due to Non-Verified |
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[ ] |
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Repurchased/Removed Eligible Receivables |
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[ ] |
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Outstanding Receivables Principal Balance of the Eligible Receivables (Variable Funding Note Investment Pool) |
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[ ] |
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Eligibility Criteria |
Reduction in Eligible Receivable Balance |
Amount in Pool |
Breach? |
Such Receivable has an original term to maturity of no more than 60 months |
[_________] |
[_________] |
[YES/NO] |
Such Receivable has an Outstanding Receivable Principal Balance equal to or less than $10,000 |
[_________] |
[_________] |
[YES/NO] |
Such Receivable has an Annual Percentage Rate that is greater than or equal to ***%, and no greater than 99.0% |
[_________] |
[_________] |
[YES/NO] |
Payments under such Receivable are due in Dollars |
[_________] |
[_________] |
[YES/NO] |
Such Receivable is a valid, legal, binding and enforceable obligation of the Obligor (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall be payable in equal scheduled installments (other than with respect to the last scheduled installment) without bullet maturity or balloon payment |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall have been originated in all material respects in compliance with all applicable laws (including all Governmental Rules) |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall not, along with the related Contract or other loan documents, violate any applicable laws in any material respect |
[_________] |
[_________] |
[YES/NO] |
Such Receivable is not a Charged-Off Receivable at the time such Receivable is sold to the Issuer and as of the applicable Conversion Date |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall not be evidenced by a judgment or have been reduced to judgment |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall have been originated in accordance with the Credit Policy |
[_________] |
[_________] |
[YES/NO] |
The related Obligor is not bankrupt or deceased |
[_________] |
[_________] |
[YES/NO] |
The related Obligor is a natural person |
[_________] |
[_________] |
[YES/NO] |
The related Obligor is an individual who is a permitted debtor under applicable state laws and is not an employee or Affiliate of the Originator or any Bank Originator |
[_________] |
[_________] |
[YES/NO] |
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Excess Concentration Limit |
Reduction in Eligible Receivable Balance |
Amount in Pool |
Concentration Limit |
Breach? |
With respect to Eligible Receivables that are included in the Variable Funding Note Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the Conversion Date, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an original principal balance of greater than $*** is less than or equal to ***% |
[________] |
[________] |
TBD Based on definition of Excess Concentration Limits |
[YES/NO] |
With respect to Eligible Receivables that are included in the Variable Funding Note Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the Conversion Date, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an original term to maturity greater than *** months is less than or equal to ***% |
[________] |
[________] |
TBD Based on definition of Excess Concentration Limits |
[YES/NO] |
With respect to Eligible Receivables that are included in any Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the Conversion Date, the weighted average *** Score of the Eligible Receivables is not less than*** |
[________] |
[________] |
TBD Based on definition of Excess Concentration Limits |
[YES/NO] |
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FORM OF CERTIFICATE OF VARIABLE FUNDING NOTE NOTEHOLDER
CERTIFICATE OF VARIABLE FUNDING NOTE NOTEHOLDER
_____ __, 201_
[__]
Attn: EFR 2016-1, LLC
[__]
[__]
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Re: |
EFR 2016-1, LLC Variable Funding Notes |
Reference is hereby made to the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), between EFR 2016-1, LLC (the “ Issuer ”) and Bankers Trust Company, as Indenture Trustee and Securities Intermediary (the “ Indenture Trustee ”). All capitalized terms used but not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Indenture.
The undersigned (the “ Variable Funding Note Noteholder ”) hereby certifies, represents and warrants to and agrees with the Indenture Trustee, and for the benefit of the Issuer, that:
(1) This letter relates to the Variable Funding Note issued to the undersigned and having the Initial Principal Amount and [other identifying information] specified on Schedule 1 hereto.
(2) The Variable Funding Note Noteholder shall timely furnish the Issuer or its agents any U.S. federal income tax form or certification (e.g., IRS Forms W-9, W-8BEN, W-8BEN-E or W-8ECI, or any successors to such IRS forms, or any documentation related to FATCA) that is required by the Indenture or that the Issuer or its agents may reasonably request, and the Variable Funding Note Noteholder shall update or replace such form or certification in accordance with its terms or its subsequent amendments. It agrees to provide any certification or information that is reasonably requested by the Issuer (x) to permit the Issuer or its agents to make payments to it without, or at a reduced rate of, withholding, (y) to enable the Issuer or its agents to qualify for a reduced rate of withholding in any jurisdiction from or through which the Issuer receive payments on its assets, or (z) to enable the Issuer or its agents to satisfy reporting and other obligations in respect of the Notes under the Code and Treasury Regulations.
(3) The Variable Funding Note Noteholder agrees to treat the Notes as debt for all U.S. federal income tax purposes and shall take no action inconsistent with such treatment unless required by law.
(4) The Variable Funding Note Noteholder agrees to comply with the following provisions:
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(a) The Variable Funding Note Noteholder will not (A) acquire, sell, transfer, assign, pledge or otherwise dispose of its Variable Funding Note (or any interest therein that is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B)) on or through (x) a United States national, regional or local securities exchange, (y) a foreign securities exchange or (z) an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers (including the National Association of Securities Dealers Automated Quotation System) ((x), (y) and (z), collectively, an “ Exchange ”) or (B) cause its Variable Funding Note or any interest therein to be marketed on or through an Exchange.
(b) The Variable Funding Note Noteholder will not enter into any financial instrument payments on which, or the value of which, is determined in whole or in part by reference to the Variable Funding Note, or the Issuer (including the amount of the Issuer’s distributions or interest on the Variable Funding Note, the value of the Issuer’s assets, or the result of the Issuer’s operations), or any contract that otherwise is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B). For the purposes of this Certificate, the terms “financial instrument” and “contract” shall not include (i) the Variable Funding Notes or any interest with respect to the Variable Funding Notes; (ii) any arrangement described in paragraph 4(c) immediately below; or (iii) any non-convertible debt instrument described in Treasury Regulations section 1.7704-1(a)(2)(ii).
(c) The Variable Funding Note Noteholder is the sole holder of the Variable Funding Note. If the Variable Funding Note Noteholder is a partnership, grantor trust or S corporation, such Variable Funding Note Noteholder represents and covenants as set forth below (as indicated by checking the applicable box):
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no more than 50% of the value of any person’s interest in such partnership, grantor trust or S corporation is attributable to the Variable Funding Note Noteholder’s interests in all Notes issued by the Issuer |
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no more than [______] persons will be treated as “partners” in the Issuer under Treasury Regulation section 1.7704-1(h)(3) solely by reason of the Variable Funding Note Noteholder’s ownership of the Variable Funding Note (without duplication after taking into account any such person being a “partner” in the Issuer by virtue of its ownership of another Variable Funding Note or Term Note Interest) (such Persons being “ Variable Funding Note Partners ”) |
(d) The Variable Funding Note Noteholder agrees that it may not directly or indirectly assign, participate, pledge, hypothecate, rehypothecate, exchange or otherwise dispose of or transfer in any manner (each a “ Transfer ”) its interest in the Variable Funding Notes unless: (A) each transferee of such Transfer
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delivers a Certificate of Variable Funding Note Noteholder in accordance with the Indenture and this Certificate and (B) such Transfer does not violate the transfer restrictions set forth in the Indenture. Any purported Transfer that does not satisfy the above mentioned conditions shall be null, void and of no effect. Notwithstanding the foregoing, a Variable Funding Note Noteholder (or a transferee thereof in a transaction described in either of the following two clauses) (i) may engage in any repurchase transaction the subject matter of which is a Variable Funding Note or any beneficial interest therein and (ii) may pledge a Variable Funding Note or any beneficial interest therein, in either case so long as doing so will not result in any Person (other than the Variable Funding Note Noteholder) being treated for U.S. federal income tax purposes as the owner of all or any portion of a Variable Funding Note or interest therein.
(e) The Variable Funding Note Noteholder agrees that the Indenture Trustee shall monitor the issuances and transfers of Variable Funding Notes and shall report to the Issuer upon request the aggregate number of Variable Funding Note Noteholders (including for such purpose the maximum number of Variable Funding Note Partners). In monitoring such issuances and transfers and providing such reports, the Indenture Trustee shall rely solely and exclusively (without any duty to make further inquiry, including any duty to inquire whether a holder holds for the account of one or more other persons) on the Certificates of Variable Funding Note Noteholders received pursuant to the terms of the Indenture and as contemplated herein.
(f) In the event that (i) the aggregate number of beneficial holders of the Term Notes and the Variable Funding Notes (as determined in accordance with Treasury Regulation section 1.7704-1(h)) would exceed 85 as a result of a proposed Transfer or (ii) if any Transfer would otherwise cause the Issuer to be unable to rely on the “private placement” safe harbor of Treasury Regulations Section 1.7704-1(h), then such Transfer, as applicable, will be void and of no force or effect, unless (a) the Issuer shall have provided its written consent to such Transfer and (b) if the Issuer so requests, the Variable Funding Note Noteholder shall have provided the Issuer with an opinion of nationally recognized tax counsel, in form and substance satisfactory to the Issuer, that such Transfer will not cause the Issuer to be treated as an entity taxable as a corporation for U.S. federal income tax purposes.
(g) The Variable Funding Note Noteholder is not acquiring or holding a Variable Funding Note with the “plan assets” of (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ ERISA ”)) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code that is subject to Section 4975 of the Internal Revenue Code, (iii) an entity whose underlying assets include “plan assets” by reason of investment by an employee benefit plan or a plan in such entity other than an insurance company general account (as defined in Prohibited Transaction Class Exemption (“ PTCE ”) 95-60) whose underlying assets include less than 25% “plan assets” and for which the purchase and holding of the Transferred Notes is eligible for and satisfies all conditions for relief under PTCE
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95-60 or (iv) an employee benefit plan or plan that is not subject to the provisions of Title I of ERISA or Section 4975 of the Internal Revenue Code, if such acquisition or holding would result in a non-exempt prohibited transaction under, or a non-exempt violation of, any applicable law that is substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code.
The Variable Funding Note Noteholder understands that the representations, warranties and covenants contained in paragraphs (4)(a) through (f) are intended to permit the Issuer to rely, if necessary, on the “private placement” safe harbor from classification as a publicly traded partnership in U.S. Treasury Regulations Section 1.7704-1(h).
(5) The Variable Funding Note Noteholder certifies that the following information is correct:
Its taxpayer identification number is_________________.
Its fiscal year for federal income tax purposes ends in_________________.
Its address for notices is:_________________________.
(6) The Variable Funding Note Noteholder acknowledges that the Issuer, the Indenture Trustee, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or warranties made or deemed to have been made by it in connection with its purchase of the Variable Funding Notes are no longer accurate, it will promptly notify the Issuer and the Indenture Trustee.
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[VARIABLE FUNDING NOTE NOTEHOLDER] By: Name: Title: |
cc: |
EFR 2016-1, LLC |
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to
Certificate from Variable Funding Note Noteholder
Identification of Variable Funding Note(s) Held by Variable Funding Note Noteholder
Name of Variable Funding Note Noteholder:_________________________________
(c)Variable Funding Note(s) Held by Variable Funding Note Noteholder |
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(d)Variable Funding Note Register No. |
(e)Issuance Date |
(f)Maximum Principal Balance |
(g)Interest Acquired From |
(h) |
(i) |
(j) |
(k) |
(l) |
(m) |
(n) |
(o) |
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FORM OF CERTIFICATE OF TERM NOTE OWNER
CERTIFICATE OF TERM NOTE OWNER
_____,____ 201____
[__]
Attn: EFR 2016-1, LLC
[__]
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Re: |
EFR 2016-1, LLC Term Notes |
Reference is hereby made to the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified form time to time, the “ Indenture ”), between EFR 2016-1, LLC (the “ Issuer ”) and Bankers Trust Company, as Indenture Trustee and Securities Intermediary (the “ Indenture Trustee ”). All capitalized terms used but not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Indenture.
The undersigned (the “ Term Note Owner ”) hereby certifies, represents and warrants to and agrees with the Indenture Trustee, and for the benefit of the Issuer, that:
(1) This letter relates to each beneficial interest in an aggregate original principal amount specified on Schedule 1 hereto (the “ Original Principal Amount ”) of each Term Note having the Conversion Date, Term Note designation and CUSIP number identified on such Schedule 1 (each, a “ Term Note Interest ”). The Term Note Owner intends to acquire each such Term Note Interest by one of the following means:
(i) the Term Note Owner acquired an Initial Term Note on the Closing Date;
(ii) the Term Note Owner is a Variable Funding Note Noteholder and will receive the Term Note Interest on the related Conversion Date directly from the Issuer pursuant to Section 4.12 of the Indenture (a “ Conversion ”);
(iii) the Term Note Owner intends to purchase the Term Note Interest on the related Conversion Date from a Variable Funding Note Noteholder (a “ Conversion Date Purchase ”); or
(iv) the Term Note Owner intends to purchase the Term Note Interest following the Conversion Date from a Term Note Owner (a “ Secondary Purchase ”).
(2) The Term Note Owner wishes to effect each such Conversion, Conversion Date Purchase or Secondary Purchase (each, a “ Note Interest Acquisition ”).
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(3) The Term Note Owner shall timely furnish the Issuer or its agents any U.S. federal income tax form or certification (e.g., IRS Forms W-9, W-8BEN, W-8BEN-E or W-8ECI, or any successors to such IRS forms, or any documentation related to FATCA) that is required by the Indenture or that the Issuer or its agents may reasonably request, and the Term Note Owner shall update or replace such form or certification in accordance with its terms or its subsequent amendments. It agrees to provide any certification or information that is reasonably requested by the Issuer (x) to permit the Issuer or its agents to make payments to it without, or at a reduced rate of, withholding, (y) to enable the Issuer or its agents to qualify for a reduced rate of withholding in any jurisdiction from or through which the Issuer receive payments on its assets, or (z) to enable the Issuer or its agents to satisfy reporting and other obligations in respect of the Notes under the Code and Treasury Regulations.
(4) The Term Note Owner agrees to treat the Notes as debt for all U.S. federal income tax purposes and shall take no action inconsistent with such treatment unless required by law.
(5) The Term Note Owner agrees to comply with the following provisions:
(a) The Term Note Owner will not (A) acquire, sell, transfer, assign, pledge or otherwise dispose of any of its Term Note Interests (or any interest therein that is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B)) on or through (x) a United States national, regional or local securities exchange, (y) a foreign securities exchange or (z) an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers (including the National Association of Securities Dealers Automated Quotation System) ((x), (y) and (z), collectively, an “ Exchange ”) or (B) cause any of its Term Note Interests or any interest therein to be marketed on or through an Exchange.
(b) The Term Note Owner will not enter into any financial instrument payments on which, or the value of which, is determined in whole or in part by reference to the Term Note Interests, or the Issuer (including the amount of the Issuer’s distributions or interest on the Term Note Interests, the value of the Issuer’s assets, or the result of the Issuer’s operations), or any contract that otherwise is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B). For the purposes of this Certificate, the terms “financial instrument” and “contract” shall not include (i) the Term Notes or any interest with respect to the Term Notes; (ii) any arrangement described in paragraph 5(c) immediately below; or (iii) any non-convertible debt instrument described in Treasury Regulations section 1.7704-1(a)(2)(ii).
(c) The Term Note Owner is the sole holder of the Term Note Interest. If the Term Note Owner is a partnership, grantor trust or S corporation, such Term Note Owner represents and covenants as set forth below (as indicated by checking the applicable box):
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no more than 50% of the value of any person’s interest in such partnership, grantor trust or S corporation is attributable to the Term Note Owner’s interests in all Notes issued by the Issuer |
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(d) The Term Note Owner agrees that it may not directly or indirectly assign, participate, pledge, hypothecate, rehypothecate, exchange or otherwise dispose of or transfer in any manner (each a “ Transfer ”) its interest in the Term Note Interests unless: (A) each transferee of such Transfer delivers a Certificate of Term Note Owner in accordance with the Indenture and this Certificate and (B) such Transfer does not violate the transfer restrictions set forth in the Indenture. Any purported Transfer that does not satisfy the above mentioned conditions shall be null, void and of no effect. Notwithstanding the foregoing, a Term Note Owner (or a transferee thereof in a transaction described in either of the following two clauses) (i) may engage in any repurchase transaction the subject matter of which is a Term Note or any beneficial interest therein and (ii) may pledge a Term Note or any beneficial interest therein, in either case so long as doing so will not result in any Person (other than the Term Note Owner) being treated for U.S. federal income tax purposes as the owner of all or any portion of a Term Note or interest therein.
(e) The Term Note Owner agrees that the Indenture Trustee shall monitor the issuances and transfers of Term Note Interests and shall report to the Issuer upon request the aggregate number of Term Note Owners (including for such purpose the maximum number of Term Note Partners). In monitoring such issuances and transfers and providing such reports, the Indenture Trustee shall rely solely and exclusively (without any duty to make further inquiry, including any duty to inquire whether a holder holds for the account of one or more other persons) on the Certificates of Term Note Owners received pursuant to the terms of the Indenture and as contemplated herein.
(f) In the event that (i) the aggregate number of beneficial holders of the Term Notes and the Variable Funding Notes (as determined in accordance with Treasury Regulation section 1.7704-1(h)) would exceed 85 as a result of this proposed Note Interest Acquisition or a proposed Transfer or (ii) if this Note Interest Acquisition or any Transfer would otherwise cause the Issuer to be unable to rely on the “private placement” safe harbor of Treasury Regulations Section 1.7704-1(h), then this Note Interest Acquisition or such Transfer, as applicable, will be void and of no force or effect, unless (a) the Issuer shall have provided its written consent to such Note Interest Acquisition or Transfer and (b) if the Issuer so requests, the Term Note Owner shall have provided the Issuer with an opinion of nationally recognized tax counsel, in form and substance satisfactory to the Issuer, that such Note Interest Acquisition or Transfer will not cause the Issuer to be treated as an entity taxable as a corporation for U.S. federal income tax purposes.
(g) The Term Note Owner is not acquiring or holding the Term Note Interests with the “plan assets” of (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ ERISA ”)) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code that is subject to Section 4975 of the Internal Revenue Code, (iii) an entity whose underlying assets include “plan assets” by reason of investment by an employee benefit plan or a plan in such entity other than an insurance company general account (as defined in Prohibited Transaction Class Exemption
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(“ PTCE ”) 95-60) whose underlying assets include less than 25% “plan assets” and for which the purchase and holding of the Transferred Notes is eligible for and satisfies all conditions for relief under PTCE 95-60 or (iv) an employee benefit plan or plan that is not subject to the provisions of Title I of ERISA or Section 4975 of the Internal Revenue Code, if such acquisition or holding would result in a non-exempt prohibited transaction under, or a non-exempt violation of, any applicable law that is substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code.
(h) The Term Note Owner understands that the representations, warranties and covenants contained in paragraphs (5)(a) through (f) are intended to permit the Issuer to rely, if necessary, on the “private placement” safe harbor from classification as a publicly traded partnership in U.S. Treasury Regulations Section 1.7704-1(h).
(6) The Term Note Owner certifies that the following information is correct:
Its taxpayer identification number is___________________.
Its fiscal year for federal income tax purposes ends in______________.
Its address for notices is:__________________.
(7) The Term Note Owner acknowledges that the Issuer, the Indenture Trustee, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or warranties made or deemed to have been made by it in connection with its purchase of the Term Note Interests are no longer accurate, it will promptly notify the Issuer and the Indenture Trustee.
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In the event that (i) subsequent to the date of this Certificate from Term Note Owner, the undersigned Term Note Owner acquires an additional Term Note Interest through any Note Acquisition Interest and (ii) all of the information in this Certificate of Term Note Owner continues to be true and correct, except for the information to be included on Schedule 1 in respect of such additional Term Note Interest, then (in lieu of submitting a new Certificate of Term Note Owner) the Term Note Owner may execute and deliver to the Indenture Trustee, with a copy to the Issuer, an updated cumulative Schedule 1, and such updated cumulative Schedule 1 shall replace any prior version of Schedule 1, provided that the provisions of Section 5(f) above that may render a Note Acquisition Interest null and void shall apply only to such new Note Acquisition Interest.
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[TERM NOTE OWNER] By: Name: Title: |
cc: |
EFR 2016-1, LLC |
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to Certificate of Term Note Owner
Identification of Term Note Interest(s) Held by Term Note Owner
Name of Term Note Owner:____________________________________
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Term Note Interest(s) Held by Term Note Owner |
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Term Note CUSIP No. |
Con-version Date |
Term Note Designation * |
Original Principal Balance |
Date Acquired |
Means of Acquiring Interest ** |
Interest Acquired From *** |
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* Specify Initial Term Note or Term Note.
** Specify Conversion, Conversion Date Purchase or Secondary Purchase, as applicable.
*** For a Conversion, list the Issuer. For a Conversion Date Purchase, list the applicable Variable Funding Note Noteholder. For a Secondary Purchase, list the applicable Term Note Owner.
[To be signed under the circumstances described in the last paragraph of the Certificate of Term Note Owner.]
The undersigned Term Note Owner hereby delivers to the Indenture Trustee, with a copy to the Issuer, this updated cumulative Schedule 1, and such updated cumulative Schedule 1 replaces any prior version of Schedule 1 delivered by the undersigned, provided that the provisions of Section
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5(f) in the Certificate of Term Note Owner that may render a Note Acquisition Interest null and void shall apply only to such new Note Acquisition Interest.
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[TERM NOTE OWNER] By: Name: Title: |
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[FORM OF] TEMPORARY REGULATION S GLOBAL NOTE
THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE.
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “ QIB ”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “ IAI ”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY
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ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “ CODE ”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE; (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“ PTCE ”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
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No. __
CUSIP NO.: [___]
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“ DTC ”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THIS NOTE OR THE TRANSACTION DOCUMENTS.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THIS NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME.
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* Denominations of $100,000 and in integral multiples of $1.00 in excess thereof.
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EFR 2016-1, LLC
TEMPORARY REGULATION S GLOBAL NOTE
EFR 2016-1, LLC (herein referred to as the “ Issuer ”), for value received, hereby promises to pay to CEDE & CO., or registered assigns, subject to the following provisos, a principal sum up to [____] ($[___]) payable on each Payment Date from the Collections on deposit in the Collection Account pursuant to Section 5.04(a) of the Indenture; provided , however , the entire unpaid principal amount of this Note shall be due and payable on the [Month][Year] Payment Date (the “ Term Note Maturity Date ”); provided further , however , that the aggregate principal sum of the Regulation S Global Notes and the Rule 144A Global Note shall not exceed the principal sum of $[ ]. The Issuer will pay principal of and interest on this Note in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose.
No reference herein to the Indenture and no provision of this Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture.
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this Note.
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IN WITNESS WHEREOF, the Issuer has caused this Note to be signed, manually or in facsimile, by its Authorized Officer.
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EFR 2016-1, LLC , as Issuer By: Name: Title:
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Date:________ ___, 20[____]
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INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-mentioned Indenture.
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Bankers Trust Company, not in its individual capacity but solely as Indenture Trustee By: Name: Title:
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Date:________ ___, 20[____]
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This Note is one of Temporary Regulation S Global Notes of a duly authorized issue of Notes of EFR 2016-1, LLC (the “ Issuer ”), designated as its [NAME OF SECURITY] (herein called the “ Note ”), all issued under an Amended and Restated Indenture, dated as of October 20, 2017 (such indenture, as further amended, restated, supplemented or otherwise modified, is herein called the “ Indenture ”), by and between the Issuer and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”). This Note is subject to all terms of the Indenture. All terms used in this Note that are defined in Part I of Appendix A of the Indenture, shall have the meanings assigned to them in or pursuant to Part I of Appendix A of the Indenture.
This Note is secured by the Collateral, and in connection with the sale of Collateral following an Event of Default the Noteholder will be entitled to its’ pro rata share of proceeds. The payment of principal of and interest on this Note, however, shall be solely based on the performance of the Receivables related to this Note’s Investment Pool and, except as otherwise set forth in Section 5.04(a) of the Indenture, shall not be dependent on Receivables related to any other Investment Pool or market or credit events that are independent of such financial assets.
Interest on this Note shall accrue at the Note Interest Rate, and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period.
Interest on and principal of this Note will be payable on each Payment Date pursuant to Section 5.04(a) of the Indenture.
“ Payment Date ” means the 15th day of each calendar month, or, if any such 15th day is not a Business Day, the next succeeding Business Day, commencing in [MONTH][YEAR].
Any installment of interest and principal, if any, or any other amount, payable on this Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name this Note is registered on the Record Date, by check mailed first-class, postage prepaid to such Person’s address as it appears on the Note Register on such Record Date, (i) except that with respect to Notes registered on the Record Date in the name of the nominee of the Depository (initially, such nominee to be Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by such nominee, and (ii) except for (A) the final installment of principal payable with respect to this Note on a Payment Date and (B) the redemption price for this Note called for redemption pursuant to Section 12.01 of the Indenture, in each case shall be payable as set forth below. All reductions in the principal amount of this Note effected by any payments of installments of principal made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not such payment is noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will provide notice of the termination as provided in the Indenture and this Note shall be entitled to the final payment only upon presentation and surrender of this Note at the Indenture Trustee’s principal Corporate Trust Office. On any payment of interest or principal being made, details of such payment shall be entered by the Indenture Trustee on behalf of the Issuer in Schedule A hereto.
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The principal amount of this Note, to the extent not previously paid, shall be due and payable on the Term Note Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount of this Note may be due and payable, if not previously paid, on the date on which an Event of Default described in Section 7.01 of the Indenture shall have occurred and be continuing, if the Notes have been declared immediately due and payable as provided in Section 7.02 of the Indenture.
This Note may not be redeemed or prepaid, except as provided in the Indenture. If this Note is prepaid prior to its Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the applicable Optional Redemption Amount. If this Note is prepaid after its related Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the Outstanding Principal Amount of such Term Note as of the Optional Redemption Date, plus all interest accrued and unpaid as of such Optional Redemption Date.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.
On any redemption, purchase, exchange or cancellation of any of the Notes represented by this Temporary Regulation S Global Note, details of such redemption, purchase, exchange or cancellation shall be entered by the Indenture Trustee in Schedule A hereto recording any such redemption, purchase, exchange or cancellation and shall be signed on, by or on behalf of the Issuer. Upon any such redemption, purchase, exchange or cancellation, the principal amount of this Temporary Regulation S Global Note and the Notes represented by this Temporary Regulation S Global Note shall be reduced or increased, as appropriate, by the principal amount so redeemed, purchased, exchanged or canceled.
This Temporary Regulation S Global Note may be exchanged, in whole or in part (free of charge), for the Permanent Regulation S Global Note in the form set out in Exhibit H to the Indenture upon the later of (i) the Exchange Date and (ii) the furnishing of the Regulation S Certificate.
Principal of, interest on and all other amounts payable on or in respect of this Note constitutes limited recourse obligations of the Issuer. The Holders of this Note has recourse to the Issuer only to the extent of the Collateral, and following realization of the Collateral, any claims of the Holders of this Note shall be extinguished and shall not revive thereafter. Neither the Issuer, nor any of its respective agents, members, partners, beneficiaries, officers, directors, employees or any Affiliate of any of them or any of their respective successors or assigns or any other Person or entity shall be personally liable for any amounts payable, or performance due, under this Note or the Indenture. It is understood that the foregoing provisions of this paragraph shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or
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agreement which is secured by the Collateral, or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture until such Collateral has been realized whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this paragraph shall not limit the right of any Person to name the Issuer as party defendant in any action, suit or in the exercise of any other remedy under this Note or in the Indenture, 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 the Issuer.
The Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and the Note Registrar and any agent of the foregoing may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Note Registrar nor any such agent of the foregoing shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of this Note under the Indenture at any time by the Issuer pursuant to Section 10.01 and Section 10.02 of the Indenture.
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.
This Note is issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal
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of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the Indenture Trustee in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purpose of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture the Holder shall have no claim against any of the entities described in the first sentence of this paragraph for any deficiency, loss or claim therefrom; provided , however , that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the Collateral pledged by the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.
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Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
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(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.
Dated: |
* Signature Guaranteed |
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* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.
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SCHEDULE OF EXCHANGES
FOR NOTES REPRESENTED BY THE PERMANENT
REGULATION S GLOBAL NOTE OR THE RULE 144A
GLOBAL NOTE, OR REDEMPTIONS OR PURCHASES AND CANCELLATIONS
The following exchanges of a part of this Temporary Regulation S Global Note for the Permanent Regulation S Global Note or the Rule 144A Global Note, in whole or in part, or redemptions, purchases or cancellation of this Temporary Regulation S Global Note have been made:
Date of exchange, or redemption or purchase or cancellation |
Part of principal amount of this Temporary Regulation S Global Note exchanged for Notes represented by the Permanent Regulation S Global Note or the Rule 144A Global Note, or redeemed or purchased or canceled |
Remaining principal amount of this Temporary Regulation S Global Note following such exchange, or redemption or purchase or cancellation |
Amount of interest paid with delivery of the Permanent Regulation S Note |
Notation made by or on behalf of the Issuer |
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[FORM OF] PERMANENT REGULATION S GLOBAL NOTE
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “ QIB ”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “ IAI ”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
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(THE “ CODE ”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE; (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“ PTCE ”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95¬60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
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No. __
CUSIP NO.: [___]
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“ DTC ”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THIS NOTE OR THE TRANSACTION DOCUMENTS.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THIS NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME .
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* Denominations of $100,000 and in integral multiples of $1.00 in excess thereof.
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EFR 2016-1, LLC
PERMANENT REGULATION S GLOBAL NOTE
EFR 2016-1, LLC (herein referred to as the “ Issuer ”), for value received, hereby promises to pay to CEDE & CO., or registered assigns, subject to the following provisos, a principal sum up to [____] ($[___]) payable on each Payment Date from the Collections on deposit in the Collection Account pursuant to Section 5.04(a) of the Indenture; provided , however , the entire unpaid principal amount of this Note shall be due and payable on the [Month][Year] Payment Date (the “ Term Note Maturity Date ”); provided further , however , that the aggregate principal sum of the Regulation S Global Notes and the Rule 144A Global Note shall not exceed the principal sum of $[ _____ ]. The Issuer will pay principal of and interest on this Note in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose.
No reference herein to the Indenture and no provision of this Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture.
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this Note.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed, manually or in facsimile, by its Authorized Officer.
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EFR 2016-1, LLC , as Issuer By: Name: Title:
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Date:________ ___, 20[____]
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INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-mentioned Indenture.
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Bankers Trust Company, not in its individual capacity but solely as Indenture Trustee By: Name: Title:
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Date:________ ___, 20[____]
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This Note is one of Permanent Regulation S Global Notes of a duly authorized issue of Notes of EFR 2016-1, LLC (the “ Issuer ”), designated as its [NAME OF SECURITY] (herein called the “ Note ”), all issued under an Amended and Restated Indenture, dated as of October 20, 2017 (such indenture, as further amended, restated, supplemented or otherwise modified, is herein called the “ Indenture ”), by and between the Issuer and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”). This Note is subject to all terms of the Indenture. All terms used in this Note that are defined in Part I of Appendix A of the Indenture, shall have the meanings assigned to them in or pursuant to Part I of Appendix A of the Indenture.
This Note is secured by the Collateral, and in connection with the sale of Collateral following an Event of Default the Noteholder will be entitled to its’ pro rata share of proceeds. The payment of principal of and interest on this Note, however, shall be solely based on the performance of the Receivables related to this Note’s Investment Pool and, except as otherwise set forth in Section 5.04(a) of the Indenture, shall not be dependent on Receivables related to any other Investment Pool or market or credit events that are independent of such financial assets.
Interest on this Note shall accrue at the Note Interest Rate, and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period.
Interest on and principal of this Note will be payable on each Payment Date pursuant to Section 5.04(a) of the Indenture.
“ Payment Date ” means the 15th day of each calendar month, or, if any such 15th day is not a Business Day, the next succeeding Business Day, commencing in [MONTH][YEAR].
Any installment of interest and principal, if any, or any other amount, payable on this Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name this Note is registered on the Record Date, by check mailed first-class, postage prepaid to such Person’s address as it appears on the Note Register on such Record Date, (i) except that with respect to Notes registered on the Record Date in the name of the nominee of the Depository (initially, such nominee to be Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by such nominee, and (ii) except for (A) the final installment of principal payable with respect to this Note on a Payment Date and (B) the redemption price for this Note called for redemption pursuant to Section 12.01 of the Indenture, in each case shall be payable as set forth below. All reductions in the principal amount of this Note effected by any payments of installments of principal made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not such payment is noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will provide notice of the termination as provided in the Indenture and this Note shall be entitled to the final payment only upon presentation and surrender of this Note at the Indenture Trustee’s principal Corporate Trust Office. On any payment of interest or principal being made, details of such payment shall be entered by the Indenture Trustee on behalf of the Issuer in Schedule A hereto.
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The principal amount of this Note, to the extent not previously paid, shall be due and payable on the Term Note Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount of this Note may be due and payable, if not previously paid, on the date on which an Event of Default described in Section 7.01 of the Indenture shall have occurred and be continuing, if the Notes have been declared immediately due and payable as provided in Section 7.02 of the Indenture.
This Note may not be redeemed or prepaid, except as provided in the Indenture. If this Note is prepaid prior to its Term Note Amortization Date, the Issuer shall remit to the Collection Account an amount equal to the applicable Optional Redemption Amount. If this Note is prepaid after its related Term Note Amortization Date, the Issuer shall remit to the Collection Account an amount equal to the Outstanding Principal Amount of such Term Note as of the Optional Redemption Date, plus all interest accrued and unpaid as of such Optional Redemption Date.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.
On any redemption, purchase, exchange or cancellation of any of the Notes represented by this Permanent Regulation S Global Note, details of such redemption, purchase, exchange or cancellation shall be entered by the Indenture Trustee in Schedule B hereto recording any such redemption, purchase, exchange or cancellation and shall be signed on, by or on behalf of the Issuer. Upon any such redemption, purchase, exchange or cancellation, the principal amount of this Permanent Regulation S Global Note and the Notes represented by this Permanent Regulation S Global Note shall be reduced or increased, as appropriate, by the principal amount so redeemed, purchased, exchanged or canceled.
Principal of, interest on and all other amounts payable on or in respect of this Note constitutes limited recourse obligations of the Issuer. The Holders of this Note has recourse to the Issuer only to the extent of the Collateral, and following realization of the Collateral, any claims of the Holders of this Note shall be extinguished and shall not revive thereafter. Neither the Issuer, nor any of its respective agents, members, partners, beneficiaries, officers, directors, employees or any Affiliate of any of them or any of their respective successors or assigns or any other Person or entity shall be personally liable for any amounts payable, or performance due, under this Note or the Indenture. It is understood that the foregoing provisions of this paragraph shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is secured by the Collateral, or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture until such Collateral has been realized whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this paragraph shall not limit the right of any Person to name the Issuer as party defendant in any action, suit or in the exercise of any other remedy under this Note or in the Indenture, so long as no judgment in the nature of a
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deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against the Issuer.
The Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and the Note Registrar and any agent of the foregoing may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Note Registrar nor any such agent of the foregoing shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of this Note under the Indenture at any time by the Issuer pursuant to Section 10.01 and Section 10.02 of the Indenture.
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.
This Note is issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the Indenture Trustee in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission
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to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purpose of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture the Holder shall have no claim against any of the entities described in the first sentence of this paragraph for any deficiency, loss or claim therefrom; provided , however , that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the Collateral pledged by the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.
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Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
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(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.
Dated: |
* Signature Guaranteed: |
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* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.
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PART I
INTEREST PAYMENTS
Interest Payment Date |
Date of Payment |
Total Amount of Interest Payable |
Amount of Interest Paid |
Confirmation of payment by or on behalf of the Issuer |
[__], 20[__] |
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[__], 20[__] |
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[continue numbering until the appropriate number of interest payment dates for this Note is reached]
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PRINCIPAL PAYMENTS
Principal Payment Date |
Total Amount Payable |
Total Amount Paid |
Confirmation of payment by or on behalf of the Issuer |
[__], 20[__] |
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[__], 20[__] |
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[continue numbering until the appropriate number of installment dates for this Note is reached]
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SCHEDULE OF EXCHANGES OR REDEMPTIONS OR PURCHASES AND
CANCELLATIONS
The following increases or decreases in principal amount of this Note, or redemptions, purchases or cancellations of this Note have been made:
Date of exchange, or redemption or purchase or cancellation |
Increase or decrease in principal amount of this Note due to exchanges |
Remaining principal amount of this Note following such exchange, or redemption or purchase or cancellation |
Notation made by or on behalf of the Issuer |
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[FORM OF] CERTIFICATION TO BE GIVEN BY
HOLDER OF BENEFICIAL INTEREST IN A
TEMPORARY REGULATION S GLOBAL NOTE
(Pursuant to
Section 3.09(b)
of the Indenture)
Re: |
EFR 2016-1, LLC [NAME OF SECURITY] |
[Euroclear Bank S.A./N.V., as operator of the Euroclear
System] [Clearstream, Luxembourg, société anonyme]
Notes, CINS No.__________________ ISIN No.____________
Reference is hereby made to the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), by and between EFR 2016-1, LLC, as Issuer (the “ Issuer ”) and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”). Capitalized terms used herein and not otherwise defined have the meanings set forth in Appendix A to the Indenture.
[For purposes of acquiring a beneficial interest in the Permanent Regulation S Global Note upon the expiration of the Distribution Compliance Period,] [For purposes of receiving payments under the Temporary Regulation S Global Note,*] the undersigned holder of a beneficial interest in the Temporary Regulation S Global Note issued under the Indenture certifies that (a) it is not a U.S. person as defined by Regulation S under the Securities Act and (b) it is an accredited investor as defined in any of paragraphs (1), (2), (3) and (7) of Rule 501(a) of Regulation D under the Securities Act and any entity in which all of the equity owners of such holder come within such paragraphs.
We undertake to advise you promptly by telex on or prior to the date on which you intend to submit your corresponding certification relating to the Notes held by you if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certificate applies as of such date.
We understand that this certificate is required in connection with certain securities laws of the United States of America. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate to any interested party in such proceedings. This certificate and the statements contained herein are made for your benefit and the health of the Issuer and the Noteholders.
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* Select, as applicable.
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Dated:_________________________, ____ |
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By: as, or as agent for, the holder of a beneficial interest in the Notes to which this certificate relates. |
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[FORM OF] EUROCLEAR AND CLEARSTREAM CERTIFICATE
(Pursuant to Section 3.08(b) of the Indenture)
Re: |
EFR 2016-1, LLC [NAME OF SECURITY] |
Bankers Trust Company,
as Indenture Trustee
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This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount of the Notes set forth below (our “ Member Organizations ”) substantially to the effect set forth in the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), EFR 2016-1, LLC, as Issuer (the “ Issuer ”) and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”), U.S. $_________principal amount of the above-captioned Notes held by us or on our behalf are beneficially owned by non-U.S. person(s). As used in this paragraph, the term “U.S. person” has the meaning given to it by Regulation S under the United States Securities Act.
We further certify that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any interest in the Notes identified above are no longer true and cannot be relied upon as of the date hereof.
[On Exchange Date: We hereby acknowledge that no portion of the Temporary Regulation S Global Note shall be exchanged for an interest in the Permanent Regulation S Global Note (as each such term is defined in the Indenture) with respect to the portion thereof for which we have not received the applicable certifications from our Member Organizations.]*
[On________________ and upon any other payments under the Temporary Regulation S Global Note: We hereby agree to hold (and return to the [ ] upon request) any payments received by us on the Temporary Regulation S Global Note (as defined in the Indenture) with respect to the portion thereof for which we have not received the applicable certifications from our Member Organizations.]*
We understand that this certification is required in connection with certain securities laws of the United States of America. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings.
Dated:__________________**
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Operator of the Euroclear System
or
Clearstream, Luxembourg, société anonyme]
By: Name: Title: |
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DEFINITIONS/RULES OF CONSTRUCTION/NOTICE INFORMATION
Appendix A-1
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PART I. Definitions
When used in the Transaction Documents, unless otherwise defined therein, the following words and phrases shall have the following meanings:
“ Accession Agreement ” shall mean an Accession Agreement to the Intercreditor Agreement, executed by and among Enova, the Intercreditor Agent and the new party to be joined to the Intercreditor Agreement.
“ Account Holder ” shall mean CNU, together with its successors and permitted assigns, in its capacity as such under and pursuant to the terms of the Intercreditor Agreement.
“ ACH Sweep Account ” shall mean either (i) an account established at Green Bank bearing the account number ***, which is held by the Indenture Trustee on behalf of the Noteholders, and which is subject to an ACH Sweep Blocked Account Control Agreement, and for which an Obligor shall be directed to remit all ACH payments, if applicable, under its applicable Contract, or (ii) an account established at North American Bank bearing the account number ***, which is held by the Indenture Trustee on behalf of the Noteholders, and which is subject to an ACH Sweep Blocked Account Control Agreement, and for which an Obligor shall be directed to remit all ACH payments, if applicable, under its applicable Contract.
“ ACH Sweep Blocked Account Control Agreement ” shall mean either (i) the Blocked Account Control Agreement, dated as of December 14, 2016, by and among Enova, the Indenture Trustee and Green Bank, as the depositary bank or (ii) the Blocked Account Control Agreement, by and among Enova, the Indenture Trustee and North American Bank, as the depositary bank, to be effective and dated prior to the date that any Collections may be deposited into the ACH Sweep Account bearing account number ***.
“ Act ” when used with respect to any Noteholder, shall have the meaning specified in Section 1.04(a) of the Indenture.
“ Action ” when used with respect to any Noteholder, shall have the meaning specified in Section 1.04(a) of the Indenture.
“ Additional Advance Fee ” shall mean, with respect to each Requested Advance in excess of twice per calendar week, $***.
“ Administrative Agent ” shall mean Jefferies.
“ Administrative Fee ” shall mean $*** per month, plus any Additional Advance Fee (if applicable).
“ Advance ” shall have the meaning specified in Section 2.04(d) of the Note Purchase Agreement.
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“ Advance Conditions ” shall mean, with respect to any Requested Advance (unless otherwise specified) to be made under the Note Purchase Agreement, the condition that each of the following shall be satisfied:
(a) the Funding Period Termination Date have not have occurred;
(b) no Event of Default shall have occurred and be continuing;
(c) the Issuer shall deliver, or shall cause to be delivered, to the Administrative Agent, with a copy to each Variable Funding Note Noteholder, an executed Funding Request no later than 12:00 p.m., New York City time, two (2) Business Days prior the proposed Advance Date, and the certifications made therein shall be true and correct in all material respects;
(d) the Issuer shall deliver, or shall cause to be delivered, to each Variable Funding Note Noteholder, a Borrowing Base Certificate no later than two (2) Business Days prior to the proposed Advance Date;
(e) the Issuer shall deliver, or shall cause to be delivered, an Officer’s Certificate to the Administrative Agent certifying (i) that the Issuer is in full compliance with the provisions of the Transaction Documents to which it is a party and (ii) that as of the Advance Date all of the Advance Conditions (save this clause (e)(ii)) have been satisfied;
(f) the Master Servicer shall deliver an Officer’s Certificate to the Administrative Agent certifying that the Receivable Files relating to the Eligible Receivables to be pledged in connection with such Advance are complete;
(g) no later than two (2) Business Days prior to the proposed Advance Date, the Master Servicer shall deliver, or otherwise make available, imaged copies of the Verifiable Collateral Documents to the Verification Agent;
(h) the Verification Agent shall deliver an Officer’s Certificate to the Administrative Agent verifying the imaged copies of the Verifiable Collateral Documents;
(i) each Requested Advance shall be in an amount of at least $500,000; and
(j) as of the Advance Date, the LTV for any Term Note (as of its most recent Payment Date), is not higher than the LTV for such Term Note as of its respective Conversion Date.
“ Advance Date ” shall be any Business Day specified in the related Funding Request and shall be the date on which the Variable Funding Note Noteholders fund a Requested Advance.
“ Advance Date Receivables Schedule ” shall have the meaning set forth in Section 9.02(a) of the Servicing Agreement.
“ Affiliate ” shall mean, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” shall mean the power (a) to vote 10% or more of the securities having
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ordinary voting power for the election of directors of such Person or (b) to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“ Aggregate Collateral Performance ” shall mean (i) the Aggregate Cumulative Delinquency Ratio and (ii) the percentage of the aggregate Outstanding Principal Amount of the Notes that have been subject to a breach of an Investment Pool Collateral Performance Trigger, in each case as of the last day of each Collection Period and as reported to the Administrative Agent on each Reporting Date.
“ Aggregate Cumulative Delinquency Ratio ” shall mean, as of any date of determination, the percentage equivalent of a fraction, the numerator of which is equal to (i) the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables (for the avoidance of doubt, in determining the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables, this shall include the aggregate Outstanding Receivable Principal Balance of any and all Delinquent Receivables repurchased by the Transferor at its option pursuant to Section 2.5 of the Sale Agreement), and the denominator of which is equal to (ii) the aggregate Outstanding Receivable Principal Balance of all Eligible Receivables.
“ Aggregate Cumulative Delinquency Trigger ” shall occur with respect to a Collection Period in the event that the Aggregate Cumulative Delinquency Ratio on the last day of a Collection Period is greater than ***%.
“ Aggregate Original Receivable Principal Balance ” shall mean, as of any date of determination, the sum of the Original Receivable Principal Balances of all Eligible Receivables sold to the Issuer through such date.
“ Agreement ” shall have, with respect to any Transaction Document, the meaning set forth in the preamble thereto.
“ Amortization Date ” shall mean any Term Note Amortization Date or the Variable Funding Note Amortization Date.
“ Annual Percentage Rate ” shall mean, with respect to a Receivable, the annual rate of finance charges stated in the Contract related to such Receivable.
“ Asset Servicer ” shall mean, at any time, each Person then appointed as such pursuant to Section 2.01 of the Servicing Agreement or by virtue of a Joinder Supplement, together with its successors and permitted assigns in such capacity. The initial Asset Servicer shall be NCLS.
“ Asset Servicer Default ” shall have the meaning set forth in Section 8.02 of the Servicing Agreement.
“ Asset Servicer Termination Date ” shall have the meaning set forth in Section 2.01(a) of the Servicing Agreement.
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“ Asset Servicer Termination Notice Date ” shall have the meaning set forth in Section 8.04(b) of the Servicing Agreement.
“ Audit ” shall have the meaning specified in Section 3.04(a) of the Servicing Agreement.
“ Authenticating Agent ” shall mean any Person authorized by the Indenture Trustee to authenticate Notes under Section 8.14 of the Indenture.
“ Authorized Officer ” shall mean, with respect to any specified Person, the chief executive officer, the president, the secretary, the chief financial officer, the chief investment officer or any vice president of such Person.
“ Average Maximum Variable Funding Note Commitment ” shall mean for all of the Variable Funding Notes and any Interest Period, the sum of the Variable Funding Note Maximum Principal Amount as in effect on each day in such Interest Period divided by the number of calendar days elapsed in such Interest Period.
“ Average Variable Funding Note Balance ” shall mean for all of the Variable Funding Notes and any Interest Period, the sum of the Outstanding Principal Amount of all such Variable Funding Notes on each day in such Interest Period divided by the number of calendar days elapsed in such Interest Period.
“ Backup Servicer ” shall mean First Associates, or any independent third party selected by the Master Servicer, with the consent of the Majority Holders, in their reasonable discretion, to perform monitoring functions with respect to the Serviced Receivables.
“ Backup Servicing Agreement ” shall mean that certain Backup Servicing Agreement, dated as of January 15, 2016 (as amended, restated, supplemented or otherwise modified from time to time), among the Backup Servicer, the Master Servicer, the Asset Servicers, the Transferor, the Verification Agent and the Issuer.
“ Backup Servicing Fee ” shall have the meaning specified in Section 4 the Backup Servicing Agreement.
“ Bank Originated Receivable ” shall have the meaning specified in Section 6.14 of the Receivables Purchase Agreement.
“ Bank Originator ” shall have the meaning specified in Section 6.14 of the Receivables Purchase Agreement.
“ Bank Originator Credit Policy ” shall mean the credit policies and procedures of the Bank Originators that are substantially consistent with the Credit Policy.
“ Bank Originator Sale Agreement ” shall have the meaning specified in Section 6.14 of the Receivables Purchase Agreement.
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“ Bank Secrecy Act ” shall mean the Currency and Foreign Transactions Reporting Act of 1970, 84 Stat. 1114-2.
“ Bankers Trust ” shall mean Bankers Trust Company, an Iowa banking corporation.
“ Benefit Plan ” shall mean an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to the provisions of Title I of ERISA, a “plan” described in and subject to Section 4975 of the Code, or an entity whose underlying assets include “plan assets” by reason of an employee benefit plan’s or plan’s investment in the entity.
“ Blocked Account Control Agreement ” shall mean any of (a) the Blocked Account Control Agreement, dated as of December 14, 2016 (as amended, restated, supplemented or otherwise modified from time to time), by and among the Intercreditor Agent, the Account Holder and Green Bank, as the depositary bank, (b) any ACH Sweep Blocked Account Control Agreement, or (c) any blocked account control agreement, by and among the Intercreditor Agent, the relevant account holder and the depositary bank where the related account is held, which is in form and substance reasonably acceptable to the Majority Holders.
“ Book-Entry System ” shall have the meaning specified in Section 3.05 of the Indenture.
“ Borrowing Base Certificate ” shall mean a certificate, in the form set forth in Exhibit D to the Indenture or otherwise in a form satisfactory to the Variable Funding Note Noteholders, which the Issuer shall deliver or cause to be delivered to the Variable Funding Note Noteholders, which (i) sets forth the calculation of the Variable Funding Note Borrowing Base (including a calculation of each component thereof) as of the related Cutoff Date, (ii) reflects the Receivables sold to the Issuer in connection with the related Requested Advance, (iii) sets forth the Excess Concentration Limits, the Eligibility Criteria, the Outstanding Principal Amount of the Notes and the Maximum Principal Amount and (iv) certifies the accuracy and completeness of all information included therein.
“ Business Day ” shall mean any day other than (a) a Saturday or Sunday or (b) any other day on which national banking associations or state banking institutions in New York, New York, Des Moines, Iowa or any other state in which the principal executive office of the Corporate Trust Office is located, are authorized or are obligated by law, executive order or governmental decree to be closed.
“ Capital Stock ” shall mean, as to any Person, the equity interests in such Person, including the shares of each class of capital stock in any Person that is a corporation, each class of partnership interest in any Person that is a partnership, and each class of membership interest in any Person that is a limited liability company, and any right to subscribe for or otherwise acquire any such equity interests.
“ Cash Equivalents ” shall mean, as of any date of determination, (a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government, or (ii) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one (1) year after such date, (b) marketable direct obligations issued by any state of the United States
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of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one (1) year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s, (c) commercial paper maturing no more than one (1) year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit or bankers’ acceptances maturing within one (1) year after such date and issued or accepted by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (i) is at least “adequately capitalized” (as defined in the regulations of its primary Federal banking regulator), and (ii) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (e) shares of any money market mutual fund that (i) has all or substantially all of its assets invested continuously in the types of investments referred to in clauses (a) and (b) above, (ii) has net assets of not less than $500,000,000, and (iii) has the highest rating obtainable from either S&P or Moody’s.
“ Certificate of Authentication ” shall mean the certificate of authentication of the Indenture Trustee, the form of which is described in Section 3.03 of the Indenture or the alternative certificate of authentication of the Authenticating Agent, the form of which is described in Section 8.14 of the Indenture.
“ Certificate of Term Note Owner ” shall mean a certificate substantially in the form of Exhibit F to the Indenture.
“ Certificate of Variable Funding Note Noteholder ” shall mean a certificate substantially in the form of Exhibit E to the Indenture.
“ Change of Control ” shall mean, with respect to (i) any of the Transferor, the Issuer or the Master Servicer failing to be a wholly owned, direct or indirect, Subsidiary of Enova and (ii) with respect to Enova, an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of Enova or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of 50% or more of the equity securities of Enova entitled to vote for members of the board of directors or equivalent governing body of Enova on a fully-diluted basis.
“ Charged-Off Receivable ” shall mean any Receivable which is *** or more days past due or which has otherwise been charged-off or deemed uncollectible by the Issuer or the applicable Asset Servicer in accordance with the Servicing Policy (including because of fraud or the Obligor becoming the subject of a proceeding under any debtor relief law), as applicable.
“ Clearing Agency Custodian ” shall mean the entity maintaining possession of the Global Notes for the Depository.
“ Clearstream ” shall mean Clearstream, Luxembourg, société anonyme, a professional depository incorporated under the laws of Luxembourg, and its successors and permitted assigns in such capacity.
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“ Closing ” shall have the meaning specified in Section 3.01 of the Note Purchase Agreement.
“ Closing Date ” shall mean October 20, 2017.
“ Closing Date Material Adverse Change ” shall mean a material adverse change in (a) the business operations, assets, condition (financial or otherwise), liabilities of the Issuer or any Enova Entity since September 30, 2017, (b) the ability of the Issuer or any Enova Entity to fully and timely perform its material obligations under any of the Transaction Documents to which it is a party, or (c) the legality, validity, binding effect, or enforceability against the Issuer or any Enova Entity of the Transaction Documents.
“ CNU ” shall mean CNU Online Holdings, LLC, a Delaware limited liability company.
“ Collateral ” shall have the meaning specified in the Granting Clause of the Indenture.
“ Collection Account ” shall have the meaning specified in Section 5.02(a) of the Indenture.
“ Collection Period ” shall mean, with respect to each Payment Date, the period from and including the first day of the calendar month immediately preceding such Payment Date to and including the last day of such calendar month; provided , however , that the initial Collection Period for the Initial Term Note Investment Pool and the Variable Funding Note Investment Pool shall be from the Closing Date to and including November 30, 2017; and, provided further , that with respect to a Variable Funding Note (i) the initial Collection Period within a Quarterly Revolving Period (other than the initial Collection Period described in the proviso above) shall be the period from and including the applicable Conversion Date to and including the last day of the calendar month occurring approximately thirty days after the Conversion Date (e.g., if the Conversion Date occurs on the last day of a calendar month, then the last day of the calendar month following the month in which the Conversion Date occurs and if the Conversion Date is the first Business Day of a calendar month, then the last day of the calendar month in which such Conversion Date occurs), and (ii) and with respect to the final Variable Funding Note Payment Date with respect to a Quarterly Revolving Period, (a) if the Conversion Date is on the last day of a calendar month, then the period from and including the first day of the calendar month to and excluding the last day of the calendar month immediately preceding the Payment Date, and (b) if the Conversion Date is on the first Business Day of a calendar month, then the period from and including the first day of the calendar month immediately preceding such Payment Date to and excluding the date on which such Conversion Date occurs.
“ Collection Receipt Accounts ” shall mean the accounts (1) bearing account number ***, held by the Account Holder on behalf of the Master Servicer at Green Bank, and (2) any other account designated by Master Servicer in a notice to the Noteholders as an account into which Collections may be deposited, each of which shall (prior to, and as a condition precedent to, any amounts being deposited therein) be subject to a Blocked Account Control Agreement and the Intercreditor Agreement, and for which the Obligor may (once such account is subject to a Blocked
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Account Control Agreement and the Intercreditor Agreement) remit all payments under its applicable Contract other than ACH payments, which shall be remitted to an ACH Sweep Account.
“ Collections ” shall mean all cash collections received in respect of the Receivables, including all Scheduled Receivable Payments, all non-scheduled payments, all prepayments, all late fees, all other fees, Net Insurance Proceeds, all Net Liquidation Proceeds, Optional Redemption Amounts, investment earnings, residual proceeds, payments received under any personal guaranty with respect to such Receivables and all other payments received with respect to such Receivables.
“ Commodity Exchange Act ” shall mean the Commodity Exchange Act of 1936.
“ Competitor ” shall mean those persons that are competitors of any Enova Entity to the extent identified by name in writing in a list provided by Enova to the Administrative Agent on October 19, 2017 (as such list may be updated from time to time to the extent agreed to and approved by the Administrative Agent (acting in good faith)), and any subsidiaries of such persons.
“ Consolidated Subsidiaries ” shall mean, as of any date of determination, all Subsidiaries of Enova which are included in the consolidated financial statements of Enova.
“ Consumer Laws ” shall mean all federal, state and local consumer credit laws, collection agency laws, fair trading or fair dealing laws, laws relating to privacy and confidential information and all other consumer protection laws relating to the conduct of the business of an Asset Servicer, laws requiring the licensing or registration of sale finance companies, loan companies, lenders or collection agencies or collection agents or any assignee of the foregoing, and any rules, regulations or interpretations of the foregoing laws.
“ Contract ” shall mean a small consumer loan agreement, customer loan agreement, consumer installment loan agreement or promissory note, relating to a fixed rate, fully amortizing, unsecured installment loan made to an Obligor and originated or acquired by the Seller or a Bank Originator.
“ Conversion Date ” shall mean each of the following dates: (a) January 2, 2018, (b) April 2, 2018, (c) July 2, 2018, (d) October 1, 2018, (e) December 31, 2018 or (f) April 1, 2019, as applicable, and (ii) the Funding Period Termination Date if it occurs earlier than any of the applicable dates described in clause (i) above.
“ Corporate Trust Office ” shall mean the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of the Indenture is located at 453 7 th Street, Des Moines, IA 50309, Attention: EFR 2016-1, LLC, or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer or the principal corporate trust office of any successor Indenture Trustee (the address of which the successor Indenture Trustee will notify the Noteholders and the Issuer).
“ Credit Agreement ” shall mean that certain Credit Agreement, dated as of June 30, 2017, by and among Enova, certain of its Subsidiaries, the lenders party thereto from time to time
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and TBK Bank, SSB, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
“ Credit Counseling Receivable ” shall have the meaning specified in Section 2.02(d)(ix) of the Servicing Agreement.
“ Credit Policy ” or “ Credit Policies ” shall mean (i) the credit policies and practices and underwriting guidelines of the Seller and the Originators that are attached as Appendix B-1 to the Receivables Purchase Agreement and (ii) the Bank Originator Credit Policy, which may be attached as Appendix B-2 to the Receivables Purchase Agreement pursuant to Section 6.14 thereof, in each case as either such policy or both such policies may be amended, modified or supplemented from time to time in compliance with the Receivables Purchase Agreement.
“ Credit Risk Retention Rules ” shall have the meaning specified in Section 5.07 of the Note Purchase Agreement.
“ Cumulative Net Losses ” shall mean, as of any date of determination and with respect to any Investment Pool, the excess of (a) the aggregate Outstanding Receivable Principal Balance of all Charged-Off Receivables (for the avoidance of doubt, in determining the aggregate Outstanding Receivable Principal Balance of all Charged-Off Receivables, this shall include the aggregate Outstanding Receivable Principal Balance of any and all Charged-Off Receivables repurchased by the Transferor at its option pursuant to Section 2.5 of the Sale Agreement), over (b) all Net Liquidation Proceeds received on or prior to such date with respect to such Investment Pool.
“ Custodian ” shall mean, at any time, the Person then appointed as such pursuant to Section 9.01 of the Servicing Agreement, which shall initially be NCLS.
“ Cutoff Date ” shall mean with respect to any Receivables, the date specified as the “Cutoff Date” of such Receivables in the applicable First Step Assignment or Second Step Assignment.
“ Daily Data File ” shall mean the daily data file delivered to the Backup Servicer pursuant to Section 2.06 of the Servicing Agreement, substantially in the form set forth in Exhibit E to the Servicing Agreement.
“ Daily Remittance Report ” shall mean a report of the Master Servicer, in a form approved by the Majority Holders, that, with respect to each Collection Receipt Account and each ACH Sweep Account, shall be delivered on each Business Day and that shall (i) specify the amount of Collections received in each Collection Receipt Account and ACH Sweep Account, as applicable, on the receipt date specified in such report, (ii) specify the amount of Collections transferred from each Collection Receipt Account and each ACH Sweep Account as applicable, to the Collection Account on the Business Day on which such report is delivered and (iii) reconcile any difference between the amount described in the preceding clauses (i) and (ii).
“ Debtor Relief Laws ” shall mean (a) the Federal Bankruptcy Code and (b) all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, readjustment of debt, marshalling of assets,
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assignment for the benefit of creditors and similar debtor relief laws from time to time in effect in any jurisdiction affecting the rights of creditors generally or the right of creditors of banks.
“ Delinquent Receivable ” shall mean any Eligible Receivable which is *** to *** days past due and is not a Charged-Off Receivable; provided, that, any Receivable that is subject to a Permitted Modification, as described in clause (iv) of such definition, shall not be a Delinquent Receivable until such Receivable becomes past due following its updated scheduled payment date and at such time the days past due shall be calculated as of the corresponding original due date. However, if a Payment Deferral is effected for an otherwise Delinquent Receivable, the Payment Deferral shall not cure or stay the loan delinquency status upon the Payment Deferral being effected.
“ Defaulting Variable Funding Note Noteholder ” shall mean any Variable Funding Note Noteholder, as reasonably determined by the Issuer, that has (a) failed, within two Business Days of the date required to be funded by it under the Note Purchase Agreement, to fund its portion of any Advance when required thereunder, (b) notified the Issuer, the Master Servicer, the Administrative Agent, or any Noteholder in writing that it does not intend to comply with all or part of its funding obligations under the Note Purchase Agreement, (c) otherwise failed to pay over to the Administrative Agent or any other Noteholder any amount required to be paid by it under the Note Purchase Agreement within three Business Days of the date when due, or (d) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided , that a Variable Funding Note Noteholder shall not be a Defaulting Variable Funding Note Noteholder under clause (d) above solely by virtue of the ownership or acquisition of any ownership interest in such Variable Funding Note Noteholder or a parent company thereof or the exercise of control over a Variable Funding Note Noteholder or parent company thereof by a Governmental Authority or instrumentality thereof; provided , however , that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any agreements made by such Person.
“ Deliver ” or “ Delivery ” shall mean the taking of the following steps by the Issuer:
(a) with respect to such of the Collateral as constitutes an instrument, causing the Indenture Trustee, or the Custodian on its behalf, to take possession in the State of Iowa of such instrument, indorsed to the Indenture Trustee or in blank by an effective indorsement;
(b) with respect to such of the Collateral as constitutes tangible chattel paper, goods, a negotiable document, or money, causing the Indenture Trustee or the Custodian on its behalf, to take possession in the State of Iowa of such tangible chattel paper, goods, negotiable document, or money;
(c) with respect to such of the Collateral as constitutes a certificated security in bearer form, causing the Indenture Trustee or the Custodian on its behalf, to acquire possession in the State of Iowa of the related security certificate;
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(d) with respect to such of the Collateral as constitutes a certificated security in registered form, causing the Indenture Trustee or the Custodian on its behalf, to acquire possession in the State of Iowa of the related security certificate, indorsed to the Indenture Trustee or in blank by an effective indorsement, or registered in the name of the Indenture Trustee, upon original issue or registration of transfer by the issuer of such certificated security;
(e) with respect to such of the Collateral as constitutes an uncertificated security, causing the issuer of such uncertificated security to register the Indenture Trustee as the registered owner of such uncertificated security;
(f) with respect to such of the Collateral as constitutes a security entitlement, causing the Securities Intermediary to indicate by book entry that the financial asset relating to such security entitlement has been credited to the Collection Account;
(g) with respect to such of the Collateral as constitutes a deposit account, causing such deposit account to be maintained in the name of the Indenture Trustee and causing the bank with which such deposit account is maintained to agree with the Indenture Trustee and the Issuer that (i) such bank will comply with instructions originated by the Indenture Trustee directing disposition of the funds in such deposit account without further consent of any other person or entity, (ii) such bank will not agree with any person or entity other than the Indenture Trustee to comply with instructions originated by any person or entity other than the Indenture Trustee, (iii) such deposit account and the property credited thereto will not be subject to any lien, security interest, encumbrance, or right of set-off in favor of such bank, other than those for ordinary fees and expenses and for reimbursement of returned items, (iv) such agreement will be governed by the laws of the State of New York, and (v) the State of New York will be the bank’s jurisdiction of such bank for purposes of Article 9 of the New York UCC;
(h) with respect to any other Collateral, causing to be filed with the Secretary of State of the State of Delaware a properly completed UCC financing statement that names the Issuer as debtor and the Indenture Trustee as secured party and that covers such Collateral; or
(i) in the case of each of paragraphs (a) through (h) above, such additional or alternative procedures as may hereafter become appropriate to grant a first priority perfected security interest in such items of the Collateral to the Indenture Trustee, consistent with applicable law or regulations.
In each case of Delivery pursuant to paragraphs (f) or (g), the Indenture Trustee is directed by the Issuer to enter into and execute all agreements necessary to accomplish Delivery. The Indenture Trustee shall make appropriate notations on its records indicating that each item of the Collateral is held by the Indenture Trustee pursuant to and as provided in the Indenture.
Effective upon Delivery of any item of the Collateral, the Indenture Trustee shall be deemed to have acknowledged that it holds such item of the Collateral as Indenture Trustee for the benefit of the Noteholders. Any additional or alternative procedures for accomplishing “Delivery” for purposes of paragraph (i) of this definition shall be permitted only upon delivery to the Indenture Trustee of an Opinion of Counsel to the effect that such procedures are appropriate
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to grant a first priority perfected security interest in the applicable type of collateral to the Indenture Trustee.
“ Depository ” shall mean, with respect to any Note issuable or issued as a Global Note, an organization registered as a “clearing agency” pursuant to the Securities Exchange Act or other applicable statute or regulation. The Initial Depository shall be DTC.
“ Distribution Compliance Period ” shall mean, with respect to each Quarterly Term Note, the period commencing on the Conversion Date for such Quarterly Term Note and ending on the fortieth .(40 th ) day following such Conversion Date.
“ Dollar ,” “ $ ” or “ U.S. $ ” shall mean lawful money of the United States.
“ DTC ” shall mean The Depository Trust Company, New York, New York, or any successor thereto registered as a clearing agency under the Securities Exchange Act.
“ Due Date Adjustment ” shall mean, with respect to a Serviced Receivable and a related Obligor, the reset of an Obligor Due Date, so long as the reset Obligor Due Date is after the corresponding original due date and not later than the next scheduled Obligor Due Date specified in the related Serviced Receivable; provided that if such Serviced Receivable is subject to a Payment Deferral, such Serviced Receivable shall not be considered to be subject to a Due Date Adjustment.
“ DWAC ” shall have the meaning specified in Section 3.09 of the Indenture.
“ EBITDA ” shall mean, with respect to any period, (a) Net Income for such period, plus (b) without duplication and to the extent deducted in determining Net Income for such period in accordance with GAAP, (i) Interest Expense for such period, (ii) federal, state, local and foreign income and franchise taxes of Enova and its Consolidated Subsidiaries for such period, (iii) depreciation and amortization expenses of Enova and its Consolidated Subsidiaries for such period and other non-cash charges of Enova and its Consolidated Subsidiaries, (iv) extraordinary, unusual or non-recurring charges, expenses or losses and related tax effects, (v) non-cash charges, expenses or losses, including any non-cash asset retirement costs, non-cash compensation charges including stock option and other equity-based compensation expenses, non-cash translation (gain) loss and non-cash expense relating to the vesting of warrants for such period, (vi) restructuring costs, integration costs, costs of strategic initiatives, business optimization expenses or costs, retention, recruiting, relocation and signing and stay bonuses and expenses, facility opening, pre-opening and closing and consolidation costs, contract termination costs, stock option and other equity-based compensation expenses, severance costs, transaction fees and expenses and management, monitoring, consulting and advisory fees, indemnities and expenses, including any one time expense relating to enhanced accounting function or other transaction costs for such period, (vii) such other adjustments evidenced by or contained in a due diligence quality of earnings report prepared by an accounting firm, or (z) consistent with Regulation S-X, (viii) other accruals, payments and expenses (including rationalization, legal, tax, structuring and other costs and expenses) related to acquisitions, investments, dividends, restricted payments, dispositions, refinancings or issuances of debt for such period, (ix) charges, losses or expenses to the extent paid for, reimbursed, indemnified or insured by a third party (solely to the extent actually paid or
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reimbursed within 365 days after the end of such period) for such period, (x) minority interest expense for such period, (xi) the amount of costs incurred related to implementation of operational and reporting systems and technology initiatives for such period, (xii) letter of credit fees, (xiii) net increases (decreases) in deferred revenue liabilities (including the current portion thereof), (xiv) charges relating to earn-out obligations incurred in connection with any acquisition which earn-out obligation is required by the application of Financial Accounting Standard No. 141 (as the same may be revised by the Financial Accounting Standards Board) to be, and are, expensed by Enova and its Consolidated Subsidiaries, (xv) losses arising from fluctuations in foreign currency exchange rates for such period, (xvi) any non-cash increase in expenses (x) resulting from the revaluation of inventory (including any impact of changes to inventory valuation policy methods including changes in capitalization of variances) or other inventory adjustments, or any other acquisition for such period or (y) due to purchase accounting for such period, (xvii) ordinary course board of director fees and expenses, and (xviii) losses from the sale, exchange, transfer or other disposition of property not in the ordinary course of business of Enova and any of its Consolidated Subsidiaries and related tax effects from such losses as determined in accordance with GAAP; provided, however, that amounts paid in cash and added back pursuant to clauses (iv), (vi), (vii), (viii), (ix), and (xi) hereof shall in the aggregate not exceed 10% of EBITDA (for Enova and its Consolidated Subsidiaries) for such period, minus (c) without duplication and to the extent included in determining Net Income for such period, any extraordinary gains and extraordinary non-cash credits of Enova and its Subsidiaries for such period.
“ Eligibility Criteria ” shall mean the criteria set forth on Appendix A of the Receivables Purchase Agreement.
“ Eligible Conversion Receivable ” shall mean, as of any date of determination, a Receivable with respect to which (i) the Eligibility Criteria are satisfied, (ii) is not an Excluded Receivable and (iii) no Scheduled Receivable Payment is more than twenty-nine (29) days past due, in each case, as of such date of determination.
“ Eligibility Date ” shall mean, with respect to any Receivable, each of (i) the date on which such Receivable was initially transferred to the Issuer and (ii) the Cutoff Date with respect to such Receivable.
“ Eligible Deposit Account ” shall mean either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states thereof, including the District of Columbia (or any domestic branch of a foreign bank), and acting as a trustee for funds deposited in such account.
“ Eligible Facility Receivable ” shall mean, as of any date of determination, a Receivable with respect to which (i) the Eligibility Criteria are satisfied, (ii) is not an Excluded Receivable and (iii) no Scheduled Receivable Payment is more than 59 days past due, in each case, as of such date of determination.
“ Eligible Institution ” shall mean a depository institution (which may be the Indenture Trustee or any Affiliate thereof) organized under the laws of the United States, any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank). If so
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qualified, the Master Servicer may be considered an Eligible Institution for the purposes of this definition.
“ Eligible Investments ” shall mean negotiable instruments, investment property, or deposit accounts which evidence:
(a) direct obligations of, or obligations fully guaranteed as to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit (having original maturities of no more than 365 days) of depository institutions or trust companies (including an affiliate of the Indenture Trustee) organized under the laws of the United States of America, any state thereof or the District of Columbia (or domestic branches of foreign banks) and subject to supervision and examination by federal or state banking or depository institution authorities; provided , that at the time of the investment or contractual commitment to invest therein, the short-term debt of such depository institution or trust company are rated by each of S&P and Moody’s in its highest rating category;
(c) commercial paper (having original or remaining maturities of no more than thirty (30) days), that shall be rated, at the time of the investment or contractual commitment to invest therein, by each of S&P and Moody’s in its highest rating category;
(d) demand deposits, time deposits and certificates of deposit which are fully insured by the FDIC;
(e) bankers’ acceptances (having original maturities of no more than 365 days) issued by any depository institution or trust company referred to in clause (b) above; or
(f) time deposits (having maturities not later than the Reporting Date) other than as referred to in clause (b) above, with a Person the commercial paper of which shall be rated by each of S&P and Moody’s in its highest rating category.
“ Eligible LMP Refinancing Receivable ” means an Eligible Refinancing Receivable as to which (i) the principal balance on the date such Eligible Refinancing Receivable was originated is the same as the Outstanding Receivable Principal Balance on such date of the applicable refinanced Serviced Receivable and (ii) the final scheduled maturity date is later than the final scheduled maturity date of the applicable refinanced Serviced Receivable.
“ Eligible Receivable ” shall mean a Receivable with respect to which the Eligibility Criteria are satisfied as of the applicable Eligibility Date; provided , however , that any Receivable which becomes an Excluded Receivable or a Charged-Off Receivable shall cease to constitute an Eligible Receivable.
“ Eligible Refinancing Receivable ” shall mean a Receivable that was (i) originated or underwritten pursuant to the Credit Policies and (ii) originated or acquired in connection with a Refinancing as to which the applicable refinanced Serviced Receivable’s status was current with no amount past due as of the date of such Refinancing.
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“ Enova ” shall mean Enova International, Inc., a Delaware corporation, together with its successors and permitted assigns.
“ Enova Entities ” shall mean each of Enova and each Subsidiary of Enova.
“ Enova Finance 5 ” shall mean Enova Finance 5, LLC, a Delaware limited liability company.
“ Enova Party ” shall mean each of Enova, CNU, NCLS, any Asset Servicer, Enova Finance 5, the Issuer and each Originator.
“ Entity ” shall mean any Person other than an individual or government (including any agency or political subdivision thereof).
“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974.
“ Euroclear ” shall mean Euroclear Bank S.A./N.V., as operator of the Euroclear System, and its successors and assigns in such capacity.
“ Event of Default ” shall have the meaning specified in Section 7.01 of the Indenture.
“ Excess Concentration Limits ” shall mean, as of the date indicated in such clause, the following limitations with respect to the Eligible Receivables on such date:
(a) with respect to Eligible Receivables that are included in the Variable Funding Note Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the related Conversion Date:
(1) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an Original Receivable Principal Balance of greater than $*** is less than or equal to ***%;
(2) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an original term to maturity greater than *** months is less than or equal to ***%;
(3) the weighted average *** Score of the Eligible Receivables is not less than ***;
(4) the weighted average annual percentage rate for the Eligible Receivables is not less than ***%;
(5) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivable that are Eligible Refinancing Receivables shall not exceed ***%;
(6) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that are Eligible LMP Refinancing Receivables shall not exceed ***%;
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(7) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that are Lower My Rate Receivables does not exceed ***%;
(b) with respect to Eligible Receivables that are included in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of Eligible Receivables with a *** Score of less than *** is less than ***% of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables;
(c) with respect to Eligible Receivables that are included in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of Eligible Receivables with a *** Score of less than *** is less than ***% of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables;
(d) with respect to Eligible Receivables that are included in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that relate to (a) an Eligible Receivable that has been the subject of a Payment Deferral that results in the new final scheduled maturity date of such Eligible Receivable to be more than 15 days after the theretofore final scheduled maturity date of such Eligible Receivable or (b) an Eligible Receivable that had its interest rate lowered for any reason other than compliance with the Servicemembers Civil Relief Act of 2003 in accordance with any section of the “Servicing Modifications” section of the Servicing Policy, is less than or equal to ***% of the aggregate Outstanding Receivable Principal Balance of all Eligible Receivables;
(e) with respect to Eligible Receivables in any Investment Pool, as of any date of determination, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivable that relate to an Ongoing Due Date Adjustment, shall be no greater than ***% of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables.
(f) with respect to Eligible Receivables in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that originate from the largest State on a percentage basis is less than or equal to ***% of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables and the Outstanding Receivable Principal Balance of such Eligible Receivables that originate from the sum of the two largest States on a percentage basis is less than or equal to ***% of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables; and
(g) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables of a Variable Funding Note Investment Pool are *** days delinquent shall not exceed ***% of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables.
In the event that a Receivable that would otherwise be an Eligible Receivable exceeds an Excess Concentration Limit, it shall be deemed an Excluded Receivable and will no longer be an Eligible Receivable for purposes of inclusion in the Outstanding Receivable Principal Balance of the related Variable Funding Note Investment Pool (prior to conversion to a Term Note), and the Transferor shall be entitled to repurchase any such Excluded Receivable pursuant to Section 2.5(c) of the Sale Agreement.
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“ Excess Receivables ” shall have the meaning set forth in Section 2.5(c) of the Sale Agreement.
“ Excess Receivables Purchase Date ” shall have the meaning set forth in Section 2.5(c) of the Sale Agreement.
“ Excess Receivables Purchase Price ” shall mean, with respect to any Excess Receivable and any date of determination, the sum of (a) an amount equal the Outstanding Receivable Principal Balance of such Excess Receivable, (b) all accrued and unpaid interest on the Outstanding Receivable Principal Balance of such Excess Receivable at the applicable Annual Percentage Rate related to such Excess Receivable through the date on which such Excess Receivable is purchased, and (c) all costs and expenses incurred by the Issuer and the Indenture Trustee in connection with the optional purchase of such Excess Receivable by the Transferor pursuant to Section 2.5(c) of the Sale Agreement.
“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.
“ Exchange Date ” shall mean the last day of the Distribution Compliance Period.
“ Excluded Receivable ” shall mean a Receivable ineligible for inclusion as an Eligible Receivable because it exceeds an Excess Concentration Limit, and, if so designated, may be repurchased by the Transferor pursuant to Section 2.5(c) of the Sale Agreement.
“ Excluded Taxes ” shall have the meaning set forth in Section 2.07(a) of the Note Purchase Agreement.
“ Executive Orders ” shall mean any legally binding orders given by the President of the United States, acting as the head of the executive branch thereof, to any United States federal administrative agencies.
“ Fair Valuation ” shall mean in respect of any entity the value of the consolidated assets of such entity on the basis of the amount which may be realized by a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to an interested buyer who is willing to purchase under ordinary selling conditions in an arm’s-length transaction.
“ FATCA ” shall have the meaning specified in Section 4.04(k) of the Indenture.
“ FATCA Administrator ” shall have the meaning specified in Section 5(d) of the Issuer LLC Agreement.
“ Federal Bankruptcy Code ” shall mean Title 11 of the United States Code.
“ Financial Trigger ” shall mean an event arising upon the occurrence of any of a Net Worth Trigger, a Liquidity Trigger or a Leverage Debt-to-Income Trigger.
“ First Associates ” shall mean First Associates Loan Servicing, LLC, a Delaware limited liability company.
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“ First Step Assignment ” shall mean a First Step Assignment from Seller to the Purchaser with respect to the Receivables and Other Conveyed Property to be conveyed by Seller to the Purchaser on any Purchase Date, in substantially the form of Exhibit A to the Receivables Purchase Agreement.
“ Fortress ” shall mean Fortress Credit Co LLC, a Delaware limited liability company.
“ FSLF ” shall mean FSLF ENV LLC, a Delaware limited liability company.
“ Funding Commitment ” shall mean, as to each Variable Funding Note Noteholder, the obligation of such Variable Funding Note Noteholder to fund its ratable share of Advances, on the Closing Date and on each Advance Date, up to but not exceeding the amount set forth under such Variable Funding Note Noteholder’s name on its signature page to the Note Purchase Agreement, or the most recent Joinder Agreement, as applicable.
“ Funding Period Termination Date ” shall mean the earlier to occur (each of which has not been cured or which has not been waived by the Majority Holders) of (i) the Variable Funding Note Amortization Date, (ii) an Aggregate Cumulative Delinquency Trigger, (iii) a Regulatory Trigger Event, (iv) an Event of Default, (v) the date as of which ***% or more of the aggregate Outstanding Principal Amount of the Notes has been subject to a breach of an Investment Pool Collateral Performance Trigger, or (vi) a material adverse change in the financial condition or operations of Enova, Enova Finance 5 or the Issuer. No new Receivables will be funded after the Funding Period Termination Date. Absent a cure of any such event or a waiver of any such event by the Majority Holders, no new Receivables will be funded after the Funding Period Termination Date.
“ Funding Request ” shall mean a request, in an amount that (i) is a multiple of $100,000, (ii) is not less than $500,000 and (iii) is not greater than the excess of the Maximum Principal Amount over the Outstanding Principal Amount of the Notes, for a Requested Advance delivered by the Issuer, or on behalf of the Issuer by the Master Servicer, to the Administrative Agent, with a copy to the Indenture Trustee, two (2) Business Days prior to the proposed Advance Date, substantially in the form of Exhibit A to the Note Purchase Agreement.
“ GAAP ” shall mean generally accepted accounting principles in effect in the United States of America (or, in the case of foreign Subsidiaries with significant operations outside the United States of America, in effect from time to time in their respective jurisdictions of organization or formation) applied on a consistent basis, subject, however, in the case of determination of compliance with the Net Worth Trigger, to the provisions of Part II of this Appendix A.
“ Global Note ” shall mean either (i) a Rule 144A Global Note or (ii) a Regulation S Global Note, issued pursuant to Section 3.04 of the Indenture.
“ Governmental Actions ” shall mean any and all consents, approvals, permits, orders, authorizations, waivers, exceptions, administrative actions, subpoenas, lawsuits, variances, civil investigative demands, investigations or inquiries by, exemptions or licenses of, or
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registrations, declarations or filings with, any Governmental Authority required under any Governmental Rules.
“ Governmental Authority ” shall mean any governmental department, commission, board, bureau, agency, court or other instrumentality of any nation, state, province, territory, commonwealth, municipality or other political subdivision thereof having jurisdiction over the Person in question.
“ Governmental Rules ” shall mean any and all laws, statutes, codes, rules, regulations, guidelines, advisories, ordinances, orders, opinions, writs, decrees and injunctions of any Governmental Authority and any and all legally binding conditions, standards, prohibitions, requirements and judgments of any Governmental Authority.
“ Green Bank ” shall mean Green Bank, N.A.
“ Holder ” shall mean a Noteholder or Note Owner.
“ Increased Costs Amount ” shall mean, for each Interest Period, an amount equal to the sum of (a) the aggregate amount payable to a Variable Funding Note Noteholder pursuant to Sections 2.06 and 2.07 of the Note Purchase Agreement in respect of such Interest Period and (b) the aggregate of such amounts owing to such Variable Funding Note Noteholder with respect to prior Interest Periods which remain unpaid.
“ Indebtedness ” shall mean, as to any Person at a particular time, all of the following:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker’s acceptances, bank guaranties, surety bonds and similar instruments;
(c) net obligations under any hedging agreement in an amount equal to the unpaid Termination Value (as defined under the Credit Agreement) thereof assuming the hedge agreement was terminated on the applicable date of measurement;
(d) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and Indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including Indebtedness arising under conditional sales or other title retention agreements), whether or not such Indebtedness shall have been assumed by such Person or is limited in recourse;
(e) accrued obligations in respect of earnout or similar payments that are immediately payable in cash or which could be immediately payable in cash at the seller’s or obligee’s option;
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(f) capital Lease obligations and synthetic lease obligations;
(g) any Redeemable Stock of such Person; and
(h) all guaranty obligations of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person except for customary exceptions reasonably acceptable to the Majority Holders. The amount of any capital lease or synthetic lease obligation as of any date shall be deemed to be the amount of Attributable Indebtedness (as defined in the Credit Agreement) in respect thereof as of such date.
“ Indemnified Party ” (a) with respect to the Servicing Agreement, shall have the meaning set forth in Section 7.01(b) of the Servicing Agreement, and (b) with respect to the Note Purchase Agreement, shall have the meaning set forth in Section 7.01(a) of the Note Purchase Agreement.
“ Indenture ” shall mean the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), between the Issuer and the Indenture Trustee.
“ Indenture Trustee ” shall mean the Person named as the Indenture Trustee in the first paragraph of the Indenture, acting not in its individual capacity but solely as Indenture Trustee, until a successor Indenture Trustee is appointed pursuant to the applicable provisions of the Indenture, and thereafter “ Indenture Trustee ” shall mean and includes each Person who is then an Indenture Trustee thereunder. The initial Indenture Trustee shall be Bankers Trust.
“ Indenture Trustee Authorized Officer ” shall mean, when used with respect to the Indenture Trustee, any vice president, any assistant vice president or trust officer, or any other officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also shall mean, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.
“ Indenture Trustee Fee ” shall mean such amount per annum as set forth in a fee letter between the Indenture Trustee and Enova, plus all indemnification amounts payable pursuant to the terms of the Indenture, and all other reasonable fees and expenses incurred by the Indenture Trustee in connection with the Transaction Documents (including any expenses or indemnification amounts payable by the Indenture Trustee pursuant to the terms of any Blocked Account Control Agreement).
“ Independent Accountants ” shall mean any nationally recognized firm of independent certified public accountants registered with the Public Company Accounting Oversight Board and otherwise acceptable to the Indenture Trustee.
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“ Ineligible Receivable ” shall mean as of any date of determination, a Receivable that would not be an Eligible Receivable if such date was the Eligibility Date, and if so designated, may be repurchased by the Transferor pursuant to Section 2.5(b) of the Sale Agreement.
“ Ineligible Receivables Release Price ” shall mean, with respect to the Ineligible Receivables to be repurchased on a Receivables Repurchase Date, the aggregate amount of the Receivable Repurchase Prices related to such Ineligible Receivables.
“ Initial Noteholders ” shall mean Jefferies, Fortress, FSLF and Waterfall, collectively in their roles as the Initial Term Note Noteholders and as the Variable Funding Note Noteholders.
“ Initial Payment Date ” shall mean (a) with respect to each Initial Term Note, December 15, 2017 and the Variable Funding Notes, December 15, 2017, and (b) with respect to any Term Note (other than the Initial Term Notes), the date specified in the related Notice of Conversion, which shall occur approximately forty-five days after the respective Conversion Date, and which for the avoidance of doubt shall be determined as follows: (x) when the Conversion Date is the last day of the calendar month, the fifteenth (15 th ) day of the calendar month (or, if any such 15 th day is not a Business Day, the next succeeding Business Day) which succeeds the calendar month that immediately follows the calendar month in which such respective Conversion Date occurs (e.g. the Conversion Date is October 31 st (the 31 st is a Business Day), thus the Initial Payment Date is December 15 th ), and (y) when the Conversion Date is the first Business Day of the calendar month, the fifteenth (15 th ) day of the calendar month (or, if any such 15 th day is not a Business Day, the next succeeding Business Day) immediately following the calendar month in which such respective Conversion Date occurs (e.g., the Conversion Date is November 1 st (October 31 st is not a Business Day), thus the initial Payment Date is December 15 th ).
“ Initial Principal Amount ” shall mean, with respect to any Term Note or the Variable Funding Notes, initial principal amount stated on the face of such Note.
“ Initial Term Note ” shall mean, the Note issued on the Closing Date, substantially in the form of Exhibit B , with an initial Outstanding Principal Amount of $181,141,753.00.
“ Initial Term Note Amortization Date ” shall mean, with respect to the Initial Term Note, the earlier to occur of (a) the Payment Date that is twenty-four (24) calendar months after the Closing Date (November 15, 2019) and (b) the date on which an Event of Default occurs.
Initial Term Note Advance Rate ” shall mean 80%.
“ Initial Term Note Investment Pool ” shall mean the separate pool of Receivables allocated to the Initial Term Notes, as provided in Section 2.10(e) of the Note Purchase Agreement.
“ Initial Term Note LTV Percentage ” shall mean (i) with respect to any Payment Date on or prior to the first Payment Date on which the LTV of the Initial Term Note has been reduced to ***%, ***% and (ii) with respect to any Payment Date following the first Payment Date on which the LTV of the Initial Term Note has been reduced to ***%, the lesser of (x) the LTV of the Initial Term Note on the immediately preceding Payment Date and (y) ***%.
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“ Initial Term Note Maturity Date ” shall mean with respect to each Initial Term Note, the Payment Date that is thirty-six (36) calendar months after the Closing Date (October 20, 2020).
“ Initial Term Note Noteholders ” shall mean Jefferies, FSLF, Fortress and Waterfall, collectively in their capacities as the Holders of each Initial Term Note under the Note Purchase Agreement.
“ Initial Term Note Optional Redemption Premium Rate ” shall mean, with respect to the Initial Term Note, a percentage equal to the product of (i) ***% and (ii) a fraction, the numerator of which is equal to the excess of (a) *** over (b) the number of Payment Dates from the Closing Date to and including the Optional Redemption Date, and the denominator of which is equal to ***.
“ Initial Term Note Purchase Price ” shall have the meaning set forth in Section 2.10 of the Note Purchase Agreement.
“ Insolvency Event ” shall mean, with respect to a specified Person, (a) the institution of a proceeding or the filing of a petition against such Person seeking the entry 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 or proceeding under any Debtor Relief Laws seeking 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 ordering the winding-up or liquidation of such Person’s affairs, and such proceeding or petition, decree or order shall remain unstayed or undismissed for a period of thirty (30) consecutive days or an order or decree for the requested relief is earlier entered or issued, or (b) the commencement by such Person of a voluntary case or proceeding under any applicable Debtor Relief Laws or the consent by such Person to the entry of an order for relief in an involuntary case or proceeding under any such law, or the consent by such Person to the appointment of or taking 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.
“ Inspection ” shall have the meaning specified in Section 3.04(c) of the Servicing Agreement.
“ Institutional Accredited Investor ” shall mean an accredited investor as defined in any of paragraphs (1), (2), (3) and (7) of Rule 501(a) of Regulation D under the Securities Act and any entity in which all of the equity owners come within such paragraphs.
“ Intercreditor Agent ” shall mean Bankers Trust, in its capacity as the Agent under and pursuant to the terms of the Intercreditor Agreement.
“ Intercreditor Agreement ” shall mean the Intercreditor Agreement re Collection Receipt Accounts, dated as of January 15, 2016, as amended by the First Amendment thereto, dated as of December 14, 2016 (as further amended, restated, supplemented or otherwise modified from time to time), by and among Enova, the Master Servicer, Enova Finance 5, the Issuer, the
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Account Holder, the Indenture Trustee and the Intercreditor Agent, and such other Persons as may become parties thereto by executing an Accession Agreement.
“ Interest Expense ” shall mean, with respect to any period, interest expense, whether paid or accrued (including the interest component of capital leases), of Enova and its Consolidated Subsidiaries, all as determined in conformity with GAAP, as it appears on the income statement of Enova and its Consolidated Subsidiaries as of such date of determination.
“ Interest Period ” shall mean, (a) with respect to each Term Note and any Payment Date, the period from and including the Payment Date immediately preceding such Payment Date (or in the case of the Initial Payment Date for the Initial Term Notes, from and including the Closing Date and in the case of the Initial Payment Date for a Quarterly Term Note from and including the applicable Conversion Date) to but excluding such Payment Date, and (b) with respect to the Variable Funding Notes (i) with respect to the initial Payment Date related to a Quarterly Revolving Period, the period from and including the Conversion Date (or in the case of the Initial Payment Date for the Variable Funding Notes under the facility, from and including the Closing Date), to but excluding such initial Payment Date, (ii) with respect to the second Payment Date related to a Quarterly Revolving Period, the period form and including the initial Payment Date, to but excluding the second Payment Date, and (iii) with respect to the final Payment Date related to a Quarterly Revolving Period, the period from and including the second Payment Date, to but excluding the final Payment Date.
“ Internal Revenue Code ” or “ Code ” shall mean the Internal Revenue Code of 1986.
“ Interpretation ” as used in Section 2.06 of the Note Purchase Agreement shall mean, with respect to any law or regulation, the interpretation or application of such law or regulation by any Governmental Authority (including any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government), central bank, accounting standards board, financial services industry advisory body or any comparable entity.
“ Investment Company Act ” shall mean the Investment Company Act of 1940.
“ Investment Pool ” shall mean a Variable Funding Note Investment Pool or a Term Note Investment Pool, as applicable.
“ Investment Pool Advance Amount ” shall mean the aggregate amount of outstanding Advances related to the applicable Investment Pool.
“ Investment Pool Collateral Performance Triggers ” shall mean the Investment Pool Cumulative Net Loss Trigger and the Investment Pool Cumulative Delinquency Trigger.
“ Investment Pool Cumulative Delinquency Ratio ” shall mean, as of any date of determination with respect to a Term Note Investment Pool, the percentage equivalent of a fraction, the numerator of which is equal to (i) the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables in the related Term Note Investment Pool (for the avoidance of doubt, in determining the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables, the aggregate Outstanding Receivable Principal Balance of any and all Delinquent Receivables repurchased by the Transferor at its option pursuant to Section 2.5 of the Sale
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Agreement shall be included), and the denominator of which is equal to (ii) the aggregate Outstanding Receivable Principal Balance of all Eligible Receivables sold to the Issuer and included in the related Term Note Investment Pool through such date.
“ Investment Pool Cumulative Delinquency Trigger ” shall occur with respect to a Collection Period in the event that the Investment Pool Cumulative Delinquency Ratio on the last day of a Collection Period (i) for the Initial Term Note Investment Pool is greater than ***% and (ii) for a Term Note Investment Pool (other than the Initial Term Note Investment Pool) is greater than ***%.
“ Investment Pool Cumulative Net Loss Ratio ” shall mean, as of any date of determination and with respect to a Term Note Investment Pool, the percentage equivalent of a fraction, the numerator of which is equal to (i) the Cumulative Net Losses for the related Term Note Investment Pool and the denominator of which is equal to (ii) the sum of the Original Receivable Principal Balance of all Receivables sold to the Issuer and included in the related Term Note Investment Pool through such date.
“ Investment Pool Cumulative Net Loss Trigger ” shall occur with respect to a Collection Period and a Term Note Investment Pool in the event that the Investment Pool Cumulative Net Loss Ratio for such Term Note Investment Pool on the last day of the Collection Period set forth below is greater than the corresponding Trigger Level set forth below:
Collection Period of Term Note Investment Pool |
Trigger Level for Initial Term Note Investment Pool Cumulative Net Loss Ratio |
Trigger Level for Term Note Investment Pool Cumulative Net Loss Ratio |
1 |
***% |
***% |
2 |
***% |
***% |
3 |
***% |
***% |
4 |
***% |
***% |
5 |
***% |
***% |
6 |
***% |
***% |
7 |
***% |
***% |
8 |
***% |
***% |
9 |
***% |
***% |
10 |
***% |
***% |
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Collection Period of Term Note Investment Pool |
Trigger Level for Initial Term Note Investment Pool Cumulative Net Loss Ratio |
Trigger Level for Term Note Investment Pool Cumulative Net Loss Ratio |
***% |
***% |
|
12 |
***% |
***% |
13 |
***% |
***% |
14 |
***% |
***% |
15 |
***% |
***% |
16 |
***% |
***% |
17 |
***% |
***% |
18 |
***% |
***% |
19 |
***% |
***% |
20 |
***% |
***% |
21 |
***% |
***% |
22 |
***% |
***% |
23 |
***% |
***% |
24 |
***% |
***% |
25 |
***% |
***% |
26 |
***% |
***% |
27 |
***% |
***% |
28 |
***% |
***% |
29 |
***% |
***% |
30 |
***% |
***% |
31 |
***% |
***% |
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“ Issuer ” shall mean EFR 2016-1, LLC, a Delaware limited liability company.
“ Issuer Certificate ” shall mean a certificate (including an Officer’s Certificate) signed by the Issuer, delivered to the Indenture Trustee relating to, among other things, the issuance of a Note. Wherever the Indenture requires that an Issuer Certificate be signed also by an accountant or other expert, such accountant or other expert (except as otherwise expressly provided in the Indenture) may be an employee of the Transferor.
“ Issuer Estate ” shall mean all right, title and interest of the Issuer in, under and to the Sale Agreement, the property and rights assigned to the Issuer pursuant to Article II of the Sale Agreement, all funds on deposit from time to time in the Collection Account and all other property of the Issuer from time to time, including any rights of the Issuer pursuant to the Sale Agreement and the Servicing Agreement.
“ Issuer LLC Agreement ” shall mean the limited liability company agreement of EFR 2016-1, LLC, dated as of December 18, 2015, as amended by Amendment No. 1 thereto, dated as of January 6, 2016, and amended and restated as of January 15, 2016 by Enova Finance 5 and Bernard J. Angelo (as further amended, restated, supplemented or otherwise modified from time to time).
“ Issuer Tax Opinion ” shall mean, with respect to any action, an Opinion of Counsel to the effect that, for United States federal income tax purposes, (a) such action will not adversely affect the tax characterization as debt of any Outstanding Note that was characterized as debt at the time of its issuance, (b) such action will not cause the Issuer to be treated as an association (or publicly traded partnership) taxable as a corporation and (c) such action will not cause or constitute an event in which gain or loss would be recognized by any Holder of any such Note.
“ Jefferies ” shall mean Jefferies Funding LLC.
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“ Joinder Agreement ” shall mean any Joinder Agreement, in substantially the form of Exhibit C to the Servicing Agreement or Exhibit B to the Note Purchase Agreement, as applicable.
“ Leverage Debt-to-Income Ratio ” shall mean, as of any date of determination Total Funded Indebtedness compared to the prior twelve-month EBITDA.
“ Leverage Trigger ” shall occur if the Leverage Debt-to-Income Ratio with respect to Enova shall exceed *** to ***.
“ LIBOR Business Day ” shall mean any day other than a Saturday, Sunday or any other day on which banks in London are required or authorized to be closed.
“ LIBOR Determination Date ” shall mean October 18, 2017 for the period from and including the Closing Date to but excluding the Record Date, and for every other Interest Period, the second LIBOR Business Day prior to the commencement of such Interest Period.
“ Lien ” shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment or other arrangement having the practical effect of any of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever.
“ Liquidity ” shall mean, as of any date of determination, an amount equal to the sum of (i) all unrestricted cash on hand, plus (ii) all Cash Equivalents.
“ Liquidity Trigger ” shall occur if the Liquidity of Enova is less than $***.
“ Losses ” shall have the meaning set forth in Section 7.01(a) of the Note Purchase Agreement.
“ Lower My Rate Receivables ” any Receivable related to a Refinancing that has had its original Contact interest rate lowered for any reason, other than as a result of the requirements of the Servicemembers Civil Relief Act of 2003.
“ LTV ” shall mean, as of a Payment Date with respect to any Term Note, the ratio of the aggregate Outstanding Principal Amount of such Term Note on such Payment Date (after giving effect to the distribution of Term Note Monthly Principal to be made to such Term Note pursuant to Section 5.04(a)(v) of the Indenture) to the Outstanding Receivable Principal Balance of the Eligible Facility Receivables in the related Term Note Investment Pool as of the end of the related Collection Period.
“ LTV Event ” shall mean, with respect to any Note and as of any Payment Date, an event which shall occur if the LTV for such Note is higher than the LTV of such Note as of the preceding Payment Date.
“ Majority Holders ” shall mean the Holders holding in the aggregate more than 66 and 2/3% of the Outstanding Principal Amount of all Outstanding Notes; provided , that solely for purposes of this definition, the Outstanding Principal Amount of any Notes as to which a
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Defaulting Variable Funding Note Noteholder is the Holder shall be disregarded (and subtracted from the Outstanding Principal Amount of all Notes) until such time as the relevant Variable Funding Note Noteholder no longer constitutes a Defaulting Variable Funding Note Noteholder.
“ Master Servicer ” shall mean, at any time, the Person then appointed pursuant to Section 3.01 of the Servicing Agreement, together with its successors and permitted assigns in such capacity. The initial Master Servicer shall be NCLS.
“ Master Servicer Default ” shall have the meaning set forth in Section 8.01 of the Servicing Agreement.
“ Master Servicer Termination Date ” shall have the meaning set forth in Section 3.01 of the Servicing Agreement.
“ Master Servicer Termination Notice Date ” shall have the meaning set forth in Section 8.03(b) of the Servicing Agreement.
“ Material Adverse Effect ” shall mean, a material adverse effect on (a) the business, operations, assets, condition (financial or otherwise) or liabilities of a specified Person, (b) the ability or prospects of a specified Person to fully and timely perform its obligations under the Transaction Documents, (c) the legality, validity, binding effect, or enforceability against a specified Person of any Transaction Document to which it is a party, or (d) the rights, remedies and benefits, taken as a whole, available to, or conferred upon, any Noteholder, the Issuer or the Indenture Trustee under any Transaction Document.
“ Maximum Advance Amount ” shall mean, as of any date of determination prior to the Funding Period Termination Date the least of (a) an amount equal to the Maximum Principal Amount, minus the sum of (x) the aggregate Outstanding Principal Amount of all Term Notes that are Outstanding and (y) the Variable Funding Note Stated Principal Amount, (b) the Variable Funding Note Maximum Principal Amount, and (c) the Variable Funding Note Borrowing Base, and thereafter, zero.
“ Maximum Principal Amount ” shall mean $275,000,000.
“ Monthly Servicing Report ” shall mean a report in substantially the form of Exhibit B to the Servicing Agreement, or otherwise in a form reasonably acceptable to the Administrative Agent, the Issuer, the Transferor and the Master Servicer and including each of the items set forth in Section 3.03(a) of the Servicing Agreement.
“ Moody’s ” shall mean Moody’s Investors Service, Inc., and any successor thereto.
“ NCLS ” shall mean NetCredit Loan Services, LLC, a Delaware limited liability company.
“ Net Equity Proceeds ” shall mean, with respect to the issuance or sale of any Capital Stock of any Person, the cash proceeds received by such Person in connection with such transaction after deducting therefrom the aggregate, without duplication, of the following amounts to the extent properly attributable to such transaction: reasonable legal fees, accounting fees,
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underwriting fees, investment banking fees and other reasonable and customary fees and expenses, in each case, to the extent paid, payable or reimbursed by such Person.
“ Net Income ” shall mean, with respect to any period, the net income or loss of Enova and its Consolidated Subsidiaries for such period, determined in accordance with GAAP; provided that there shall be excluded from such calculation the income or loss of any Person (other than a Consolidated Subsidiary) of which Enova or any Subsidiary owns Capital Stock, except to the extent of the amount of dividends or other distributions actually paid to Enova or any of the Consolidated Subsidiaries during such period.
“ Net Insurance Proceeds ” shall mean, with respect to a claim related to the Transaction Documents, an amount equal to: (a) any cash payments or proceeds received by the Issuer, an Asset Servicer or the Master Servicer in respect of any covered loss under any policy of insurance required under the Transaction Documents; provided , however , that any cash payments or proceeds in respect of any covered loss under the employee fidelity insurance policy required under the Transaction Documents included under this clause (a) shall not exceed $2,500,000 in the aggregate, minus (b) any actual and reasonable costs incurred or to be incurred by the Issuer, an Asset Servicer or the Master Servicer in connection with the adjustment or settlement of any claims of the Issuer, an Asset Servicer or the Master Servicer in respect thereof, minus (c) any actual and reasonable costs of repairing or replacing the subject of such covered loss.
“ Net Liquidation Proceeds ” shall mean, with respect to an Investment Pool, the aggregate amount of recoveries on (or proceeds from sales of) Charged-Off Receivables, net of any reasonable collection agency fees, legal fees, sales commissions and other reasonable costs related to the collection of recoveries.
“ Net Worth ” shall mean, as of any date, the total shareholder’s equity (including Capital Stock (including preferred stock), additional paid-in capital, and retained earnings after deducting treasury stock) which would appear on a balance sheet of Enova and its Subsidiaries on a consolidated basis prepared as of such date in accordance with GAAP, but excluding all other comprehensive income or losses resulting from foreign currency translation adjustments or derivative value fluctuation.
The “ Net Worth Trigger ” will occur if Enova permits Net Worth to be less than the sum of (i) $***, plus (ii) ***% of Net Income (with no deduction for net losses during any quarterly period) earned in each fiscal quarter of Enova ending on or after October 31, 2017, plus (iii) ***% of the Net Equity Proceeds received by Enova and its Subsidiaries from the issuance and sale of Capital Stock of Enova or any of its Subsidiaries (other than an issuance to Enova or its wholly-owned Subsidiaries), including any conversion of debt securities of Enova into such Capital Stock after October 31, 2017 to the extent of any increase in Net Worth resulting therefrom.
“ Non-U.S. Certificate ” shall have the meaning specified in Section 3.08(b) of the Indenture.
“ North American Bank ” shall mean North American Banking Company and its successor and permitted assigns.
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“ Note ” or “ Notes ” shall mean any note or notes authenticated and delivered from time to time under the Indenture, and (a) with respect to any Term Note, such Term Note shall be substantially in the form of Exhibit B to the Indenture, and (b) with respect to the Variable Funding Note, such Variable Funding Note shall be substantially in the form of Exhibit A to the Indenture.
“ Note Administrative Fee ” shall mean with respect to each Payment Date the portion of the Administrative Fee payable to the Variable Funding Note Noteholders (such fee to be allocated between the Variable Funding Note Noteholders in accordance with the Outstanding Principal Amount of each respective Variable Funding Note as of the end of the related Collection Period) that is allocable to each Term Note, and shall be an amount equal to the product of (i) the Administrative Fee due and payable on such Payment Date and (ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Term Note, and the denominator of which is the Outstanding Principal Amount of all Outstanding Term Notes, in each case measured as of the last day of the Collection Period immediately preceding such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Note Interest ” shall mean a beneficial interest in a Note.
“ Note Interest Rate ” shall mean, for any Interest Period (i) with respect to the Initial Term Note and any Quarterly Term Note, a per annum rate equal to One-Month LIBOR (or such other reference rate determined by the Agent and the Master Servicer pursuant to Section 5.05 ), plus 7.50%, or (ii) for the Variable Funding Notes, a per annum rate equal to One-Month LIBOR (or such other reference rate determined by the Agent and the Master Servicer pursuant to Section 5.05 ), plus 7.50%; provided , however , that upon the occurrence and during the continuation of an Event of Default, the Note Interest Rate for each of the Term Notes and the Variable Funding Notes shall be increased by 2.50%.
“ Note Owner ” shall mean the beneficial owner of an interest in a Global Note.
“ Note Purchase Agreement ” shall mean the Amended and Restated Note Purchase Agreement, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), by and among the Issuer, the Master Servicer, the Administrative Agent, the Initial Noteholders and the other Variable Funding Note Noteholders from time to time party thereto.
“ Note Register ” shall have the meaning specified in Section 4.04(a) of the Indenture.
“ Note Registrar ” shall mean the Person who keeps the Note Register specified in Section 4.04(a) of the Indenture. The initial Note Registrar shall be Bankers Trust.
“ Noteholder ” or “ Noteholders ” shall mean a Variable Funding Note Noteholder or a Term Noteholder, as applicable, in whose name such Note is registered in the Note Register.
“ Noteholder Monthly Interest ” shall mean Variable Funding Note Monthly Interest or Term Note Monthly Interest, as applicable.
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“ Notice of Conversion ” shall mean each notice, substantially in the form of Exhibit C to the Indenture, delivered from the Issuer to the Indenture Trustee on each Conversion Date.
“ Obligor ” shall mean, with respect to each Receivable, the borrower under the related Contract or any other Person who owes or may be liable (whether primarily or secondarily) for payments under such Receivable.
“ Obligor Due Date ” shall mean, with respect to a Receivable, each date in a calendar month on which an installment payment is due from the Obligor. By way of example, if an Obligor’s installment payment is due on the 14 th day of each month, then the 14 th is the Obligor Due Date; if an installment payment is due on each of the 14 th and the 28 th of each month, then each of the 14 th and 28 th is an Obligor Due Date.
“ OFAC ” shall have the meaning set forth in Section 6.01(l) of the Servicing Agreement.
“ Officer’s Certificate ” shall mean a certificate on behalf of any Person that is signed by any Authorized Officer or vice president or more senior officer of such Person and which states that the certifications set forth in such certificate are based upon the results of a due inquiry into the matters in question conducted by or under the supervision of the signing officer and that the facts stated in such certifications are true and correct to the best of the signing officer’s knowledge.
“ One-Month LIBOR ” shall mean, for any Interest Period, a per annum interest rate determined by the Indenture Trustee for such Interest Period in accordance with Section 5.05 of the Indenture; provided , however , that One-Month LIBOR for any Interest Period will not be less than 1.00%.
“ Ongoing Due Date Adjustment ” shall mean, as of any date of determination, an Eligible Receivable with respect to which a Due Date Adjustment has been made and as of such date of determination, the next scheduled Obligor Due Date is not the original Obligor Due Date after giving effect to such Due Date Adjustment.
“ Opinion of Counsel ” shall mean a written opinion of counsel, who may be an employee of or counsel to the Transferor or the Master Servicer. As to any factual matters relevant to such opinion, such counsel shall be permitted to rely upon an Officer’s Certificate to establish such factual matters, unless such counsel knew or in the exercise of reasonable care should have known, any of such factual matters are erroneous.
“ Optional Redemption Amount ” shall mean, with respect to a redemption of the Notes pursuant to Section 12.01 of the Indenture on a Payment Date, an amount equal to (i) with respect to a redemption pursuant to Section 12.01(b) of the Indenture, the sum of (A) the aggregate Outstanding Principal Amount of the Variable Funding Notes or the Term Notes, as applicable, (B) all accrued and unpaid interest on the Notes owing on such Payment Date, (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture, and (D) the Optional Redemption Premium, if any, or (ii) with respect to a redemption pursuant to Sections 12.01(c), (d) or (e) of the Indenture, the applicable amount specified in such section.
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“ Optional Redemption Date ” shall mean the date on which the Issuer remits to the Collection Account the Optional Redemption Amount pursuant to Section 12.01 of the Indenture.
“ Optional Redemption Premium ” shall mean, with respect to a redemption of the Notes on a Payment Date pursuant to Section 12.01(b) of the Indenture, an amount equal to the product of (i) the Outstanding Principal Amount of the Variable Funding Notes or the Term Note, as applicable, immediately prior to such Payment Date and (ii) the applicable Optional Redemption Premium Rate.
“ Optional Redemption Premium Rate ” shall mean, as applicable, the Initial Term Note Optional Redemption Premium Rate, the Quarterly Term Note Optional Redemption Premium Rate or the Variable Funding Note Optional Redemption Premium Rate, as applicable.
“ Original Receivable Principal Balance ” shall mean, with respect to a Receivable, as of the date such Receivable is sold to the Issuer, the outstanding principal balance owed by the Obligor on such Receivable.
“ Origination Fee ” shall mean any upfront fee charged by an Originator or a Bank Originator for processing or originating a new unsecured installment loan made to an Obligor.
“ Originator ” shall mean each of the Persons executing the Transfer Agreement in the capacity of an Originator on the signature pages thereto and each Person that executes a joinder supplement to become an Originator, together in each case with its successors and permitted assigns in such capacity.
“ Other Conveyed Property ” shall mean (a) with respect to the Seller all property conveyed by the Seller to the Purchaser pursuant to Sections 2.1(a)(ii) through (iv) of the Receivables Purchase Agreement and each related First Step Assignment, (b) with respect to the Transferor, all property conveyed by the Transferor to the Issuer pursuant to Sections 2.1(a)(ii) through (iv) of the Sale Agreement and each related Second Step Assignment and (c) with respect to a Bank Originator all property conveyed by a Bank Originator to the Seller or any Originator of a type described in Sections 2.1(a)(ii) through (iv) of the Receivables Purchase Agreement.
“ Other Taxes ” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment or deposit required to be made under the Note Purchase Agreement or the Indenture or from the execution, delivery or registration of, or otherwise with respect to, any of the foregoing.
“ Outstanding ,” shall mean, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture, except:
(a) any Notes theretofore canceled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 4.08 of the Indenture, or canceled by the Issuer and delivered to the Indenture Trustee pursuant to Section 4.08 of the Indenture;
(b) any Notes for whose full payment (including principal and interest) or redemption money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes; provided , that if such Notes
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are to be redeemed, notice of such redemption has been duly given if required pursuant to the Indenture, or provision therefor satisfactory to the Indenture Trustee has been made;
(c) any Notes which are canceled pursuant to Section 6.03 of the Indenture; and
(d) any Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture, or which will have been paid pursuant to the terms of Section 4.05 of the Indenture (except with respect to any such Note as to which proof satisfactory to the Indenture Trustee is presented that such Note is held by a person in whose hands such Note is a legal, valid and binding obligation of the Issuer).
For purposes of determining the amounts of deposits, allocations, reallocations or payments to be made, unless the context clearly requires otherwise, references to “Notes” will be deemed to be references to “Outstanding Notes.” In determining whether the Holders of the requisite principal amount of such Outstanding Notes have taken any Action, Notes beneficially owned by the Issuer or any Affiliate of the Issuer will be disregarded and deemed not to be Outstanding. In determining whether the Indenture Trustee will be protected in relying upon any such Action, only Notes which an Indenture Trustee Authorized Officer knows to be owned by the Issuer or any Affiliate of the Issuer will be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee creates to the satisfaction of the Indenture Trustee the pledgee’s right to act as owner with respect to such Notes and that the pledgee is not the Issuer or any other obligor upon the Notes or any Affiliate of the Issuer or such other obligor.
“ Outstanding Principal Amount ” shall mean at any time with respect to any of the Variable Funding Notes or the Term Notes, the aggregate principal amount of such Variable Funding Notes or Term Notes that is Outstanding on such date.
“ Outstanding Receivable Principal Balance ” shall mean, with respect to a single Receivable, the outstanding amount of principal owed by the Obligor or Bank Originator (with respect to participation interests in Bank Originated Receivables sold by a Bank Originator), as applicable, on such Receivable on such date, and with respect to an Investment Pool, the aggregate amount of principal owed by each Obligor on each Receivable attributable to such Investment Pool on such date.
“ Ownership Share ” shall have the meaning set forth in Section 2.09(b) of the Note Purchase Agreement.
“ Participant Register ” shall have the meaning set forth pursuant to Section 8.03(c) of the Note Purchase Agreement.
“ Paying Agent ” shall mean any Person authorized by the Issuer to pay the principal of or interest on any Notes on behalf of the Issuer as provided in the Indenture. The initial Paying Agent shall be Bankers Trust.
“ Payment Date ” shall mean (i) with respect to each Term Note, the 15 th day of each calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day), commencing with respect to each Term Note on such Term Note’s respective Initial Payment Date,
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and (ii) with respect to the Variable Funding Notes and each Quarterly Revolving Period, (a) with respect to the initial Payment Date, the 15 th day of the calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day) following the calendar month in which Receivables are initially pledged to the Variable Funding Note Investment Pool, (b) with respect to the second Payment Date, the 15 th day of the calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day) following the calendar month of the initial Payment Date, and (c) the with respect to the final Payment Date, the 15 th day of the calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day) following the calendar month of the second Payment Date. For the avoidance of doubt, with respect to the Variable Funding Notes, the Unused Fee shall be paid on the 15 th day of each calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day), regardless of whether or not Receivables are pledged to the Variable Funding Note Investment Pool until the occurrence of the Funding Period Termination Date.
“ Payment Deferral ” shall mean, with respect to a Serviced Receivable and a related Obligor, the deferral of a scheduled installment payment from such Obligor’s next Obligor Due Date to a new Obligor Due Date, which follows the Obligor Due Date that theretofore had been the final scheduled maturity date of such Serviced Receivable.
“ Payment Plan Receivable ” shall have the meaning set forth in Section 2.02(d) of the Servicing Agreement.
“ Performance Trigger ” shall mean an event arising upon the occurrence of any Investment Pool Collateral Performance Trigger or any Aggregate Cumulative Delinquency Trigger.
“ Permanent Regulation S Global Note ” shall mean a Note issued in global form, which bears a legend generally to the effect that sales of such Note or interests therein may be made only to Institutional Accredited Investors or QIBs in global form in an “offshore transaction” (within the meaning of Regulation S under the Securities Act), substantially in the form of Exhibit H to the Indenture.
“ Permitted Indebtedness ” shall mean indebtedness outstanding under the Indenture and the Note Purchase Agreement.
“ Permitted Liens ” shall mean liens imposed by law for taxes, assessments or other governmental charges.
“ Permitted Modification ” shall have the meaning set forth in Section 2.02(d) of the Servicing Agreement.
“ Person ” shall mean any person or entity, including any individual, corporation, limited liability company, partnership (general or limited), joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity or other entity of any nature, whether or not a legal entity.
“ Term Notes ” shall mean, collectively, the Initial Term Note and each Quarterly Term Note.
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“ Place of Payment ” shall mean, with respect to any Note issued under the Indenture, the city or political subdivision so designated with respect to such Note in accordance with the provisions of the Indenture.
“ Predecessor Notes ” of any particular Note shall mean every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 4.05 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Note will be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
“ Privacy Laws ” shall have the meaning set forth in Section 11.12(b) of the Servicing Agreement.
“ Protected Party ” shall have the meaning set forth in Section 11.12(a) of the Servicing Agreement.
“ protected purchaser ” shall have the meaning set forth in Section 8-303 of the applicable UCC, and provided that the requirements of Section 8-405 of the applicable UCC are met.
“ Public Company Accounting Oversight Board ” shall mean the nonprofit corporation established by Congress through the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies in order to, amongst other things, protect the interest of investors.
“ Purchase Date ” shall mean each Business Day on which the Purchaser or the Issuer, as applicable, acquires Receivables from the Seller or the Transferor, as applicable, pursuant to the terms of the Receivables Purchase Agreement or the Sale Agreement, as applicable.
“ Purchase Price ” shall mean, with respect to each Receivable and related Other Conveyed Property transferred to the Purchaser by the Seller pursuant to the Receivables Purchase Agreement on any Purchase Date, an amount equal to the Outstanding Receivable Principal Balance of such Receivable as of such Purchase Date.
“ Purchaser ” shall mean the Transferor, in its capacity as the purchaser under the Receivables Purchase Agreement, together with its successors and permitted assigns in such capacity.
“ QIB ” shall have the meaning specified in Section 4.04(b) of the Indenture.
“ Quarterly Revolving Period ” shall mean, with respect to the Variable Funding Notes, (i) with respect to the initial Quarterly Revolving Period, the period from and including the Closing Date, to but excluding the initial Conversion Date, and (ii) thereafter, the period from and including the Conversion Date to but excluding the immediately subsequent Conversion Date.
“ Quarterly Term Note ” shall mean each Note issued on a Conversion Date, substantially in the form of Exhibit B , with an Initial Principal Amount determined in accordance with Section 4.11(g) of the Indenture.
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“ Quarterly Term Note Advance Rate ” shall mean ***%.
“ Quarterly Term Note Optional Redemption Premium Rate ” shall mean, with respect to any Quarterly Term Note, a percentage equal to the product of (i) ***% and (ii) a fraction, the numerator of which is equal to the excess of (a) *** over (b) the number of Payment Dates from the Conversion Date related to such Quarterly Term Note to and including the Optional Redemption Date, and the denominator of which is equal to ***.
“ Ratable Portion ” shall have the meaning set forth in Section 2.04(d) of the Note Purchase Agreement.
“ Receivable ” shall mean a consumer loan represented by a Contract, and all rights and obligations thereunder, including the obligation of an Obligor to make payments thereunder, originated or acquired by the Seller or a Bank Originator and subsequently sold by the Seller to the Purchaser, pursuant to the terms of the Receivables Purchase Agreement. For the avoidance of doubt, each “Serviced Receivable” constitutes a “Receivable.”
“ Receivable File ” shall mean, with respect to each Receivable, the file to be (a) delivered to the Master Servicer pursuant to the Receivables Purchase Agreement, containing the following documents: (i) the original, fully executed copy of the related Contract (which shall include the truth-in-lending disclosure), which shall on the related Purchase Date be payable to the Seller, (ii) original, fully executed copies of any non-negotiable promissory note and any guaranty related to such Receivable, if applicable, (iii) original, fully executed copies of any modifications, amendments, supplements or addendums to the original Contract and all other agreements and documents-related to such Contract, and (iv) such other documents as the Purchaser, Issuer or Indenture Trustee may reasonably require from time to time, and (b) maintained by the Custodian pursuant to Article IX of the Servicing Agreement.
“ Receivable Modification ” shall have the meaning set forth in Section 2.02(d) of the Servicing Agreement.
“ Receivables Purchase Agreement ” shall mean that certain amended and restated receivables purchase agreement dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), by and between the Seller and the Purchaser.
“ Receivables Repurchase Date ” shall mean the day that an optional receivables repurchase pursuant to Section 2.5(b) of the Sale Agreement occurs.
“ Receivable Repurchase Price ” shall mean, with respect to any Receivable and any date of determination, an amount equal to the sum of (a) the Outstanding Receivable Principal Balance of such Receivable, plus (b) all accrued and unpaid interest on the Outstanding Receivable Principal Balance of such Receivable at the applicable Annual Percentage Rate related to such Receivable through the date on which such Receivable is repurchased.
“ Recipient ” shall have the meaning set forth in Section 2.07(a) of the Note Purchase Agreement.
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“ Record Date ” shall mean, for the interest or principal payable on any Note on any applicable Payment Date, the last day of the calendar month immediately preceding such Payment Date.
“ Redeemable Stock ” shall mean the portion of any Capital Stock of Enova or any of its Consolidated Subsidiaries which is or may be (a) unilaterally redeemable (by sinking fund or similar payments or otherwise) upon the occurrence of certain events or otherwise; (b) redeemable at the option of the holder thereof or (c) convertible into Indebtedness (excluding Capital Stock convertible or exchangeable solely at the option of Enova or a Subsidiary of the Enova; provided that any such conversion or exchange will be deemed an incurrence of Indebtedness).
“ Reference Banks ” shall mean four (4) major banks in the London interbank market selected by the Master Servicer.
“ Refinancing ” shall mean, those occurrences when an Originator enters into (or acquires) a new consumer loan arrangement with an Obligor, and whereby a Receivable is paid in full with the proceeds of a new Receivable.
“ Registered Note ” shall mean a Note issued in registered form.
“ Registered Noteholder ” shall mean a Holder of a Registered Note.
“ Regulation S Certificate ” shall have the meaning specified in Section 4.06(d) of the Indenture.
“ Regulation S Global Note ” shall mean either a Temporary Regulation S Global Note or the Permanent Regulation S Global Note.
“ Regulatory Trigger Event ” shall be deemed to have occurred if, commencement by any governmental authority of any inquiry or investigation (which for the avoidance of doubt excludes any routine inquiry or investigation) through the issuance of subpoena, civil investigative demand, or other administrative or judicial method of discovery, legal action or proceeding, against any Enova Entity challenging such person’s authority to originate, hold, own, service, pledge or enforce any Receivables with respect to the residents of any jurisdiction, or otherwise alleging any noncompliance with or violation of any Governmental Rule or Governmental Rules by any Enova Entity with such jurisdiction’s applicable laws related to originating, holding, pledging, servicing or enforcing such Receivable or otherwise related to such Receivables, which inquiry, investigation, legal action or proceeding either (a) is not released or terminated in a manner acceptable to the Majority Holders in their reasonable discretion within one hundred eighty (180) calendar days of commencement thereof, and would reasonably be expected to have a Material Adverse Effect, as determined by the Majority Holders in their reasonable discretion, or (b) results in the issuance or entering of any stay, order, judgment, cease and desist order, injunction, temporary restraining order, or other judicial or non-judicial sanction, order or ruling against any Enova Entity related in any way to the originating, holding, pledging, servicing or enforcing of any Receivable or rendering the Receivables Purchase Agreement unenforceable in such respective jurisdiction, the effect of which would reasonably be expected to have a Material Adverse Effect, as determined by the Majority Holders in their reasonable discretion; provided
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that , in each case, upon the favorable resolution (whether by judgment, withdrawal of such action or proceeding or settlement of such action or proceeding) of such inquiry, investigation, action or proceeding as determined by the Majority Holders in their reasonable discretion and confirmed by notice from the Majority Holders, such Regulatory Trigger Event shall cease to exist immediately upon such determination by the Majority Holders.
“ Related Receivables ” shall mean, with respect to a Purchase Date, the Receivables set forth in the .csv file delivered in connection with the applicable First Step Assignment or Second Step Assignment, as applicable, executed and delivered by the Seller or the Transferor, as applicable, with respect to such Purchase Date.
“ Related Receivables File ” shall mean the .csv file setting forth the Receivables with respect to a Purchase Date, which is delivered in connection with the applicable First Step Assignment or Second Step Assignment, as applicable, and executed and delivered by the Seller or the Transferor, as applicable.
“ Replacement Receivables ” shall have the meaning set forth in Section 2.5(b) of the Sale Agreement.
“ Reporting Date ” shall mean a date on or before the tenth calendar day of each month (or if the tenth calendar day of any given month is not a Business Day, the next following Business Day).
“ Republic Bank ” shall mean Republic Bank & Trust Company.
“ Republic Loan Purchase Agreement ” shall mean the Loan Purchase Agreement, dated as of February 15, 2016, by and between Republic Bank and NetCredit Finance, LLC.
“ Requested Advance ” shall have the meaning specified in Section 2.04(a) of the Note Purchase Agreement.
“ Responsible Officer ” shall mean any officer within the Corporate Trust Office of the Indenture Trustee, including any director, vice president, assistant vice president, assistant treasurer, assistant secretary, or any other officer of such Person, as applicable, 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, in each case having direct responsibility for the administration of the Indenture and the other Transaction Documents on behalf of the Indenture Trustee.
“ Reuters Screen LIBOR01 Page ” shall mean the display page currently designated as page LIBOR01 on the Reuters Screen (or such other page as may replace that page on the Bloomberg terminal for the purpose of displaying comparable rates or prices).
“ Revolving Period ” shall mean the period commencing on the Closing Date and ending on the Funding Period Termination Date.
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“ Rule 144A Global Note ” shall mean a Note issued in global form, which bears a legend generally to the effect that sales of such Note or interests therein may be made only to QIBs in transactions exempt from the registration requirements of the Securities Act in reliance on Rule 144A, substantially in the form of Exhibit B to the Indenture.
“ S&P ” shall mean Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services, LLC business, and any successor thereto.
“ Sale Agreement ” shall mean the Amended and Restated Sale Agreement, dated October 20, 2017 (as amended, restated, supplemented or otherwise modified from time to time), between the Transferor and the Issuer.
“ Sanctions ” shall mean economic or financial sanctions or trade embargos imposed, administered or enforced from time to time by the U.S. government, including those administered by OFAC or the U.S. Department of State.
“ Schedule of Asset Servicer Serviced Receivables ” shall have the meaning set forth in Section 2.05(a) of the Servicing Agreement.
“ Schedule of Receivables ” shall mean (i) collectively, all of the schedules of Receivables purchased by the Purchaser pursuant to the Receivables Purchase Agreement and each First Step Assignment, with each such individual Schedule to be attached as Schedule A to the related First Step Assignment, as amended or supplemented from time to time upon each transfer of Receivables or otherwise in accordance with the terms of the Receivables Purchase Agreement or (ii) collectively, all of the schedules of Receivables purchased by the Issuer pursuant to the Sale Agreement and each Second Step Assignment, with each such individual Schedule to be attached as Schedule A to the related Second Step Assignment, as amended or supplemented from time to time upon each transfer of Receivables or otherwise in accordance with the terms of the Sale Agreement, as applicable.
“ Schedule of Serviced Receivables ” shall have the meaning set forth in Section 3.03 of the Servicing Agreement.
“ Scheduled Receivable Payment ” shall mean, for any Collection Period and for any Receivable, the amount indicated in the Contract relating to such Receivable as required to be paid by the Obligor in such Collection Period. If after the Closing Date the Obligor’s obligation under such Receivable with respect to a Collection Period has been modified so as to differ from the amount specified in such Receivable as a result of (a) the order of a court in a proceeding relating to Debtor Relief Laws as to which the Obligor is a debtor, (b) the application of the Servicemembers Civil Relief Act of 2003, or (c) modifications or extensions of the Receivable permitted by the Transaction Documents, the Scheduled Receivable Payment with respect to such Collection Period shall refer to the Obligor’s payment obligation with respect to such Collection Period as so modified.
“ Second Step Assignment ” shall mean a Second Step Assignment from the Transferor to the Issuer with respect to the Receivables and Other Conveyed Property to be conveyed by the Transferor to the Issuer on any Purchase Date, in substantially the form of Exhibit A to the Sale Agreement.
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“ Securities Act ” shall mean the Securities Act of 1933.
“ Securities Exchange Act ” shall mean the Securities Exchange Act of 1934.
“ Securities Intermediary ” shall have the meaning specified in Section 2.11(a) of the Indenture, together with its successors and permitted assigns in such capacity. The initial Securities Intermediary shall be Bankers Trust.
“ Security Interest ” shall mean the security interest granted pursuant to the Granting Clause of the Indenture.
“ Seller ” shall mean Enova, in its capacity as the seller pursuant to the Receivables Purchase Agreement, together with its successors and permitted assigns in such capacity.
“ Serviced Receivables ” shall mean all Receivables set forth on the Schedule of Serviced Receivables; provided , however , that upon the repurchase of such Receivable in accordance with the terms of the Receivables Purchase Agreement, the Sale Agreement, the Servicing Agreement, or any other Transaction Document, such repurchased Receivable shall no longer constitute a Serviced Receivable.
“ Servicing Agreement ” shall mean the Amended and Restated Servicing Agreement, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), by and among the Master Servicer, the Asset Servicers, the Custodian, the Issuer, the Indenture Trustee, the Transferor and the Verification Agent.
“ Servicing Fee ” shall mean an amount, with respect to the Master Servicer and for each Payment Date, equal to the sum of (i) the Variable Funding Note Servicing Fee and (ii) the sum of the Term Note Servicing Fees attributable to each Term Note.
“ Servicing Fee Rate ” shall mean 2.50%.
“ Servicing Policy ” shall mean, the collections policy and the payment plan policy of the Master Servicer and the Asset Servicers, as such policies may be amended, modified or supplemented from time to time in compliance with the Servicing Agreement.
“ Servicing Standard ” shall have the meaning set forth in Section 2.01(b) of the Servicing Agreement.
“ Solvent ” shall mean, with respect to any Person, as of any date of determination, both (a)(i) the sum of such Person’s debt (including contingent liabilities) does not exceed the assets of such Person, at Fair Valuation, (ii) such Person’s capital is not unreasonably small in relation to its business as contemplated on the Closing Date, and (iii) such entity has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (b) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be
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expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).
“ Specified Documents ” shall mean, with respect to any Receivable File, the following documents required to be contained in such Receivable File:
(a) the original, fully executed copy of the related Contract (which shall include the truth-in-lending disclosure), which shall originally be payable to the related Asset Servicer;
(b) original, fully executed copies of any non-negotiable promissory note and any guaranty related to such Receivable, if applicable;
(c) original, fully executed copies of any modifications, amendments, supplements or addendums to the original Contract and all other agreements and documents relating to such Contract; and
(d) such other documents not otherwise described in (a) through (c) above as the Issuer, Indenture Trustee (at the direction of the Majority Holders), or the Custodian may reasonably require from time to time.
“ Standard Modification ” shall mean a “Servicing Modification” as defined in the Servicing Policy.
“ State ” shall mean any one of the 50 states of the United States of America or the District of Columbia.
“ Subsidiary ” shall mean, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided , in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.
“ Successor Asset Servicing Transfer Date ” shall have the meaning set forth in Section 8.04(a) of the Servicing Agreement.
“ Successor Asset Servicer ” shall mean the Backup Servicer or any other successor to an Asset Servicer appointed pursuant to Section 8.04(a) of the Servicing Agreement.
“ Successor Master Servicer ” shall mean the Backup Servicer or any other successor to the Master Servicer appointed pursuant to Section 8.03(a) of the Servicing Agreement.
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“ Successor Servicing Agreement ” shall mean the Successor Servicing Agreement, dated as of March 31, 2016, entered into by First Associates, the Issuer, the Indenture Trustee, the Custodian and the Verification Agent.
“ Taxes ” shall mean, all present or future taxes, levies, imposts, duties, deductions, withholding (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Temporary Regulation S Global Note ” shall mean a Note issued in global form, which bears a legend generally to the effect that sales of such Note or interests therein may be made only to Institutional Accredited Investors in global form in an “offshore transaction” (within the meaning of Regulation S under the Securities Act), substantially in the form of Exhibit G to the Indenture.
“ Term Note ” shall mean the Initial Term Note or any Quarterly Term Note, as applicable.
“ Term Note Amortization Date ” shall mean, (i) with respect to a Quarterly Term Note the earlier to occur of (a) the Payment Date that is*** (***) calendar months after the Conversion Date on which such Term Note was issued and (b) the date on which an Event of Default occurs or (ii) the Initial Term Note Amortization Date, as applicable.
“ Term Note Available Collections ” shall mean, with respect to any Payment Date and a Term Note Investment Pool, an amount equal to the Collections received during the related Collection Period with respect to such Term Note Investment Pool, and with respect to the first Payment Date for a Term Note following its Conversion Date, the Term Note Available Collections shall also include the Variable Funding Note Available Collections remaining after all payments are made to the Variable Funding Note Noteholders on the final Payment Date with respect to such Quarterly Revolving Period.
“ Term Note Backup Servicing Fee ” shall mean with respect to each Payment Date the portion of the Backup Servicing Fee payable to the Backup Servicer that is allocable to each Term Note, and shall be an amount equal to the product of (i) the Backup Servicing Fee due and payable on such Payment Date and (ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Term Note, and the denominator of which is the aggregate Outstanding Principal Amount of all Term Notes that are Outstanding, in each case measured as of the last day of the Collection Period immediately preceding such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Term Note Indenture Trustee Fee ” shall mean with respect to each Payment Date the portion of the Indenture Trustee Fee payable to the Indenture Trustee that is allocable to each Term Note, and shall be an amount equal to the product of (i) the Indenture Trustee Fee due and payable on such Payment Date and (ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Term Note, and the denominator of which is the aggregate Outstanding Principal Amount of all Term Notes that are Outstanding, in each case measured as of the last day of the Collection Period immediately preceding such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
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“ Term Note Investment Pool ” shall mean either (i) the Initial Term Note Investment Pool or (ii) with respect to each other Term Note, the Receivables related to the applicable Investment Pool, as set forth on the schedule of Receivables attached to the Notice of Conversion related to such Term Note, as provided in Section 2.09(e) of the Note Purchase Agreement.
“ Term Note LTV Percentage ” shall mean with respect to any Quarterly Term Note, (i) with respect to any Payment Date on or prior to the first Payment Date on which the LTV of such Quarterly Term Note has been reduced to ***%, ***% and (ii) with respect to any Payment Date following the first Payment Date on which the LTV of such Quarterly Term Note has been reduced to ***%, the lesser of (x) the LTV of such Quarterly Term Note on the immediately preceding Payment Date and (y) ***%.
“ Term Note Maturity Date ” shall mean either (i) with respect to a Quarterly Term Note, the Payment Date that is *** (***) calendar months after the related Conversion Date or (ii) with respect to the Initial Term Notes, the Initial Term Note Maturity Date, as applicable.
“ Term Note Monthly Interest ” shall mean, with respect to any Payment Date for: each Quarterly Term Note and the Initial Term Note, an amount equal to (a) the product of (A)(x) a fraction, the number of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (y) the Note Interest Rate applicable to such Term Note in effect for the related Interest Period and (B) the Outstanding Principal Amount of such Term Note as of the close of business on the Record Date, plus (b) any amounts described in clause (a) above, or portion thereof, previously due but not paid to such Term Note Noteholder on a prior Payment Date.
“ Term Note Monthly Principal ” shall mean with respect to each Payment Date for each Quarterly Term Note and the Initial Term Note, an amount equal to:
(i) prior to the applicable Term Note Amortization Date or any breach of an Investment Pool Collateral Performance Trigger with respect to the related Term Note Investment Pool, the lesser of:
|
(a) |
an amount equal to (x) the Term Note Available Collections minus (y) an amount equal to the sum of the portions that are allocable to such Term Note in respect of the amounts paid pursuant to clauses (i) through (iv) of Section 5.04(a) of the Indenture; and |
|
(b) |
the amount by which the Outstanding Principal Amount of such Term Note exceeds the product of (x) the Initial Term Note LTV Percentage or the Term Note LTV Percentage, as applicable, and (y) the Outstanding Receivable Principal Balance of the Eligible Facility Receivables in the related Term Note Investment Pool as of the last day of the related Collection Period, and |
(ii) after the applicable Term Note Amortization Date, an acceleration of the Notes pursuant to Section 7.02 of the Indenture or any breach of an Investment Pool Collateral Performance Trigger with respect to the related Term Note Investment Pool, an amount equal to (x) the Term Note Available Collections minus (y) an amount equal to the sum of the portions that are allocable to such Term Note in respect of the amounts paid pursuant to clauses (i) through (iv)
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of Section 5.04(a) of the Indenture on such Payment Date until such Term Notes Outstanding Principal Amount equals zero.
“ Term Note Noteholder ” shall mean the Person in whose name a Term Note is registered in the Note Register.
“ Term Note Servicing Fee ” shall mean with respect to each Payment Date the portion of the Servicing Fee payable to the Servicer that is allocable to each Term Note, and shall be an amount equal to the product of (i) 1/12th of the Servicing Fee Rate (or in the case of the Initial Payment Date for the Initial Term Notes, a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360) multiplied by (ii) the Outstanding Receivable Principal Balance of the Eligible Facility Receivables of the related Term Note Investment Pool, measured as of the last day of the Collection Period related to such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Term Noteholder ” shall mean any Person that is a Holder of a Term Note.
“ Total Assets ” shall mean any and all tangible assets and properties, including cash, securities, accounts and contract rights, accounted for as assets under GAAP (but excluding all intangible assets).
“ Total Indebtedness ” shall mean, as to Enova and its Consolidated Subsidiaries on a consolidated basis at a particular time (without duplication), the sum of (a) all funded Indebtedness for borrowed money or letters of credit and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, in each case, that by its terms matures more than one year after such date of determination, and any such Indebtedness maturing within one year from such date that is renewable or extendable at the option of Enova or its Consolidated Subsidiaries, as applicable, to a date more than one year from such date; provided that Funded Debt shall not include (i) the amount of obligations outstanding under a Permitted Receivables Financing (as defined in the Credit Agreement) on any date of determination that could be characterized as principal if such Permitted Receivables Financing (as defined in the Credit Agreement) were structured as a secured lending transaction or other than a purchase, (ii) (x) cash collateralized bonds and (y) undrawn letters of credit that are cash collateralized or backstopped, (iii) trade accounts payable and other accrued expenses accrued in the ordinary course of business, (iv) earnouts, purchase price adjustments or similar obligations that are not earned, due and payable or that are supported by third party escrow or indemnification obligations, and (v) the amount of obligations outstanding under the Senior Notes Indenture (as defined in the Credit Agreement) minus (b) unrestricted cash and Cash Equivalents as of such date minus (c) Permitted Indebtedness.
“ Transaction Documents ” shall mean the Transfer Agreement, the Receivables Purchase Agreement, the Sale Agreement, the Servicing Agreement, the Successor Servicing Agreement, the Backup Servicing Agreement, the Issuer LLC Agreement, the Transferor LLC Agreement, the Indenture, the Blocked Account Control Agreement, the Intercreditor Agreement, the Note Purchase Agreement, any Funding Request, each First Step Assignment, each Second Step Assignment, each Note and with respect to any Term Note, the related Notice of Conversion.
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“ Transfer Agreement ” shall mean the Transfer Agreement, dated as of January 15, 2016 (as amended, restated, supplemented or otherwise modified from time to time), by and among Enova and each of the Originators party thereto.
“ Transferor ” shall mean Enova Finance 5, in its capacity as the transferor pursuant to the Sale Agreement, together with its successors and permitted assigns in such capacity.
“ Transferor LLC Agreement ” shall mean the limited liability company agreement of Enova Finance 5, dated as of September 15, 2015 and amended and restated as of January 15, 2016 (as amended, restated, supplemented or otherwise modified from time to time), by CNU and Bernard J. Angelo, as further amended, restated, supplemented or otherwise modified from time to time.
“ Treasury Regulations ” shall mean the regulations, including proposed or temporary regulations, promulgated under the Internal Revenue Code. References to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.
“ Trust Indenture Act ” shall mean the Trust Indenture Act of 1939.
“ UCC ” shall mean the Uniform Commercial Code, as in effect in the State of New York or any other relevant jurisdiction.
“ United States Regulations ” shall mean 31 C.F.R. Part 357, Subpart B; 12 C.F.R. Part 615, Subparts O, R and S; 12 C.F.R. Part 987; 12 C.F.R. Part 1511; 24 C.F.R. Part 81, Subpart H; 31 C.F.R. Part 354; 18 C.F.R. Part 1314; and 24 C.F.R. Part 350.
“ Unused Fee ” shall have the meaning specified in Section 2.08 of the Note Purchase Agreement.
“ Variable Funding Note ” or “ Variable Funding Notes ” shall mean the note or notes authenticated and delivered pursuant to the Indenture, substantially in the form of Exhibit A to the Indenture.
“ Variable Funding Note Advance Rate ” shall mean 80%.
“ Variable Funding Note Amortization Date ” shall mean the earlier to occur of (a) April 15, 2019 and (b) the date on which an Event of Default occurs.
“ Variable Funding Note Available Collections ” shall mean, with respect to any Payment Date and a Variable Funding Note Investment Pool, an amount equal to the Collections received during the related Collection Period in respect of such Variable Funding Note Investment Pool.
“ Variable Funding Note Borrowing Base ” shall mean, as of any date of determination, an amount equal to the product of (a) the Variable Funding Note Advance Rate multiplied by (b) the Outstanding Receivable Principal Balance of the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool as of such date of determination.
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“ Variable Funding Note Investment Pool ” shall mean, with respect to a Quarterly Revolving Period during the Revolving Period, the Receivables that have not been allocated to a Term Note Investment Pool.
“ Variable Funding Note Maximum Principal Amount ” shall mean $75,000,000; provided , that upon the request of the Issuer, the Noteholders may agree to increase the Variable Funding Note Maximum Principal Amount to $90,000,000 in their sole and absolute discretion.
“ Variable Funding Note Monthly Interest ” shall mean, with respect to each Payment Date, an amount equal to the product of (i)(x) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (y) the Note Interest Rate in effect for the related Interest Period for the applicable Variable Funding Note and (ii) the Average Variable Funding Note Balance.
“ Variable Funding Note Monthly Principal ” shall mean, with respect to each Payment Date related to the Variable Funding Notes, an amount equal to:
(i) prior to the Variable Funding Note Amortization Date, an amount equal to the amount by which the Outstanding Principal Amount of the Variable Funding Notes exceeds (or exceeded as of the applicable Conversion Date (with respect to the final Payment Date related to a Quarterly Revolving Period)) the product of (x) 80% and (y) the Outstanding Receivable Principal Balance of the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool as of the last day of the related Collection Period, and
(ii) after the Variable Funding Note Amortization Date or an acceleration of the Notes pursuant to Section 7.02 of the Indenture has occurred, an amount equal to the Variable Funding Note Available Collections until such Variable Funding Notes Outstanding Principal Amount equals zero.
“ Variable Funding Note Noteholder ” shall mean each Initial Noteholder and any other Person that becomes a Holder of a Variable Funding Note and executes a Joinder Agreement to become a signatory to the Note Purchase Agreement in such capacity.
“ Variable Funding Note Optional Redemption Premium Rate ” shall mean, with respect to any Variable Funding Note, a percentage equal to the product of (i) 9.00% and (ii) a fraction, the numerator of which is equal to the excess of (a) 3 over (b) the number of Payment Dates from the beginning of the related Quarterly Revolving Period to and including the Optional Redemption Date, and the denominator of which is equal to 3.
“ Variable Funding Note Payment Amount ” shall mean, with respect to each Payment Date, an amount equal to the sum of (i) the Variable Funding Note Monthly Interest, (ii) the Unused Fee and (iii) any Increased Costs Amounts.
“ Variable Funding Note Purchase Price ” shall have the meaning set forth in Section 2.02 of the Note Purchase Agreement.
“ Variable Funding Note Servicing Fee ” shall mean, with respect to each Payment Date for the Variable Funding Note, the portion of the Servicing Fee payable to the Servicer that
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is allocable to the Variable Funding Note, and shall be an amount equal to the product of (a) 1/12 th of the Servicing Fee Rate (or, (i) in the case of the initial Payment Date for a Quarterly Revolving Period, a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360 and (ii) in the case of the final Payment Date for a Quarterly Revolving Period, a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360), multiplied by (ii) the daily average Outstanding Receivable Principal Balance of the Eligible Conversion Receivables of the Variable Funding Note Investment Pool, measured as of the last day of the calendar month (or in the case of the final Payment Date for a Quarterly Revolving Period, as of the Conversion Date (immediately prior to giving effect to such conversion)); such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Variable Funding Note Stated Principal Amount ” shall mean, on any date of determination, an amount equal to the aggregate amount of all Advances made during the related Quarterly Revolving Period on or prior to such date of determination with respect to the Variable Funding Note, after giving effect to any Advance to be made on such date of determination.
“ Variable Funding Note Verification Fee ” shall mean with respect to each initial Payment Date related to a Quarterly Revolving Period the portion of the Verification Fee payable to the Verification Agent that is allocable to each Variable Funding Note, and shall be an amount equal to the product of (i) the Verification Fee due and payable on such Payment Date and (ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Variable Funding Note, and the denominator of which is the aggregate Outstanding Principal Amount of all Variable Funding Notes that are Outstanding, in each case measured as of such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Verifiable Collateral Documents ” shall mean, with respect to each Serviced Receivable, the related Contract and, if applicable, the non-negotiable promissory note and any guaranty related to such Serviced Receivable, together with any other items mutually agreed upon by the Master Servicer and the Indenture Trustee.
“ Verification Agent ” shall mean First Associates, in its capacity as verification agent, or any successor thereto acceptable to the Majority Holders.
“ Verification Fee ” shall have the meaning set forth in Section 9 of the Backup Servicing Agreement.
“ Waiver Amount ” shall mean, with respect to any Collection Period, the aggregate amount of all Waiver Credits granted in respect of Eligible Receivables in all Investment Pools during such Collection Period, net of all returns of Waiver Credits previously granted in respect of Eligible Receivables that have been received in such Collection Period.
“ Waiver Credit ” shall mean, with respect to an Eligible Receivable, a one-time credit granted to the Obligor in order to re-establish goodwill due to an unsatisfactory customer service experience or to make a similar minor adjustment to an Eligible Receivable in respect of
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other administrative or timing factors, such credit to be granted to the Obligor in accordance with the Servicing Standing and the Servicing Policy.
“ Waterfall ” shall mean WN 2016-1, LLC, a Delaware limited liability company.
“ Weighted Average Fixed Interest Rate ” shall mean the Annual Percentage Rate for all outstanding Eligible Receivables (excluding the Excluded Receivables) included in an Investment Pool from the Closing Date through such date of determination, weighted on the basis of the Outstanding Receivable Principal Balance as of the Cutoff Date stated in the related Borrowing Base Certificate.
PART II. Rules of Construction
For all purposes of each Transaction Document, except as otherwise expressly provided or unless the context otherwise requires:
(1) Number . The plural as well as the singular of all terms defined herein shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined in such certificate or other document
(2) Accounting Terms . All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” or “GAAP” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation;
(3) Changes in GAAP . If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in the Transaction Documents, and the Master Servicer, the Issuer, the Transferor or the Indenture Trustee, at the direction of the Majority Holders, shall so request, the Master Servicer, the Issuer, the Transferor and the Indenture Trustee shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that , until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Master Servicer shall provide to the Issuer, the Transferor and the Indenture Trustee financial statements and other documents required under the Transaction Documents or as reasonably requested under the Transaction Documents setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP; provided , however , if the Master Servicer, the Issuer, the Transferor and the Indenture Trustee are not able to agree to an amendment of such ratio or requirement by the thirtieth (30th) day after the receipt by the applicable party of such request, then from and after such thirtieth (30th) day, (i) none of the Master Servicer, the Issuer, the Transferor and the Indenture Trustee shall be required to negotiate in good faith in respect of such change in GAAP, and (ii) such ratio or requirement shall be computed in accordance with the Transaction Documents in conformity with GAAP as then in effect as of the Closing Date. Notwithstanding anything to the contrary herein, all leases of any Person that are or would be characterized as operating leases in accordance with GAAP immediately prior to the Closing Date (wither or not such operating leases were in effect on such date) shall continue to be accounted for as operating leases (and not as capital leases)
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for purposes of this rule of construction regardless of any change in GAAP following the Closing Date that would otherwise require such leases to be re-characterized as capital leases.
(4) UCC . Unless the context otherwise requires, terms defined in the New York UCC and not otherwise defined herein shall have the meanings set forth in the New York UCC;
(5) Hereof . All references to designated “Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of the related Transaction Document as originally executed. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to the respective agreement as a whole and not to any particular Article, Section or other subdivision;
(6) Beneficial Interest . Any reference in the Transaction Documents to a “beneficial interest” in a security also shall mean, unless the context otherwise requires, a security entitlement with respect to such security, and any reference herein to a “beneficial owner” or “beneficial holder” of a security also shall mean, unless the context otherwise requires, the holder of a security entitlement with respect to such security. Any reference in the Transaction Documents to money or other property that is to be deposited in or is on deposit in a securities account shall also mean that such money or other property is to be credited to, or is credited to, such securities account, and any reference herein or in any Transaction Document to money that is to be credited to or is credited to a deposit account shall also mean that such money is to be deposited in, or is on deposit in, such deposit account;
(7) Amendments . Any agreement, instrument or statute defined or referred to in the Transaction Documents or in any instrument or certificate delivered in connection herewith shall mean such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein;
(8) Successors . References to a Person are also to its permitted successors and assigns;
(9) Or . Unless the context otherwise requires, “or” is not exclusive;
(10) Including . “Including” and words of similar import will be deemed to be followed by “without limitation”; and
(11) Time Periods . Unless otherwise stated, in the computation of a period of time from a specified date to a later specified date, the word “from” shall mean “from and including” and the words “to” and “until” each shall mean “to but excluding.”
(12) Lien . Unless otherwise stated, references herein and the other Transaction Documents to the priority of the Liens held by the Indenture Trustee or the Noteholders or representations and warranties or covenants prohibiting the creation of Liens by the Issuer shall, in each case, be qualified by, and subject to, the existence of Permitted Liens (which, for the avoidance of doubt, shall be permitted hereunder and the other Transaction Documents).
PART III. Notice Addresses and Procedures
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All requests, demands, directions, consents, waivers, notices, authorizations and communications provided or permitted under any Transaction Document to be made upon, given or furnished to or filed with the Transferor, the Master Servicer, each Asset Servicer, the Verification Agent, the Backup Servicer, the Administrative Agent, the Note Registrar, the Intercreditor Agent, the Paying Agent, the Securities Intermediary, Jefferies, FSLF, Fortress, Waterfall, the other Noteholders, the Indenture Trustee, the Issuer or the Custodian shall be in writing, personally delivered, sent by facsimile or email, in each case with a copy to follow via first class mail or mailed by certified mail-return receipt requested, and shall be deemed to have been duly given upon receipt:
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(a) |
in the case of the Seller or any Originator, at the following address: |
Enova International, Inc.
175 West Jackson Boulevard
Suite 1000
Chicago, IL 60606
Attention: Lisa M. Young, General Counsel
Telephone No.: (312) 568-4200
E-mail: lyoung@enova.com
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(b) |
in the case of the Transferor, at the following address: |
Enova Finance 5, LLC
175 West Jackson Boulevard
Suite 1000
Chicago, IL 60606
Attention: Lisa M. Young, General Counsel
Telephone No.: (312) 568-4200
E-mail: lyoung@enova.com
with a copy to:
Enova International, Inc.
175 West Jackson Boulevard
Suite 1000
Chicago, IL 60606
Attention: Lisa M. Young, General Counsel
Telephone No.: (312) 568-4200
E-mail: lyoung@enova.com
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(c) |
in the case of the Issuer, at the following address: |
EFR 2016-1, LLC
175 West Jackson Boulevard
Suite 1000
Chicago, IL 60606
Attention: Lisa M. Young, General Counsel
Telephone No.: (312) 568-4200
50
EAST\146409251.8
with a copy to:
Enova International, Inc.
175 West Jackson Boulevard
Suite 1000
Chicago, IL 60606
Attention: Lisa M. Young, General Counsel
Telephone No.: (312) 568-4200
E-mail: lyoung@enova.com
|
(d) |
in the case of the Master Servicer, the initial Asset Servicer, or the Custodian, at the following address: |
NetCredit Loan Services, LLC
175 West Jackson Boulevard
Suite 1000
Chicago, IL 60606
Attention: Lisa M. Young, General Counsel
Telephone No.: (312) 568-4200
E-mail: lyoung@enova.com
with a copy to:
Enova International, Inc.
175 West Jackson Boulevard
Suite 1000
Chicago, IL 60606
Attention: Lisa M. Young, General Counsel
Telephone No.: (312) 568-4200
E-mail: lyoung@enova.com
|
(e) |
in the case of Jefferies, at the following address: |
Jefferies Funding LLC
520 Madison Avenue
New York, NY 10022
Attention: General Counsel
Facsimile: (646) 786-5691
Telephone No.: (212) 284-2300
|
(f) |
in the case of the Backup Servicer and the Verification Agent, at the following address |
First Associates Loan Servicing, LLC
15373 Innovation Drive
San Diego, CA 92128
51
EAST\146409251.8
Telephone No.: (631) 243-2516
E-mail: lchiavaro@1stassociates.com
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(g) |
in the case of the Indenture Trustee, the Intercreditor Agent, the Paying Agent, the Note Registrar and the Securities Intermediary, at the following address: |
Bankers Trust Company
453 7th Street
Des Moines, Iowa 50309
Attn: Corporate Trust Department
Telephone No.: (855) 829-8068
|
(h) |
in the case of FSLF and Fortress, at the following address: |
Fortress Investment Group
1345 Avenue of the Americas
New York, New York 10105
Attention: ***
Facsimile: ***
Telephone: ***
E-mail: ***
|
(i) |
in the case of Waterfall, at the following address: |
WN 2016-1, LLC
1140 Avenue of Americas
New York, NY 10036
Attn: ***
Telephone No.: ***
The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee and the Indenture Trustee shall likewise promptly transmit any notice received by it from the Noteholders to the Issuer.
With respect to any Monthly Servicing Report sent to the Indenture Trustee pursuant to Section 3.03 of the Servicing Agreement, the Master Servicer shall not be required to send a copy of such communication via first class mail or mailed by certified mail-return receipt requested unless requested by the Indenture Trustee and in the absence of any such request, any email or facsimile of any Monthly Servicing Report otherwise sent in accordance with the instructions above shall be deemed to have been duly delivered upon receipt thereof by the Indenture Trustee.
Where any Transaction Document provides for notice to Noteholders of any condition or event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if it is in writing and mailed, first-class, postage prepaid to each Noteholder affected by such condition or event, at such Person’s address as it appears on the Note Register not later than the latest date, and not earlier than the earliest date, prescribed in such Transaction Document for the giving of such notice. If notice to Noteholders is given by mail, neither the failure to mail such notice nor
52
EAST\146409251.8
any defect in any notice so mailed to any particular Noteholders shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given regardless of whether such notice is in fact actually received.
53
EAST\146409251.8
Exhibit 4.10
October 25, 2017
This FIRST AMENDMENT, dated as of the date specified above (this “ Amendment ”), is by and among EFR 2016-1, LLC (the “ Issuer ”) and Bankers Trust Company, in its capacity as indenture trustee and securities intermediary (the “ Indenture Trustee ”). Whenever used in this Amendment and unless the context requires a different meaning, capitalized terms used herein and not otherwise expressly defined herein shall have the meanings assigned to such terms in Part I of Appendix A to the Amended and Restated Indenture, dated as of October 20, 2017 by and between the Issuer and the Indenture Trustee (as amended, restated, supplemented or otherwise modified, the “ Indenture ”).
WHEREAS, the Issuer and the Indenture Trustee desire to amend the Indenture in certain respects; and
WHEREAS, all of the Variable Funding Note Noteholders and all of the Note Owners (the “ Consenting Investors ”) have executed consents (the “ Investor Consents ”) to this Amendment.
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendments to Indenture.
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i. |
The Indenture is, effective as of the date hereof, hereby amended to delete the stricken text (indicated textually in the same manner as the following example:
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2. Limited Waiver . The Issuer and the Indenture Trustee (on its own behalf and on behalf of the Consenting Investors) hereby agree that, notwithstanding Section 10.02 of the Indenture, the Issuer shall not be required to deliver an Issuer Tax Opinion in connection with this Amendment.
3. Reference to and Effect Upon the Transaction Documents . Except as specifically amended hereby, all terms, conditions, covenants, representations and warranties contained in the Transaction Documents, and all rights of the parties thereto and all of the obligations under the Transaction Documents, shall remain in full force and effect.
+ |
Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Securities and Exchange Commission. |
*** |
Indicates confidential material redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the redacted material. |
Exhibit 4.10
4 . GOVERNING LAW . THIS AMENDMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW, 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.
5 . Counterparts . This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Signatures of the parties hereto transmitted by facsimile or by electronic media or similar means shall be deemed to be their original signature for all purposes.
6. Severability . The invalidity, illegality, or unenforceability of any provision in or obligation under this Amendment in any jurisdiction shall not affect or impair the validity, legality, or enforceability of the remaining provisions or obligations under this Amendment or of such provision or obligation in any other jurisdiction. If feasible, any such offending provision shall be deemed modified to be within the limits of enforceability or validity; provided that if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Amendment in all other respects shall remain valid and enforceable.
7. Further Assurances . The parties hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.
8. Headings . The headings of this Amendment are for convenience of reference and shall not form part of, or affect the interpretation of, this Amendment.
9. Consent to Amendment . The Indenture Trustee hereby certifies, as of the date hereof, that:
(i) pursuant to Section 4.04(m) of the Indenture, the Indenture Trustee is the Note Registrar for the Registered Notes;
(ii) as of the date hereof, there are no more than ten separate Variable Funding Note Noteholders registered in the Note Register and no more than ten separate Term Note Owners (including for such purpose the maximum number of Term Note Partners (as defined in the Certificate of Term Note Owner)) listed in the register of Note Interests maintained by the Indenture Trustee pursuant to Section 4.04(n) of the Indenture; and
(iii) the Consenting Investors hold in the aggregate all of the Outstanding Principal Amount of all Outstanding Notes.
The parties hereto acknowledge that, in making the certifications in the foregoing clauses (ii) and (iii), the Indenture Trustee has relied solely and exclusively (without any duty to make further inquiry, including any duty to inquire whether a holder holds for the account of one or more other persons) on (A) the Certificates of Variable Funding Note Noteholders and Certificates of Term Note Owners received by it pursuant to the terms of the Indenture and as contemplated therein and (B) the Investor Consents.
(iv) [Remainder of Page Intentionally Left Blank; Signature Pages Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on October 2, 2017 and effective as of the date first written above.
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EFR 2016-1, LLC |
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/s/ Lisa M. Young |
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Name: |
Lisa M. Young |
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Title: |
Vice President and Secretary |
[Signature Page to First Amendment to Indenture]
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BANKERS TRUST COMPANY, as |
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Indenture Trustee and not in its |
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individual capacity |
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/s/ Minda Barr |
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Name: |
Minda Barr |
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Title: |
Vice President, Institutional |
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Support Service Supervisor |
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BANKERS TRUST COMPANY, as |
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Indenture Trustee and not in its |
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individual capacity |
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/s/ Minda Barr |
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Name: |
Minda Barr |
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Title: |
Vice President, Institutional |
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Support Service Supervisor |
[Signature Page to First Amendment to Indenture]
EXECUTION VERSION
as Indenture Trustee and Securities Intermediary
EAST\
146409251.8
147895167.4
TABLE OF CONTENTS
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Page |
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DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION |
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Section 1.01 |
Definitions |
2 |
Section 1.02 |
Compliance Certificates and Opinions |
2 |
Section 1.03 |
Form of Documents Delivered to Indenture Trustee |
3 |
Section 1.04 |
Acts of Noteholders |
3 |
Section 1.05 |
Notices, etc. to Indenture Trustee and Issuer |
5 |
Section 1.06 |
Notices to Noteholders, Waiver |
5 |
Section 1.07 |
Effect of Headings and Table of Contents |
6 |
Section 1.08 |
Successors and Assigns |
6 |
Section 1.09 |
Severability of Provisions |
6 |
Section 1.10 |
Benefits of Indenture |
6 |
Section 1.11 |
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial |
6 |
Section 1.12 |
Counterparts |
7 |
Section 1.13 |
[RESERVED] |
7 |
Section 1.14 |
Legal Holidays |
7 |
ARTICLE II |
||
COLLATERAL |
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Section 2.01 |
Recording, Etc |
8 |
Section 2.02 |
[RESERVED] |
9 |
Section 2.03 |
Suits to Protect the Collateral |
9 |
Section 2.04 |
Purchaser Protected |
9 |
Section 2.05 |
Powers Exercisable by Receiver or Indenture Trustee |
10 |
Section 2.06 |
Determinations Relating to Collateral |
10 |
Section 2.07 |
Release of All Collateral |
10 |
Section 2.08 |
Certain Actions by Indenture Trustee |
11 |
Section 2.09 |
Opinions as to Collateral |
11 |
Section 2.10 |
Certain Commercial Law Representations and Warranties |
11 |
Section 2.11 |
The Securities Intermediary |
12 |
ARTICLE III |
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NOTE FORMS |
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Section 3.01 |
Forms Generally |
15 |
Section 3.02 |
Forms of Notes |
15 |
-i-
TABLE OF CONTENTS
(continued)
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Page |
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Form of Indenture Trustee’s Certificate of Authentication |
15 |
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Section 3.04 |
Notes Issuable in the Form of a Global Note |
16 |
Section 3.05 |
Beneficial Ownership of Global Notes |
17 |
Section 3.06 |
Notices to Depository |
18 |
Section 3.07 |
CUSIP Numbers |
18 |
Section 3.08 |
Regulation S Global Notes |
19 |
Section 3.09 |
Special Transfer Provisions |
20 |
ARTICLE IV |
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THE NOTES |
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Section 4.01 |
General Title; General Limitations; Terms of Notes |
23 |
Section 4.02 |
Denominations |
23 |
Section 4.03 |
Execution, Authentication and Delivery and Dating |
23 |
Section 4.04 |
Registration, Transfer and Exchange |
24 |
Section 4.05 |
Mutilated, Destroyed, Lost and Stolen Notes |
34 |
Section 4.06 |
Payment of Principal and Interest; Payment Rights Preserved; Withholding Taxes |
34 |
Section 4.07 |
Persons Deemed Owners |
35 |
Section 4.08 |
Cancellation |
35 |
Section 4.09 |
Termination |
36 |
Section 4.10 |
Issuance of Notes |
36 |
Section 4.11 |
Variable Funding Note |
37 |
Section 4.12 |
Term Notes |
38 |
ARTICLE V |
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ISSUER ACCOUNTS; INVESTMENTS; ALLOCATIONS; APPLICATION |
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Section 5.01 |
Collections |
41 |
Section 5.02 |
Collection Account; Distributions from Collection Account |
41 |
Section 5.03 |
Investment of Funds in the Collection Account |
42 |
Section 5.04 |
Application of Available Collections on Deposit in the Collection Account |
43 |
Section 5.05 |
Determination of LIBOR |
45 |
ARTICLE VI |
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SATISFACTION AND DISCHARGE; CANCELLATION OF NOTES HELD BY THE ISSUER |
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Section 6.01 |
Satisfaction and Discharge of Indenture |
47 |
-ii-
TABLE OF CONTENTS
(continued)
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Page |
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Application of Money |
47 |
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Section 6.03 |
Cancellation of Notes Held by the Issuer |
47 |
ARTICLE VII |
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EVENTS OF DEFAULT AND REMEDIES |
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Section 7.01 |
Events of Default |
48 |
Section 7.02 |
Acceleration of Maturity |
50 |
Section 7.03 |
Indenture Trustee May File Proofs of Claim |
50 |
Section 7.04 |
Indenture Trustee May Enforce Claims Without Possession of Notes |
51 |
Section 7.05 |
Application of Money Collected |
51 |
Section 7.06 |
Indenture Trustee May Elect to Hold the Collateral |
51 |
Section 7.07 |
Sale of Collateral for Accelerated Notes |
51 |
Section 7.08 |
Noteholders Have the Right to Direct the Time, Method and Place of Conducting Any Proceeding for Any Remedy Available to the Indenture Trustee |
51 |
Section 7.09 |
Limitation on Suits |
52 |
Section 7.10 |
Unconditional Right of Noteholders to Receive Principal and Interest; Limited Recourse |
52 |
Section 7.11 |
Restoration of Rights and Remedies |
52 |
Section 7.12 |
Rights and Remedies Cumulative |
53 |
Section 7.13 |
Delay or Omission Not Waiver |
53 |
Section 7.14 |
Control by Noteholders |
53 |
Section 7.15 |
Waiver of Past Defaults |
53 |
Section 7.16 |
Undertaking for Costs |
54 |
Section 7.17 |
Waiver of Stay or Extension Laws |
54 |
ARTICLE VIII |
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THE INDENTURE TRUSTEE |
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Section 8.01 |
Certain Duties and Responsibilities |
55 |
Section 8.02 |
Notice of Defaults |
56 |
Section 8.03 |
Certain Rights of Indenture Trustee |
56 |
Section 8.04 |
Not Responsible for Recitals or Issuance of Notes |
58 |
Section 8.05 |
May Hold Notes |
58 |
Section 8.06 |
Money Held in Trust |
58 |
Section 8.07 |
Compensation and Reimbursement; Limit on Compensation Reimbursement and Indemnity |
58 |
-iii-
TABLE OF CONTENTS
(continued)
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Page |
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[RESERVED] |
59 |
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Section 8.09 |
Corporate Indenture Trustee Required; Eligibility |
59 |
Section 8.10 |
Resignation and Removal; Appointment of Successor |
59 |
Section 8.11 |
Acceptance of Appointment by Successor |
60 |
Section 8.12 |
Merger, Conversion, Consolidation or Succession to Business |
61 |
Section 8.13 |
[RESERVED] |
61 |
Section 8.14 |
Appointment of Authenticating Agent |
61 |
Section 8.15 |
Tax Returns |
63 |
Section 8.16 |
Representations, Warranties and Covenants of the Indenture Trustee |
63 |
Section 8.17 |
Appointment of Co-Trustee or Separate Indenture Trustee |
64 |
ARTICLE IX |
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LISTS, REPORTS BY INDENTURE |
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TRUSTEE AND ISSUER |
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Section 9.01 |
Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders |
66 |
Section 9.02 |
Preservation of Information; Communications to Noteholders |
66 |
ARTICLE X |
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AMENDMENTS |
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Section 10.01 |
Amendments Without Consent of Noteholders |
67 |
Section 10.02 |
Amendments with Consent of Noteholders |
67 |
Section 10.03 |
Execution of Amendments |
69 |
Section 10.04 |
Effect of Amendments |
69 |
Section 10.05 |
Reference in Notes |
69 |
ARTICLE XI |
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER |
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Section 11.01 |
Payment of Principal and Interest |
71 |
Section 11.02 |
Financial Statements and Reports and Other Information |
71 |
Section 11.03 |
Maintenance of Office or Agency |
72 |
Section 11.04 |
Certain Negative Covenants |
72 |
Section 11.05 |
Litigation |
73 |
Section 11.06 |
Money for Note Payments to Be Held in Trust |
73 |
Section 11.07 |
Statement as to Compliance |
74 |
Section 11.08 |
Legal Existence |
75 |
Section 11.09 |
Further Instruments and Acts |
75 |
Section 11.10 |
Compliance with Laws |
75 |
-iv-
TABLE OF CONTENTS
(continued)
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Page |
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Notice of Events of Default |
75 |
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Section 11.12 |
Sales of Receivables |
75 |
Section 11.13 |
Investment Company Act |
75 |
Section 11.14 |
Volcker Rule |
76 |
ARTICLE XII |
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OPTIONAL REPURCHASE OF NOTES |
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Section 12.01 |
Optional Redemption or Release |
77 |
Section 12.02 |
Release of Receivables |
78 |
ARTICLE XIII |
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MISCELLANEOUS |
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Section 13.01 |
No Petition |
79 |
Section 13.02 |
Obligations |
79 |
Section 13.03 |
[RESERVED] |
79 |
Section 13.04 |
Tax Treatment |
79 |
Section 13.05 |
[Reserved] |
79 |
Section 13.06 |
Alternate Payment Provisions |
79 |
Section 13.07 |
Termination of Issuer |
79 |
Section 13.08 |
Final Distribution |
80 |
Section 13.09 |
Termination Distributions |
80 |
Section 13.10 |
Third Party Beneficiaries |
80 |
Section 13.11 |
Notices |
81 |
Section 13.12 |
Force Majeure |
81 |
Section 13.13 |
Patriot Act |
81 |
EXHIBITS
EXHIBIT A |
FORM OF VARIABLE FUNDING NOTE |
FORM OF NOTICE OF CONVERSION |
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-v-
TABLE OF CONTENTS
(continued)
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Page |
EXHIBIT D |
FORM OF BORROWING BASE CERTIFICATE |
EXHIBIT E |
FORM OF CERTIFICATE OF VARIABLE FUNDING NOTE NOTEHOLDER |
EXHIBIT F |
FORM OF CERTIFICATE OF TERM NOTE OWNER |
EXHIBIT G |
[FORM OF] TEMPORARY REGULATION S GLOBAL NOTE |
EXHIBIT H |
[FORM OF] PERMANENT REGULATION S GLOBAL NOTE |
EXHIBIT I |
[FORM OF] REGULATION S CERTIFICATE |
EXHIBIT J |
[FORM OF] NON-U.S. CERTIFICATE |
APPENDIX A |
DEFINITIONS/RULES OF CONSTRUCTION/NOTICE INFORMATION |
-vi-
This AMENDED AND RESTATED INDENTURE, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, this “
Indenture
”), by and between EFR 2016-1, LLC (the “
Issuer
”), having its principal office at 175 W Jackson Blvd, Suite 1000, Chicago, Illinois
60606,
60604,
and Bankers Trust Company, in its capacity as Indenture Trustee (the “
Indenture Trustee
”), and as initial Securities Intermediary (the “
Securities Intermediary
”).
WHEREAS, the Issuer duly authorized the execution and delivery of this Indenture to provide for the issuance of its Notes; and
WHEREAS, the Issuer agrees that everything necessary to make this Indenture a valid and legally binding agreement of the Issuer, in accordance with its terms, has been done.
NOW, THEREFORE, to set forth and establish the terms and conditions upon which the Notes are to be authenticated, issued and delivered, and in consideration of the premises and the mutual agreements herein contained, the purchase of Notes by the Holders thereof and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, for the equal and proportionate benefit of all Holders of the Notes, as the case may be, the parties hereto intending to be legally bound hereby agree as follows:
The Issuer hereby grants to the Indenture Trustee, for the benefit and security of the Noteholders and the Indenture Trustee, a first priority security interest in all of its right, title and interest, whether now owned or hereafter acquired, in, to and under the Issuer Estate and all accounts, certificates of deposit, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property (including securities accounts and financial assets credited thereto), letter-of-credit rights, money and supporting obligations, including (a) all ownership interests in the Receivables, (b) all monies received with respect to the Receivables, (c) any and all documents that the Issuer (or its designee) keeps on file relating to the Receivables or the related Obligors, (d) all rights, remedies, powers, privileges and claims of the Issuer under or with respect to the Transaction Documents (whether arising pursuant to the terms of any such agreement or otherwise available to the Issuer at law or in equity), including the rights of the Issuer to enforce the Transaction Documents, and to give or withhold any and all consents, requests, notices, directions, approvals, extensions or waivers under or with respect to any such agreement, (e) the Collection Account, including all amounts and property from time to time held therein or credited thereto, (f) all present and future claims, demands, causes and choses in action in respect of action in respect of any or all of the foregoing, (g) all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all cash and non-cash proceeds, and other property consisting of, arising from or relating to all or any part of any of the foregoing and (h) all other assets owned or acquired by the Issuer.
The property described in the preceding sentence is collectively referred to as the “ Collateral .” The Security Interest in the Collateral is granted to secure the Notes (and the related obligations under this Indenture), equally and ratably without prejudice, priority or distinction
between any Note by reason of difference in time of issuance or otherwise, except as otherwise expressly provided in this Indenture or in any Note issued pursuant hereto, and to secure (i) the payment of all amounts due on such Notes in accordance with their terms, (ii) the payment of all other sums payable by the Issuer under this Indenture or the Notes and (iii) compliance by the Issuer with the provisions of this Indenture or the Notes. This Indenture, as it may be supplemented, is a security agreement within the meaning of the UCC.
The Indenture Trustee acknowledges the grant of such Security Interest, and accepts the Collateral in trust hereunder in accordance with the provisions hereof and agrees to perform the duties herein such that the interests of the Noteholders may be adequately and effectively protected.
The obligation of the Issuer to make payments of principal, interest and other amounts on the Notes is limited in recourse as set forth in Section 7.10 .
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions . Whenever used in this Indenture and unless the context requires a different meaning, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in Part I of Appendix A. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Indenture.
Section 1.02 Compliance Certificates and Opinions . Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate executed by the Transferor or the Issuer, stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with or waived and (ii) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with or waived, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
It will not be necessary to deliver the Officer’s Certificate and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or before the time of authentication and delivery of any Note issued hereunder. The Indenture Trustee may rely, as to authorization by the Issuer of any Notes, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the delivery of the documents required pursuant to Sections 4.10, 4.11 and 4.12 , as applicable, in connection with the authentication and delivery of any Note issued hereunder.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (except for the statement required by Section 11.07 ) will include:
-2-
(a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that such individual has made such examination or investigation as is reasonably necessary to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
Section 1.03 Form of Documents Delivered to Indenture Trustee . In any case where several matters are required to be certified by, or covered by an opinion of, one or more specified Persons, one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to the other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless the Issuer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations are erroneous. Any such certificate or opinion of, or representation by, counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, the Issuer stating that the information with respect to such factual matters is in the possession of the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
Section 1.04 Acts of Noteholders . (a) Any request, demand, authorization, direction, notice, consent, waiver or other action (collectively, an “ Action ”) provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such Action will become effective when such instrument or instruments or record are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments and any such record (and the Action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent, will be sufficient for any purpose of this Indenture and (subject to Section 8.01 ) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 1.04 .
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness to such execution or by the certificate of any
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notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or limited liability company or a member of a partnership, on behalf of such corporation or limited liability company or partnership, such certificate or affidavit will also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Indenture Trustee deems sufficient.
(c) The ownership of Notes will be proved solely by the Note Register, and the beneficial ownership of any interest in Global Notes will be proved solely by the Book Entry System.
(d) The fact and date of execution of any such instrument or writing, the authority of the Person executing the same and the principal amount may also be proved in any other manner which the Indenture Trustee deems sufficient; and the Indenture Trustee may in any instance require further proof with respect to any of the matters referred to in this Section 1.04 .
(e) If the Issuer will solicit from the Holders any Action, the Issuer may, at its option, by an Officer’s Certificate, fix in advance a record date for the determination of Holders entitled to give such Action, but the Issuer will have no obligation to do so. If the Issuer does not so fix a record date, such record date will be the later of 30 days before the first solicitation of such Action or the date of the most recent list of Noteholders furnished to the Indenture Trustee pursuant to Section 9.01 before such solicitation. Such Action may be given before or after the record date, but only the Holders of record at the close of business on the record date will be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Notes Outstanding have authorized or agreed or consented to such Action, and for that purpose the Notes Outstanding will be computed as of the record date; provided , that no such authorization, agreement or consent by the Holders on the record date will be deemed effective unless it will become effective pursuant to the provisions of this Indenture not later than six months after the record date.
(f) Any Action by the Holder of any Note will bind the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon whether or not notation of such Action is made upon such Note.
(g) Without limiting the foregoing, a Holder entitled hereunder to take any Action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Any notice given or Action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.
(h) Without limiting the generality of the foregoing, unless otherwise specified pursuant to Section 4.01 , a Holder, including a Depository that is the Holder of a Global Note, may make, give or take, by a proxy or proxies duly appointed in writing, any Action provided in
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this Indenture to be made, given or taken by Holders, and a Depository that is the Holder of a Global Note may provide its proxy or proxies to the beneficial owners of interests in or security entitlements to any such Global Note through such Depository’s standing instructions and customary practices.
(i) The Issuer may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in or security entitlements to any Global Note held by a Depository entitled under the procedures of such Depository to make, give or take, by a proxy or proxies duly appointed in writing, any Action provided in this Indenture to be made, given or taken by Holders. If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such Action, whether or not such Holders remain Holders after such record date. No such Action shall be valid or effective if made, given or taken more than 90 days after such record date.
Section 1.05 Notices, etc. to Indenture Trustee and Issuer . Any Action of Noteholders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (i) the Indenture Trustee by any Noteholder or by the Issuer will be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid or sent via electronic transmission to the Indenture Trustee at its Corporate Trust Office, (ii) or the Issuer by the Indenture Trustee or by any Noteholder will be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid or sent via electronic transmission, to the Issuer addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Indenture Trustee by the Issuer.
Section 1.06 Notices to Noteholders, Waiver . Where this Indenture, or any Registered Note provides for notice to Noteholders of any event, such notice will be sufficiently given (unless otherwise herein or in such Registered Note expressly provided) if in writing and mailed, first-class postage prepaid, sent by facsimile, sent by electronic transmission or personally delivered to each Holder of a Registered Note affected by such event, at such Noteholder’s address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Registered Noteholders is given by mail, facsimile, electronic transmission or delivery neither the failure to mail, send by facsimile, send by electronic transmission or deliver such notice, nor any defect in any notice so mailed, to any particular Noteholders will affect the sufficiency of such notice with respect to other Noteholders and any notice that is mailed, sent by facsimile, sent by electronic transmission or delivered in the manner herein provided shall conclusively have been presumed to have been duly given.
Where this Indenture or any Registered Note provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver will be the equivalent of such notice. Waivers of notice by Noteholders will be filed with the Indenture Trustee, but such filing will not be a condition precedent to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or otherwise, it will be impractical to mail notice of any event to any Holder of a Registered Note when such notice is required to be given pursuant to any provision of this
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Indenture, then any method of notification as will be satisfactory to the Indenture Trustee and the Issuer will be deemed to be a sufficient giving of such notice.
Section 1.07 Effect of Headings and Table of Contents . The Article and Section headings herein and the Table of Contents are for purposes of reference only and shall not affect the meaning or interpretation of any provision hereof.
Section 1.08 Successors and Assigns . All covenants and agreements in this Indenture by the Issuer will bind its successors and assigns, whether so expressed or not. All covenants and agreements of the Indenture Trustee in this Indenture shall bind its successors, co-trustees and agents of the Indenture Trustee, whether so expressed or not.
Section 1.09 Severability of Provisions . If any one or more of the covenants, agreements, provisions or terms of this Indenture or the Notes shall for any reason whatsoever be held invalid, illegal or unenforceable then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, and terms of this Indenture or the Notes and shall in no way affect the validity, legality or enforceability of such remaining covenants, agreements, provisions or terms of this Indenture or the Notes.
Section 1.10 Benefits of Indenture . Nothing in this Indenture or in any Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and to the extent expressly provided herein, any Authenticating Agent or Paying Agent, the Note Registrar, any other party secured hereunder and any other Person with an ownership interest in any part of the Issuer Estate and the Holders of Notes (or such of them as may be affected thereby), any benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 1.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial .
(a) THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW, 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.
(b) Each party hereto hereby consents and agrees that the State or federal courts located in the Borough of Manhattan in New York City shall have exclusive jurisdiction to hear and determine any claims or disputes between them pertaining to this Indenture or to any matter arising out of or relating to this Indenture; provided , that each party hereto acknowledges that any appeals from those courts may have to be heard by a court located outside of the Borough of Manhattan in New York City; provided , further , that nothing in this Indenture shall be deemed or operate to preclude the Indenture Trustee from bringing suit or taking other legal action in any other jurisdiction to realize on the Receivables or any security for the obligations of the Issuer arising hereunder or to enforce a judgment or other court order in favor of the Indenture Trustee. Each party hereto submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each party hereto hereby waives any objection that such party may have based upon lack of personal jurisdiction, improper venue or forum non conveniens and
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hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each party hereto hereby waives personal service of the summons, complaint and other process issued in any such action or suit and agrees that service of such summons, complaint, and other process may be made by registered or certified mail addressed to such party at its address, and that service so made shall be deemed completed upon the earlier of such party’s actual receipt thereof or three (3) days after deposit in the United States mail, proper postage prepaid. Nothing in this Section 1.11 shall affect the right of any party hereto to serve legal process in any other manner permitted by law.
(c) Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable State and federal laws to apply, the parties desire that their disputes be resolved by a judge applying such applicable laws. THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, OR IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 1.12 Counterparts . This Indenture may be executed in two (2) or more counterparts (and by different parties on separate counterparts), each of which shall be deemed an original, and all of which when taken together shall constitute one and the same instrument.
Section 1.14 Legal Holidays . In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.
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(a) The Issuer intends the Security Interest granted pursuant to this Indenture in favor of the Indenture Trustee to be prior to all other liens in respect of the Collateral. The Issuer will take all actions necessary to maintain a perfected first priority lien on and Security Interest in the Collateral in favor of the Indenture Trustee.
(b) The Issuer shall cause each item of the Collateral to be Delivered, and the Indenture Trustee or the Custodian on its behalf, shall hold each item of the Collateral as Delivered, separate and apart from all other property held by the Indenture Trustee, or the Custodian on its behalf, in accordance with the Indenture Trustee’s or the Custodian’s, as applicable, internal policies and procedures. To the extent that such of the Collateral as constitutes a deposit account or a securities account is maintained with Bankers Trust, Bankers Trust hereby makes the agreements required under the UCC in order for such deposit account or securities account to be controlled by Bankers Trust. Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not hold any part of the Collateral through an agent or nominee except as expressly permitted by this Section 2.01(b) .
(c) The Issuer will from time to time execute, authorize and deliver all such supplements and amendments hereto and all such financing statements, amendments thereto, instruments of further assurance and other instruments, all as prepared by the Issuer, and will take such other action reasonably necessary or advisable to:
(i) grant the Security Interest more effectively in all or any portion of the Collateral;
(ii) maintain or preserve the Security Interest (and the priority thereof) created by this Indenture or carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any grant made or to be made by this Indenture;
(iv) enforce the Receivables and each other instrument or agreement designated for inclusion in the Collateral;
(v) preserve and defend title to the Collateral and the rights of the Indenture Trustee in the Collateral against the claims of all persons and parties; or
(vi) pay all taxes or assessments levied or assessed upon the Collateral when due.
(d) The Issuer will from time to time promptly pay and discharge all UCC recording and filing fees, charges and taxes relating to this Indenture, any amendments hereto and any other instruments of further assurance.
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(e) Without limiting the generality of Section 2.01(b) or (c) :
(i) The Issuer will cause this Indenture, all amendments and supplements hereto and all financing statements and all amendments to such financing statements and any other necessary documents covering the Indenture Trustee’s right, title and interest in and to the Collateral to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Indenture Trustee in and to all property comprising the Collateral. The Issuer will deliver to the Indenture Trustee file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, promptly when available following such recording, registration or filing. The Issuer hereby authorizes the filing of financing statements (and amendments of financing statements) that name the Issuer as debtor and the Indenture Trustee as secured party and that cover all personal property of the Issuer; provided , however , that the Indenture Trustee shall have no obligation to file the financing statements or amendments thereto. Such financing statements may describe as the collateral covered thereby “all assets of the debtor, whether now owned or hereafter acquired” or words to that effect notwithstanding that such collateral description may be broader in scope than the collateral described herein. The Issuer also hereby ratifies the filing of any such financing statements (or amendments of financing statements) that were filed prior to the execution hereof.
(ii) The Issuer shall not change its name or its type or jurisdiction of organization unless it has first (A) made all filings and taken all actions in all relevant jurisdictions under the applicable UCC and other applicable law as are necessary to continue and maintain the first priority perfected Security Interest of the Indenture Trustee in the Collateral, and (B) delivered to the Indenture Trustee an Opinion of Counsel to the effect that all necessary filings have been made under the applicable UCC in all relevant jurisdictions as are necessary to continue and maintain the first priority perfected Security Interest of the Indenture Trustee in the Collateral.
Section 2.03 Suits to Protect the Collateral . Subject to the provisions of this Indenture, the Indenture Trustee will have power to institute and to maintain such suits and proceedings as it may deem expedient or as it may be directed by the Majority Holders, to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of this Indenture, and such suits and proceedings as the Indenture Trustee may deem expedient to preserve or protect the interests of the Noteholders and the interests of the Indenture Trustee in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Security Interest or be prejudicial to the interests of the Noteholders or the Indenture Trustee).
Section 2.04 Purchaser Protected . In no event will any purchaser in good faith of any property purported to be released hereunder be bound to ascertain the authority of the
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Indenture Trustee to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor will any purchaser or other transferee of any property or rights permitted by this Article II to be sold be under any obligation to ascertain or inquire into the authority of the Issuer or any other obligor, as applicable, to make any such sale or other transfer.
Section 2.05 Powers Exercisable by Receiver or Indenture Trustee . In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article II upon the Issuer or any other obligor, as applicable, with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Issuer or any other obligor, as applicable, or of any officer or officers thereof required by the provisions of this Article II .
Section 2.06 Determinations Relating to Collateral . In the event (i) the Indenture Trustee shall receive any request from the Issuer or any other obligor for consent or approval with respect to any matter relating to any Collateral or the Issuer’s or any other obligor’s obligations with respect thereto or (ii) there shall be due to or from the Indenture Trustee under the provisions hereof any performance or the delivery of any instrument or (iii) the Indenture Trustee shall become aware of any nonperformance by the Issuer or any other obligor of any covenant or any breach of any representation or warranty of the Issuer or any other obligor set forth in this Indenture or any other Transaction Document, then, in each such event, the Indenture Trustee shall be entitled, at the expense of the Issuer, to hire experts, consultants, agents and attorneys to advise the Indenture Trustee on the manner in which the Indenture Trustee should respond to such request or render any requested performance or response to such nonperformance or breach (the expenses of which will be reimbursed to the Indenture Trustee pursuant to Section 8.07 ). The Indenture Trustee will be fully protected and shall not incur any personal liability in the taking of any action recommended or approved by any such expert, consultant, agent or attorney or agreed to by the Majority Holders.
Section 2.07 Release of All Collateral .
(a) Subject to the payment of its fees, expenses and indemnities (other than indemnities and reimbursement obligations for which a claim has not yet been asserted) pursuant to Section 8.07 and payment in full of all amounts due and payable to the Noteholders (other than indemnities and reimbursement obligations for which a claim has not yet been asserted or except as otherwise permitted by this Indenture), the Indenture Trustee shall, at the request of the Issuer or when otherwise required by the provisions of this Indenture, execute instruments to release property and Collateral from the Lien of this Indenture, or convey the Indenture Trustee’s interest (which is held by the Indenture Trustee for the benefit of the Noteholders) in the same, in a manner and under circumstances which are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article II will be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any funds.
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(b) Upon delivery of an Officer’s Certificate of the Issuer (which shall be acknowledged by the Majority Holders), certifying that the Issuer’s obligations under this Indenture have been satisfied and discharged by complying with the provisions of this Article II , the Indenture Trustee shall execute and deliver such releases, termination statements and other instruments (in recordable form, where appropriate) as the Issuer or any other obligor, as applicable, may reasonably request evidencing the termination of the Security Interest created by this Indenture.
(c) The Master Servicer, each Asset Servicer, the Issuer and the Noteholders shall be entitled to receive at least 10 days prior notice when the Indenture Trustee proposes to take any action pursuant to clause (a) or (b), accompanied by copies of any instruments involved, and the Indenture Trustee shall also be entitled to require, as a condition to such action, an Opinion of Counsel, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with or waived in accordance with the terms of this Indenture and that such action is not inconsistent with any of the provisions of this Indenture. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate, including any Officer’s Certificates, or other instrument delivered to the Indenture Trustee in connection with any such action, unless such counsel knew or in the exercise of reasonable care should have known, any such certificate or other instrument, or any factual matter asserted therein, is erroneous.
Section 2.08 Certain Actions by Indenture Trustee . Any action taken by the Indenture Trustee pursuant to this Article II in respect of the release of any or all of the Collateral will be taken by the Indenture Trustee as its interest in such Collateral may appear, and no provision of this Article II is intended to, or will, excuse compliance with any provision hereof.
Section 2.09 Opinions as to Collateral . (a) On the date hereof, the Issuer shall furnish to the Indenture Trustee, for the benefit of the Noteholders, an Opinion of Counsel stating that, in the opinion of such counsel, such action has been taken as is necessary to perfect the Security Interest created by this Indenture in favor of the Indenture Trustee and reciting the details of such action.
(b) On or before March 31 in each calendar year, beginning in 2018, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel with respect to each UCC financing statement which has been filed by the Issuer with respect to the Collateral either stating that, (i) in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of such financing statements and amendments thereto as are necessary to maintain the first priority perfected Security Interest created by this Indenture and reciting the details of such action or (ii) in the opinion of such counsel, no such action is necessary to maintain such Security Interest. Such Opinion of Counsel will also describe the recording, filing, re-recording and re-filing of such financing statements and amendments thereto that will, in the opinion of such counsel, be required to maintain the Security Interest created by this Indenture until March 31 in the following calendar year.
Section 2.10 Certain Commercial Law Representations and Warranties . The Issuer hereby makes the following representations and warranties on which the Indenture Trustee and each of the Noteholders shall be entitled to rely in connection with the transactions
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contemplated by this Indenture. Such representations and warranties shall survive until the termination of this Indenture. Such representations and warranties speak of the date that a security interest in the Collateral is granted to the Indenture Trustee and shall not be waived by any of the parties to this Indenture.
(a) This Indenture creates a valid and continuing security interest (as defined in the applicable UCC) in favor of the Indenture Trustee, for the benefit of the Noteholders, in the related Collateral, which security interest is perfected and prior to all other Liens, and is enforceable as such against creditors of and purchasers from the Issuer.
(b) Each of the existing Receivables constitutes a “payment intangible.”
(c) At the time of its grant of any security interest in the related Collateral pursuant to this Indenture, the Issuer owned and had good and marketable title to such Collateral free and clear of any lien, claim or encumbrance of any Person (other than the security interest granted to the Indenture Trustee pursuant to this Indenture).
(d) The Issuer has caused or will have caused no later than October 23, 2017, 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 related Collateral granted to the Indenture Trustee pursuant to this Indenture.
(f) Other than the security interest granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed, the related Collateral. No effective financing statement has been filed against the Issuer that includes a description of the related Collateral other than any financing statement relating to the security interest granted to the Indenture Trustee pursuant to this Indenture or that has been terminated. As of the Closing Date, no judgment has been entered, and no tax Liens have been filed, against the Issuer.
Section 2.11 The Securities Intermediary .
(a) There shall at all times be one or more securities intermediaries appointed for purposes of this Indenture (the “ Securities Intermediary ”). Bankers Trust is hereby appointed as the initial Securities Intermediary hereunder, and Bankers Trust accepts such appointment.
(b) The Securities Intermediary shall be, and Bankers Trust as initial Securities Intermediary hereby represents and warrants that it is as of the date hereof and shall be, for so long as it is the Securities Intermediary hereunder, a corporation, State bank or national bank that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity hereunder. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree with the parties hereto that the Collection Account shall be an account to which financial assets (as defined in the UCC) may be credited and undertake to treat the Indenture Trustee as entitled to exercise the rights that comprise such financial assets. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree with the parties hereto that each item of property credited to the Collection Account shall be treated as a financial
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asset (as defined in the UCC). The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree with the parties hereto that the jurisdiction of the Securities Intermediary with respect to the Collection Account shall be the State of Iowa. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, represent and covenant that it is not and will not be (as long as it is the Securities Intermediary hereunder) a party to any agreement that is inconsistent with the provisions of this Indenture. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, covenant that it will not take any action inconsistent with the provisions of this Indenture applicable to it. The Securities Intermediary shall, and Bankers Trust as initial Securities Intermediary does, agree that any item of property credited to the Collection Account shall not be subject to any security interest, lien, encumbrance or right of setoff in favor of the Securities Intermediary or anyone claiming through the Securities Intermediary (other than the Indenture Trustee).
(c) It is the intent of the Indenture Trustee and the Issuer that the Collection Account shall be a securities account, as to which the Indenture Trustee is the “entitlement holder” (as defined in the UCC). The Securities Intermediary shall covenant that it will not agree with any person or entity other than the Indenture Trustee that it will comply with entitlement orders originated by any person or entity other than the Indenture Trustee, and Bankers Trust as initial Securities Intermediary hereby covenants that, for so long as it is the Securities Intermediary hereunder, it will not agree with any person or entity other than the Indenture Trustee that it will comply with entitlement orders originated by any person or entity other than the Indenture Trustee.
(d) Nothing herein shall imply or impose upon the Securities Intermediary any duties or obligations other than those expressly set forth herein and those applicable to a securities intermediary under the UCC and the United States Regulations (and the Securities Intermediary shall be entitled to all of the protections available to a securities intermediary under the UCC and the United States Regulations). Without limiting the foregoing, nothing herein shall imply or impose upon the Securities Intermediary any duties of a fiduciary nature (such as the fiduciary duties of the Indenture Trustee hereunder).
(e) The Securities Intermediary may at any time resign by notice to the Indenture Trustee and may at any time be removed by notice from the Indenture Trustee, if a different Person than the Securities Intermediary, but if not, then the Issuer; provided , that it shall be the responsibility of the Indenture Trustee, if a different Person than the Securities Intermediary, but if not, then the Issuer, to appoint a successor Securities Intermediary and to cause the Collection Account to be established and maintained with such successor Securities Intermediary in accordance with the terms hereof; and the responsibilities and duties of the retiring Securities Intermediary hereunder shall remain in effect until all of the Collateral credited to the Collection Account held by such retiring Securities Intermediary has been transferred to such successor. Any corporation into which the Securities Intermediary may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which the Securities Intermediary shall be a party, shall be the successor of the Securities Intermediary hereunder, without the execution or filing of any further act on the part of the parties hereto or such Securities Intermediary or such successor corporation.
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Section 3.01 Forms Generally . The Notes will have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon, as may be required to comply with applicable laws or regulations or with the rules of any securities exchange, or as may, consistently herewith, be determined by the Issuer, as evidenced by the Issuer’s execution of such Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note.
The definitive Notes will be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders) or may be produced in any other manner, all as determined by the Issuer, as evidenced by the Issuer’s execution of such Notes, subject to the rules of any securities exchange on which such Notes are listed.
Section 3.02 Forms of Notes . Each Note will be in one of the forms approved hereby. Before the delivery of a Variable Funding Note, an Initial Term Note or a Quarterly Term Note to the Indenture Trustee for authentication pursuant to Section 4.03 in any form approved by or pursuant to an Issuer Certificate, the Issuer will deliver to the Indenture Trustee the Issuer Certificate by or pursuant to which such form of Note has been approved, which Issuer Certificate will have attached thereto a true and correct copy of the form of Note which has been approved thereby or, if an Issuer Certificate authorizes a specific officer or officers of the Transferor to approve a form of Variable Funding Note, Initial Term Note or Quarterly Term Note, a certificate of such officer or officers approving the form of Variable Funding Note, Initial Term Note or Quarterly Term Note attached thereto. Any form of Variable Funding Note, an Initial Term Note or a Quarterly Term Note approved by or pursuant to an Issuer Certificate must be acceptable as to form to the Indenture Trustee, such acceptance to be evidenced by the Indenture Trustee’s authentication of Variable Funding Notes, Initial Term Notes or Quarterly Term Notes in that form or a certificate signed by an Indenture Trustee Authorized Officer and delivered to the Issuer.
Section 3.03 Form of Indenture Trustee’s Certificate of Authentication . The form of Indenture Trustee’s Certificate of Authentication for any Note issued pursuant to this Indenture will be substantially as follows:
INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
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BANKERS TRUST COMPANY, as |
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Indenture Trustee and not in its |
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By:________________________________ |
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Authorized Signatory |
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Dated: ________________________________ |
Section 3.04 Notes Issuable in the Form of a Global Note .
(a) If the Issuer establishes pursuant to Section 3.02 and Section 4.01 that the Term Notes are to be issued in whole or in part in the form of one or more Global Notes, then the Issuer will execute and the Indenture Trustee or its agent will, in accordance with Section 4.03 , authenticate and deliver, such Global Note, which (i) will represent, and will be denominated in an amount equal to the aggregate Initial Principal Amount of the Term Notes that are Outstanding to be represented by such Global Note or Global Notes, or such portion thereof as the Issuer will specify in an Issuer Certificate, (ii) will be registered in the name of the Depository for the beneficial owners of such Global Note or its nominee, (iii) will be delivered by the Indenture Trustee or its agent to the Depository or pursuant to the Depository’s instruction, (iv) if applicable, will bear a legend substantially to the following effect: “Unless this Note is presented by an authorized representative of The Depository Trust Company, a New York corporation (“ DTC ”), to the Issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein” and (v) may bear such other legend as the Issuer, upon advice of counsel, deems to be applicable. DTC will credit interests in any Regulation S Global Note to participant accounts maintained by Clearstream or Euroclear with DTC according to the interests in such Regulation S Global Note maintained by participants in Clearstream or Euroclear, as the case may be.
(b) Notwithstanding any other provisions of this Section 3.04 or Section 4.04 , and subject to the provisions of Section 3.04(c), a Global Note, or beneficial interest therein, may be transferred in the manner provided in Section 3.09 or Section 4.04 , as applicable.
(c) With respect to the Notes:
(i) If at any time the Depository for a Global Note notifies the Issuer that it is unwilling or unable to continue as Depository for such Global Note or if at any time the Depository for the Notes, ceases to be a clearing agency registered under the Securities Exchange Act, or other applicable statute or regulation, the Issuer will appoint a successor Depository with respect to such Global Note. If a successor nominee for such Global Note is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer will execute, and the Indenture Trustee or its agent, upon receipt of an Issuer Certificate requesting the authentication and delivery of individual Notes in exchange for such Global Note, will authenticate and deliver, individual Notes of like tenor and terms in an aggregate Initial Principal Amount equal to the Initial Principal Amount of the Global Note in exchange for such Global Note.
(ii) To the extent permitted by law, the Issuer may at any time and in its sole discretion determine that the Notes or portion thereof issued or issuable in the form of
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one or more Global Notes will no longer be represented by such Global Note or Notes. In such event the Issuer will execute, and the Indenture Trustee, upon receipt of a request by the Issuer for the authentication and delivery of individual Notes in exchange in whole or in part for such Global Note, will authenticate and deliver individual Notes of like tenor and terms in definitive form in an aggregate Initial Principal Amount equal to the Initial Principal Amount of such Global Note in exchange for such Global Note or Notes.
(iii) If specified by the Issuer pursuant to Section 3.02 and Section 4.01 with respect to Notes issued or issuable in the form of a Global Note, the Depository for such Global Note may surrender such Global Note in exchange in whole or in part for individual Notes of like tenor and terms in definitive form on such terms as are acceptable to the Issuer and such Depository. Thereupon the Issuer will execute, and the Indenture Trustee or its agent will authenticate and deliver, without service charge, (A) to each Person specified by such Depository a new Note or Notes of like tenor and terms and of any authorized denomination as requested by such Person in aggregate Initial Principal Amount equal to and in exchange for such Person’s beneficial interest in the Global Note; and (B) to such Depository a new Global Note of like tenor and terms and in an authorized denomination equal to the difference, if any, between the Initial Principal Amount of the surrendered Global Note and the aggregate Initial Principal Amount of Notes delivered to the Holders thereof.
(iv) If any Note Owner advises the Indenture Trustee and the Depository that it would prefer to receive an individual Note, such Note Owner may exchange its beneficial interest in such Global Note for individual Notes, to be delivered in electronic or physical form, as requested by the respective Note Owner.
(v) In any exchange provided for in any of the preceding four paragraphs, the Issuer will execute and the Indenture Trustee or its agent will authenticate and deliver individual Notes in definitive registered form in authorized denominations. Upon the exchange of the entire Initial Principal Amount of a Global Note for individual Notes, such Global Note will be canceled by the Indenture Trustee or its agent. Except as provided in the preceding paragraphs, Notes issued in exchange for a Global Note pursuant to this Section 3.04 will be registered in such names and in such authorized denominations as the Depository for such Global Note, pursuant to instructions from its direct or indirect participants or otherwise, will instruct the Indenture Trustee or the Note Registrar. The Indenture Trustee or the Note Registrar will deliver such Notes to the Persons in whose names such Notes are so registered.
(vi) Any Note Owner holding an individual definitive Note may exchange its individual definitive Note for a beneficial interest in a Global Note to be issued in accordance with clause (a) above, upon notice to the Indenture Trustee.
Section 3.05 Beneficial Ownership of Global Notes . Until definitive Notes have been issued to the applicable Note Owners pursuant to Section 3.04 :
(a) the Issuer and the Indenture Trustee may deal with the applicable clearing agency or Depository and the clearing agency’s or Depository’s participants for all purposes
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(including the making of distributions) as the authorized representatives of the respective Note Owners; and
(b) the rights of the respective Note Owners will be exercised only through the applicable clearing agency or Depository and the clearing agency’s or Depository’s participants and will be limited to those established by law and agreements between such Note Owners and the clearing agency or Depository and/or the clearing agency’s or Depository’s participants. Pursuant to the operating rules of the applicable clearing agency, unless and until Notes in definitive form are issued pursuant to Section 3.04 , the clearing agency’s or the Depository’s participants shall receive and transmit distributions of principal and interest on the related Notes to such clearing agency’s or Depository’s participants.
Notwithstanding any other provision of this Indenture, for purposes of any provision of this Indenture requiring or permitting Actions with the consent of, or at the direction of, Noteholders evidencing a specified percentage of the Outstanding Principal Amount of Outstanding Notes, such direction or consent may be given by Note Owners (acting through the clearing agency and the clearing agency’s participants) owning interests in or security entitlements to Notes evidencing the requisite percentage of principal amount of Notes.
Notwithstanding anything to the contrary herein, the right to the principal of, and stated interest on, the Global Notes may be transferred only through a book entry system maintained by the Depository (the “ Book Entry System ”), which for this purpose will be acting as the Issuer’s agent, and the ownership of any interest in the Global Notes shall be reflected in a book entry in the Book Entry System. The Depository shall maintain the Book Entry System in a manner that will ensure that the Book Entry System constitutes a “book entry system” for purposes of Section 871(h) of the Code and the applicable Treasury Regulations thereunder (including Treasury Regulations Section 1.871-14(c)(1)(i)) at all times. The entries in the Book Entry System shall be conclusive absent manifest error. This Section 3.05 shall be construed so that the Global Notes are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations promulgated thereunder.
Section 3.06 Notices to Depository . Whenever any notice or other communication is required to be given to Noteholders with respect to which book-entry Notes have been issued, unless and until Notes in definitive form will have been issued to the related Note Owners, the Indenture Trustee will give all such notices and communications to the applicable clearing agency or Depository.
Section 3.07 CUSIP Numbers . In issuing the Notes, the Issuer may use “CUSIP” numbers (if then generally in use), and, if so, the Indenture Trustee shall use such CUSIP numbers in notices of redemption as a convenience to Holders; provided , that subject to Section 8.01 , any such notice may state that (a) no representation is made as to the correctness of such CUSIP numbers as printed on the related Notes or as contained in any notice of redemption, (b) reliance may be placed only on the other identification numbers, if any, printed on the Notes and (c) any such redemption shall not be affected by any defect in or omission of such CUSIP numbers. The Issuer will promptly notify the Indenture Trustee of any change in the CUSIP numbers for any Outstanding Note.
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Section 3.08 Regulation S Global Notes .
(a) Notes issued in reliance on Regulation S under the Securities Act shall initially be in the form of a Temporary Regulation S Global Note. Any beneficial interest in a Note evidenced by the Temporary Regulation S Global Note is exchangeable for a beneficial interest in a Permanent Regulation S Global Note, authenticated and delivered in substantially the form attached hereto in Exhibit H (each a “ Permanent Regulation S Global Note ”), upon the later of (i) the Exchange Date and (ii) the furnishing of a Regulation S Certificate.
(b) (i) On or prior to the Exchange Date, each owner of a beneficial interest in a Temporary Regulation S Global Note shall deliver to Euroclear or Clearstream (as applicable) a Regulation S Certificate; provided , however , that any owner of a beneficial interest in a Temporary Regulation S Global Note on the Exchange Date that has previously delivered a Regulation S Certificate hereunder shall not be required to deliver any subsequent Regulation S Certificate (unless the certificate previously delivered is no longer true as of such subsequent date, in which case such owner shall promptly notify Euroclear or Clearstream, as applicable, thereof and shall deliver an updated Regulation S Certificate). Euroclear or Clearstream, as applicable, shall deliver to the Indenture Trustee a certificate substantially in the form of Exhibit J (a “ Non-U.S. Certificate ”) attached hereto promptly upon the receipt of each such Regulation S Certificate, and no such owner (or transferee from such owner) shall be entitled to receive a beneficial interest in a Permanent Regulation S Global Note or any payment of principal or interest on or any other payment with respect to its beneficial interest in a Temporary Regulation S Global Note prior to the Indenture Trustee receiving such Non-U.S. Certificate from Euroclear or Clearstream with respect to the portion of the Temporary Regulation S Global Note owned by such owner (and, with respect to a beneficial interest in the Permanent Regulation S Global Note, prior to the Exchange Date).
(c) Any payments of principal or interest on or any other payment on a Temporary Regulation S Global Note received by Euroclear or Clearstream with respect to any portion of such Regulation S Global Note owned by a Note Owner that has not delivered the Regulation S Certificate required by this Section 3.08 shall be held by Euroclear or Clearstream, as applicable, solely as agents for the Indenture Trustee. Euroclear or Clearstream, as applicable, shall remit such payments to the applicable Note Owner (or to a Euroclear or Clearstream member on behalf of such Note Owner) only after Euroclear or Clearstream has received the requisite Regulation S Certificate and Euroclear or Clearstream, as applicable, has provided the Indenture Trustee a Non-U.S. Certificate. Until the Indenture Trustee has received a Non-U.S. Certificate from Euroclear or Clearstream, as applicable, and it has received the requisite Regulation S Certificate with respect to the ownership of a beneficial interest in any portion of a Temporary Regulation S Global Note, the Indenture Trustee may revoke the right of Euroclear or Clearstream, as applicable, to hold any payments made with respect to such portion of such Temporary Regulation S Global Note. If the Indenture Trustee exercises its right of revocation pursuant to the immediately preceding sentence, Euroclear or Clearstream, as applicable, shall return such payments to the Indenture Trustee and the Indenture Trustee shall hold such payments in the Collection Account until Euroclear or Clearstream, as applicable, has provided the necessary Non-U.S. Certificates to the Indenture Trustee (at which time the Indenture Trustee shall forward such payments to Euroclear or Clearstream, as applicable, to be remitted to the Note Owner that is
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entitled thereto on the records of Euroclear or Clearstream (or on the records of their respective members)).
(d) Each Note Owner with respect to a Temporary Regulation S Global Note is entitled to exchange its beneficial interest therein for a beneficial interest in a Permanent Regulation S Global Note on or after the Exchange Date upon furnishing to Euroclear or Clearstream, as applicable, the Regulation S Certificate and upon receipt by the Indenture Trustee of the Non-U.S. Certificate thereof from Euroclear or Clearstream, as applicable, in each case pursuant to the terms of this Section 3.08 . On and after the Exchange Date, upon receipt by the Indenture Trustee of any Non-U.S. Certificate from Euroclear or Clearstream described in the immediately preceding sentence (i) with respect to the first such certification, the Issuer shall execute, upon receipt of an order to authenticate, and the Indenture Trustee shall authenticate and deliver to the Clearing Agency Custodian, the applicable Permanent Regulation S Global Note and (ii) with respect to the first and all subsequent certifications, the Clearing Agency Custodian shall exchange on behalf of the applicable owners the portion of the applicable Temporary Regulation S Global Note covered by such certification for a comparable portion of the applicable Permanent Regulation S Global Note. Upon any exchange of a portion of a Temporary Regulation S Global Note for a comparable portion of a Permanent Regulation S Global Note, the Clearing Agency Custodian shall endorse on the schedules affixed to each such Regulation S Global Note (or on continuations of such schedules affixed to each such Regulation S Global Note and made parts thereof) appropriate notations evidencing the date of transfer and (x) with respect to the Temporary Regulation S Global Note, a decrease in the principal amount thereof equal to the amount covered by the applicable certification and (y) with respect to the Permanent Regulation S Global Note, an increase in the principal amount thereof equal to the principal amount of the decrease in the Temporary Regulation S Global Note pursuant to clause (x) above.
Section 3.09 Special Transfer Provisions .
(a) If a holder of a beneficial interest in a Rule 144A Global Note wishes at any time to exchange its beneficial interest in such Rule 144A Global Note for a beneficial interest in a Regulation S Global Note, or to transfer a beneficial interest in a Rule 144A Global Note to a person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Note, such holder may, subject to the rules and procedures of the DTC and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of the beneficial interest for an equivalent beneficial interest in a Regulation S Global Note. Upon receipt by the Indenture Trustee of (1) instructions given in accordance with the DTC’s procedures from or on behalf of a Note Owner of any such Rule 144A Global Note, directing the Indenture Trustee (via the Depository’s Deposit/Withdrawal of Custodian System (“ DWAC ”)), as transfer agent, to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged or transferred, (2) a written order in accordance with the DTC’s procedures containing information regarding the Euroclear or Clearstream account to be credited with such increase and the name of such account, and (3) a certificate given by such Note Owner stating that the exchange or transfer of such beneficial interest has been made pursuant to and in accordance with Rule 904 of Regulation S under the Securities Act to a person that such Note Owner reasonably believes is an Institutional Accredited Investor and is obtaining such beneficial interest for its own account or the account of an Institutional Accredited Investor, the Indenture Trustee,
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as transfer agent, shall promptly deliver appropriate instructions to the DTC (via DWAC), its nominee, or the custodian for the DTC, as the case may be, to reduce or reflect on its records a reduction of such Rule 144A Global Note by the aggregate principal amount of the beneficial interest in the Rule 144A Global Note to be so exchanged or transferred from the relevant participant, and the Indenture Trustee, as transfer agent, shall promptly deliver appropriate instructions (via DWAC) to the DTC, its nominee, or the custodian for the DTC, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the principal amount of such Regulation S Global Note by the aggregate principal amount of the beneficial interest in the Rule 144A Global Note to be so exchanged or transferred, and to credit or cause to be credited to the account of the person specified in such instructions (who may be Euroclear Bank S.A./N.V., as operator of Euroclear or Clearstream or another agent member of Euroclear, or Clearstream, or both, as the case may be, acting for and on behalf of them) a beneficial interest in such Regulation S Global Note equal to the reduction in the principal amount of the Rule 144A Global Note.
(b) If a holder of a beneficial interest in a Permanent Regulation S Global Note wishes at any time to exchange its beneficial interest in a Regulation S Global Note for a beneficial interest in the Rule 144A Global Note, or to transfer a beneficial interest in a Regulation S Global Note to a person who wishes to take delivery thereof in the form of beneficial interest in a Rule 144A Global Note, such holder may, subject to the rules and procedures of Euroclear or Clearstream and the DTC, as the case may be, and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such beneficial interest for an equivalent beneficial interest in a Rule 144A Global Note. Upon receipt by the Indenture Trustee, as transfer agent, of (1) instructions given in accordance with the procedures of Euroclear or Clearstream and the DTC, as the case may be, from or on behalf of a Note Owner of a Regulation S Global Note directing the Indenture Trustee, as transfer agent, to credit or cause to be credited a beneficial interest in a Rule 144A Global Note in an amount equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, (2) a written order given in accordance with the procedures of Euroclear or Clearstream and the DTC, as the case may be, containing information regarding the account with the DTC to be credited with such increase and the name of such account, and (3) prior to the expiration of the Distribution Compliance Period, a certificate given by such Note Owner stating that the person transferring such beneficial interest in such Regulation S Global Note reasonably believes that the person acquiring such beneficial interest in the Rule 144A Global Note is a QIB and is obtaining such beneficial interest for its own account or the account of a QIB in a transaction meeting the requirements of Rule 144A under the Securities Act and any applicable securities laws of any State of the United States or any other jurisdiction, the Indenture Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the DTC, its nominee, or the custodian for the DTC, as the case may be, to reduce or reflect on its records a reduction of the applicable Regulation S Global Note by the aggregate principal amount of the beneficial interest in such Regulation S Global Note to be exchanged or transferred, and the Indenture Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the DTC its nominee, or the custodian for the DTC, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the principal amount of the applicable Rule 144A Global Note by the aggregate principal amount of the beneficial interest in the Regulation S Global Note to be so exchanged or transferred, and to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the reduction in the principal amount of the
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Regulation S Global Note. After the expiration of the Distribution Compliance Period, the certification requirement set forth in clause (3) of the second sentence of this Section 3.09 shall no longer apply to such exchanges and transfers.
(c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of a beneficial interest in the other Global Note shall, upon transfer, cease to be an interest in such Global Note and become a beneficial interest in the other Global Note and, accordingly, shall thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such a beneficial interest.
(d) Until the later of the Exchange Date and the provision of the certifications required by Section 4.06(d) , beneficial interests in a Regulation S Global Note may only be held through Euroclear Bank S.A./N.V., as operator of Euroclear or Clearstream, or another agent member of Euroclear and Clearstream acting for and on behalf of them. During the Distribution Compliance Period, beneficial interests in the Regulation S Global Note may be exchanged for beneficial interests in the Rule 144A Global Note only in accordance with the certification requirements described above.
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Section 4.01 General Title; General Limitations; Terms of Notes . (a) The Notes may be issued up to an aggregate Initial Principal Amount as may be authorized by the Issuer from time to time. All Notes under this Indenture will in all respects be equally and ratably entitled to the benefits hereof without preference, priority or distinction on account of the actual time of the authentication and delivery or their respective maturity.
(b) Payments of principal and interest on each Note issued must be paid in United States dollars.
(c) Any provision relating to or terms of a Term Note not set forth herein, including such Term Note’s Initial Payment Date, Initial Principal Amount, the identity of the related Investment Pool and the related CUSIP number, will be set forth in the related Notice of Conversion.
(d) The form of the Notes will be established pursuant to the provisions of this Indenture. The Notes will be distinguished from each other in such manner reasonably satisfactory to the Indenture Trustee, as the Issuer may determine.
Section 4.02 Denominations . The Notes will be issuable in such denominations as will be provided in the provisions of this Indenture. The currency shall be in United States dollars. In the absence of any such provisions with respect to the Notes, the Notes (except the I/O Term Notes) will be issued in minimum denominations of $100,000 and integral multiples of $1. The I/O Term Notes will not be issued with any denomination and shall only be issued with a Notional Principal Amount.
Section 4.03 Execution, Authentication and Delivery and Dating . (a) The Notes will be executed on behalf of the Issuer by an Authorized Officer of the Issuer. The signature of any officer of the Issuer on the Notes may be manual or facsimile or may be given by other electronic means.
(b) Notes bearing the manual, facsimile or other electronic signatures of individuals who were at the time of execution an Authorized Officer of the Issuer will bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices before the authentication and delivery of such Notes or did not hold such offices at the date of issuance of such Notes.
(c) At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Notes executed by the Issuer along with an Issuer Certificate requesting authentication to the Indenture Trustee for authentication; and the Indenture Trustee will authenticate and deliver such Notes as in this Indenture provided and not otherwise ; provided that with respect to the issuance of Fixed Rate Term Notes and I/O Term Notes in connection with the exchange of an Initial Term Note or a Quarterly Term Note, the related Notice of Note Exchange shall constitute such Issuer Certificate .
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(d) Before any such authentication and delivery, the Indenture Trustee will be entitled to receive any opinion or certificate relating to the issuance of the Notes required to be furnished pursuant to Section 4.10 .
(e) The Indenture Trustee will not be required to authenticate such Notes if the issue thereof will adversely affect the Indenture Trustee’s own rights, duties or immunities under the Notes and this Indenture.
(f) Unless otherwise provided in the form of Note, all Notes will be dated the date of their authentication.
(g) No Note will be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a Certificate of Authentication substantially in the form provided for herein executed by the Indenture Trustee by manual signature of an authorized signatory, and such certificate upon any Note will be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.
Section 4.04 Registration, Transfer and Exchange . (a) The Indenture Trustee shall maintain at its principal executive office (or such other office or agency as it may designate by notice to each Noteholder), a register for the Notes in which the Indenture Trustee shall record the name and address of the Person in whose name the Notes have been issued (including the name and address of each transferee) and the principal amount (and stated interest) of Notes held by such Person (the “ Note Register ”). The Indenture Trustee shall keep the Note Register open and available at all times during normal business hours for inspection of any Holder or their respective representatives. The Note Register may be maintained in electronic format. The entries in the Note Register shall be conclusive absent manifest error, and the Issuer, the Holders and any assignees shall treat each Person whose name is recorded in the Note Register pursuant to the terms hereof as Holder hereunder for all purposes of this Indenture except as otherwise provided in Section 10.02 .
Notwithstanding anything to the contrary contained herein, the Notes (including Global Notes) and this Indenture are registered obligations and the right, title and interest of each Holder and their assignees in and to such Notes (or any rights under this Indenture) shall be transferable only upon notation of such transfer in the Note Register or in the Book Entry System. The Note Registrar shall make all notations of transfer requested by any Holder promptly, but in any event no later than two (2) Business Days after receiving such a request by a Holder. The Notes shall only evidence a Holder’s or their assignee’s right, title and interest in and to the related Notes, and in no event is any such Note to be considered a bearer instrument or obligation. This Section 4.04 shall be construed so that the Notes are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations promulgated thereunder.
Each Noteholder, or Note Owner that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Issuer, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Notes or other obligations under the Transaction Documents (the “ Participant
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Register ”); provided , that, no Holder shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans, letters of credit or its other obligations under any Transaction Document) to any Person other than the Issuer except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations or to the extent required pursuant to Section 4.11 or Section 4.12 and any Certificate of Variable Funding Note Noteholder or Certificate of Term Note Owner required under clause vii of Section 4.04(i) . The entries in the Participant Register shall be conclusive absent manifest error, and such Noteholder or Note Owner shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Indenture notwithstanding any notice to the contrary.
(b) Subject to Section 3.04 , upon surrender for transfer of any Registered Note at the office or agency of the Issuer in a Place of Payment, if the requirements of Section 8-401(a) of the UCC are met, the Issuer will execute, and, upon receipt of such surrendered Note, the Indenture Trustee will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Notes of any authorized denominations, of a like aggregate Initial Principal Amount and (if such Registered Note is a Term Note) Term Note Maturity Date and of like terms.
(c) All Notes issued upon any transfer or exchange of Notes will be the valid and legally binding obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such transfer or exchange.
(d) Every Note presented or surrendered for transfer or exchange will be duly indorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
(e) Unless otherwise provided in the Note to be transferred or exchanged, no service charge will be made on any Noteholder for any transfer or exchange of Notes, but the Issuer and the Indenture Trustee may (unless otherwise provided in such Note) require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Notes before the transfer or exchange will be complete.
(f) None of the Issuer, the Note Registrar or the Indenture Trustee shall be required (i) to issue, register the transfer of or exchange any Notes during a period beginning at the opening of business 15 days before the day of selection of Notes to be redeemed and ending at the close of business on the day of the mailing of the relevant notice of redemption of Registered Notes so selected for redemption or (ii) to register the transfer or exchange of any Notes or portions thereof so selected for redemption.
(g) The Notes have not been registered under the Securities Act or any state securities law. None of the Issuer, the Master Servicer, any Asset Servicer, the Note Registrar or the Indenture Trustee is obligated to register the Notes under the Securities Act or any other
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securities or “Blue Sky” laws or to take any other action not otherwise required under this Indenture to permit the transfer of any Note without registration.
(h) Each Note issued pursuant to this Indenture shall be fully assignable; provided , however , that no transfer of any Note or any interest therein (including by pledge or hypothecation) shall be made except in compliance with the restrictions on transfer set forth in this Section 4.04 (including the applicable legend to be set forth on the face of each Note as provided in the form of Note attached as an exhibit hereto) and in a transaction exempt from the registration requirements of the Securities Act and applicable State securities or “Blue Sky” laws. The transfer of the Notes and of beneficial interests in the Notes shall be restricted to transfers to a person (A)(x) that the transferor reasonably believes is a “qualified institutional buyer” (a “ QIB ”) within the meaning thereof in Rule 144A under the Securities Act (“ Rule 144A ”) in the form of beneficial interests in the 144A Global Note and (y) that is aware that the resale or other transfer is being made in reliance on Rule 144A or (B) that is not a United States Person but that the transferor reasonably believes is an Institutional Accredited Investor or a QIB in an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act, in the form of beneficial interests in the applicable Regulation S Global Note.
(i) Each Noteholder, by its acceptance of its Note, and each Note Owner and other Person who acquires a beneficial interest or participation interest in a Note (each, a “ Note Interest ”), by its acceptance of its Note Interests, shall be deemed to have acknowledged, represented to and agreed with the Issuer as follows:
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iii. |
It has had access to such financial and other information concerning the Issuer and the Notes as it has deemed necessary in connection with its decision to purchase the Note or Note Interest. |
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iv. |
It acknowledges that the Notes will bear a legend to the following effect unless the Issuer determines otherwise, consistent with applicable law: |
“THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “ QIB ”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “ IAI ”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB,
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AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “ CODE ”) THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE COMPANY GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“ PTCE ”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIES ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.”
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|
Interest in an offshore transaction meeting the requirements of Rule 904 of Regulation S and if it is acquiring such Note or Note Interest for the account of another IAI or a QIB, such other IAI or QIB is aware that the sale is being made in reliance on Regulation S and (iii) is acquiring such Note or Note Interest for its own account or for the account of another IAI or a QIB. |
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|
xii. |
It acknowledges that transfers of the Notes or any Note Interest shall otherwise be subject in all respects to the restrictions applicable thereto contained in this Indenture. |
|
xv. |
It understands that the Temporary Regulation S Global Note will bear a legend to the following effect unless the Issuer determines otherwise, consistent with applicable law: |
“THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE REFERRED TO BELOW.”
Any transfer, resale, pledge or other transfer of any of the Notes or any Note Interest contrary to the restrictions set forth above, in any Certificate of Variable Funding Note Noteholder
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or Certificate of Term Note Owner, and elsewhere in this Indenture shall be deemed void ab initio by the Issuer and the Indenture Trustee.
(j) Each Noteholder of any Notes understands and acknowledges that the Issuer has structured this Indenture and the Notes with the intention that the Notes will qualify under applicable tax law as indebtedness of the Issuer, and the Issuer and each Noteholder by acceptance of its Note agree to treat the Notes (or interests therein) as indebtedness for purposes of federal, State, local and foreign income or franchise taxes or any other applicable tax.
(k) Each Noteholder or Note Owner of any Notes, by the purchase of such Note or its acceptance of a beneficial interest therein, acknowledges and agrees that, subject to the provisions of Section 2.07 of the Note Purchase Agreement, interest on the Notes will be treated as United States source interest, and, as such, United States withholding tax may apply. Each such Noteholder or Note Owner further agrees, upon request, to provide any certifications that may be required under applicable law, regulations or procedures to evidence its status and understands that if it ceases to provide requested documentation, payments to it under the Notes may be subject to United States withholding tax and each Noteholder acknowledges and agrees that the Indenture Trustee shall have the right (without liability) to deduct and withhold any required U.S. withholding tax, including under FATCA, pursuant to applicable law. Without limiting the foregoing, if a payment made under this Indenture would be subject to United States federal withholding tax imposed by FATCA if the recipient of such payment were to fail to comply with FATCA (including the requirements of Code Sections 1471(b) or 1472(b), as applicable), such recipient shall deliver to the Issuer, with a copy to the Indenture Trustee, at the time or times prescribed by the Code and at such time or times reasonably requested by the Issuer or the Indenture Trustee, such documentation prescribed by the Code (including as prescribed by Code Section 1471(b)(3)(C)(i)) and such additional documentation reasonably requested by the Issuer or the Indenture Trustee to comply with their respective obligations under FATCA, to determine that such recipient has complied with such recipient’s obligations under FATCA, or to determine the amount to deduct and withhold from such payment. For these purposes, “FATCA” means Section 1471 through 1474 of the Code and any regulations or official interpretations thereof (including any revenue ruling, revenue procedure, notice or similar guidance issued by the U.S. Internal Revenue Service thereunder as a precondition to relief or exemption from taxes under such Sections, regulations and interpretations), any agreements entered into pursuant to Code Section 1471(b)(1), and including any amendments made to FATCA after the date of this Indenture.
(l) None of the Issuer, the Indenture Trustee, any agent of the Indenture Trustee, any Payment Agent or the Note Registrar will have any responsibility or liability for any aspect of the records relating to or payment made on account of beneficial ownership of a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership.
(m) The Issuer initially appoints Bankers Trust to act as Note Registrar for the Registered Notes on its behalf, and Bankers Trust by its execution of this Indenture hereby accepts such appointment. Under no circumstances will the Note Registrar have any responsibility for the Participant Register. The Issuer may at any time and from time to time authorize any Person to
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act as Note Registrar in place of the Indenture Trustee with respect to any Notes issued under this Indenture.
(n) The Indenture Trustee shall maintain a register of the holders of Notes and Note Interests, based upon the Certificates of Variable Funding Note Noteholders and Certificates of Term Note Owners delivered to the Indenture Trustee as provided in clause vii of Section 4.04(i) . Upon the request of the Issuer, the Indenture Trustee shall report to the Issuer the aggregate number of Term Note Owners (including for such purpose the maximum number of Term Note Partners (as defined in the Certificate of Term Note Owner) and the aggregate number of Variable Funding Note Noteholders. In monitoring such issuances and transfers and providing such reports, the Indenture Trustee shall rely solely and exclusively (without any duty to make further inquiry, including any duty to inquire whether a holder holds for the account of one or more other persons) on the Certificates of Variable Funding Note Noteholders and Certificates of Term Note Owners received pursuant to the terms of this Indenture and as contemplated herein.
(o) For so long as any of the Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer agrees to provide to any Noteholder and to any prospective purchaser of Notes designated by such Noteholder, upon the request of such Noteholder or prospective purchaser, any information required to be provided to such Holder or prospective purchaser to satisfy the conditions set forth in Rule 144A(d)(4) under the Securities Act.
Notwithstanding anything to the contrary contained herein, each Note and this Indenture may be amended or supplemented to modify the restrictions on and procedures for resale and other transfers of the Notes to reflect any change in applicable law or regulation (or the interpretation thereof) or in practices relating to the resale or transfer of restricted securities generally. Each Noteholder shall, by its acceptance of such Note, have agreed to any such amendment or supplement.
(p) Each Noteholder shall have the right at any time to sell one or more participations to any Person (other than Enova or any of its Affiliates) in all or any part of the Funding Commitment, the Notes or in any other obligation, so long as such Person agrees to be subject to the confidentiality provisions contained in the Transaction Documents. No such participation arrangement shall relieve the Noteholder of any of its obligations under the Transaction Documents, including the Funding Commitment. The holder of any such participation, other than an Affiliate of the Noteholder granting such participation, shall not be entitled to require the Noteholder to take or omit to take any action hereunder except the consent of each participant shall be required to the same extent as if such participant were a Noteholder with respect to any amendment, modification, termination, waiver or consent that would (i) extend the final scheduled maturity of any Funding Commitment or Note in which such participant is participating, or reduce or waive the rate or extend or waive the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce or waive the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that an increase in any Funding Commitment or Note shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Issuer of any of its rights and obligations under this Indenture, (iii) release all or
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substantially all of the Collateral under the Transaction Documents (except as expressly provided in the Transaction Documents) supporting the Notes hereunder in which such participant is participating, (iv) otherwise be required of any Noteholder under Section 10.02 hereof, (v) waive or declare an Event of Default hereunder without the consent of the Majority Holders or, where applicable, all Noteholders, in either case treating all participants as Holders for such purpose, (vi) result in a change to the priority of payments set forth in Article V hereof in a manner adverse to a participant, (vii) increase any fees payable to the Administrative Agent pursuant to Article VI hereof, or (viii) amend any of the affirmative or negative covenants set forth in Article XI hereof, as applicable, in a manner more adverse to a participant than it is to a Noteholder. The Issuer agrees that each participant shall be entitled to the benefits of the Note Purchase Agreement to the same extent as if it were a Noteholder and had acquired its interest by assignment pursuant to clause (h) of this Section 4.04 ; provided , (i) a participant shall not be entitled to receive any greater payment under Sections 2.06 and 2.07 of the Note Purchase Agreement than the applicable Noteholder would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the Issuer’s prior written consent, (ii) a participant shall not be entitled to the benefits of Section 2.07 of the Note Purchase Agreement unless such participant complies with Section 2.07(f) as though it were a Noteholder by providing such documentation to the participating Noteholder and (iii) such participant complies with the certification requirements specified in Section 2.07(b) thereof and the refund requirements in Section 2.07(g) thereof. Notwithstanding any participation made hereunder (i) such selling Noteholder’s obligations under this Indenture shall remain unchanged, (ii) such selling Noteholder shall remain solely responsible to the other parties hereto for the performance of its obligations hereunder, and (iii) except as set forth above, the Enova Parties, the Administrative Agent, the Indenture Trustee and any other Noteholders shall continue to deal solely and directly with such selling Noteholder in connection with such selling Noteholder’s rights and obligations under this Indenture, and such selling Noteholder shall retain the sole right to enforce the obligations of the Enova Parties under this Indenture and to approve, without the consent of or consultation with any participant, any amendment, modification or waiver of any provision of this Indenture; provided , however , if the Issuer is provided notice of the sale of the participation to such participant, then during the occurrence and continuance of an Event of Default, the participant (to the extent of its interest in any Notes) shall have the right to exercise any remedies hereunder and vote any claims with respect to the Issuer or the Notes in any bankruptcy, insolvency or similar type of proceeding of the Issuer.
(q)
Notwithstanding any provision to the contrary herein, each Noteholder, by its acceptance of its Note, and each Note Owner and other Person who acquires a Note Interest, by its acceptance of its Note Interests, shall be deemed to have acknowledged, represented and warranted to the Issuer that it is not a Competitor, and, prior to the occurrence and
continuance
after the cure or waiver
of an Event of Default, shall not transfer a Note or a Note Interest to, or enter into a participation with respect to Note or Note Interests with, any Competitor without the prior written consent of the Issuer.
(r) Notwithstanding anything to the contrary set forth in this Article 4 or the Note Purchase Agreement, (i) FSLF is an accredited investor (as defined under Rule 501(a) of Regulation D under the Securities Act), (ii) all future transfers and assignments made by FSLF shall be made in accordance with (and subject to restrictions of) the terms of this Indenture (including, but not limited to, this Section 4.04 ), and (iii) after FSLF becomes a QIB, it may
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exchange any definitive Notes in its possession for a beneficial interest in a Global Note to be registered in the name of the Depository (pursuant to and in accordance with the terms of this Indenture). The Issuer and the Indenture Trustee further acknowledge and agree that, (i) in lieu of the certification set forth in Section 4.04(i)(vi) , FSLF, by its acceptance of a Note shall be deemed to have represented and agreed that it is an accredited investor (as defined under Rule 501(a) of Regulation D under the Securities Act) and (ii) for the avoidance of doubt, FSLF, by its acceptance of a Note, shall not be deemed to violate the transfer restrictions set forth in this Indenture for purposes of Section 4(d) of the Certificate of Variable Funding Note Noteholder or Section 5(d) of the Certificate of Term Note Owner.
Section 4.05 Mutilated, Destroyed, Lost and Stolen Notes . (a) If (i) any mutilated Note is surrendered to the Indenture Trustee or the Note Registrar, or the Issuer, the Note Registrar or the Indenture Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Issuer, the Note Registrar or the Indenture Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a protected purchaser (as defined in Article 8 of the UCC), the Issuer will execute and upon its request the Indenture Trustee will authenticate and deliver in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of like tenor, Term Note Maturity Date and Initial Principal Amount, bearing a number not contemporaneously Outstanding.
(b) In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer in its discretion may, instead of issuing a new Note, pay such Note in full as provided hereunder.
(c) Upon the issuance of any new Note under this Section 4.05 , the Issuer and the Indenture Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Indenture Trustee) connected therewith.
(d) Every new Note issued pursuant to this Section 4.05 in lieu of any destroyed, lost or stolen Note will constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note will be at any time enforceable by anyone, and will be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
(e) The provisions of this Section 4.05 are exclusive and will preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.06 Payment of Principal and Interest; Payment Rights Preserved; Withholding Taxes . (a) Unless otherwise provided with respect to such Note pursuant to Section 4.01 , principal and interest payable on any Registered Note will be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the most recent Record Date.
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(b) Subject to clause (a), each Note delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Note will carry the rights to interest accrued or principal accreted and unpaid, and to accrue or accrete, which were carried by such other Note.
(c) Subject to the provisions of Section 2.07 of the Note Purchase Agreement, the right of any Noteholder to receive interest on or principal of any Note shall be subject to any applicable withholding or deduction imposed pursuant to the Internal Revenue Code or other applicable tax law, including foreign withholding and deduction. Subject to the provisions of Section 2.07 of the Note Purchase Agreement, any amounts properly so withheld or deducted shall be treated as actually paid to the appropriate Noteholder.
(d) Holders of a beneficial interest in Notes sold in reliance on Regulation S as Temporary Regulation S Global Notes are prohibited from receiving payments or from exchanging beneficial interests in such Temporary Regulation S Global Notes for Permanent Regulation S Global Notes until the furnishing of a certificate, substantially in the form of Exhibit I attached hereto, certifying that the beneficial owner of the Temporary Regulation S Global Note is a non-United States Person (a “ Regulation S Certificate ”) as provided in Section 3.08(b) .
Section 4.07 Persons Deemed Owners . The Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person who is proved to be the owner of such Note pursuant to Section 1.04(c) as the owner of such Note for the purpose of receiving payment of principal of and (subject to Section 4.06 ) interest on such Note and, subject to Section 10.02 , for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 4.08 Cancellation . All Notes surrendered for payment, redemption, transfer, conversion or exchange will, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee with notification of such surrender, redemption, transfer, conversion or exchange to Issuer and, if not already canceled and if accompanied by such Officer’s Certificate and Opinion of Counsel as Indenture Trustee may require, will be promptly canceled by it simultaneously with such payment, redemption, transfer, conversion or exchange. No Note may be surrendered (including any surrender in connection with any abandonment, donation, gift, contribution or other event or circumstance) except for payment as provided herein, or for registration of transfer, exchange or redemption, or for replacement in connection with any Note mutilated, defaced or deemed lost or stolen. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered will be promptly canceled by the Indenture Trustee. No Note will be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 4.08 , except as expressly permitted by this Indenture. The Indenture Trustee will dispose of all canceled Notes in accordance with its customary procedures and, upon Issuer’s request, will deliver a certificate of such disposition to the Issuer.
Section 4.09 Termination . Each Note shall be considered to be paid in full, the Holders of such Note shall have no further right or claim, and the Issuer shall have no further obligation or liability with respect to such Note on the earliest to occur of (i) the Optional
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Redemption Date and a payment of the applicable Optional Redemption Amount, (ii) the date on which the Outstanding Principal Amount with respect to such Note, and all Noteholder Monthly Interest on such Note, is paid in full and (iii) the date on which all of the Collateral is sold and the proceeds in respect thereof applied in accordance with Section 7.05 , in each case after giving effect to all deposits, allocations, reimbursements, reallocations, sales of Collateral and payments to be made in connection therewith.
Section 4.10 Issuance of Notes . (a) The Issuer shall issue the Initial Term Notes and the initial Variable Funding Notes on the Closing Date, so long as the following conditions precedent are satisfied:
(i) on the Closing Date, the Issuer delivers to the Indenture Trustee an Issuer Certificate to the effect that:
(A) all instruments furnished to the Indenture Trustee conform to the requirements of this Indenture and constitute sufficient authority hereunder for the Indenture Trustee to authenticate and deliver such Notes;
(B) the form and terms of the Initial Term Notes and the initial Variable Funding Notes have been established in conformity with the provisions of this Indenture; and
(C) such other matters as the Indenture Trustee may reasonably request;
(ii) on the Closing Date, the Issuer delivers to the Indenture Trustee an Issuer Certificate certifying that all laws and requirements with respect to the execution and delivery by the Issuer of such Notes have been complied with, the Issuer has the power and authority to issue such Notes and such Notes have been duly authorized and delivered by the Issuer and, assuming due authentication and delivery by the Indenture Trustee, constitute legal, valid and binding obligations of the Issuer enforceable in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and entitled to the benefits of this Indenture, equally and ratably with all other Outstanding Notes, if any, subject to the terms of this Indenture;
(iii) on or prior to the Closing Date, the Issuer will have delivered to the Indenture Trustee and the Noteholders an opinion regarding tax matters reasonably acceptable to the Majority Holders, which addresses items including (i) the debt for tax status of the Notes and (ii) that the Issuer will not be treated as an association (or publicly traded partnership) taxable as a corporation; and
(iv) the conditions specified herein are satisfied.
(b) With respect to the issuance of each Quarterly Term Note in connection with a Conversion Date, as contemplated in Section 4.12 , or any I/O Term Note and Fixed Rate Term Note on a Note Exchange Date, as contemplated in Section 4.13, the Issuer and the
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Indenture Trustee will not be required to provide prior notice to or to obtain the consent of any Noteholder nor will the Issuer be subject to the conditions set forth above in Section 4.10(a)(i)-(iv) .
(c) With respect to the issuance of each Quarterly Term Note in connection with a Conversion Date, as contemplated in Section 4.12 , the Outstanding Principal Amount of all Notes Outstanding (after giving effect to such issuance) shall not exceed the Maximum Principal Amount.
Section 4.11 Variable Funding Note .
(a) On the Closing Date, upon satisfaction of the conditions set forth in Section 4.10(a) , the Issuer shall execute and deliver to the Indenture Trustee for authentication, the notes designated as the “Variable Funding Notes,” each substantially in the form of Exhibit A hereto.
(b) Each Variable Funding Note shall be delivered in definitive form and registered in the name of a Variable Funding Note Noteholder.
(c) The first Payment Date with respect to the Variable Funding Notes shall be the Initial Payment Date.
(d) During the Revolving Period, pursuant to Section 2.04 of the Note Purchase Agreement, the Variable Funding Note Noteholders shall make Advances.
(e) All Advances shall be remitted to the Issuer pursuant to instructions provided by the Issuer in the applicable Funding Request.
(f) In connection with any Advance made pursuant to the Note Purchase Agreement, the Indenture Trustee, or the Note Registrar if a different Person than the Indenture Trustee, pursuant to an Issuer Certificate setting forth for each Advance, (i) the date on which such Advance was made, (ii) the amount of such Advance, and (iii) the Outstanding Principal Amount of the Variable Funding Notes as of such date after giving effect to such Advance, shall annotate the Note Register to reflect such date, Advance amount and the Outstanding Principal Amount of the Variable Funding Notes as of such date after giving effect to such Advance.
(g) On each Conversion Date during the Revolving Period, the Issuer shall execute and deliver an authenticated Quarterly Term Note in accordance with Section 4.12 . Each Quarterly Term Note shall have an Initial Principal Amount equal to the lesser of (x) the product of (i) the Quarterly Term Note Advance Rate and (ii) the Outstanding Receivable Principal Balance of the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool as of such date of determination and (y) the Outstanding Principal Amount of the Variable Funding Notes as of such Conversion Date. Amounts advanced under the Variable Funding Notes as of such Conversion Date shall be (in full or in part, based on the Initial Principal Amount of the Quarterly Term Note) repaid in kind by the issuance of the Quarterly Term Note, and the excess, if any, of (i) the Outstanding Principal Amount of such Variable Funding Notes as of such Conversion Date (immediately prior to giving effect to the issuance of the related Quarterly Term Note) over (ii) the Initial Principal Amount of such Quarterly Term Note, shall be paid to the Variable Funding Note Noteholders on the final Payment Date of such Quarterly Revolving Period
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(which Payment Date shall occur approximately fifteen (15) days following the Conversion Date). Each Holder of a Variable Funding Note will receive its allocable share of beneficial interest in the Quarterly Term Notes issued on the related Conversion Date based upon its ratable share of the Outstanding Principal Amount of the Variable Funding Notes as of such Conversion Date. Immediately following each issuance of Quarterly Term Notes the Outstanding Principal Amount of the Variable Funding Notes shall be reduced by the Initial Principal Amount of the Quarterly Term Note. Such reduction shall be annotated by the Indenture Trustee on the Variable Funding Notes. Following the issuance of Quarterly Term Notes on a Conversion Date, no additional Eligible Receivables may be allocated to the Term Note Investment Pool applicable to such Quarterly Term Notes created by such conversion.
(h) On each Payment Date, the Indenture Trustee shall apply Variable Funding Note Available Collections pursuant to Section 5.04(b) hereof. Except as provided in Section 13.08 hereof with respect to final distribution, distributions to the Variable Funding Note Noteholder shall be made by wire transfer to a bank account, such bank account to be designated by the Variable Funding Note Noteholders prior to such Payment Date, without presentation or surrender of the Variable Funding Note or the making of any notation thereon.
(i) The Variable Funding Notes shall be secured by the Collateral, and in connection with the sale of Collateral following an Event of Default, the Variable Funding Note Noteholder shall be entitled to its pro rata share of proceeds. Any payment of principal and interest on the Variable Funding Notes, however, shall be based solely on the performance of the Receivables relating to the Variable Funding Note Investment Pool, and, unless otherwise set forth in Section 5.04(b) , shall not be dependent on the Receivables related to any other Investment Pool or market or other credit events that are independent of such Receivables.
(j) There shall at no time be more than one Variable Funding Note Investment Pool outstanding.
(k) The Holder of a Variable Funding Note shall have no further right or claim (unless otherwise expressly set forth in a Transaction Document), and the Issuer shall have no further obligation or liability with respect to such Variable Funding Note on the earlier to occur of (i) the date on which Collateral is sold and the proceeds in respect thereof applied in accordance with Section 7.05 hereof, and (ii) the Funding Period Termination Date, in each case after giving effect to all deposits, allocations, reimbursements, reallocations, sales of Collateral and payments to be made in connection therewith.
(a) On the Closing Date, the Issuer shall issue the Initial Term Note. On each Conversion Date the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool shall be allocated into a Term Note Investment Pool for such Quarterly Term Notes and any Receivable that is not an Eligible Conversion Receivable shall remain in the Variable Funding Note Investment Pool after such Conversion Date and be subject to repurchase pursuant to Section 2.5 of the Sale Agreement. On each Conversion Date, subject to Section 4.12(b) below, a Quarterly Term Note will be delivered in the form of a Global Note substantially in the form of Exhibit B -2 hereto, in each case to be executed and delivered by the Issuer,
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authenticated by the Indenture Trustee and issued in the Initial Principal Amount determined as specified in Section 4.11(g) .
(b) On each Conversion Date, the Issuer shall deliver, or shall cause to be delivered, a Notice of Conversion to the Indenture Trustee, which will (i) include the schedule of Eligible Conversion Receivables related to the Term Note Investment Pool for such Quarterly Term Notes, and (ii) certify that all laws and requirements with respect to the execution and delivery by the Issuer of such Quarterly Term Notes has been complied with, the Issuer has the power and authority to issue such Quarterly Term Notes and such Quarterly Term Notes have been duly authorized and delivered by the Issuer and, assuming due authentication and delivery by the Indenture Trustee, constitutes a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and entitled to the benefits of this Indenture, equally and ratably with all other Outstanding Notes, if any, subject to the terms of this Indenture.
(c) Each Term Note shall be issued in minimum denominations of $100,000 and integral multiples of $1.
(d) Except as otherwise provided in Section 13.08 , distributions hereunder to Term Note Noteholders shall be made pursuant to Section 5.04(a) to the clearing agency with respect to which each Term Note is registered, in immediately available funds.
(e)
Following the issuance of a Term Note pursuant to this
Section 4.12
, the Issuer may not add any additional Eligible Receivables purchased by the Issuer after the applicable Conversion Date to the related Term Note Investment Pool for such
Quarterly
Term Notes.
(f)
Each Term Note shall be secured by the Collateral, and in connection with the sale of Collateral following an Event of Default, each Term Note Noteholder shall be entitled to its pro rata share of proceeds. The payment of principal and interest on
each
the Initial Term Note, each Quarterly Term Note and each Fixed Rate Term Note and the payment of interest on each I/O
Term Note, however, shall, except as otherwise provided in
Section 5.04(a)
, be solely based on the performance of the Receivables included in the related Term Note Investment Pool and shall not be dependent on the Receivables related to any other Investment Pool or market or credit events that are independent of such Receivables.
(g) Subject to any amounts due under any of the other Transaction Documents (other than indemnities and reimbursement obligations for which a claim has not yet been asserted), each Term Note shall be considered to be paid in full, the Holders of such Term Note shall have no further right or claim, and the Issuer shall have no further obligation or liability with respect to such Term Note on the earliest to occur of (i) the Optional Redemption Date and payment of the applicable Optional Redemption Amount, (ii) the date on which the Outstanding Principal Amount (if applicable) with respect to such Term Note and all Term Note Monthly Interest on such Term Note is paid in full, and (iii) the date on which all of the Collateral is sold and the proceeds in respect thereof applied in accordance with Section 7.05 of the Indenture, in
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each case after giving effect to all deposits, allocations, reimbursements, reallocations, sales of Collateral and payments to be made in connection therewith. ¶
Section 4. 13 Exchange of Term Notes. ¶
(a) Any Note Owner or Noteholder of the Initial Term Note or a Quarterly Term Note may deliver a Notice of Note Exchange to the Issuer and the Indenture Trustee. Upon the exchange of a Term Note on the Note Exchange Date, the Issuer shall issue an I/O Term Note and a Fixed Rate Term Note to the Note Owner or Noteholder that delivered such Notice of Note Exchange, in exchange for such Note Owners or Noteholders Outstanding Note Interest in the Term Notes, as identified by such Note Owner or Noteholder in such Notice of Note Exchange. Any such exchange of the Initial Term Note or a Quarterly Term Note or an interest therein on a Note Exchange Date shall satisfy each of the requirements of Section 4.04. ¶
(b) On the related Note Exchange Date, the Issuer shall deliver, and the Indenture Trustee shall authenticate, (i) a Fixed Rate Term Note in the form of a Global Note, to be issued in the Initial Principal Amount specified in the Notice of Note Exchange, and (ii) an I/O Term Note in the form of a Global Note, to be issued with a Notional Principal Amount as specified in the related Notice of Note Exchange. No I/O Term Note will be entitled to payments of principal and will only be entitled to the payment of interest. ¶
(c) The Term Note Investment Pool related to any I/O Term Note and Fixed Rate Term Note, shall be the same Term Note Investment Pool relating to the Initial Term Note or Quarterly Term Note, as applicable, subject to the exchange on the Note Exchange Date on which such I/O Term Note and Fixed Rate Term Note are issued. ¶
(d) For purposes of calculating Term Note Monthly Interest for any Payment Date, once issued, any I/O Term Note and Fixed Rate Term Note shall be deemed to have been Outstanding for the totality of the applicable Interest Period, regardless of when the Note Exchange Date actually occurs.
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ARTICLE V
ISSUER ACCOUNTS; INVESTMENTS; ALLOCATIONS; APPLICATION
Section 5.01 Collections . Except as otherwise expressly provided in this Indenture, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance from any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture including all funds and other property payable to the Indenture Trustee in connection with the Collateral. The Indenture Trustee will hold all such money and property received by it as part of the Collateral and will apply it as provided in this Indenture.
Section 5.02 Collection Account; Distributions from Collection Account . (a) On or before the date hereof, the Issuer shall cause to be established and maintained an Eligible Deposit Account (the “ Collection Account ”) in the name of the Indenture Trustee as a securities account with the Securities Intermediary in accordance with Section 2.11 , bearing a designation clearly indicating that the funds and other property credited thereto are held for the benefit of the Indenture Trustee and the Noteholders. All collections and distributions received pursuant to Section 2.02 of the Servicing Agreement shall be credited to the Collection Account. The Collection Account shall be under the control of the Securities Intermediary for the benefit of the Indenture Trustee and the Noteholders in accordance with Section 2.11 . If, at any time (i) the institution holding the Collection Account ceases to be an Eligible Institution, the Issuer shall notify the Indenture Trustee, and the Issuer (or the Master Servicer) shall within thirty (30) Business Days establish (or cause to be established) a new Collection Account that is an Eligible Deposit Account and shall transfer (or cause to be transferred) any funds or other property from such Collection Account to such new Collection Account or (ii) the Issuer determines for any reason that the Collection Account should be held at a different Eligible Institution, then upon prior notice to the Indenture Trustee, the Issuer shall establish or cause to be established a new Collection Account that is an Eligible Deposit Account and shall transfer (or cause to be transferred) any funds or other property from such Collection Account to such new Collection Account. From the date each such new Collection Account is established, it shall be the “Collection Account.” Prior to or at the time of the establishment of any Collection Account (whether the initial Collection Account or any successor Collection Account), the Issuer shall (I) deliver to the Indenture Trustee an Officer’s Certificate specifying the Eligible Institution at which the Collection Account is maintained and the account number of the Collection Account, and (II) Deliver the Collection Account to the Indenture Trustee.
(b) All payments to be made from time to time by or on behalf of the Indenture Trustee to Noteholders out of available funds in the Collection Account pursuant to this Indenture will be made by the Indenture Trustee or by the Paying Agent (if a different Person than the Indenture Trustee) not later than 2:00 p.m., New York City time, on the applicable Payment Date or earlier, if necessary, but only to the extent of available funds in the Collection Account at the time the Indenture Trustee or the Paying Agent (if a different Person than the Indenture Trustee) makes payments to Noteholders.
(c) Except as provided in Section 13.08 hereof with respect to final distribution, distributions to a Variable Funding Note Noteholder shall be made by wire transfer to a bank
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account, such bank account to be designated by the Variable Funding Note Noteholder prior to such Payment Date, without presentation or surrender of the Variable Funding Note or the making of any notation thereon.
Section 5.03 Investment of Funds in the Collection Account . (a) Funds credited to the Collection Account may (unless otherwise stated in this Indenture) be invested and reinvested by the Indenture Trustee at the direction of the Issuer in one or more Eligible Investments. The Issuer may authorize the Indenture Trustee to make specific investments pursuant to instructions, in such amounts as the Issuer will specify. Notwithstanding the foregoing, funds held by the Indenture Trustee in the Collection Account will be invested at the direction of the Issuer in Eligible Investments that will mature in each case no later than the Business Day preceding the date on which such funds in the Collection Account are scheduled to be transferred or distributed by the Indenture Trustee pursuant to this Indenture (or as necessary to provide for timely payment of principal or interest on the applicable Payment Date). The Indenture Trustee shall not have any investment discretion with respect to the Collection Account or any funds therein and shall have no liability with respect to the Eligible Investments selected by the Issuer or any losses resulting therein.
(b) All funds from time to time credited to the Collection Account pursuant to this Indenture and all investments made with such funds, if any, will be held by the Indenture Trustee in the Collection Account as part of the Collateral as herein provided, subject to withdrawal by the Indenture Trustee for the purposes specified herein.
(c) Funds and other property in the Collection Account will not be commingled with any other funds or property of the Issuer or the Indenture Trustee.
(d) On the applicable Reporting Date, all interest and earnings (net of losses and investment expenses), if any, on funds credited to the Collection Account will be applied as specified herein. For purposes of determining the availability of funds or the balance in the Collection Account for any reason under this Indenture (other than for the distribution of funds in accordance with Section 5.04 ), investment earnings on such funds, if any, shall be deemed not to be available or on deposit.
Subject to Section 8.01(d) , the Indenture Trustee will not in any way be held liable by reason of any insufficiency in Collection Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee’s own failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity, in accordance with their terms.
(e) The Issuer hereby directs that funds credited to the Collection Account will be invested and reinvested by the Indenture Trustee at the direction of the Issuer, to the fullest extent practicable, in investments described in clause (b) of “Eligible Investments,” upon the occurrence of any of the following events:
(i) the Issuer will have failed to give investment directions to the Indenture Trustee; or
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(ii) an Event of Default will have occurred and is continuing but no Notes have been declared due and payable pursuant to Section 7.02 .
Section 5.04 Application of Available Collections on Deposit in the Collection Account .
(a) With respect to each Term Note, the Master Servicer shall instruct the Indenture Trustee or the Paying Agent (if a Person different than the Indenture Trustee) to apply on each Payment Date, the Term Note Available Collections on deposit in the Collection Account with respect to such Payment Date to make the following distributions allocable to each such Term Note in the following priority:
(i)
pro rata
and
pari passu
to the Indenture Trustee, the Term Note Indenture Trustee Fee attributable to
each
the Initial Term Note, each Quarterly Term Note and each Fixed Rate
Term Note, and to the Holder of each Variable Funding Note, its allocable share of the Note Administrative Fee attributable to
each
the Initial Term Note, each Quarterly Term Note and each Fixed Rate
Term Note;
(ii)
to the Master Servicer, the sum of the Term Note Servicing Fees attributable to
each
the Initial Term Note, each Quarterly Term Note and each Fixed Rate
Term Note owing with respect to such Payment Date;
(iii)
to the Backup Servicer, an amount equal to the sum of the Term Note Backup Servicing Fees attributable to
each
the Initial Term Note, each Quarterly Term Note and each Fixed Rate
Term Note owing with respect to such Payment Date;
(iv)
(A) an amount equal to the Term Note Monthly Interest applicable to such Term Note for such Payment Date owing thereunder, for distribution to the applicable Holder of a Term Note (
pro rata
by and between the Initial Term Notes issued on the Closing Date and pro rata by and between the Quarterly Term Notes issued on the same Conversion Date, as applicable
and
pari passu
by and among Term Notes related to the same Term Note Investment Pool, based on the aggregate Outstanding Principal Amount of such Quarterly Term Note or Initial Term Note, as applicable, and any Fixed Rate Term Note, and amounts allocated to any Fixed Rate Term Note shall be allocated
pro rata
and
pari passu
by and between such Fixed Rate Term Note and the related I/O Term Note
) or (B) if such Payment Date is an Optional Redemption Date, then the applicable Optional Redemption Amount, for distribution to the applicable Holder of
a
the Initial Term Note, each Quarterly Term Note and each Fixed Rate
Term Note;
(v) with respect to the Initial Term Note, each Quarterly Term Note and each Fixed Rate Term Note, an amount equal to the Term Note Monthly Principal for such Payment Date owing thereunder attributable to the Initial Term Note, each Quarterly Term Note and each Fixed Rate Term Note, as applicable , for distribution to the applicable Holder of such Term Note (which Term Note Monthly Principal related to a Term Note Investment Pool shall be allocated pro rata and pari passu by and between the Initial Term Note, Quarterly Term Notes and any Fixed Rate Term
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Notes, as applicable, based on the aggregate Outstanding Principal Amount of such Initial Term Note, Quarterly Term Notes and any Fixed Rate Term Notes related to the same Term Note Investment Pool) ;
(vi) with respect to each Quarterly Term Note, each Fixed Rate Term Note or the Initial Term Note (A) for which the Term Note Amortization Date has occurred, (B) for which any breach of an Investment Pool Collateral Performance Trigger with respect to the related Term Note Investment Pool has occurred and is continuing, (C) for which any LTV Event has occurred, or (D) for which the Term Note Monthly Interest owing to such Term Note on such Payment Date pursuant to clause (iv) above has not been paid in full (with respect to all Term Notes), all Collections remaining after the payments specified in the foregoing clauses (i) through (v) shall be distributed pro rata on the basis of each such Term Note’s Outstanding Principal Amount (after taking into account all prior distributions made on such Payment Date, and provided , however , that no Collections shall be applied pursuant to clause (vii) below until all amounts due and owing within this clause (vi) are satisfied): (x) to any Quarterly Term Note, any Fixed Rate Term Note or the Initial Term Note which has reached its Term Note Amortization Date or for which any breach of an Investment Pool Collateral Performance Trigger with respect to the related Term Note Investment Pool has occurred until the Outstanding Principal Amount of such Quarterly Term Note, Fixed Rate Term Note or Initial Term Note equals zero, (y) to any Quarterly Term Note, Fixed Rate Term Note or Initial Term Note for which an LTV Event has occurred until the LTV for such Quarterly Term Note, Fixed Rate Term Note or Initial Term Note is no longer higher than the LTV as of the prior Payment Date, and (z) to any Term Note for which the Term Note Monthly Interest owing to such Term Note on such Payment Date above has not been paid in full until the Term Note Monthly Interest owing to such Term Note on such Payment Date has been paid in full (which Term Note Monthly Interest shall be allocated in the same manner as set forth in clause (iv) above) ;
(vii) to the extent the Variable Funding Note Available Collections are insufficient to pay in full the amounts due and payable pursuant to Section 5.04(b)(i) through (iv) , to the payment of such amounts in accordance with Section 5.04(b)(i) through (iv) ;
(viii) an amount equal to that needed to pay any other obligations of the Issuer under the Transaction Documents shall be applied to pay such obligations to each Person to whom such amount is owed, pro rata according to the respective amounts owed, as well as any amounts owed to CUSIP Global Services (except to the extent any such amount relates to a Fixed Rate Term Note or an I/O Term Note) ; and
(ix) to the Issuer, any remaining amounts.
For the avoidance of any doubt, pursuant to Section 4.12(f) (except as set forth in clause (vi) above), any payment of principal and interest on each Term Note shall be based solely on the performance of the Receivables included in the related Term Note Investment Pool and shall not be dependent on the Receivables related to any other Investment Pool or market or other credit events that are independent of such Receivables.
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(b) With respect to the Variable Funding Notes, the Master Servicer shall instruct the Indenture Trustee or the Paying Agent (if a Person different than the Indenture Trustee) to apply on each Payment Date, the Variable Funding Note Available Collections on deposit in the Collection Account with respect to such Payment Date to make the following distributions allocable to the Variable Funding Notes in the following priority:
(i) to the Verification Agent, the Variable Funding Note Verification Fee;
(ii) to the Master Servicer, the Variable Funding Note Servicing Fee owing with respect to such Payment Date;
(iii) to the Holder of each Variable Funding Note, its allocable share of, (A) the Variable Funding Note Payment Amount owing with respect to such Payment Date and (B) if such Payment Date is an Optional Redemption Date, then the applicable Optional Redemption Amount, for distribution to the applicable Holder of a Variable Funding Note;
(iv) to the Holder of each Variable Funding Note its allocable share of the Variable Funding Note Monthly Principal for such Payment Date owing thereunder;
(v) (A) if such Payment Date is the first or second Payment Date related to a Quarterly Revolving Period (i.e., prior to the respective Conversion Date), then all Collections remaining shall be allocated to and distributed pursuant to Section 5.04(a)(vi) to the extent of a shortfall of any amounts in accordance therewith, and (B) if such Payment Date is the final Payment Date of such Quarterly Revolving Period, then to the Collection Account, any remaining amounts to be distributed to the Quarterly Term Notes created on such respective Conversion Date in accordance with Section 5.04(a) on the Initial Payment Date related to such Quarterly Term Note; and
(vi) to the Issuer, any remaining amounts.
Section 5.05 Determination of LIBOR .
(a) On each LIBOR Determination Date, the Indenture Trustee shall determine the interest rate to use in the definition of One-Month LIBOR for the related Interest Period, which interest rate shall be the per annum interest rate for deposits in United States dollars for a period equal to one-month that appears on Reuters Screen LIBOR01 Page as of 11:00 A.M., London time, on such date. Upon such determination, the Indenture Trustee shall notify the Master Servicer of One-Month LIBOR for such LIBOR Determination Date. If such rate does not appear on Reuters Screen LIBOR01 Page, the rate for the LIBOR Determination Date shall be determined on the basis of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 A.M., London time, on that day to prime banks in the London interbank market for a period equal to one-month commencing on the first day of such Interest Period. The Master Servicer shall request the principal London office of each of the Reference Banks to provide a quotation of its rate. If at least two (2) such quotations are provided, the rate for that LIBOR Determination Date shall be the arithmetic mean of the quotations. If fewer than two (2) quotations are provided as requested, the rate for that LIBOR Determination Date shall be the arithmetic mean of the rates quoted by major banks in New York City, selected by the Master
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Servicer, at approximately 11:00 A.M., New York City time, on that day for loans in United States dollars to leading European banks for a period equal to one-month commencing on the first day of such Interest Period. If the banks selected by the Master Servicer are not quoting rates as provided in the immediately preceding sentence, LIBOR for such Interest Period shall be LIBOR in effect for the immediately preceding Interest Period. Notwithstanding the foregoing, if the Administrative Agent and the Master Servicer reasonably determine that determination of One-Month LIBOR using the above methodologies is no longer available or is untrustworthy, then One-Month LIBOR for such Interest Period shall be the rate per annum determined by the Administrative Agent and the Master Servicer in their good faith and reasonable discretion to be (x) the rate at which deposits in U.S. dollars for delivery on the first day of such Interest Period in immediately available funds in the approximate amount of the Advance being made and with a term equivalent to such Interest Period would be offered by such other authoritative sources (as selected by the Administrative Agent) to major banks in the London interbank Eurodollar market at their request at approximately 11:00 a.m., London time, on such date and (y) if the methodology described in clause (x) is not available as reasonably determined by the Administrative Agent and the Master Servicer in their good faith discretion, then the Administrative Agent and the Master Servicer shall mutually determine how to calculate such rate (or shall determine to use a replacement rate) in their reasonable and good faith discretion.
(b) The Master Servicer shall determine, as applicable, and promptly notify the Issuer, the Administrative Agent and the Noteholders and the Indenture Trustee of, the Note Interest Rate for the applicable Interest Period. The Note Interest Rate applicable to the then current and the immediately preceding Interest Periods may be obtained by any Noteholder by telephoning the Indenture Trustee at its Corporate Trust Office at (855) 829-8068 or by emailing a request to the Indenture Trustee at CorpTrust@BankersTrust.com.
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ARTICLE VI
SATISFACTION AND DISCHARGE; CANCELLATION OF NOTES HELD BY THE ISSUER
Section 6.01 Satisfaction and Discharge of Indenture . This Indenture will cease to be of further effect with respect to any Notes (except as to any surviving rights of transfer or exchange of Notes expressly provided for herein or in the form of Note), and the Indenture Trustee, on demand of and at the expense of the Issuer, will execute proper instruments acknowledging satisfaction and discharge of this Indenture, when:
(a) the Issuer has paid or caused to be paid all other sums payable under the Indenture with respect to the Notes (including payments to the Indenture Trustee pursuant to Section 8.07 ); and
(b) the Issuer has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Notes have been complied with or waived in accordance with the terms of this Indenture.
Notwithstanding the satisfaction and discharge of this Indenture with respect to any Notes, the obligations of the Issuer to the Indenture Trustee with respect to such Notes under Section 8.07 and the obligations of the Indenture Trustee under Section 6.02 and Section 11.03 will survive such satisfaction and discharge.
Section 6.02 Application of Money . All money and obligations deposited with the Indenture Trustee pursuant to Section 5.01 or Section 5.03 and all money received by the Indenture Trustee in respect of such obligations will be held in trust and applied by it, in accordance with the provisions of Section 5.04 , to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Indenture Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment that money and obligations have been deposited with or received by the Indenture Trustee; but that money and obligations need not be segregated from other funds held by the Indenture Trustee except to the extent required by this Indenture or by law.
Section 6.03 Cancellation of Notes Held by the Issuer . If the Issuer holds any Notes, such Notes shall be automatically cancelled and no longer Outstanding. Further, Notes held by Affiliates of the Issuer shall be deemed to be not Outstanding for all voting purposes.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01 Events of Default . “Event of Default,” wherever used herein, means with respect to any Note any one of the following events (whatever the reason for such Event of Default and whether it will be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) with respect to any Note a failure by the Issuer, an Asset Servicer or the Master Servicer to make any payment or deposit when required pursuant to any Transaction Document, in any case on or before the date occurring two (2) Business Days after the date such payment or deposit is due;
(b) (i) the Issuer shall file a petition or commence a proceeding (A) to take advantage of any Debtor Relief Law or (B) for the appointment of a trustee, conservator, receiver, liquidator, or similar official for or relating to the Issuer or all or substantially all of its property, (ii) the Issuer shall consent or fail to object to any such petition filed or proceeding commenced against or with respect to it or all or substantially all of its property, or any such petition or proceeding shall not have been dismissed or stayed within 90 days of its filing or commencement, or a court, agency, or other supervisory authority with jurisdiction shall have decreed or ordered relief with respect to any such petition or proceeding, (iii) the Issuer shall admit in writing its inability to pay its debts generally as they become due, (iv) the Issuer shall make an assignment generally for the benefit of its creditors, or (v) the Issuer shall voluntarily suspend payment of its obligations;
(c) the Issuer becomes an investment company within the meaning of the Investment Company Act;
(d) any Master Servicer Default or Asset Servicer Default occurs;
(e) any event occurs that could reasonably be expected to have a Material Adverse Effect on (i) the Issuer’s ability to make payments under the terms of this Indenture or fulfill its payment obligations under any of the other Transaction Documents, (ii) the validity, collectability or enforceability of the Receivables, or (iii) the Collateral, the Indenture Trustee’s lien on the Collateral or the priority of such lien;
(f) subject to Section 12.01(c) , a decree or order is entered by an administrative body (including an administrative order of the Consumer Financial Protection Bureau) or by a court of competent jurisdiction that requires an Enova Entity to pay more than $5,000,000 in civil penalties or finds an Enova Entity engaged in reckless or knowing violations of applicable law, whether or not such decree or order is appealable or is being appealed, in connection with a proceeding brought against any Enova Entity;
(g) any representation or warranty made by the Seller, Transferor, Issuer, an Asset Servicer or the Master Servicer under any Transaction Document shall be incorrect (subject to any materiality qualifier that may be contained in such representation or warranty) and remain
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unremedied for a period of fifteen (15) Business Days from the discovery by such party or receipt of notice from the Indenture Trustee, the Administrative Agent or any Noteholder;
(h) the Seller, Transferor or Issuer shall fail to perform or observe any affirmative covenant under any Transaction Document and such failure shall remain unremedied for a period of fifteen (15) Business Days from the discovery by such party or receipt of notice from either the Indenture Trustee, the Administrative Agent or any Noteholder;
(i) the Seller, Transferor or Issuer shall fail to perform or observe any negative covenant under any Transaction Document;
(j) the Indenture Trustee shall fail to hold a valid and perfected first-priority security interest in the Receivables;
(k) any Enova Entity (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $***, or (ii) fails to observe or perform any other agreement or condition relating to any such Indebtedness referred to in clause (i) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise);
(l) the failure to have paid any Term Note in full as of its Term Note Maturity Date;
(n) the occurrence of a Financial Trigger;
(o) the occurrence of a Regulatory Trigger Event;
(p) unless permitted by Section 7.03 of the Servicing Agreement, Enova, the Issuer, Transferor or the Master Servicer shall enter into any transaction or merger in which it is not the surviving entity, without the prior consent of the Majority Holders;
(q) occurrence of a Material Adverse Effect (as determined by the Majority Holders) with respect to Enova, the Issuer, the Transferor, the Master Servicer and the Originators, taken as a whole;
(r) subject to Section 12.01(c) , the occurrence of a Change of Control; or
(s) subject to Section 5.2(e) of the Receives Purchase Agreement and Section 2.02(f) of the Servicing Agreement, the occurrence of a material change to the Credit Policies or Servicing Policies without the prior consent of the Majority Holders.
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Section 7.02 Acceleration of Maturity . (a) If an Event of Default described in Section 7.01 occurs and is continuing with respect to a Note (other than with respect to clauses (a) or (b)), then, unless the principal of all the Notes shall have already become due and payable, the Indenture Trustee may (but shall not be required to) provided the Indenture Trustee has actual notice of the occurrence of the Event of Default, or, upon the direction of the Majority Holders provided to the Indenture Trustee, shall declare the Outstanding Principal Amount of the Outstanding Notes and all interest accrued or principal accreted and unpaid (if any) thereon to be due and payable immediately, and upon any such declaration the same will become and will be immediately due and payable, anything in this Indenture or in the Notes to the contrary notwithstanding.
(a) If an Event of Default described in clauses (a) or (b) of Section 7.01 occurs and is continuing, then all the Notes will automatically be and become immediately due and payable by the Issuer, without notice or demand to any Person, and the Issuer will automatically and immediately be obligated to pay off the Notes.
Section 7.03 Indenture Trustee May File Proofs of Claim . In case of the pendency of any receivership, insolvency, liquidation, bankruptcy or other similar proceeding relative to the Issuer or any other obligor upon the Notes or the property of the Issuer or of such other obligor, the Indenture Trustee (irrespective of whether the principal of the Notes will then be due and payable as therein expressed or by declaration or otherwise) will be entitled and empowered by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary and advisable in order to have the claims of the Indenture Trustee (including any claim for the reasonable compensation, expenses, indemnity, disbursements and advances of the Indenture Trustee, its agents and counsel and all other amounts due the Indenture Trustee under Section 8.07 ) and of the Noteholders allowed in such judicial proceeding, and
(ii) to collect and receive any funds or other property payable or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator or other similar official in any such proceeding is hereby authorized by each Noteholder to make such payment to the Indenture Trustee, and in the event that the Indenture Trustee will consent to the making of such payments directly to the Noteholders, to pay to the Indenture Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, and any other amounts due the Indenture Trustee under Section 8.07 .
Nothing herein contained will be deemed to authorize the Indenture Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding.
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Section 7.04 Indenture Trustee May Enforce Claims Without Possession of Notes . All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Indenture Trustee will be brought in its own name as trustee, and any recovery of judgment will, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its respective agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.
Section 7.05 Application of Money Collected . Any money or other property collected by the Indenture Trustee with respect to a Note pursuant to this Article VII will be applied according to the priority of payments set forth in Section 5.04 at the date or dates fixed by the Indenture Trustee.
Section 7.06 Indenture Trustee May Elect to Hold the Collateral . Following an acceleration of any Note, the Indenture Trustee may elect to continue to hold the Collateral and apply distributions on the Collateral in accordance with the regular distribution provisions set forth in Section 5.04 , except that principal will be paid on the accelerated Notes to the extent funds are received and allocated to the accelerated Notes.
Section 7.07 Sale of Collateral for Accelerated Notes .
(a) If the Notes are accelerated pursuant to this Indenture following an Event of Default, the Indenture Trustee, at the direction of the Majority Holders, will sell Receivables (or interests therein).
(b) Such a sale will be permitted if at least one of the following conditions is met:
(i) the net proceeds of such sale would be sufficient to pay all amounts due on the Notes together with any unpaid interest and fees; or
(ii) consented to by Holders of at least 66-2/3% of the Outstanding Principal Amount of the Outstanding Notes.
(c) Sale proceeds received with respect to the Notes will be applied as specified in Section 7.05 of this Indenture.
Section 7.08 Noteholders Have the Right to Direct the Time, Method and Place of Conducting Any Proceeding for Any Remedy Available to the Indenture Trustee . The Majority Holders shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any power conferred on the Indenture Trustee, subject to Section 7.07(b) . This right may be exercised only if the Indenture Trustee is adequately indemnified by the Holders of such accelerated Notes and if the Majority Holders provide the Indenture Trustee with an Opinion of Counsel acceptable to the Indenture Trustee upon which Indenture Trustee may conclusively rely that the direction provided by the Noteholders does not conflict with applicable law or this Indenture and the likelihood of the Indenture Trustee incurring liability from acting in reliance thereon, personal or otherwise, is remote.
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Section 7.09 Limitation on Suits . To the fullest extent permitted by applicable law, but subject to Section 7.07(b) and Section 7.08 , no Holder of any Note will have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee or similar official, or for any other remedy hereunder, unless:
(a) such Holder has previously given notice to the Indenture Trustee of a continuing Event of Default with respect to such Notes;
(b) the Majority Holders have made request to the Indenture Trustee to institute proceedings in respect of such Event of Default in the name of the Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; and
(d) the Indenture Trustee, for 30 days after the Indenture Trustee has received such notice, request and offer of indemnity has failed to institute any such proceeding;
it being understood and intended that no one or more Holders of such Notes will have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to obtain or to seek to obtain priority or preference over any other such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and proportionate benefit of all the Holders of all such Notes.
Section 7.10 Unconditional Right of Noteholders to Receive Principal and Interest; Limited Recourse . Notwithstanding any other provisions in this Indenture, the Holder of any Note will have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Note and to institute suit for the enforcement of any such payment, and such right will not be impaired without the consent of such Holder; provided , however , that the obligation to pay principal of or interest on the Notes or any other amount payable to any Noteholder will be without recourse to the Indenture Trustee or any Affiliate, officer, employee, member or director of any of them, and the obligation of the Issuer to pay principal of or interest on the Notes or any other amount payable to any Noteholder will be subject to the allocation and payment provisions of this Indenture, and limited to amounts available from the Collateral.
Section 7.11 Restoration of Rights and Remedies . If the Indenture Trustee or any Noteholder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, then and in every such case the Issuer, the Indenture Trustee and the Noteholders will, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders will continue as though no such proceeding had been instituted.
Section 7.12 Rights and Remedies Cumulative . No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy will, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or
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remedy hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other appropriate right or remedy.
Section 7.13 Delay or Omission Not Waiver . No delay or omission of the Indenture Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VII or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be.
Section 7.14 Control by Noteholders . Subject to Section 7.07(b) and Section 7.08 , the Majority Holders will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any power conferred on the Indenture Trustee with respect to the Notes, provided , that:
(a) the Indenture Trustee will have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, determines that the Action so directed may not lawfully be taken or would conflict with this Indenture or if the Indenture Trustee in good faith determines that the proceedings so directed would involve it in personal liability or be unjustly prejudicial to the Holders not taking part in such direction, and
(b) the Indenture Trustee may take any other action permitted hereunder deemed proper by the Indenture Trustee which is not inconsistent with such direction.
Section 7.15 Waiver of Past Defaults . The Majority Holders may on behalf of the Holders of all the Notes waive any past default hereunder and its consequences, except consent of the Holder of each Outstanding Note is required if (i) there is a default not theretofore cured in the payment of the principal of or interest on any Note, or (ii) in respect of a covenant or provision hereof which under Article X cannot be modified or amended without the consent of the Holder of each Outstanding Note. Until any Event of Default arising from such default is hereunder waived or cured, and during the continuation of any such Event of Default, the Note Interest Rate for (a) the Initial Term Note, each of the Quarterly Term Notes and the Variable Funding Notes shall be increased by 2.50% , (b) each of the I/O Term Notes shall be increased by 1.50% and (c) each of the Fixed Rate Term Notes shall be increased by 1.0% .
Upon any such waiver, such default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, for every purpose of this Indenture; but no such waiver will extend to any subsequent or other default or impair any right consequent thereon.
Section 7.16 Undertaking for Costs . All parties to this Indenture agree, and each Holder of any Note by his or her acceptance thereof will be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable and documented attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the
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provisions of this Section 7.16 will not apply to any suit instituted by the Indenture Trustee, to any suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than 25% in Outstanding Principal Amount of the Outstanding Notes.
Section 7.17 Waiver of Stay or Extension Laws . The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
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ARTICLE VIII
THE INDENTURE TRUSTEE
Section 8.01 Certain Duties and Responsibilities . (a) The Indenture Trustee is hereby authorized and directed to enter into the Transaction Documents to which the Indenture Trustee is a party and undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the other Transaction Documents with respect to the Notes, and no implied duties (including fiduciary duties) covenants or obligations will be read into this Indenture against the Indenture Trustee. The permissive right of the Indenture Trustee to do things enumerated in this Indenture shall never be construed as a duty. Bankers Trust and any Indenture Trustee (if a different Person than Bankers Trust) shall only be responsible for the performance of the express duties outlined herein in whatever capacity, whether as Indenture Trustee, Paying Agent, Securities Intermediary, Authenticating Agent, Note Registrar or otherwise, and it shall not be liable for any action reasonably taken or omitted to be taken by it in any capacity hereunder in good faith or be responsible other than for its own gross negligence or willful default in the performance of those express duties.
(b) In the absence of bad faith on its part, the Indenture Trustee may, with respect to Notes, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee will be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein).
(c) In case an Event of Default with respect to any Notes has occurred and is continuing and for which the Indenture Trustee has actual knowledge, the Indenture Trustee will exercise with respect to such Notes such of the rights and powers vested in it by this Indenture, as the Indenture Trustee in its sole discretion determines are consistent with the terms of this Indenture and use the same degree of care and skill in their exercise, as a corporate trustee would exercise or use under the circumstances in the conduct of such corporate trustee’s own affairs. Nothing in this subsection (c) shall be construed to limit the effect of subsection (a) of this Section 8.01 .
(d) Except to the extent otherwise provided in Section 8.03 , no provision of this Indenture will be construed to relieve the Indenture Trustee from liability for its own gross negligence or willful misconduct, except that:
(i) this subsection (d) will not be construed to limit the effect of subsection (a) of this Section 8.01 or Section 8.03 ;
(ii) the Indenture Trustee will not be liable for any error of judgment made in good faith by an Indenture Trustee Authorized Officer;
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(iii) the Indenture Trustee will not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Majority Holders relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any power conferred upon the Indenture Trustee, under this Indenture with respect to the Notes; and
(iv) no provision of this Indenture will require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it will have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to the Indenture Trustee against such risk or liability is not reasonably assured to it.
Section 8.02 Notice of Defaults . Within ten (10) Business Days after the occurrence of any default hereunder with respect any Note of which a Responsible Officer of the Indenture Trustee shall have actual knowledge, the Indenture Trustee will transmit by mail to all Noteholders, as their names and addresses appear in the Note Register, notice of such default hereunder known to the Indenture Trustee. For the purpose of this Section 8.02 , the term “default,” with respect any Note, means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Note.
Section 8.03 Certain Rights of Indenture Trustee .
(a) The Indenture Trustee may conclusively rely and will be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, including any Officer’s Certificate or Opinion of Counsel, whether in its original, facsimile or other electronic form, believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) whenever in the administration of this Indenture the Indenture Trustee deems it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer’s Certificate;
(c) the Indenture Trustee may consult with counsel of its own selection and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(d) the Indenture Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholders shall have offered to the Indenture Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(e) the Indenture Trustee will not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, including facts or
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matters stated in any Officer’s Certificate or Opinion of Counsel, but the Indenture Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Indenture Trustee will determine to make such further inquiry or investigation, it will be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney;
(f) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Indenture Trustee will not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(g) the Indenture Trustee will not be responsible for filing any financing statements or continuation statements in connection with the Notes, but will cooperate with the Issuer in connection with the filing of such financing statements or amendments to such financing statements;
(h) the Indenture Trustee shall not be deemed to have notice of any default (including any Master Servicer Default or Asset Servicer Default under the Servicing Agreement) or Event of Default unless a Responsible Officer of the Indenture Trustee has actual knowledge thereof or unless notice of any event which is in fact such a default is received by a Responsible Officer of the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee, and such notice references the Notes and this Indenture (delivery of reports and other information to the Indenture Trustee shall not constitute actual or constructive knowledge or notice of an Event of Default);
(i) the rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, including its capacity as Indenture Trustee, Paying Agent, Securities Intermediary, Authenticating Agent and Note Registrar, and each agent, custodian and other person employed by the Indenture Trustee to act hereunder;
(j) the Indenture Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;
(k) the right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty;
(l) the Indenture Trustee may conclusively rely on the authority of any Authorized Officer whose signatures and incumbency have been certified to the Indenture Trustee by any Person to sign an Officer’s Certificate or otherwise act on behalf of such Person until Indenture Trustee has received written notice to the contrary and the Indenture Trustee shall have no duty to verify the authenticity of the signature appearing on any Officer’s Certificate or other written document purportedly made on behalf of such Person;
(m) the Indenture Trustee shall be protected in relying on any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond debenture or other paper or document which it, in good faith, believes to be genuine and what it
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purports to be and shall have no duty to inquire or to the genuineness, validity or enforceability thereof; and
(n) to the fullest extent permitted by law and notwithstanding anything in this Indenture to the contrary, the Indenture Trustee shall not be liable under any circumstances for special, indirect, incidental, consequential or punitive damages, however styled, including lost profits, loss of revenue, diminution in value or loss of business.
Section 8.04 Not Responsible for Recitals or Issuance of Notes . The recitals contained herein and in the Notes, except the certificates of authentication, will be taken as the statements of the Issuer, and the Indenture Trustee assumes no responsibility for their correctness. The Indenture Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes. The Indenture Trustee will not be accountable for the use or application by the Issuer of Notes or the proceeds thereof.
Section 8.05 May Hold Notes . The Indenture Trustee, any Paying Agent, the Note Registrar or any other agent of the Issuer, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer with the same rights it would have if it were not Indenture Trustee, Paying Agent, Note Registrar or such other agent and the Issuer and the Noteholders waive any resulting conflict of interest.
Section 8.06 Money Held in Trust . Money held by the Indenture Trustee in trust hereunder need not be segregated from other funds except to the extent required by this Indenture or by law. The Indenture Trustee will be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuer.
Section 8.07 Compensation and Reimbursement; Limit on Compensation Reimbursement and Indemnity . (a) The Issuer agrees:
(i) to pay to the Indenture Trustee from time to time reasonable compensation (or, for so long as Bankers Trust is the Indenture Trustee, such amount as has been mutually agreed upon in writing) for all services rendered by it hereunder (which compensation will not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(ii) to reimburse the Indenture Trustee upon the Indenture Trustee’s request for all reasonable expenses, disbursements and advances incurred or made by the Indenture Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the reasonable expenses and disbursements of the Indenture Trustee’s agents and counsel), except any such expense, disbursement or advance as may be attributable to the Indenture Trustee’s own gross negligence, willful misconduct or bad faith; and
(iii) to indemnify, defend and hold harmless the Indenture Trustee and its officers, directors, employees and agents for, and to hold the Indenture Trustee harmless against, any and all loss, liability, expense, claim, action, suit, damage or injury of any kind and nature whatsoever incurred without gross negligence, willful misconduct or bad faith on the Indenture Trustee’s part, arising out of or in connection with the acceptance or
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administration of this trust, including the costs and expenses of the Indenture Trustee defending itself against any claim or liability (whether asserted by the Issuer, the Master Servicer, any Asset Servicer, any Holder or any other Person) in connection with the exercise or performance of any of its powers or duties hereunder.
The Indenture Trustee will have no recourse to any asset of the Issuer other than funds available pursuant to Section 7.05 .
(b) This Section 8.07 will survive the termination of this Indenture and the resignation, removal or replacement of the Indenture Trustee under Section 8.10 .
Section 8.09 Corporate Indenture Trustee Required; Eligibility . There will at all times be an Indenture Trustee hereunder with respect to each Note, which will be either a bank or a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to exercise corporate trust powers, and having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 8.09 , the combined capital and surplus of such corporation will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Issuer may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Issuer, serve as Indenture Trustee. If at any time the Indenture Trustee with respect to any Note ceases to be eligible in accordance with the provisions of this Section 8.09 , it will, if a Responsible Officer has actual knowledge thereof, resign immediately in the manner and with the effect hereinafter specified in this Article VIII .
Section 8.10 Resignation and Removal; Appointment of Successor . The following provisions shall apply to the resignation or removal of the Indenture Trustee and the appointment of a successor.
(a) No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee pursuant to this Article VIII will become effective until the acceptance of appointment by the successor Indenture Trustee under Section 8.11 .
(b) The Indenture Trustee may resign at any time by giving at least thirty (30) days’ prior notice thereof to the Issuer and Administrative Agent. If an instrument of acceptance by a successor Indenture Trustee shall not have been delivered to the Indenture Trustee within 30 days after the giving of such notice of resignation, the resigning Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(c) The Indenture Trustee may be removed at any time by Action of the Majority Holders, delivered to the Indenture Trustee and to the Issuer and Administrative Agent. If an instrument of acceptance by a successor Indenture Trustee shall not have been delivered to the Indenture Trustee within 30 days after the giving of such notice of removal, the Indenture
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Trustee being removed may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(i) the Indenture Trustee ceases to be eligible under Section 8.09 and fails to resign after request therefor by the Issuer or by any such Noteholder, or
(ii) the Indenture Trustee is adjudged bankrupt or insolvent or a receiver of the Indenture Trustee or of its property is appointed or any public officer takes charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (A) the Issuer may remove the Indenture Trustee, or (B) subject to Section 7.17 , any Noteholder who has been a bona fide Holder of a Note for at least 6 months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee resigns, is removed or becomes incapable of acting, the Issuer will promptly appoint a successor Indenture Trustee. If, within sixty (60) days after such resignation, removal or incapacity, or the occurrence of such vacancy, a successor Indenture Trustee has not been appointed, then an Indenture Trustee may thereupon be appointed by Act of the Majority Holders delivered to the Issuer and the retiring Indenture Trustee. The successor Indenture Trustee so appointed will, forthwith upon its acceptance of such appointment, become the successor Indenture Trustee. If no successor Indenture Trustee shall have been so appointed by the Issuer or the Noteholders and accepted appointment in the manner hereinafter provided, the resigning or removed Indenture Trustee or any Noteholder who has been a bona fide Holder of a Note for at least 6 months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(f) The Issuer will give notice of each resignation and each removal of the Indenture Trustee and each appointment of a successor Indenture Trustee to each Noteholder as provided in Section 1.06 . To facilitate delivery of such notice, upon request by the Issuer, the Note Registrar shall provide to the Issuer a list of the relevant Registered Noteholders. Each notice will include the name of the successor Indenture Trustee and the address of its principal Corporate Trust Office.
Section 8.11 Acceptance of Appointment by Successor . Every successor Indenture Trustee appointed hereunder will execute, acknowledge and deliver to the Issuer and to the predecessor Indenture Trustee an instrument accepting such appointment and thereupon the resignation or removal of the predecessor Indenture Trustee will become effective, and such successor Indenture Trustee, without any further act, deed or conveyance, will become vested with all the rights, powers, trusts and duties of the predecessor Indenture Trustee; but, on request of the Issuer or the successor Indenture Trustee, such predecessor Indenture Trustee will, upon payment of its reasonable charges, if any, execute and deliver an instrument transferring to such successor Indenture Trustee all the rights, powers and trusts of the predecessor Indenture Trustee, and will duly assign, transfer and deliver to such successor Indenture Trustee all property and money held
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by such predecessor Indenture Trustee hereunder, subject nevertheless to its Lien, if any, provided for in Section 8.07 and the payment of all costs, fees and expenses of the Indenture Trustee. Upon request of any such successor Indenture Trustee, the Issuer will execute any and all instruments for more fully and certainly vesting in and confirming to such successor Indenture Trustee all such rights, powers and trusts.
In case of the appointment hereunder of a successor Indenture Trustee with respect to the Notes, the Issuer, the predecessor Indenture Trustee and each successor Indenture Trustee with respect to the Notes will execute and deliver a supplement to this Indenture which will contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Indenture Trustee with respect to the Notes shall be vested in the successor Indenture Trustee.
No successor Indenture Trustee will accept its appointment unless at the time of such acceptance such successor Indenture Trustee will be qualified and eligible under this Article VIII .
Section 8.12 Merger, Conversion, Consolidation or Succession to Business . Any entity into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any entity succeeding to all or substantially all of the corporate trust business of the Indenture Trustee, will be the successor of the Indenture Trustee hereunder, provided such entity shall be otherwise qualified and eligible under this Article VIII , without the execution or filing of any paper or any further act on the part of any of the parties hereto. The Indenture Trustee shall give prompt notice of such merger, conversion, consolidation or succession to the Issuer. In case any Notes shall have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Indenture Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Indenture Trustee had itself authenticated such Notes.
Section 8.14 Appointment of Authenticating Agent . At any time when any of the Notes remain Outstanding the Indenture Trustee, with the approval of the Issuer, may appoint an Authenticating Agent or Agents which will be authorized to act on behalf of the Indenture Trustee to authenticate Notes issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 4.06 , and Notes so authenticated will be entitled to the benefits of this Indenture and will be valid and obligatory for all purposes as if authenticated by the Indenture Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Indenture Trustee or the Indenture Trustee’s Certificate of Authentication, such reference will be deemed to include authentication and delivery on behalf of the Indenture Trustee by an Authenticating Agent and a Certificate of Authentication executed on behalf of the Indenture Trustee by an Authenticating Agent. Each Authenticating Agent will be acceptable to the Issuer and will at all times be an Entity organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as an Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and, if other than the Issuer itself, subject to supervision or examination by federal or State authority. If
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such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 8.14 , the combined capital and surplus of such Authenticating Agent will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent will cease to be eligible in accordance with the provisions of this Section 8.14 , such Authenticating Agent will resign immediately in the manner and with the effect specified in this Section 8.14 . The initial Authenticating Agent for the Notes will be Bankers Trust.
Any entity into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which such Authenticating Agent will be a party, or any entity succeeding to the corporate agency or corporate trust business of an Authenticating Agent, will continue to be an Authenticating Agent, provided such entity will be otherwise eligible under this Section 8.14 , without the execution or filing of any paper or any further act on the part of the Indenture Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Indenture Trustee and to the Issuer. The Indenture Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent will cease to be eligible in accordance with the provisions of this Section 8.14 , the Indenture Trustee, with the approval of the Issuer, may appoint a successor Authenticating Agent and will give notice to each Noteholder as provided in Section 1.06 . Any successor Authenticating Agent upon acceptance of its appointment hereunder will become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent will be appointed unless eligible under the provisions of this Section 8.14 .
The Indenture Trustee agrees to pay to each Authenticating Agent (other than an Authenticating Agent appointed at the request of the Issuer from time to time) reasonable compensation for its services under this Section 8.14 , and the Indenture Trustee will be entitled to be reimbursed for such payments, subject to the provisions of Section 8.07 .
If an appointment of an Authenticating Agent, other than the Indenture Trustee, is made pursuant to this Section 8.14 , the Notes may have endorsed thereon, in lieu of the Indenture Trustee’s Certificate of Authentication, an alternate Certificate of Authentication in the following form:
This is one of the Notes designated therein referred to in the within-mentioned Indenture.
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Bankers Trust Company, as Indenture |
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Trustee |
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By:________________________________ |
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As Authenticating Agent |
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By:________________________________ |
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Authorized Signatory |
Section 8.15 Tax Returns . In the event that the Issuer shall be required to file tax returns, the Issuer shall prepare or shall cause to be prepared and executed such tax returns. The Issuer shall also prepare or shall cause to be prepared all tax information required by law to be distributed to Noteholders and shall deliver such information to the Indenture Trustee at least five days prior to the date it is required by law to be distributed to Noteholders. The Indenture Trustee, upon request, will furnish the Issuer with all such information in the possession of the Indenture Trustee as may be reasonably requested and required in connection with the preparation of all tax returns of the Issuer. In no event shall the Issuer or the Indenture Trustee be personally liable for any liabilities, costs or expenses of the Issuer or any Noteholder arising under any tax law, including federal, State or local income or excise taxes or any other tax imposed on or measured by income (or any interest or penalty with respect thereto arising from a failure to comply therewith).
Section 8.16 Representations, Warranties and Covenants of the Indenture Trustee . The Indenture Trustee represents, warrants and covenants that:
(i) The Indenture Trustee is an entity validly existing in good standing under the applicable laws of the jurisdiction of its organization;
(ii) The Indenture Trustee has full corporate power and authority to execute, deliver and perform its obligations under this Indenture and has taken all necessary corporate action to authorize the execution, delivery and performance by it of this Indenture and other Transaction Documents to which it is a party;
(iii) Each of this Indenture and the other Transaction Documents to which it is a party has been duly executed and delivered by the Indenture Trustee and constitutes its legal, valid and binding obligation in accordance with its terms subject to bankruptcy and equitable principles;
(iv) No consent, approval, license, exemption of or filing or registration with, giving of notice to, or other authorization of or by, any Iowa or federal court, administrative agency or other governmental authority governing the Indenture Trustee’s trust powers is or shall be required in connection with the execution, delivery or performance by the Indenture Trustee of this Indenture and each other Transaction Document to which it is a party for the valid consummation of the transactions contemplated hereby or thereby;
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(v) There is no action, suit, proceeding or investigation pending or, to the knowledge of the Indenture Trustee, threatened against or affecting the Indenture Trustee before or by any court, administrative agency or other governmental authority that brings into question the validity of the transactions contemplated hereby, or that might result in any Material Adverse Effect; and
(vi) The execution, delivery and performance by the Indenture Trustee of this Indenture and each of the Transaction Documents to which it is a party does not and shall not (i) violate any provision of any law, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Indenture Trustee or (ii) violate any provision of its charter documents.
Section 8.17 Appointment of Co-Trustee or Separate Indenture Trustee . (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Issuer Estate may at the time be located, the Indenture Trustee shall have the power and shall execute and deliver all instruments, subject to the prior consent of the Issuer, which consent shall not be unreasonably withheld, conditioned or delayed to appoint one or more Persons reasonably acceptable to the Issuer to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Issuer Estate, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Issuer Estate, or any part thereof, and, subject to the other provisions of this Section 8.17 , such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 8.09 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 8.10 .
(b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture 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 Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture 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 Issuer 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 Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.
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(c) Any notice, request or other writing given to the Indenture 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 Indenture and the conditions of this Article VIII . 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 Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee and an executed copy delivered to the Issuer.
(d) Any separate trustee or co-trustee may at any time appoint the Indenture Trustee, 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 Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.
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ARTICLE IX
LISTS, REPORTS BY INDENTURE
TRUSTEE AND ISSUER
Section 9.01 Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders . The Issuer will furnish or cause to be furnished to the Indenture Trustee:
(a) not more than ten (10) days after each Record Date, in such form as the Indenture Trustee may reasonably require, a list of the names and addresses of the Noteholders as of such date, and
(b) at such other times as the Indenture Trustee may request, within 30 days after the receipt by the Issuer of any such request, a list of similar form and content as of a date not more than fifteen (15) days before the time such list is furnished;
provided , however , that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished.
Section 9.02 Preservation of Information; Communications to Noteholders .
(a) The Indenture Trustee will preserve, in as current a form as is reasonably practicable, the names and addresses of Noteholders contained in the most recent list furnished to the Indenture Trustee as provided in Section 9.01 or in the names and addresses of Noteholders received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 9.01 upon receipt of a new list so furnished.
(b) Every Holder of Notes, by receiving and holding the same, agrees with the Issuer and the Indenture Trustee that neither the Issuer nor the Indenture Trustee will be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Notes in accordance with Section 9.01 , regardless of the source from which such information was derived, and that the Indenture Trustee will not be held accountable by reason of mailing any material pursuant to a request made under Section 9.01 .
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Section 10.01 Amendments Without Consent of Noteholders . Without the consent of the Holders of any Notes, at any time and from time to time, upon delivery of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes that such amendment will not have a Material Adverse Effect and is not reasonably expected to have a Material Adverse Effect at any time in the future, the Issuer may amend this Indenture in form reasonably satisfactory to the Indenture Trustee, for any of the following purposes:
(a) to add to the covenants of the Issuer, or to surrender any right or power herein conferred upon the Issuer by the Issuer, for the benefit of the Holders of the Notes (and if such covenants or the surrender of such right or power are to be for the benefit of less than all Notes, stating that such covenants are expressly being included or such surrenders are expressly being made solely for the benefit of one or more specified Notes); or
(b) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein; or
(c) to evidence and provide for the acceptance of appointment by another corporation as a successor Indenture Trustee hereunder and to add to or change any of the provisions of this Indenture as will be necessary or advisable to provide for or facilitate the administration of the trusts hereunder by more than one Indenture Trustee, pursuant to Section 8.11 ; or
(e) to provide for additional forms of credit enhancement for the Notes; or
(f) to comply with any applicable regulatory, accounting, securities or tax laws, rules, regulations or requirements that in the reasonable judgment of the Issuer would otherwise result in a Material Adverse Effect to the Issuer; or
(g) to qualify for sale treatment of the transactions contemplated by the Receivables Purchase Agreement under generally accepted accounting principles.
The Indenture Trustee may, but shall not be obligated to, enter into any amendments which, in its determination, adversely affects the Indenture Trustee’s rights, duties, benefits, protections, indemnities, privileges or immunities under this Indenture or otherwise.
Section 10.02 Amendments with Consent of Noteholders . In addition to any amendment permitted pursuant to Section 10.01 hereof, with the consent of the Majority Holders affected by such amendment of this Indenture by Act of said Holders delivered to the Issuer and the Indenture Trustee, the Issuer, and the Indenture Trustee, as applicable, upon delivery of an Issuer Tax Opinion (unless such delivery is waived by such Majority Holders) may enter into an amendment of this Indenture for the purpose of adding any provisions to, or changing in any
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manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided , however , that no such amendment will, without the consent of the Holder of each Outstanding Note affected thereby:
(a) waive or change the scheduled payment date of any payment of interest on any Note, or change the Term Note Amortization Date or the Term Note Maturity Date of any Term Note;
(b) waive or reduce the Initial Principal Amount of, or the interest rate on any Note, or change the method of computing the Outstanding Principal Amount in a manner that is adverse to the Holder of any Note; or change the provisions of this Indenture relating to the application of proceeds of any Collateral to the payment of principal of or interest on any Notes; or change any place where, or the coin or currency in which, Notes or the principal thereof or interest or any distribution thereon is payable;
(c) impair the right to institute suit for the enforcement of any payment on any Note;
(d) amend the definition of Advance Conditions, Initial Term Note Advance Rate, Quarterly Term Note Advance Rate, Variable Funding Note Advance Rate, Aggregate Collateral Performance, Aggregate Cumulative Delinquency Ratio, Aggregate Cumulative Delinquency Trigger, Aggregate Cumulative Net Loss Ratio, Aggregate Cumulative Net Loss Trigger, Aggregate Original Receivable Principal Balance, Change of Control, Excess Concentration Limits, Eligible Receivable, Ineligible Receivable, Excluded Receivable, Financial Trigger, Net Worth Trigger, Liquidity Trigger, Leverage Debt-to-Income Trigger, Investment Pool Collateral Performance Triggers, Investment Pool Cumulative Delinquency Ratio, Investment Pool Cumulative Delinquency Trigger, Investment Pool Cumulative Net Loss Ratio, Investment Pool Cumulative Net Loss Trigger, Delinquent Receivable, Charged-Off Receivable, Term Note LTV Percentage, Initial Term Note LTV Percentage, Majority Holders, Maximum Advance Amount, Maximum Principal Amount, Performance Trigger, Funding Period Termination Date, Variable Funding Note Borrowing Base, Variable Funding Note Maximum Principal Amount and Regulatory Trigger Event;
(e) modify the percentage in Outstanding Principal Amount of the Outstanding Notes, the consent of whose Holders is required for any such amendment, or the consent of whose Holders is required for any waiver of compliance with the provisions of this Indenture or of defaults hereunder and their consequences, provided for in this Indenture;
(f) modify any of the provisions of this Section 10.02 or Section 7.16 , except to increase any percentage of Holders required to consent to any such amendment or to provide that other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby;
(g) permit the creation of any lien or other encumbrance on the Collateral that is prior to the lien in favor of the Indenture Trustee for the benefit of the Holders of such Notes or permit the release of Collateral except as expressly permitted by this Indenture and the Transaction Documents;
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(h) consent to the assignment by the Issuer of its rights under the Transaction Documents except as expressly permitted under the Transaction Documents;
(i) change any Place of Payment where any principal of, or interest on, any Note is payable; or
(j) change the method of computing the amount of principal of, or interest on, any Note on any date.
Notwithstanding any other provision of this Indenture, (a) the consent of any Holder of any Outstanding Note shall not be required for an amendment of this Indenture (including any amendment listed in clauses (a) through (j) above) if such amendment is with respect to a provision of this Indenture that does not affect such Holder or only affects Notes that are not held by such Holder and (b) an amendment of this Indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of a particular Note, or which modifies the rights of the Holders of such Notes with respect to such covenant or other provision, will be deemed not to affect the rights under this Indenture of the Holders of any other Notes.
It will not be necessary for any Act of Noteholders under this Section 10.02 to approve the particular form of any proposed amendment, but it will be sufficient if such Act will approve the substance thereof.
Section 10.03 Execution of Amendments . In executing or accepting the additional trusts created by any amendment of this Indenture permitted by this Article X or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee will be provided with, and will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Indenture and that all conditions precedent thereto have been satisfied. The Indenture Trustee may, but will not (except to the extent required in the case of an amendment entered into under Section 10.01(f) ) be obligated to, enter into any such amendment which affects the Indenture Trustee’s own rights, duties or immunities under this Indenture or otherwise.
Section 10.04 Effect of Amendments . Upon the execution of any amendment of this Indenture under this Article X , this Indenture will be modified in accordance therewith, and such amendment will form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder will be bound thereby to the extent provided therein.
Section 10.05 Reference in Notes . Notes authenticated and delivered after the execution of any amendment of this Indenture pursuant to this Article X may, and will if required by the Indenture Trustee, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such amendment. If the Issuer will so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such amendment may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER
The Issuer hereby represents, warrants, and covenants to the Indenture Trustee and each of the Noteholders as of the date hereof, and as of (and as a condition to any Advance occurring on) each Advance Date, in each case with reference to the facts and circumstances then existing, as follows:
Section 11.01 Payment of Principal and Interest . With respect to each Note, the Issuer will duly and punctually pay the principal of and interest on such Note in accordance with its terms and this Indenture, and will duly comply with all the other terms, agreements and conditions contained in, or made in this Indenture for the benefit of, the Notes. The payment of principal and interest on each Note will be primarily based on the performance of the Receivables pledged to each respective Investment Pool and will not be contingent on market or credit events that are independent of the Receivables.
Section 11.02 Financial Statements and Reports and Other Information . (a) The Issuer shall deliver, or shall cause to be delivered, or make available, as applicable, the following to the Indenture Trustee who shall deliver to any Noteholder upon request:
(b) unaudited consolidated quarterly financial statements (within 45 days of the end of each fiscal quarter) and audited consolidated annual statements (within 120 days of the end of each fiscal year) of Enova and its Consolidated Subsidiaries.
(c) on each Reporting Date, a report summarizing pool performance, Eligible Receivables and cash flow information, Excess Concentration Limits, Investment Pool Collateral Performance Triggers and Aggregate Collateral Performance and the calculation of the Financial Triggers;
(d) on each Reporting Date, a data tape that includes the performance of all Receivables;
(e) an annual statement of compliance and auditor’s report regarding the servicing platform of the Master Servicer, to be delivered on or before March 31 of each year beginning in 2018;
(f) two days prior to each Advance Date and at such other times as the Majority Holders shall reasonably request, a Borrowing Base Certificate, the execution and delivery of which shall in each instance constitute a representation and warranty by the Issuer that each Eligible Receivable included therein satisfies the Eligibility Criteria as of the related Eligibility Date; and
(g) such financial and other information as the Majority Holders may reasonably request, all of which shall be provided in a format reasonably satisfactory to the Majority Holders, provided , that, any such financial or other information must be publicly available.
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Section 11.03 Maintenance of Office or Agency . The Issuer will maintain an office or agency in each Place of Payment where Notes may be presented or surrendered for payment, where Notes may be surrendered for transfer or exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer will give prompt notice to the Indenture Trustee of the location, and of any change in the location, of such office or agency. If at any time the Issuer will fail to maintain such office or agency or will fail to furnish the Indenture Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints the Indenture Trustee its agent to receive all such presentations, surrenders, notices and demands.
The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all of such purposes specified above and may constitute and appoint one or more Paying Agents for the payments of such Notes, in one or more other cities, and may from time to time rescind such designations and appointments; provided , however , that no such designation, appointment or rescission shall in any matter relieve the Issuer of its obligations to maintain an office or agency in each Place of Payment for any Notes for such purposes. The Issuer will give prompt notice to the Indenture Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless and until the Issuer rescinds one or more of such appointments, the Issuer hereby appoints the Indenture Trustee, at its Corporate Trust Office, as its Paying Agent.
Section 11.04 Certain Negative Covenants . Until the satisfaction and discharge of this Indenture pursuant to Section 6.01 , the Issuer shall not:
(a) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts withheld in good faith from such payments under the Internal Revenue Code or other applicable tax law including foreign withholding);
(b) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien in favor of the Indenture Trustee created by this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby or by the other Transaction Documents;
(c) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than Permitted Liens and the lien in favor of the Indenture Trustee created by this Indenture) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the proceeds thereof;
(d) permit the lien in favor of the Indenture Trustee created by this Indenture not to constitute a valid first priority perfected security interest in the Collateral, subject to Permitted Liens;
(e) voluntarily dissolve or liquidate;
(f) establish or maintain an account that is not the Collection Account, except for as otherwise permitted in the Transaction Documents;
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(g) at any time fail to be wholly owned by the Transferor, unless it obtains the prior consent of the Majority Holders; or
(h) terminate any Servicing Agreement or the Backup Servicing Agreement, or (b) designate a replacement master servicer or an asset servicer other than the Backup Servicer, in each case without the consent of the Majority Holders or as otherwise expressly provided in the Transaction Documents.
Section 11.05 Litigation . The Issuer shall deliver to the Indenture Trustee, and the Noteholders promptly upon obtaining actual knowledge of (i) the institution of, or non-frivolous threat in writing of, an adverse proceeding against the Issuer, or (ii) any material development of any adverse proceeding against the Issuer that, if adversely determined, is reasonably likely to result in a judgment in an amount in excess of $50,000, or which seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, notice thereof together with such other information as may be reasonably available to the Issuer to enable the Indenture Trustee, the Noteholders and their counsel to evaluate such matters.
Section 11.06 Money for Note Payments to Be Held in Trust . The Paying Agent (if a different Person than the Indenture Trustee), on behalf of the Indenture Trustee, will make distributions to Noteholders from the Collection Account and will report the amounts of such distributions to the Indenture Trustee. Any Paying Agent will have the revocable power to withdraw funds from the Collection Account for the purpose of making the distributions referred to above. The Indenture Trustee may revoke such power and remove the Paying Agent if the Indenture Trustee determines in its sole discretion that the Paying Agent has failed to perform its obligations under this Indenture in any material respect. The Paying Agent upon removal will return all funds in its possession to the Indenture Trustee.
The Issuer will cause each Paying Agent (if a different Person than the Indenture Trustee) for any Note to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent will agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it so agrees), subject to the provisions of this Section 11.06 , that such Paying Agent will:
(a) hold all sums held by it for the payment of principal of or interest on such Notes in trust for the benefit of the Persons entitled thereto until such sums will be paid to such Persons or otherwise disposed of as herein provided;
(b) if such Paying Agent is not the Indenture Trustee, give the Indenture Trustee notice of any default by the Issuer (or any other obligor upon such Notes) in the making of any such payment of principal or interest on such Notes;
(c) if such Paying Agent is not the Indenture Trustee, at any time during the continuance of any such default, upon the request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent;
(d) immediately resign as a Paying Agent and, if such Paying Agent is not the Indenture Trustee, forthwith pay to the Indenture Trustee all sums held by it in trust for the payment
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of Notes if at any time it ceases to meet the standards described in this Section 11.06 required to be met by a Paying Agent at the time of its appointment; and
(e) comply with all requirements of the Internal Revenue Code or any other applicable tax law with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture with respect to any Note or for any other purpose, pay, or by an Officer’s Certificate direct any Paying Agent to pay, to the Indenture Trustee all sums held in trust by the Issuer or such Paying Agent in respect of each and every Note as to which it seeks to discharge this Indenture or, if for any other purpose, all sums so held in trust by the Issuer in respect of all Notes, such sums to be held by the Indenture Trustee upon the same trusts as those upon which such sums were held by the Issuer or such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent will be released from all further liability with respect to such money.
Any money deposited with the Indenture Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable will be paid to the Issuer upon request in an Officer’s Certificate, or (if then held by the Issuer) will be discharged from such trust; and the Holder of such Note will thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, will thereupon cease. The Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer give to the Holders of the Notes as to which the money to be repaid was held in trust, as provided in Section 1.06 , a notice that such funds remain unclaimed and that, after a date specified in the notice, which will not be less than 30 days from the date on which the notice was first mailed or published to the Holders of the Notes as to which the money to be repaid was held in trust, any unclaimed balance of such funds then remaining will be paid to the Issuer free of the trust formerly impressed upon it.
Each Paying Agent will at all times have a combined capital and surplus of at least $50,000,000 and be subject to supervision or examination by a United States federal or State authority. If such Paying Agent publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 11.06 , the combined capital and surplus of such Paying Agent will be deemed to be its combined capital and surplus as set forth in its most recent report of condition as so published.
Section 11.07 Statement as to Compliance . The Issuer will deliver to the Indenture Trustee and each Noteholder, on or before March 31 of each year, beginning in 2018, a statement signed by an Authorized Officer of the Issuer stating that:
(a) a review of the activities of the Issuer during the prior year and of the Issuer’s performance under this Indenture and under the terms of the Notes has been made under such Authorized Officer’s supervision; and
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(b) to the best of such Authorized Officer’s knowledge, based on such review, the Issuer has complied in all material respects with all conditions and covenants under this Indenture throughout such year, or, if there has been a material default in the fulfillment of any such condition or covenant (without regard to any grace period or requirement of notice), specifying each such default known to such Authorized Officer and the nature and status thereof.
Section 11.08 Legal Existence . The Issuer shall preserve and maintain its existence, rights, franchises and privileges in the jurisdiction of its organization, and qualify and remain qualified in good standing as a foreign entity, and maintain all necessary licenses and approvals, in each jurisdiction in which it does business, except where the failure to preserve and maintain such existence, rights, franchises, privileges, qualifications, licenses and approvals would not have a Material Adverse Effect.
Section 11.09 Further Instruments and Acts . Upon the reasonable request of the Indenture Trustee or as reasonably necessary, the Issuer will execute and deliver such further instruments and do such further acts (including disclosing or causing to be disclosed information) as may be reasonably necessary or advisable to carry out more effectively the purpose of this Indenture.
Section 11.10 Compliance with Laws . The Issuer will comply with the requirements of all applicable laws the noncompliance with which would, individually or in the aggregate, adversely affect the ability of the Issuer to perform its obligations under the Notes or this Indenture in any material respect.
Section 11.11 Notice of Events of Default . The Issuer agrees to give the Indenture Trustee notice of each Event of Default hereunder promptly following discovery of such Event of Default(s) by the Issuer.
Section 11.12 Sales of Receivables . Notwithstanding anything to the contrary herein or in the other Transaction Documents, the Issuer shall be entitled to sell, transfer or dispose of any Receivable (i) in connection with a repurchase of Receivables pursuant to Section 3.2 of the Receivables Purchase Agreement, Section 2.5 of the Sale Agreement, Section 3.2 of the Sale Agreement or Section 7.01 of the Servicing Agreement, (ii) if the inclusion of such Receivable in the Variable Funding Note Investment Pool would exceed an Excess Concentration Limit or (iii) if such Receivable is a Charged-Off Receivable, provided , however , that the with respect to this clause (iii) any purchaser of a Charged-Off Receivable must be consented to by the Majority Holders (which consent shall not be unreasonably withheld, conditioned or delayed and which consent if not affirmatively granted or denied within fifteen (15) Business Days of any such request for consent shall be deemed given).
Section 11.13 Investment Company Act . The Issuer is not, and will not be as a result of the issuance and sale of the Notes, required to register as an “investment company” or a company “controlled by” a registered investment company within the meaning of the Investment Company Act, and relies on Rule 3a-7 of the Investment Company Act for its exemption from registration under the Investment Company Act, although additional exemptions or exceptions may apply.
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Section 11.14 Volcker Rule . The Issuer is structured so as not to be a “covered fund” under the regulations adopted to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the “Volcker Rule.”
Section 11.15 Modification of Bank Originator Sale Agreements . The Issuer shall ensure that no Bank Originator Sale Agreement (including the Republic Loan Purchase Agreement) is amended, restated, or otherwise modified, without the consent of the Indenture Trustee (at the direction of the Majority Holders), except that following the delivery by the Issuer, Enova, and the Originators to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer, Enova, and the Originators reasonably believe that such amendment will not have a Material Adverse Effect and is not reasonably expected to have a Material Adverse Effect at any time in the future, any Bank Originator Sale Agreement may be amended for any of the following purposes without the consent of the Indenture Trustee (or by the Indenture Trustee at the direction of the Majority Holders):
(a) to add to the covenants of Enova, the Originators and the Bank Originators or to surrender any right or power herein conferred upon Enova, the Originators and the Bank Originators, for the benefit of the Holders of the Notes (and if such covenants or the surrender of such right or power are to be for the benefit of less than all Notes, stating that such covenants are expressly being included or such surrenders are expressly being made solely for the benefit of one or more specified Notes);
(b) to cure any ambiguity, to correct or supplement any provision therein which may be inconsistent with any other provision therein; or
(c) to qualify for the sale treatment of the transactions contemplated by such Bank Originator Sale Agreement under generally accepted accounting principles;
provided , however , that a Bank Originator Sale Agreement may be amended, restated or otherwise modified for any other purpose without the consent of the Indenture Trustee (at the direction of the Majority Holders) if (i) such amendment, restatement or modification does not affect any of the Receivables owned by the Issuer and (ii) the Issuer does not acquire any Receivables originated pursuant to such amended, restated, or otherwise modified Bank Originator Sale Agreement on or after the effective date of such amendment.
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ARTICLE XII
OPTIONAL REPURCHASE OF NOTES
Section 12.01 Optional Redemption or Release .
(a) Prior to the Funding Period Termination Date, except as provided in Section 12.01(c) and (e) , as applicable, no Term Note may be redeemed or prepaid in full or in part.
(b) On any Payment Date following the Funding Period Termination Date and upon delivering notice to the Indenture Trustee and the Noteholders no less than fifteen (15) Business Days prior to such prepayment, the Issuer may prepay the Term Notes in full on the first Payment Date following delivery of such notice to the Indenture Trustee and the Noteholders by remitting to the Collection Account an amount equal to the applicable Optional Redemption Amount.
(c)
On any Payment Date if an event described under
Section 7.01(f)
or
Section 7.01(r)
, as applicable, has occurred, such event will not be an Event of Default for purposes of this Indenture, if the Issuer prepays the
Quarterly Term Notes, the Fixed Rate Term Notes and the Initial
Term Notes in full on or prior to the first Payment Date that is at least ten (10) Business Day after such event by remitting to the Collection Account an amount equal to (A) the aggregate Outstanding Principal Amount of
the
such
Notes, (B) all accrued and unpaid interest on
the
such
Notes owing on such Payment Date, and (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture (other than indemnities and reimbursement obligations for which claim has not yet been asserted);
provided
,
however
, that in connection with any such cure five (5) Business Days prior notice shall be delivered to the Indenture Trustee and the Noteholders.
(d)
On any Payment Date following the Funding Period Termination Date on which the Outstanding Principal Amount of the
Quarterly Term Notes, the Fixed Rate Term Notes and the Initial Term
Notes is less than 10% of the Outstanding Principal Amount of
the
such
Notes as determined as of the Funding Period Termination Date, then the Issuer will have the option to repurchase all of
the
such
Notes by remitting to the Collection Account an amount equal to (A) the aggregate Outstanding Principal Amount of
the
such
Notes, (B) all accrued and unpaid interest on
the
such
Notes owing on such Payment Date, and (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture (other than indemnities and reimbursement obligations for which a claim has not yet been asserted);
provided
,
however
, that in connection with any such optional repurchase thirty (30) days prior notice shall be delivered to the Indenture Trustee and the Noteholders.
(e) During the Revolving Period, the Issuer is permitted to repay the Outstanding Principal Amount of the Variable Funding Notes and any Quarterly Term Note, Fixed Rate Term Note or the Initial Term Note (subject to the proviso below) in an amount equal to the sum of (A) the aggregate Outstanding Principal Amount of such Notes, and (B) all accrued and unpaid interest on such Notes, and (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture or the Note Purchase Agreement (other than indemnities and reimbursement obligations for which a claim has not yet been
-77-
asserted); provided , however , that only one such repayment is allowed to occur during the Revolving Period and the maximum amount of Eligible Receivables to be released from the Variable Funding Note Investment Pool and the applicable Term Note Investment Pools in connection therewith shall be no greater than $100,000,000.
Section 12.02 Release of Receivables . On any Business Day, upon (a) the deposit by the Issuer (or the Transferor on behalf of the Issuer) of an amount equal to the Optional Redemption Amount, the Ineligible Receivables Release Price or Receivable Repurchase Price, as applicable (in each case as certified by the Issuer pursuant to clause (b)) to the Collection Account and (b) the delivery of an Officer’s Certificate complying with the requirements of Section 1.02 by the Issuer to the Indenture Trustee that each of the conditions set forth in Section 3.2 of the Receivables Purchase Agreement, Section 2.5 of the Sale Agreement, Section 3.2 of the Sale Agreement, Sections 2.07 or 7.01 of the Servicing Agreement or Section 12.01 , as applicable, have been satisfied, the Indenture Trustee shall release from the lien of this Indenture any Receivable sold pursuant to and in accordance with Section 11.12 or any other sale expressly authorized by the Transaction Documents (including in connection with any optional redemption).
-78-
Section 13.01 No Petition . The Indenture Trustee, by entering into this Indenture, agrees, to the fullest extent permitted by applicable law, that at no time shall it commence, or join in commencing, a bankruptcy case or other insolvency or similar proceeding under the laws of any jurisdiction against the Issuer or the Transferor; provided , that nothing contained herein shall prohibit the Indenture Trustee from filing a proof of claim in any such proceeding.
Section 13.02 Obligations . No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee in its individual capacity or (ii) any holder of a beneficial interest in the Issuer. Except to the extent expressly otherwise provided in this Indenture, neither the Indenture Trustee nor any beneficiary of the Issuer or any of their respective officers, directors, employers or agents will have any liability with respect to this Indenture, and recourse of any Noteholder may be had solely to the Collateral.
Section 13.04 Tax Treatment . The Issuer and the Noteholders agree that the Notes are intended to be debt for federal, State and local income and franchise tax purposes and agree to treat the Notes accordingly for all such purposes, unless otherwise required by a taxing authority. Each Noteholder further agrees that it will cause any Note Owner acquiring an interest in a Note through it to comply with this Indenture as to treatment as indebtedness under applicable tax law as described in this Section 13.04 . The Issuer and the Enova Entities shall use all commercially reasonable efforts, as necessary, to ensure that all the Notes are treated as debt for U.S. federal income tax purposes at all times.
Section 13.06 Alternate Payment Provisions . Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment or notice that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments or notices, as applicable, to be made in accordance with such agreements.
Section 13.07 Termination of Issuer . The Issuer and the respective obligations and responsibilities of the Indenture Trustee created hereby (unless otherwise specified and other than the obligation of the Indenture Trustee to make payments to Noteholders as hereinafter set forth) shall terminate upon payment in full of the Notes and all other amounts due and owing under the Transaction Documents (other than indemnities and reimbursement obligations for which a claim has not yet been asserted).
Section 13.08 Final Distribution . (a) The Issuer shall give the Indenture Trustee at least 45 days’ notice of the Payment Date on which any Noteholders may surrender their Notes
-79-
for payment of the final distribution on and cancellation of such Notes. Not later than the fifth day of the month in which the final distribution in respect of such Note is payable to Noteholders, the Indenture Trustee shall provide notice to Noteholders of such Note specifying (i) the date upon which final payment of such Note will be made upon presentation and surrender of such Note at the office or offices 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 such Notes at the office or offices therein specified. The Indenture Trustee shall give such notice to the Note Registrar and the Paying Agent at the time such notice is given to Noteholders.
(b) Notwithstanding a final distribution to any Noteholders of Notes (or the termination of the Issuer), except as otherwise provided in this paragraph, all funds then on deposit in the Collection Account allocated to such Noteholders shall continue to be held in trust for the benefit of such Noteholders, and the Paying Agent or the Indenture Trustee shall pay such funds to such Noteholders upon surrender of their Notes, if certificated. In the event that all such Noteholders shall not surrender their Notes for cancellation within 6 months after the date specified in the notice from the Indenture Trustee described in paragraph (a), the Indenture Trustee shall give a second notice to the remaining such Noteholders to surrender their Notes for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all such Notes shall not have been surrendered for cancellation, the Indenture Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining such Noteholders concerning surrender of their Notes, and the cost thereof shall be paid out of the funds in the Collection Account. The Indenture Trustee and the Paying Agent shall pay to the Issuer any monies held by them for the payment of principal or interest that remains unclaimed for two years. After payment to the Issuer, Noteholders entitled to the money must look to the Issuer for payment as general creditors unless an applicable abandoned property law designates another Person.
Section 13.09 Termination Distributions . Upon the dissolution of the Issuer, the Indenture Trustee shall release, assign and convey to the members of the Issuer, or any of their designees, without recourse, representation or warranty, all of its right, title and interest in the Collateral, whether then existing or thereafter created, all monies due or to become due and all amounts received or receivable with respect thereto (including all moneys then held in the Collection Account) and all proceeds thereof, except for amounts held by the Indenture Trustee pursuant to Section 13.08(b) . The Indenture Trustee shall execute and deliver such instruments of transfer and assignment provided to it, in each case without recourse, as shall be reasonably requested by the Issuer in order to vest in the members of the Issuer, or any of their designees, all right, title and interest which the Indenture Trustee had in the Collateral.
Section 13.10 Third Party Beneficiaries . Each Noteholder is an express third party beneficiary of this Indenture and shall be entitled to enforce this Indenture as if it were a party hereto; provided , however , that any exercise of such rights by a Noteholder shall be subject to and limited by any conflicting position taken by the Majority Holders.
Section 13.11 Notices . Any notice or other communication to any party in connection with this Indenture shall be in writing and shall be sent by manual delivery, electronic transmission, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to such party at the address specified in Part III of Appendix A.
-80-
Section 13.12 Force Majeure . In no event shall the Indenture Trustee or the Issuer be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Indenture Trustee and the Issuer shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
Section 13.13 Patriot Act . The parties hereto acknowledge that, in accordance with Section 326 of the USA PATRIOT Act, Bankers Trust, in order to fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account. The Issuer agrees that it will provide Bankers Trust with such information as it may reasonably request in order for Bankers Trust to satisfy the requirements of the USA PATRIOT Act.
-81-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
|
EFR 2016-1, LLC
By: Name: Title:
|
|
BANKERS TRUST COMPANY
,
By: Name:
Title:
|
|
BANKERS TRUST COMPANY
,
By: Name:
Title:
|
[Signature Page To Indenture]
[
FORM OF VARIABLE FUNDING NOTE
]
EFR 2016-1, LLC
VARIABLE FUNDING NOTE
FOR VALUE RECEIVED, EFR 2016-1, LLC (the “ Issuer ”), hereby promises to pay to [___] (the “ Payee ”), or its registered assigns, on or before [___], an amount up to [NINETY MILLION DOLLARS ($90,000,000)].
Issuer also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of (i) that certain Amended and Restated Note Purchase Agreement, dated as of October 20, 2017 (as it may be further amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “
Note Purchase Agreement
”), by among the Issuer, the Master Servicer, Jefferies Funding LLC, as Administrative Agent, an Initial Term Note Noteholder and as a Variable Funding Note Noteholder,
WN 2016-1,
WF 18,
LLC, as an Initial Term Note Noteholder and Variable Funding Note Noteholder, FSLF ENV LLC, as an Initial Term Note Noteholder and Variable Funding Note Noteholder, Fortress Credit Co LLC, as an Initial Term Note Noteholder and Variable Funding Note Noteholder and the other Variable Funding Note Noteholders from time to time party thereto, and (ii) that certain Amended and Restated Indenture, dated as of October 20, 2017 (as it may be further amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “
Indenture
”), by and between the Issuer and the Indenture Trustee. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Note Purchase Agreement and the Indenture, as applicable.
This Variable Funding Note is the “Variable Funding Note” referred to in the Indenture and is issued pursuant to and entitled to the benefits of the Indenture, to which reference is hereby made for a more complete statement of the terms and conditions under which the Variable Funding Note evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Variable Funding Note shall be made in lawful money of the United States of America in same day funds at the location in writing for such purpose by the Payee. Unless and until an assignment agreement effecting the assignment or transfer of the obligations evidenced hereby shall have been duly executed and delivered in accordance with the Note Purchase Agreement and accepted by the Variable Funding Note Noteholder and recorded in the Register, the Issuer, each Variable Funding Note Noteholder shall be entitled to deem and treat the Payee as the owner and holder of this Variable Funding Note and the obligations evidenced hereby. The Payee hereby agrees, by its acceptance hereof, that before disposing of this Variable Funding Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided , the failure to make a notation of any payment made on this Variable Funding Note
A-1
shall not limit or otherwise affect the obligations of the Issuer hereunder with respect to payments of principal of or interest on this Variable Funding Note.
This Variable Funding Note is subject to mandatory prepayment as provided in the Note Purchase Agreement and the Indenture, as applicable.
The Issuer, the Indenture Trustee and any agent of the Issuer, shall treat the person in whose name this Note is registered as the owner hereof for all purposes, and none of the Issuer, the Indenture Trustee, nor any agent of the Issuer, shall be affected by notice to the contrary.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, 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.
Upon the occurrence and during the continuation of an Event of Default, the unpaid balance of the principal amount of this Variable Funding Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Indenture.
The terms of this Variable Funding Note are subject to amendment only in the manner provided in the Indenture.
No reference herein to the Indenture and no provision of this Variable Funding Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Variable Funding Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture and the Note Purchase Agreement.
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture or Note Purchase Agreement, as applicable, incurred in connection with the collection and enforcement of this Variable Funding Note. The Issuer and any endorsers of this Variable Funding Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, and demand notice of every kind.
Each Noteholder, by its acceptance of its Note, acknowledges and agrees that the indebtedness and obligations represented by the Notes is solely the obligation of the Issuer and is payable solely from the Collateral.
IN WITNESS WHEREOF , the Issuer has caused this Variable Funding Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above
|
EFR 2016-1, LLC, |
A-2
|
as Issuer |
|
|
By: |
|
|
|
Name: |
|
|
Title: |
A-3
INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Variable Funding Note described in the within-mentioned Indenture.
|
Bankers Trust Company , as Indenture Trustee
By: Authorized Signatory |
A-4
TRANSACTIONS ON
VARIABLE FUNDING NOTE
Date |
Amount of Advance
|
Variable Funding
|
A-5
[
FORM OF
] TERM NOTE
I/O TERM NOTE
¶
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “
SECURITIES ACT
”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, OR (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “
QIB
”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “
IAI
”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“
ERISA
”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “
CODE
”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE, (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE
ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“
PTCE
”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
¶
PRIOR TO PURCHASING ANY TERM NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE TERM NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE TERM NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
¶
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
¶
UNLESS THIS TERM NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“
DTC
”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY TERM NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
¶
THE HOLDER OF THIS TERM NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THE TERM NOTE OR THE TRANSACTION DOCUMENTS.
¶
THE HOLDER OF THIS TERM NOTE, BY ACCEPTANCE OF THIS TERM NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS TERM NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THE TERM NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME.
¶
$[__________]
CUSIP NO. [______]
[mm/dd/yy]
¶
FOR VALUE RECEIVED, EFR 2016-1, LLC (the “
Issuer
”) promises to pay [NOTEHOLDER] (the “
Payee
”), or its registered assigns, on or before [__][__], 20[__], [DOLLARS] ($[___]).
¶
Issuer also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Amended and Restated Indenture, dated as of October 20, 2017 (as it may be further amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “
Indenture
”), by and between the Issuer and the Indenture Trustee. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in Part I of Appendix A of the Indenture.
¶
This Term Note is one of the “Notes” referred to in the Indenture and is issued pursuant to and entitled to the benefits of the Indenture, to which reference is hereby made for a more complete statement of the terms and conditions under which the Term Note evidenced hereby was made and is to be repaid. Final payment of this Note is due and owing on the Term Note Maturity Date.
¶
All payments of principal and interest in respect of this Term Note shall be made in lawful money of the United States of America. This Term Note is subject to prepayment at the option of the Issuer, each as provided in the Indenture.
¶
THIS TERM NOTE AND THE RIGHTS AND OBLIGATIONS OF THE ISSUER AND THE PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
¶
Upon the occurrence and during the continuation of an Event of Default, the unpaid balance of the principal amount of this Term Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Indenture.
¶
The terms of this Term Note are subject to amendment only in the manner provided in the Indenture.
¶
No reference herein to the Indenture and no provision of this Term Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Term Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture.
¶
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this Term Note. The Issuer and any endorsers of this Term Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, and demand notice of every kind.
¶
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, OR (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “QIB”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “IAI”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE, (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY
OTHER THAN AN INSURANCE ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE. ¶
PRIOR TO PURCHASING ANY I/O TERM NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE I/O TERM NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE I/O TERM NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS. ¶
THIS I/O TERM NOTE DOES NOT HAVE ANY OUTSTANDING PRINCIPAL AMOUNT AND IS NOT ENTITLED TO DISTRIBUTIONS OF PRINCIPAL. ¶
UNLESS THIS I/O TERM NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY I/O TERM NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. ¶
THE HOLDER OF THIS I/O TERM NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THE I/O TERM NOTE OR THE TRANSACTION DOCUMENTS. ¶
THE HOLDER OF THIS I/O TERM NOTE, BY ACCEPTANCE OF THIS I/O TERM NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS I/O TERM NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THE I/O TERM NOTE AS INDEBTEDNESS OF THE ISSUER FOR
APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME. ¶
$[__] initial Notional Principal Amount
CUSIP NO. [______]
[mm/dd/yy]
¶
FOR VALUE RECEIVED, EFR 2016-1, LLC (the “Issuer”) promises to pay [NOTEHOLDER] (the “Payee”), or its registered assigns, on or before [__][__], 20[__], interest on this Note based on the Notional Principal Amount and as more fully described herein. ¶
The Issuer promises to pay interest based on the Notional Principal Amount, from the date hereof until the Notional Principal Amount has been reduced to zero, at the rates and at the times which shall be determined in accordance with the provisions of that certain Amended and Restated Indenture, dated as of October 20, 2017 (as it may be further amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “Indenture”), by and between the Issuer and the Indenture Trustee. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in Part I of Appendix A of the Indenture. ¶
This I/O Term Note is one of the “Notes” referred to in the Indenture and is issued pursuant to and entitled to the benefits of the Indenture, to which reference is hereby made for a more complete statement of the terms and conditions under which the I/O Term Note evidenced hereby was made and is to be paid. No payments on this I/O Term Note other than accrued and unpaid interest will be due and payable on any Payment Date. ¶
All payments in respect of this I/O Term Note shall be made in lawful money of the United States of America. The holder(s) of this I/O Term Note are not entitled to any distributions of principal. This I/O Term Note is subject to a reduction of the amounts payable hereunder if the Issuer makes a prepayment on the Fixed Rate Term Note related to the Notional Principal Amount of this I/O Term Note as provided in the Indenture. ¶
THIS I/O TERM NOTE AND THE RIGHTS AND OBLIGATIONS OF THE ISSUER AND THE PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. ¶
Upon the occurrence and during the continuation of an Event of Default, the Notional Principal Amount related to this I/O Term Note may be reduced to zero, and all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Indenture. ¶
The terms of this I/O Term Note are subject to amendment only in the manner provided in the Indenture. ¶
No reference herein to the Indenture and no provision of this I/O Term Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay interest on this I/O Term Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture. ¶
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this I/O Term Note. The Issuer and any endorsers of this I/O Term Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, and demand notice of every kind.
¶
IN WITNESS WHEREOF, the Issuer has caused this Term Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above.
¶
IN WITNESS WHEREOF, the Issuer has caused this Term Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above.
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EFR 2016-1, LLC, |
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Authorized Signatory |
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INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION ¶
This is one of the Term Notes described in the within-mentioned Indenture. ¶
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¶
This I/O Term Note is one of the I/O Term Notes of a duly authorized issue of I/O Term Notes of EFR 2016-1, LLC (the “Issuer”), designated as its [__] I/O Term Note (herein called the “Note”), all issued under the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), by and between the Issuer and Bankers Trust Company (the “Indenture Trustee”). This Note is subject to all terms of the Indenture. All terms used in this Note that are defined in Part I of Appendix A of the Indenture, shall have the meanings assigned to them in or pursuant to Part I of Appendix A of the Indenture, as so supplemented or amended. ¶
This Note is secured by the Collateral, and in connection with the sale of Collateral following an Event of Default the Noteholder will be entitled to its pro rata share of proceeds. The payment of interest on this Note, however, shall be solely based on the performance of the Receivables related to this Note’s Investment Pool and, except as otherwise set forth in Section 5.04(a) of the Indenture, shall not be dependent on the Receivables related to any other Investment Pool or market or credit events that are independent of such financial assets. ¶
Interest on this Note shall be based solely on the Notional Principal Amount and shall be determined in accordance with the Indenture. This Note shall accrue interest at the rate of One-Month LIBOR plus 2.50% per annum based on the outstanding Notional Principal Amount and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period. ¶
This Note does not have any Outstanding Principal Amount and is not entitled to distributions of principal. The Notional Principal Amount of this Note is for the purpose of calculating the amount of interest payable under this Note and this Note does not entitle the holder hereof to any distributions other than interest payments related to such Notional Principal Amount. ¶
“Payment Date” means the 15 th day of each calendar month, or, if any such 15 th day is not a Business Day, the next succeeding Business Day, occurring on or after December 15, 2017. ¶
Any payment of interest on this Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name this Note is registered. This Note will be registered in the name of the nominee of the Depository Trust Company (Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by Cede & Co. If funds are expected to be available, as provided in the Indenture, for payment in full of any remaining accrued and unpaid interest related to this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will provide notice of the termination as provided in the Indenture and this Note shall be entitled to the final payment only upon presentation and surrender of this Note at the Indenture Trustee’s principal Corporate Trust Office or at the
office of the Indenture Trustee’s agent appointed for such purposes. On any payment of interest being made, details of such payment shall be entered by the Indenture Trustee on behalf of the Issuer in Schedule A hereto. ¶
Any accrued and unpaid interest on this Note may be due and payable on the date on which an Event of Default described in Section 7.01 of the Indenture shall have occurred and be continuing, if the Notes have been declared immediately due and payable as provided in Section 7.02 of the Indenture. ¶
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. ¶
Interest on this Note constitutes a limited recourse obligation of the Issuer. The Holders of this Note have recourse to the Issuer only to the extent of the Collateral, and following realization of the Collateral, any claims of the Holders of this Note shall be extinguished and shall not revive thereafter. Neither the Issuer, nor any of its respective agents, members, partners, beneficiaries, officers, directors, employees or any Affiliate of any of them or any of their respective successors or assigns or any other Person or entity shall be personally liable for any amounts payable, or performance due, under this Note or the Indenture. It is understood that the foregoing provisions of this paragraph shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is secured by the Collateral, or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture until such Collateral has been realized whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this paragraph shall not limit the right of any Person to name the Issuer as party defendant in any action, suit or in the exercise of any other remedy under this Note or in the Indenture, 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 the Issuer. ¶
The Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. ¶
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and the Note Registrar and any agent of the foregoing may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Note Registrar nor any such agent of the foregoing shall be affected by notice to the contrary. ¶
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of this Note under the Indenture at any time by the Issuer pursuant to Sections 10.01 and 10.02 of the Indenture. ¶
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture. ¶
This Note is issuable only in registered form as provided in the Indenture, subject to certain limitations therein set forth. ¶
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. ¶
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. ¶
Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the Indenture Trustee in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purpose of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture the Holder shall have no claim against any of the entities described in the first sentence of this paragraph for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the Collateral pledged by the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ¶
¶
Social Security or taxpayer I.D. or other identifying number of assignee ¶
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ¶
(name and address of assignee) ¶
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. ¶
* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. ¶
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[continue numbering until the Notional Principal Amount related to this Note has reached zero] ¶
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FORM OF [INITIAL/QUARTERLY/FIXED RATE ] TERM NOTE ¶
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, OR (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “QIB”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “IAI”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE, (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN
EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE. ¶
PRIOR TO PURCHASING ANY TERM NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE TERM NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE TERM NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS. ¶
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. ¶
UNLESS THIS TERM NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY TERM NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. ¶
THE HOLDER OF THIS TERM NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THE TERM NOTE OR THE TRANSACTION DOCUMENTS. ¶
THE HOLDER OF THIS TERM NOTE, BY ACCEPTANCE OF THIS TERM NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS TERM NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THE TERM NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME. ¶
$[__________]
CUSIP NO. [______]
[mm/dd/yy]
¶
FOR VALUE RECEIVED, EFR 2016-1, LLC (the “Issuer”) promises to pay [NOTEHOLDER] (the “Payee”), or its registered assigns, on or before [__][__], 20[__], [DOLLARS] ($[___]). ¶
Issuer also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Amended and Restated Indenture, dated as of October 20, 2017 (as it may be further amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “Indenture”), by and between the Issuer and the Indenture Trustee. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in Part I of Appendix A of the Indenture. ¶
This Term Note is one of the “Notes” referred to in the Indenture and is issued pursuant to and entitled to the benefits of the Indenture, to which reference is hereby made for a more complete statement of the terms and conditions under which the Term Note evidenced hereby was made and is to be repaid. Final payment of this Note is due and owing on the Term Note Maturity Date. ¶
All payments of principal and interest in respect of this Term Note shall be made in lawful money of the United States of America. This Term Note is subject to prepayment at the option of the Issuer, each as provided in the Indenture. ¶
THIS TERM NOTE AND THE RIGHTS AND OBLIGATIONS OF THE ISSUER AND THE PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. ¶
Upon the occurrence and during the continuation of an Event of Default, the unpaid balance of the principal amount of this Term Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Indenture. ¶
The terms of this Term Note are subject to amendment only in the manner provided in the Indenture. ¶
No reference herein to the Indenture and no provision of this Term Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Term Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture. ¶
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this Term Note. The Issuer and any endorsers of this Term Note hereby consent to renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, and demand notice of every kind. ¶
¶
IN WITNESS WHEREOF, the Issuer has caused this Term Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. ¶
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INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Term Notes described in the within-mentioned Indenture.
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Bankers Trust Company, |
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Authorized Signatory |
REVERSE OF [FIXED RATE/INITIAL/QUARTERLY] TERM NOTE
This Term Note is one of the Term Notes of a duly authorized issue of Term Notes of EFR 2016-1, LLC (the “ Issuer ”), designated as its [__] Note (herein called the “ Note ”), all issued under the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), by and between the Issuer and Bankers Trust Company (the “ Indenture Trustee ”). This Note is subject to all terms of the Indenture. All terms used in this Note that are defined in Part I of Appendix A of the Indenture, shall have the meanings assigned to them in or pursuant to Part I of Appendix A of the Indenture, as so supplemented or amended.
This Note is secured by the Collateral, and in connection with the sale of Collateral following an Event of Default the Noteholder will be entitled to its’ pro rata share of proceeds. The payment of principal and interest on this Note, however, shall be solely based on the performance of the Receivables related to this Notes Investment Pool and, except as otherwise set forth in Section 5.04(a) of the Indenture, shall not be dependent on the Receivables related to any other Investment Pool or market or credit events that are independent of such financial assets.
[ Interest on this Note shall be determined in accordance with the Indenture and shall accrue at the rate of One-Month LIBOR plus 7.5% per annum and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period. ] 1 [Interest on this Note shall be determined in accordance with the Indenture and shall accrue at the rate of 5.0% per annum and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period.] 2
Principal of this Note will be payable on each Payment Date pursuant to Section 5.04(a) of the Indenture.
“ Payment Date ” means the 15 th day of each calendar month, or, if any such 15 th day is not a Business Day, the next succeeding Business Day, commencing in [December, 2017].
Any installment of interest and principal, if any, or any other amount, payable on this Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name this Note is registered. This Note will be registered in the name of the nominee of the Depository Trust Company (Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by Cede & Co. All reductions in the principal amount of this Note effected by any payments of installments of principal made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not such payment is noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will provide notice of the termination as provided in the Indenture and this Note shall be entitled to the final payment only upon presentation and surrender of this Note at the Indenture Trustee’s
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principal Corporate Trust Office or at the office of the Indenture Trustee’s agent appointed for such purposes. On any payment of interest or principal being made, details of such payment shall be entered by the Indenture Trustee on behalf of the Issuer in Schedule A hereto.
The principal amount of this Note, to the extent not previously paid, shall be due and payable on the Term Note Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount of this Note may be due and payable, if not previously paid, on the date on which an Event of Default described in Section 7.01 of the Indenture shall have occurred and be continuing, if the Notes have been declared immediately due and payable as provided in Section 7.02 of the Indenture.
This Note may not be redeemed or prepaid, except as provided in the Indenture. If this Note is prepaid prior to the Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the applicable Optional Redemption Amount. If this Note is prepaid after the Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the Outstanding Principal Amount of such Term Note as of the Optional Redemption Date, plus all interest accrued and unpaid as of the date of prepayment.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.
On any redemption, purchase, exchange or cancellation of any of this Note, details of such redemption, purchase, exchange or cancellation shall be entered by the Indenture Trustee in Schedule B hereto recording any such redemption, purchase, exchange or cancellation. Upon any such redemption, purchase, exchange or cancellation, the principal amount of this Note shall be reduced or increased, as appropriate, by the principal amount so redeemed, purchased, exchanged or canceled.
Principal of, interest on and all other amounts payable on or in respect of this Note constitutes limited recourse obligations of the Issuer. The Holders of this Note has recourse to the Issuer only to the extent of the Collateral, and following realization of the Collateral, any claims of the Holders of this Note shall be extinguished and shall not revive thereafter. Neither the Issuer, nor any of its respective agents, members, partners, beneficiaries, officers, directors, employees or any Affiliate of any of them or any of their respective successors or assigns or any other Person or entity shall be personally liable for any amounts payable, or performance due, under this Note or the Indenture. It is understood that the foregoing provisions of this paragraph shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is secured by the Collateral, or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture until such Collateral has been realized whereupon any outstanding indebtedness or obligation shall be
extinguished. It is further understood that the foregoing provisions of this paragraph shall not limit the right of any Person to name the Issuer as party defendant in any action, suit or in the exercise of any other remedy under this Note or in the Indenture, 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 the Issuer.
The Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and the Note Registrar and any agent of the foregoing may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Note Registrar nor any such agent of the foregoing shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of this Note under the Indenture at any time by the Issuer pursuant to Sections 10.01 and 10.02 of the Indenture.
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.
This Note is issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the Indenture Trustee in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purpose of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture the Holder shall have no claim against any of the entities described in the first sentence of this paragraph for any deficiency, loss or claim therefrom; provided , however , that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the Collateral pledged by the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.
Dated: |
* |
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Signature Guaranteed |
* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.
Interest Payment Date |
Date of Payment |
Total Amount of Interest Payable |
Amount of Interest Paid |
Confirmation of payment by or on behalf of the Issuer |
[__], 20[__] |
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[__], 20[__] |
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[continue numbering until the appropriate number of interest payment dates for this Note is reached]
Principal Payment Date |
Total Amount Payable |
Total Amount Paid |
Confirmation of payment by or on behalf of the Issuer |
[__], 20[__] |
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[__], 20[__] |
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[continue numbering until the appropriate number of installment dates for this Note is reached]
SCHEDULE OF EXCHANGES OR REDEMPTIONS OR PURCHASES AND
CANCELLATIONS
The following increases or decreases in principal amount of this Note, or redemptions, purchases or cancellations of this Note have been made:
Date of exchange, or redemption or purchase or cancellation |
Increase or decrease in principal amount of this Note due to exchanges |
Remaining principal amount of this Note following such exchange, or redemption or purchase or cancellation |
Notation made by or on behalf of the Issuer |
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Reference is made to that certain Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), between EFR 2016-1, LLC, as issuer (the “ Issuer ”), and Bankers Trust Company, as indenture trustee (in such capacity, the “ Indenture Trustee ”) and as securities intermediary. Unless otherwise indicated, all terms defined in Part I of Appendix A to the Indenture have the same respective meanings when used herein.
Pursuant to Section 4.12(b) of the Indenture, you are hereby notified as follows:
(a) on the date hereof (the “ Conversion Date ”), the aggregate Outstanding Principal Amount of the Variable Funding Notes relating to the Variable Funding Note Investment Pool identified on Schedule I hereto will be converted into a Quarterly Term Note (the “ Term Note ”) substantially in the form of Exhibit B -2 to the Indenture;
(b)
the Initial Payment Date with respect to the Term Notes will be [___], 20[__]
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; and
(c) the initial Outstanding Principal Amount with respect to the Term Note will be $[______].
The Issuer hereby certifies that all laws and requirements with respect to the execution and delivery by the Issuer of the Term Notes have been complied with, the Issuer has the trust power and authority to issue the Term Notes and the Term Notes have been duly authorized and delivered by the Issuer and, assuming due authentication and delivery by the Indenture Trustee, constitutes a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and entitled to the benefits of the Indenture, equally and ratably with all other Outstanding Notes, if any, subject
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to the terms of the Indenture. If such Term Note is a Global Note, the Issuer has delivered a completed Representations for Rule 144A Securities to the Depository Trust Company (“ DTC ”) Letter of Representations substantially in the form of Exhibit 1 hereto (the “ 144A Rider ”) to DTC and DTC has approved such 144A Rider.
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IN WITNESS WHEREOF, the Issuer has executed this Notice of Conversion on the date set forth above.
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EFR 2016-1, LLC |
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By: |
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Name: |
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Title: |
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DTC Issuer Letter of Representations for Rule 144A Securities
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FORM OF NOTICE OF NOTE EXCHANGE ¶
Reference is made to that certain Amended and Restated Indenture, dated as of October 20, 2017, as amended by the [First Amendment], dated as of October 25, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), between EFR 2016-1, LLC, as issuer (the “Issuer”), and Bankers Trust Company, as indenture trustee (in such capacity, the “Indenture Trustee”) and as securities intermediary. Unless otherwise indicated, all terms defined in Part I of Appendix A to the Indenture have the same respective meanings when used herein. ¶
The undersigned hereby represents and warrants that it is a [Noteholder][Note Owner] of the following Term Notes (the “Exchanged Notes”) with the following characteristics: ¶
(i) [Insert Name of Term Note to be exchanged]; ¶
(ii) [Insert CUSIP number of Term Note to be exchanged]; ¶
(iii) [Insert Initial Principal Amount of exchanged Term Notes]; ¶
(iv) [Insert Outstanding Principal Amount of exchanged Term Notes]; and ¶
(v) [Insert Maturity Date of exchanged Term Notes]. ¶
Pursuant to Section 4.13 of the Indenture, you are hereby notified that the undersigned [Note Owner][Noteholder] intends to exchange the Exchanged Notes for I/O Term Notes and a Fixed Rate Term Notes to be delivered on [_____________] 4 (the “Note Exchange Date”). ¶
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The undersigned hereby acknowledges and agrees that: ¶
(c) on the Note Exchange Date, the Indenture Trustee will cancel the Exchanged Notes and deliver an I/O Term Note and a Fixed Rate Term Notes described in Section 4.13 of the Indenture; ¶
(d) the initial Notional Principal Amount with respect to the I/O Term Notes to be issued on the Note Exchange Date will be equal to the Outstanding Principal Amount of the Exchanged Notes; ¶
(e) the Initial Principal Amount with respect to the Fixed Rate Term Notes to be issued on the Note Exchange Date will be equal to the Outstanding Principal Amount of exchanged Term Note as of the Note Exchange Date; ¶
(f) the Initial Payment Date with respect to the Fixed Rate Term Notes and the I/O Term Notes to be issued on the Note Exchange Date will be the next Payment Date related to the Exchanged Notes; and ¶
(g) the Maturity Date related to each of the I/O Term Note and the Fixed Rate Note to be issued on the Note Exchange Date will be the same as the Exchanged Notes; ¶
(h) each of the I/O Term Note and the Fixed Rate Note to be issued on the Note Exchange Date will be entitled to payments in accordance with the terms of the Indenture; ¶
(i) on or prior to the Business Day before the Note Exchange Date it will deliver to the Issuer a CUSIP number for each of the Fixed Rate Term Notes and the I/O Term Notes to be issued on the Note Exchange Date; ¶
(j) on or prior to the Business Day before the Note Exchange Date it will deliver to the Issuer a completed Representations for Rule 144A Securities to the Depository Trust Company (“DTC”) Letter of Representations or a Representations for Regulation S Securities to DTC Letter of Representations, as applicable, for submission to DTC by the Issuer; ¶
(k) on or prior to the Business Day before the Note Exchange Date it will deliver to the Indenture Trustee a Certificate of Term Note Owner for each of the Fixed Rate Term Notes and the I/O Term Notes to be issued on the Note Exchange Date; and ¶
(l) the provisions of Article IV of the Indenture are applicable to the exchange of the Exchanged Notes and the issuance of the Fixed Rate Term Notes and the I/O Term Notes to be issued on the Note Exchange Date. ¶
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¶
IN WITNESS WHEREOF, the undersigned has executed this Notice of Note Exchange on the date set forth above. ¶
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FORM OF BORROWING BASE CERTIFICATE
NetCredit Loan Services, LLC. as Master Servicer - Page 1
Borrowing Base Certificate
By delivery of this certificate, the Issuer hereby certifies the accuracy and completeness of all information included herein
Request Date: |
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Advance Date: |
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Conversion Date: |
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Has the Funding Period Termination Date Occurred? |
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[YES/NO] |
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I.Variable Funding Note Availability / Balance |
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Variable Funding Note Principal Balance (prior) |
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Paydowns (since prior borrowing base) |
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Term Note Conversion (since prior borrowing base) |
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Variable Funding Note Investment Pool |
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Term Notes Outstanding (entire facility) |
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Total Facility Amount |
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Maximum Variable Funding Note Amount |
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Maximum Facility Amount |
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Facility Availability |
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Increase to Variable Funding Note Principal Balance |
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Breakdown of Variable Funding Note Investors |
% of Variable Funding Note |
Investor Allocation |
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Increase to Variable Funding Note Principal Balance |
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Ending Variable Funding Note Principal Balance |
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Variable Funding Note Advance Rate |
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*** % |
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Outstanding Receivable Principal Balance of Eligible Conversion Receivables |
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Variable Funding Note Borrowing Base |
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II. Receivables Overview |
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Outstanding Receivables Balance (Variable Funding Note Investment Pool) |
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Reduction in Eligible Receivables due to Excess Concentration Limits |
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Reduction in Eligible Receivables due to Non-Verified |
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Repurchased/Removed Eligible Receivables |
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Outstanding Receivables Principal Balance of the Eligible Receivables (Variable Funding Note Investment Pool) |
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Eligibility Criteria |
Reduction in Eligible Receivable Balance |
Amount in Pool |
Breach? |
Such Receivable has an original term to maturity of no more than 60 months |
[_________] |
[_________] |
[YES/NO] |
Such Receivable has an Outstanding Receivable Principal Balance equal to or less than $10,000 |
[_________] |
[_________] |
[YES/NO] |
Such Receivable has an Annual Percentage Rate that is greater than or equal to ***%, and no greater than 99.0% |
[_________] |
[_________] |
[YES/NO] |
Payments under such Receivable are due in Dollars |
[_________] |
[_________] |
[YES/NO] |
Such Receivable is a valid, legal, binding and enforceable obligation of the Obligor (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall be payable in equal scheduled installments (other than with respect to the last scheduled installment) without bullet maturity or balloon payment |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall have been originated in all material respects in compliance with all applicable laws (including all Governmental Rules) |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall not, along with the related Contract or other loan documents, violate any applicable laws in any material respect |
[_________] |
[_________] |
[YES/NO] |
Such Receivable is not a Charged-Off Receivable at the time such Receivable is sold to the Issuer and as of the applicable Conversion Date |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall not be evidenced by a judgment or have been reduced to judgment |
[_________] |
[_________] |
[YES/NO] |
Such Receivable shall have been originated in accordance with the Credit Policy |
[_________] |
[_________] |
[YES/NO] |
The related Obligor is not bankrupt or deceased |
[_________] |
[_________] |
[YES/NO] |
The related Obligor is a natural person |
[_________] |
[_________] |
[YES/NO] |
The related Obligor is an individual who is a permitted debtor under applicable state laws and is not an employee or Affiliate of the Originator or any Bank Originator |
[_________] |
[_________] |
[YES/NO] |
Excess Concentration Limit |
Reduction in Eligible Receivable Balance |
Amount in Pool |
Concentration Limit |
Breach? |
With respect to Eligible Receivables that are included in the Variable Funding Note Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the Conversion Date, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an original principal balance of greater than $*** is less than or equal to ***% |
[________] |
[________] |
TBD Based on definition of Excess Concentration Limits |
[YES/NO] |
With respect to Eligible Receivables that are included in the Variable Funding Note Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the Conversion Date, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an original term to maturity greater than *** months is less than or equal to ***% |
[________] |
[________] |
TBD Based on definition of Excess Concentration Limits |
[YES/NO] |
With respect to Eligible Receivables that are included in any Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the Conversion Date,the weighted average *** Score of the Eligible Receivables is not less than *** |
[________] |
[________] |
TBD Based on definition of Excess Concentration Limits |
[YES/NO] |
FORM OF CERTIFICATE OF VARIABLE FUNDING NOTE NOTEHOLDER
CERTIFICATE OF VARIABLE FUNDING NOTE NOTEHOLDER
Reference is hereby made to the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), between EFR 2016-1, LLC (the “ Issuer ”) and Bankers Trust Company, as Indenture Trustee and Securities Intermediary (the “ Indenture Trustee ”). All capitalized terms used but not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Indenture.
The undersigned (the “ Variable Funding Note Noteholder ”) hereby certifies, represents and warrants to and agrees with the Indenture Trustee, and for the benefit of the Issuer, that:
(1) This letter relates to the Variable Funding Note issued to the undersigned and having the Initial Principal Amount and [other identifying information] specified on Schedule 1 hereto.
(2) The Variable Funding Note Noteholder shall timely furnish the Issuer or its agents any U.S. federal income tax form or certification (e.g., IRS Forms W-9, W-8BEN, W-8BEN-E or W-8ECI, or any successors to such IRS forms, or any documentation related to FATCA) that is required by the Indenture or that the Issuer or its agents may reasonably request, and the Variable Funding Note Noteholder shall update or replace such form or certification in accordance with its terms or its subsequent amendments. It agrees to provide any certification or information that is reasonably requested by the Issuer (x) to permit the Issuer or its agents to make payments to it without, or at a reduced rate of, withholding, (y) to enable the Issuer or its agents to qualify for a reduced rate of withholding in any jurisdiction from or through which the Issuer receive payments on its assets, or (z) to enable the Issuer or its agents to satisfy reporting and other obligations in respect of the Notes under the Code and Treasury Regulations.
(3) The Variable Funding Note Noteholder agrees to treat the Notes as debt for all U.S. federal income tax purposes and shall take no action inconsistent with such treatment unless required by law.
(4) The Variable Funding Note Noteholder agrees to comply with the following provisions:
E-1
(a) The Variable Funding Note Noteholder will not (A) acquire, sell, transfer, assign, pledge or otherwise dispose of its Variable Funding Note (or any interest therein that is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B)) on or through (x) a United States national, regional or local securities exchange, (y) a foreign securities exchange or (z) an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers (including the National Association of Securities Dealers Automated Quotation System) ((x), (y) and (z), collectively, an “ Exchange ”) or (B) cause its Variable Funding Note or any interest therein to be marketed on or through an Exchange.
(b) The Variable Funding Note Noteholder will not enter into any financial instrument payments on which, or the value of which, is determined in whole or in part by reference to the Variable Funding Note, or the Issuer (including the amount of the Issuer’s distributions or interest on the Variable Funding Note, the value of the Issuer’s assets, or the result of the Issuer’s operations), or any contract that otherwise is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B). For the purposes of this Certificate, the terms “financial instrument” and “contract” shall not include (i) the Variable Funding Notes or any interest with respect to the Variable Funding Notes; (ii) any arrangement described in paragraph 4(c) immediately below; or (iii) any non-convertible debt instrument described in Treasury Regulations section 1.7704-1(a)(2)(ii).
(c) The Variable Funding Note Noteholder is the sole holder of the Variable Funding Note. If the Variable Funding Note Noteholder is a partnership, grantor trust or S corporation, such Variable Funding Note Noteholder represents and covenants as set forth below (as indicated by checking the applicable box):
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no more than 50% of the value of any person’s interest in such partnership, grantor trust or S corporation is attributable to the Variable Funding Note Noteholder’s interests in all Notes issued by the Issuer |
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no more than [______] persons will be treated as “partners” in the Issuer under Treasury Regulation section 1.7704-1(h)(3) solely by reason of the Variable Funding Note Noteholder’s ownership of the Variable Funding Note (without duplication after taking into account any such person being a “partner” in the Issuer by virtue of its ownership of another Variable Funding Note or Term Note Interest) (such Persons being “ Variable Funding Note Partners ”) |
(d) The Variable Funding Note Noteholder agrees that it may not directly or indirectly assign, participate, pledge, hypothecate, rehypothecate, exchange or otherwise dispose of or transfer in any manner (each a “ Transfer ”) its interest in the Variable Funding Notes unless: (A) each transferee of such Transfer
E-2
delivers a Certificate of Variable Funding Note Noteholder in accordance with the Indenture and this Certificate and (B) such Transfer does not violate the transfer restrictions set forth in the Indenture. Any purported Transfer that does not satisfy the above mentioned conditions shall be null, void and of no effect. Notwithstanding the foregoing, a Variable Funding Note Noteholder (or a transferee thereof in a transaction described in either of the following two clauses) (i) may engage in any repurchase transaction the subject matter of which is a Variable Funding Note or any beneficial interest therein and (ii) may pledge a Variable Funding Note or any beneficial interest therein, in either case so long as doing so will not result in any Person (other than the Variable Funding Note Noteholder) being treated for U.S. federal income tax purposes as the owner of all or any portion of a Variable Funding Note or interest therein.
(e) The Variable Funding Note Noteholder agrees that the Indenture Trustee shall monitor the issuances and transfers of Variable Funding Notes and shall report to the Issuer upon request the aggregate number of Variable Funding Note Noteholders (including for such purpose the maximum number of Variable Funding Note Partners). In monitoring such issuances and transfers and providing such reports, the Indenture Trustee shall rely solely and exclusively (without any duty to make further inquiry, including any duty to inquire whether a holder holds for the account of one or more other persons) on the Certificates of Variable Funding Note Noteholders received pursuant to the terms of the Indenture and as contemplated herein.
(f) In the event that (i) the aggregate number of beneficial holders of the Term Notes and the Variable Funding Notes (as determined in accordance with Treasury Regulation section 1.7704-1(h)) would exceed 85 as a result of a proposed Transfer or (ii) if any Transfer would otherwise cause the Issuer to be unable to rely on the “private placement” safe harbor of Treasury Regulations Section 1.7704-1(h), then such Transfer, as applicable, will be void and of no force or effect, unless (a) the Issuer shall have provided its written consent to such Transfer and (b) if the Issuer so requests, the Variable Funding Note Noteholder shall have provided the Issuer with an opinion of nationally recognized tax counsel, in form and substance satisfactory to the Issuer, that such Transfer will not cause the Issuer to be treated as an entity taxable as a corporation for U.S. federal income tax purposes.
(g) The Variable Funding Note Noteholder is not acquiring or holding a Variable Funding Note with the “plan assets” of (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ ERISA ”)) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code that is subject to Section 4975 of the Internal Revenue Code, (iii) an entity whose underlying assets include “plan assets” by reason of investment by an employee benefit plan or a plan in such entity other than an insurance company general account (as defined in Prohibited Transaction Class Exemption (“ PTCE ”) 95-60) whose underlying assets include less than 25% “plan assets” and for which the purchase and holding of the Transferred Notes is eligible for and satisfies all conditions for relief under PTCE
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95-60 or (iv) an employee benefit plan or plan that is not subject to the provisions of Title I of ERISA or Section 4975 of the Internal Revenue Code, if such acquisition or holding would result in a non-exempt prohibited transaction under, or a non-exempt violation of, any applicable law that is substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code.
The Variable Funding Note Noteholder understands that the representations, warranties and covenants contained in paragraphs (4)(a) through (f) are intended to permit the Issuer to rely, if necessary, on the “private placement” safe harbor from classification as a publicly traded partnership in U.S. Treasury Regulations Section 1.7704-1(h).
(5) The Variable Funding Note Noteholder certifies that the following information is correct:
Its taxpayer identification number is_________________.
Its fiscal year for federal income tax purposes ends in_________________.
Its address for notices is:_________________________.
(6) The Variable Funding Note Noteholder acknowledges that the Issuer, the Indenture Trustee, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or warranties made or deemed to have been made by it in connection with its purchase of the Variable Funding Notes are no longer accurate, it will promptly notify the Issuer and the Indenture Trustee.
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[VARIABLE FUNDING NOTE NOTEHOLDER] By: Name: Title: |
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Certificate from Variable Funding Note Noteholder
Identification of Variable Funding Note(s) Held by Variable Funding Note Noteholder
Name of Variable Funding Note Noteholder:_________________________________
Variable Funding Note(s) Held by Variable Funding Note Noteholder |
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FORM OF CERTIFICATE OF TERM NOTE OWNER
CERTIFICATE OF TERM NOTE OWNER
Reference is hereby made to the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified f
r
o
r
m time to time, the “
Indenture
”), between EFR 2016-1, LLC (the “
Issuer
”) and Bankers Trust Company, as Indenture Trustee and Securities Intermediary (the “
Indenture Trustee
”). All capitalized terms used but not otherwise defined herein shall have the respective meanings set forth in Appendix A to the Indenture.
The undersigned (the “ Term Note Owner ”) hereby certifies, represents and warrants to and agrees with the Indenture Trustee, and for the benefit of the Issuer, that:
(1)
This letter relates to each beneficial interest in
[
an aggregate original principal amount
]
5
[a Notional Principal Amount]
6
specified on
Schedule 1
hereto
(the “
Original Principal Amount
”)
of each Term Note having the Conversion Date, Term Note designation and CUSIP number identified on such
Schedule 1
(each, a “
Term Note Interest
”). The Term Note Owner intends to acquire each such Term Note Interest by one of the following means:
(i) the Term Note Owner acquired an Initial Term Note on the Closing Date;
(ii) the Term Note Owner is a Variable Funding Note Noteholder and will receive the Term Note Interest on the related Conversion Date directly from the Issuer pursuant to Section 4.12 of the Indenture (a “ Conversion ”);
(iii) the Term Note Owner intends to purchase the Term Note Interest on the related Conversion Date from a Variable Funding Note Noteholder (a “ Conversion Date Purchase ”); ¶
(iv) the Term Note Owner owns a Term Note Interest and intends to exchange an Initial Term Note or a Quarterly Term Note on a Note Exchange
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Date for a Fixed Rate Term Note and an I/O Term Note (a “Note Exchange ”); or
(v)
(iv)
the Term Note Owner intends to purchase the Term Note Interest following the Conversion Date from a Term Note Owner (a “
Secondary Purchase
”).
(2) The Term Note Owner wishes to effect each such Conversion, Conversion Date Purchase , Note Exchange or Secondary Purchase (each, a “ Note Interest Acquisition ”).
(3) The Term Note Owner shall timely furnish the Issuer or its agents any U.S. federal income tax form or certification (e.g., IRS Forms W-9, W-8BEN, W-8BEN-E or W-8ECI, or any successors to such IRS forms, or any documentation related to FATCA) that is required by the Indenture or that the Issuer or its agents may reasonably request, and the Term Note Owner shall update or replace such form or certification in accordance with its terms or its subsequent amendments. It agrees to provide any certification or information that is reasonably requested by the Issuer (x) to permit the Issuer or its agents to make payments to it without, or at a reduced rate of, withholding, (y) to enable the Issuer or its agents to qualify for a reduced rate of withholding in any jurisdiction from or through which the Issuer receive payments on its assets, or (z) to enable the Issuer or its agents to satisfy reporting and other obligations in respect of the Notes under the Code and Treasury Regulations.
(4) The Term Note Owner agrees to treat the Notes as debt for all U.S. federal income tax purposes and shall take no action inconsistent with such treatment unless required by law.
(5) The Term Note Owner agrees to comply with the following provisions:
(a) The Term Note Owner will not (A) acquire, sell, transfer, assign, pledge or otherwise dispose of any of its Term Note Interests (or any interest therein that is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B)) on or through (x) a United States national, regional or local securities exchange, (y) a foreign securities exchange or (z) an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers (including the National Association of Securities Dealers Automated Quotation System) ((x), (y) and (z), collectively, an “ Exchange ”) or (B) cause any of its Term Note Interests or any interest therein to be marketed on or through an Exchange.
(b) The Term Note Owner will not enter into any financial instrument payments on which, or the value of which, is determined in whole or in part by reference to the Term Note Interests, or the Issuer (including the amount of the Issuer’s distributions or interest on the Term Note Interests, the value of the Issuer’s assets, or the result of the Issuer’s operations), or any contract that otherwise is described in Treasury Regulations section 1.7704-1(a)(2)(i)(B). For the purposes of this Certificate, the terms “financial instrument” and “contract” shall not include (i) the Term Notes or any interest with respect to the Term Notes; (ii) any arrangement described in paragraph 5(c) immediately below; or (iii) any non-convertible debt instrument described in Treasury Regulations section 1.7704-1(a)(2)(ii).
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(c) The Term Note Owner is the sole holder of the Term Note Interest. If the Term Note Owner is a partnership, grantor trust or S corporation, such Term Note Owner represents and covenants as set forth below (as indicated by checking the applicable box):
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no more than 50% of the value of any person’s interest in such partnership, grantor trust or S corporation is attributable to the Term Note Owner’s interests in all Notes issued by the Issuer |
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no more than [______] persons will be treated as “partners” in the Issuer under Treasury Regulation section 1.7704-1(h)(3) solely by reason of the Term Note Owner’s ownership of the Term Note Interest (without duplication after taking into account any such person being a “partner” in the Issuer by virtue of its ownership of another Term Note Interest or a Variable Funding Note) (such Persons being “ Term Note Partners ”). |
(d)
The Term Note Owner agrees that it may not directly or indirectly assign, participate, pledge, hypothecate, rehypothecate, exchange or otherwise dispose of or transfer in any manner (each a “
Transfer
”) its interest in
the
a
Term Note Interest
s
unless: (A) each transferee of such Transfer delivers a Certificate of Term Note Owner in accordance with the Indenture and this Certificate and (B) such Transfer does not violate the transfer restrictions set forth in the Indenture. Any purported Transfer that does not satisfy the above mentioned conditions shall be null, void and of no effect. Notwithstanding the foregoing, a Term Note Owner (or a transferee thereof in a transaction described in either of the following two clauses) (i) may engage in any repurchase transaction the subject matter of which is a Term Note or any beneficial interest therein and (ii) may pledge a Term Note or any beneficial interest therein, in either case so long as doing so will not result in any Person (other than the Term Note Owner) being treated for U.S. federal income tax purposes as the owner of all or any portion of a Term Note or interest therein.
(e) The Term Note Owner agrees that the Indenture Trustee shall monitor the issuances and transfers of Term Note Interests and shall report to the Issuer upon request the aggregate number of Term Note Owners (including for such purpose the maximum number of Term Note Partners). In monitoring such issuances and transfers and providing such reports, the Indenture Trustee shall rely solely and exclusively (without any duty to make further inquiry, including any duty to inquire whether a holder holds for the account of one or more other persons) on the Certificates of Term Note Owners received pursuant to the terms of the Indenture and as contemplated herein.
(f) In the event that (i) the aggregate number of beneficial holders of the Term Notes and the Variable Funding Notes (as determined in accordance with Treasury Regulation section 1.7704-1(h)) would exceed 85 as a result of this proposed Note Interest Acquisition or a proposed Transfer or (ii) if this Note Interest Acquisition or any Transfer would otherwise cause the Issuer to be unable to rely on the “private placement” safe harbor of Treasury Regulations Section 1.7704-1(h), then this Note Interest Acquisition or such Transfer, as applicable, will be void and of no force or effect, unless (a) the Issuer shall have provided its written consent to such Note Interest Acquisition or Transfer and (b) if the Issuer so requests, the Term Note Owner shall
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have provided the Issuer with an opinion of nationally recognized tax counsel, in form and substance satisfactory to the Issuer, that such Note Interest Acquisition or Transfer will not cause the Issuer to be treated as an entity taxable as a corporation for U.S. federal income tax purposes.
(g) The Term Note Owner is not acquiring or holding the Term Note Interests with the “plan assets” of (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ ERISA ”)) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code that is subject to Section 4975 of the Internal Revenue Code, (iii) an entity whose underlying assets include “plan assets” by reason of investment by an employee benefit plan or a plan in such entity other than an insurance company general account (as defined in Prohibited Transaction Class Exemption (“ PTCE ”) 95-60) whose underlying assets include less than 25% “plan assets” and for which the purchase and holding of the Transferred Notes is eligible for and satisfies all conditions for relief under PTCE 95-60 or (iv) an employee benefit plan or plan that is not subject to the provisions of Title I of ERISA or Section 4975 of the Internal Revenue Code, if such acquisition or holding would result in a non-exempt prohibited transaction under, or a non-exempt violation of, any applicable law that is substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code.
(h) The Term Note Owner understands that the representations, warranties and covenants contained in paragraphs (5)(a) through (f) are intended to permit the Issuer to rely, if necessary, on the “private placement” safe harbor from classification as a publicly traded partnership in U.S. Treasury Regulations Section 1.7704-1(h).
(6) The Term Note Owner certifies that the following information is correct:
Its taxpayer identification number is___________________.
Its fiscal year for federal income tax purposes ends in______________.
Its address for notices is:__________________.
(7) The Term Note Owner acknowledges that the Issuer, the Indenture Trustee, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or warranties made or deemed to have been made by it in connection with its purchase of the Term Note Interests are no longer accurate, it will promptly notify the Issuer and the Indenture Trustee.
In the event that (i) subsequent to the date of this Certificate from Term Note Owner, the undersigned Term Note Owner acquires an additional Term Note Interest through any Note
Interest
Acquisition
Interest
and (ii) all of the information in this Certificate of Term Note Owner continues to be true and correct, except for the information to be included on Schedule 1 in respect of such additional Term Note Interest, then (in lieu of submitting a new Certificate of Term Note Owner) the Term Note Owner may execute and deliver to the Indenture Trustee, with a copy to the Issuer, an updated cumulative Schedule 1, and such updated cumulative Schedule 1 shall replace any prior version of Schedule 1,
provided
that the provisions of
Section 5(f)
above that
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may render a Note
Interest
Acquisition
Interest
null and void shall apply only to such new Note
Interest
Acquisition
Interest
.
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¶
F-6
to Certificate of Term Note Owner
Identification of Term Note Interest(s) Held by Term Note Owner
Name of Term Note Owner:____________________________________
* Specify Initial Term Note
or
, I/O Term Note, Fixed Rate Term Note or Quarterly
Term Note.
** Specify Conversion, Conversion Date Purchase , Note Exchange or Secondary Purchase, as applicable.
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*** For a Conversion, list the Issuer. For a Conversion Date Purchase, list the applicable Variable Funding Note Noteholder. For a Note Exchange, list the exchanged Term Note. For a Secondary Purchase, list the applicable Term Note Owner.
[To be signed under the circumstances described in the last paragraph of the Certificate of Term Note Owner.]
The undersigned Term Note Owner hereby delivers to the Indenture Trustee, with a copy to the Issuer, this updated cumulative Schedule 1, and such updated cumulative Schedule 1 replaces any prior version of Schedule 1 delivered by the undersigned, provided that the provisions of
Section 5(f)
in the Certificate of Term Note Owner that may render a Note
Interest
Acquisition
Interest
null and void shall apply only to such new Note
Interest
Acquisition
Interest
.
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[TERM NOTE OWNER] By: Name: Title: |
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[FORM OF] TEMPORARY REGULATION S GLOBAL NOTE
THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE.
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “ QIB ”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “ IAI ”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY
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ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “ CODE ”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE; (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“ PTCE ”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95-60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
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UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“ DTC ”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THIS NOTE OR THE TRANSACTION DOCUMENTS.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THIS NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME.
* Denominations of $100,000 and in integral multiples of $1.00 in excess thereof.
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EFR 2016-1, LLC
TEMPORARY REGULATION S GLOBAL NOTE
EFR 2016-1, LLC (herein referred to as the “ Issuer ”), for value received, hereby promises to pay to CEDE & CO., or registered assigns, subject to the following provisos, a principal sum up to [____] ($[___]) payable on each Payment Date from the Collections on deposit in the Collection Account pursuant to Section 5.04(a) of the Indenture; provided , however , the entire unpaid principal amount of this Note shall be due and payable on the [Month][Year] Payment Date (the “ Term Note Maturity Date ”); provided further , however , that the aggregate principal sum of the Regulation S Global Notes and the Rule 144A Global Note shall not exceed the principal sum of $[ ]. The Issuer will pay principal of and interest on this Note in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose.
No reference herein to the Indenture and no provision of this Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture.
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this Note.
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IN WITNESS WHEREOF, the Issuer has caused this Note to be signed, manually or in facsimile, by its Authorized Officer.
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INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-mentioned Indenture.
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This Note is one of Temporary Regulation S Global Notes of a duly authorized issue of Notes of EFR 2016-1, LLC (the “ Issuer ”), designated as its [NAME OF SECURITY] (herein called the “ Note ”), all issued under an Amended and Restated Indenture, dated as of October 20, 2017 (such indenture, as further amended, restated, supplemented or otherwise modified, is herein called the “ Indenture ”), by and between the Issuer and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”). This Note is subject to all terms of the Indenture. All terms used in this Note that are defined in Part I of Appendix A of the Indenture, shall have the meanings assigned to them in or pursuant to Part I of Appendix A of the Indenture.
This Note is secured by the Collateral, and in connection with the sale of Collateral following an Event of Default the Noteholder will be entitled to its’ pro rata share of proceeds. The payment of principal of and interest on this Note, however, shall be solely based on the performance of the Receivables related to this Note’s Investment Pool and, except as otherwise set forth in Section 5.04(a) of the Indenture, shall not be dependent on Receivables related to any other Investment Pool or market or credit events that are independent of such financial assets.
Interest on this Note shall accrue at the Note Interest Rate, and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period.
Interest on and principal of this Note will be payable on each Payment Date pursuant to Section 5.04(a) of the Indenture.
“ Payment Date ” means the 15th day of each calendar month, or, if any such 15th day is not a Business Day, the next succeeding Business Day, commencing in [MONTH][YEAR].
Any installment of interest and principal, if any, or any other amount, payable on this Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name this Note is registered on the Record Date, by check mailed first-class, postage prepaid to such Person’s address as it appears on the Note Register on such Record Date, (i) except that with respect to Notes registered on the Record Date in the name of the nominee of the Depository (initially, such nominee to be Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by such nominee, and (ii) except for (A) the final installment of principal payable with respect to this Note on a Payment Date and (B) the redemption price for this Note called for redemption pursuant to Section 12.01 of the Indenture, in each case shall be payable as set forth below. All reductions in the principal amount of this Note effected by any payments of installments of principal made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not such payment is noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will provide notice of the termination as provided in the Indenture and this Note shall be entitled to the final payment only upon presentation and surrender of this Note at the Indenture Trustee’s principal Corporate Trust Office. On any payment of interest or principal being made, details of such payment shall be entered by the Indenture Trustee on behalf of the Issuer in Schedule A hereto.
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The principal amount of this Note, to the extent not previously paid, shall be due and payable on the Term Note Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount of this Note may be due and payable, if not previously paid, on the date on which an Event of Default described in Section 7.01 of the Indenture shall have occurred and be continuing, if the Notes have been declared immediately due and payable as provided in Section 7.02 of the Indenture.
This Note may not be redeemed or prepaid, except as provided in the Indenture. If this Note is prepaid prior to its Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the applicable Optional Redemption Amount. If this Note is prepaid after its related Term Note Amortization Date, the Issuer shall remit to the Collection Account for payment to the Noteholder an amount equal to the Outstanding Principal Amount of such Term Note as of the Optional Redemption Date, plus all interest accrued and unpaid as of such Optional Redemption Date.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.
On any redemption, purchase, exchange or cancellation of any of the Notes represented by this Temporary Regulation S Global Note, details of such redemption, purchase, exchange or cancellation shall be entered by the Indenture Trustee in Schedule A hereto recording any such redemption, purchase, exchange or cancellation and shall be signed on, by or on behalf of the Issuer. Upon any such redemption, purchase, exchange or cancellation, the principal amount of this Temporary Regulation S Global Note and the Notes represented by this Temporary Regulation S Global Note shall be reduced or increased, as appropriate, by the principal amount so redeemed, purchased, exchanged or canceled.
This Temporary Regulation S Global Note may be exchanged, in whole or in part (free of charge), for the Permanent Regulation S Global Note in the form set out in Exhibit H to the Indenture upon the later of (i) the Exchange Date and (ii) the furnishing of the Regulation S Certificate.
Principal of, interest on and all other amounts payable on or in respect of this Note constitutes limited recourse obligations of the Issuer. The Holders of this Note has recourse to the Issuer only to the extent of the Collateral, and following realization of the Collateral, any claims of the Holders of this Note shall be extinguished and shall not revive thereafter. Neither the Issuer, nor any of its respective agents, members, partners, beneficiaries, officers, directors, employees or any Affiliate of any of them or any of their respective successors or assigns or any other Person or entity shall be personally liable for any amounts payable, or performance due, under this Note or the Indenture. It is understood that the foregoing provisions of this paragraph shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or
G-8
agreement which is secured by the Collateral, or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture until such Collateral has been realized whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this paragraph shall not limit the right of any Person to name the Issuer as party defendant in any action, suit or in the exercise of any other remedy under this Note or in the Indenture, 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 the Issuer.
The Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and the Note Registrar and any agent of the foregoing may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Note Registrar nor any such agent of the foregoing shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of this Note under the Indenture at any time by the Issuer pursuant to Section 10.01 and Section 10.02 of the Indenture.
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.
This Note is issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal
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of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the Indenture Trustee in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purpose of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture the Holder shall have no claim against any of the entities described in the first sentence of this paragraph for any deficiency, loss or claim therefrom; provided , however , that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the Collateral pledged by the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.
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Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.
Dated: |
* Signature Guaranteed |
* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.
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SCHEDULE OF EXCHANGES
FOR NOTES REPRESENTED BY THE PERMANENT
REGULATION S GLOBAL NOTE OR THE RULE 144A
GLOBAL NOTE, OR REDEMPTIONS OR PURCHASES AND CANCELLATIONS
The following exchanges of a part of this Temporary Regulation S Global Note for the Permanent Regulation S Global Note or the Rule 144A Global Note, in whole or in part, or redemptions, purchases or cancellation of this Temporary Regulation S Global Note have been made:
Date of exchange, or redemption or purchase or cancellation |
Part of principal amount of this Temporary Regulation S Global Note exchanged for Notes represented by the Permanent Regulation S Global Note or the Rule 144A Global Note, or redeemed or purchased or canceled |
Remaining principal amount of this Temporary Regulation S Global Note following such exchange, or redemption or purchase or cancellation |
Amount of interest paid with delivery of the Permanent Regulation S Note |
Notation made by or on behalf of the Issuer |
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[FORM OF] PERMANENT REGULATION S GLOBAL NOTE
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR, WITH THE WRITTEN CONSENT OF THE ISSUER, TO AN AFFILIATE OF THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “ QIB ”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS AN ACCREDITED INVESTOR AS DEFINED IN ANY OF PARAGRAPHS (1), (2), (3) AND (7) OF RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT AND ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS (AN “ IAI ”) OR A QIB PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI OR A QIB. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE UNDERSTANDS AND ACKNOWLEDGES THAT, IF IT SEEKS TO EFFECT A TRANSFER TO A NON-UNITED STATES PERSON UNDER REGULATION S UNDER THE SECURITIES ACT, IT SHALL (I) NOT TAKE ANY ACTION THAT WOULD CONSTITUTE “DIRECTED SELLING EFFORTS” OR THAT WOULD CAUSE IT TO BE OR BECOME A “DISTRIBUTOR” OR TO ENTER INTO CONTRACTUAL ARRANGEMENTS WITH A “DISTRIBUTOR” (AS TO EACH SUCH TERM, UNDER AND AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (II) IT SHALL EFFECT SUCH TRANSFER IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE (A) UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (1) ABOVE, IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT, A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB, AN IAI PURCHASING FOR ITS OWN ACCOUNT OR AN IAI OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER IAI AND (B) IS DEEMED TO REPRESENT THAT IT IS NOT ACQUIRING OR HOLDING THIS NOTE WITH THE “PLAN ASSETS” OF (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
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(THE “ CODE ”) WHICH IS SUBJECT TO SECTION 4975 OF THE CODE; (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR A PLAN IN SUCH ENTITY OTHER THAN AN INSURANCE ISSUER GENERAL ACCOUNT (AS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION (“ PTCE ”) 95-60) WHOSE UNDERLYING ASSETS INCLUDE LESS THAN 25% “PLAN ASSETS” AND FOR WHICH THE PURCHASE AND HOLDING OF THIS NOTE IS ELIGIBLE FOR AND SATISFIED ALL CONDITIONS FOR RELIEF UNDER PTCE 95¬60 OR (IV) AN EMPLOYEE BENEFIT PLAN OR PLAN THAT IS NOT SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, IF SUCH ACQUISITION OR HOLDING WOULD RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER, OR A NON-EXEMPT VIOLATION OF, ANY APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTIONS ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASERS.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
H-2
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“ DTC ”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER OF, ANY BANKRUPTCY PROCEEDING UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THIS NOTE OR THE TRANSACTION DOCUMENTS.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST HEREIN, AGREE TO TREAT THIS NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME .
* Denominations of $100,000 and in integral multiples of $1.00 in excess thereof.
H-3
EFR 2016-1, LLC
PERMANENT REGULATION S GLOBAL NOTE
EFR 2016-1, LLC (herein referred to as the “ Issuer ”), for value received, hereby promises to pay to CEDE & CO., or registered assigns, subject to the following provisos, a principal sum up to [____] ($[___]) payable on each Payment Date from the Collections on deposit in the Collection Account pursuant to Section 5.04(a) of the Indenture; provided , however , the entire unpaid principal amount of this Note shall be due and payable on the [Month][Year] Payment Date (the “ Term Note Maturity Date ”); provided further , however , that the aggregate principal sum of the Regulation S Global Notes and the Rule 144A Global Note shall not exceed the principal sum of $[ _____ ]. The Issuer will pay principal of and interest on this Note in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose.
No reference herein to the Indenture and no provision of this Note or the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed and in the Indenture.
The Issuer promises to pay all reasonable and documented out-of-pocket costs and expenses, including reasonable and documented out-of-pocket attorneys’ fees, all as provided in the Indenture, incurred in connection with the collection and enforcement of this Note.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed, manually or in facsimile, by its Authorized Officer.
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H-5
INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-mentioned Indenture.
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H-6
This Note is one of Permanent Regulation S Global Notes of a duly authorized issue of Notes of EFR 2016-1, LLC (the “ Issuer ”), designated as its [NAME OF SECURITY] (herein called the “ Note ”), all issued under an Amended and Restated Indenture, dated as of October 20, 2017 (such indenture, as further ramended, restated, supplemented or otherwise modified, is herein called the “ Indenture ”), by and between the Issuer and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”). This Note is subject to all terms of the Indenture. All terms used in this Note that are defined in Part I of Appendix A of the Indenture, shall have the meanings assigned to them in or pursuant to Part I of Appendix A of the Indenture.
This Note is secured by the Collateral, and in connection with the sale of Collateral following an Event of Default the Noteholder will be entitled to its’ pro rata share of proceeds. The payment of principal of and interest on this Note, however, shall be solely based on the performance of the Receivables related to this Note’s Investment Pool and, except as otherwise set forth in Section 5.04(a) of the Indenture, shall not be dependent on Receivables related to any other Investment Pool or market or credit events that are independent of such financial assets.
Interest on this Note shall accrue at the Note Interest Rate, and will be calculated on the basis of a year of 360 days and the actual number of days in the related Interest Period.
Interest on and principal of this Note will be payable on each Payment Date pursuant to Section 5.04(a) of the Indenture.
“ Payment Date ” means the 15th day of each calendar month, or, if any such 15th day is not a Business Day, the next succeeding Business Day, commencing in [MONTH][YEAR].
Any installment of interest and principal, if any, or any other amount, payable on this Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name this Note is registered on the Record Date, by check mailed first-class, postage prepaid to such Person’s address as it appears on the Note Register on such Record Date, (i) except that with respect to Notes registered on the Record Date in the name of the nominee of the Depository (initially, such nominee to be Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by such nominee, and (ii) except for (A) the final installment of principal payable with respect to this Note on a Payment Date and (B) the redemption price for this Note called for redemption pursuant to Section 12.01 of the Indenture, in each case shall be payable as set forth below. All reductions in the principal amount of this Note effected by any payments of installments of principal made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not such payment is noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will provide notice of the termination as provided in the Indenture and this Note shall be entitled to the final payment only upon presentation and surrender of this Note at the Indenture Trustee’s principal Corporate Trust Office. On any payment of interest or principal being made, details of such payment shall be entered by the Indenture Trustee on behalf of the Issuer in Schedule A hereto.
H-7
The principal amount of this Note, to the extent not previously paid, shall be due and payable on the Term Note Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount of this Note may be due and payable, if not previously paid, on the date on which an Event of Default described in Section 7.01 of the Indenture shall have occurred and be continuing, if the Notes have been declared immediately due and payable as provided in Section 7.02 of the Indenture.
This Note may not be redeemed or prepaid, except as provided in the Indenture. If this Note is prepaid prior to its Term Note Amortization Date, the Issuer shall remit to the Collection Account an amount equal to the applicable Optional Redemption Amount. If this Note is prepaid after its related Term Note Amortization Date, the Issuer shall remit to the Collection Account an amount equal to the Outstanding Principal Amount of such Term Note as of the Optional Redemption Date, plus all interest accrued and unpaid as of such Optional Redemption Date.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.
On any redemption, purchase, exchange or cancellation of any of the Notes represented by this Permanent Regulation S Global Note, details of such redemption, purchase, exchange or cancellation shall be entered by the Indenture Trustee in Schedule B hereto recording any such redemption, purchase, exchange or cancellation and shall be signed on, by or on behalf of the Issuer. Upon any such redemption, purchase, exchange or cancellation, the principal amount of this Permanent Regulation S Global Note and the Notes represented by this Permanent Regulation S Global Note shall be reduced or increased, as appropriate, by the principal amount so redeemed, purchased, exchanged or canceled.
Principal of, interest on and all other amounts payable on or in respect of this Note constitutes limited recourse obligations of the Issuer. The Holders of this Note has recourse to the Issuer only to the extent of the Collateral, and following realization of the Collateral, any claims of the Holders of this Note shall be extinguished and shall not revive thereafter. Neither the Issuer, nor any of its respective agents, members, partners, beneficiaries, officers, directors, employees or any Affiliate of any of them or any of their respective successors or assigns or any other Person or entity shall be personally liable for any amounts payable, or performance due, under this Note or the Indenture. It is understood that the foregoing provisions of this paragraph shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is secured by the Collateral, or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture until such Collateral has been realized whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this paragraph shall not limit the right of any Person to name the Issuer as party defendant in any action, suit or in the exercise of any other remedy under this Note or in the Indenture, so long as no judgment in the nature of a
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deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against the Issuer.
The Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and the Note Registrar and any agent of the foregoing may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Note Registrar nor any such agent of the foregoing shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of this Note under the Indenture at any time by the Issuer pursuant to Section 10.01 and Section 10.02 of the Indenture.
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.
This Note is issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the Indenture Trustee in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission
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to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Indenture Trustee for the sole purpose of binding the interests of the Indenture Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, in the case of an Event of Default under the Indenture the Holder shall have no claim against any of the entities described in the first sentence of this paragraph for any deficiency, loss or claim therefrom; provided , however , that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the Collateral pledged by the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.
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Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.
Dated: |
* Signature Guaranteed: |
* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.
H-11
Interest Payment Date |
Date of Payment |
Total Amount of Interest Payable |
Amount of Interest Paid |
Confirmation of payment by or on behalf of the Issuer |
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Principal Payment Date |
Total Amount Payable |
Total Amount Paid |
Confirmation of payment by or on behalf of the Issuer |
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SCHEDULE OF EXCHANGES OR REDEMPTIONS OR PURCHASES AND
CANCELLATIONS
The following increases or decreases in principal amount of this Note, or redemptions, purchases or cancellations of this Note have been made:
Date of exchange, or redemption or purchase or cancellation |
Increase or decrease in principal amount of this Note due to exchanges |
Remaining principal amount of this Note following such exchange, or redemption or purchase or cancellation |
Notation made by or on behalf of the Issuer |
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H-14
[FORM OF] CERTIFICATION TO BE GIVEN BY
HOLDER OF BENEFICIAL INTEREST IN A
TEMPORARY REGULATION S GLOBAL NOTE
(Pursuant to
Section 3.09(b)
of the Indenture)
[Euroclear Bank S.A./N.V., as operator of the Euroclear
System] [Clearstream, Luxembourg, société anonyme]
Notes, CINS No.__________________ ISIN No.____________
Reference is hereby made to the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), by and between EFR 2016-1, LLC, as Issuer (the “ Issuer ”) and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”). Capitalized terms used herein and not otherwise defined have the meanings set forth in Appendix A to the Indenture.
[For purposes of acquiring a beneficial interest in the Permanent Regulation S Global Note upon the expiration of the Distribution Compliance Period,] [For purposes of receiving payments under the Temporary Regulation S Global Note,*] the undersigned holder of a beneficial interest in the Temporary Regulation S Global Note issued under the Indenture certifies that (a) it is not a U.S. person as defined by Regulation S under the Securities Act and (b) it is an accredited investor as defined in any of paragraphs (1), (2), (3) and (7) of Rule 501(a) of Regulation D under the Securities Act and any entity in which all of the equity owners of such holder come within such paragraphs.
We undertake to advise you promptly by telex on or prior to the date on which you intend to submit your corresponding certification relating to the Notes held by you if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certificate applies as of such date.
We understand that this certificate is required in connection with certain securities laws of the United States of America. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate to any interested party in such proceedings. This certificate and the statements contained herein are made for your benefit and the health of the Issuer and the Noteholders.
I-1
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Dated:_________________________, ____ |
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By: as, or as agent for, the holder of a beneficial interest in the Notes to which this certificate relates. |
I-2
[FORM OF] EUROCLEAR AND CLEARSTREAM CERTIFICATE
(Pursuant to Section 3.08(b) of the Indenture)
This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount of the Notes set forth below (our “ Member Organizations ”) substantially to the effect set forth in the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), EFR 2016-1, LLC, as Issuer (the “ Issuer ”) and Bankers Trust Company, as Indenture Trustee (the “ Indenture Trustee ”), U.S. $_________principal amount of the above-captioned Notes held by us or on our behalf are beneficially owned by non-U.S. person(s). As used in this paragraph, the term “U.S. person” has the meaning given to it by Regulation S under the United States Securities Act.
We further certify that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any interest in the Notes identified above are no longer true and cannot be relied upon as of the date hereof.
[On Exchange Date: We hereby acknowledge that no portion of the Temporary Regulation S Global Note shall be exchanged for an interest in the Permanent Regulation S Global Note (as each such term is defined in the Indenture) with respect to the portion thereof for which we have not received the applicable certifications from our Member Organizations.]*
[On________________ and upon any other payments under the Temporary Regulation S Global Note: We hereby agree to hold (and return to the [ ] upon request) any payments received by us on the Temporary Regulation S Global Note (as defined in the Indenture) with respect to the portion thereof for which we have not received the applicable certifications from our Member Organizations.]*
We understand that this certification is required in connection with certain securities laws of the United States of America. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings.
J-1
Operator of the Euroclear System
or
Clearstream, Luxembourg, société anonyme]
By: Name: Title: |
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J-2
DEFINITIONS/RULES OF CONSTRUCTION/NOTICE INFORMATION
Appendix A-1
When used in the Transaction Documents, unless otherwise defined therein, the following words and phrases shall have the following meanings:
“ Accession Agreement ” shall mean an Accession Agreement to the Intercreditor Agreement, executed by and among Enova, the Intercreditor Agent and the new party to be joined to the Intercreditor Agreement.
“ Account Holder ” shall mean CNU, together with its successors and permitted assigns, in its capacity as such under and pursuant to the terms of the Intercreditor Agreement.
“ ACH Sweep Account ” shall mean either (i) an account established at Green Bank bearing the account number *** , which is held by the Indenture Trustee on behalf of the Noteholders, and which is subject to an ACH Sweep Blocked Account Control Agreement, and for which an Obligor shall be directed to remit all ACH payments, if applicable, under its applicable Contract, or (ii) an account established at North American Bank bearing the account number *** , which is held by the Indenture Trustee on behalf of the Noteholders, and which is subject to an ACH Sweep Blocked Account Control Agreement, and for which an Obligor shall be directed to remit all ACH payments, if applicable, under its applicable Contract.
“ ACH Sweep Blocked Account Control Agreement ” shall mean either (i) the Blocked Account Control Agreement, dated as of December 14, 2016, by and among Enova, the Indenture Trustee and Green Bank, as the depositary bank or (ii) the Blocked Account Control Agreement, by and among Enova, the Indenture Trustee and North American Bank, as the depositary bank, to be effective and dated prior to the date that any Collections may be deposited into the ACH Sweep Account bearing account number *** .
“ Act ” when used with respect to any Noteholder, shall have the meaning specified in Section 1.04(a) of the Indenture.
“ Action ” when used with respect to any Noteholder, shall have the meaning specified in Section 1.04(a) of the Indenture.
“ Additional Advance Fee ” shall mean, with respect to each Requested Advance in excess of twice per calendar week, $ *** .
“ Administrative Agent ” shall mean Jefferies.
“ Administrative Fee ” shall mean $ *** per month, plus any Additional Advance Fee (if applicable).
“ Advance ” shall have the meaning specified in Section 2.04(d) of the Note Purchase Agreement.
“ Advance Conditions ” shall mean, with respect to any Requested Advance (unless otherwise specified) to be made under the Note Purchase Agreement, the condition that each of the following shall be satisfied:
(a) the Funding Period Termination Date have not have occurred;
(b) no Event of Default shall have occurred and be continuing;
(c) the Issuer shall deliver, or shall cause to be delivered, to the Administrative Agent, with a copy to each Variable Funding Note Noteholder, an executed Funding Request no later than 12:00 p.m., New York City time, two (2) Business Days prior the proposed Advance Date, and the certifications made therein shall be true and correct in all material respects;
(d) the Issuer shall deliver, or shall cause to be delivered, to each Variable Funding Note Noteholder, a Borrowing Base Certificate no later than two (2) Business Days prior to the proposed Advance Date;
(e) the Issuer shall deliver, or shall cause to be delivered, an Officer’s Certificate to the Administrative Agent certifying (i) that the Issuer is in full compliance with the provisions of the Transaction Documents to which it is a party and (ii) that as of the Advance Date all of the Advance Conditions (save this clause (e)(ii)) have been satisfied;
(f) the Master Servicer shall deliver an Officer’s Certificate to the Administrative Agent certifying that the Receivable Files relating to the Eligible Receivables to be pledged in connection with such Advance are complete;
(g) no later than two (2) Business Days prior to the proposed Advance Date, the Master Servicer shall deliver, or otherwise make available, imaged copies of the Verifiable Collateral Documents to the Verification Agent;
(h) the Verification Agent shall deliver an Officer’s Certificate to the Administrative Agent verifying the imaged copies of the Verifiable Collateral Documents;
(i) each Requested Advance shall be in an amount of at least $500,000; and
(j) as of the Advance Date, the LTV for any Term Note (as of its most recent Payment Date), is not higher than the LTV for such Term Note as of its respective Conversion Date.
“ Advance Date ” shall be any Business Day specified in the related Funding Request and shall be the date on which the Variable Funding Note Noteholders fund a Requested Advance.
“ Advance Date Receivables Schedule ” shall have the meaning set forth in Section 9.02(a) of the Servicing Agreement.
“ Affiliate ” shall mean, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” shall mean the power (a) to vote 10% or more of the securities having
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ordinary voting power for the election of directors of such Person or (b) to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“ Aggregate Collateral Performance ” shall mean (i) the Aggregate Cumulative Delinquency Ratio and (ii) the percentage of the aggregate Outstanding Principal Amount of the Notes that have been subject to a breach of an Investment Pool Collateral Performance Trigger, in each case as of the last day of each Collection Period and as reported to the Administrative Agent on each Reporting Date.
“ Aggregate Cumulative Delinquency Ratio ” shall mean, as of any date of determination, the percentage equivalent of a fraction, the numerator of which is equal to (i) the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables (for the avoidance of doubt, in determining the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables, this shall include the aggregate Outstanding Receivable Principal Balance of any and all Delinquent Receivables repurchased by the Transferor at its option pursuant to Section 2.5 of the Sale Agreement), and the denominator of which is equal to (ii) the aggregate Outstanding Receivable Principal Balance of all Eligible Receivables.
“ Aggregate Cumulative Delinquency Trigger ” shall occur with respect to a Collection Period in the event that the Aggregate Cumulative Delinquency Ratio on the last day of a Collection Period is greater than *** %.
“ Aggregate Original Receivable Principal Balance ” shall mean, as of any date of determination, the sum of the Original Receivable Principal Balances of all Eligible Receivables sold to the Issuer through such date.
“ Agreement ” shall have, with respect to any Transaction Document, the meaning set forth in the preamble thereto.
“ Amortization Date ” shall mean any Term Note Amortization Date or the Variable Funding Note Amortization Date.
“ Annual Percentage Rate ” shall mean, with respect to a Receivable, the annual rate of finance charges stated in the Contract related to such Receivable.
“ Asset Servicer ” shall mean, at any time, each Person then appointed as such pursuant to Section 2.01 of the Servicing Agreement or by virtue of a Joinder Supplement, together with its successors and permitted assigns in such capacity. The initial Asset Servicer shall be NCLS.
“ Asset Servicer Default ” shall have the meaning set forth in Section 8.02 of the Servicing Agreement.
“ Asset Servicer Termination Date ” shall have the meaning set forth in Section 2.01(a) of the Servicing Agreement.
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“ Asset Servicer Termination Notice Date ” shall have the meaning set forth in Section 8.04(b) of the Servicing Agreement.
“ Audit ” shall have the meaning specified in Section 3.04(a) of the Servicing Agreement.
“ Authenticating Agent ” shall mean any Person authorized by the Indenture Trustee to authenticate Notes under Section 8.14 of the Indenture.
“ Authorized Officer ” shall mean, with respect to any specified Person, the chief executive officer, the president, the secretary, the chief financial officer, the chief investment officer or any vice president of such Person.
“ Average Maximum Variable Funding Note Commitment ” shall mean for all of the Variable Funding Notes and any Interest Period, the sum of the Variable Funding Note Maximum Principal Amount as in effect on each day in such Interest Period divided by the number of calendar days elapsed in such Interest Period.
“ Average Variable Funding Note Balance ” shall mean for all of the Variable Funding Notes and any Interest Period, the sum of the Outstanding Principal Amount of all such Variable Funding Notes on each day in such Interest Period divided by the number of calendar days elapsed in such Interest Period.
“ Backup Servicer ” shall mean First Associates, or any independent third party selected by the Master Servicer, with the consent of the Majority Holders, in their reasonable discretion, to perform monitoring functions with respect to the Serviced Receivables.
“ Backup Servicing Agreement ” shall mean that certain Backup Servicing Agreement, dated as of January 15, 2016 (as amended, restated, supplemented or otherwise modified from time to time), among the Backup Servicer, the Master Servicer, the Asset Servicers, the Transferor, the Verification Agent and the Issuer.
“ Backup Servicing Fee ” shall have the meaning specified in Section 4 the Backup Servicing Agreement.
“ Bank Originated Receivable ” shall have the meaning specified in Section 6.14 of the Receivables Purchase Agreement.
“ Bank Originator ” shall have the meaning specified in Section 6.14 of the Receivables Purchase Agreement.
“ Bank Originator Credit Policy ” shall mean the credit policies and procedures of the Bank Originators that are substantially consistent with the Credit Policy.
“ Bank Originator Sale Agreement ” shall have the meaning specified in Section 6.14 of the Receivables Purchase Agreement.
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“ Bank Secrecy Act ” shall mean the Currency and Foreign Transactions Reporting Act of 1970, 84 Stat. 1114-2.
“ Bankers Trust ” shall mean Bankers Trust Company, an Iowa banking corporation.
“ Benefit Plan ” shall mean an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to the provisions of Title I of ERISA, a “plan” described in and subject to Section 4975 of the Code, or an entity whose underlying assets include “plan assets” by reason of an employee benefit plan’s or plan’s investment in the entity.
“ Blocked Account Control Agreement ” shall mean any of (a) the Blocked Account Control Agreement, dated as of December 14, 2016 (as amended, restated, supplemented or otherwise modified from time to time), by and among the Intercreditor Agent, the Account Holder and Green Bank, as the depositary bank, (b) any ACH Sweep Blocked Account Control Agreement, or (c) any blocked account control agreement, by and among the Intercreditor Agent, the relevant account holder and the depositary bank where the related account is held, which is in form and substance reasonably acceptable to the Majority Holders.
“ Book-Entry System ” shall have the meaning specified in Section 3.05 of the Indenture.
“ Borrowing Base Certificate ” shall mean a certificate, in the form set forth in Exhibit D to the Indenture or otherwise in a form satisfactory to the Variable Funding Note Noteholders, which the Issuer shall deliver or cause to be delivered to the Variable Funding Note Noteholders, which (i) sets forth the calculation of the Variable Funding Note Borrowing Base (including a calculation of each component thereof) as of the related Cutoff Date, (ii) reflects the Receivables sold to the Issuer in connection with the related Requested Advance, (iii) sets forth the Excess Concentration Limits, the Eligibility Criteria, the Outstanding Principal Amount of the Notes and the Maximum Principal Amount and (iv) certifies the accuracy and completeness of all information included therein.
“ Business Day ” shall mean any day other than (a) a Saturday or Sunday or (b) any other day on which national banking associations or state banking institutions in New York, New York, Des Moines, Iowa or any other state in which the principal executive office of the Corporate Trust Office is located, are authorized or are obligated by law, executive order or governmental decree to be closed.
“ Capital Stock ” shall mean, as to any Person, the equity interests in such Person, including the shares of each class of capital stock in any Person that is a corporation, each class of partnership interest in any Person that is a partnership, and each class of membership interest in any Person that is a limited liability company, and any right to subscribe for or otherwise acquire any such equity interests.
“ Cash Equivalents ” shall mean, as of any date of determination, (a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government, or (ii) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one (1) year after such date, (b) marketable direct obligations issued by any state of the United States
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of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one (1) year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s, (c) commercial paper maturing no more than one (1) year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit or bankers’ acceptances maturing within one (1) year after such date and issued or accepted by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (i) is at least “adequately capitalized” (as defined in the regulations of its primary Federal banking regulator), and (ii) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (e) shares of any money market mutual fund that (i) has all or substantially all of its assets invested continuously in the types of investments referred to in clauses (a) and (b) above, (ii) has net assets of not less than $500,000,000, and (iii) has the highest rating obtainable from either S&P or Moody’s.
“ Certificate of Authentication ” shall mean the certificate of authentication of the Indenture Trustee, the form of which is described in Section 3.03 of the Indenture or the alternative certificate of authentication of the Authenticating Agent, the form of which is described in Section 8.14 of the Indenture.
“ Certificate of Term Note Owner ” shall mean a certificate substantially in the form of Exhibit F to the Indenture.
“ Certificate of Variable Funding Note Noteholder ” shall mean a certificate substantially in the form of Exhibit E to the Indenture.
“ Change of Control ” shall mean, with respect to (i) any of the Transferor, the Issuer or the Master Servicer failing to be a wholly owned, direct or indirect, Subsidiary of Enova and (ii) with respect to Enova, an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of Enova or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of 50% or more of the equity securities of Enova entitled to vote for members of the board of directors or equivalent governing body of Enova on a fully-diluted basis.
“ Charged-Off Receivable ” shall mean any Receivable which is *** or more days past due or which has otherwise been charged-off or deemed uncollectible by the Issuer or the applicable Asset Servicer in accordance with the Servicing Policy (including because of fraud or the Obligor becoming the subject of a proceeding under any debtor relief law), as applicable.
“ Clearing Agency Custodian ” shall mean the entity maintaining possession of the Global Notes for the Depository.
“ Clearstream ” shall mean Clearstream, Luxembourg, société anonyme, a professional depository incorporated under the laws of Luxembourg, and its successors and permitted assigns in such capacity.
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“ Closing ” shall have the meaning specified in Section 3.01 of the Note Purchase Agreement.
“ Closing Date ” shall mean October 20, 2017.
“ Closing Date Material Adverse Change ” shall mean a material adverse change in (a) the business operations, assets, condition (financial or otherwise), liabilities of the Issuer or any Enova Entity since September 30, 2017, (b) the ability of the Issuer or any Enova Entity to fully and timely perform its material obligations under any of the Transaction Documents to which it is a party, or (c) the legality, validity, binding effect, or enforceability against the Issuer or any Enova Entity of the Transaction Documents.
“ CNU ” shall mean CNU Online Holdings, LLC, a Delaware limited liability company.
“ Collateral ” shall have the meaning specified in the Granting Clause of the Indenture.
“ Collection Account ” shall have the meaning specified in Section 5.02(a) of the Indenture.
“ Collection Period ” shall mean, with respect to each Payment Date, the period from and including the first day of the calendar month immediately preceding such Payment Date to and including the last day of such calendar month; provided , however , that the initial Collection Period for the Initial Term Note Investment Pool and the Variable Funding Note Investment Pool shall be from the Closing Date to and including November 30, 2017; and, provided further , that with respect to a Variable Funding Note (i) the initial Collection Period within a Quarterly Revolving Period (other than the initial Collection Period described in the proviso above) shall be the period from and including the applicable Conversion Date to and including the last day of the calendar month occurring approximately thirty days after the Conversion Date (e.g., if the Conversion Date occurs on the last day of a calendar month, then the last day of the calendar month following the month in which the Conversion Date occurs and if the Conversion Date is the first Business Day of a calendar month, then the last day of the calendar month in which such Conversion Date occurs), and (ii) and with respect to the final Variable Funding Note Payment Date with respect to a Quarterly Revolving Period, (a) if the Conversion Date is on the last day of a calendar month, then the period from and including the first day of the calendar month to and excluding the last day of the calendar month immediately preceding the Payment Date, and (b) if the Conversion Date is on the first Business Day of a calendar month, then the period from and including the first day of the calendar month immediately preceding such Payment Date to and excluding the date on which such Conversion Date occurs.
“ Collection Receipt Accounts ” shall mean the accounts (1) bearing account number *** , held by the Account Holder on behalf of the Master Servicer at Green Bank, and (2) any other account designated by Master Servicer in a notice to the Noteholders as an account into which Collections may be deposited, each of which shall (prior to, and as a condition precedent to, any amounts being deposited therein) be subject to a Blocked Account Control Agreement and the Intercreditor Agreement, and for which the Obligor may (once such account is subject to a Blocked
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Account Control Agreement and the Intercreditor Agreement) remit all payments under its applicable Contract other than ACH payments, which shall be remitted to an ACH Sweep Account.
“ Collections ” shall mean all cash collections received in respect of the Receivables, including all Scheduled Receivable Payments, all non-scheduled payments, all prepayments, all late fees, all other fees, Net Insurance Proceeds, all Net Liquidation Proceeds, Optional Redemption Amounts, investment earnings, residual proceeds, payments received under any personal guaranty with respect to such Receivables and all other payments received with respect to such Receivables.
“ Commodity Exchange Act ” shall mean the Commodity Exchange Act of 1936.
“
Competitor
” shall mean those persons that are competitors of any Enova Entity to the extent identified by name in writing in a list provided by Enova to the Administrative Agent on October
19,
20,
2017 (as such list may be updated from time to time to the extent agreed to and approved by the Administrative Agent (acting in good faith)), and any subsidiaries of such persons.
“ Consolidated Subsidiaries ” shall mean, as of any date of determination, all Subsidiaries of Enova which are included in the consolidated financial statements of Enova.
“ Consumer Laws ” shall mean all federal, state and local consumer credit laws, collection agency laws, fair trading or fair dealing laws, laws relating to privacy and confidential information and all other consumer protection laws relating to the conduct of the business of an Asset Servicer, laws requiring the licensing or registration of sale finance companies, loan companies, lenders or collection agencies or collection agents or any assignee of the foregoing, and any rules, regulations or interpretations of the foregoing laws.
“ Contract ” shall mean a small consumer loan agreement, customer loan agreement, consumer installment loan agreement or promissory note, relating to a fixed rate, fully amortizing, unsecured installment loan made to an Obligor and originated or acquired by the Seller or a Bank Originator.
“ Conversion Date ” shall mean each of the following dates: (a) January 2, 2018, (b) April 2, 2018, (c) July 2, 2018, (d) October 1, 2018, (e) December 31, 2018 or (f) April 1, 2019, as applicable, and (ii) the Funding Period Termination Date if it occurs earlier than any of the applicable dates described in clause (i) above.
“ Corporate Trust Office ” shall mean the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of the Indenture is located at 453 7 th Street, Des Moines, IA 50309, Attention: EFR 2016-1, LLC, or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer or the principal corporate trust office of any successor Indenture Trustee (the address of which the successor Indenture Trustee will notify the Noteholders and the Issuer).
“ Credit Agreement ” shall mean that certain Credit Agreement, dated as of June 30, 2017, by and among Enova, certain of its Subsidiaries, the lenders party thereto from time to time
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and TBK Bank, SSB, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
“ Credit Counseling Receivable ” shall have the meaning specified in Section 2.02(d)(ix) of the Servicing Agreement.
“ Credit Policy ” or “ Credit Policies ” shall mean (i) the credit policies and practices and underwriting guidelines of the Seller and the Originators that are attached as Appendix B-1 to the Receivables Purchase Agreement and (ii) the Bank Originator Credit Policy, which may be attached as Appendix B-2 to the Receivables Purchase Agreement pursuant to Section 6.14 thereof, in each case as either such policy or both such policies may be amended, modified or supplemented from time to time in compliance with the Receivables Purchase Agreement.
“ Credit Risk Retention Rules ” shall have the meaning specified in Section 5.07 of the Note Purchase Agreement.
“ Cumulative Net Losses ” shall mean, as of any date of determination and with respect to any Investment Pool, the excess of (a) the aggregate Outstanding Receivable Principal Balance of all Charged-Off Receivables (for the avoidance of doubt, in determining the aggregate Outstanding Receivable Principal Balance of all Charged-Off Receivables, this shall include the aggregate Outstanding Receivable Principal Balance of any and all Charged-Off Receivables repurchased by the Transferor at its option pursuant to Section 2.5 of the Sale Agreement), over (b) all Net Liquidation Proceeds received on or prior to such date with respect to such Investment Pool.
“ Custodian ” shall mean, at any time, the Person then appointed as such pursuant to Section 9.01 of the Servicing Agreement, which shall initially be NCLS.
“ Cutoff Date ” shall mean with respect to any Receivables, the date specified as the “Cutoff Date” of such Receivables in the applicable First Step Assignment or Second Step Assignment.
“ Daily Data File ” shall mean the daily data file delivered to the Backup Servicer pursuant to Section 2.06 of the Servicing Agreement, substantially in the form set forth in Exhibit E to the Servicing Agreement.
“ Daily Remittance Report ” shall mean a report of the Master Servicer, in a form approved by the Majority Holders, that, with respect to each Collection Receipt Account and each ACH Sweep Account, shall be delivered on each Business Day and that shall (i) specify the amount of Collections received in each Collection Receipt Account and ACH Sweep Account, as applicable, on the receipt date specified in such report, (ii) specify the amount of Collections transferred from each Collection Receipt Account and each ACH Sweep Account as applicable, to the Collection Account on the Business Day on which such report is delivered and (iii) reconcile any difference between the amount described in the preceding clauses (i) and (ii).
“ Debtor Relief Laws ” shall mean (a) the Federal Bankruptcy Code and (b) all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, readjustment of debt, marshalling of assets,
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assignment for the benefit of creditors and similar debtor relief laws from time to time in effect in any jurisdiction affecting the rights of creditors generally or the right of creditors of banks.
“ Delinquent Receivable ” shall mean any Eligible Receivable which is *** to *** days past due and is not a Charged-Off Receivable; provided, that, any Receivable that is subject to a Permitted Modification, as described in clause (iv) of such definition, shall not be a Delinquent Receivable until such Receivable becomes past due following its updated scheduled payment date and at such time the days past due shall be calculated as of the corresponding original due date. However, if a Payment Deferral is effected for an otherwise Delinquent Receivable, the Payment Deferral shall not cure or stay the loan delinquency status upon the Payment Deferral being effected.
“ Defaulting Variable Funding Note Noteholder ” shall mean any Variable Funding Note Noteholder, as reasonably determined by the Issuer, that has (a) failed, within two Business Days of the date required to be funded by it under the Note Purchase Agreement, to fund its portion of any Advance when required thereunder, (b) notified the Issuer, the Master Servicer, the Administrative Agent, or any Noteholder in writing that it does not intend to comply with all or part of its funding obligations under the Note Purchase Agreement, (c) otherwise failed to pay over to the Administrative Agent or any other Noteholder any amount required to be paid by it under the Note Purchase Agreement within three Business Days of the date when due, or (d) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided , that a Variable Funding Note Noteholder shall not be a Defaulting Variable Funding Note Noteholder under clause (d) above solely by virtue of the ownership or acquisition of any ownership interest in such Variable Funding Note Noteholder or a parent company thereof or the exercise of control over a Variable Funding Note Noteholder or parent company thereof by a Governmental Authority or instrumentality thereof; provided , however , that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any agreements made by such Person.
“ Deliver ” or “ Delivery ” shall mean the taking of the following steps by the Issuer:
(a) with respect to such of the Collateral as constitutes an instrument, causing the Indenture Trustee, or the Custodian on its behalf, to take possession in the State of Iowa of such instrument, indorsed to the Indenture Trustee or in blank by an effective indorsement;
(b) with respect to such of the Collateral as constitutes tangible chattel paper, goods, a negotiable document, or money, causing the Indenture Trustee or the Custodian on its behalf, to take possession in the State of Iowa of such tangible chattel paper, goods, negotiable document, or money;
(c) with respect to such of the Collateral as constitutes a certificated security in bearer form, causing the Indenture Trustee or the Custodian on its behalf, to acquire possession in the State of Iowa of the related security certificate;
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(d) with respect to such of the Collateral as constitutes a certificated security in registered form, causing the Indenture Trustee or the Custodian on its behalf, to acquire possession in the State of Iowa of the related security certificate, indorsed to the Indenture Trustee or in blank by an effective indorsement, or registered in the name of the Indenture Trustee, upon original issue or registration of transfer by the issuer of such certificated security;
(e) with respect to such of the Collateral as constitutes an uncertificated security, causing the issuer of such uncertificated security to register the Indenture Trustee as the registered owner of such uncertificated security;
(f) with respect to such of the Collateral as constitutes a security entitlement, causing the Securities Intermediary to indicate by book entry that the financial asset relating to such security entitlement has been credited to the Collection Account;
(g) with respect to such of the Collateral as constitutes a deposit account, causing such deposit account to be maintained in the name of the Indenture Trustee and causing the bank with which such deposit account is maintained to agree with the Indenture Trustee and the Issuer that (i) such bank will comply with instructions originated by the Indenture Trustee directing disposition of the funds in such deposit account without further consent of any other person or entity, (ii) such bank will not agree with any person or entity other than the Indenture Trustee to comply with instructions originated by any person or entity other than the Indenture Trustee, (iii) such deposit account and the property credited thereto will not be subject to any lien, security interest, encumbrance, or right of set-off in favor of such bank, other than those for ordinary fees and expenses and for reimbursement of returned items, (iv) such agreement will be governed by the laws of the State of New York, and (v) the State of New York will be the bank’s jurisdiction of such bank for purposes of Article 9 of the New York UCC;
(h) with respect to any other Collateral, causing to be filed with the Secretary of State of the State of Delaware a properly completed UCC financing statement that names the Issuer as debtor and the Indenture Trustee as secured party and that covers such Collateral; or
(i) in the case of each of paragraphs (a) through (h) above, such additional or alternative procedures as may hereafter become appropriate to grant a first priority perfected security interest in such items of the Collateral to the Indenture Trustee, consistent with applicable law or regulations.
In each case of Delivery pursuant to paragraphs (f) or (g), the Indenture Trustee is directed by the Issuer to enter into and execute all agreements necessary to accomplish Delivery. The Indenture Trustee shall make appropriate notations on its records indicating that each item of the Collateral is held by the Indenture Trustee pursuant to and as provided in the Indenture.
Effective upon Delivery of any item of the Collateral, the Indenture Trustee shall be deemed to have acknowledged that it holds such item of the Collateral as Indenture Trustee for the benefit of the Noteholders. Any additional or alternative procedures for accomplishing “Delivery” for purposes of paragraph (i) of this definition shall be permitted only upon delivery to the Indenture Trustee of an Opinion of Counsel to the effect that such procedures are appropriate
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to grant a first priority perfected security interest in the applicable type of collateral to the Indenture Trustee.
“ Depository ” shall mean, with respect to any Note issuable or issued as a Global Note, an organization registered as a “clearing agency” pursuant to the Securities Exchange Act or other applicable statute or regulation. The Initial Depository shall be DTC.
“
Distribution Compliance Period
” shall mean, with respect to each Quarterly Term Note, the period commencing on the Conversion Date for such Quarterly Term Note and ending on the fortieth
.
(40
th
) day following such Conversion Date.
“ Dollar ,” “ $ ” or “ U.S. $ ” shall mean lawful money of the United States.
“ DTC ” shall mean The Depository Trust Company, New York, New York, or any successor thereto registered as a clearing agency under the Securities Exchange Act.
“ Due Date Adjustment ” shall mean, with respect to a Serviced Receivable and a related Obligor, the reset of an Obligor Due Date, so long as the reset Obligor Due Date is after the corresponding original due date and not later than the next scheduled Obligor Due Date specified in the related Serviced Receivable; provided that if such Serviced Receivable is subject to a Payment Deferral, such Serviced Receivable shall not be considered to be subject to a Due Date Adjustment.
“ DWAC ” shall have the meaning specified in Section 3.09 of the Indenture.
“ EBITDA ” shall mean, with respect to any period, (a) Net Income for such period, plus (b) without duplication and to the extent deducted in determining Net Income for such period in accordance with GAAP, (i) Interest Expense for such period, (ii) federal, state, local and foreign income and franchise taxes of Enova and its Consolidated Subsidiaries for such period, (iii) depreciation and amortization expenses of Enova and its Consolidated Subsidiaries for such period and other non-cash charges of Enova and its Consolidated Subsidiaries, (iv) extraordinary, unusual or non-recurring charges, expenses or losses and related tax effects, (v) non-cash charges, expenses or losses, including any non-cash asset retirement costs, non-cash compensation charges including stock option and other equity-based compensation expenses, non-cash translation (gain) loss and non-cash expense relating to the vesting of warrants for such period, (vi) restructuring costs, integration costs, costs of strategic initiatives, business optimization expenses or costs, retention, recruiting, relocation and signing and stay bonuses and expenses, facility opening, pre-opening and closing and consolidation costs, contract termination costs, stock option and other equity-based compensation expenses, severance costs, transaction fees and expenses and management, monitoring, consulting and advisory fees, indemnities and expenses, including any one time expense relating to enhanced accounting function or other transaction costs for such period, (vii) such other adjustments evidenced by or contained in a due diligence quality of earnings report prepared by an accounting firm, or (z) consistent with Regulation S-X, (viii) other accruals, payments and expenses (including rationalization, legal, tax, structuring and other costs and expenses) related to acquisitions, investments, dividends, restricted payments, dispositions, refinancings or issuances of debt for such period, (ix) charges, losses or expenses to the extent paid for, reimbursed, indemnified or insured by a third party (solely to the extent actually paid or
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reimbursed within 365 days after the end of such period) for such period, (x) minority interest expense for such period, (xi) the amount of costs incurred related to implementation of operational and reporting systems and technology initiatives for such period, (xii) letter of credit fees, (xiii) net increases (decreases) in deferred revenue liabilities (including the current portion thereof), (xiv) charges relating to earn-out obligations incurred in connection with any acquisition which earn-out obligation is required by the application of Financial Accounting Standard No. 141 (as the same may be revised by the Financial Accounting Standards Board) to be, and are, expensed by Enova and its Consolidated Subsidiaries, (xv) losses arising from fluctuations in foreign currency exchange rates for such period, (xvi) any non-cash increase in expenses (x) resulting from the revaluation of inventory (including any impact of changes to inventory valuation policy methods including changes in capitalization of variances) or other inventory adjustments, or any other acquisition for such period or (y) due to purchase accounting for such period, (xvii) ordinary course board of director fees and expenses, and (xviii) losses from the sale, exchange, transfer or other disposition of property not in the ordinary course of business of Enova and any of its Consolidated Subsidiaries and related tax effects from such losses as determined in accordance with GAAP; provided, however, that amounts paid in cash and added back pursuant to clauses (iv), (vi), (vii), (viii), (ix), and (xi) hereof shall in the aggregate not exceed 10% of EBITDA (for Enova and its Consolidated Subsidiaries) for such period, minus (c) without duplication and to the extent included in determining Net Income for such period, any extraordinary gains and extraordinary non-cash credits of Enova and its Subsidiaries for such period.
“ Eligibility Criteria ” shall mean the criteria set forth on Appendix A of the Receivables Purchase Agreement.
“ Eligible Conversion Receivable ” shall mean, as of any date of determination, a Receivable with respect to which (i) the Eligibility Criteria are satisfied, (ii) is not an Excluded Receivable and (iii) no Scheduled Receivable Payment is more than twenty-nine (29) days past due, in each case, as of such date of determination.
“ Eligibility Date ” shall mean, with respect to any Receivable, each of (i) the date on which such Receivable was initially transferred to the Issuer and (ii) the Cutoff Date with respect to such Receivable.
“ Eligible Deposit Account ” shall mean either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states thereof, including the District of Columbia (or any domestic branch of a foreign bank), and acting as a trustee for funds deposited in such account.
“ Eligible Facility Receivable ” shall mean, as of any date of determination, a Receivable with respect to which (i) the Eligibility Criteria are satisfied, (ii) is not an Excluded Receivable and (iii) no Scheduled Receivable Payment is more than 59 days past due, in each case, as of such date of determination.
“ Eligible Institution ” shall mean a depository institution (which may be the Indenture Trustee or any Affiliate thereof) organized under the laws of the United States, any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank). If so
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qualified, the Master Servicer may be considered an Eligible Institution for the purposes of this definition.
“ Eligible Investments ” shall mean negotiable instruments, investment property, or deposit accounts which evidence:
(a) direct obligations of, or obligations fully guaranteed as to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit (having original maturities of no more than 365 days) of depository institutions or trust companies (including an affiliate of the Indenture Trustee) organized under the laws of the United States of America, any state thereof or the District of Columbia (or domestic branches of foreign banks) and subject to supervision and examination by federal or state banking or depository institution authorities; provided , that at the time of the investment or contractual commitment to invest therein, the short-term debt of such depository institution or trust company are rated by each of S&P and Moody’s in its highest rating category;
(c) commercial paper (having original or remaining maturities of no more than thirty (30) days), that shall be rated, at the time of the investment or contractual commitment to invest therein, by each of S&P and Moody’s in its highest rating category;
(d) demand deposits, time deposits and certificates of deposit which are fully insured by the FDIC;
(e) bankers’ acceptances (having original maturities of no more than 365 days) issued by any depository institution or trust company referred to in clause (b) above; or
(f) time deposits (having maturities not later than the Reporting Date) other than as referred to in clause (b) above, with a Person the commercial paper of which shall be rated by each of S&P and Moody’s in its highest rating category.
“ Eligible LMP Refinancing Receivable ” means an Eligible Refinancing Receivable as to which (i) the principal balance on the date such Eligible Refinancing Receivable was originated is the same as the Outstanding Receivable Principal Balance on such date of the applicable refinanced Serviced Receivable and (ii) the final scheduled maturity date is later than the final scheduled maturity date of the applicable refinanced Serviced Receivable.
“ Eligible Receivable ” shall mean a Receivable with respect to which the Eligibility Criteria are satisfied as of the applicable Eligibility Date; provided , however , that any Receivable which becomes an Excluded Receivable or a Charged-Off Receivable shall cease to constitute an Eligible Receivable.
“ Eligible Refinancing Receivable ” shall mean a Receivable that was (i) originated or underwritten pursuant to the Credit Policies and (ii) originated or acquired in connection with a Refinancing as to which the applicable refinanced Serviced Receivable’s status was current with no amount past due as of the date of such Refinancing.
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“ Enova ” shall mean Enova International, Inc., a Delaware corporation, together with its successors and permitted assigns.
“ Enova Entities ” shall mean each of Enova and each Subsidiary of Enova.
“ Enova Finance 5 ” shall mean Enova Finance 5, LLC, a Delaware limited liability company.
“ Enova Party ” shall mean each of Enova, CNU, NCLS, any Asset Servicer, Enova Finance 5, the Issuer and each Originator.
“ Entity ” shall mean any Person other than an individual or government (including any agency or political subdivision thereof).
“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974.
“ Euroclear ” shall mean Euroclear Bank S.A./N.V., as operator of the Euroclear System, and its successors and assigns in such capacity.
“ Event of Default ” shall have the meaning specified in Section 7.01 of the Indenture.
“ Excess Concentration Limits ” shall mean, as of the date indicated in such clause, the following limitations with respect to the Eligible Receivables on such date:
(a) with respect to Eligible Receivables that are included in the Variable Funding Note Investment Pool, as of the date any such Eligible Receivables are transferred to the Issuer and as of the related Conversion Date:
(1) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an Original Receivable Principal Balance of greater than $ *** is less than or equal to *** %;
(2) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables with an original term to maturity greater than *** months is less than or equal to *** %;
(3) the weighted average *** Score of the Eligible Receivables is not less than *** ;
(4) the weighted average annual percentage rate for the Eligible Receivables is not less than *** %;
(5) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivable that are Eligible Refinancing Receivables shall not exceed *** %;
(6) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that are Eligible LMP Refinancing Receivables shall not exceed *** %;
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(7) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that are Lower My Rate Receivables does not exceed *** %;
(b) with respect to Eligible Receivables that are included in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of Eligible Receivables with a *** Score of less than *** is less than *** % of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables;
(c) with respect to Eligible Receivables that are included in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of Eligible Receivables with a *** Score of less than *** is less than *** % of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables;
(d) with respect to Eligible Receivables that are included in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that relate to (a) an Eligible Receivable that has been the subject of a Payment Deferral that results in the new final scheduled maturity date of such Eligible Receivable to be more than 15 days after the theretofore final scheduled maturity date of such Eligible Receivable or (b) an Eligible Receivable that had its interest rate lowered for any reason other than compliance with the Servicemembers Civil Relief Act of 2003 in accordance with any section of the “Servicing Modifications” section of the Servicing Policy, is less than or equal to *** % of the aggregate Outstanding Receivable Principal Balance of all Eligible Receivables;
(e) with respect to Eligible Receivables in any Investment Pool, as of any date of determination, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivable that relate to an Ongoing Due Date Adjustment, shall be no greater than *** % of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables.
(f) with respect to Eligible Receivables in any Investment Pool, the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables that originate from the largest State on a percentage basis is less than or equal to *** % of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables and the Outstanding Receivable Principal Balance of such Eligible Receivables that originate from the sum of the two largest States on a percentage basis is less than or equal to *** % of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables; and
(g) the percentage of the Outstanding Receivable Principal Balance of such Eligible Receivables of a Variable Funding Note Investment Pool are *** days delinquent shall not exceed *** % of the aggregate Outstanding Receivable Principal Balance of all such Eligible Receivables.
In the event that a Receivable that would otherwise be an Eligible Receivable exceeds an Excess Concentration Limit, it shall be deemed an Excluded Receivable and will no longer be an Eligible Receivable for purposes of inclusion in the Outstanding Receivable Principal Balance of the related Variable Funding Note Investment Pool (prior to conversion to a Term Note), and the Transferor shall be entitled to repurchase any such Excluded Receivable pursuant to Section 2.5(c) of the Sale Agreement.
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“ Excess Receivables ” shall have the meaning set forth in Section 2.5(c) of the Sale Agreement.
“ Excess Receivables Purchase Date ” shall have the meaning set forth in Section 2.5(c) of the Sale Agreement.
“ Excess Receivables Purchase Price ” shall mean, with respect to any Excess Receivable and any date of determination, the sum of (a) an amount equal the Outstanding Receivable Principal Balance of such Excess Receivable, (b) all accrued and unpaid interest on the Outstanding Receivable Principal Balance of such Excess Receivable at the applicable Annual Percentage Rate related to such Excess Receivable through the date on which such Excess Receivable is purchased, and (c) all costs and expenses incurred by the Issuer and the Indenture Trustee in connection with the optional purchase of such Excess Receivable by the Transferor pursuant to Section 2.5(c) of the Sale Agreement.
“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.
“ Exchange Date ” shall mean the last day of the Distribution Compliance Period.
“ Excluded Receivable ” shall mean a Receivable ineligible for inclusion as an Eligible Receivable because it exceeds an Excess Concentration Limit, and, if so designated, may be repurchased by the Transferor pursuant to Section 2.5(c) of the Sale Agreement.
“ Excluded Taxes ” shall have the meaning set forth in Section 2.07(a) of the Note Purchase Agreement.
“ Executive Orders ” shall mean any legally binding orders given by the President of the United States, acting as the head of the executive branch thereof, to any United States federal administrative agencies.
“ Fair Valuation ” shall mean in respect of any entity the value of the consolidated assets of such entity on the basis of the amount which may be realized by a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to an interested buyer who is willing to purchase under ordinary selling conditions in an arm’s-length transaction.
“ FATCA ” shall have the meaning specified in Section 4.04(k) of the Indenture.
“ FATCA Administrator ” shall have the meaning specified in Section 5(d) of the Issuer LLC Agreement.
“ Federal Bankruptcy Code ” shall mean Title 11 of the United States Code.
“ Financial Trigger ” shall mean an event arising upon the occurrence of any of a Net Worth Trigger, a Liquidity Trigger or a Leverage Debt-to-Income Trigger.
“ First Associates ” shall mean First Associates Loan Servicing, LLC, a Delaware limited liability company.
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“ First Step Assignment ” shall mean a First Step Assignment from Seller to the Purchaser with respect to the Receivables and Other Conveyed Property to be conveyed by Seller to the Purchaser on any Purchase Date, in substantially the form of Exhibit A to the Receivables Purchase Agreement. ¶
“Fixed Rate Term Note” shall mean, each fixed rate term Note issued on a Note Exchange Date, substantially in the form of Exhibit B-2, with an Initial Principal Amount equal to the portion of the Outstanding Principal Amount of either the Initial Term Notes or the Quarterly Term Notes, as applicable, exchanged on such Note Exchange Date, as set forth in the applicable Notice of Note Exchange.
“ Fortress ” shall mean Fortress Credit Co LLC, a Delaware limited liability company.
“ FSLF ” shall mean FSLF ENV LLC, a Delaware limited liability company.
“ Funding Commitment ” shall mean, as to each Variable Funding Note Noteholder, the obligation of such Variable Funding Note Noteholder to fund its ratable share of Advances, on the Closing Date and on each Advance Date, up to but not exceeding the amount set forth under such Variable Funding Note Noteholder’s name on its signature page to the Note Purchase Agreement, or the most recent Joinder Agreement, as applicable.
“ Funding Period Termination Date ” shall mean the earlier to occur (each of which has not been cured or which has not been waived by the Majority Holders) of (i) the Variable Funding Note Amortization Date, (ii) an Aggregate Cumulative Delinquency Trigger, (iii) a Regulatory Trigger Event, (iv) an Event of Default, (v) the date as of which *** % or more of the aggregate Outstanding Principal Amount of the Notes has been subject to a breach of an Investment Pool Collateral Performance Trigger, or (vi) a material adverse change in the financial condition or operations of Enova, Enova Finance 5 or the Issuer. No new Receivables will be funded after the Funding Period Termination Date. Absent a cure of any such event or a waiver of any such event by the Majority Holders, no new Receivables will be funded after the Funding Period Termination Date.
“ Funding Request ” shall mean a request, in an amount that (i) is a multiple of $100,000, (ii) is not less than $500,000 and (iii) is not greater than the excess of the Maximum Principal Amount over the Outstanding Principal Amount of the Notes, for a Requested Advance delivered by the Issuer, or on behalf of the Issuer by the Master Servicer, to the Administrative Agent, with a copy to the Indenture Trustee, two (2) Business Days prior to the proposed Advance Date, substantially in the form of Exhibit A to the Note Purchase Agreement.
“ GAAP ” shall mean generally accepted accounting principles in effect in the United States of America (or, in the case of foreign Subsidiaries with significant operations outside the United States of America, in effect from time to time in their respective jurisdictions of organization or formation) applied on a consistent basis, subject, however, in the case of determination of compliance with the Net Worth Trigger, to the provisions of Part II of this Appendix A.
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“ Global Note ” shall mean either (i) a Rule 144A Global Note or (ii) a Regulation S Global Note, issued pursuant to Section 3.04 of the Indenture.
“ Governmental Actions ” shall mean any and all consents, approvals, permits, orders, authorizations, waivers, exceptions, administrative actions, subpoenas, lawsuits, variances, civil investigative demands, investigations or inquiries by, exemptions or licenses of, or registrations, declarations or filings with, any Governmental Authority required under any Governmental Rules.
“ Governmental Authority ” shall mean any governmental department, commission, board, bureau, agency, court or other instrumentality of any nation, state, province, territory, commonwealth, municipality or other political subdivision thereof having jurisdiction over the Person in question.
“ Governmental Rules ” shall mean any and all laws, statutes, codes, rules, regulations, guidelines, advisories, ordinances, orders, opinions, writs, decrees and injunctions of any Governmental Authority and any and all legally binding conditions, standards, prohibitions, requirements and judgments of any Governmental Authority.
“ Green Bank ” shall mean Green Bank, N.A.
“ Holder ” shall mean a Noteholder or Note Owner.
“ Increased Costs Amount ” shall mean, for each Interest Period, an amount equal to the sum of (a) the aggregate amount payable to a Variable Funding Note Noteholder pursuant to Sections 2.06 and 2.07 of the Note Purchase Agreement in respect of such Interest Period and (b) the aggregate of such amounts owing to such Variable Funding Note Noteholder with respect to prior Interest Periods which remain unpaid.
“ Indebtedness ” shall mean, as to any Person at a particular time, all of the following:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker’s acceptances, bank guaranties, surety bonds and similar instruments;
(c) net obligations under any hedging agreement in an amount equal to the unpaid Termination Value (as defined under the Credit Agreement) thereof assuming the hedge agreement was terminated on the applicable date of measurement;
(d) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and Indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including Indebtedness arising under conditional sales or other title
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retention agreements), whether or not such Indebtedness shall have been assumed by such Person or is limited in recourse;
(e) accrued obligations in respect of earnout or similar payments that are immediately payable in cash or which could be immediately payable in cash at the seller’s or obligee’s option;
(f) capital Lease obligations and synthetic lease obligations;
(g) any Redeemable Stock of such Person; and
(h) all guaranty obligations of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person except for customary exceptions reasonably acceptable to the Majority Holders. The amount of any capital lease or synthetic lease obligation as of any date shall be deemed to be the amount of Attributable Indebtedness (as defined in the Credit Agreement) in respect thereof as of such date.
“ Indemnified Party ” (a) with respect to the Servicing Agreement, shall have the meaning set forth in Section 7.01(b) of the Servicing Agreement, and (b) with respect to the Note Purchase Agreement, shall have the meaning set forth in Section 7.01(a) of the Note Purchase Agreement.
“ Indenture ” shall mean the Amended and Restated Indenture, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), between the Issuer and the Indenture Trustee.
“ Indenture Trustee ” shall mean the Person named as the Indenture Trustee in the first paragraph of the Indenture, acting not in its individual capacity but solely as Indenture Trustee, until a successor Indenture Trustee is appointed pursuant to the applicable provisions of the Indenture, and thereafter “ Indenture Trustee ” shall mean and includes each Person who is then an Indenture Trustee thereunder. The initial Indenture Trustee shall be Bankers Trust.
“ Indenture Trustee Authorized Officer ” shall mean, when used with respect to the Indenture Trustee, any vice president, any assistant vice president or trust officer, or any other officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also shall mean, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.
“ Indenture Trustee Fee ” shall mean such amount per annum as set forth in a fee letter between the Indenture Trustee and Enova, plus all indemnification amounts payable pursuant to the terms of the Indenture, and all other reasonable fees and expenses incurred by the Indenture Trustee in connection with the Transaction Documents (including any expenses or indemnification amounts payable by the Indenture Trustee pursuant to the terms of any Blocked Account Control Agreement).
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“ Independent Accountants ” shall mean any nationally recognized firm of independent certified public accountants registered with the Public Company Accounting Oversight Board and otherwise acceptable to the Indenture Trustee.
“ Ineligible Receivable ” shall mean as of any date of determination, a Receivable that would not be an Eligible Receivable if such date was the Eligibility Date, and if so designated, may be repurchased by the Transferor pursuant to Section 2.5(b) of the Sale Agreement.
“ Ineligible Receivables Release Price ” shall mean, with respect to the Ineligible Receivables to be repurchased on a Receivables Repurchase Date, the aggregate amount of the Receivable Repurchase Prices related to such Ineligible Receivables.
“ Initial Noteholders ” shall mean Jefferies, Fortress, FSLF and Waterfall, collectively in their roles as the Initial Term Note Noteholders and as the Variable Funding Note Noteholders.
“ Initial Payment Date ” shall mean (a) with respect to each Initial Term Note, December 15, 2017 and the Variable Funding Notes, December 15, 2017, and (b) with respect to any Term Note (other than the Initial Term Notes), the date specified in the related Notice of Conversion, which shall occur approximately forty-five days after the respective Conversion Date, and which for the avoidance of doubt shall be determined as follows: (x) when the Conversion Date is the last day of the calendar month, the fifteenth (15 th ) day of the calendar month (or, if any such 15 th day is not a Business Day, the next succeeding Business Day) which succeeds the calendar month that immediately follows the calendar month in which such respective Conversion Date occurs (e.g. the Conversion Date is October 31 st (the 31 st is a Business Day), thus the Initial Payment Date is December 15 th ), and (y) when the Conversion Date is the first Business Day of the calendar month, the fifteenth (15 th ) day of the calendar month (or, if any such 15 th day is not a Business Day, the next succeeding Business Day) immediately following the calendar month in which such respective Conversion Date occurs (e.g., the Conversion Date is November 1 st (October 31 st is not a Business Day), thus the initial Payment Date is December 15 th ).
“ Initial Principal Amount ” shall mean, with respect to any Term Note or the Variable Funding Notes, initial principal amount stated on the face of such Note.
“
Initial Term Note
” shall mean, the Note issued on the Closing Date, substantially in the form of
Exhibit B
,
-2,
with an initial Outstanding Principal Amount of $181,141,753.00.
“ Initial Term Note Amortization Date ” shall mean, with respect to the Initial Term Note (and any Fixed Rate Term Note related to the Initial Term Note Investment Pool) , the earlier to occur of (a) the Payment Date that is twenty-four (24) calendar months after the Closing Date (November 15, 2019) and (b) the date on which an Event of Default occurs.
Initial Term Note Advance Rate ” shall mean 80%.
“ Initial Term Note Investment Pool ” shall mean the separate pool of Receivables allocated to the Initial Term Notes, as provided in Section 2.10(e) of the Note Purchase Agreement.
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“ Initial Term Note LTV Percentage ” shall mean (i) with respect to any Payment Date on or prior to the first Payment Date on which the LTV of the Initial Term Note (and any Fixed Rate Term Note related to the Initial Term Note Investment Pool) has been reduced to *** %, *** % and (ii) with respect to any Payment Date following the first Payment Date on which the LTV of the Initial Term Note (and any Fixed Rate Term Note related to the Initial Term Note Investment Pool) has been reduced to *** %, the lesser of (x) the LTV of the Initial Term Note (and any Fixed Rate Term Note related to the Initial Term Note Investment Pool) on the immediately preceding Payment Date and (y) *** %.
“
Initial Term Note Maturity Date
” shall mean with respect to
each
the
Initial Term Note
(and any Fixed Rate Term Note related to the Initial Term Note Investment Pool)
, the Payment Date
that is
occurring approximately
thirty-six (36) calendar months after the Closing Date (
October 20,
November 16,
2020).
“ Initial Term Note Noteholders ” shall mean Jefferies, FSLF, Fortress and Waterfall, collectively in their capacities as the Holders of each Initial Term Note under the Note Purchase Agreement.
“ Initial Term Note Optional Redemption Premium Rate ” shall mean, with respect to the Initial Term Note (and any Fixed Rate Term Note related to the Initial Term Note Investment Pool) , a percentage equal to the product of (i) *** % and (ii) a fraction, the numerator of which is equal to the excess of (a) *** over (b) the number of Payment Dates from the Closing Date to and including the Optional Redemption Date, and the denominator of which is equal to *** .
“ Initial Term Note Purchase Price ” shall have the meaning set forth in Section 2.10 of the Note Purchase Agreement.
“ Insolvency Event ” shall mean, with respect to a specified Person, (a) the institution of a proceeding or the filing of a petition against such Person seeking the entry 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 or proceeding under any Debtor Relief Laws seeking 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 ordering the winding-up or liquidation of such Person’s affairs, and such proceeding or petition, decree or order shall remain unstayed or undismissed for a period of thirty (30) consecutive days or an order or decree for the requested relief is earlier entered or issued, or (b) the commencement by such Person of a voluntary case or proceeding under any applicable Debtor Relief Laws or the consent by such Person to the entry of an order for relief in an involuntary case or proceeding under any such law, or the consent by such Person to the appointment of or taking 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.
“ Inspection ” shall have the meaning specified in Section 3.04(c) of the Servicing Agreement.
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“ Institutional Accredited Investor ” shall mean an accredited investor as defined in any of paragraphs (1), (2), (3) and (7) of Rule 501(a) of Regulation D under the Securities Act and any entity in which all of the equity owners come within such paragraphs.
“ Intercreditor Agent ” shall mean Bankers Trust, in its capacity as the Agent under and pursuant to the terms of the Intercreditor Agreement.
“ Intercreditor Agreement ” shall mean the Intercreditor Agreement re Collection Receipt Accounts, dated as of January 15, 2016, as amended by the First Amendment thereto, dated as of December 14, 2016 (as further amended, restated, supplemented or otherwise modified from time to time), by and among Enova, the Master Servicer, Enova Finance 5, the Issuer, the Account Holder, the Indenture Trustee and the Intercreditor Agent, and such other Persons as may become parties thereto by executing an Accession Agreement.
“ Interest Expense ” shall mean, with respect to any period, interest expense, whether paid or accrued (including the interest component of capital leases), of Enova and its Consolidated Subsidiaries, all as determined in conformity with GAAP, as it appears on the income statement of Enova and its Consolidated Subsidiaries as of such date of determination.
“ Interest Period ” shall mean, (a) with respect to each Term Note and any Payment Date, the period from and including the Payment Date immediately preceding such Payment Date (or in the case of the Initial Payment Date for the Initial Term Notes, from and including the Closing Date and in the case of the Initial Payment Date for a Quarterly Term Note from and including the applicable Conversion Date) to but excluding such Payment Date, and (b) with respect to the Variable Funding Notes (i) with respect to the initial Payment Date related to a Quarterly Revolving Period, the period from and including the Conversion Date (or in the case of the Initial Payment Date for the Variable Funding Notes under the facility, from and including the Closing Date), to but excluding such initial Payment Date, (ii) with respect to the second Payment Date related to a Quarterly Revolving Period, the period form and including the initial Payment Date, to but excluding the second Payment Date, and (iii) with respect to the final Payment Date related to a Quarterly Revolving Period, the period from and including the second Payment Date, to but excluding the final Payment Date.
“ Internal Revenue Code ” or “ Code ” shall mean the Internal Revenue Code of 1986.
“ Interpretation ” as used in Section 2.06 of the Note Purchase Agreement shall mean, with respect to any law or regulation, the interpretation or application of such law or regulation by any Governmental Authority (including any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government), central bank, accounting standards board, financial services industry advisory body or any comparable entity.
“ Investment Company Act ” shall mean the Investment Company Act of 1940.
“ Investment Pool ” shall mean a Variable Funding Note Investment Pool or a Term Note Investment Pool, as applicable.
“ Investment Pool Advance Amount ” shall mean the aggregate amount of outstanding Advances related to the applicable Investment Pool.
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“ Investment Pool Collateral Performance Triggers ” shall mean the Investment Pool Cumulative Net Loss Trigger and the Investment Pool Cumulative Delinquency Trigger.
“ Investment Pool Cumulative Delinquency Ratio ” shall mean, as of any date of determination with respect to a Term Note Investment Pool, the percentage equivalent of a fraction, the numerator of which is equal to (i) the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables in the related Term Note Investment Pool (for the avoidance of doubt, in determining the aggregate Outstanding Receivable Principal Balance of all Delinquent Receivables, the aggregate Outstanding Receivable Principal Balance of any and all Delinquent Receivables repurchased by the Transferor at its option pursuant to Section 2.5 of the Sale Agreement shall be included), and the denominator of which is equal to (ii) the aggregate Outstanding Receivable Principal Balance of all Eligible Receivables sold to the Issuer and included in the related Term Note Investment Pool through such date.
“ Investment Pool Cumulative Delinquency Trigger ” shall occur with respect to a Collection Period in the event that the Investment Pool Cumulative Delinquency Ratio on the last day of a Collection Period (i) for the Initial Term Note Investment Pool is greater than *** % and (ii) for a Term Note Investment Pool (other than the Initial Term Note Investment Pool) is greater than *** %.
“ Investment Pool Cumulative Net Loss Ratio ” shall mean, as of any date of determination and with respect to a Term Note Investment Pool, the percentage equivalent of a fraction, the numerator of which is equal to (i) the Cumulative Net Losses for the related Term Note Investment Pool and the denominator of which is equal to (ii) the sum of the Original Receivable Principal Balance of all Receivables sold to the Issuer and included in the related Term Note Investment Pool through such date.
“ Investment Pool Cumulative Net Loss Trigger ” shall occur with respect to a Collection Period and a Term Note Investment Pool in the event that the Investment Pool Cumulative Net Loss Ratio for such Term Note Investment Pool on the last day of the Collection Period set forth below is greater than the corresponding Trigger Level set forth below:
Collection Period of Term Note Investment Pool |
Trigger Level for Initial Term Note Investment Pool Cumulative Net Loss Ratio |
Trigger Level for Term Note Investment Pool Cumulative Net Loss Ratio |
1 |
*** % |
*** % |
2 |
*** % |
*** % |
3 |
*** % |
*** % |
4 |
*** % |
*** % |
5 |
*** % |
*** % |
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Collection Period of Term Note Investment Pool |
Trigger Level for Initial Term Note Investment Pool Cumulative Net Loss Ratio |
Trigger Level for Term Note Investment Pool Cumulative Net Loss Ratio |
*** % |
*** % |
|
7 |
*** % |
*** % |
8 |
*** % |
*** % |
9 |
*** % |
*** % |
10 |
*** % |
*** % |
11 |
*** % |
*** % |
12 |
*** % |
*** % |
13 |
*** % |
*** % |
14 |
*** % |
*** % |
15 |
*** % |
*** % |
16 |
*** % |
*** % |
17 |
*** % |
*** % |
18 |
*** % |
*** % |
19 |
*** % |
*** % |
20 |
*** % |
*** % |
21 |
*** % |
*** % |
22 |
*** % |
*** % |
23 |
*** % |
*** % |
24 |
*** % |
*** % |
25 |
*** % |
*** % |
26 |
*** % |
*** % |
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Collection Period of Term Note Investment Pool |
Trigger Level for Initial Term Note Investment Pool Cumulative Net Loss Ratio |
Trigger Level for Term Note Investment Pool Cumulative Net Loss Ratio |
*** % |
*** % |
|
28 |
*** % |
*** % |
29 |
*** % |
*** % |
30 |
*** % |
*** % |
31 |
*** % |
*** % |
32 |
*** % |
*** % |
33 |
*** % |
*** % |
34 |
*** % |
*** % |
35 |
*** % |
*** % |
36 |
*** % |
*** % |
“ I/O Term Note” shall mean, each Note issued on a Note Exchange Date, substantially in the form of Exhibit B-1 with the initial Notional Principal Amount equal to the portion of the Outstanding Principal Amount of either the Initial Term Notes or the Quarterly Term Notes, as applicable, exchanged on such Note Exchange Date, as set forth in the applicable Notice of Note Exchange. ¶
“ Issuer ” shall mean EFR 2016-1, LLC, a Delaware limited liability company.
“ Issuer Certificate ” shall mean a certificate (including an Officer’s Certificate) signed by the Issuer, delivered to the Indenture Trustee relating to, among other things, the issuance of a Variable Funding Note, an Initial Term Note or a Quarterly Term Note. Wherever the Indenture requires that an Issuer Certificate be signed also by an accountant or other expert, such accountant or other expert (except as otherwise expressly provided in the Indenture) may be an employee of the Transferor.
“ Issuer Estate ” shall mean all right, title and interest of the Issuer in, under and to the Sale Agreement, the property and rights assigned to the Issuer pursuant to Article II of the Sale Agreement, all funds on deposit from time to time in the Collection Account and all other property of the Issuer from time to time, including any rights of the Issuer pursuant to the Sale Agreement and the Servicing Agreement.
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“ Issuer LLC Agreement ” shall mean the limited liability company agreement of EFR 2016-1, LLC, dated as of December 18, 2015, as amended by Amendment No. 1 thereto, dated as of January 6, 2016, and amended and restated as of January 15, 2016 by Enova Finance 5 and Bernard J. Angelo (as further amended, restated, supplemented or otherwise modified from time to time).
“ Issuer Tax Opinion ” shall mean, with respect to any action, an Opinion of Counsel to the effect that, for United States federal income tax purposes, (a) such action will not adversely affect the tax characterization as debt of any Outstanding Note that was characterized as debt at the time of its issuance, (b) such action will not cause the Issuer to be treated as an association (or publicly traded partnership) taxable as a corporation and (c) such action will not cause or constitute an event in which gain or loss would be recognized by any Holder of any such Note.
“ Jefferies ” shall mean Jefferies Funding LLC.
“ Joinder Agreement ” shall mean any Joinder Agreement, in substantially the form of Exhibit C to the Servicing Agreement or Exhibit B to the Note Purchase Agreement, as applicable.
“ Leverage Debt-to-Income Ratio ” shall mean, as of any date of determination Total Funded Indebtedness compared to the prior twelve-month EBITDA.
“ Leverage Trigger ” shall occur if the Leverage Debt-to-Income Ratio with respect to Enova shall exceed *** to ***.
“ LIBOR Business Day ” shall mean any day other than a Saturday, Sunday or any other day on which banks in London are required or authorized to be closed.
“ LIBOR Determination Date ” shall mean October 18, 2017 for the period from and including the Closing Date to but excluding the Record Date, and for every other Interest Period, the second LIBOR Business Day prior to the commencement of such Interest Period.
“ Lien ” shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment or other arrangement having the practical effect of any of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever.
“ Liquidity ” shall mean, as of any date of determination, an amount equal to the sum of (i) all unrestricted cash on hand, plus (ii) all Cash Equivalents.
“ Liquidity Trigger ” shall occur if the Liquidity of Enova is less than $ *** .
“ Losses ” shall have the meaning set forth in Section 7.01(a) of the Note Purchase Agreement.
“ Lower My Rate Receivables ” any Receivable related to a Refinancing that has had its original Contact interest rate lowered for any reason, other than as a result of the requirements of the Servicemembers Civil Relief Act of 2003.
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“ LTV ” shall mean, as of a Payment Date with respect to any Term Note, the ratio of the aggregate Outstanding Principal Amount of such Term Note on such Payment Date (after giving effect to the distribution of Term Note Monthly Principal to be made to such Term Note pursuant to Section 5.04(a)(v) of the Indenture) to the Outstanding Receivable Principal Balance of the Eligible Facility Receivables in the related Term Note Investment Pool as of the end of the related Collection Period.
“ LTV Event ” shall mean, with respect to any Note and as of any Payment Date, an event which shall occur if the LTV for such Note is higher than the LTV of such Note as of the preceding Payment Date.
“ Majority Holders ” shall mean the Holders holding in the aggregate more than 66 and 2/3% of the Outstanding Principal Amount of all Outstanding Notes; provided , that solely for purposes of this definition, the Outstanding Principal Amount of any Notes as to which a Defaulting Variable Funding Note Noteholder is the Holder shall be disregarded (and subtracted from the Outstanding Principal Amount of all Notes) until such time as the relevant Variable Funding Note Noteholder no longer constitutes a Defaulting Variable Funding Note Noteholder.
“ Master Servicer ” shall mean, at any time, the Person then appointed pursuant to Section 3.01 of the Servicing Agreement, together with its successors and permitted assigns in such capacity. The initial Master Servicer shall be NCLS.
“ Master Servicer Default ” shall have the meaning set forth in Section 8.01 of the Servicing Agreement.
“ Master Servicer Termination Date ” shall have the meaning set forth in Section 3.01 of the Servicing Agreement.
“ Master Servicer Termination Notice Date ” shall have the meaning set forth in Section 8.03(b) of the Servicing Agreement.
“ Material Adverse Effect ” shall mean, a material adverse effect on (a) the business, operations, assets, condition (financial or otherwise) or liabilities of a specified Person, (b) the ability or prospects of a specified Person to fully and timely perform its obligations under the Transaction Documents, (c) the legality, validity, binding effect, or enforceability against a specified Person of any Transaction Document to which it is a party, or (d) the rights, remedies and benefits, taken as a whole, available to, or conferred upon, any Noteholder, the Issuer or the Indenture Trustee under any Transaction Document.
“ Maximum Advance Amount ” shall mean, as of any date of determination prior to the Funding Period Termination Date the least of (a) an amount equal to the Maximum Principal Amount, minus the sum of (x) the aggregate Outstanding Principal Amount of all Initial Term Notes, Quarterly Term Notes and Fixed Rate Term Notes that are Outstanding and (y) the Variable Funding Note Stated Principal Amount, (b) the Variable Funding Note Maximum Principal Amount, and (c) the Variable Funding Note Borrowing Base, and thereafter, zero.
“ Maximum Principal Amount ” shall mean $275,000,000.
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“ Monthly Servicing Report ” shall mean a report in substantially the form of Exhibit B to the Servicing Agreement, or otherwise in a form reasonably acceptable to the Administrative Agent, the Issuer, the Transferor and the Master Servicer and including each of the items set forth in Section 3.03(a) of the Servicing Agreement.
“ Moody’s ” shall mean Moody’s Investors Service, Inc., and any successor thereto.
“ NCLS ” shall mean NetCredit Loan Services, LLC, a Delaware limited liability company.
“ Net Equity Proceeds ” shall mean, with respect to the issuance or sale of any Capital Stock of any Person, the cash proceeds received by such Person in connection with such transaction after deducting therefrom the aggregate, without duplication, of the following amounts to the extent properly attributable to such transaction: reasonable legal fees, accounting fees, underwriting fees, investment banking fees and other reasonable and customary fees and expenses, in each case, to the extent paid, payable or reimbursed by such Person.
“ Net Income ” shall mean, with respect to any period, the net income or loss of Enova and its Consolidated Subsidiaries for such period, determined in accordance with GAAP; provided that there shall be excluded from such calculation the income or loss of any Person (other than a Consolidated Subsidiary) of which Enova or any Subsidiary owns Capital Stock, except to the extent of the amount of dividends or other distributions actually paid to Enova or any of the Consolidated Subsidiaries during such period.
“ Net Insurance Proceeds ” shall mean, with respect to a claim related to the Transaction Documents, an amount equal to: (a) any cash payments or proceeds received by the Issuer, an Asset Servicer or the Master Servicer in respect of any covered loss under any policy of insurance required under the Transaction Documents; provided , however , that any cash payments or proceeds in respect of any covered loss under the employee fidelity insurance policy required under the Transaction Documents included under this clause (a) shall not exceed $2,500,000 in the aggregate, minus (b) any actual and reasonable costs incurred or to be incurred by the Issuer, an Asset Servicer or the Master Servicer in connection with the adjustment or settlement of any claims of the Issuer, an Asset Servicer or the Master Servicer in respect thereof, minus (c) any actual and reasonable costs of repairing or replacing the subject of such covered loss.
“ Net Liquidation Proceeds ” shall mean, with respect to an Investment Pool, the aggregate amount of recoveries on (or proceeds from sales of) Charged-Off Receivables, net of any reasonable collection agency fees, legal fees, sales commissions and other reasonable costs related to the collection of recoveries.
“ Net Worth ” shall mean, as of any date, the total shareholder’s equity (including Capital Stock (including preferred stock), additional paid-in capital, and retained earnings after deducting treasury stock) which would appear on a balance sheet of Enova and its Subsidiaries on a consolidated basis prepared as of such date in accordance with GAAP, but excluding all other comprehensive income or losses resulting from foreign currency translation adjustments or derivative value fluctuation.
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The “ Net Worth Trigger ” will occur if Enova permits Net Worth to be less than the sum of (i) $ *** , plus (ii) *** % of Net Income (with no deduction for net losses during any quarterly period) earned in each fiscal quarter of Enova ending on or after October 31, 2017, plus (iii) *** % of the Net Equity Proceeds received by Enova and its Subsidiaries from the issuance and sale of Capital Stock of Enova or any of its Subsidiaries (other than an issuance to Enova or its wholly-owned Subsidiaries), including any conversion of debt securities of Enova into such Capital Stock after October 31, 2017 to the extent of any increase in Net Worth resulting therefrom.
“ Non-U.S. Certificate ” shall have the meaning specified in Section 3.08(b) of the Indenture.
“ North American Bank ” shall mean North American Banking Company and its successor and permitted assigns.
“ Note ” or “ Notes ” shall mean any note or notes authenticated and delivered from time to time under the Indenture, and (a) with respect to (i) any I/O Term Note, such I/O Term Note shall be substantially in the form of Exhibit B -1 to the Indenture and (ii) any Initial Term Note, Quarterly Term Note or Fixed Rate Term Note, such Initial Term Note, Quarterly Term Note or Fixed Rate Term Note shall be substantially in the form of Exhibit B-2 to the Indenture, and (b) with respect to the Variable Funding Note, such Variable Funding Note shall be substantially in the form of Exhibit A to the Indenture.
“ Note Administrative Fee ” shall mean with respect to each Payment Date the portion of the Administrative Fee payable to the Variable Funding Note Noteholders (such fee to be allocated between the Variable Funding Note Noteholders in accordance with the Outstanding Principal Amount of each respective Variable Funding Note as of the end of the related Collection Period) that is allocable to each Term Note, and shall be an amount equal to the product of (i) the Administrative Fee due and payable on such Payment Date and (ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Term Note, and the denominator of which is the Outstanding Principal Amount of all Outstanding Term Notes, in each case measured as of the last day of the Collection Period immediately preceding such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Note Exchange Date” shall mean the date specified in the Notice of a Note Exchange, which (subject to the proviso below) shall be (with respect to any exchange effectuated pursuant to Section 4.13 of the Indenture) no earlier than: (a) that date that is five (5) days after the delivery of the related Notice of a Note Exchange (or if such date is not a Business Day, the next following Business Day) and (b)(i) with respect to the Initial Term Note, the date that is five (5) days after the Closing Date (or if such date is not a Business Day, the next following Business Day), and (ii) with respect to any Quarterly Term Note, the date that is five (5) days after the Conversion Date on which the related Quarterly Term Note was issued (or if such date is not a Business Day, the next following Business Day); provided, however, that if a Note Owner or Noteholder delivers a Notice of Note Exchange to the Issuer and the Indenture on October 26, 2017, clause (a) of this definition shall not apply. ¶
“ Note Interest ” shall mean a beneficial interest in a Note.
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“
Note Interest Rate
” shall mean, for any Interest Period (i) with respect to the Initial Term Note and any Quarterly Term Note, a
per annum
rate equal to One-Month LIBOR (or such other reference rate determined by the Agent and the Master Servicer pursuant to
Section 5.05
),
plus
7.50%,
or
(ii
) with respect to any I/O Term Note, a
per annum
rate equal to One-Month LIBOR (or such other reference rate determined by the Agent and the Master Servicer pursuant to Section 5.05),
plus
2.50%, (iii) with respect to any Fixed Rate Term Note, a
per annum
rate equal to 5.00%, or (iv
) for the Variable Funding Notes, a
per annum
rate equal to One-Month LIBOR (or such other reference rate determined by the Agent and the Master Servicer pursuant to
Section 5.05
),
plus
7.50%;
provided
,
however
, that upon the occurrence and during the continuation of an Event of Default, the Note Interest Rate for
(a) the Initial Term Note,
each of the
Quarterly
Term Notes and the Variable Funding Notes shall be increased by 2.50%
, (b) each of the I/O Term Notes shall be increased by 1.50% and (c) each of the Fixed Rate Term Notes shall be increased by 1.0%
.
“ Note Owner ” shall mean the beneficial owner of an interest in a Global Note.
“ Note Purchase Agreement ” shall mean the Amended and Restated Note Purchase Agreement, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), by and among the Issuer, the Master Servicer, the Administrative Agent, the Initial Noteholders and the other Variable Funding Note Noteholders from time to time party thereto.
“ Note Register ” shall have the meaning specified in Section 4.04(a) of the Indenture.
“ Note Registrar ” shall mean the Person who keeps the Note Register specified in Section 4.04(a) of the Indenture. The initial Note Registrar shall be Bankers Trust.
“ Noteholder ” or “ Noteholders ” shall mean a Variable Funding Note Noteholder or a Term Noteholder, as applicable, in whose name such Note is registered in the Note Register.
“ Noteholder Monthly Interest ” shall mean Variable Funding Note Monthly Interest or Term Note Monthly Interest, as applicable.
“ Notice of Conversion ” shall mean each notice, substantially in the form of Exhibit C -1 to the Indenture, delivered from the Issuer to the Indenture Trustee on each Conversion Date.
“ Notice of Note Exchange” shall mean a written notice, substantially in the form set forth as Exhibit C-2, delivered to the Issuer and the Indenture Trustee by a Noteholder or a Note Owner. ¶
“Notional Principal Amount” shall mean, with respect to each I/O Term Note and as of any date of determination, an amount equal to the Outstanding Principal Amount as of such date of the Fixed Rate Term Note issued on the same Note Exchange Date as such I/O Term Note. ¶
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“ Obligor ” shall mean, with respect to each Receivable, the borrower under the related Contract or any other Person who owes or may be liable (whether primarily or secondarily) for payments under such Receivable.
“ Obligor Due Date ” shall mean, with respect to a Receivable, each date in a calendar month on which an installment payment is due from the Obligor. By way of example, if an Obligor’s installment payment is due on the 14 th day of each month, then the 14 th is the Obligor Due Date; if an installment payment is due on each of the 14 th and the 28 th of each month, then each of the 14 th and 28 th is an Obligor Due Date.
“ OFAC ” shall have the meaning set forth in Section 6.01(l) of the Servicing Agreement.
“ Officer’s Certificate ” shall mean a certificate on behalf of any Person that is signed by any Authorized Officer or vice president or more senior officer of such Person and which states that the certifications set forth in such certificate are based upon the results of a due inquiry into the matters in question conducted by or under the supervision of the signing officer and that the facts stated in such certifications are true and correct to the best of the signing officer’s knowledge.
“ One-Month LIBOR ” shall mean, for any Interest Period, a per annum interest rate determined by the Indenture Trustee for such Interest Period in accordance with Section 5.05 of the Indenture; provided , however , that One-Month LIBOR for any Interest Period will not be less than 1.00%.
“ Ongoing Due Date Adjustment ” shall mean, as of any date of determination, an Eligible Receivable with respect to which a Due Date Adjustment has been made and as of such date of determination, the next scheduled Obligor Due Date is not the original Obligor Due Date after giving effect to such Due Date Adjustment.
“ Opinion of Counsel ” shall mean a written opinion of counsel, who may be an employee of or counsel to the Transferor or the Master Servicer. As to any factual matters relevant to such opinion, such counsel shall be permitted to rely upon an Officer’s Certificate to establish such factual matters, unless such counsel knew or in the exercise of reasonable care should have known, any of such factual matters are erroneous.
“
Optional Redemption Amount
” shall mean, with respect to a redemption of the Notes pursuant to
Section 12.01
of the Indenture on a Payment Date, an amount equal to (i) with respect to a redemption pursuant to
Section 12.01(b)
of the Indenture, the sum of (A) the aggregate Outstanding Principal Amount of the Variable Funding Notes
, the Quarterly Term Notes, Fixed Rate Term Notes
or the
Initial
Term Note
s
, as applicable, (B) all accrued and unpaid interest on the Notes owing on such Payment Date, (C) all accrued and unpaid fees, expenses, indemnity amounts and other amounts owing under the Indenture, and (D) the Optional Redemption Premium, if any, or (ii) with respect to a redemption pursuant to
Sections 12.01(c), (d) or (e)
of the Indenture, the applicable amount specified in such section.
“ Optional Redemption Date ” shall mean the date on which the Issuer remits to the Collection Account the Optional Redemption Amount pursuant to Section 12.01 of the Indenture.
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“
Optional Redemption Premium
” shall mean, with respect to a redemption of the
Notes
Quarterly Term Notes, the Fixed Rate Term Notes and the Initial Term Note
on a Payment Date pursuant to
Section 12.01(b)
of the Indenture, an amount equal to the product of (i) the Outstanding Principal Amount of the Variable Funding Notes
or the Term Note
, the Quarterly Term Notes, the Fixed Rate Term Notes and the Initial Term Notes
, as applicable, immediately prior to such Payment Date and (ii) the applicable Optional Redemption Premium Rate.
“ Optional Redemption Premium Rate ” shall mean, as applicable, the Initial Term Note Optional Redemption Premium Rate, the Quarterly Term Note Optional Redemption Premium Rate or the Variable Funding Note Optional Redemption Premium Rate, as applicable.
“ Original Receivable Principal Balance ” shall mean, with respect to a Receivable, as of the date such Receivable is sold to the Issuer, the outstanding principal balance owed by the Obligor on such Receivable.
“ Origination Fee ” shall mean any upfront fee charged by an Originator or a Bank Originator for processing or originating a new unsecured installment loan made to an Obligor.
“ Originator ” shall mean each of the Persons executing the Transfer Agreement in the capacity of an Originator on the signature pages thereto and each Person that executes a joinder supplement to become an Originator, together in each case with its successors and permitted assigns in such capacity.
“ Other Conveyed Property ” shall mean (a) with respect to the Seller all property conveyed by the Seller to the Purchaser pursuant to Sections 2.1(a)(ii) through (iv) of the Receivables Purchase Agreement and each related First Step Assignment, (b) with respect to the Transferor, all property conveyed by the Transferor to the Issuer pursuant to Sections 2.1(a)(ii) through (iv) of the Sale Agreement and each related Second Step Assignment and (c) with respect to a Bank Originator all property conveyed by a Bank Originator to the Seller or any Originator of a type described in Sections 2.1(a)(ii) through (iv) of the Receivables Purchase Agreement.
“ Other Taxes ” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment or deposit required to be made under the Note Purchase Agreement or the Indenture or from the execution, delivery or registration of, or otherwise with respect to, any of the foregoing.
“ Outstanding ,” shall mean, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture, except:
(a) any Notes theretofore canceled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 4.08 of the Indenture, or canceled by the Issuer and delivered to the Indenture Trustee pursuant to Section 4.08 of the Indenture;
(b) any Notes for whose full payment (including principal and interest) or redemption money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes; provided , that if such Notes are to be redeemed, notice of such redemption has been duly given if required pursuant to the Indenture, or provision therefor satisfactory to the Indenture Trustee has been made;
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(c) any Notes which are canceled pursuant to Section 6.03 of the Indenture; and
(d) any Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture, or which will have been paid pursuant to the terms of Section 4.05 of the Indenture (except with respect to any such Note as to which proof satisfactory to the Indenture Trustee is presented that such Note is held by a person in whose hands such Note is a legal, valid and binding obligation of the Issuer).
For purposes of determining the amounts of deposits, allocations, reallocations or payments to be made, unless the context clearly requires otherwise, references to “Notes” will be deemed to be references to “Outstanding Notes.” In determining whether the Holders of the requisite principal amount of such Outstanding Notes have taken any Action, Notes beneficially owned by the Issuer or any Affiliate of the Issuer will be disregarded and deemed not to be Outstanding. In determining whether the Indenture Trustee will be protected in relying upon any such Action, only Notes which an Indenture Trustee Authorized Officer knows to be owned by the Issuer or any Affiliate of the Issuer will be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee creates to the satisfaction of the Indenture Trustee the pledgee’s right to act as owner with respect to such Notes and that the pledgee is not the Issuer or any other obligor upon the Notes or any Affiliate of the Issuer or such other obligor.
“
Outstanding Principal Amount
” shall mean at any time with respect to any of the Variable Funding Notes
, the Quarterly Term Notes, the Fixed Rate Term Notes
or the
Initial
Term Notes
, as applicable
, the aggregate principal amount of such Variable Funding Notes
or
, the Quarterly Term Notes, the Fixed Rate Term Notes or the Initial
Term Notes
, as applicable,
that is Outstanding on such date.
“ Outstanding Receivable Principal Balance ” shall mean, with respect to a single Receivable, the outstanding amount of principal owed by the Obligor or Bank Originator (with respect to participation interests in Bank Originated Receivables sold by a Bank Originator), as applicable, on such Receivable on such date, and with respect to an Investment Pool, the aggregate amount of principal owed by each Obligor on each Receivable attributable to such Investment Pool on such date.
“ Ownership Share ” shall have the meaning set forth in Section 2.09(b) of the Note Purchase Agreement.
“ Participant Register ” shall have the meaning set forth pursuant to Section 8.03(c) of the Note Purchase Agreement.
“ Paying Agent ” shall mean any Person authorized by the Issuer to pay the principal of or interest on any Notes on behalf of the Issuer as provided in the Indenture. The initial Paying Agent shall be Bankers Trust.
“ Payment Date ” shall mean (i) with respect to each Term Note, the 15 th day of each calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day), commencing with respect to each Term Note on such Term Note’s respective Initial Payment Date, and (ii) with respect to the Variable Funding Notes and each Quarterly Revolving Period, (a) with
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respect to the initial Payment Date, the 15 th day of the calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day) following the calendar month in which Receivables are initially pledged to the Variable Funding Note Investment Pool, (b) with respect to the second Payment Date, the 15 th day of the calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day) following the calendar month of the initial Payment Date, and (c) the with respect to the final Payment Date, the 15 th day of the calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day) following the calendar month of the second Payment Date. For the avoidance of doubt, with respect to the Variable Funding Notes, the Unused Fee shall be paid on the 15 th day of each calendar month (or, if any such 15th day is not a Business Day, the next succeeding Business Day), regardless of whether or not Receivables are pledged to the Variable Funding Note Investment Pool until the occurrence of the Funding Period Termination Date.
“ Payment Deferral ” shall mean, with respect to a Serviced Receivable and a related Obligor, the deferral of a scheduled installment payment from such Obligor’s next Obligor Due Date to a new Obligor Due Date, which follows the Obligor Due Date that theretofore had been the final scheduled maturity date of such Serviced Receivable.
“ Payment Plan Receivable ” shall have the meaning set forth in Section 2.02(d) of the Servicing Agreement.
“ Performance Trigger ” shall mean an event arising upon the occurrence of any Investment Pool Collateral Performance Trigger or any Aggregate Cumulative Delinquency Trigger.
“ Permanent Regulation S Global Note ” shall mean a Note issued in global form, which bears a legend generally to the effect that sales of such Note or interests therein may be made only to Institutional Accredited Investors or QIBs in global form in an “offshore transaction” (within the meaning of Regulation S under the Securities Act), substantially in the form of Exhibit H to the Indenture.
“ Permitted Indebtedness ” shall mean indebtedness outstanding under the Indenture and the Note Purchase Agreement.
“ Permitted Liens ” shall mean liens imposed by law for taxes, assessments or other governmental charges.
“ Permitted Modification ” shall have the meaning set forth in Section 2.02(d) of the Servicing Agreement.
“
Person
” shall mean any person or entity, including any individual, corporation, limited liability company, partnership (general or limited), joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity or other entity of any nature, whether or not a legal entity.
¶
“
Term Notes
” shall mean, collectively, the Initial Term Note and each Quarterly Term Note.
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“ Place of Payment ” shall mean, with respect to any Note issued under the Indenture, the city or political subdivision so designated with respect to such Note in accordance with the provisions of the Indenture.
“ Predecessor Notes ” of any particular Note shall mean every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 4.05 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Note will be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
“ Privacy Laws ” shall have the meaning set forth in Section 11.12(b) of the Servicing Agreement.
“ Protected Party ” shall have the meaning set forth in Section 11.12(a) of the Servicing Agreement.
“ protected purchaser ” shall have the meaning set forth in Section 8-303 of the applicable UCC, and provided that the requirements of Section 8-405 of the applicable UCC are met.
“ Public Company Accounting Oversight Board ” shall mean the nonprofit corporation established by Congress through the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies in order to, amongst other things, protect the interest of investors.
“ Purchase Date ” shall mean each Business Day on which the Purchaser or the Issuer, as applicable, acquires Receivables from the Seller or the Transferor, as applicable, pursuant to the terms of the Receivables Purchase Agreement or the Sale Agreement, as applicable.
“ Purchase Price ” shall mean, with respect to each Receivable and related Other Conveyed Property transferred to the Purchaser by the Seller pursuant to the Receivables Purchase Agreement on any Purchase Date, an amount equal to the Outstanding Receivable Principal Balance of such Receivable as of such Purchase Date.
“ Purchaser ” shall mean the Transferor, in its capacity as the purchaser under the Receivables Purchase Agreement, together with its successors and permitted assigns in such capacity.
“ QIB ” shall have the meaning specified in Section 4.04(b) of the Indenture.
“ Quarterly Revolving Period ” shall mean, with respect to the Variable Funding Notes, (i) with respect to the initial Quarterly Revolving Period, the period from and including the Closing Date, to but excluding the initial Conversion Date, and (ii) thereafter, the period from and including the Conversion Date to but excluding the immediately subsequent Conversion Date.
“
Quarterly Term Note
” shall mean each Note issued on a Conversion Date, substantially in the form of
Exhibit B
,
-2,
with an Initial Principal Amount determined in accordance with
Section 4.11(g)
of the Indenture.
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“ Quarterly Term Note Advance Rate ” shall mean *** %.
“ Quarterly Term Note Optional Redemption Premium Rate ” shall mean, with respect to any Quarterly Term Note (and any Fixed Rate Term Note related to the same Term Note Investment Pool) , a percentage equal to the product of (i) *** % and (ii) a fraction, the numerator of which is equal to the excess of (a) *** over (b) the number of Payment Dates from the Conversion Date related to such Quarterly Term Note to and including the Optional Redemption Date, and the denominator of which is equal to *** .
“ Ratable Portion ” shall have the meaning set forth in Section 2.04(d) of the Note Purchase Agreement.
“ Receivable ” shall mean a consumer loan represented by a Contract, and all rights and obligations thereunder, including the obligation of an Obligor to make payments thereunder, originated or acquired by the Seller or a Bank Originator and subsequently sold by the Seller to the Purchaser, pursuant to the terms of the Receivables Purchase Agreement. For the avoidance of doubt, each “Serviced Receivable” constitutes a “Receivable.”
“ Receivable File ” shall mean, with respect to each Receivable, the file to be (a) delivered to the Master Servicer pursuant to the Receivables Purchase Agreement, containing the following documents: (i) the original, fully executed copy of the related Contract (which shall include the truth-in-lending disclosure), which shall on the related Purchase Date be payable to the Seller, (ii) original, fully executed copies of any non-negotiable promissory note and any guaranty related to such Receivable, if applicable, (iii) original, fully executed copies of any modifications, amendments, supplements or addendums to the original Contract and all other agreements and documents-related to such Contract, and (iv) such other documents as the Purchaser, Issuer or Indenture Trustee may reasonably require from time to time, and (b) maintained by the Custodian pursuant to Article IX of the Servicing Agreement.
“ Receivable Modification ” shall have the meaning set forth in Section 2.02(d) of the Servicing Agreement.
“ Receivables Purchase Agreement ” shall mean that certain amended and restated receivables purchase agreement dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), by and between the Seller and the Purchaser.
“ Receivables Repurchase Date ” shall mean the day that an optional receivables repurchase pursuant to Section 2.5(b) of the Sale Agreement occurs.
“ Receivable Repurchase Price ” shall mean, with respect to any Receivable and any date of determination, an amount equal to the sum of (a) the Outstanding Receivable Principal Balance of such Receivable, plus (b) all accrued and unpaid interest on the Outstanding Receivable Principal Balance of such Receivable at the applicable Annual Percentage Rate related to such Receivable through the date on which such Receivable is repurchased.
“ Recipient ” shall have the meaning set forth in Section 2.07(a) of the Note Purchase Agreement.
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“ Record Date ” shall mean, for the interest or principal payable on any Note on any applicable Payment Date, the last day of the calendar month immediately preceding such Payment Date.
“ Redeemable Stock ” shall mean the portion of any Capital Stock of Enova or any of its Consolidated Subsidiaries which is or may be (a) unilaterally redeemable (by sinking fund or similar payments or otherwise) upon the occurrence of certain events or otherwise; (b) redeemable at the option of the holder thereof or (c) convertible into Indebtedness (excluding Capital Stock convertible or exchangeable solely at the option of Enova or a Subsidiary of the Enova; provided that any such conversion or exchange will be deemed an incurrence of Indebtedness).
“ Reference Banks ” shall mean four (4) major banks in the London interbank market selected by the Master Servicer.
“ Refinancing ” shall mean, those occurrences when an Originator enters into (or acquires) a new consumer loan arrangement with an Obligor, and whereby a Receivable is paid in full with the proceeds of a new Receivable.
“ Registered Note ” shall mean a Note issued in registered form.
“ Registered Noteholder ” shall mean a Holder of a Registered Note.
“ Regulation S Certificate ” shall have the meaning specified in Section 4.06(d) of the Indenture.
“ Regulation S Global Note ” shall mean either a Temporary Regulation S Global Note or the Permanent Regulation S Global Note.
“ Regulatory Trigger Event ” shall be deemed to have occurred if, commencement by any governmental authority of any inquiry or investigation (which for the avoidance of doubt excludes any routine inquiry or investigation) through the issuance of subpoena, civil investigative demand, or other administrative or judicial method of discovery, legal action or proceeding, against any Enova Entity challenging such person’s authority to originate, hold, own, service, pledge or enforce any Receivables with respect to the residents of any jurisdiction, or otherwise alleging any noncompliance with or violation of any Governmental Rule or Governmental Rules by any Enova Entity with such jurisdiction’s applicable laws related to originating, holding, pledging, servicing or enforcing such Receivable or otherwise related to such Receivables, which inquiry, investigation, legal action or proceeding either (a) is not released or terminated in a manner acceptable to the Majority Holders in their reasonable discretion within one hundred eighty (180) calendar days of commencement thereof, and would reasonably be expected to have a Material Adverse Effect, as determined by the Majority Holders in their reasonable discretion, or (b) results in the issuance or entering of any stay, order, judgment, cease and desist order, injunction, temporary restraining order, or other judicial or non-judicial sanction, order or ruling against any Enova Entity related in any way to the originating, holding, pledging, servicing or enforcing of any Receivable or rendering the Receivables Purchase Agreement unenforceable in such respective jurisdiction, the effect of which would reasonably be expected to have a Material Adverse Effect, as determined by the Majority Holders in their reasonable discretion; provided
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that , in each case, upon the favorable resolution (whether by judgment, withdrawal of such action or proceeding or settlement of such action or proceeding) of such inquiry, investigation, action or proceeding as determined by the Majority Holders in their reasonable discretion and confirmed by notice from the Majority Holders, such Regulatory Trigger Event shall cease to exist immediately upon such determination by the Majority Holders.
“ Related Receivables ” shall mean, with respect to a Purchase Date, the Receivables set forth in the .csv file delivered in connection with the applicable First Step Assignment or Second Step Assignment, as applicable, executed and delivered by the Seller or the Transferor, as applicable, with respect to such Purchase Date.
“ Related Receivables File ” shall mean the .csv file setting forth the Receivables with respect to a Purchase Date, which is delivered in connection with the applicable First Step Assignment or Second Step Assignment, as applicable, and executed and delivered by the Seller or the Transferor, as applicable.
“ Replacement Receivables ” shall have the meaning set forth in Section 2.5(b) of the Sale Agreement.
“ Reporting Date ” shall mean a date on or before the tenth calendar day of each month (or if the tenth calendar day of any given month is not a Business Day, the next following Business Day).
“ Republic Bank ” shall mean Republic Bank & Trust Company.
“ Republic Loan Purchase Agreement ” shall mean the Loan Purchase Agreement, dated as of February 15, 2016, by and between Republic Bank and NetCredit Finance, LLC.
“ Requested Advance ” shall have the meaning specified in Section 2.04(a) of the Note Purchase Agreement.
“ Responsible Officer ” shall mean any officer within the Corporate Trust Office of the Indenture Trustee, including any director, vice president, assistant vice president, assistant treasurer, assistant secretary, or any other officer of such Person, as applicable, 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, in each case having direct responsibility for the administration of the Indenture and the other Transaction Documents on behalf of the Indenture Trustee.
“ Reuters Screen LIBOR01 Page ” shall mean the display page currently designated as page LIBOR01 on the Reuters Screen (or such other page as may replace that page on the Bloomberg terminal for the purpose of displaying comparable rates or prices).
“ Revolving Period ” shall mean the period commencing on the Closing Date and ending on the Funding Period Termination Date.
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“ Rule 144A Global Note ” shall mean a Note issued in global form, which bears a legend generally to the effect that sales of such Note or interests therein may be made only to QIBs in transactions exempt from the registration requirements of the Securities Act in reliance on Rule 144A, substantially in the form of Exhibit B -1 or Exhibit B-2, as applicable, to the Indenture.
“ S&P ” shall mean Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services, LLC business, and any successor thereto.
“ Sale Agreement ” shall mean the Amended and Restated Sale Agreement, dated October 20, 2017 (as amended, restated, supplemented or otherwise modified from time to time), between the Transferor and the Issuer.
“ Sanctions ” shall mean economic or financial sanctions or trade embargos imposed, administered or enforced from time to time by the U.S. government, including those administered by OFAC or the U.S. Department of State.
“ Schedule of Asset Servicer Serviced Receivables ” shall have the meaning set forth in Section 2.05(a) of the Servicing Agreement.
“ Schedule of Receivables ” shall mean (i) collectively, all of the schedules of Receivables purchased by the Purchaser pursuant to the Receivables Purchase Agreement and each First Step Assignment, with each such individual Schedule to be attached as Schedule A to the related First Step Assignment, as amended or supplemented from time to time upon each transfer of Receivables or otherwise in accordance with the terms of the Receivables Purchase Agreement or (ii) collectively, all of the schedules of Receivables purchased by the Issuer pursuant to the Sale Agreement and each Second Step Assignment, with each such individual Schedule to be attached as Schedule A to the related Second Step Assignment, as amended or supplemented from time to time upon each transfer of Receivables or otherwise in accordance with the terms of the Sale Agreement, as applicable.
“ Schedule of Serviced Receivables ” shall have the meaning set forth in Section 3.03 of the Servicing Agreement.
“ Scheduled Receivable Payment ” shall mean, for any Collection Period and for any Receivable, the amount indicated in the Contract relating to such Receivable as required to be paid by the Obligor in such Collection Period. If after the Closing Date the Obligor’s obligation under such Receivable with respect to a Collection Period has been modified so as to differ from the amount specified in such Receivable as a result of (a) the order of a court in a proceeding relating to Debtor Relief Laws as to which the Obligor is a debtor, (b) the application of the Servicemembers Civil Relief Act of 2003, or (c) modifications or extensions of the Receivable permitted by the Transaction Documents, the Scheduled Receivable Payment with respect to such Collection Period shall refer to the Obligor’s payment obligation with respect to such Collection Period as so modified.
“ Second Step Assignment ” shall mean a Second Step Assignment from the Transferor to the Issuer with respect to the Receivables and Other Conveyed Property to be conveyed by the Transferor to the Issuer on any Purchase Date, in substantially the form of Exhibit A to the Sale Agreement.
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“ Securities Act ” shall mean the Securities Act of 1933.
“ Securities Exchange Act ” shall mean the Securities Exchange Act of 1934.
“ Securities Intermediary ” shall have the meaning specified in Section 2.11(a) of the Indenture, together with its successors and permitted assigns in such capacity. The initial Securities Intermediary shall be Bankers Trust.
“ Security Interest ” shall mean the security interest granted pursuant to the Granting Clause of the Indenture.
“ Seller ” shall mean Enova, in its capacity as the seller pursuant to the Receivables Purchase Agreement, together with its successors and permitted assigns in such capacity.
“ Serviced Receivables ” shall mean all Receivables set forth on the Schedule of Serviced Receivables; provided , however , that upon the repurchase of such Receivable in accordance with the terms of the Receivables Purchase Agreement, the Sale Agreement, the Servicing Agreement, or any other Transaction Document, such repurchased Receivable shall no longer constitute a Serviced Receivable.
“ Servicing Agreement ” shall mean the Amended and Restated Servicing Agreement, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified from time to time), by and among the Master Servicer, the Asset Servicers, the Custodian, the Issuer, the Indenture Trustee, the Transferor and the Verification Agent.
“ Servicing Fee ” shall mean an amount, with respect to the Master Servicer and for each Payment Date, equal to the sum of (i) the Variable Funding Note Servicing Fee and (ii) the sum of the Term Note Servicing Fees attributable to each Term Note.
“ Servicing Fee Rate ” shall mean 2.50%.
“ Servicing Policy ” shall mean, the collections policy and the payment plan policy of the Master Servicer and the Asset Servicers, as such policies may be amended, modified or supplemented from time to time in compliance with the Servicing Agreement.
“ Servicing Standard ” shall have the meaning set forth in Section 2.01(b) of the Servicing Agreement.
“ Solvent ” shall mean, with respect to any Person, as of any date of determination, both (a)(i) the sum of such Person’s debt (including contingent liabilities) does not exceed the assets of such Person, at Fair Valuation, (ii) such Person’s capital is not unreasonably small in relation to its business as contemplated on the Closing Date, and (iii) such entity has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (b) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be
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expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).
“ Specified Documents ” shall mean, with respect to any Receivable File, the following documents required to be contained in such Receivable File:
(a) the original, fully executed copy of the related Contract (which shall include the truth-in-lending disclosure), which shall originally be payable to the related Asset Servicer;
(b) original, fully executed copies of any non-negotiable promissory note and any guaranty related to such Receivable, if applicable;
(c) original, fully executed copies of any modifications, amendments, supplements or addendums to the original Contract and all other agreements and documents relating to such Contract; and
(d) such other documents not otherwise described in (a) through (c) above as the Issuer, Indenture Trustee (at the direction of the Majority Holders), or the Custodian may reasonably require from time to time.
“ Standard Modification ” shall mean a “Servicing Modification” as defined in the Servicing Policy.
“ State ” shall mean any one of the 50 states of the United States of America or the District of Columbia.
“ Subsidiary ” shall mean, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided , in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.
“ Successor Asset Servicing Transfer Date ” shall have the meaning set forth in Section 8.04(a) of the Servicing Agreement.
“ Successor Asset Servicer ” shall mean the Backup Servicer or any other successor to an Asset Servicer appointed pursuant to Section 8.04(a) of the Servicing Agreement.
“ Successor Master Servicer ” shall mean the Backup Servicer or any other successor to the Master Servicer appointed pursuant to Section 8.03(a) of the Servicing Agreement.
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“ Successor Servicing Agreement ” shall mean the Successor Servicing Agreement, dated as of March 31, 2016, entered into by First Associates, the Issuer, the Indenture Trustee, the Custodian and the Verification Agent.
“ Taxes ” shall mean, all present or future taxes, levies, imposts, duties, deductions, withholding (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Temporary Regulation S Global Note ” shall mean a Note issued in global form, which bears a legend generally to the effect that sales of such Note or interests therein may be made only to Institutional Accredited Investors in global form in an “offshore transaction” (within the meaning of Regulation S under the Securities Act), substantially in the form of Exhibit G to the Indenture.
“
Term Note
” shall mean the Initial Term Note
or
,
any Quarterly
Term Note, any Fixed Rate Term Note and any I/O
Term Note, as applicable.
“ Term Note Amortization Date ” shall mean, (i) with respect to a Quarterly Term Note (and any Fixed Rate Term Note related to the same Term Note Investment Pool) the earlier to occur of (a) the Payment Date that is *** ( *** ) calendar months after the Conversion Date on which such Quarterly Term Note was issued and (b) the date on which an Event of Default occurs or (ii) the Initial Term Note Amortization Date, as applicable.
“ Term Note Available Collections ” shall mean, with respect to any Payment Date and a Term Note Investment Pool, an amount equal to the Collections received during the related Collection Period with respect to such Term Note Investment Pool, and with respect to the first Payment Date for a Term Note following its Conversion Date, the Term Note Available Collections shall also include the Variable Funding Note Available Collections remaining after all payments are made to the Variable Funding Note Noteholders on the final Payment Date with respect to such Quarterly Revolving Period.
“ Term Note Backup Servicing Fee ” shall mean with respect to each Payment Date the portion of the Backup Servicing Fee payable to the Backup Servicer that is allocable to each Quarterly Term Note, Fixed Rate Term Note and the Initial Term Note, and shall be an amount equal to the product of (i) the Backup Servicing Fee due and payable on such Payment Date and (ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Quarterly Term Note , Fixed Rate Term Note and the Initial Term Note, as applicable , and the denominator of which is the aggregate Outstanding Principal Amount of all Quarterly Term Notes, Fixed Rate Term Notes and the Initial Term Notes that are Outstanding, in each case measured as of the last day of the Collection Period immediately preceding such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Term Note Indenture Trustee Fee ” shall mean with respect to each Payment Date the portion of the Indenture Trustee Fee payable to the Indenture Trustee that is allocable to each Quarterly Term Note, Fixed Rate Term Note and the Initial Term Note, and shall be an amount equal to the product of (i) the Indenture Trustee Fee due and payable on such Payment Date and
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(ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Quarterly, Term Note , Fixed Rate Term Note and the Initial Term Note, as applicable , and the denominator of which is the aggregate Outstanding Principal Amount of all Quarterly Term Note, Fixed Rate Term Note and the Initial Term Notes that are Outstanding, in each case measured as of the last day of the Collection Period immediately preceding such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Term Note Investment Pool ” shall mean either (i) the Initial Term Note Investment Pool or (ii) with respect to each other Term Note, the Receivables related to the applicable Investment Pool, as set forth on the schedule of Receivables attached to the Notice of Conversion related to such Term Note, as provided in Section 2.09(e) of the Note Purchase Agreement.
“ Term Note LTV Percentage ” shall mean with respect to any Quarterly Term Note (and any Fixed Rate Term Note related to the same Term Note Investment Pool) , (i) with respect to any Payment Date on or prior to the first Payment Date on which the LTV of such Quarterly Term Note (and any Fixed Rate Term Note related to the same Term Note Investment Pool) has been reduced to *** %, *** % and (ii) with respect to any Payment Date following the first Payment Date on which the LTV of such Quarterly Term Note (and any Fixed Rate Term Note related to the same Term Note Investment Pool) has been reduced to *** %, the lesser of (x) the LTV of such Quarterly Term Note (and any Fixed Rate Term Note related to the same Term Note Investment Pool) on the immediately preceding Payment Date and (y) *** %.
“
Term Note Maturity Date
” shall mean either (i) with respect to a Quarterly Term Note
(and any Fixed Rate Term Note related to the same Term Note Investment Pool)
, the Payment Date that is
***
(
***
) calendar months after the
related
Conversion Date
on which such Quarterly Term Note was issued
or (ii) with respect to the Initial Term Notes, the Initial Term Note Maturity Date, as applicable.
“
Term Note Monthly Interest
” shall mean, with respect to any Payment Date
for
:
¶
(i)
with respect to
each Quarterly
Term Note, each Fixed Rate
Term Note and the Initial Term Note, an amount equal to (a) the product of (A)(x) a fraction, the number of which is the actual number of days in the related Interest Period and the denominator of which is 360,
times
(y)
the Note Interest Rate applicable to such
Quarterly Term Note, Fixed Rate Term Note or Initial
Term Note in effect for the related Interest Period and (B) the Outstanding Principal Amount of such
Quarterly
Term Note
, Fixed Rate Term Note or Initial Term Note
as of the close of business on the Record Date,
plus
(b) any amounts described in clause (a) above, or portion thereof, previously due but not paid
to such
to such Term Note Noteholder on a prior Payment Date; and
¶
(ii) with respect to each I/O Term Note, an amount equal to (a) the product of (A)(x) a fraction, the number of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (y) the Note Interest Rate applicable to such I/O Term Note in effect for the related Interest Period and (B) the Notional Principal Amount of such I/O Term Note as of the close of business on the Record Date, plus (b) any
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amounts described in clause (a) above, or portion thereof, previously due but not paid to such I/O Term Note Noteholder on a prior Payment Date.
“ Term Note Monthly Principal ” shall mean with respect to each Payment Date for each Quarterly Term Note, Fixed Rate Term Note and the Initial Term Note, an amount equal to:
(i) prior to the applicable Term Note Amortization Date or any breach of an Investment Pool Collateral Performance Trigger with respect to the related Term Note Investment Pool, the lesser of:
(ii) after the applicable Term Note Amortization Date, an acceleration of the Notes pursuant to Section 7.02 of the Indenture or any breach of an Investment Pool Collateral Performance Trigger with respect to the related Term Note Investment Pool, an amount equal to (x) the Term Note Available Collections minus (y) an amount equal to the sum of the portions that are allocable to such Term Note in respect of the amounts paid pursuant to clauses (i) through (iv) of Section 5.04(a) of the Indenture on such Payment Date until such Term Notes Outstanding Principal Amount equals zero.
“ Term Note Noteholder ” shall mean the Person in whose name a Term Note is registered in the Note Register.
“ Term Note Servicing Fee ” shall mean with respect to each Payment Date the portion of the Servicing Fee payable to the Servicer that is allocable to each Quarterly Term Note, Fixed Rate Term Note and the Initial Term Note and shall be an amount equal to the product of (i) 1/12th of the Servicing Fee Rate (or in the case of the Initial Payment Date for the Initial Term Notes, a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360) multiplied by (ii) the Outstanding Receivable Principal Balance of the Eligible Facility Receivables of the related Term Note Investment Pool, measured as of the last day of the Collection Period related to such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Term Noteholder ” shall mean any Person that is a Holder of a Term Note.
“ Total Assets ” shall mean any and all tangible assets and properties, including cash, securities, accounts and contract rights, accounted for as assets under GAAP (but excluding all intangible assets).
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“ Total Indebtedness ” shall mean, as to Enova and its Consolidated Subsidiaries on a consolidated basis at a particular time (without duplication), the sum of (a) all funded Indebtedness for borrowed money or letters of credit and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, in each case, that by its terms matures more than one year after such date of determination, and any such Indebtedness maturing within one year from such date that is renewable or extendable at the option of Enova or its Consolidated Subsidiaries, as applicable, to a date more than one year from such date; provided that Funded Debt shall not include (i) the amount of obligations outstanding under a Permitted Receivables Financing (as defined in the Credit Agreement) on any date of determination that could be characterized as principal if such Permitted Receivables Financing (as defined in the Credit Agreement) were structured as a secured lending transaction or other than a purchase, (ii) (x) cash collateralized bonds and (y) undrawn letters of credit that are cash collateralized or backstopped, (iii) trade accounts payable and other accrued expenses accrued in the ordinary course of business, (iv) earnouts, purchase price adjustments or similar obligations that are not earned, due and payable or that are supported by third party escrow or indemnification obligations, and (v) the amount of obligations outstanding under the Senior Notes Indenture (as defined in the Credit Agreement) minus (b) unrestricted cash and Cash Equivalents as of such date minus (c) Permitted Indebtedness.
“ Transaction Documents ” shall mean the Transfer Agreement, the Receivables Purchase Agreement, the Sale Agreement, the Servicing Agreement, the Successor Servicing Agreement, the Backup Servicing Agreement, the Issuer LLC Agreement, the Transferor LLC Agreement, the Indenture, the Blocked Account Control Agreement, the Intercreditor Agreement, the Note Purchase Agreement, any Funding Request, each First Step Assignment, each Second Step Assignment, each Note and with respect to any Term Note, the related Notice of Conversion.
“ Transfer Agreement ” shall mean the Transfer Agreement, dated as of January 15, 2016 (as amended, restated, supplemented or otherwise modified from time to time), by and among Enova and each of the Originators party thereto.
“ Transferor ” shall mean Enova Finance 5, in its capacity as the transferor pursuant to the Sale Agreement, together with its successors and permitted assigns in such capacity.
“ Transferor LLC Agreement ” shall mean the limited liability company agreement of Enova Finance 5, dated as of September 15, 2015 and amended and restated as of January 15, 2016 (as amended, restated, supplemented or otherwise modified from time to time), by CNU and Bernard J. Angelo, as further amended, restated, supplemented or otherwise modified from time to time.
“ Treasury Regulations ” shall mean the regulations, including proposed or temporary regulations, promulgated under the Internal Revenue Code. References to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.
“ Trust Indenture Act ” shall mean the Trust Indenture Act of 1939.
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“ UCC ” shall mean the Uniform Commercial Code, as in effect in the State of New York or any other relevant jurisdiction.
“ United States Regulations ” shall mean 31 C.F.R. Part 357, Subpart B; 12 C.F.R. Part 615, Subparts O, R and S; 12 C.F.R. Part 987; 12 C.F.R. Part 1511; 24 C.F.R. Part 81, Subpart H; 31 C.F.R. Part 354; 18 C.F.R. Part 1314; and 24 C.F.R. Part 350.
“ Unused Fee ” shall have the meaning specified in Section 2.08 of the Note Purchase Agreement.
“ Variable Funding Note ” or “ Variable Funding Notes ” shall mean the note or notes authenticated and delivered pursuant to the Indenture, substantially in the form of Exhibit A to the Indenture.
“ Variable Funding Note Advance Rate ” shall mean 80%.
“ Variable Funding Note Amortization Date ” shall mean the earlier to occur of (a) April 15, 2019 and (b) the date on which an Event of Default occurs.
“ Variable Funding Note Available Collections ” shall mean, with respect to any Payment Date and a Variable Funding Note Investment Pool, an amount equal to the Collections received during the related Collection Period in respect of such Variable Funding Note Investment Pool.
“ Variable Funding Note Borrowing Base ” shall mean, as of any date of determination, an amount equal to the product of (a) the Variable Funding Note Advance Rate multiplied by (b) the Outstanding Receivable Principal Balance of the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool as of such date of determination.
“ Variable Funding Note Investment Pool ” shall mean, with respect to a Quarterly Revolving Period during the Revolving Period, the Receivables that have not been allocated to a Term Note Investment Pool.
“ Variable Funding Note Maximum Principal Amount ” shall mean $75,000,000; provided , that upon the request of the Issuer, the Noteholders may agree to increase the Variable Funding Note Maximum Principal Amount to $90,000,000 in their sole and absolute discretion.
“ Variable Funding Note Monthly Interest ” shall mean, with respect to each Payment Date, an amount equal to the product of (i)(x) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (y) the Note Interest Rate in effect for the related Interest Period for the applicable Variable Funding Note and (ii) the Average Variable Funding Note Balance.
“ Variable Funding Note Monthly Principal ” shall mean, with respect to each Payment Date related to the Variable Funding Notes, an amount equal to:
(i) prior to the Variable Funding Note Amortization Date, an amount equal to the amount by which the Outstanding Principal Amount of the Variable Funding Notes exceeds
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(or exceeded as of the applicable Conversion Date (with respect to the final Payment Date related to a Quarterly Revolving Period)) the product of (x) 80% and (y) the Outstanding Receivable Principal Balance of the Eligible Conversion Receivables in the related Variable Funding Note Investment Pool as of the last day of the related Collection Period, and
(ii) after the Variable Funding Note Amortization Date or an acceleration of the Notes pursuant to Section 7.02 of the Indenture has occurred, an amount equal to the Variable Funding Note Available Collections until such Variable Funding Notes Outstanding Principal Amount equals zero.
“ Variable Funding Note Noteholder ” shall mean each Initial Noteholder and any other Person that becomes a Holder of a Variable Funding Note and executes a Joinder Agreement to become a signatory to the Note Purchase Agreement in such capacity.
“ Variable Funding Note Optional Redemption Premium Rate ” shall mean, with respect to any Variable Funding Note, a percentage equal to the product of (i) 9.00% and (ii) a fraction, the numerator of which is equal to the excess of (a) 3 over (b) the number of Payment Dates from the beginning of the related Quarterly Revolving Period to and including the Optional Redemption Date, and the denominator of which is equal to 3.
“ Variable Funding Note Payment Amount ” shall mean, with respect to each Payment Date, an amount equal to the sum of (i) the Variable Funding Note Monthly Interest, (ii) the Unused Fee and (iii) any Increased Costs Amounts.
“ Variable Funding Note Purchase Price ” shall have the meaning set forth in Section 2.02 of the Note Purchase Agreement.
“ Variable Funding Note Servicing Fee ” shall mean, with respect to each Payment Date for the Variable Funding Note, the portion of the Servicing Fee payable to the Servicer that is allocable to the Variable Funding Note, and shall be an amount equal to the product of (a) 1/12 th of the Servicing Fee Rate (or, (i) in the case of the initial Payment Date for a Quarterly Revolving Period, a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360 and (ii) in the case of the final Payment Date for a Quarterly Revolving Period, a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360), multiplied by (ii) the daily average Outstanding Receivable Principal Balance of the Eligible Conversion Receivables of the Variable Funding Note Investment Pool, measured as of the last day of the calendar month (or in the case of the final Payment Date for a Quarterly Revolving Period, as of the Conversion Date (immediately prior to giving effect to such conversion)); such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Variable Funding Note Stated Principal Amount ” shall mean, on any date of determination, an amount equal to the aggregate amount of all Advances made during the related Quarterly Revolving Period on or prior to such date of determination with respect to the Variable Funding Note, after giving effect to any Advance to be made on such date of determination.
“ Variable Funding Note Verification Fee ” shall mean with respect to each initial Payment Date related to a Quarterly Revolving Period the portion of the Verification Fee payable
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to the Verification Agent that is allocable to each Variable Funding Note, and shall be an amount equal to the product of (i) the Verification Fee due and payable on such Payment Date and (ii) a fraction, the numerator of which is the Outstanding Principal Amount of such Variable Funding Note, and the denominator of which is the aggregate Outstanding Principal Amount of all Variable Funding Notes that are Outstanding, in each case measured as of such Payment Date; such fee to be specified in the Monthly Servicing Report delivered to the Indenture Trustee on each Reporting Date.
“ Verifiable Collateral Documents ” shall mean, with respect to each Serviced Receivable, the related Contract and, if applicable, the non-negotiable promissory note and any guaranty related to such Serviced Receivable, together with any other items mutually agreed upon by the Master Servicer and the Indenture Trustee.
“ Verification Agent ” shall mean First Associates, in its capacity as verification agent, or any successor thereto acceptable to the Majority Holders.
“ Verification Fee ” shall have the meaning set forth in Section 9 of the Backup Servicing Agreement.
“ Waiver Amount ” shall mean, with respect to any Collection Period, the aggregate amount of all Waiver Credits granted in respect of Eligible Receivables in all Investment Pools during such Collection Period, net of all returns of Waiver Credits previously granted in respect of Eligible Receivables that have been received in such Collection Period.
“ Waiver Credit ” shall mean, with respect to an Eligible Receivable, a one-time credit granted to the Obligor in order to re-establish goodwill due to an unsatisfactory customer service experience or to make a similar minor adjustment to an Eligible Receivable in respect of other administrative or timing factors, such credit to be granted to the Obligor in accordance with the Servicing Standing and the Servicing Policy.
“
Waterfall
” shall mean
WN 2016-1,
WF 18,
LLC, a Delaware limited liability company.
“ Weighted Average Fixed Interest Rate ” shall mean the Annual Percentage Rate for all outstanding Eligible Receivables (excluding the Excluded Receivables) included in an Investment Pool from the Closing Date through such date of determination, weighted on the basis of the Outstanding Receivable Principal Balance as of the Cutoff Date stated in the related Borrowing Base Certificate.
PART II. Rules of Construction
For all purposes of each Transaction Document, except as otherwise expressly provided or unless the context otherwise requires:
(1) Number . The plural as well as the singular of all terms defined herein shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined in such certificate or other document
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(2) Accounting Terms . All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” or “GAAP” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation;
(3) Changes in GAAP . If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in the Transaction Documents, and the Master Servicer, the Issuer, the Transferor or the Indenture Trustee, at the direction of the Majority Holders, shall so request, the Master Servicer, the Issuer, the Transferor and the Indenture Trustee shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that , until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Master Servicer shall provide to the Issuer, the Transferor and the Indenture Trustee financial statements and other documents required under the Transaction Documents or as reasonably requested under the Transaction Documents setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP; provided , however , if the Master Servicer, the Issuer, the Transferor and the Indenture Trustee are not able to agree to an amendment of such ratio or requirement by the thirtieth (30th) day after the receipt by the applicable party of such request, then from and after such thirtieth (30th) day, (i) none of the Master Servicer, the Issuer, the Transferor and the Indenture Trustee shall be required to negotiate in good faith in respect of such change in GAAP, and (ii) such ratio or requirement shall be computed in accordance with the Transaction Documents in conformity with GAAP as then in effect as of the Closing Date. Notwithstanding anything to the contrary herein, all leases of any Person that are or would be characterized as operating leases in accordance with GAAP immediately prior to the Closing Date (wither or not such operating leases were in effect on such date) shall continue to be accounted for as operating leases (and not as capital leases) for purposes of this rule of construction regardless of any change in GAAP following the Closing Date that would otherwise require such leases to be re-characterized as capital leases.
(4) UCC . Unless the context otherwise requires, terms defined in the New York UCC and not otherwise defined herein shall have the meanings set forth in the New York UCC;
(5) Hereof . All references to designated “Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of the related Transaction Document as originally executed. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to the respective agreement as a whole and not to any particular Article, Section or other subdivision;
(6) Beneficial Interest . Any reference in the Transaction Documents to a “beneficial interest” in a security also shall mean, unless the context otherwise requires, a security entitlement with respect to such security, and any reference herein to a “beneficial owner” or “beneficial holder” of a security also shall mean, unless the context otherwise requires, the holder of a security entitlement with respect to such security. Any reference in the Transaction Documents to money or other property that is to be deposited in or is on deposit in a securities account shall also mean that such money or other property is to be credited to, or is credited to, such securities account, and any reference herein or in any Transaction Document to money that
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is to be credited to or is credited to a deposit account shall also mean that such money is to be deposited in, or is on deposit in, such deposit account;
(7) Amendments . Any agreement, instrument or statute defined or referred to in the Transaction Documents or in any instrument or certificate delivered in connection herewith shall mean such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein;
(8) Successors . References to a Person are also to its permitted successors and assigns;
(9) Or . Unless the context otherwise requires, “or” is not exclusive;
(10) Including . “Including” and words of similar import will be deemed to be followed by “without limitation”; and
(11) Time Periods . Unless otherwise stated, in the computation of a period of time from a specified date to a later specified date, the word “from” shall mean “from and including” and the words “to” and “until” each shall mean “to but excluding.”
(12) Lien . Unless otherwise stated, references herein and the other Transaction Documents to the priority of the Liens held by the Indenture Trustee or the Noteholders or representations and warranties or covenants prohibiting the creation of Liens by the Issuer shall, in each case, be qualified by, and subject to, the existence of Permitted Liens (which, for the avoidance of doubt, shall be permitted hereunder and the other Transaction Documents).
PART III. Notice Addresses and Procedures
All requests, demands, directions, consents, waivers, notices, authorizations and communications provided or permitted under any Transaction Document to be made upon, given or furnished to or filed with the Transferor, the Master Servicer, each Asset Servicer, the Verification Agent, the Backup Servicer, the Administrative Agent, the Note Registrar, the Intercreditor Agent, the Paying Agent, the Securities Intermediary, Jefferies, FSLF, Fortress, Waterfall, the other Noteholders, the Indenture Trustee, the Issuer or the Custodian shall be in writing, personally delivered, sent by facsimile or email, in each case with a copy to follow via first class mail or mailed by certified mail-return receipt requested, and shall be deemed to have been duly given upon receipt:
Attention: Lisa M. Young, General Counsel
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Attention: Lisa M. Young, General Counsel
Attention: Lisa M. Young, General Counsel
Attention: Lisa M. Young, General Counsel
Attention: Lisa M. Young, General Counsel
|
(d) |
in the case of the Master Servicer, the initial Asset Servicer, or the Custodian, at the following address: |
Attention: Lisa M. Young, General Counsel
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Attention: Lisa M. Young, General Counsel
First Associates Loan Servicing, LLC
E-mail: lchiavaro@1stassociates.com
|
(g) |
in the case of the Indenture Trustee, the Intercreditor Agent, the Paying Agent, the Note Registrar and the Securities Intermediary, at the following address: |
Attn: Corporate Trust Department
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The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee and the Indenture Trustee shall likewise promptly transmit any notice received by it from the Noteholders to the Issuer.
With respect to any Monthly Servicing Report sent to the Indenture Trustee pursuant to Section 3.03 of the Servicing Agreement, the Master Servicer shall not be required to send a copy of such communication via first class mail or mailed by certified mail-return receipt requested unless requested by the Indenture Trustee and in the absence of any such request, any email or facsimile of any Monthly Servicing Report otherwise sent in accordance with the instructions above shall be deemed to have been duly delivered upon receipt thereof by the Indenture Trustee.
Where any Transaction Document provides for notice to Noteholders of any condition or event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if it is in writing and mailed, first-class, postage prepaid to each Noteholder affected by such condition or event, at such Person’s address as it appears on the Note Register not later than the latest date, and not earlier than the earliest date, prescribed in such Transaction Document for the giving of such notice. If notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholders shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given regardless of whether such notice is in fact actually received.
Exhibit 10.26
AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
+
Dated as of October 20, 2017
by and among:
NETCREDIT LOAN SERVICES, LLC,
as the Master Servicer,
EFR 2016-1, LLC,
as the Issuer,
and
JEFFERIES FUNDING LLC,
as the Administrative Agent, as an Initial Term Note Noteholder and as a Variable Funding Note
Noteholder
WN 2016-1, LLC,
as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder
FORTRESS CREDIT CO LLC,
as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder
FSLF ENV LLC,
as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder
and
the other Variable Funding Note Noteholders from time to time party hereto
+ Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Securities and Exchange Commission.
***Indicates confidential material redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the redacted material.
ARTICLE I DEFINITIONS |
1 |
|
Section 1.01 |
Definitions |
1 |
ARTICLE II PURCHASE AND SALE; PURCHASE COMMITMENT |
1 |
|
Section 2.01 |
Purchase and Sale of the Variable Funding Note |
1 |
Section 2.02 |
Variable Funding Note Purchase Price |
1 |
Section 2.03 |
Increases in the Variable Funding Note Stated Principal Amount |
1 |
Section 2.04 |
Requested Advances |
2 |
Section 2.05 |
Payments to Variable Funding Note Noteholders |
3 |
Section 2.06 |
Increased Costs Amounts |
3 |
Section 2.07 |
Taxes |
4 |
Section 2.08 |
Unused Fee |
6 |
Section 2.09 |
Term Note Conversion |
6 |
Section 2.10 |
Purchase and Sale of the Initial Term Note |
7 |
Section 2.11 |
Defaulting Variable Funding Note Noteholders |
8 |
ARTICLE III CLOSING |
9 |
|
Section 3.01 |
Closing |
9 |
Section 3.02 |
Transactions to be Effected at the Closing |
9 |
Section 3.03 |
Conditions Precedent |
9 |
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER |
12 |
|
Section 4.01 |
Organization |
12 |
Section 4.02 |
Authority |
12 |
Section 4.03 |
The Notes |
13 |
Section 4.04 |
Litigation |
13 |
Section 4.05 |
Access to Information |
13 |
Section 4.06 |
Taxes, Etc |
14 |
Section 4.07 |
Disclosure |
14 |
Section 4.08 |
Investment Company Act, Etc |
14 |
Section 4.09 |
Commodity Pool |
14 |
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER SERVICER |
14 |
|
Section 5.01 |
Organization |
15 |
Section 5.02 |
Authority |
15 |
Section 5.03 |
Litigation |
16 |
Section 5.04 |
Access to Information |
16 |
Section 5.05 |
Taxes, Etc |
16 |
Section 5.06 |
Disclosure |
16 |
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF EACH NOTEHOLDER |
17 |
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-i-
Organization |
17 |
|
Section 6.02 |
Authority |
17 |
Section 6.03 |
Securities Act |
17 |
Section 6.04 |
No Reliance |
17 |
Section 6.05 |
IAI or QIB |
18 |
ARTICLE VII INDEMNIFICATION |
18 |
|
Section 7.01 |
Indemnification by the Issuer and the Master Servicer |
18 |
Section 7.02 |
Costs and Expenses |
19 |
ARTICLE VIII MISCELLANEOUS |
19 |
|
Section 8.01 |
Notices, Etc |
19 |
Section 8.02 |
No Waiver; Remedies |
20 |
Section 8.03 |
Binding Effect; Assignability |
20 |
Section 8.04 |
[RESERVED] |
21 |
Section 8.05 |
GOVERNING LAW |
21 |
Section 8.06 |
No Proceedings |
22 |
Section 8.07 |
Execution in Counterparts |
22 |
Section 8.08 |
No Recourse |
22 |
Section 8.09 |
[RESERVED] |
23 |
Section 8.10 |
Administrative Agent’s Reliance |
23 |
Section 8.11 |
Joinder of Variable Funding Note Noteholders |
23 |
EXHIBITS
EXHIBIT A |
FORM OF FUNDING REQUEST |
EXHIBIT B |
FORM OF JOINDER AGREEMENT |
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-
ii-
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT, dated as of October 20, 2017 (as further amended, restated, supplemented or otherwise modified form time to time, this “ Agreement ”), by and among NetCredit Loan Services, LLC (formerly known as Enova Lending Services, LLC), as master servicer (the “ Master Servicer ”), EFR 2016-1, LLC, as issuer (the “ Issuer ”), Jefferies Funding LLC (“ Jefferies ”), as administrative agent (in such capacity, the “ Administrative Agent ”), as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder, WN 2016-1, LLC (“ Waterfall ”), as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder, FSLF ENV LLC (“ FSLF ”), as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder, and Fortress Credit Co LLC (“ Fortress ”), as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder (such Initial Term Note Noteholders and Variable Funding Note Noteholders, collectively, the “ Initial Noteholders ”), and any other party that becomes a Variable Funding Note Noteholder and party hereto after the date hereof.
In consideration of the representations, warranties and agreements herein contained, the parties hereto hereby agree as follows:
Section 1.01 Definitions . Whenever used in this Agreement and unless the context requires a different meaning, capitalized terms used herein and not otherwise expressly defined herein shall have the meanings assigned to such terms in Part I of Appendix A to the Amended and Restated Indenture, dated as of October 20, 2017, between the Issuer and Bankers Trust, as the indenture trustee (the “ Indenture Trustee ”) and the securities intermediary (the “ Securities Intermediary ”), which is incorporated by reference herein and made a part hereof. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Agreement.
ARTICLE II
PURCHASE AND SALE; PURCHASE COMMITMENT
Section 2.01 Purchase and Sale of the Variable Funding Note . the terms, and in reliance on the covenants, representations, warranties and agreements herein set forth, the Issuer agrees to sell, transfer and deliver to each of the initial Variable Funding Note Noteholders, and each of the initial Variable Funding Note Noteholders agree to purchase from the Issuer, at the Closing, a Variable Funding Note to be issued on the Closing Date (the “ Variable Funding Notes ”), each with an Outstanding Principal Amount initially of $0, but up to an aggregate amount for all such Variable Funding Notes not to exceed the Variable Funding Note Maximum Principal Amount.
Section 2.02 Variable Funding Note Purchase Price . Each Variable Funding Note is to be purchased at an initial purchase price (the “ Variable Funding Note Purchase Price ”) equal to $0, representing 100% of the aggregate initial Outstanding Principal Amount.
Section 2.03 Increases in the Variable Funding Note Stated Principal Amount . Subject to the terms and conditions of Section 4.11 of the Indenture, each Variable Funding Note Noteholder shall from the Closing Date to the Funding Period Termination Date fund its share of each Requested Advance sought by the Issuer in accordance with the procedures described in Section 2.04 ; provided , however , that at no time shall the Variable Funding Note Stated Principal
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Amount for the Outstanding Variable Funding Notes exceed the Variable Funding Note Noteholders’ aggregate Funding Commitments.
Section 2.04 Requested Advances .
(a) During the Revolving Period and subject to the terms and conditions hereof and in the Indenture, the Issuer may request, from time to time, but no more than *** per calendar week (unless otherwise agreed to by the Administrative Agent and the Variable Funding Note Noteholders and subject to an Additional Advance Fee for each additional Requested Advance beyond the first two, such fee to be allocated between the Variable Funding Note Noteholders in accordance with their respective Ratable Portions), that the Variable Funding Note Noteholders advance to the Issuer an amount in the aggregate (a “ Requested Advance ”) that is a multiple of $100,000 and that is not less than $500,000. After giving effect to the Requested Advance, (i) the aggregate Outstanding Principal Amount of the Notes shall not exceed the Maximum Principal Amount, (ii) the Outstanding Principal Amount of the Variable Funding Notes shall not exceed the Variable Funding Note Borrowing Base and (iii) the Outstanding Principal Amount of the Variable Funding Notes shall not exceed the Maximum Advance Amount.
(b) Whenever the Issuer requests that the Variable Funding Note Noteholders make a Requested Advance, the Issuer shall deliver, or shall cause to be delivered on its behalf, to the Administrative Agent, as the designated representative of all Variable Funding Note Noteholders, an executed Funding Request, substantially in the form of Exhibit A hereto, no later than 12:00 p.m., New York City time, two Business Days prior to the proposed Advance Date, and shall satisfy the terms and conditions set forth herein, in the Funding Request and in the Indenture. Notwithstanding anything to the contrary contained herein, if any Requested Advance is not made by reason of an Advance Condition, or a condition in the Funding Request or the Indenture not being satisfied on or prior to the Advance Date specified by the Issuer in its Funding Request, the Issuer shall indemnify each Variable Funding Note Noteholder against any loss, cost or expense incurred by such Variable Funding Note Noteholder as a result of such occurrence, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Variable Funding Note Noteholder to fund such anticipated Advance, but excluding any loss attributable to lost profits or consequential damages.
(c) [Reserved.]
(d) Each Variable Funding Note Noteholder shall fund the percentage of the Requested Advance (its “ Ratable Portion ”) determined by dividing (i) the amount of such Variable Funding Note Noteholder’s Funding Commitment by (ii) the aggregate Funding Commitments of all Variable Funding Note Noteholders. Subject to satisfaction of the Advance Conditions, each Variable Funding Note Noteholder shall deliver immediately available funds in an amount (an “ Advance ”) equal to its Ratable Portion of the Requested Advance to the Bankers Trust account specified in a separate letter agreement by and among the parties hereto no later than 2:00 p.m., New York City time, on the applicable Advance Date. Once all funds have been deposited, then upon Bankers Trust’s receipt of notice and instruction from the Administrative Agent (which for the avoidance of doubt can be in the form of electronic correspondence) no later than 3:00 p.m. New York City time, Bankers Trust shall deliver the funds deposited into such account to an account specified by the Issuer (the information for which shall be provided to Bankers Trust by the Administrative Agent as part of the aforementioned notice and instruction); provided , however , that if all Variable Funding Note Noteholders do not deposit their Ratable Portion of the Requested
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Advance to the Bankers Trust account by 2:00 p.m. New York City time, on the applicable Advance Date, then all funds on deposit in such account shall be returned to the respective parties who made such deposits; provided , further , that any Variable Funding Note Noteholder who made a deposit of its Ratable Portion of the Requested Advance to the Bankers Trust account by 2:00 p.m. New York City time on such Advance Date shall not be deemed to be a Defaulting Variable Funding Note Noteholder if funds are subsequently returned to such Variable Funding Note Noteholder pursuant to the first proviso of this Section 2.04(d) ; provided , further , that if the Administrative Agent does not provide to Bankers Trust notice and instruction for delivery of the funds deposited in such account to an account specified by the Issuer by 3:00 p.m., New York City time, then Bankers Trust shall not be required to deliver such funds into the account specified by the Issuer until the next Business Day.
(e) The Revolving Period shall expire on the Funding Period Termination Date and no new Advances shall be funded after such date.
(f) No portion of any Advance shall be funded with “plan assets” of any Benefit Plan.
(g) During the Revolving Period, the Eligible Receivables purchased by the Issuer with the proceeds of an Advance made pursuant to this Section 2.04 shall be allocated to the Variable Funding Note Investment Pool. In connection with the issuance of Quarterly Term Notes on the Conversion Date, as contemplated by Section 2.09 of this Agreement and Sections 4.11 and 4.12 of the Indenture, such Eligible Receivables shall be allocated to a Term Note Investment Pool and shall cease to be allocated to the Variable Funding Note Investment Pool.
Section 2.05 Payments to Variable Funding Note Noteholders . On each Payment Date, the Master Servicer shall instruct the Indenture Trustee or the Paying Agent (if a Person different than the Indenture Trustee) to apply the Variable Funding Note Available Collections on deposit in the Collection Account to make distributions to the Variable Funding Note Noteholders in the amount and in the priority set forth in Section 5.04(b) of the Indenture.
Section 2.06 Increased Costs Amounts . If due to the introduction of or any change in or in the Interpretation of any law or regulation or the imposition of any guideline or request from any central bank or other Governmental Authority, in each case after the date hereof, there shall be an increase in the cost to any Variable Funding Note Noteholder of making, funding or maintaining any investment in a Variable Funding Note or any interest therein, as the case may be (other than by reason of any Interpretation of or change in laws or regulations relating to Excluded Taxes), such Variable Funding Note Noteholder shall promptly submit to the Issuer and the Master Servicer, a certificate prepared in good faith setting forth in reasonable detail, the calculation of such increased costs incurred by such Variable Funding Note Noteholder. In determining such amount, such Variable Funding Note Noteholder may use any reasonable averaging and attribution methods, consistent with the averaging and attribution methods generally used by such Variable Funding Note Noteholder in determining amounts of this type. The amount of increased costs set forth in such certificate (which certificate shall, in the absence of manifest error, be prima facie evidence as to such amount) shall be included in the Increased Costs Amount to be paid on the Payment Date with respect to (a) the first full Interest Period immediately succeeding the date on which the certificate specifying the amount owing was delivered and (b) to the extent remaining
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outstanding, each Interest Period thereafter until paid in full. Failure on the part of any Variable Funding Note Noteholder to demand compensation for any amount pursuant to this Section 2.06 for any period shall not constitute a waiver of such Variable Funding Note Noteholder’s right to demand compensation for such period; provided that the Issuer shall not be required to compensate a Variable Funding Note Noteholder pursuant hereto for any reductions in return on capital or assets incurred during any fiscal quarter ended more than one hundred eighty (180) days prior to the date that such Variable Funding Note Noteholder makes its request for additional amounts pursuant to this Section 2.06 .
(a) Any and all payments and deposits required to be made hereunder or under the Indenture, any Note or any other Transaction Document by or on behalf of the Issuer or the Indenture Trustee to or for the benefit of any Noteholder (each, a “ Recipient ”) shall be made free and clear of and without deduction for any Taxes, unless required by applicable law. In the case of any Recipient, (a) Taxes imposed on, or measured by net income (however denominated) of each Noteholder, franchise taxes, or branch profit Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office in the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Transaction Document, or sold or assigned an interest in any Note or any other Transaction Document), (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of a Noteholder with respect to an applicable interest in a Note or any other Transaction Document pursuant to a law in effect on the date on which such Noteholder acquires such interest in the Note or other Transaction Document, except to the extent that, pursuant to this Section 2.07 , amounts with respect to such Taxes were payable to such Noteholder’s assignor immediately before such Noteholder became a party hereto, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.07(f) , and (d) any U.S. federal withholding Taxes imposed under FATCA, shall be referred to herein as “ Excluded Taxes. ” If the Issuer, the Indenture Trustee or an applicable withholding agent shall be required by law (as determined in the good faith discretion of such Person) to deduct any Taxes from or in respect of any sum required to be paid or deposited hereunder, under the Indenture or under any other Transaction Document to or for the benefit of any Noteholder, then, (i) the Issuer, the Indenture Trustee or any other applicable withholding agent (as appropriate) shall make such deductions, (ii) the Issuer, the Indenture Trustee, the Paying Agent or any other applicable withholding agent (as appropriate) shall timely pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iii) unless such Tax is an Excluded Tax, the sum payable by the Issuer or the Indenture Trustee (as applicable) shall be increased with funds provided by the Issuer as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.07 ) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
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(b) The Issuer shall promptly reimburse and indemnify each Recipient for the full amount of Taxes (other than Excluded Taxes) and Other Taxes (including any Taxes (other than Excluded Taxes) or Other Taxes imposed on amounts payable under this Section 2.07 ) paid by the Recipient and any reasonable expenses, penalties and interest arising therefrom or with respect thereto. Each Noteholder agrees to promptly notify the Issuer and the Master Servicer, of any payment of such Taxes (other than Excluded Taxes) or Other Taxes made by it and, if practicable, any request, demand or notice received in respect thereof prior to such payment. A certificate as to the amount of such payment or liability pursuant to this Section 2.07(b) submitted to the Issuer by such Recipient setting forth in reasonable detail the basis for and the calculation thereof shall be conclusive absent manifest error.
(c) The Issuer shall timely pay to the relevant Governmental Authority in accordance with applicable law any Other Taxes.
(d) Within thirty (30) days after the date of any payment of Taxes, Excluded Taxes or Other Taxes, the Issuer will furnish to the applicable Recipient the original or a certified receipt evidencing payment thereof.
(e) Any amounts payable to any Noteholder pursuant to this Section 2.07 shall be included in the Increased Costs Amount for amounts payable pursuant to Section 2.07(b) , the first full Interest Period immediately succeeding the date on which the certificate specifying the amount owing was delivered and to the extent remaining outstanding, each Interest Period thereafter until paid in full.
(f) Any Noteholder shall deliver to the Issuer on or prior to the date on which such Noteholder becomes a Noteholder under this Agreement (and from time to time thereafter upon the reasonable request of the Issuer), executed copies of IRS Form W-9 if such Noteholder is a U.S. Person (as defined in Section 7701(a)(30) of the Code) or, if such Noteholder is not a U.S. Person (as defined in Section 7701(a)(30) of the Code), the applicable IRS Form W-8 or other applicable tax compliance certificate.
(g) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.07 (including by the payment of additional amounts pursuant to this Section 2.07 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.07 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 2.07(g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.07(g) , in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.07(g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional
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amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(h) Without prejudice to the survival of any other agreement of the Issuer hereunder, the agreements and obligations of the parties contained in this Section 2.07 shall survive the termination of this Agreement.
Section 2.08 Unused Fee . On each Payment Date, until the Funding Period Termination Date, the Issuer shall pay to the Variable Funding Note Noteholders (subject to the priority of payments set forth in Section 5.04(b) of the Indenture, a fee (the “ Unused Fee ”) equal to the product of: (a) the excess of (i) the lesser of (A) an amount equal to the Maximum Principal Amount, minus the sum of (x) the aggregate Outstanding Principal Amount of all Outstanding Term Notes and (y) the Average Variable Funding Note Balance, and (B) the Average Maximum Variable Funding Note Commitment, over (ii) the Average Variable Funding Note Balance; (b) a per annum rate of ***%; and (c) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, payable in arrears on each Payment Date.
Section 2.09 Term Note Conversion .
(a) Amounts advanced under the Variable Funding Notes as of such Conversion Date shall be (in full or in part, based on the Initial Principal Amount of the Quarterly Term Note) repaid in kind by the issuance of the Quarterly Term Note and the excess, if any, of (i) the Outstanding Principal Amount of the Variable Funding Notes as of such Conversion Date (immediately prior to giving effect to the issuance of the related Quarterly Term Note) over (ii) the Initial Principal Amount of such Quarterly Term Note, shall be paid to the Variable Funding Note Noteholders on the final Payment Date of such Quarterly Revolving Period (which Payment Date shall occur approximately fifteen (15) days following the Conversion Date), pursuant to this Section 2.09 and Sections 4.11 and 4.12 of the Indenture, as provided herein and therein, enabling additional Advances to be made following such Conversion Date during the Revolving Period.
(b) On each Conversion Date, the Issuer shall execute and deliver in accordance with Section 4.12 of the Indenture a Quarterly Term Note in the Initial Principal Amount determined as provided in Section 4.11(g) of the Indenture. Each such Quarterly Term Note shall be delivered in the form of a Global Note attached as Exhibit B to the Indenture. Each Variable Funding Note Noteholder shall be an initial Note Owner of each Quarterly Term Note, and each Variable Funding Note Noteholder’s beneficial ownership share (its “ Ownership Share ”) of each such Quarterly Term Note shall be equal to a fraction (1) the numerator of which is the Outstanding Principal Amount of its Variable Funding Note and (2) the denominator of which is the Outstanding Principal Amount of all Variable Funding Notes, in each case as of the end of the related Collection Period.
(c) Upon the issuance of the Quarterly Term Note pursuant to Section 4.12 of the Indenture, the Outstanding Principal Amount of each Variable Funding Note shall be reduced by its Ownership Share of the Initial Principal Amount of the Quarterly Term Note delivered pursuant to Section 2.09(a) .
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(d) With respect to each Quarterly Term Note, prior to each Conversion Date the Administrative Agent shall obtain a CUSIP number for the Quarterly Term Note to be issued and shall promptly provide such number to the Indenture Trustee and the Issuer.
(e) On each Conversion Date, the Eligible Conversion Receivables allocated to the Variable Funding Note Investment Pool during the applicable Quarterly Revolving Period, shall be reallocated to a Term Note Investment Pool to be associated with the Quarterly Term Note that is issued on such Conversion Date.
Section 2.10 Purchase and Sale of the Initial Term Notes .
(a) On the terms, and in reliance on the covenants, representations, warranties and agreements herein set forth, the Issuer agrees to sell, transfer and deliver to the Indenture Trustee, and the Initial Term Note Noteholders agree to purchase from the Issuer, at the Closing, the Initial Term Note in the Initial Principal Amount of $181,141,753.
(b) The Initial Principal Amount of the Initial Term Note will not exceed the product of (x) the Outstanding Receivable Principal Balance of the Initial Term Note Investment Pool and (y) the Initial Term Note Advance Rate.
(c) The purchase price that each Initial Term Note Noteholder shall pay for its beneficial interest in the Initial Term Notes (its “ Initial Term Note Purchase Price ”) shall be the amount set forth beneath the signature of such Initial Term Note Noteholder on this Agreement. Each Initial Term Note Noteholder shall wire its allocable share of the Initial Term Note Purchase Price on the Closing Date to the Indenture Trustee per the following wiring instructions:
Bankers Trust
Des Moines, IA
ABA#: ***
Acct#: ***
Reference: FBO Enova Intl
The Indenture Trustee will confirm receipt of the entire Initial Term Note Purchase Price prior to Closing and as a condition precedent to any proceeds being released to an Enova Entity.
(d) With respect to the Initial Term Note, prior to the Closing Date, the Administrative Agent shall obtain a CUSIP number for such Initial Term Note and shall promptly provide such number to the Indenture Trustee and the Issuer.
(e) The Initial Term Note Investment Pool shall apply to the Initial Term Note, and be composed of the Eligible Receivables described on a schedule delivered to the Administrative Agent on or prior to the Closing Date. Any Ineligible Receivables owned by the Issuer on the Closing Date will be repurchased by the Transferor in accordance with Section 2.5 of the Sale Agreement.
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Section 2.11 Defaulting Variable Funding Note Noteholders .
(a) Notwithstanding anything to the contrary contained in this Agreement, if any Variable Funding Note Noteholder becomes a Defaulting Variable Funding Note Noteholder, then, until such time as such Variable Funding Note Noteholder is no longer a Defaulting Variable Funding Note Noteholder, to the extent permitted by applicable law, the following provisions shall apply:
(i) such Defaulting Variable Funding Note Noteholder shall not be entitled to receive any Unused Fee or Additional Advance Fee accrued in any period during which such Noteholder is a Defaulting Variable Funding Note Noteholder;
(ii) for purposes of determining the Majority Holders, the Funding Commitment of such Defaulting Variable Funding Note Noteholder shall be disregarded (and subtracted from the Outstanding Principal Amount of all Outstanding Notes) until such time as the relevant Variable Funding Note Noteholder no longer constitutes a Defaulting Variable Funding Note Noteholder;
(iii) such Defaulting Variable Funding Note Noteholder shall have no right to approve or disapprove any amendment, waiver or consent under this Agreement (and any amendment, waiver or consent which by its terms requires the consent of all Noteholders or each affected Noteholder may be effected with the consent of the applicable Variable Funding Note Noteholders other than Defaulting Variable Funding Note Noteholders), except that (x) the Funding Commitment of any Defaulting Variable Funding Note Noteholder may not be increased or extended without the consent of such Variable Funding Note Noteholder and (y) any waiver, amendment or modification requiring the consent of all Noteholders or each affected Noteholder that by its terms affects any Defaulting Variable Funding Note Noteholder more adversely than other affected Noteholders shall require the consent of such Defaulting Variable Funding Note Noteholder; and
(iv) for purposes of the making and funding of a Requested Advance, the Ratable Portion to be funded by each non-Defaulting Variable Funding Note Noteholder shall be determined without reference to the Funding Commitment of the Defaulting Variable Funding Note Noteholder, and the Maximum Advance Amount shall be reduced as appropriate to reflect the impact of the Defaulting Variable Funding Note Noteholder.
(b) If such Defaulting Variable Funding Note Noteholder purchases at par its pro rata portion of the outstanding Advances of the other Variable Funding Note Noteholders (plus any related losses, costs or expenses subject to indemnification contemplated by Section 2.04(b) and incurred by the selling Variable Funding Note Noteholders), then such Variable Funding Note Noteholder will cease to be a Defaulting Variable Funding Note Noteholder; provided , that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Issuer while such Variable Funding Note Noteholder was a Defaulting Variable Funding Note Noteholder; and provided , further , that except to the extent otherwise expressly
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agreed by the affected parties, no change hereunder from Defaulting Variable Funding Note Noteholder to Variable Funding Note Noteholder will constitute a waiver or release of any claim of any party hereunder arising from such Variable Funding Note Noteholder having been a Defaulting Variable Funding Note Noteholder.
Section 3.01 Closing . The closing of the purchase and sale of the Initial Term Note and the Variable Funding Notes shall take place at the offices of DLA Piper LLP (US), 500 8 th Street, NW, Washington, DC 20004, on the Closing Date (the “ Closing ”).
Section 3.02 Transactions to be Effected at the Closing
. At the Closing, (a) each Initial Term Note Noteholder will deliver to the Issuer, by wire transfer of immediately available funds, to a bank account that has been designated by the Issuer at least two (2) Business Days prior to the Closing Date, an amount equal to its respective Initial Term Note Purchase Price, (b) each initial Variable Funding Note Noteholder will deliver to the Issuer, by wire transfer of immediately available funds to a bank account designated by the Issuer at least two (2) Business Days prior to the Closing Date, an amount equal to its respective Variable Funding Note Purchase Price and (c) the Issuer shall (i) deliver to the Indenture Trustee, the Initial Term Note and (ii) to each initial Variable Funding Note Noteholder, its respective Variable Funding Note, as purchased hereunder.
Section 3.03 Conditions Precedent
. The effectiveness of this Agreement is subject to the satisfaction at the time of the Closing of each of the following conditions precedent:
(a) Good Standing . Prior to the Closing Date, the Initial Noteholders shall have received good standing certificates for the Issuer, the Transferor and the Seller issued as of a recent date acceptable to the Initial Noteholders by the Secretary of State of the jurisdiction of such Person’s incorporation or organization.
(b) Execution and Delivery . The Issuer, the Indenture Trustee, the Seller, the Transferor, the Backup Servicer and the other parties to the Transaction Documents shall have executed and delivered the Transaction Documents (as amended, restated, supplemented or otherwise modified) to which they are parties in the same form and substance as previously presented to and approved by the Initial Noteholders.
(c) Performance by the Seller, the Transferor and the Issuer . The Initial Noteholders shall have received on the Closing Date from each of the Seller, the Transferor and the Issuer, a certificate, dated the Closing Date and signed by executive officers of the Seller, the Transferor and the Issuer, to the effect that (i) each of the representations and warranties of the Seller, the Transferor and the Issuer contained in Article IV and Article V of this Agreement, Article XI of the Indenture and the other Transaction Documents are true and correct as of the Closing Date, (ii) each of the Seller, the Transferor and the Issuer has complied with all the agreements and satisfied all the conditions on their part to be performed or satisfied in this Agreement, the Indenture and the other Transaction Documents, as applicable, on or prior to the Closing Date, and (iii) there has not occurred any change or any development that is likely to result in a change in the condition, financial or otherwise, or in the earnings, business, operations or
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prospects of any of the Seller, the Transferor or the Issuer that has had or could reasonably be expected to have a Material Adverse Effect.
(d) Opinions of Counsel . The Initial Noteholders shall have received favorable opinions, reliance letters or bring-down opinions, as applicable and as acceptable to the Initial Noteholders (addressed to the Initial Noteholders) from counsel to the Seller, the Transferor, the Issuer and the Indenture Trustee, as applicable, dated as of the Closing Date and reasonably satisfactory in form and substance to each Initial Noteholder and their counsel, as to such matters as each Initial Noteholder and their counsel may reasonably request. Such legal opinions, shall include opinions: (i) from Kirkland & Ellis LLP as to (A) the security interest in the Receivables, (B) corporate and enforceability matters; (C) true sale and non-consolidation of the Transferor with the Seller, the Originators or the Master Servicer; (D) certain tax matters and (E) the Issuer not being a “covered fund” under the Volcker Rule (17 C.F.R. 75.10(b)) (the “ Volcker Rule ”), and (ii) from Nyemaster Goode, P.C. as to certain matters pertaining to the Indenture Trustee.
(e) Additional Information . Prior to the Closing Date, the Issuer, the Transferor and the Seller shall have furnished to the Initial Noteholders such further information, certificates and documents as the Initial Noteholders may reasonably request.
(f) Corporate Documents . Prior to the Closing Date, the Initial Noteholders shall have received certified copies of resolutions of the Board of Directors of the Seller, the Transferor and the Issuer authorizing or ratifying the execution, delivery and performance, respectively, of the Transaction Documents to which it is a party, together with a certified copy of its articles or certificate of incorporation or certificate of formation, as applicable, and a copy of its limited liability company agreement or by-laws, as applicable.
(g) Approvals . Prior to the Closing Date, the Initial Noteholders shall have received certified copies of all documents evidencing any necessary corporate action, consents, licenses and governmental approvals with respect to the Transaction Documents.
(h) Incumbency . Prior to the Closing Date, the Initial Noteholders shall have received a certificate of the secretary or an assistant secretary of each of the Transferor, the Seller and the Issuer certifying the names of its officer or officers authorized to sign the Transaction Documents to which it is a party.
(i) Search Reports . Prior to the Closing Date, the Initial Noteholders shall have received a written search report by a search service acceptable to the Initial Noteholders listing all effective financing statements that name the Seller, the Transferor or the Issuer as a debtor or assignor and that are filed in the jurisdictions in which filings were or are to be made pursuant to Section 4.1(i) above and in such other jurisdictions that the Initial Noteholders shall reasonably request, together with copies of such financing statements (none of which shall cover any of the Receivables or the Issuer Estate unless otherwise released as described in Section 4.1(i)(iv) ).
(j) Actions or Proceedings . No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any Governmental Authority that would, as of the Closing Date, prevent the issuance or sale of the Notes; and no injunction or
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order of any Federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the issuance or sale of the Notes.
(k) Pending Actions or Proceedings . No material claim or litigation by any Governmental Authority shall be pending, as of the Closing Date, which would be reasonably expected to result in a Material Adverse Effect to the Initial Noteholders, except as disclosed prior to the Closing Date and acceptable to the Initial Noteholders.
(l) Review of Financial Information . The Initial Noteholders shall have received from the Seller, the Transferor and the Issuer such financial and other information as is reasonably requested by the Initial Noteholders.
(m) Review of Policies and Procedures . The Initial Noteholders shall have received from the Seller, the Transferor and the Issuer such credit policies, collection policies and operating and reporting policies and procedures as are reasonably requested by the Initial Noteholders.
(n) Approvals and Consents . All Governmental Actions of all Governmental Authorities required with respect to the transactions contemplated by the Transaction Documents and the other documents related thereto shall have been obtained or made.
(o) No Defaults . No Event of Default has occurred and is continuing.
(p) Representations and Warranties . The representations and warranties of the Issuer, the Transferor and the Seller set forth in this Agreement and the other Transaction Documents are true and correct as of the Closing Date.
(q) No Material Adverse Change . As of the Closing Date none of the following shall have occurred (i) a general moratorium on commercial banking activities in New York shall have been declared by the relevant authorities, or (ii) there shall have occurred any outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or any calamity or crisis (economic, financial or otherwise) that, in the Initial Noteholders’ reasonable judgement, materially and adversely affects financial markets, or (iii) there shall have occurred any change in financial markets that, in the Initial Noteholders’ reasonable judgment, is material and adverse, or (iv) any material adverse change, or any development involving a prospective material adverse change, in or affecting particularly the business or properties of Enova or any of its Affiliates or (v) any investigation shall have commenced against Enova or any of its Affiliates that has resulted in a Regulatory Trigger Event.
(r) Credit Committee . The Initial Noteholders shall have received final investment or credit committee approval.
(s) Fees and Expenses . All due diligence expenses, attorney's fees, search fees, title fees, documentation and filing fees and other fees due to the Initial Noteholders have been paid by the Issuer.
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(t) Cash Management System . The Initial Purchasers shall be satisfied with the Seller's, the Transferor's, the Master Servicer's and the Issuer's cash management systems and the Issuer shall have executed account control agreements satisfactory to the Initial Noteholders.
(u) UCCs . The Initial Noteholders shall receive (a) copies of proper UCC-3 financing statements with respect to the following initial filing numbers: (i) 2016 0325512, (ii) 2016 0325975, (iii) 2016 0325603, (iv) 2016 0326122, (v) 2016 0325769, (vi) 2016 0326304, (vii) 2016 0325843, (viii) 2016 0326619, (ix) 2016 0326874, and (b) copies of proper UCC-1 financing statements with respect to the following Originators: (i) NC Financial Solutions of Delaware, (ii) NC Financial Solutions of North Dakota, (iii) NC Financial Solutions of South Dakota, (iv) NC Financial Solutions of Wisconsin, (v) NC Financial Solutions of Utah and (vi) NC Financial Solutions of Idaho.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER
The Issuer hereby represents, warrants and covenants to the Initial Noteholders as of the date of this Agreement, and to each Variable Funding Note Noteholder as of (and as a condition to any Advance occurring on) each Advance Date until satisfaction and discharge of the Indenture pursuant to Section 6.01 thereof, in each case with reference to the facts and circumstances then existing, as follows.
Section 4.01 Organization . The Issuer has been duly organized and is validly existing, in good standing under the laws of Delaware, and is duly qualified to do business and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, and has full power and authority to own its properties and conduct its business as currently conducted. The Issuer shall at all times preserve and keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business, except where the failure to preserve and maintain such existence, rights, franchises, privileges, qualifications, licenses and approvals would not have a Material Adverse Effect.
Section 4.02 Authority . The Issuer has all the requisite power and authority in all material respects to enter into and perform its obligations under the Transaction Documents to which it is a party, to execute and deliver the Notes and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Issuer of the Transaction Documents to which it is a party and the consummation by the Issuer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary limited liability company action on the part of the Issuer. Each of the Transaction Documents have been duly and validly executed and delivered by the Issuer and constitutes a legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to bankruptcy, reorganization, insolvency, receivership, conservatorship, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity. Neither the execution nor the delivery by the Issuer of the Transaction Documents, nor the issuance or delivery by the Issuer of the Notes, nor the consummation by the Issuer of any of the transactions contemplated by the Transaction Documents, nor the fulfillment by the Issuer of the terms of the Transaction Documents will conflict with, or violate, result in a material breach of or
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constitute a material default (with or without notice or lapse of time, or both) under (a) any term or provision of the constituent documents of the Issuer or any Governmental Rule applicable to the Issuer or (b) any term or provision of any indenture or other agreement or instrument to which the Issuer is a party or by which it or any material portion of its properties are bound, nor will it result in the creation or imposition of any lien, charge or encumbrance upon any of the property of the Issuer pursuant to the terms of any indenture or other such agreement or instrument to which the Issuer is bound. No Governmental Action is required by or with respect to the Issuer in connection with the execution and delivery of the Transaction Documents by the Issuer or the consummation by the Issuer of the transactions contemplated hereby or thereby.
(a) Each Variable Funding Note has been duly and validly authorized, and, when executed and authenticated in accordance with the terms of the Indenture and delivered to each Variable Funding Note Noteholder in accordance with this Agreement, will be duly and validly issued and outstanding, and will be entitled to the benefits of, as applicable, of the Indenture. No Event of Default, Regulatory Trigger Event or any event which after any applicable grace period will become an Event of Default or Regulatory Trigger Event, as applicable, is or shall be subsisting in relation to any Variable Funding Note and no event has occurred which would constitute an Event of Default or a Regulatory Trigger Event or any event which after any applicable grace period would become an Event of Default or Regulatory Trigger Event, as applicable.
(b) Each Note as of the Closing Date, or each Conversion Date, as applicable, has been duly and validly authorized, and, when executed and authenticated in accordance with the terms of the Indenture and delivered to the Indenture Trustee in accordance with this Agreement, will be duly and validly issued and outstanding, and will be entitled to the benefits of the Indenture. No Event of Default, Regulatory Trigger Event or any event which after any applicable grace period will become an Event of Default or Regulatory Trigger Event, as applicable, is or shall be subsisting in relation to the Term Notes and no event has occurred which would constitute an Event of Default or a Regulatory Trigger Event or any event which after any applicable grace period would become an Event of Default or Regulatory Trigger Event, as applicable.
Section 4.04 Litigation . There is no pending or threatened action, suit or proceeding by or against the Issuer before any Governmental Authority or any arbitrator with respect to the Issuer, any of the Transaction Documents, or any of the transactions contemplated herein or therein, or with respect to the Issuer which, in the case of any such action, suit or proceeding with respect to the Issuer if adversely determined, would, in the reasonable judgment of the management of the Issuer have a Material Adverse Effect on the ability of the Issuer to perform its obligations under the Transaction Documents to which it is a party.
Section 4.05 Access to Information . From the Closing Date until the Maturity Date, the Issuer will, during regular business hours, on at least five (5) Business Days’ notice to the Issuer, permit the Variable Funding Note Noteholders, or their agents or representatives collectively, at the expense of the Issuer (subject to the limits imposed in Section 3.04(d) of the Servicing Agreement): (a) to examine all books, records and documents (including computer tapes and disks) in the possession or under the control of the Issuer relating to the Receivables, and (b) to
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visit the offices and properties of the Issuer for the purpose of examining such materials described in clause (a) above; provided , that prior to the occurrence of an Event of Default, a Master Servicer Default or an Asset Servicer Default, no more than four (4) visits to the offices and property of the Issuer and the Master Servicer pursuant to this Section 4.05 or Section 5.04 for access to the documentation regarding the Receivables shall be collectively made by or on behalf of the Variable Funding Note Noteholders and their representatives, collectively, in any twelve-month period; provided further that after or during the continuance of an Event of Default, a Master Servicer Default or an Asset Servicer Default, a Variable Funding Note Noteholder and its representatives may make more than four (4) visits per twelve-month period as it determines in its sole discretion.
Section 4.06 Taxes, Etc . Any taxes, fees and other charges of Governmental Authorities imposed upon the Issuer in connection with the execution, delivery and performance by the Issuer of the Transaction Documents or otherwise, have been paid or will be paid by the Issuer at or prior to the Closing Date, to the extent then due.
Section 4.07 Disclosure . All written information heretofore furnished by the Issuer or any of its representatives, to the Variable Funding Note Noteholders, or any of their representatives, for purposes of or in connection with any Transaction Document, including information relating to the Receivables, was true and correct in all material respects (i) on the date such information was furnished by the Issuer or (ii) if such information specifically relates to an earlier date, on such earlier date, and no information, exhibit or report furnished by the Issuer or any of its representatives, to the Initial Noteholders, the Variable Funding Note Noteholders, or any of their representatives, for purposes of or in connection with any Transaction Document, including information relating to the Receivables, omitted to state a material fact necessary to make the statements made therein not misleading.
Section 4.08 Investment Company Act, Etc . The Issuer (i) is not a “covered fund” for purposes of Section 13 of the Bank Holding Act of 1956 (commonly referred to as the “ Volcker Rule ”), and (b) the Issuer is not required to register as an “investment company” under the Investment Company Act. In reaching this conclusion, the Issuer relied on the exemption from the definition of “ investment company ” contained in Rule 3a-7 under the Investment Company Act, although other exclusions or exemptions may apply.
Section 4.09 Commodity Pool . The Issuer is not an investment trust, syndicate or similar form of enterprise operated for the purpose of trading in commodity interests for purposes of the Commodity Pool definition in the Commodity Exchange Act.
In addition to the foregoing, the representations and warranties of Issuer set forth in any Transaction Document are hereby incorporated herein by reference for the benefit of the Initial Noteholders and the Variable Funding Note Noteholders.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER
SERVICER
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The Master Servicer hereby represents, warrants and covenants with respect to itself and each Enova Party (other than the Issuer) to the Initial Noteholders and hereby reaffirms its representations, warrants and covenants with respect to itself and each Enova Party (other than the Issuer) set forth in all of the other Transaction Documents as of the date of this Agreement, and to the Variable Funding Note Noteholders as of (and as a condition to any Advance occurring on) each Advance Date until satisfaction and discharge of the Indenture pursuant to Section 6.01 thereof, in each case with reference to the facts and circumstances then existing, as follows.
Section 5.01 Organization . Each Enova Party (other than the Issuer) has been duly organized and is validly existing, in good standing under the laws of the jurisdiction of organization, and is duly qualified to do business and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, and has full power and authority to own its properties and conduct its business as currently conducted. Each Enova Party (other than the Issuer) shall at all times preserve and keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business.
Section 5.02 Authority . Each Enova Party (other than the Issuer) has all the requisite power and authority in all material respects to enter into and perform its obligations under the Transaction Documents to which it is a party, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Enova Party (other than the Issuer) of the Transaction Documents to which it is a party and the consummation by each Enova Party (other than the Issuer) of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of each Enova Party (other than the Issuer). Each of the Transaction Documents have been duly and validly executed and delivered by each Enova Party (other than the Issuer) and constitutes a legal, valid and binding obligation of each Enova Party (other than the Issuer) enforceable against each Enova Party (other than the Issuer) in accordance with its terms, subject to bankruptcy, reorganization, insolvency, receivership, conservatorship, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity. Neither the execution nor the delivery by each Enova Party (other than the Issuer) of the Transaction Documents, nor the consummation by each Enova Party (other than the Issuer) of any of the transactions contemplated by the Transaction Documents, nor the fulfillment by each Enova Party (other than the Issuer) of the terms of the Transaction Documents will conflict with, or violate, result in a material breach of or constitute a material default (with or without notice or lapse of time, or both) under (a) any term or provision of the constituent documents of an Enova Entity (other than the Issuer) or any Governmental Rule applicable to such Enova Entity or (b) any term or provision of any indenture or other agreement or instrument to which an Enova Entity (other than the Issuer) is a party or by which it or any material portion of its properties are bound, nor will it result in the creation or imposition of any lien, charge or encumbrance upon any of the property of an Enova Entity (other than the Issuer) pursuant to the terms of any indenture or other such agreement or instrument to which such Enova Entity is bound. No Governmental Action is required by or with respect to any Enova Entity (other than the Issuer) in connection with the execution and delivery of the Transaction Documents by the Enova Entities or the consummation by the Enova Entities of the transactions contemplated hereby or thereby.
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Section 5.03 Litigation . There is no pending or threatened action, suit or proceeding by or against any Enova Entity (other than the Issuer) before any Governmental Authority or any arbitrator with respect to any Enova Entity (other than the Issuer), any of the Transaction Documents, or any of the transactions contemplated herein or therein, or with respect to any Enova Entity (other than the Issuer) which, in the case of any such action, suit or proceeding with respect to an Enova Entity (other than the Issuer) if adversely determined, would, in the reasonable judgment of the management of such Enova Entity have a material adverse effect on the ability of such Enova Entity to perform its obligations under the Transaction Documents to which it is a party.
Section 5.04 Access to Information . From the Closing Date until the Maturity Date, the Master Servicer will, during regular business hours, on at least five (5) Business Days’ notice to the Master Servicer, permit the Variable Funding Note Noteholders, or their agents or representatives collectively, at the expense of the Issuer (subject to the limits imposed in Section 3.04(d) of the Servicing Agreement): (a) to examine all books, records and documents (including computer tapes and disks) in the possession or under the control of the Master Servicer relating to the Receivables, and (b) to visit the offices and properties of the Master Servicer for the purpose of examining such materials described in clause (a) above; provided , that prior to the occurrence of an Event of Default, a Master Servicer Default or an Asset Servicer Default, no more than four (4) visits to the offices and property of the Issuer and the Master Servicer pursuant to this Section 5.04 or Section 4.05 for access to the documentation regarding the Receivables shall be collectively made by or on behalf of the Variable Funding Note Noteholders and their representatives, collectively, in any twelve-month period; provided further, that after or during the continuance of an Event of Default, a Master Servicer Default or an Asset Servicer Default, any Variable Funding Note Noteholder and its representatives may make more than four (4) visits per twelve-month period as it determines in its sole discretion.
Section 5.05 Taxes, Etc . Any taxes, fees and other charges of Governmental Authorities imposed upon an Enova Entity (other than the Issuer) in connection with the execution, delivery and performance by such Enova Entity of the Transaction Documents or otherwise, have been paid or will be paid by such Enova Entity at or prior to the Closing Date, to the extent then due.
Section 5.06 Disclosure . All written information heretofore furnished by an Enova Entity (other than the Issuer) or any of its representatives, to the Initial Noteholders, the Variable Funding Note Noteholders, or any of their representatives, for purposes of or in connection with any Transaction Document, including information relating to the Receivables, was true and correct in all material respects (i) on the date such information was furnished by such Enova Entity or (ii) if such information specifically relates to an earlier date, on such earlier date, and no information, exhibit or report furnished by an Enova Entity (other than the Issuer) or any of its representatives, to the Initial Noteholders, the Variable Funding Note Noteholders, or any of their representatives, for purposes of or in connection with any Transaction Document, including information relating to the Receivables, omitted to state a material fact necessary to make the statements made therein not misleading.
In addition to the foregoing, the representations and warranties each Enova Entity set forth in the Transaction Documents are hereby incorporated herein by reference for the benefit of the Initial Noteholders and the Variable Funding Note Noteholders.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF EACH NOTEHOLDER
Each Initial Noteholder and each Variable Funding Note Noteholder severally hereby represents and warrants (as to itself and no other Noteholder) to each of the Issuer and the Master Servicer as of the Closing Date or the date on which it becomes a Variable Funding Note Noteholder pursuant hereto, as follows:
Section 6.01 Organization . Such Noteholder has been duly incorporated, formed or organized and is validly existing in good standing under the laws of its jurisdiction of incorporation, formation or organization.
Section 6.02 Authority . Such Noteholder has all requisite power and authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by such Noteholder of this Agreement and the consummation by such Noteholder of the transactions contemplated hereby have been duly and validly authorized by all necessary entity action on the part of such Noteholder. This Agreement has been duly and validly executed and delivered by such Noteholder, and constitutes a legal, valid and binding obligation of such Noteholder, enforceable against such Noteholder, in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity. Neither the execution or delivery by such Noteholder of this Agreement, nor the consummation by such Noteholder of any of the transactions contemplated hereby, nor the fulfillment by such Noteholder of the terms hereof, will conflict with, or violate, result in a material breach of or constitute a material default (with or without notice or lapse of time, or both) under (i) any term or provision of the constituent documents of such Noteholder or any Governmental Rule applicable to such Noteholder, or (ii) any term or provision of any indenture or other agreement or instrument to which such Noteholder is a party or by which such Noteholder or any material portion of its properties are bound. No Governmental Action is required by or with respect to such Noteholder in connection with the execution and delivery of this Agreement by such Noteholder or the consummation by such Noteholder of the transactions contemplated hereby.
Section 6.03 Securities Act . The Initial Term Note and the Variable Funding Notes purchased pursuant to this Agreement, and any Term Note exchanged pursuant to Section 2.09(a) , is acquired by the Person for investment only and not with a view to any public distribution thereof, and such Person will not offer to sell or otherwise dispose of its Note in violation of any of the registration requirements of the Securities Act or any applicable state or other securities laws. The Person acknowledges that it has no right to require the Issuer to register under the Securities Act or any other securities law its Note.
Section 6.04 No Reliance . Such Noteholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in its Note and is able to bear the economic risk of such investment. Each Noteholder has been afforded the opportunity to ask such questions as it deems necessary to make an investment decision, and has received all information it has requested in connection with making such investment decision. Each Noteholder has, independently and without reliance upon the Administrative Agent or any other Noteholder, and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the Receivables and the business, operations, property, financial and other condition and creditworthiness of the Seller, the Transferor and the Issuer and made its own decision to purchase its interest in a Note, and will, independently and without reliance upon the Administrative Agent or any other Noteholder, and based on such
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documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Transaction Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Receivables, the Seller, the Transferor and the Issuer.
Section 6.05 IAI or QIB . It is an accredited investor as defined in any of paragraphs (1), (2), (3) and (7) of Rule 501(a) of Regulation D under the Securities Act or an entity in which all of the equity owners come within such paragraphs or a qualified institutional buyer within the meaning of Rule 144A under the Securities Act.
Section 7.01 Indemnification by the Issuer and the Master Servicer .
(a) The Issuer shall indemnify and hold harmless each Initial Noteholder and each Variable Funding Note Noteholder, their respective Affiliates and their respective officers, directors, employees, stockholders, agents and representatives (each, an “ Indemnified Party ”), against any and all losses, claims, damages, liabilities or expenses (including legal and accounting fees) (collectively, “ Losses ”), as incurred (payable promptly upon request), for or on account of or arising from or in connection with or otherwise with respect to any Transaction Document, the financing, ownership, funding or maintenance of the Notes, including any breach of any representation or warranty of the Issuer set forth in any Transaction Document or in any certificate delivered pursuant hereto or thereto; provided , however , that the Issuer shall not be required to indemnify any Indemnified Party for any Losses (i) that have resulted from such Indemnified Party’s gross negligence, bad faith or willful misconduct or (ii) arising from any settlement entered into by an Indemnified Party without the Issuer’s prior consent (not to be unreasonably withheld or delayed). This Section 7.01 shall not apply with respect to Taxes other than Taxes that represent losses, claims, damages or similar expenses arising from any non-Tax claim.
(b)
The Master Servicer shall indemnify and hold harmless each Initial Noteholder and each Variable Funding Note Noteholder, their respective Affiliates and their respective officers, directors, employees, stockholders, agents and representatives, against any and all Losses, as incurred (payable promptly upon request), for or on account of or arising from or in connection with or otherwise with respect to any breach of any representation or warranty of the Master Servicer in any Transaction Document or in any certificate delivered pursuant hereto or thereto;
provided
,
however
, that the Master Servicer shall not be required to indemnify any Indemnified Party for any Losses (i) that have resulted from such Indemnified Party’s gross negligence, bad faith or willful misconduct or (ii) arising from any settlement entered into by an Indemnified Party without the Master Servicer’s prior consent (not to be unreasonably withheld or delayed).
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(c) If any action or proceeding (including any governmental proceeding) is brought or asserted against any Indemnified Party in respect of which indemnity may be sought against the Issuer or the Master Servicer, as applicable, the Indemnified Party shall notify the Issuer or the Master Servicer, as applicable, of the commencement of such action or proceeding; provided , however , that failure to notify the Issuer or the Master Servicer, as applicable, will not relieve the Issuer or the Master Servicer, as applicable, of any liability or obligation hereunder. Upon receipt of such notice, the Issuer or the Master Servicer, as applicable, shall promptly assume the defense of such action or proceeding, including the employment of counsel satisfactory to the Indemnified Parties in their reasonable judgment and the payment of all related expenses. If upon receipt of notice the Master Servicer fails to promptly assume the defense of such action or proceeding (as determined by the Indemnified Party in its sole discretion), each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and to participate in the defense thereof, and the Issuer or the Master Servicer, as applicable, shall assume the fees and expenses of such counsel. Otherwise, each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and to participate in (but not control) the defense thereof, and the Issuer or the Master Servicer, as applicable, shall assume the fees and expenses of such counsel; provided, that the Issuer or Master Servicer, as applicable, shall only assume the fees and expenses of such counsel if a conflict exists with the counsel employed by the Issuer or the Master Servicer, as applicable, and the Issuer or the Master Servicer, as applicable, approves such counsel.
Section 7.02 Costs and Expenses . The Issuer agrees to pay on demand to each Initial Noteholder and each Variable Funding Note Noteholder, as applicable, all reasonable and documented costs and expenses in connection with the preparation, execution, delivery and administration (including any amendments, waivers or consents) of this Agreement and the other documents to be delivered hereunder or in connection herewith, including (i) the reasonable and documented fees and out-of-pocket expenses of counsel for such Noteholder with respect thereto and with respect to advising such Noteholder as to its respective rights and remedies under this Agreement and the other documents delivered hereunder or in connection herewith, (ii) documented costs and expenses incurred in connection with the purchase by such Noteholder of a Note hereunder, (iii) all other documented fees, costs and expenses incurred by or in connection with the issuance of a Note, and (iv) all reasonable and documented costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement, and the other documents delivered hereunder or in connection herewith.
Section 8.01 Notices, Etc . All requests, demands, directions consents, waivers, notices, authorizations and communications to any party provided for hereunder shall be in writing (including telecopy or electronic transmission) and addressed to such party at the address specified in Part III of Appendix A to the Indenture. All such notices and other communications shall, when mailed, be effective when transmitted (receipt confirmed). Any party hereto may change the address or telecopier number to which notices to it are to be sent by notice given to the other parties hereto.
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Section 8.02 No Waiver; Remedies . No failure on the part of any party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
Section 8.03 Binding Effect; Assignability .
(a) This Agreement shall be binding upon, and inure to the benefit of, the Initial Noteholders, each Variable Funding Note Noteholder, the Issuer, the Master Servicer and their respective successors and permitted assigns.
(b) Neither the Issuer nor the Master Servicer shall assign any of its respective rights and obligations hereunder or any interest herein without the prior consent of the Initial Noteholders and each Variable Funding Note Noteholder. In connection with any such assignment the assignee shall expressly agree to assume all the obligations of the Issuer or the Master Servicer, as applicable, hereunder and no such assignment made without the prior consent of each such Noteholder shall relieve the Issuer or the Master Servicer, as applicable, of any of its obligations hereunder, and no assignment permitted hereunder shall relieve the Issuer or the Master Servicer, as applicable, from any obligations arising hereunder prior to such assignment (including obligations with respect to breaches of representations and warranties made herein).
(c)
Each Initial Noteholder and each Variable Funding Note Noteholders may, at any time, (i) sell, assign, grant undivided participation interests in all or part of the obligations due to it under this Agreement and in respect of its interest in a Note to any of its Affiliates or any Person that is not a Competitor without the consent of the Issuer, or (ii) otherwise sell, assign or transfer all or part of the obligations due to it under this Agreement and in respect of its interest in a Note to any of its Affiliates without the consent of the Issuer or, unless and Event of Default has occurred and is continuing, to any other Person with the consent of the Issuer to the extent such Person is a Competitor;
provided
,
however
, that any such sale, assignment or grant of a participation interest shall be effected in compliance with Section 4.04 of the Indenture. Each Noteholder that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Issuer, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Notes or other obligations under the Transaction Documents (the “
Participant Register
”); provided that no Noteholder shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant's interest in any commitments, loans, letters of credit or its other obligations under any Transaction Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Noteholder shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. This
Section 8.03(c)
shall be construed so that the Notes are at all times maintained in “registered form” within the meanings of Code Sections 163(f), 871(h)(2), and 881(c)(2) and any related regulations (and any successor provisions).
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(d) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until the Funding Period Termination Date; provided , however , that the rights and remedies with respect to any breach of any representation, warranty or covenant made by the Issuer or Master Servicer pursuant to Article IV and Article V , as applicable, shall be continuing and shall survive any termination of this Agreement.
(e) Each Holder hereby acknowledges that it is subject to and bound by the provisions of Section 3.04 and 11.12 of the Servicing Agreement in accordance with the terms thereof, which shall remain in full force and effect until terminated pursuant to Section 11.07 thereof.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
(b) Each party hereto hereby consents and agrees that the state or federal courts located in the Borough of Manhattan in New York City shall have exclusive jurisdiction to hear and determine any claims or disputes between them pertaining to this Agreement or to any matter arising out of or relating to this Agreement; provided, that each party hereto acknowledges that any appeals from those courts may have to be heard by a court located outside of the Borough of Manhattan in New York City. Each party hereto submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each party hereto hereby waives any objection that such party may have based upon lack of personal jurisdiction, improper venue or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each party hereto hereby waives personal service of the summons, complaint and other process issued in any such action or suit and agrees that service of such summons, complaint, and other process may be made by registered or certified mail addressed to such party at its address, and that service so made shall be deemed completed upon the earlier of such party’s actual receipt thereof or three (3) days after deposit in the United States mail, proper postage prepaid. Nothing in this Section 8.05 shall affect the right of any party hereto to serve legal process in any other manner permitted by law.
(c) Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws. Therefore, to achieve the best combination of the benefits of the judicial system and of arbitration, the parties hereto waive all rights to trial by jury in any action, suit, or proceeding brought to resolve any dispute, whether sounding in contract, tort or otherwise, arising out of, or connection with, related to, or incidental to the relationship established among them in connection with this Agreement or the transactions contemplated hereby.
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(a) Each of the Issuer and the Master Servicer hereby severally agrees that it will not, acquiesce, petition or otherwise invoke or cause any Initial Noteholder or any Variable Funding Note Noteholder to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case against such Noteholder under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of such Noteholder or any substantial part of its property or ordering the winding-up or liquidation of the affairs of such Noteholder.
(b) The provisions of this Section 8.06 shall survive the termination of this Agreement.
Section 8.07 Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
(a) No recourse under or with respect to any obligation, covenant or agreement (including the payment of any fees or any other obligations) of any Initial Noteholder or any Variable Funding Note Noteholder as contained in this Agreement or any other agreement, instrument or document entered into by it pursuant hereto or in connection herewith shall be had against any incorporator, affiliate, stockholder, officer, employee or director of any such Noteholder, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise (except to the extent that recourse against any such Person arises from the gross negligence or willful misconduct of such Person); it being expressly agreed and understood , that the agreements of each such Noteholder contained in this Agreement and all of the other agreements, instruments and documents entered into by it pursuant hereto or in connection herewith are, in each case, solely the corporate obligations of such Noteholder, and that no personal liability whatsoever shall attach to or be incurred by any incorporator, stockholder, affiliate, officer, employee or director of such Noteholder, as such, or any of them, under or by reason of any of the obligations, covenants or agreements of such Noteholder contained in this Agreement or in any other such instruments, documents or agreements, or which are implied therefrom, and that any and all personal liability of each incorporator, stockholder, affiliate, officer, employee or director of such Noteholder, or any of them, for breaches by such Noteholder of any such obligations, covenants or agreements, which liability may arise either at common law or at equity, or by statute or constitution, or otherwise, is hereby expressly waived except to the extent that such personal liability of any such Person arises from the gross negligence or willful misconduct of such Person.
(b)
The provisions of this
Section 8.08
shall survive the termination of this Agreement
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Section 8.10 Administrative Agent’s Reliance . Neither the Administrative Agent, nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them as Administrative Agent under or in connection with this Agreement or any related agreement, instrument or document except for its or their own gross negligence or willful misconduct. Without limiting the foregoing, the Administrative Agent: (a) may consult with legal counsel (including counsel for the Issuer, the Master Servicer or the Indenture Trustee), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any other Noteholder and shall not be responsible to any other Noteholder for any statements, warranties or representations made in or in connection with this Agreement or in connection with any related agreement, instrument or document; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any related agreement, instrument or document on the part of the Issuer or the Indenture Trustee or to inspect the property (including the books and records) of the Issuer or the Indenture Trustee; (d) shall not be responsible to any other Noteholder for the due execution, legality, validity, enforceability, genuineness or sufficiency of value of this Agreement or any related agreement, instrument or document; (e) shall not be deemed to be acting as any other Noteholder’s trustee or otherwise in a fiduciary capacity hereunder or in connection with any related agreement, instrument or document; and (f) shall incur no liability under or in respect of this Agreement or any related agreement, instrument or document by acting upon any notice (including notice by telephone), consent, certificate or other instrument (which may be by telex, facsimile or in a PDF file) believed by it to be genuine and signed or sent by the proper party or parties.
Section 8.11 Joinder of Variable Funding Note Noteholders . A Person who is not a Competitor may become a Variable Funding Note Noteholder under this Agreement by purchasing an ownership interest in an outstanding Variable Funding Note and by executing a Joinder Agreement, in the form attached hereto as Exhibit B , among such Person, the Issuer, the Master Servicer and the assigning Variable Funding Note Noteholders. Such Person shall thereupon have all of the rights and obligations of a “Variable Funding Note Noteholder” hereunder. A Person who holds only a participation interest in a Variable Funding Note shall not be considered a Variable Funding Note Noteholder hereunder based on such interests.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
|
NETCREDIT LOAN SERVICES, LLC,
By: /s/ Lisa M. Young Name:Lisa M. Young Title:Vice President and Secretary
|
|
EFR 2016-1, LLC, as Issuer By: /s/ Lisa M. Young Name:Lisa M. Young Title:Vice President and Secretary
|
[Signature Page to A&R Note Purchase Agreement]
EAST\147727759.5
|
JEFFERIES FUNDING LLC,
By: /s/ Brian McGrath Name: Brian McGrath Title: Executive Vice President
INITIAL TERM NOTE
FUNDING COMMITMENT:$*** |
|
|
[Signature Page to A&R Note Purchase Agreement]
EAST\147727759.5
|
WN 2016-1, LLC,
By: Waterfall Asset Management, LLC, as Investment Manager By: /s/ Kenneth Nick Name: Kenneth Nick Title: Authorized Person
INITIAL TERM NOTE
FUNDING COMMITMENT:$*** |
[Signature Page to A&R Note Purchase Agreement]
EAST\147727759.5
|
FORTRESS CREDIT CO LLC,
By: /s/ Constantine M. Dakolias Name: Constantine M. Dakolias Title: President
INITIAL TERM NOTE
FUNDING COMMITMENT:$***
FSLF ENV LLC,
By: /s/ Constantine M. Dakolias Name: Constantine M. Dakolias Title: President
INITIAL TERM NOTE
FUNDING COMMITMENT:$*** |
[Signature Page to A&R Note Purchase Agreement]
EAST\147727759.5
[FORM OF] FUNDING REQUEST
Reference is made to the Amended and Restated Note Purchase Agreement, dated as of October 20, 2017 (as it may be further amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “ Note Purchase Agreement ”), by and among NetCredit Loan Services, LLC, as Master Servicer, EFR 2016-1, LLC, as Issuer, Jefferies Funding LLC, as Administrative Agent, as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder, WN 2016-1, LLC, as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder, FSLF ENV LLC, as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder, Fortress Credit Co LLC, as an Initial Term Note Noteholder and as a Variable Funding Note Noteholder and the other Variable Funding Note Noteholders from time to time party thereto. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in Appendix A to the Amended and Restated Indenture, dated as of October 20, 2017, by and between the Issuer and Bankers Trust, as Indenture Trustee.
Pursuant to Section 2.04 of the Note Purchase Agreement, the Issuer desires that the Variable Funding Note Noteholders make the following Requested Advance to the Issuer in accordance with the applicable terms and conditions of the Note Purchase Agreement and the Indenture by 3:00 p.m. New York City time on mm/dd/yy (the “ Advance Date ”):
1. |
Requested Advance |
$[___,___,___] |
2. |
Borrowing base availability |
$[___,___,___] |
3. |
Account Number |
$[___,___,___] |
4. |
Routing Number |
[___________] |
The following table sets forth the computation of borrowing base availability referenced in line 2 above:
(A) Outstanding Principal Balance of Variable Funding Notes (prior to Requested Advance) |
$[___,___,___] |
(B) Variable Funding Note Borrowing Base (including Receivables to be transferred on Advance Date) |
$[___,___,___] |
(C) = (B) - (A) = Borrowing base availability |
$[___,___,___] |
Pursuant to Section 2.04(d) of the Note Purchase Agreement, the following table sets forth the Ratable Portion and the Advance for each Variable Funding Note Noteholder:
Note Number |
Variable Funding Note Noteholder |
Ratable Portion |
Advance |
|
Jefferies |
[__._]% |
$[___,___,___] |
|
Fortress |
[__._]% |
$[___,___,___] |
|
FLSF |
[__._]% |
$[___,___,___] |
|
Waterfall |
[__._]% |
$[___,___,___] |
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The Master Servicer and Issuer each hereby certify that:
(i) as of the date set forth in the Borrowing Base Certificate, the Variable Funding Note Borrowing Base is equal to $[_________] the Investment Pool Advance Amount is equal to $[________];
(ii) after the Requested Advance has been funded by the Variable Funding Note Noteholders on the Advance Date, the aggregate Outstanding Principal Amount of the Variable Funding Notes as of such Advance Date will not exceed the Maximum Advance Amount then in effect;
(iii) as of the date hereof (prior to the funding of the Requested Advance): (A) the Outstanding Principal Amount of the Variable Funding Notes is equal to $[____] and (B) the Outstanding Principal Amount of all Term Notes is equal to $[_____];
(iv) after making the Advances requested on the Advance Date, the sum of the Variable Funding Note Stated Principal Amount and the Outstanding Principal Amount of all Outstanding Term Notes will not exceed the Maximum Principal Amount;
(v) as of the Advance Date, each Transaction Document is in full force and effect and no provision thereof has been amended, restated, supplemented, modified or waived except in accordance with the related Transaction Document;
(vi) as of the Advance Date, the representations and warranties made by each of the parties contained in each of the Transaction Documents are true and correct in all material respects on and as of such Advance Date to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties are true and correct in all material respects on and as of such earlier date;
(vii) as of the Advance Date, after giving effect to the Requested Advance funded on such Advance Date, no Event of Default will have occurred or will be continuing or with the giving of notice or lapse of time would result from the consummation of the Requested Advance contemplated hereby;
(viii) as of the date hereof and in accordance with the terms of the Servicing Agreement, the Issuer has delivered, or caused the Master Servicer to deliver, to the Verification Agent, imaged copies of the Verifiable Collateral Documents;
(ix) as of the Advance Date, a Closing Date Material Adverse Change with respect to the Enova Entities shall not have occurred; and
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(x) as of the Advance Date, each Receivable reflected on the related Borrowing Base Certificate is an Eligible Receivable;
Date: [mm/dd/yy]
|
EFR 2016-1, LLC By: Name: Title:
|
|
NETCREDIT LOAN SERVICES, LLC,
By: Name: Title:
|
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[FORM OF] JOINDER AGREEMENT
JOINDER AGREEMENT, dated as of __________, 20__ (this “ Joinder Agreement ”), by and among [Joining Variable Funding Note Noteholder], as a Variable Funding Note Noteholder (the “ Joining Noteholder ”), EFR 2016-1, LLC, as Issuer, Jefferies Funding LLC (“ Jefferies ”), as the Administrative Agent and [________ (“ [Short-Form Name] ”), as the Selling Noteholder (as defined below)].
PRELIMINARY STATEMENTS
WHEREAS, this Joinder Agreement is being executed and delivered pursuant to the Amended and Restated Note Purchase Agreement, dated as of October 20, 2017 (as it may be further amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “ Agreement ”), by and among the Master Servicer, the Issuer, the Administrative Agent, the Initial Noteholders and the other Variable Funding Note Noteholders party thereto from time to time;
WHEREAS, pursuant to the Agreement, one or more persons may become a Variable Funding Note Noteholder with all the rights and obligations of a Variable Funding Note Noteholder;
WHEREAS, pursuant to the Agreement and a separate assignment and assumption agreement between [Short-Form Name] and Joining Noteholder, [Short-Form Name] wishes to transfer and assign to Joining Noteholder a portion of its rights and obligations as a Variable Funding Note Noteholder and to reduce the Funding Commitment of [Short-Form Name] (in such capacity, the “ Selling Noteholder ”); and
WHEREAS, the Joining Noteholder wishes to enter into this Joinder Agreement to acquire the rights and undertake the obligations assigned to it by the Selling Noteholder and to become a “Variable Funding Note Noteholder” pursuant to the Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements contained herein, the parties hereto agree as follows:
(a) Defined Terms . Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Appendix to the Indenture (as defined by reference in the Agreement).
(b) Joining Noteholder . The Joining Noteholder is hereby added as a “Variable Funding Note Noteholder” with all the rights and obligations of each other Variable Funding Note Noteholder under the Agreement and agrees to be bound by the terms thereof. As of the date hereof, the Joining Noteholder hereby makes, as to itself, each of the representations and warranties set forth in Article VI of the Agreement.
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(c) Confirmation . The parties to the Agreement hereby confirm that the Agreement remains in full force and effect and hereby ratifies the acceptance of the Joining Noteholder as “Variable Funding Note Noteholder” as of the date hereof.
(d) Commitment . The Joining Noteholder and each other Variable Funding Note Noteholder, hereby confirms its obligation to fund its ratable share of Advances on each Advance Date, up to but not exceeding the amount set forth under such Noteholder’s signature hereto.
(e) Principal Amount of Variable Funding Note . The initial Outstanding Principal Amount of the Joining Noteholder’s Variable Funding Note is $_______.
(f) Governing Law . THIS JOINDER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
(g) Counterparts . This Joinder Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Joinder Agreement to be duly executed by their respective officers as of the day and year first above written.
|
EFR 2016-1, LLC, as Issuer By: Name: Title:
|
[Signature Page to Joinder Agreement]
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|
JEFFERIES FUNDING LLC, as Administrative Agent By: Name: Title:
[________], as the Selling Noteholder
By: Name: Title:
NEW FUNDING COMMITMENT: $[__]
|
|
[ JOINING VARIABLE FUNDING NOTE NOTEHOLDER ], as the Joining Noteholder
By: Name: Title:
FUNDING COMMITMENT: $[__] |
[Signature Page to Joinder Agreement]
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Exhibit 10.27
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT +
dated as of October 20, 2017
between
ENOVA FINANCE 5, LLC,
as Purchaser,
and
ENOVA INTERNATIONAL, INC.,
as Seller
+ Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Securities and Exchange Commission.
***Indicates confidential material redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the redacted material.
TABLE OF CONTENTS
|
Page |
|
Article I DEFINITIONS |
1 |
|
Section 1.1 |
Definitions |
1 |
Article II CONVEYANCE OF RECEIVABLES |
1 |
|
Section 2.1 |
Conveyance of Receivables |
1 |
Section 2.2 |
Payment of Purchase Price |
3 |
Section 2.3 |
Transfers Intended as Sales |
3 |
Article III THE RECEIVABLES |
4 |
|
Section 3.1 |
Representations and Warranties of the Seller as to the Receivables |
4 |
Section 3.2 |
Repurchase Upon Breach |
7 |
Article IV THE PURCHASER |
7 |
|
Section 4.1 |
Representations of Purchaser |
7 |
Article V THE SELLER |
8 |
|
Section 5.1 |
Representations of Seller |
8 |
Section 5.2 |
Additional Covenants |
10 |
Section 5.3 |
Financial Covenant of the Seller |
11 |
Section 5.4 |
Liability of the Seller; Indemnities |
11 |
Article VI MISCELLANEOUS |
12 |
|
Section 6.1 |
Notices |
12 |
Section 6.2 |
Prior Agreements Superseded |
12 |
Section 6.3 |
Amendment |
12 |
Section 6.4 |
Parties Bound |
13 |
Section 6.5 |
Execution in Counterparts |
13 |
Section 6.6 |
Assignment |
13 |
Section 6.7 |
Severability of Provisions |
13 |
Section 6.8 |
Further Instruments |
13 |
Section 6.9 |
Governing Law |
13 |
Section 6.10 |
Consent to Jurisdiction |
14 |
Section 6.11 |
Waiver of Jury Trial |
14 |
Section 6.12 |
Third Party Beneficiaries |
15 |
Section 6.13 |
Termination of Agreement |
15 |
Section 6.14 |
Bank Originator |
15 |
APPENDIX
Appendix A |
- |
Eligibility Criteria |
Appendix B |
- |
Enova Credit Policies |
EXHIBIT
Exhibit A |
- |
Form of First Step Assignment |
--
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This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, is entered into as of as of October 20, 2017 (as it may be amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof, this “ Agreement ”), by and between Enova Finance 5, LLC, a Delaware limited liability company (the “ Purchaser ”), and Enova International, Inc., a Delaware corporation, as the Seller (the “ Seller ’).
RECITALS:
WHEREAS, the Purchaser desires to purchase from the Seller, from time to time, certain Receivables arising in connection with certain Contracts;
WHEREAS, the Seller is willing to sell such Receivables and Other Conveyed Property to the Purchaser, from time to time;
WHEREAS, the Purchaser may wish to sell or otherwise transfer on the date hereof and the date of any First Step Assignment such Receivables and Other Conveyed Property to the Issuer; and
WHEREAS, the Issuer may issue debentures, notes, participations, certificates of beneficial interest or other interests or securities to fund its acquisition of such Receivables and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:
Section 1.1 Definitions . Whenever used in this Agreement and unless the context requires a different meaning, capitalized terms used herein and not otherwise expressly defined herein shall have the meanings assigned to such terms in Part I of Appendix A to the Amended and Restated Indenture, dated as of October 20, 2017, by and between the Issuer and Bankers Trust Company, in its capacity as the Indenture Trustee (the “ Indenture ”), which is incorporated by reference herein and made a part hereof. The rules of construction set forth in Part II of Appendix A in the Indenture shall apply to this Agreement and be incorporated by reference herein and made a part hereof.
Article II
CONVEYANCE OF RECEIVABLES
Section 2.1 Conveyance of Receivables .
(a) In consideration of the Purchaser’s delivery to, or as may be directed by, the Seller on any Purchase Date of the Purchase Price therefor, the Seller agrees to sell, transfer, assign, set over and otherwise convey to the Purchaser, without recourse (except as otherwise provided
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herein) all right, title and interest of the Seller, whether now existing or hereafter arising, in, to and under:
(i) the Related Receivables set forth in the .csv file delivered in connection with each First Step Assignment executed and delivered by the Seller on each Purchase Date and all monies received with respect to such Related Receivables on and after the related Cutoff Date;
(ii) the Receivable File related to each Related Receivable and any and all other Instruments, including Promissory Notes (each as defined in the UCC), if any, and other documents relating to the Related Receivables and the related Obligors acquired by the Seller pursuant to the Transfer Agreement;
(iii) all present and future claims, demands, causes and choses in action in respect of any of the foregoing, including the right for the Purchaser or its assignee to bring any such claim, demand, cause or chose in action in the name of the Seller and the right, title and interest of the Seller in, to and under the Transfer Agreement; and
(iv) all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all cash and non-cash proceeds, and other property consisting of, arising from or relating to all or any part of any of the foregoing.
(b) The Purchaser shall purchase and the Seller shall transfer to the Purchaser the Related Receivables and Other Conveyed Property described in paragraph (a) above only upon the satisfaction of each of the conditions set forth below on or prior to the related Purchase Date:
(i) the Seller shall have provided the Purchaser, each Asset Servicer, the Backup Servicer and the Master Servicer with either access to an FTP website or a copy of a data tape or other electronic file that, in either case, contains information regarding the Related Receivables and shall have provided any information reasonably requested by any of the foregoing with respect to the Seller, any Asset Servicer, the Master Servicer or the Related Receivables, as applicable;
(ii) the Seller shall have deposited into the Collection Account all Collections received (if any) on and after the Cutoff Date in respect of the Related Receivables to be purchased on such Purchase Date;
(iii) as of each Purchase Date, (A) the Seller shall be Solvent and shall not fail to be Solvent as a result of the transfer of the Related Receivables on such Purchase Date, (B) the Seller shall not intend to incur or believe that it shall incur debts that would be beyond its ability to pay as such debts mature, (C) such transfers shall not have been made with actual intent to hinder, delay or defraud any Person, and (D) the assets of the Seller shall not constitute unreasonably small capital to carry out its business as then conducted and all businesses and transactions in which it is about to engage;
(iv) no Event of Default shall have occurred and be continuing;
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(v) the Funding Period Termination Date shall not have occurred;
(vi) each of the representations and warranties made by the Seller pursuant to Section 3.1 shall be true and correct as of the related Purchase Date and the Seller shall have performed all obligations required to be performed by it hereunder or in any First Step Assignment on or prior to such Purchase Date;
(vii) the Seller shall have taken all actions required to convey and maintain the ownership interest of the Purchaser in the Related Receivables and Other Conveyed Property;
(viii) no selection procedures adverse to the interests of the Purchaser or the Noteholders shall have been utilized in selecting the Related Receivables to be sold on such Purchase Date;
(ix) no Asset Servicer Default or Master Servicer Default shall have occurred and be continuing;
(x) the Seller shall have delivered each related Receivable File to the Master Servicer no later than two (2) Business Days prior to the requested Purchase Date; and
(xi) the Seller shall have executed and delivered to the Purchaser a First Step Assignment in the form of Exhibit A with respect to the Related Receivables and Other Conveyed Property related thereto to be purchased on such Purchase Date.
Section 2.2 Payment of Purchase Price .
(a) In consideration for the sale of the Related Receivables and Other Conveyed Property described in Section 2.1(a) or the related First Step Assignment, the Purchaser shall, on each Purchase Date on which Related Receivables are transferred hereunder, pay to or upon the order of the Seller the applicable Purchase Price. The Purchaser and the Seller agree that the Purchase Price paid with respect to any Related Receivables shall represent fair and reasonably equivalent value for the Receivables then sold and purchased. A portion of the Purchase Price shall be paid to the Seller in immediately available funds and the balance of such purchase shall be paid through a deemed distribution from the Seller of the applicable amount to the equity of the Purchaser (which, if the Purchaser is owned indirectly by the Seller, shall be effected by a consecutive series of deemed distributions by each intermediate entity in the ownership chain to its subsidiary until such distribution is received by the Purchaser). The amount of the deemed capital contribution shall be duly recorded by the Seller and the Purchaser.
(b) Immediately upon the conveyance to the Purchaser by the Seller of the Related Receivables and Other Conveyed Property pursuant to Section 2.1 and the related First Step Assignment, all right, title and interest of the Seller in and to such Related Receivables and Other Conveyed Property shall terminate, and all such right, title and interest shall vest in the Purchaser.
Section 2.3 Transfers Intended as Sales . It is the intention of the Seller and the Purchaser that each transfer and assignment contemplated by this Agreement and each First Step Assignment shall constitute an absolute and irrevocable sale of the Related Receivables and Other
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Conveyed Property from the Seller to the Purchaser (and not a loan or secured borrowing) free and clear of all liens and rights of others and it is intended that the beneficial interest in and title to the Related Receivables and Other Conveyed Property shall not be part of the Seller’s estate in the event of the filing of a petition by or against the Seller under any bankruptcy or insolvency law. In the event that, notwithstanding the intent of the Seller and the Purchaser, the transfers and assignments contemplated hereby or by any First Step Assignment is held not to be a sale, this Agreement and each First Step Assignment shall constitute a security agreement under applicable law and the Seller hereby grants to the Purchaser a security interest in the Related Receivables and Other Conveyed Property, which security interest has been ultimately assigned to the Indenture Trustee for the benefit of the Noteholders pursuant to the Indenture.
Section 3.1 Representations and Warranties of the Seller as to the Receivables . The Seller makes the following representations and warranties to the Purchaser as to the Related Receivables conveyed to the Purchaser pursuant to Section 2.1(a) above, on which the Purchaser relies in purchasing the Related Receivables on any Purchase Date, and on which the Variable Funding Note Noteholders will rely in making Advances under their Variable Funding Note. All such representations and warranties shall survive the sale, transfer and assignment of the Related Receivables to the Purchaser and the pledge thereof to the Indenture Trustee for the benefit of the Noteholders pursuant to the Indenture.
(a) Characteristics of Receivables . Each Related Receivable is an Eligible Receivable in accordance with the Eligibility Criteria and no selection procedures adverse to any party hereto have been utilized in selecting the Related Receivables to be sold hereunder.
(b) Schedule of Receivables . The information with respect to the Related Receivables set forth in the .csv file delivered in connection with the related First Step Assignment is true and correct in all material respects as of the close of business on the related Cutoff Date.
(c) Compliance With Law . Each Related Receivable has been originated in compliance with, and complies with, all requirements of applicable federal, State and local laws (including all Governmental Rules) in all material respects. Each Receivable has been serviced in compliance with all applicable requirements of law in all material respects and all material rights with respect to each Related Receivable are in full force and effect.
(d) No Government Obligor . None of the Related Receivables are due from the United States of America or any State or from any agency, department or instrumentality of the United States of America or any State.
(e) Receivables in Force . As of the close of business on the related Cutoff Date no Related Receivable has been satisfied, subordinated or rescinded.
(f) No Amendments . Except as permitted under the Servicing Agreement or the other Transaction Documents, no Related Receivable has been amended, modified, waived or refinanced.
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(g) No Defenses . No right of rescission, setoff, counterclaim or defense exists or has been asserted or threatened in writing with respect to any Related Receivable. The operation of the terms of any Related Receivable or the exercise of any right thereunder will not render such Related Receivable unenforceable in whole or in part and such Related Receivable is not subject to any such right of rescission, setoff, counterclaim, or defense.
(h) Title . Immediately prior to each transfer and assignment herein contemplated, the Seller had good and marketable title to each Related Receivable and the related Other Conveyed Property and the Seller was the sole owner thereof, free and clear of all liens, claims, encumbrances, security interests, and rights of others, and, immediately upon the transfer thereof to the Purchaser, the Purchaser shall have good and marketable title to the Receivables and the Other Conveyed Property and shall be the sole owner thereof, free and clear of all Liens.
(i) Lawful Assignment; No Consent Required . No Related Receivable has been originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful the sale, transfer and assignment of such Related Receivable under this Agreement. The Seller has not entered into any agreement that prohibits, restricts or conditions the assignment of any portion of the Related Receivables. For the validity of such sales, transfers, assignments and pledges, no consent by any Person (that has not been obtained) is required under any agreement or applicable law.
(j) All Filings Made . All filings (including UCC filings or other actions) necessary in any jurisdiction to give the Purchaser a first priority perfected ownership interest in the Related Receivables and the Other Conveyed Property, including the proceeds of the Related Receivables, shall have been made, given, taken or performed.
(k) Receivable File . The Seller (i) has caused the Master Servicer to be in possession of the Receivable File related to each Related Receivable and such Receivable File shall be complete in all material respects as of the related Purchase Date and (ii) has, prior to the related Purchase Date, delivered (or caused to be delivered) to the Verification Agent by electronic means, the documents related to each Related Receivable required to be verified by the Verification Agent prior to each Advance. Each Receivable File shall be in electronic form and there shall be no physical Receivable Files to be delivered.
(l) Valid and Binding Obligation of Obligor . Each Related Receivable represents the legal, valid and binding obligation in writing of the Obligor thereunder and is enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and all parties to the related Contract had full legal capacity to execute and deliver such Contract and all other documents related thereto and to grant any security interest purported to be granted thereby. No Related Receivable is subject to any right of setoff by the Obligor.
(m) Characteristics of Obligors . The related Obligor is not, and during the period from the Eligibility Date for each Related Receivable to the applicable Purchase Date, has not become, the subject of an Insolvency Event.
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(n) Full Amount Advanced; No Agreement to Lend . The full amount of each Related Receivable has been advanced to the related Obligor, and there are no requirements for future advances thereunder.
(o) No Impairment . Neither the Seller nor the Purchaser has done anything to convey any right to any Person that would result in such Person having a right to payments due under any Related Receivable or otherwise to impair the rights of the Purchaser or the Indenture Trustee in any Related Receivable or the proceeds thereof.
(p) Receivables Not Assumable . No Related Receivable is assumable by another Person in a manner which would release the Obligor thereof from such Obligor’s obligations to the Purchaser or the Seller with respect to such Related Receivable.
(q) Servicing . At all times prior to the Eligibility Date of a Related Receivable, the servicing of such Related Receivable and the collection practices relating thereto have been lawful and in accordance with the Credit Policies and the Servicing Policy; and other than the Master Servicer, the applicable Asset Servicer and the Backup Servicer pursuant to the Transaction Documents, no other person has the right to service such Related Receivable.
(r) Creation of Security Interest . This Agreement creates a valid and continuing security interest (as defined in the UCC) in the Related Receivables and the Other Conveyed Property in favor of the Purchaser, which security interest is prior to all other Liens (other than Permitted Liens) and is enforceable as such as against creditors of and purchasers from the Seller.
(s) Perfection of Security Interest in Receivables and Other Conveyed Property . The Seller has caused the filing of all appropriate financing statements and amendments thereto in the proper filing office in the appropriate jurisdictions under applicable law, in order to perfect the first priority security interest in the Related Receivables and the Other Conveyed Property granted to the Purchaser hereunder pursuant to Section 2.3 and the related First Step Assignment.
(t) Unsecured Loan . Each Related Receivable relates to an unsecured consumer installment loan.
(u) No Other Security Interests by Seller . Other than the security interest granted to the Purchaser pursuant to Section 2.3 and the related First Step Assignment, the Seller has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed, any of the Related Receivables or Other Conveyed Property, other than such security interests as are released at or before the conveyance thereof. The Seller has not authorized the filing of, nor is the Seller aware of, any financing statements filed against the Seller that include a description of collateral covering any portion of the Related Receivables or the Other Conveyed Property, other than any financing statement relating to the security interest granted to the Purchaser hereunder, or that has been terminated or released as to the Related Receivables or the Other Conveyed Property. As of the close of business on the related Cutoff Date, the Seller is not aware of any judgment or tax lien filings against the Seller.
(v) Records . On or prior to each Purchase Date, the Seller will have caused its records (including electronic ledgers) relating to each Related Receivable to be conveyed by it on such
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Purchase Date to be clearly and unambiguously marked to reflect that such Related Receivable was conveyed by it to the Purchaser.
(w) Computer Information . The electronic information made available by the Seller to the Purchaser and the Verification Agent with respect to each Purchase Date is, as of the related Cutoff Date, complete and accurate and includes a description of the same Receivables described in the .csv file delivered in connection to the related First Step Assignment.
(x) No Pre-existing Indebtedness . The Seller is not transferring any Related Receivable to the Purchaser in connection with any pre-existing indebtedness.
(y) Past Due . No portion of any scheduled payment with respect to Receivable is more than 0 days past due as of the related Purchase Date.
Section 3.2 Repurchase Upon Breach . The Seller shall inform the Purchaser and the Indenture Trustee promptly upon the discovery of (or upon receiving notice from the Indenture Trustee or any Noteholder of) any breach of the representations and warranties made by the Seller pursuant to Section 3.1 with respect to any Related Receivables conveyed to the Purchaser pursuant to Section 2.1(a) . Unless the breach shall have been cured within ten (10) Business Days following notice to the Purchaser and the Indenture Trustee, the Seller shall within five (5) Business Days of the end of such ten (10) Business Day period, repurchase the applicable Related Receivable on the date and for the amount specified in the Sale Agreement, without further notice to the Purchaser hereunder. In consideration of the repurchase of any Related Receivable, the Seller shall remit the Receivable Repurchase Price to the Collection Account on the date of such repurchase. Upon the deposit of the Receivable Repurchase Price in respect of any such Receivable into the Collection Account, the Purchaser shall cause the Master Servicer to release the related Receivable File and the Purchaser shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by the Seller and delivered to the Purchaser and necessary to vest in the Seller or its designee title to such Receivable. The sole remedies of the Purchaser under this Agreement with respect to any Receivables as to which a breach of representations and warranties pursuant to Section 3.1 has occurred shall be to enforce the Seller’s obligation to repurchase such Receivables pursuant to this Section 3.2 . The purchase obligations of the Seller under this Section 3.2 shall be continuing and shall survive the termination of the Servicing Agreement and any termination of the Master Servicer.
Section 4.1 Representations of Purchaser . The Purchaser, as of each Purchase Date, hereby represents and warrants that:
(a) The Purchaser is an entity duly formed, validly existing and in good standing under the laws of the State of its organization, is duly qualified to do business and is in good standing in all states where such qualification is required, except in those states where the failure to be so qualified has not had and could not be reasonably expected to have, a Material Adverse Effect, has all necessary limited liability company power and authority to enter into this Agreement and each
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of the other Transaction Documents to which it is a party and to perform all of its obligations hereunder and thereunder.
(b) The Purchaser has all requisite right and power and is duly authorized and empowered to enter into, execute, deliver and perform this Agreement and each other Transaction Document to which it is a party and this Agreement and each other Transaction Document to which the Purchaser is a party are the legal, valid and binding obligations of the Purchaser and are enforceable against the Purchaser in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity).
(c) The execution, delivery and performance by the Purchaser of this Agreement and each of the Transaction Documents to which it is a party does not and shall not (i) violate any provision of any applicable law, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Purchaser, (ii) violate any provision of its formation documents or limited liability company agreement, or (iii) result in a breach of or constitute a default under the terms of any indenture, loan, credit agreement or any other agreement, lease or instrument to which the Purchaser is a party or by which it or any of its assets or properties may be bound or affected; and the Purchaser is not in default of any such law, order, writ, judgment, injunction, decree, determination or award or any such indenture, agreement, lease or instrument.
(d) No consent, approval, license, exemption of or filing or registration with, giving of notice to, or other authorization of or by, any court, administrative agency or other Governmental Authority is or shall be required in connection with the execution, delivery or performance by the Purchaser of this Agreement and each other Transaction Document for the valid consummation of the transactions contemplated hereby or thereby, other than the filing of financing statements.
(e) There is no action, suit, proceeding or investigation pending or threatened in writing against or affecting the Purchaser before or by any court, administrative agency or other Governmental Authority that brings into question the validity of the transactions contemplated hereby, or that might result in any Material Adverse Effect.
Section 5.1 Representations of Seller . The Seller, as of each Purchase Date, hereby represents and warrants that:
(a) The Seller is a corporation, duly incorporated, validly existing and in good standing under the laws of the state of its organization, is duly qualified to do business and is in good standing as a foreign corporation in all states where such qualification is required, except in those states where the failure to be so qualified has not had and could not be reasonably expected to have, a Material Adverse Effect, has all necessary corporate power and authority to enter into this Agreement and each other Transaction Document to which it is a party and to perform all of its obligations hereunder and thereunder, and the Seller has obtained all necessary licenses, permits,
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consents or approvals in each jurisdiction in which failure to so qualify or to obtain such licenses, permits, consents and approvals would have a Material Adverse Effect on this Agreement or the transactions contemplated hereby or on the ability of the Seller to perform its obligations under this Agreement.
(b) The Seller has all requisite right and power and is duly authorized and empowered to enter into, execute, deliver and perform this Agreement and each other Transaction Document to which it is a party and this Agreement and each other Transaction Document to which the Seller is a party are the legal, valid and binding obligations of the Seller, and are enforceable against the Seller in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity).
(c) The execution, delivery and performance by the Seller of this Agreement and each other Transaction Document to which it is a party does not and shall not (i) violate any provision of any law, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Seller, (ii) violate any provision of its charter documents, or (iii) result in a breach of or constitute a default under any indenture, loan, credit agreement or any other agreement, lease or instrument to which the Seller is a party or by which it or any of its assets or properties may be bound or affected; and the Seller is not in default of any such law, order, writ, judgment, injunction, decree, determination or award or any such indenture, agreement, lease or instrument.
(d) All authorizations, consents, orders, filings, notices, or approvals of or registrations or declarations with, any Governmental Authority required to be obtained, effected or given by the Seller in connection with the execution and delivery by the Seller of this Agreement and the performance by the Seller of the Transactions contemplated by this Agreement have been duly obtained, effected or given and are in full force and effect, other than the filing of financing statements.
(e) No event has occurred and is continuing which constitutes an Event of Default or Regulatory Trigger Event. There is no action, suit, proceeding or investigation pending or threatened in writing against or affecting the Seller before or by any court, administrative agency or other governmental authority that brings into question the validity of the transactions contemplated hereby or by the other Transaction Documents, or that might result in any Material Adverse Effect.
(f) The Seller is Solvent. The Seller shall not fail to be Solvent by the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and the capital remaining in the Seller is not now and shall not become unreasonably small to permit the Seller to carry on its business and transactions and all businesses and transactions in which it is about to engage. The Seller does not intend to, nor does it reasonably believe it shall, incur debts beyond its ability to repay the same as they mature.
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(g) Not an Investment Company. The Seller is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act. The purchase of Related Receivables by the Purchaser hereunder, the application of the proceeds hereof and the consummation of the transactions contemplated by this Agreement will not violate any provision of the Securities Act or the Investment Company Act.
Section 5.2 Additional Covenants .
(a) Sale . The Seller agrees to treat the conveyances hereunder as sales for all purposes (including legal and bankruptcy purposes) on all relevant books, records, tax returns, financial statements and other applicable documents, and from and after the Purchase Date relating to any Related Receivables, the Seller shall not take any action inconsistent with the Purchaser’s absolute ownership of the Related Receivables and shall not claim any ownership interest in the Related Receivables; provided , that the financial statements of the Purchaser may be consolidated with those of the Seller in accordance with GAAP. The Seller will not make any transfer of Receivables hereunder if the Seller or the Purchaser is then insolvent or would be rendered insolvent thereby.
(b) Non-Petition . The Seller covenants and agrees that, to the fullest extent permitted by applicable law, it will not take any action to pursue any remedy against the Purchaser that it may have hereunder, in law, in equity or otherwise, until one (1) year and one (1) day have passed since the date on which all of the Notes have been paid in full. The Purchaser and the Seller agree that damages will not be an adequate remedy for breach of this covenant and that this covenant may be specifically enforced by the Purchaser.
(c) Cooperation . If an Event of Default shall have occurred and be continuing, the Seller and the Purchaser shall cooperate with and provide all information and access reasonably requested by the Indenture Trustee or the Noteholders in connection with any actions taken in connection therewith pursuant to the Transaction Documents.
(d) Accounts . The Seller covenants and agrees it shall not, nor direct any Person to, deposit any Collections with respect to the Related Receivables in any account other than the Collection Account or the Collection Receipt Accounts.
(e) Changes to the Credit Policies . The Seller shall (i) deliver a written summary on or prior to the tenth calendar day of each month (or if the tenth calendar day of any given month is not a Business Day, the next following Business Day) of the immaterial changes or modifications that have been made to the Credit Policy since delivery of the prior summary delivered pursuant to this Section 5.2(e)(i) (or in the case of the initial summary, since the Closing Date), to the Issuer, the Indenture Trustee and the Verification Agent, and (ii) furnish notice to the Issuer, the Indenture Trustee and the Verification Agent of any material proposed change or modification to the Credit Policy and any such proposed change or modification to the Credit Policy may only be made with the prior consent of the Majority Holders. If an item set forth in the written summary described above in clause (i) is deemed a material change or modification to the Credit Policy by the Majority Holders or if a material change or modification is made to the Credit Policy without the prior consent of the Majority Holders, then the Seller shall within five (5) Business Days of receiving any request to do so from the Indenture Trustee (at the direction of the Majority Holders)
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repurchase any and all Receivables (i) that were originated from the date such change or modification to the Credit Policy was made effective and that were sold to the Purchaser and (ii) that but for such change or modification to the Credit Policy would not have otherwise been an Eligible Receivable. In consideration of any repurchase hereunder, the Seller shall remit the Receivable Repurchase Price to the Collection Account on the date of such repurchase. Upon the deposit of the Receivable Repurchase Price in respect of any such Receivable into the Collection Account, the Purchaser shall cause the Master Servicer to release the related Receivable File and the Purchaser shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by the Seller and delivered to the Purchaser and necessary to vest in the Seller or its designee title to such Receivable. No Event of Default arising under Section 7.01(s) of the Indenture shall be deemed to have occurred unless and until payment of the Receivables Purchase Price is not made prior to the end of the five (5) Business Day period as described in this Section 5.2(e).
Section 5.3 Financial Covenant of the Seller . No Financial Trigger has occurred and is continuing.
Section 5.4 Liability of the Seller; Indemnities .
(a) The Seller shall defend, indemnify and hold harmless the Purchaser, the Indenture Trustee, and the Noteholders and their Affiliates and their respective officers, directors, agents and employees for any liability as a result of the failure of a Receivable conveyed to the Purchaser pursuant to Section 2.1(a) above to be originated in compliance with all requirements of law (including any Governmental Rules) and for any breach of any of its representations, warranties, covenants or other agreements contained herein, including:
(i) any taxes that may at any time be asserted against any such Person with respect to the transactions contemplated in this Agreement and any of the Transaction Documents, including any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but, in the case of the Purchaser, not including any taxes asserted with respect to federal or other income taxes arising out of payments on the Notes) and costs and expenses in defending against the same;
(ii) any loss, liability or expense incurred by reason of the Seller’s willful misfeasance, bad faith or negligence in the performance of its duties under this Agreement, or by reason of reckless disregard of its obligations and duties under this Agreement;
(iii) any and all costs, expenses, losses, claims, damages and liabilities arising out of, or incurred in connection with the acceptance or performance of the trusts and duties set forth herein and in the Transaction Documents, except to the extent that such cost, expense, loss, claim, damage or liability shall be due to the willful misfeasance, bad faith or negligence (except for errors in judgment) of such indemnified party;
(iv) any and all costs, expenses, losses, claims, damages and liabilities arising out of or relating to the Seller’s representations and warranties, covenants or other agreements contained herein or in any other Transaction Document to which the Seller is a party; or
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(v) any and all costs, expenses, awards, penalties, fines, damages, levies, reasonable and documented attorney’s fees, or monetary costs of any kind arising out of or relating to any (a) Governmental Action pertaining in any way to the Receivables, or (b) any claim, lawsuit, or arbitration of any kind asserted by a non-governmental party related to the Receivables.
(b) Indemnification under this Section 5.4 shall survive the termination of this Agreement and the other Transaction Documents and shall include reasonable and documented fees and expenses of counsel and other expenses of litigation. These indemnity obligations shall be in addition to any obligation that the Seller may otherwise have under applicable law, hereunder or under any other Transaction Document.
Notwithstanding any provision of this Section 5.4 or any other provision of this Agreement, nothing in this Agreement shall be construed as to require the Seller to provide any indemnification hereunder or under any other Transaction Document for any costs, expenses, losses, claims, damages or liabilities arising out of, or incurred in connection with, credit losses on or the diminution in value of the Receivables or Other Conveyed Property.
Section 6.1 Notices . Except when telephonic notice is expressly authorized by this Agreement, any notice, request, demand, direction, consent, waiver, authorization or other communication to any party in connection with this Agreement shall be in writing and shall be sent by manual delivery, facsimile transmission, overnight courier, electronic mail or United States mail (postage prepaid) addressed to such party at the address specified in Part III of Appendix A to the Indenture.
Section 6.2 Prior Agreements Superseded . This Agreement, together with the other Transaction Documents, constitutes the sole and only agreement of the parties hereto and supersedes any prior understandings or written or oral agreements between the parties respecting the subject matter of this Agreement and the other Transaction Documents.
Section 6.3 Amendment . The parties hereto may not amend, modify or waive any provision hereof without the prior consent of the Indenture Trustee at the direction of the Majority Holders; except that, following the delivery by the Purchaser and Seller to the Indenture Trustee of an Officer’s Certificate to the effect that the Purchaser and Seller reasonably believes that such amendment will not have a Material Adverse Effect and is not reasonably expected to have a Material Adverse Effect at any time in the future, the Purchaser and the Seller may amend this Agreement, for any of the following purposes:
(a) to add to the covenants of the Purchaser or Seller, or to surrender any right or power herein conferred upon the Purchaser or Seller, for the benefit of the Holders of the Notes (and if such covenants or the surrender of such right or power are to be for the benefit of less than all Notes, stating that such covenants are expressly being included or such surrenders are expressly being made solely for the benefit of one or more specified Notes);
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(b) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein; or
(c) to qualify for sale treatment of the transactions contemplated by this Agreement under generally accepted accounting principles.
Section 6.4 Parties Bound . This Agreement shall be binding upon the parties hereto and their respective successors and assigns, and shall inure to the benefit of such parties hereto and their respective successors and permitted assigns.
Section 6.5 Execution in Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. The parties agree that the delivery of this Agreement may be effected by means of an exchange of facsimile or other electronic means (including PDF signatures).
Section 6.6 Assignment . Neither party hereto may assign or delegate its rights, duties or obligations hereunder or interest herein, (i) to any entity which is not a Subsidiary of Enova without (x) the prior consent of the Indenture Trustee at the direction of the Majority Holders and (y) the assignee executing an agreement of assumption to perform every obligation of the assignor under this Agreement and the other Transaction Documents, and (ii) to a Subsidiary of Enova without (y) the assignor delivering an Officer’s Certificate to the Indenture Trustee certifying that such assignment or delegation will not have a Material Adverse Effect on the Noteholders and (x) the assignee executing an agreement of assumption to perform every obligation of the assignor under this Agreement and the other Transaction Documents. Any assignment or other transfer in violation of this provision shall be void. Notwithstanding the foregoing, the Purchaser may transfer all of its rights under this Agreement to the Issuer as contemplated in the Sale Agreement.
Section 6.7 Severability of Provisions . Any provision which is determined to be unconscionable, against public policy or any provision of this Agreement which 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 or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 6.8 Further Instruments . Each party hereto shall from time to time authorize, execute or deliver, and shall cause each of its subsidiaries to authorize, execute or deliver, all such amendments, supplements and other modifications hereto and to the other Transaction Documents and all such financing statements or continuation statements, instruments of further assurance and any other instruments, and shall take such other actions, as the Indenture Trustee or the Noteholders reasonably requests and deems necessary or advisable in furtherance of the agreements contained herein.
Section 6.9 Governing Law . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER
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THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
Section 6.10 Consent to Jurisdiction .
(a) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING HERETO OR ANY OTHER TRANSACTION DOCUMENT, OR ANY OF THE NOTES, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (i) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS, (ii) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, (iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY HERETO AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 13.11 OF THE INDENTURE AND TO ANY PROCESS AGENT SELECTED BY SUCH PARTY IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER EACH PARTY HERETO IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT, AND (iv) AGREES THAT THE INDENTURE TRUSTEE AND THE NOTEHOLDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY PARTY HERETO IN THE COURTS OF ANY OTHER JURISDICTION.
(b) EACH OF THE PURCHASER AND THE SELLER HEREBY AGREES THAT PROCESS MAY BE SERVED ON IT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE ADDRESS PERTAINING TO IT AS SPECIFIED IN SECTION 6.1. ANY AND ALL SERVICE OF PROCESS AND ANY OTHER NOTICE IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE EFFECTIVE AGAINST ANY OF THE SELLER OR THE PURCHASER IF GIVEN BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY OTHER MEANS OR MAIL WHICH REQUIRES A SIGNED RECEIPT, POSTAGE PREPAID, MAILED AS PROVIDED ABOVE.
Section 6.11 Waiver of Jury Trial . EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY DEALINGS BETWEEN IT RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT IT HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT IT WILL CONTINUE TO RELY ON
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THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WAIVER SPECIFICALLY REFERRING TO THIS SECTION 6.11 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE NOTES ISSUED UNDER THE INDENTURE. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 6.12 Third Party Beneficiaries . The Seller acknowledges that the Purchaser has assigned all of its rights, title and interest in and to this Agreement to the Issuer, which has pledged all of its rights, title and interest in and to this Agreement to the Indenture Trustee for the benefit of the Noteholders, and that the Issuer, Indenture Trustee and the Noteholders may enforce this Agreement as if they were parties hereto. Each of the Issuer, Indenture Trustee and the Noteholders is an intended third party beneficiary of this Agreement and shall be entitled to enforce this Agreement as if it were a party hereto, provided , however , that any exercise of such rights by a Noteholder shall be subject to and limited by any conflicting position taken by the Majority Holders.
Section 6.13 Termination of Agreement . This Agreement shall terminate and be of no further force or effect upon the termination of the Indenture.
Section 6.14 Bank Originator . Notwithstanding anything to the contrary in any Transaction Document, the Seller or any Originator may establish a program or platform with one or more insured depository institutions (each a “ Bank Originator ” and collectively the “ Bank Originators ”) under which the Seller, any such Originator or the Master Servicer will provide marketing and processing services to facilitate the origination by each Bank Originator of consumer loans represented by Contracts, and all rights and obligations thereunder, including the obligation of an Obligor to make payments thereunder (each constituting a “ Bank Originated Receivable ”), which each Bank Originator will subsequently sell, together with all Other Conveyed Property of the type described in Section 2.1(a) to the Seller or any such Originator, under one or more sale agreements (each, a “ Bank Originator Sale Agreement ”); provided , however , that the Majority Holders have provided confirmation that any such Bank Originator is reasonably acceptable to the Majority Holders; provided further that as of the Closing Date, the Republic Loan Purchase Agreement has been approved by the Majority Holders. Any Bank Originated Receivables or Other Conveyed Property transferred to the Seller or any Originator by a Bank Originator under a Bank Originator Sale Agreement may be included as Receivables and Other Conveyed Property sold to the Purchaser hereunder so long as:
(a) the Majority Holders have provided confirmation that such Bank Originator Sale Agreement is in form and substance reasonably acceptable to the Majority Holders;
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(b) the representations and warranties contained in Section 3.1 are true and correct with respect to such Receivables; and
(c) such Bank Originated Receivable satisfies the Eligibility Criteria.
Notwithstanding anything to the contrary in any Transaction Document, a Bank Originator may sell, and the Seller or Originator may purchase from a Bank Originator and sell to the Purchaser, participation interests in Bank Originated Receivables instead of the entire ownership of such Bank Originated Receivables, and such participation interests shall be treated for all purposes hereunder as Receivables.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the day and the year first above written.
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ENOVA FINANCE 5, LLC, as Purchaser |
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By: |
/s/ David A Fisher |
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Name:David A Fisher |
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Title:President |
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ENOVA INTERNATIONAL, INC. , as Seller |
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By: |
/s/ David A Fisher |
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Name:David A Fisher |
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Title:President |
[Signature Page to Amended and Restated Receivables Purchase Agreement]
APPENDIX A
TO amended and restated RECEIVABLES PURCHASE AGREEMENT
ELIGIBILITY CRITERIA
A Receivable shall constitute an “Eligible Receivable” if it satisfies each of the following criteria as of its Eligibility Date (or other date as may be specified below):
1. |
Such Receivable has an original term to maturity of no more than 60 months; |
2. |
Such Receivable has an Outstanding Receivable Principal Balance equal to or less than $10,000; |
3. |
Such Receivable has an Annual Percentage Rate that is greater than or equal to ***%, and no greater than 99.0%; |
4. |
Payments under such Receivable are due in Dollars; |
5. |
Such Receivable is a valid, legal, binding and enforceable obligation of the Obligor (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity); |
6. |
Such Receivable shall be payable in equal scheduled installments (other than with respect to the last scheduled installment) without bullet maturity or balloon payment; |
7. |
Such Receivable shall have been originated in all material respects in compliance with all applicable laws (including all Governmental Rules); |
8. |
Such Receivable shall not, along with the related Contract or other loan documents, violate any applicable laws in any material respect; |
9. |
Such Receivable is not a Charged-Off Receivable at the time such Receivable is sold to the Issuer and as of the applicable Conversion Date; |
10. |
Such Receivable shall not be evidenced by a judgment or have been reduced to judgment; |
11. |
Such Receivable shall have been originated in accordance with the Credit Policy; |
12. |
The related Obligor is not bankrupt or deceased; |
13. |
The related Obligor is a natural person; |
14. |
The related Obligor is an individual who is a permitted debtor under applicable state laws and is not an employee or Affiliate of the Originator or any Bank Originator; |
15. |
At the time of the origination of such Receivable the Obligor is residing in either: (a) to the extent originated by an Originator that is not a Bank Originator, *** (provided that the |
Appendix A-
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interest rate of such loan is less than 36% per annum), *** or any other jurisdiction approved by the Majority Holders in writing; or (b) to the extent originated by a Bank Originator in connection with the Republic Loan Purchase Agreement, *** or any other jurisdiction approved by the Majority Holders in writing; |
16. |
Such Receivable is secured by a fully executed Contract with the Obligor; |
17. |
The Master Servicer, in its capacity as Custodian, has certified that the related Receivable Files are complete and has delivered the imaged copies of the documents to be verified by the Verification Agent to the Verification Agent; |
18. |
The Verification Agent has completed its verification of imaged copies of the Verifiable Collateral Documents pursuant to its verification process within two (2) Business Days of the Master Servicer providing such imaged copies to the Verification Agent; |
19. |
The Indenture Trustee, upon acquisition of such Receivable by the Issuer, shall have a perfected, first-priority security interest therein, subject to Permitted Liens; |
20. |
Such Receivable and the related Contract shall not have been modified (other than a Permitted Modification) from its original terms in any material respect; |
21. |
The related Contract does not prohibit the sale, transfer or assignment of such Receivable to the extent such prohibition is enforceable; |
22. |
Such Receivable will be owned by the Purchaser free and clear of any adverse claims, subject to Permitted Liens; |
23. |
Such Receivable shall not be a revolving line of credit; |
24. |
Such Receivable is the liability of an Obligor who is not a “foreign person” within the meaning of Section 1445 and 7701 of the Internal Revenue Code or the rules and regulations promulgated thereunder; provided, that, for the avoidance of doubt, it is agreed and understood that United States military employees and personnel living, working or deployed abroad shall not be excluded by the application of this criteria; |
25. |
Such Receivable represents the undisputed, bona fide transaction created by the lending of money by the Originator or a Bank Originator in the ordinary course of business and completed in accordance with the terms and provisions contained in the related Contract; |
26. |
Such Receivable, if resulting from a Refinancing, is an Eligible Refinancing Receivable; |
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The representations and warranties of the Seller in respect of such Receivable under clauses (c), (f), (h), (i), (l), (m) and (n) of Section 3.1 of this Agreement are true and correct; |
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The Obligor related to such Receivable has paid in full a scheduled installment payment, the funds of which have been received in the Collection Account in the last ninety-five (95) calendar days; |
Appendix A-
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30. |
Such Receivable does not have any Scheduled Receivable Payments due that are greater than twice the initial Scheduled Receivable Payment set forth in the applicable Contract; and |
31. |
Such Receivable is not a Credit Counseling Receivable. |
Appendix A-
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APPENDIX B
TO amended and restated RECEIVABLES PURCHASE AGREEMENT
CREDIT POLICIES
Appendix B-
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[FORM OF] FIRST STEP ASSIGNMENT
For value received, in accordance with the Amended and Restated Receivables Purchase Agreement, dated as of October 20, 2017 (as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “ Purchase Agreement ” between Enova Finance 5, LLC, as Purchaser (the “ Purchaser ”) and Enova International, Inc., as Seller (the “ Seller ”), the Seller does hereby sell, transfer, assign, set over and otherwise convey to the Purchaser, without recourse (subject to the obligations set forth herein and in the Purchase Agreement) all right, title and interest of the Seller in and to the following:
(a) the Related Receivables set forth in the .csv file delivered in connection with this Assignment and all monies received with respect to such Related Receivables on and after the related Cutoff Date;
(b) the Receivable File related to each Related Receivable and any and all other Instruments, including Promissory Notes (each as defined in the UCC) and other documents that the Seller (or its designee) kept on file in accordance with its customary procedures relating to the Related Receivables and the related Obligors;
(c) all present and future claims, demands, causes and choses in action in respect of any of the foregoing, including the right for the Purchaser or its assignee to bring any such claim, demand, cause or chose in action in the name of the Seller and the right, title and interest of the Seller in, to and under the Transfer Agreement; and
(d) all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all cash and non-cash proceeds, and other property consisting of, arising from or relating to all or any part of any of the foregoing.
1. Definitions . All terms defined in the Purchase Agreement (whether directly or by reference to other documents) and used herein shall have such defined meanings when used herein, unless otherwise defined herein.
“ Cutoff Date ” means, with respect to the Receivables and the related Other Conveyed Property being conveyed hereby, _____, 20__.
2. Restatement of Representations and Warranties of Seller . The Seller hereby restates the representations and warranties set forth in Section 3.1 of the Purchase Agreement (with respect to the Related Receivables set forth in the csv file delivered in connection with this Assignment) and Section 5.1 of the Purchase Agreement, with full force and effect as if the same were fully set forth herein. The Seller hereby certifies that all conditions precedent set forth in Section 2.1(b) of the Purchase Agreement have been satisfied.
3. Transfer and Assignment Sale of Receivables . The Seller hereby certifies that the Related Receivables and Other Conveyed Property assigned to the Purchaser hereunder are free and clear of all Liens (other than Permitted Liens and those provided for in the Purchase Agreement) and that the beneficial interest in and title to such Related Receivables and Other
Exhibit A-
EAST\146409059.2
Conveyed Property shall not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. In the event that, notwithstanding the intent of the Seller, the transfer and assignment contemplated hereby and under the Purchase Agreement is held not to be a sale, the transfer and assignment of such Related Receivables and Other Conveyed Property hereunder shall constitute a grant of a security interest by the Seller to the Purchaser in the property referred to in Section 2 above, which security interest has been assigned to the Indenture Trustee for the benefit of the Noteholders, and this Assignment and the Purchase Agreement shall each constitute a security agreement under applicable law.
4. Further Encumbrance of Receivables and Other Conveyed Property .
(a) Immediately upon the conveyance to the Purchaser by the Seller of the Related Receivables and any item of related Other Conveyed Property hereto, all right, title and interest of the Seller in and to such Related Receivables and Other Conveyed Property shall terminate and all such right, title and interest shall vest in the Purchaser.
(b) Immediately upon the vesting of such Related Receivables and Other Conveyed Property in the Purchaser, the Purchaser shall have assumed the sole right to pledge or otherwise encumber such Related Receivables and related Other Conveyed Property.
5. Governing Law . THIS ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Exhibit A-
EAST\146409059.2
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed and delivered by a duly authorized officer on the day and year first above written.
|
ENOVA INTERNATIONAL, INC.
|
|
By:_______________________________
|
Exhibit A-
EAST\146409059.2
Exhibit 21.1
Subsidiaries of Enova International, Inc.
The following is a list of subsidiaries of Enova International, Inc. as of February 26, 2018:
Entity Name |
|
Jurisdiction of
|
Debit Plus, LLC |
|
Delaware |
Debit Plus Technologies, LLC |
|
Delaware |
Debit Plus Payment Solutions, LLC |
|
Delaware |
Debit Plus Services, LLC |
|
Delaware |
DP Labor Holdings, LLC |
|
Delaware |
Enova Online Services, Inc. |
|
Delaware |
Billers Acceptance Group, LLC |
|
Delaware |
Enova Financial Holdings, LLC |
|
Delaware |
CNU Online Holdings, LLC |
|
Delaware |
AEL Net Marketing, LLC |
|
Delaware |
AEL Net of Missouri, LLC |
|
Delaware |
CNU of Alaska, LLC |
|
Delaware |
CNU of Arizona, LLC |
|
Delaware |
CNU of California, LLC |
|
Delaware |
CNU of Colorado, LLC |
|
Delaware |
CNU of Delaware, LLC |
|
Delaware |
CNU of Florida, LLC |
|
Delaware |
CNU of Hawaii, LLC |
|
Delaware |
CNU of Illinois, LLC |
|
Delaware |
CNU of Indiana, LLC |
|
Delaware |
CNU of Iowa, LLC |
|
Delaware |
CNU of Louisiana, LLC |
|
Delaware |
CNU of Maine, LLC |
|
Delaware |
CNU of Michigan, LLC |
|
Delaware |
CNU of Minnesota, LLC |
|
Delaware |
CNU of Mississippi, LLC |
|
Delaware |
CNU of Missouri, LLC |
|
Delaware |
CNU of Montana, LLC |
|
Delaware |
CNU of Nevada, LLC |
|
Delaware |
CNU of New Hampshire, LLC |
|
Delaware |
CNU of New Mexico, LLC |
|
Delaware |
CNU of North Dakota, LLC |
|
Delaware |
CNU of Ohio, LLC |
|
Delaware |
CNU of Oklahoma, LLC |
|
Delaware |
CNU of Oregon, LLC |
|
Delaware |
CNU of Rhode Island, LLC |
|
Delaware |
CNU of South Carolina, LLC |
|
Delaware |
CNU of Tennessee, LLC |
|
Delaware |
CNU of Texas, LLC |
|
Delaware |
CNU of Virginia, LLC |
|
Utah |
CNU of Washington, LLC |
|
Delaware |
CNU of Wisconsin, LLC |
|
Delaware |
CNU of Wyoming, LLC |
|
Delaware |
CNU Technologies of Iowa, LLC |
|
Delaware |
The Business Backer, LLC |
|
Delaware |
CashEuroNet UK, LLC |
|
Delaware |
CashNetUSA of Florida, LLC |
|
Delaware |
CashNetUSA CO, LLC |
|
Delaware |
CashNetUSA OR, LLC |
|
Delaware |
CNU DollarsDirect Canada Inc. |
|
New Brunswick |
CNU DollarsDirect Inc. |
|
Delaware |
CNU DollarsDirect Lending Inc. |
|
Delaware |
DollarsDirect, LLC |
|
Delaware |
DollarsDirect Services Pty Limited |
|
Australia |
Entity Name |
|
Jurisdiction of
|
|
England & Wales |
|
EFR 2016-2, LLC |
|
Delaware |
EFR 2017-1, LLC |
|
Delaware |
Enova Brazil, LLC |
|
Delaware |
Enova Finance 2, LLC |
|
Delaware |
Enova Finance 3, LLC |
|
Delaware |
Enova Finance 4, LLC |
|
Delaware |
Enova Finance 5, LLC |
|
Delaware |
EFR 2016-1, LLC |
|
Delaware |
Enova International GEC, LLC |
|
Delaware |
EuroNetCash, LLC |
|
Delaware |
LH 1003 Servicos de Dados LTDA |
|
Brazil |
LH 1010 Correspondente Bancário e Servicos Ltda. |
|
Brazil |
Mobile Leasing Group, Inc. |
|
Delaware |
Ohio Consumer Financial Solutions, LLC |
|
Delaware |
Onstride Financial UK Ltd |
|
England & Wales |
Headway Capital, LLC |
|
Delaware |
CashNet CSO of Maryland, LLC |
|
Delaware |
CNU of Alabama, LLC |
|
Delaware |
CNU of Idaho, LLC |
|
Delaware |
CNU of Kansas, LLC |
|
Delaware |
CNU of South Dakota, LLC |
|
Delaware |
CNU of Utah, LLC |
|
Utah |
Tennessee CNU, LLC |
|
Delaware |
NC Financial Solutions, LLC |
|
Delaware |
CreditMe, LLC |
|
Delaware |
NC Financial Solutions of Alabama, LLC |
|
Delaware |
NC Financial Solutions of Arizona, LLC |
|
Delaware |
NC Financial Solutions of California, LLC |
|
Delaware |
NC Financial Solutions of Delaware, LLC |
|
Delaware |
NC Financial Solutions of Florida, LLC |
|
Delaware |
NC Financial Solutions of Georgia, LLC |
|
Delaware |
NC Financial Solutions of Idaho, LLC |
|
Delaware |
NC Financial Solutions of Illinois, LLC |
|
Delaware |
NC Financial Solutions of Indiana, LLC |
|
Delaware |
NC Financial Solutions of Kansas, LLC |
|
Delaware |
NC Financial Solutions of Louisiana, LLC |
|
Delaware |
NC Financial Solutions of Maryland, LLC |
|
Delaware |
NC Financial Solutions of Mississippi, LLC |
|
Delaware |
NC Financial Solutions of Missouri, LLC |
|
Delaware |
NC Financial Solutions of Montana, LLC |
|
Delaware |
NC Financial Solutions of Nevada, LLC |
|
Delaware |
NC Financial Solutions of New Hampshire, LLC |
|
Delaware |
NC Financial Solutions of New Jersey, LLC |
|
Delaware |
NC Financial Solutions of New Mexico, LLC |
|
Delaware |
NC Financial Solutions of North Dakota, LLC |
|
Delaware |
NC Financial Solutions of Ohio, LLC |
|
Delaware |
NC Financial Solutions of Oregon, LLC |
|
Delaware |
NC Financial Solutions of Rhode Island, LLC |
|
Delaware |
NC Financial Solutions of South Carolina, LLC |
|
Delaware |
NC Financial Solutions of South Dakota, LLC |
|
Delaware |
NC Financial Solutions of Tennessee, LLC |
|
Delaware |
NC Financial Solutions of Texas, LLC |
|
Delaware |
NC Financial Solutions of Utah, LLC |
|
Utah |
NC Financial Solutions of Virginia, LLC |
|
Utah |
NC Financial Solutions of Wisconsin, LLC |
|
Delaware |
NetCredit Finance, LLC |
|
Delaware |
NetCredit Loan Services, LLC |
|
Delaware |
The Check Giant NM, LLC |
|
Delaware |
Enova Business, LLC |
|
Delaware |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (No. 333-199733) and S-8 (Nos. 333-211413 and 333-200929 ) of Enova International, Inc. of our report dated February 26, 2018 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Chicago, IL
February 26, 2018
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David A. Fisher, certify that:
1. |
I have reviewed this Annual Report on Form 10-K of Enova International, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: February 26, 2018
/s/ David A. Fisher |
David A. Fisher |
President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven E. Cunningham, certify that:
1. |
I have reviewed this Annual Report on Form 10-K of Enova International, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: February 26, 2018
/s/ Steven E. Cunningham |
Steven E. Cunningham |
Executive Vice President—Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Enova International, Inc. (the “Company”) for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Fisher, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Enova International, Inc. and will be retained by Enova International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The undersigned expressly disclaims any obligation to update the foregoing certification except as required by law.
/s/ David A. Fisher |
David A. Fisher |
President and Chief Executive Officer |
Date: February 26, 2018
The foregoing certification is being furnished solely pursuant to the requirements of 18 U.S.C. § 1350 and is not being filed as a part of the Report or as a separate disclosure document.
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Enova International, Inc. (the “Company”) for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven E. Cunningham, Executive Vice President—Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Enova International, Inc. and will be retained by Enova International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The undersigned expressly disclaims any obligation to update the foregoing certification except as required by law.
/s/ Steven E. Cunningham |
Steven E. Cunningham |
Executive Vice President—Chief Financial Officer |
Date: February 26, 2018
The foregoing certification is being furnished solely pursuant to the requirements of 18 U.S.C. § 1350 and is not being filed as a part of the Report or as a separate disclosure document.