CONFIDENTIAL
EXECUTION VERSION
SUPPLEMENTAL INDENTURE NO. 2
to the
Indenture dated as of January 29, 2024
among
BELMONT RIDGE EQUIPMENT TRUST 2024-A, as Issuer,
BELMONT RIDGE BANK, NATIONAL ASSOCIATION, as Servicer,
and
MERIDIAN FIDUCIARY SERVICES, INC., as Indenture Trustee, Paying Agent, Calculation Agent, and Note Registrar
Dated as of April 19, 2024
$48,000,000 Class A-2 Notes (Additional)
CUSIP: 07839LAB3 ISIN: US07839LAB36
Drafted by: Calderwood & Harkness LLP 250 Park Avenue, 40th Floor New York, NY 10177
TABLE OF CONTENTS
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SUPPLEMENTAL INDENTURE NO. 2
This SUPPLEMENTAL INDENTURE NO. 2, dated as of April 19, 2024 (this "Supplemental Indenture No. 2" or this "Supplemental Indenture"), is entered into among:
(1) BELMONT RIDGE EQUIPMENT TRUST 2024-A, a Delaware statutory trust (the "Trust" or the "Issuer");
(2) BELMONT RIDGE BANK, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States ("BRB" or the "Servicer"); and
(3) MERIDIAN FIDUCIARY SERVICES, INC., a Delaware corporation, as Indenture Trustee, Paying Agent, Calculation Agent, and Note Registrar (together with its successors and assigns, the "Indenture Trustee").
RECITALS
A. The Original Indenture. The Issuer, the Servicer, and the Indenture Trustee are parties to that certain Indenture, dated as of January 29, 2024 (as supplemented prior to the date hereof, the "Base Indenture"), among Belmont Ridge Equipment Trust 2024-A, a Delaware statutory trust formed on January 8, 2024 under the Delaware Statutory Trust Act, as amended (12 Del. C. §3801 et seq.), Belmont Ridge Bank, National Association, a national banking association duly organized, validly existing, and in good standing under the laws of the United States pursuant to a charter granted by the Office of the Comptroller of the Currency (OCC Charter No. 91-4428), with its principal office at 600 Lexington Avenue, 32nd Floor, New York, New York 10022, and Meridian Fiduciary Services, Inc., a Delaware corporation, with its corporate trust office at 101 Barclay Street, 12th Floor, New York, New York 10007. The Base Indenture governs the issuance by the Trust of the Series 2024-A Notes and sets forth the terms, conditions, covenants, and other provisions relating thereto.
B. The Original Notes. Pursuant to the Base Indenture, on January 29, 2024, the Trust issued the following classes of Notes:
(i) Class A-1 Notes in the aggregate original principal amount of $130,000,000 (the "Class A-1 Notes"), constituting a money-market tranche bearing interest at a floating rate, and rated "A-1+" by Pinnacle Ratings Group Inc. ("Pinnacle") and "P-1" by Crestline Ratings International LLC ("Crestline"); and
(ii) Class A-2 Notes in the aggregate original principal amount of $220,000,000 (the "Original Class A-2 Notes"), constituting a term tranche bearing interest at a fixed rate, and rated "AAA(sf)" by Pinnacle and "Aaa(sf)" by Crestline.
The total original Series 2024-A issuance was $350,000,000 in aggregate principal amount.
C. Authorization of Additional Notes. Section 2.14 of the Base Indenture provides that the Issuer may, from time to time, without the consent of the existing Noteholders, issue additional Notes of any existing Class, subject to the satisfaction of certain conditions precedent as set forth therein, including, without limitation, the receipt of rating agency confirmations, the delivery of officer's certificates, opinions of counsel, and the conveyance of additional eligible collateral to the Trust. The Issuer now desires to issue an additional $48,000,000 in aggregate principal amount of Class A-2 Notes (the "Tap Notes" or "Additional Class A-2 Notes") under and pursuant to this Supplemental Indenture No. 2, on the terms and conditions set forth herein.
D. Shelf Registration. The Tap Notes are being issued pursuant to the Registration Statement on Form SF-3 (Registration Statement No. 333-276891) filed by the Issuer with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"), which Registration Statement was declared effective by the SEC, and the related Prospectus Supplement to be filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act. The Issuer has complied, or will comply on or prior to the Tap Closing Date, with all applicable requirements of the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, in connection with the offer and sale of the Tap Notes.
E. Trust Formation and Owner Trustee. The Trust was formed as a Delaware statutory trust on January 8, 2024, pursuant to (i) a Certificate of Trust filed with the Secretary of State of the State of Delaware on January 8, 2024 and (ii) a Trust Agreement, dated as of January 22, 2024 (the "Trust Agreement"), between BRB, as depositor, and Keyline Trust Company, National Association, a national banking association, as owner trustee (the "Owner Trustee"), with its principal office at 2100 Market Street, Suite 800, Philadelphia, Pennsylvania 19103. The registered agent of the Trust in the State of Delaware is Capitol Trust Services LLC, with an office at 1209 Orange Street, Wilmington, Delaware 19801. The Trust's employer identification number is 88-4231957.
F. Conditions Precedent. All conditions precedent to the execution and delivery of this Supplemental Indenture No. 2 and to the issuance, authentication, and delivery of the Tap Notes, as set forth in the Base Indenture and this Supplemental Indenture No. 2, have been duly satisfied or will be satisfied on or prior to the Tap Closing Date, including, without limitation:
(i) receipt of written confirmation from Pinnacle Ratings Group Inc. that the issuance of the Tap Notes will not result in a downgrade, qualification, or withdrawal of its "AAA(sf)" rating on the Class A-2 Notes (including the Tap Notes);
(ii) receipt of written confirmation from Crestline Ratings International LLC that the issuance of the Tap Notes will not result in a downgrade, qualification, or withdrawal of its "Aaa(sf)" rating on the Class A-2 Notes (including the Tap Notes);
(iii) delivery of an Officer's Certificate of BRB, executed by Derek Ashworth, Treasurer & Head of Capital Markets, certifying, among other things, that (a) no Event of Default or Servicer Default has occurred and is continuing as of the date hereof and (b) the Tap Pool receivables satisfy all applicable eligibility criteria;
(iv) delivery of opinions of counsel from (a) Calderwood & Harkness LLP, as counsel to the Issuer, (b) Whitfield & Donahue LLP, as Delaware counsel, and (c) Hargrove, Sato & Chen LLP, as counsel to the underwriter; and
(v) execution and delivery of Amendment No. 1 to the Sale and Servicing Agreement, dated as of April 19, 2024, among the Trust, BRB (in its capacities as seller and servicer), and the Indenture Trustee.
G. Authorization. The Issuer, the Servicer, and the Indenture Trustee are each duly authorized to enter into this Supplemental Indenture No. 2 in accordance with their respective organizational documents, charter documents, and authorizing resolutions, and have taken all action necessary to authorize the execution, delivery, and performance of this Supplemental Indenture No. 2 and the transactions contemplated hereby.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Definitions.
All capitalized terms used but not otherwise defined in this Supplemental Indenture No. 2 shall have the respective meanings assigned to such terms in the Base Indenture. To the extent that a term is defined both in the Base Indenture and in this Supplemental Indenture No. 2, the definition set forth in this Supplemental Indenture No. 2 shall control. The following terms, as used in this Supplemental Indenture No. 2, shall have the meanings indicated below:
"Additional Class A-2 Notes" or "Tap Notes" means the $48,000,000 aggregate principal amount of Class A-2 Notes authorized and issued pursuant to this Supplemental Indenture No. 2 on the Tap Closing Date.
"Post-Tap Aggregate Outstanding Principal Amount" means $398,000,000, being the sum of (a) the outstanding principal amount of the Class A-1 Notes ($130,000,000) and (b) the Post-Tap Class A-2 Outstanding Principal Amount ($268,000,000), in each case as of the Tap Closing Date and subject to subsequent reductions through scheduled and unscheduled principal payments.
"Post-Tap Class A-2 Outstanding Principal Amount" means $268,000,000, being the sum of (a) the original aggregate principal amount of the Class A-2 Notes ($220,000,000) and (b) the aggregate principal amount of the Tap Notes ($48,000,000), in each case as of the Tap Closing Date and subject to subsequent reductions through scheduled and unscheduled principal payments.
"Revised Overcollateralization Target Amount" means an amount equal to 4.50% of the Post-Tap Aggregate Outstanding Principal Amount, which as of the Tap Closing Date is $17,910,000 (being 4.50% of $398,000,000), subject to adjustment in accordance with Section 3.01 hereof and the applicable provisions of the Base Indenture.
"Revised Reserve Account Required Amount" means an amount equal to 1.00% of the Post-Tap Aggregate Outstanding Principal Amount, which as of the Tap Closing Date is $3,980,000 (being 1.00% of $398,000,000), subject to adjustment in accordance with Section 3.02 hereof and the applicable provisions of the Base Indenture.
"Tap Closing Date" means May 17, 2024, or such later date as the Issuer, the Servicer, and the Indenture Trustee may mutually agree in writing.
"Tap Cut-Off Date" means April 30, 2024.
"Tap Issue Price" means 100.125% of the par amount of the Tap Notes, resulting in gross proceeds of $48,060,000.
"Tap Pool" means the pool of additional eligible equipment-lease receivables conveyed to the Trust in connection with this tap issuance pursuant to Amendment No. 1 to the Sale and Servicing Agreement, dated as of April 19, 2024.
"Tap Pool Aggregate discounted Receivable Balance" means $49,344,000, being the aggregate discounted receivable balance of the Tap Pool receivables as of the Tap Cut-Off Date, calculated in accordance with the methodology set forth in the Sale and Servicing Agreement.
Section 1.02 — Rules of Interpretation.
(a) Unless the context otherwise requires, all references in this Supplemental Indenture No. 2 to the "Indenture" shall mean the Base Indenture, as supplemented by Supplemental Indenture No. 1, dated as of March 15, 2024 (if any), and this Supplemental Indenture No. 2, and as the same may be further supplemented, amended, restated, or otherwise modified from time to time.
(b) All references to "Sections," "Articles," "Schedules," and "Exhibits" are to sections, articles, schedules, and exhibits of this Supplemental Indenture No. 2, unless otherwise specifically indicated. Cross-references to sections of the Base Indenture are so identified.
(c) The headings of Articles and Sections herein are inserted for convenience of reference only and shall not be deemed to constitute a part of this Supplemental Indenture No. 2 or to affect the meaning or interpretation of any provision hereof.
(d) Unless the context otherwise requires, words importing the singular number include the plural number and vice versa, words importing the masculine gender include the feminine and neuter genders, and the words "hereof," "herein," "hereunder," and words of similar import refer to this Supplemental Indenture No. 2 as a whole and not to any particular provision hereof.
(e) References to any statute, regulation, or other governmental enactment shall be deemed to include references to any successor statute, regulation, or enactment, and all rules and regulations promulgated thereunder.
(f) The terms "include" and "including" shall mean "including, without limitation."
ARTICLE II — AUTHORIZATION AND TERMS OF THE TAP NOTES
Section 2.01 — Authorization of Tap Notes.
The Issuer hereby authorizes the creation and issuance of Additional Class A-2 Notes in the aggregate principal amount of $48,000,000. The Tap Notes shall be designated as "Class A-2 Notes" and shall bear the same CUSIP number (07839LAB3) and ISIN (US07839LAB36) as the Original Class A-2 Notes. The Tap Notes are authorized pursuant to Section 2.14 of the Base Indenture and this Supplemental Indenture No. 2. No additional Notes may be issued under this Supplemental Indenture No. 2 in excess of the $48,000,000 aggregate principal amount authorized hereby. Upon issuance, authentication, and settlement on the Tap Closing Date, the Tap Notes shall be fully fungible with, and shall form a single series and class with, the Original Class A-2 Notes for all purposes under the Indenture, including, without limitation, for purposes of voting, payment priority, security interest, and credit enhancement.
Section 2.02 — Terms of the Tap Notes.
The Tap Notes shall have the following terms:
(a) Aggregate Principal Amount. $48,000,000.
(b) Issue Price. 100.125% of par (the "Tap Issue Price"), resulting in aggregate gross proceeds to the Issuer of $48,060,000.
(c) Gross Proceeds. $48,060,000.
(d) Fixed Coupon Rate. 5.78% per annum, calculated on the basis of the interpolated 3-year SOFR swap rate of 3.68% in effect as of the pricing date, plus a spread of 210 basis points.
(e) Day Count Convention. 30/360.
(f) Interest Accrual. Interest on the Tap Notes shall accrue from and including the Tap Closing Date (May 17, 2024). For the avoidance of doubt, holders of Tap Notes shall receive accrued and unpaid interest for each Interest Period commencing on or after the Tap Closing Date in accordance with the payment provisions of the Indenture.
(g) Payment Frequency. Monthly, on the 15th day of each calendar month (or, if such day is not a Business Day, the next succeeding Business Day) (each, a "Payment Date"), in accordance with the priority of payments set forth in the Indenture.
(h) First Payment Date. June 15, 2024.
(i) Record Date. The last Business Day of the calendar month immediately preceding each Payment Date.
(j) Legal Final Maturity Date. January 15, 2029.
(k) Form. The Tap Notes shall be issued in fully registered, book-entry form, and shall be represented by one or more global notes registered in the name of Cede & Co., as nominee for The Depository Trust Company ("DTC"), and held through DTC and its participants in accordance with DTC's customary procedures.
(l) Minimum Denomination. $100,000 and integral multiples of $1,000 in excess thereof.
Section 2.03 — Fungibility.
(a) Upon settlement on the Tap Closing Date, the Tap Notes shall constitute additional obligations of the same class and series as the Original Class A-2 Notes. The Tap Notes shall have identical terms (including, without limitation, the same coupon rate, day count convention, payment dates, record dates, and legal final maturity date) as the Original Class A-2 Notes. From and after the Tap Closing Date, the Tap Notes and the Original Class A-2 Notes shall constitute a single, unified class of securities for all purposes.
(b) The Tap Notes shall rank pari passu in right of payment with the Original Class A-2 Notes. The Tap Notes shall be entitled to the same credit enhancement, security interests, and payment priority as the Original Class A-2 Notes, and no distinction shall be made between the Tap Notes and the Original Class A-2 Notes in the application of collections, the allocation of losses, or the exercise of remedies under the Indenture.
(c) The Indenture Trustee shall register the Tap Notes in the Note Register maintained by it in its capacity as Note Registrar, without distinction from the Original Class A-2 Notes. The Indenture Trustee shall not maintain a separate register or sub-register distinguishing the Tap Notes from the Original Class A-2 Notes; provided, however, that the Indenture Trustee may maintain internal records solely for the purpose of tracking the issuance and settlement of the Tap Notes as required by applicable law, regulation, or the Indenture.
(d) After the Tap Closing Date, all references in the Indenture and in each Transaction Document to "Class A-2 Notes" shall be deemed to refer to the combined $268,000,000 aggregate principal amount of Class A-2 Notes (consisting of the $220,000,000 Original Class A-2 Notes and the $48,000,000 Tap Notes), unless the context clearly requires otherwise.
Section 2.04 — Issuance and Authentication.
On the Tap Closing Date, the Indenture Trustee shall authenticate and deliver the Tap Notes upon its receipt of each of the following:
(a) a written order of the Issuer (or the Owner Trustee on behalf of the Issuer) requesting the authentication and delivery of the Tap Notes, in form and substance reasonably satisfactory to the Indenture Trustee, specifying the aggregate principal amount of Tap Notes to be authenticated, the date of authentication, and the person or persons to whom or on whose order such Tap Notes are to be delivered;
(b) an Officer's Certificate of BRB, executed by Derek Ashworth, Treasurer & Head of Capital Markets, in the form required by Section 6.01(d) hereof, certifying the satisfaction of all conditions precedent to the issuance of the Tap Notes;
(c) an opinion of Calderwood & Harkness LLP, as counsel to the Issuer, in the form required by Section 6.01(e)(i) hereof, addressed to the Indenture Trustee, covering enforceability, Securities Act compliance, 10b-5 negative assurance, and Investment Company Act matters; and
(d) written confirmations from each of Pinnacle Ratings Group Inc. and Crestline Ratings International LLC that the issuance of the Tap Notes will not result in a downgrade, qualification, or withdrawal of the ratings then assigned to the Class A-2 Notes.
The Indenture Trustee shall have no obligation to authenticate the Tap Notes unless and until all of the foregoing conditions have been satisfied to its reasonable satisfaction. The Indenture Trustee shall not be responsible for the sufficiency, accuracy, or validity of the foregoing documents or for the authorization of the issuance of the Tap Notes by the Issuer.
Section 2.05 — Use of Proceeds.
Net proceeds of the Tap Notes shall be $47,916,000, calculated as gross proceeds of $48,060,000 less an underwriting discount of $144,000 (representing 0.30% of the par amount of the Tap Notes). Such net proceeds shall be deposited into the Collection Account maintained by the Indenture Trustee on or prior to the Tap Closing Date and shall be applied by the Trust to purchase additional eligible equipment-lease receivables comprising the Tap Pool from BRB pursuant to the terms and conditions of Amendment No. 1 to the Sale and Servicing Agreement, dated as of April 19, 2024. Any excess proceeds remaining after the purchase of the Tap Pool receivables and the funding of any required credit enhancement amounts shall be applied in accordance with Section 5.04 of the Base Indenture.
ARTICLE III — AMENDMENTS TO THE BASE INDENTURE
Section 3.01 — Revision of Overcollateralization Target Amount.
The definition of "Overcollateralization Target Amount" set forth in Section 1.01 of the Base Indenture is hereby amended and restated in its entirety to read as follows:
"Overcollateralization Target Amount" means, as of any date of determination, an amount equal to 4.50% of the Aggregate Outstanding Principal Amount of all Series 2024-A Notes as of such date of determination. As of the Tap Closing Date, the Overcollateralization Target Amount shall be $17,910,000 (being 4.50% of $398,000,000). Thereafter, the Overcollateralization Target Amount shall be recalculated on each Payment Date based on the then-current Aggregate Outstanding Principal Amount, after giving effect to any principal payments made on such Payment Date.
The parties acknowledge that, as of the Tap Closing Date, the required Overcollateralization Target Amount will increase from the amount in effect immediately prior to the Tap Closing Date to $17,910,000 as a result of the increase in the Aggregate Outstanding Principal Amount attributable to the issuance of the Tap Notes.
Section 3.02 — Revision of Reserve Account Required Amount.
The definition of "Reserve Account Required Amount" set forth in Section 1.01 of the Base Indenture is hereby amended and restated in its entirety to read as follows:
"Reserve Account Required Amount" means, as of any date of determination, an amount equal to 1.00% of the Aggregate Outstanding Principal Amount of all Series 2024-A Notes as of such date of determination. As of the Tap Closing Date, the Reserve Account Required Amount shall be $3,980,000 (being 1.00% of $398,000,000). Thereafter, the Reserve Account Required Amount shall be recalculated on each Payment Date based on the then-current Aggregate Outstanding Principal Amount, after giving effect to any principal payments made on such Payment Date.
On or before the Tap Closing Date, the Servicer shall deposit, or cause to be deposited, into the Reserve Account maintained by the Indenture Trustee such additional amounts as may be necessary to bring the balance of the Reserve Account to not less than the Revised Reserve Account Required Amount of $3,980,000. The Indenture Trustee shall confirm receipt of such deposit and shall not authenticate the Tap Notes until the Reserve Account has been funded to the Revised Reserve Account Required Amount.
Section 3.03 — Revision of Aggregate Note Balance References.
Effective as of the Tap Closing Date, all references in the Base Indenture (and in any other Transaction Document that incorporates by reference the definitions set forth in the Base Indenture) to the "Aggregate Outstanding Principal Amount" of the Class A-2 Notes shall be deemed to be references to $268,000,000 (or such lesser amount as may then be outstanding after giving effect to any intervening principal payments), and all references to the "Aggregate Outstanding Principal Amount" of the Series 2024-A Notes shall be deemed to be references to $398,000,000 (or such lesser amount as may then be outstanding after giving effect to any intervening principal payments). Without limiting the generality of the foregoing, all waterfall payment calculations, amortization schedules, trigger event tests, early amortization tests, performance-related tests, and other calculations or determinations under the Indenture that reference the Aggregate Outstanding Principal Amount of the Class A-2 Notes or the Series 2024-A Notes shall, from and after the Tap Closing Date, be calculated based on the post-tap aggregate amounts specified in this Section 3.03.
Section 3.04 — Amendment of Exhibit A (Form of Class A-2 Note).
The Form of Class A-2 Note attached as Exhibit A to the Base Indenture is hereby supplemented and amended to reflect that the aggregate principal amount of the Class A-2 Notes, as evidenced by the Note Register maintained by the Indenture Trustee as Note Registrar, is the Post-Tap Class A-2 Outstanding Principal Amount of $268,000,000 (subject to reductions for principal payments). For the avoidance of doubt, there shall be no change to the CUSIP number (07839LAB3), the ISIN (US07839LAB36), or any other identifying information relating to the Class A-2 Notes. The form of the global note representing the Tap Notes is substantially in the form set forth in Exhibit A hereto.
Section 3.05 — No Other Amendments.
Except as expressly amended, supplemented, or modified by this Supplemental Indenture No. 2, the Base Indenture shall remain in full force and effect and is hereby ratified and confirmed in all respects. Each reference in the Base Indenture to "this Indenture," "hereunder," "hereof," "herein," or words of like import referring to the Base Indenture shall mean and be a reference to the Base Indenture as supplemented by this Supplemental Indenture No. 2. No provision of this Supplemental Indenture No. 2 shall be deemed to amend, modify, or supplement any provision of the Base Indenture except to the extent expressly set forth herein.
ARTICLE IV — COLLATERAL AND CREDIT ENHANCEMENT
Section 4.01 — Tap Pool Receivables.
The Tap Pool consists of 1,247 eligible equipment-lease contracts originated by BRB in the ordinary course of its equipment lease origination business. The Tap Pool Aggregate discounted Receivable Balance, as of the Tap Cut-Off Date, is $49,344,000. The overcollateralization attributable to the Tap Pool is $1,344,000, calculated as the difference between the Tap Pool Aggregate discounted Receivable Balance ($49,344,000) and the aggregate principal amount of the Tap Notes ($48,000,000), representing approximately 2.72% overcollateralization on the Tap Notes on a standalone basis (before giving effect to the structural overcollateralization and reserve account applicable to the combined pool). The Tap Pool receivables are conveyed to the Trust by BRB, as seller, pursuant to Amendment No. 1 to the Sale and Servicing Agreement, dated as of April 19, 2024, in accordance with the conveyance procedures and conditions set forth therein.
Section 4.02 — Tap Pool Characteristics.
As of the Tap Cut-Off Date, the Tap Pool has the following statistical characteristics, as determined by BRB in its capacity as Servicer and verified by the Indenture Trustee to the extent required by the Base Indenture:
(a) Weighted-Average Original Term: 42.6 months.
(b) Weighted-Average Remaining Term: 36.8 months.
(c) Weighted-Average Seasoning: 5.8 months.
(d) Weighted-Average Implicit Lease Rate: 7.14%.
(e) Average discounted Balance per Lease: approximately $39,570.17 (calculated as $49,344,000 divided by 1,247 leases).
(f) Top 10 Obligors Concentration: 4.3% of the Tap Pool Aggregate discounted Receivable Balance. No single obligor represents more than 0.65% of the Tap Pool.
(g) Equipment Type Distribution:
(h) Geographic Concentration:
A more detailed summary of the Tap Pool statistics is set forth in Schedule A hereto. The Servicer represents and warrants that all lease contracts included in the Tap Pool satisfy the eligibility criteria set forth in the Sale and Servicing Agreement, as amended.
Section 4.03 — Credit Enhancement.
As of the Tap Closing Date, credit enhancement for the Class A-2 Notes (including the Tap Notes) consists of the following:
(a) Overcollateralization. The Overcollateralization Target Amount is 4.50% of the Post-Tap Aggregate Outstanding Principal Amount, which as of the Tap Closing Date is $17,910,000 (4.50% × $398,000,000). Overcollateralization is provided by the excess of the aggregate discounted receivable balance of the combined receivable pool over the Post-Tap Aggregate Outstanding Principal Amount.
(b) Reserve Account. The Reserve Account Required Amount is 1.00% of the Post-Tap Aggregate Outstanding Principal Amount, which as of the Tap Closing Date is $3,980,000 (1.00% × $398,000,000). The Reserve Account is a cash reserve funded at closing and maintained by the Indenture Trustee, available to cover shortfalls in interest and principal payments on the Notes in accordance with the priority of payments set forth in the Indenture.
(c) Excess Spread. Estimated annualized excess spread is approximately 0.86%, calculated as the weighted-average implicit lease rate of the combined pool (approximately 7.14%) minus the weighted-average coupon rate on the Notes (approximately 5.78%, based on the blended rate of the Class A-1 and Class A-2 Notes) minus the servicing fee (0.50% per annum). Excess spread provides a first layer of protection against credit losses and shortfalls in available funds.
The parties acknowledge that the Series 2024-A Notes are a single-A-class structure, meaning that credit support for the Class A-2 Notes is provided solely by overcollateralization, the reserve account, and excess spread. There is no subordination of any class of Notes to any other class of Notes. The Class A-1 Notes and the Class A-2 Notes rank pari passu in their claim on the Trust Estate, subject to the sequential payment structure set forth in the Base Indenture with respect to principal distributions.
Section 4.04 — Security Interest.
The Indenture Trustee's first-priority perfected security interest in the Trust Estate, as granted pursuant to the granting clause of the Base Indenture, is hereby confirmed and ratified to extend to and include the Tap Pool receivables, all collections thereon, and all proceeds thereof, whether now existing or hereafter arising. The lien of the Indenture, as supplemented hereby, secures the Tap Notes equally and ratably with the Original Class A-2 Notes and the Class A-1 Notes, without preference or priority of any Note over any other Note by reason of priority of issuance, authentication, registration, or otherwise. The Issuer hereby confirms that the Trust Estate, including the Tap Pool receivables and all proceeds thereof, has been pledged, assigned, transferred, and set over to the Indenture Trustee for the equal and ratable benefit of all Noteholders in accordance with the terms of the Indenture.
ARTICLE V — SERVICING
Section 5.01 — Servicer.
BRB shall continue to act as Servicer of the receivable pool, including the Tap Pool receivables, under the Sale and Servicing Agreement, as amended by Amendment No. 1 thereto, dated as of April 19, 2024. BRB shall service, administer, and collect the Tap Pool receivables in accordance with the customary servicing standards set forth in the Sale and Servicing Agreement, applicable law, and the prudent practices of commercial equipment lessors servicing similar equipment-lease receivables. The servicing fee payable to BRB shall remain at 0.50% per annum, calculated on the outstanding pool balance (including the Tap Pool receivables), payable monthly in accordance with the priority of payments set forth in the Indenture. The addition of the Tap Pool receivables to the Trust Estate shall not modify, reduce, or otherwise affect BRB's obligations, duties, or standard of care as Servicer under the Sale and Servicing Agreement.
Section 5.02 — Back-Up Servicer.
Redwood Servicing Solutions LLC, a Delaware limited liability company, with its principal office at 500 West Monroe Street, Suite 3600, Chicago, Illinois 60661, shall continue to serve as Back-Up Servicer under the Back-Up Servicing Agreement, dated as of January 29, 2024, among the Trust, BRB (as Servicer), Redwood Servicing Solutions LLC (as Back-Up Servicer), and the Indenture Trustee. The back-up servicing fee payable to Redwood Servicing Solutions LLC shall remain at $7,500 per month ($90,000 per annum). The Back-Up Servicer shall continue to receive monthly data files and servicing reports with respect to the entire receivable pool, including the Tap Pool receivables, and shall maintain warm back-up servicing capabilities in accordance with the terms of the Back-Up Servicing Agreement.
ARTICLE VI — CONDITIONS PRECEDENT TO TAP CLOSING
Section 6.01 — Conditions Precedent.
The obligation of the Indenture Trustee to authenticate and deliver the Tap Notes on the Tap Closing Date is subject to the satisfaction (or waiver by the Indenture Trustee, to the extent permitted by the Indenture) of each of the following conditions precedent:
(a) Supplemental Indenture. This Supplemental Indenture No. 2 shall have been duly executed and delivered by each of the Issuer, the Servicer, and the Indenture Trustee, and counterparts thereof shall have been delivered to each party.
(b) Amendment to Sale and Servicing Agreement. Amendment No. 1 to the Sale and Servicing Agreement, dated as of April 19, 2024, among the Trust, BRB (in its capacities as seller and servicer), and the Indenture Trustee, shall have been duly executed and delivered by all parties thereto, and the Indenture Trustee shall have received a fully executed counterpart thereof.
(c) Underwriting Agreement. The Underwriting Agreement, dated as of April 19, 2024, among the Issuer, BRB, and Ashford Capital Markets LLC, as underwriter, relating to the offer and sale of the Tap Notes, shall have been duly executed and delivered by all parties thereto, and the Indenture Trustee shall have received a copy thereof.
(d) Officer's Certificate of the Servicer. The Indenture Trustee shall have received an Officer's Certificate of BRB, executed by Derek Ashworth, Treasurer & Head of Capital Markets, dated as of the Tap Closing Date, certifying that:
(i) all representations and warranties of BRB (in each of its capacities as depositor, seller, and servicer) contained in the Transaction Documents are true and correct in all material respects as of the Tap Closing Date (or, if any such representation or warranty is made as of a specific date, as of such date);
(ii) no Event of Default under the Indenture or Servicer Default under the Sale and Servicing Agreement has occurred and is continuing as of the Tap Closing Date, and no event has occurred that, with the giving of notice or the lapse of time, or both, would constitute an Event of Default or Servicer Default;
(iii) each lease contract included in the Tap Pool satisfies all eligibility criteria set forth in the Sale and Servicing Agreement, and the Tap Pool receivables have been originated in the ordinary course of BRB's equipment lease origination business in compliance with BRB's customary credit and underwriting policies;
(iv) BRB is in compliance in all material respects with the terms and conditions of its charter granted by the Office of the Comptroller of the Currency (OCC Charter No. 91-4428) and all applicable laws, rules, regulations, and orders; and
(v) BRB has the power, authority, and legal right to execute and deliver this Supplemental Indenture No. 2 and to consummate the transactions contemplated hereby.
(e) Legal Opinions. The Indenture Trustee shall have received the following legal opinions, each dated as of the Tap Closing Date and addressed to the Indenture Trustee and, where applicable, the underwriter:
(i) Issuer's Counsel Opinion. An opinion of Calderwood & Harkness LLP, as counsel to the Issuer, covering (A) due authorization, execution, delivery, and enforceability of this Supplemental Indenture No. 2 and the Tap Notes, (B) the valid issuance of the Tap Notes under the Indenture, (C) 10b-5 negative assurance with respect to the Prospectus Supplement and the Registration Statement, (D) the Tap Notes constituting valid and binding obligations of the Issuer, (E) the Trust not being required to register as an "investment company" under the Investment Company Act of 1940, as amended, and (F) such other matters as may be reasonably requested by the Indenture Trustee or the underwriter.
(ii) Delaware Trust Counsel Opinion. An opinion of Whitfield & Donahue LLP, as Delaware counsel, covering (A) the due formation and valid existence of the Trust as a Delaware statutory trust, (B) the enforceability of the Trust Agreement and this Supplemental Indenture No. 2 under Delaware law, (C) the conveyance of the Tap Pool receivables to the Trust constituting a "true sale" for purposes of Delaware law, and (D) the non-consolidation of the Trust with BRB or any of its affiliates in the event of a bankruptcy or insolvency proceeding with respect to BRB.
(iii) Underwriter's Counsel Opinion. An opinion of Hargrove, Sato & Chen LLP, as counsel to Ashford Capital Markets LLC, covering such matters as are customary in public offerings of asset-backed securities, including enforceability and due authorization.
(f) Rating Agency Confirmations. The Indenture Trustee shall have received written confirmation from each of (i) Pinnacle Ratings Group Inc. that the rating of "AAA(sf)" assigned to the Class A-2 Notes (including the Tap Notes) will not be downgraded, qualified, or withdrawn as a result of the issuance of the Tap Notes and the execution of this Supplemental Indenture No. 2, and (ii) Crestline Ratings International LLC that the rating of "Aaa(sf)" assigned to the Class A-2 Notes (including the Tap Notes) will not be downgraded, qualified, or withdrawn as a result of the issuance of the Tap Notes and the execution of this Supplemental Indenture No. 2.
(g) Bring-Down Comfort Letter. The Indenture Trustee shall have received a bring-down comfort letter from Velthorn Accounting Group LLP, independent registered public accounting firm of BRB, dated as of the Tap Closing Date, in form and substance customary for comfort letters delivered in connection with public offerings of asset-backed securities, confirming, among other things, the accuracy of certain financial and statistical information set forth in the Prospectus Supplement.
(h) Prospectus Supplement. The Prospectus Supplement relating to the Tap Notes shall have been filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act, and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or, to the knowledge of the Issuer, threatened by the SEC.
(i) Receipt of Net Proceeds. The Indenture Trustee shall have received confirmation that the net proceeds of the Tap Notes in the amount of $47,916,000 have been deposited in the Collection Account, in immediately available funds.
(j) Reserve Account Funding. The Indenture Trustee shall have received confirmation that the balance of the Reserve Account has been brought to not less than the Revised Reserve Account Required Amount of $3,980,000, by the deposit of any additional amounts required therefor.
The Indenture Trustee shall not be required to independently verify the satisfaction of any of the foregoing conditions and may conclusively rely on the Officer's Certificate, opinions, confirmations, and other documents delivered to it in satisfaction thereof.
ARTICLE VII — REPRESENTATIONS AND WARRANTIES
Section 7.01 — Representations of the Issuer.
The Issuer hereby represents and warrants to the Servicer and the Indenture Trustee, as of the date hereof and as of the Tap Closing Date, as follows:
(a) Organization. The Trust is a Delaware statutory trust duly formed, validly existing, and in good standing under the laws of the State of Delaware, and has the power and authority to own its properties and to conduct its business as presently conducted. The Trust's employer identification number is 88-4231957.
(b) Authorization. The Trust has full power, authority, and legal right to execute and deliver this Supplemental Indenture No. 2, to issue the Tap Notes, and to perform its obligations hereunder and under the Indenture. The execution, delivery, and performance of this Supplemental Indenture No. 2 and the issuance of the Tap Notes have been duly authorized by all necessary action on the part of the Trust, including the requisite action of the Owner Trustee pursuant to the Trust Agreement.
(c) Enforceability. This Supplemental Indenture No. 2 constitutes the legal, valid, and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(d) No Conflicts. The execution, delivery, and performance of this Supplemental Indenture No. 2 by the Trust, and the issuance of the Tap Notes, do not and will not (i) violate the Trust Agreement or any other organizational document of the Trust, (ii) conflict with, result in a breach of, or constitute a default under any agreement, instrument, or obligation to which the Trust is a party or by which the Trust or its properties may be bound, or (iii) violate any applicable law, rule, regulation, order, judgment, or decree of any governmental authority having jurisdiction over the Trust.
(e) No Litigation. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of the Trust, threatened against the Trust that could reasonably be expected to have a material adverse effect on the Trust's ability to perform its obligations under this Supplemental Indenture No. 2 or the Indenture.
Section 7.02 — Representations of the Servicer.
BRB, in its capacity as Servicer and in its capacity as depositor and seller under the Sale and Servicing Agreement, hereby represents and warrants to the Issuer and the Indenture Trustee, as of the date hereof and as of the Tap Closing Date, as follows:
(a) Organization. BRB is a national banking association duly organized, validly existing, and in good standing under the laws of the United States of America, pursuant to a charter granted by the Office of the Comptroller of the Currency (OCC Charter No. 91-4428). BRB has its principal office at 600 Lexington Avenue, 32nd Floor, New York, New York 10022.
(b) Authorization. BRB has full power, authority, and legal right to execute and deliver this Supplemental Indenture No. 2 and to perform its obligations hereunder and under each Transaction Document to which it is a party. The execution, delivery, and performance of this Supplemental Indenture No. 2 have been duly authorized by all necessary corporate action on the part of BRB.
(c) No Event of Default. No Event of Default under the Indenture and no Servicer Default under the Sale and Servicing Agreement has occurred and is continuing as of the date hereof, and no event has occurred that, with the giving of notice or the lapse of time, or both, would constitute an Event of Default or a Servicer Default.
(d) Eligibility of Tap Pool. Each lease contract included in the Tap Pool satisfies all eligibility criteria set forth in the Sale and Servicing Agreement, including, without limitation, the criteria relating to origination standards, payment history, credit quality, lease term, equipment type, and geographic concentration. The information relating to the Tap Pool set forth in Schedule A hereto and in the Prospectus Supplement is true and correct in all material respects as of the Tap Cut-Off Date.
(e) Ownership. BRB is the sole owner of the Tap Pool receivables, free and clear of all liens, claims, encumbrances, security interests, pledges, charges, and rights of others, other than the security interest granted to the Indenture Trustee pursuant to the Indenture. Upon the conveyance of the Tap Pool receivables to the Trust pursuant to Amendment No. 1 to the Sale and Servicing Agreement, the Trust will acquire good and marketable title to the Tap Pool receivables, free and clear of all liens and encumbrances (other than the lien of the Indenture in favor of the Indenture Trustee).
(f) Compliance with Law. BRB is in compliance in all material respects with all applicable laws, rules, regulations, orders, and requirements of any federal, state, or local governmental authority applicable to BRB, the Tap Pool receivables, and the servicing thereof, including, without limitation, the requirements of the OCC, the Consumer Financial Protection Bureau, and all applicable state consumer protection and equipment leasing laws.
Section 7.03 — Representations of the Indenture Trustee.
Meridian Fiduciary Services, Inc., solely in its capacity as Indenture Trustee and not in its individual capacity, hereby represents and warrants to the Issuer and the Servicer, as of the date hereof, as follows:
(a) Organization. Meridian Fiduciary Services, Inc. is a Delaware corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and is qualified to act as indenture trustee under the Trust Indenture Act of 1939, as amended, to the extent applicable.
(b) Authorization. Meridian has full corporate power and authority to execute and deliver this Supplemental Indenture No. 2 and to perform its duties and obligations as Indenture Trustee, Paying Agent, Calculation Agent, and Note Registrar hereunder and under the Indenture. The execution, delivery, and performance of this Supplemental Indenture No. 2 have been duly authorized by all necessary corporate action on the part of Meridian.
(c) Enforceability. This Supplemental Indenture No. 2 constitutes the legal, valid, and binding obligation of Meridian, enforceable against Meridian in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity.
ARTICLE VIII — RATINGS
Section 8.01 — Rating Confirmations.
(a) Pinnacle Ratings Group Inc. has confirmed, in a letter dated April 18, 2024 addressed to the Issuer and the Indenture Trustee, its rating of "AAA(sf)" on the Class A-2 Notes, including the Tap Notes, and has confirmed that the issuance of the Tap Notes and the execution and delivery of this Supplemental Indenture No. 2 will not result in a downgrade, qualification, or withdrawal of such rating.
(b) Crestline Ratings International LLC has confirmed, in a letter dated April 18, 2024 addressed to the Issuer and the Indenture Trustee, its rating of "Aaa(sf)" on the Class A-2 Notes, including the Tap Notes, and has confirmed that the issuance of the Tap Notes and the execution and delivery of this Supplemental Indenture No. 2 will not result in a downgrade, qualification, or withdrawal of such rating.
(c) No action shall be taken by any party under this Supplemental Indenture No. 2 or the Indenture that would reasonably be expected to result in a downgrade or withdrawal of the ratings assigned to the Class A-2 Notes (including the Tap Notes) by Pinnacle or Crestline without the prior written consent of the holders of a majority in principal amount of the outstanding Class A-2 Notes, unless such action is otherwise required by applicable law or regulation.
(d) The ratings assigned by Pinnacle and Crestline address only the likelihood of timely payment of interest and ultimate payment of principal on the Class A-2 Notes (including the Tap Notes) and do not address the market value, liquidity, or suitability of the Tap Notes for any particular investor. A rating is not a recommendation to buy, sell, or hold any security.
ARTICLE IX — MISCELLANEOUS
Section 9.01 — Governing Law.
THIS SUPPLEMENTAL INDENTURE NO. 2 SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE NO. 2, AND EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 9.02 — Ratification of Base Indenture.
The Base Indenture, as supplemented and amended by this Supplemental Indenture No. 2, is in all respects ratified and confirmed, and the Base Indenture and this Supplemental Indenture No. 2 shall be read, taken, and construed as a single instrument. All provisions, covenants, conditions, representations, and warranties of the Base Indenture, except as expressly amended or supplemented hereby, shall continue in full force and effect. In the event of any conflict or inconsistency between the terms and provisions of this Supplemental Indenture No. 2 and the terms and provisions of the Base Indenture, the terms and provisions of this Supplemental Indenture No. 2 shall govern and control.
Section 9.03 — Counterparts.
This Supplemental Indenture No. 2 may be executed in any number of counterparts (and by different parties on separate counterparts), each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Supplemental Indenture No. 2 by facsimile or other electronic means (including .pdf, .tif, or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.Brightwater Software.com) shall be effective as delivery of a manually executed counterpart of this Supplemental Indenture No. 2.
Section 9.04 — Severability.
If any provision of this Supplemental Indenture No. 2 shall be held invalid, illegal, or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof, and the remaining provisions of this Supplemental Indenture No. 2 shall continue in full force and effect. To the extent permitted by applicable law, each party hereto hereby waives any provision of law that renders any provision of this Supplemental Indenture No. 2 invalid, illegal, or unenforceable in any respect.
Section 9.05 — Binding Effect; Successors.
This Supplemental Indenture No. 2 shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party may assign its rights or obligations hereunder without the prior written consent of each other party, except as otherwise permitted by the Indenture. This Supplemental Indenture No. 2 shall also inure to the benefit of the holders of the Notes from time to time outstanding, as third-party beneficiaries, to the extent provided herein and in the Indenture.
Section 9.06 — Notices.
All notices, demands, requests, directions, consents, waivers, and other communications required or permitted under this Supplemental Indenture No. 2 shall be in writing and shall be delivered in accordance with the notice provisions set forth in the Base Indenture, to the following addresses (or to such other address as any party may designate in writing to the other parties):
If to the Issuer:
Belmont Ridge Equipment Trust 2024-A c/o Keyline Trust Company, National Association 2100 Market Street, Suite 800 Philadelphia, Pennsylvania 19103
Attention: Corporate Trust Administration
Telephone: (215) 555-3400
If to the Servicer:
Belmont Ridge Bank, National Association 600 Lexington Avenue, 32nd Floor New York, New York 10022