UNDERWRITING AGREEMENT
Belmont Ridge Equipment Trust 2024-A Class A-2 Notes (Tap Issuance)
$48,000,000 Aggregate Principal Amount
Execution Version
April 19, 2024
Drafted by Calderwood & Harkness LLP, 250 Park Avenue, 40th Floor, New York, NY 10177
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UNDERWRITING AGREEMENT
This Underwriting Agreement (this "Agreement") is entered into as of April 19, 2024, by and among:
(1) BELMONT RIDGE EQUIPMENT TRUST 2024-A, a Delaware statutory trust (the "Trust" or the "Issuer"), formed on January 8, 2024, pursuant to the Delaware Statutory Trust Act, 12 Del. C. §§ 3801 et seq., with its registered agent at Capitol Trust Services LLC, 1209 Orange Street, Wilmington, Delaware 19801, and having Employer Identification Number 88-4231957;
(2) BELMONT RIDGE BANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States (OCC Charter No. 91-4428), with its principal office and headquarters located at 600 Lexington Avenue, 32nd Floor, New York, New York 10022 (in its various capacities hereunder, the "Bank," the "Originator," and the "Servicer"); and
(3) ASHFORD CAPITAL MARKETS LLC, a Delaware limited liability company and a broker-dealer registered with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and a member of the Financial Industry Regulatory Authority, Inc. ("FINRA") (CRD No. 284756), with its principal office located at 383 Madison Avenue, 22nd Floor, New York, New York 10179 (the "Underwriter").
The Trust, the Bank, and the Underwriter are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. The Trust was formed as a Delaware statutory trust on January 8, 2024, pursuant to a Trust Agreement dated as of January 22, 2024 (the "Trust Agreement"), by and between Belmont Ridge Bank, National Association, as depositor, and Keyline Trust Company, National Association, as owner trustee (the "Owner Trustee"), having its corporate trust office at 2100 Market Street, Suite 800, Philadelphia, Pennsylvania 19103, for the purpose of acquiring, holding, and administering equipment-lease receivables and issuing notes secured thereby;
B. On January 29, 2024 (the "Initial Closing Date"), the Trust issued $350,000,000 aggregate principal amount of its Series 2024-A Notes (the "Original Notes"), comprising $130,000,000 aggregate principal amount of Class A-1 Notes (the "Class A-1 Notes") and $220,000,000 aggregate principal amount of Class A-2 Notes (the "Original Class A-2 Notes"), pursuant to an Indenture dated as of January 29, 2024 (the "Indenture"), by and between the Trust and Meridian Fiduciary Services, Inc., a New York corporation, as indenture trustee (the "Indenture Trustee"), having its corporate trust office at 101 Barclay Street, 12th Floor, New York, New York 10007. The Class A-1 Notes bear interest at a rate of 5.42% per annum and mature on July 15, 2026. The Original Class A-2 Notes bear interest at a rate of 5.78% per annum and have a Legal Final Maturity Date of January 15, 2029;
C. The Trust now desires to issue an additional $48,000,000 aggregate principal amount of Class A-2 Notes (the "Tap Notes") pursuant to Supplemental Indenture No. 2 dated as of April 19, 2024 (the "Supplemental Indenture"), by and among the Trust, the Bank, and the Indenture Trustee, which Tap Notes will be fungible with, form a single series and class with, and have the same terms, conditions, CUSIP number (07839LAB3), and ISIN (US07839LAB36) as the Original Class A-2 Notes. Upon the issuance of the Tap Notes, the aggregate outstanding principal amount of Class A-2 Notes will be $268,000,000, and the aggregate outstanding principal amount of all Series 2024-A Notes will be $398,000,000;
D. The Tap Notes are being offered and sold pursuant to a shelf registration statement on Form SF-3 filed with the SEC (Registration Statement No. 333-276891), which registration statement was declared effective by the SEC on January 14, 2024, the base prospectus forming part thereof filed on January 15, 2024 (the "Base Prospectus"), and a prospectus supplement relating to the Tap Notes (the "Prospectus Supplement") to be filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended (the "Securities Act"), on or before April 22, 2024;
E. In connection with the issuance of the Tap Notes, the Bank has agreed to sell and transfer to the Trust additional eligible equipment-lease receivables, consisting of 1,247 equipment-lease contracts with an aggregate discounted receivable balance of $49,344,000, pursuant to Amendment No. 1 to the Sale and Servicing Agreement dated as of April 19, 2024 ("Amendment No. 1"), which amends the Sale and Servicing Agreement dated as of January 29, 2024 (as so amended, the "Sale and Servicing Agreement"), by and among the Trust, the Bank (as Originator and as Servicer), and the Indenture Trustee; and
F. The Underwriter desires to purchase the Tap Notes from the Trust, and the Trust desires to sell the Tap Notes to the Underwriter, on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Additional Notes" or "Tap Notes" means the $48,000,000 aggregate principal amount of additional Class A-2 Notes to be issued by the Trust on the Closing Date pursuant to the Supplemental Indenture and this Agreement, which shall be fungible with and form a single class with the Original Class A-2 Notes.
"Amendment No. 1" means Amendment No. 1 to the Sale and Servicing Agreement, dated as of April 19, 2024, by and among the Trust, the Bank (as Originator and Servicer), and the Indenture Trustee, pursuant to which the Bank will sell additional Eligible Receivables to the Trust in connection with the issuance of the Tap Notes.
"Applicable Time" means 5:00 p.m. (New York City time) on April 19, 2024.
"Back-Up Servicer" means Redwood Servicing Solutions LLC, a Delaware limited liability company, with its principal office at 500 West Monroe Street, Suite 3600, Chicago, Illinois 60661, in its capacity as back-up servicer under the Sale and Servicing Agreement.
"Base Prospectus" means the prospectus forming part of the Registration Statement, as filed with the SEC on January 15, 2024.
"Benchmark Rate" means the interpolated SOFR swap rate (3-year) as of the Pricing Date, which was 3.68%.
"Closing Date" or "Settlement Date" means May 17, 2024, or such other date as the Parties may mutually agree in writing.
"Comfort Letter" means the comfort letter from Velthorn Accounting Group LLP, dated as of April 19, 2024, addressed to the Underwriter and the Trust, relating to certain financial information included or incorporated by reference in the Final Prospectus.
"Crestline" means Crestline Ratings International LLC, a nationally recognized statistical rating organization, having its principal office at 55 Water Street, Suite 3100, New York, New York 10041.
"Day Count Convention" means the 30/360 day count convention, as applied in accordance with the terms of the Indenture.
"Effective Date" means the date of this Agreement, April 19, 2024.
"Eligible Receivables" means equipment-lease receivables that satisfy each of the eligibility criteria set forth in Section 2.04 of the Sale and Servicing Agreement, as amended by Amendment No. 1, including, without limitation, requirements relating to lease type, obligor creditworthiness, equipment condition, geographic diversity, and concentration limits.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Final Prospectus" means the Base Prospectus, as supplemented by the Prospectus Supplement.
"FINRA" means the Financial Industry Regulatory Authority, Inc.
"First Payment Date" means June 15, 2024, being the first Payment Date on which interest on the Tap Notes shall be payable.
"Indenture" means the Indenture dated as of January 29, 2024, by and between the Trust and Meridian Fiduciary Services, Inc., as Indenture Trustee, as supplemented by the Supplemental Indenture, and as may be further supplemented or amended from time to time.
"Indenture Trustee" means Meridian Fiduciary Services, Inc., a New York corporation, in its capacity as indenture trustee, paying agent, note registrar, and custodian under the Indenture, having its corporate trust office at 101 Barclay Street, 12th Floor, New York, New York 10007.
"Initial Closing Date" means January 29, 2024, being the closing date of the original issuance of the Series 2024-A Notes.
"Issue Price" means 100.125% of the aggregate principal amount of the Tap Notes.
"Issuer's Counsel" means Calderwood & Harkness LLP, with offices at 250 Park Avenue, 40th Floor, New York, New York 10177.
"Legal Final Maturity Date" means January 15, 2029, being the date on which all outstanding principal of the Class A-2 Notes (including the Tap Notes) must be repaid in full.
"Note Rate" or "Coupon" means 5.78% per annum, being the fixed rate of interest payable on the Class A-2 Notes (including the Tap Notes), calculated on the basis of the Benchmark Rate of 3.68% plus the Spread of 210 basis points (2.10%).
"Original Target Closing Date" means May 10, 2024.
"Owner Trustee" means Keyline Trust Company, National Association, a national banking association, in its capacity as owner trustee under the Trust Agreement, having its corporate trust office at 2100 Market Street, Suite 800, Philadelphia, Pennsylvania 19103.
"Payment Dates" means the 15th day of each calendar month (or, if such day is not a Business Day, the next succeeding Business Day), commencing on the First Payment Date of June 15, 2024, and continuing through and including the Legal Final Maturity Date.
"Pinnacle" means Pinnacle Ratings Group Inc., a nationally recognized statistical rating organization, having its principal office at 7 World Trade Center, 38th Floor, New York, New York 10006.
"Pricing Date" means April 19, 2024, the date on which the pricing terms of the Tap Notes were established.
"Prospectus Supplement" means the supplement to the Base Prospectus relating to the Tap Notes, to be filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act on or before April 22, 2024.
"Purchased Notes" means the Tap Notes to be purchased by the Underwriter pursuant to Section 2.1 of this Agreement.
"Rating Agencies" means, collectively, Pinnacle Ratings Group Inc. and Crestline Ratings International LLC.
"Record Date" means, with respect to each Payment Date, the last Business Day of the calendar month immediately preceding such Payment Date.
"Registration Statement" means the shelf registration statement on Form SF-3 (Registration Statement No. 333-276891) filed by the Trust with the SEC, as declared effective on January 14, 2024, including all amendments and supplements thereto and all exhibits, financial statements, and documents incorporated therein by reference.
"Receivables Pool" or "Tap Pool" means the pool of 1,247 equipment-lease contracts to be sold by the Bank to the Trust pursuant to Amendment No. 1, having an aggregate discounted receivable balance of $49,344,000 as of the applicable cut-off date.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement dated as of January 29, 2024, by and among the Trust, the Bank (as Originator and as Servicer), and the Indenture Trustee, as amended by Amendment No. 1, and as may be further amended, supplemented, or modified from time to time.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Spread" means 210 basis points (2.10%), being the spread over the Benchmark Rate at which the Tap Notes are priced.
"Supplemental Indenture" means Supplemental Indenture No. 2 dated as of April 19, 2024, by and among the Trust, the Bank, and the Indenture Trustee, pursuant to which the Tap Notes are issued and the Indenture is supplemented to provide for the Tap Notes and the related Eligible Receivables.
"Transaction Documents" means, collectively, the Indenture, the Supplemental Indenture, the Trust Agreement, the Sale and Servicing Agreement (including Amendment No. 1), and this Agreement, together with all schedules, exhibits, and annexes thereto, in each case as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Trust Agreement" means the Trust Agreement dated as of January 22, 2024, by and between the Bank, as depositor, and Keyline Trust Company, National Association, as Owner Trustee, pursuant to which the Trust was formed.
"Underwriter's Counsel" means Hargrove, Sato & Chen LLP, with offices at 1585 Broadway, 28th Floor, New York, New York 10036.
"Underwriting discount" means an amount equal to 30 basis points (0.30%) of the aggregate principal amount of the Tap Notes, calculated as $48,000,000 × 0.30% = $144,000.
Section 1.2 — Other Definitional Provisions
(a) Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Indenture, as supplemented by the Supplemental Indenture, or, if not defined therein, in the Sale and Servicing Agreement, as amended by Amendment No. 1.
(b) The words "hereof," "herein," "hereunder," and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to any Article, Section, Schedule, or Exhibit shall mean such Article, Section, Schedule, or Exhibit of this Agreement unless otherwise specified. The terms "include" and "including" shall be deemed to be followed by the phrase "without limitation." The use of the singular form of any word shall include the plural, and vice versa, and the use of any gender shall include all genders, in each case as the context requires. References to any statute or regulation shall include all amendments thereto and any successor statute or regulation. References to any agreement shall include all amendments, supplements, restatements, and other modifications thereto.
ARTICLE II — PURCHASE AND SALE OF THE TAP NOTES
Section 2.1 — Agreement to Purchase
Upon the terms and subject to the conditions set forth in this Agreement, the Trust hereby agrees to issue and sell to the Underwriter, and the Underwriter hereby agrees to purchase from the Trust, $48,000,000 aggregate principal amount of Tap Notes. The Tap Notes shall be Class A-2 Notes issued pursuant to the Supplemental Indenture and shall be fully fungible with the $220,000,000 aggregate principal amount of Original Class A-2 Notes issued on the Initial Closing Date. Following the issuance of the Tap Notes on the Closing Date, the aggregate outstanding principal amount of Class A-2 Notes shall be $268,000,000, and the aggregate outstanding principal amount of all Series 2024-A Notes (consisting of $130,000,000 of Class A-1 Notes and $268,000,000 of Class A-2 Notes) shall be $398,000,000.
The obligation of the Underwriter to purchase the Tap Notes is subject to the satisfaction or waiver of each of the conditions precedent set forth in Article VI hereof. The obligation of the Trust to issue and sell the Tap Notes is subject to the satisfaction or waiver of each of the conditions set forth in Section 6.2 hereof.
Section 2.2 — Issue Price and Purchase Price
(a) Issue Price. The Issue Price of the Tap Notes shall be 100.125% of the aggregate principal amount thereof.
(b) Gross Proceeds. The gross proceeds from the sale of the Tap Notes shall be equal to $48,000,000 × 100.125% = $48,060,000.
(c) Underwriting discount. The Underwriting discount payable to the Underwriter shall be $144,000, representing 30 basis points (0.30%) of the aggregate principal amount of the Tap Notes ($48,000,000).
(d) Purchase Price. The purchase price payable by the Underwriter to the Trust (the "Purchase Price") shall equal the gross proceeds minus the Underwriting discount, calculated as follows:
Gross Proceeds: $48,060,000 Less: Underwriting discount: ($144,000) Purchase Price (Net Proceeds): $47,916,000
The Purchase Price shall be paid by the Underwriter to the Trust on the Closing Date in the manner set forth in Section 2.5 hereof.
Section 2.3 — Terms of the Tap Notes
The Tap Notes shall have the following terms:
The Tap Notes shall be in all respects identical to, and shall rank pari passu with, the Original Class A-2 Notes. Interest on the Tap Notes shall accrue from the most recent Payment Date on which interest has been paid on the Original Class A-2 Notes or, if no interest has been paid on the Original Class A-2 Notes since the most recent Payment Date prior to the Closing Date, from such Payment Date. The Tap Notes shall be entitled to the same security interest in the Trust's assets, the same credit enhancement, and the same priority of payment as the Original Class A-2 Notes, all as more fully described in the Indenture and the Supplemental Indenture.
Section 2.4 — Use of Proceeds
The net proceeds from the sale of the Tap Notes in the amount of $47,916,000 shall be applied by the Trust as follows:
(a) to purchase from the Bank additional Eligible Receivables constituting the Tap Pool, pursuant to the Sale and Servicing Agreement, as amended by Amendment No. 1; and
(b) to fund any required additions to the reserve account and the overcollateralization account maintained under the Indenture, in each case to the extent necessary to satisfy the target levels set forth in the Indenture (as supplemented by the Supplemental Indenture) following the issuance of the Tap Notes.
No portion of the net proceeds of the Tap Notes shall be used for any purpose other than as set forth in this Section 2.4 without the prior written consent of the Underwriter.
Section 2.5 — Closing; Delivery and Payment
(a) Closing. The closing of the purchase and sale of the Tap Notes (the "Closing") shall take place on May 17, 2024 (the "Closing Date"), at the offices of Calderwood & Harkness LLP, 250 Park Avenue, 40th Floor, New York, New York 10177, commencing at 10:00 a.m. (New York City time), or at such other location, date, and time as the Parties may mutually agree in writing; provided that in no event shall the Closing Date be later than May 24, 2024, unless otherwise agreed by each of the Parties.
(b) Delivery of Tap Notes. On the Closing Date, the Trust shall cause the Tap Notes to be delivered to the Underwriter (or to the accounts of the initial purchasers designated by the Underwriter, as set forth in Schedule D hereto) in book-entry form through the facilities of The Depository Trust Company ("DTC"), against payment of the Purchase Price. The Tap Notes shall be registered in the name of Cede & Co., as nominee of DTC, or such other name as DTC may request. The Tap Notes shall bear the same CUSIP number (07839LAB3) and ISIN (US07839LAB36) as the Original Class A-2 Notes.
(c) Payment of Purchase Price. On the Closing Date, simultaneously with the delivery of the Tap Notes, the Underwriter shall pay the Purchase Price of $47,916,000 to the Trust by wire transfer of immediately available funds to the Trust's collection account maintained at Meridian Fiduciary Services, Inc., in accordance with the wire transfer instructions to be provided by the Trust to the Underwriter at least two (2) Business Days prior to the Closing Date.
(d) Accrued Interest. In addition to the Purchase Price, the Underwriter shall pay to the Trust, on behalf of the initial purchasers, accrued interest on the Tap Notes from the most recent Payment Date on which interest has been paid on the Original Class A-2 Notes (or, if applicable, from the Initial Closing Date) to, but not including, the Closing Date, calculated in accordance with the Day Count Convention.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE BANK
Section 3.1 — Representations and Warranties of the Trust
The Trust hereby represents and warrants to the Underwriter as of the Effective Date and as of the Closing Date (except where a representation or warranty is stated to be made as of a specific date, in which case such representation or warranty shall be made only as of such specific date) as follows:
(a) Due Organization. The Trust is a Delaware statutory trust duly formed, validly existing, and in good standing under the laws of the State of Delaware, having been formed on January 8, 2024, pursuant to the filing of a Certificate of Trust with the Secretary of State of the State of Delaware and the execution of the Trust Agreement. The Trust has the power and authority to own its properties and to conduct its business as presently conducted and as described in the Final Prospectus. The Trust's registered agent in the State of Delaware is Capitol Trust Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. The Trust's Employer Identification Number is 88-4231957.
(b) Authority and Authorization. The Trust has full power and authority to execute, deliver, and perform its obligations under this Agreement, the Supplemental Indenture, and the other Transaction Documents to which it is a party, and to issue the Tap Notes. All necessary trust action on the part of the Trust, including all actions required under the Trust Agreement, has been duly and validly taken to authorize the execution, delivery, and performance by the Trust of this Agreement, the Supplemental Indenture, and the other Transaction Documents, and the issuance and sale of the Tap Notes on the terms and subject to the conditions set forth herein and therein.
(c) Enforceability. This Agreement has been duly executed and delivered by the Trust and constitutes a valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, except as enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). The Supplemental Indenture has been duly authorized, and upon its execution and delivery will constitute a valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to the same exceptions.
(d) No Conflicts. The execution, delivery, and performance by the Trust of this Agreement and the Supplemental Indenture, and the issuance and sale of the Tap Notes, do not and will not (i) violate, conflict with, or result in a breach of any provision of the Trust Agreement or any other organizational document of the Trust, (ii) violate any applicable law, rule, regulation, order, judgment, injunction, decree, or governmental permit applicable to the Trust, (iii) result in a breach of, or constitute a default under, or result in the creation or imposition of any lien upon any property of the Trust pursuant to any indenture, mortgage, deed of trust, loan agreement, lease, or other agreement or instrument to which the Trust is a party or by which the Trust or any of its property is bound, or (iv) result in the acceleration of any obligation of the Trust, except in each case as would not have a material adverse effect on the Trust's ability to perform its obligations hereunder or under the Supplemental Indenture.
(e) Registration Statement. The Registration Statement (Registration Statement No. 333-276891) has been filed with the SEC on Form SF-3 and was declared effective by the SEC on January 14, 2024. The Base Prospectus forming part of the Registration Statement was filed with the SEC on January 15, 2024, in compliance with the Securities Act and the rules and regulations promulgated thereunder. The Prospectus Supplement will be filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act on or before April 22, 2024. No stop order suspending the effectiveness of the Registration Statement has been issued, and no proceeding for that purpose has been instituted or, to the knowledge of the Trust, threatened by the SEC. The Registration Statement and the Final Prospectus comply, and will comply, in all material respects with the requirements of the Securities Act, Regulation AB, and the rules and regulations thereunder.
(f) No Material Misstatements or Omissions. As of the Applicable Time and as of the Closing Date, (i) the Registration Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and (ii) the Final Prospectus does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence shall not apply to statements in or omissions from the Registration Statement or the Final Prospectus based upon information furnished in writing by the Underwriter specifically for inclusion therein.
(g) Investment Company Act. The Trust is not, and upon the issuance of the Tap Notes and the application of the proceeds thereof in accordance with Section 2.4, will not be, required to register as an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Trust is relying on the exclusion from the definition of "investment company" provided by Section 3(c)(5) of the Investment Company Act, or, in the alternative, Rule 3a-7 promulgated thereunder, and the Trust meets the conditions of such exclusion.
(h) Tax Status. The Trust is treated as a disregarded entity of the Bank for United States federal income tax purposes, and the Tap Notes will be characterized as debt for United States federal income tax purposes. The Trust has been assigned Employer Identification Number 88-4231957 by the Internal Revenue Service.
(i) No Event of Default. No Event of Default under the Indenture, and no event that with the giving of notice or the passage of time, or both, would constitute an Event of Default under the Indenture, has occurred and is continuing as of the Effective Date. The Trust is in compliance in all material respects with all terms and conditions of the Indenture and the Trust Agreement.
(j) Ratings. The Class A-2 Notes (including, upon issuance, the Tap Notes) have been rated "AAA(sf)" by Pinnacle Ratings Group Inc. and "Aaa(sf)" by Crestline Ratings International LLC. The Trust has not received any notification from either Rating Agency that it is reviewing, qualifying, downgrading, or withdrawing any such rating, or placing any such rating on a watch list for possible downgrade or withdrawal.
Section 3.2 — Representations and Warranties of the Bank
The Bank hereby represents and warrants to the Underwriter as of the Effective Date and as of the Closing Date (except where a representation or warranty is stated to be made as of a specific date, in which case such representation or warranty shall be made only as of such specific date) as follows:
(a) Organization and Authority. Belmont Ridge Bank, National Association is a national banking association duly organized, validly existing, and in good standing under the laws of the United States, holding OCC Charter No. 91-4428, with its principal office and headquarters located at 600 Lexington Avenue, 32nd Floor, New York, New York 10022. The Bank's common stock is listed on the New York Stock Exchange under the ticker symbol "BRBK." As of December 31, 2023, the Bank's total consolidated assets were approximately $14.7 billion. The Bank has all requisite corporate power and authority to conduct its business as presently conducted and as described in the Final Prospectus, and to own, hold, and administer its properties and assets.
(b) Equipment Lease Portfolio. As of December 31, 2023, the Bank's equipment lease portfolio had an aggregate outstanding balance of approximately $3.2 billion, consisting primarily of small-ticket commercial equipment leases including, without limitation, leases of copiers and office equipment, information technology and networking equipment, medical devices, and light industrial equipment. The Bank has been engaged in the origination and servicing of equipment leases for more than twenty (20) years, and the Bank's equipment finance division employed approximately 185 professionals as of the date hereof.
(c) Authorization. All corporate action on the part of the Bank, including all actions required by the Bank's articles of association, bylaws, and applicable OCC regulations, necessary for the authorization, execution, delivery, and performance of this Agreement, Amendment No. 1, and the other Transaction Documents to which the Bank is a party, and for the consummation of the transactions contemplated hereby and thereby, has been duly and validly taken. The board of directors of the Bank (or a duly authorized committee thereof) has approved the transactions contemplated by this Agreement, Amendment No. 1, and the other Transaction Documents.
(d) Enforceability. This Agreement, the Sale and Servicing Agreement (as amended by Amendment No. 1), and the other Transaction Documents to which the Bank is a party have been duly executed and delivered by the Bank and constitute valid and binding obligations of the Bank, enforceable against the Bank in accordance with their respective terms, except as enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally, (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law), and (iii) the powers of the OCC and the Federal Deposit Insurance Corporation as receiver or conservator.
(e) No Conflicts. The execution, delivery, and performance by the Bank of this Agreement, Amendment No. 1, and the other Transaction Documents to which the Bank is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) violate any provision of the Bank's articles of association or bylaws, (ii) violate any applicable law, rule, regulation, or order of the OCC, the Federal Reserve Board, the FDIC, or any other governmental authority having jurisdiction over the Bank, (iii) result in a breach of, or constitute a default under, any material agreement or instrument to which the Bank is a party, or (iv) require any consent, approval, authorization, or permit of, or filing with, any governmental authority that has not been obtained or made, except for the filing of the Prospectus Supplement with the SEC.
(f) Receivables Representations. The Tap Pool consists of 1,247 equipment-lease contracts, each of which constitutes an Eligible Receivable under the Sale and Servicing Agreement, as amended by Amendment No. 1. The Tap Pool has the following characteristics as of the applicable cut-off date:
(i) Aggregate discounted receivable balance: $49,344,000;
(ii) Weighted-average original term: 42.6 months;
(iii) Weighted-average remaining term: 36.8 months;
(iv) Weighted-average seasoning: 5.8 months;
(v) Weighted-average implicit lease rate: 7.14%;
(vi) Average discounted balance per lease: $39,570.17;
(vii) Top 10 obligor concentration: 4.3% of the aggregate discounted receivable balance of the Tap Pool; and
(viii) No single obligor represents more than 1.0% of the aggregate discounted receivable balance of the Tap Pool.
Each of the equipment-lease contracts in the Tap Pool was originated by the Bank in the ordinary course of its equipment finance business and in accordance with the Bank's customary underwriting guidelines. Each obligor under such equipment-lease contracts has been subjected to the Bank's standard credit evaluation process.
(g) Equipment Type Distribution. The Tap Pool has the following equipment type distribution, expressed as a percentage of the aggregate discounted receivable balance:
(h) Geographic Distribution. The Tap Pool has the following geographic distribution, expressed as a percentage of the aggregate discounted receivable balance based on the billing address of each obligor:
No single state other than those listed above represents 5.0% or more of the aggregate discounted receivable balance of the Tap Pool.
(i) True Sale. The transfer of the Tap Pool receivables from the Bank to the Trust pursuant to Amendment No. 1 constitutes a "true sale" and not a secured loan for purposes of federal and state insolvency law, including the Federal Deposit Insurance Act. The Bank has taken all steps necessary to evidence such transfer as a sale, including the recording of the transfer as a sale on the Bank's books and records and the filing of appropriate UCC financing statements. The Bank has not retained any interest in the Tap Pool receivables other than the servicing fee, the retained interest (if any) in the form of the residual interest certificate, and the Bank's rights under the Sale and Servicing Agreement with respect to any obligations of the Trust to the Bank.
(j) Servicing Capabilities. The Bank has the capacity, resources, personnel, and systems necessary to perform its obligations as Servicer under the Sale and Servicing Agreement, as amended by Amendment No. 1. The Bank has been servicing equipment leases since its inception and has maintained adequate internal controls, quality assurance procedures, and technology infrastructure for the servicing of equipment-lease receivables. The servicing fee payable to the Bank as Servicer is 0.50% per annum of the outstanding pool balance, payable monthly in accordance with the priority of payments set forth in the Indenture.
(k) Back-Up Servicer. Redwood Servicing Solutions LLC has been duly appointed as Back-Up Servicer under the Sale and Servicing Agreement and is prepared to assume the duties of Servicer in the event of a Servicer Default. The annual fee payable to the Back-Up Servicer is $7,500 per month ($90,000 per annum), which fee is payable as an operating expense of the Trust in accordance with the priority of payments set forth in the Indenture.
(l) No Servicer Default. No Servicer Default (as defined in the Sale and Servicing Agreement), and no event that with the giving of notice or the passage of time, or both, would constitute a Servicer Default, has occurred and is continuing as of the Effective Date.
(m) OCC Compliance. The Bank is in compliance in all material respects with all applicable requirements of the Office of the Comptroller of the Currency, including all capital adequacy requirements, risk-based capital requirements, and reporting requirements. The Bank has not received any notice from the OCC of any pending or threatened enforcement action, cease and desist order, or other supervisory action that would materially affect the Bank's ability to perform its obligations under the Transaction Documents.
(n) Disclosure. The Bank has provided to the Trust and the Underwriter all information regarding the Bank, the Tap Pool, the equipment-lease receivables, and the Bank's servicing operations required for inclusion in the Final Prospectus, and all such information is true, correct, and complete in all material respects. The Bank has not withheld any information that would be material to an investor's decision to purchase the Tap Notes.
(o) Credit Enhancement Post-Tap. Following the issuance of the Tap Notes and the acquisition of the Tap Pool receivables by the Trust, the credit enhancement for the Series 2024-A Notes will be as follows:
(i) Overcollateralization. The overcollateralization target is 4.50% of the aggregate outstanding note balance ($398,000,000), equal to $17,910,000. The overcollateralization will be built up over time through the application of excess cash flow in accordance with the priority of payments set forth in the Indenture.
(ii) Reserve Account. The reserve account will be funded at a level equal to 1.00% of the aggregate outstanding note balance ($398,000,000), equal to $3,980,000. The reserve account is maintained with the Indenture Trustee and will be replenished from available funds in accordance with the priority of payments.
(iii) Excess Spread. The annualized excess spread following the tap issuance is estimated to be approximately 0.86%, calculated as the weighted-average implicit lease rate (7.14%) minus the weighted-average note coupon (5.78%) minus the servicing fee (0.50%).
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER
Section 4.1 — Organization and Authority
Ashford Capital Markets LLC hereby represents and warrants that it is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware. Ashford Capital Markets LLC is duly registered as a broker-dealer with the SEC under the Exchange Act and is a member in good standing of FINRA (CRD No. 284756). Ashford Capital Markets LLC has all requisite limited liability company power and authority to execute, deliver, and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
Section 4.2 — Authorization
All limited liability company action necessary for the authorization, execution, delivery, and performance by the Underwriter of this Agreement and for the consummation by the Underwriter of the transactions contemplated hereby has been duly and validly taken. This Agreement has been duly executed and delivered by the Underwriter and constitutes a valid and binding obligation of the Underwriter, enforceable against the Underwriter in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally and by general principles of equity.
Section 4.3 — No Conflicts
The execution, delivery, and performance by the Underwriter of this Agreement and the consummation of the transactions contemplated hereby do not and will not (a) violate any provision of the Underwriter's certificate of formation or limited liability company agreement, (b) violate any applicable law, rule, regulation, or order of any governmental authority having jurisdiction over the Underwriter, or (c) result in a breach of, or constitute a default under, any material agreement or instrument to which the Underwriter is a party or by which the Underwriter or any of its properties or assets is bound, in each case in a manner that would have a material adverse effect on the Underwriter's ability to perform its obligations under this Agreement.
Section 4.4 — Distribution Compliance
The Underwriter hereby represents, warrants, and covenants that it shall offer and sell the Tap Notes only in compliance with the Securities Act, the Exchange Act, and all applicable rules and regulations of FINRA, including, without limitation, FINRA Rules 5110, 5121, and 5130, and shall not offer or sell the Tap Notes in any jurisdiction in which such offer or sale would not be permitted under applicable securities laws. The Underwriter shall deliver the Final Prospectus (or make available the Final Prospectus pursuant to Rule 172 under the Securities Act) to each purchaser of the Tap Notes in compliance with Section 5(b) of the Securities Act and Rule 172 thereunder. The Underwriter shall not use any "free writing prospectus" (as defined in Rule 405 under the Securities Act) in connection with the offering of the Tap Notes without the prior written consent of the Trust and the Bank.
ARTICLE V — COVENANTS
Section 5.1 — Covenants of the Trust
The Trust hereby covenants and agrees with the Underwriter as follows:
(a) Prospectus Delivery. The Trust shall ensure that the Prospectus Supplement is filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act on or before April 22, 2024. If, at any time prior to the completion of the distribution of the Tap Notes (as determined by the Underwriter), any event occurs as a result of which the Final Prospectus as then amended or supplemented would contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to amend or supplement the Final Prospectus to comply with the Securities Act, the Trust shall promptly prepare and file with the SEC an appropriate amendment or supplement, and furnish copies thereof to the Underwriter.
(b) Amendments. The Trust shall not amend or supplement, or file with the SEC any amendment or supplement to, the Registration Statement, the Base Prospectus, or the Prospectus Supplement without the prior written consent of the Underwriter (such consent not to be unreasonably withheld, conditioned, or delayed), unless such amendment or supplement is required by applicable law or regulation and the Trust has given the Underwriter reasonable prior notice thereof.
(c) Notice of Events. The Trust shall promptly notify the Underwriter in writing upon becoming aware of (i) any Event of Default or event that with notice or lapse of time, or both, would constitute an Event of Default under the Indenture, (ii) any downgrade, qualification, or withdrawal of any rating assigned to the Class A-2 Notes by either Rating Agency, or the placement of any such rating on a watch list for possible downgrade or withdrawal, (iii) any material adverse change in the business, financial condition, or results of operations of the Trust, or (iv) the issuance of any stop order suspending the effectiveness of the Registration Statement or the initiation or threat of any proceeding for that purpose.
(d) Compliance with Indenture. The Trust shall comply in all material respects with all terms, conditions, covenants, and obligations set forth in the Indenture, as supplemented by the Supplemental Indenture, and shall not take any action or omit to take any action that would cause a breach or default under the Indenture.
(e) Reserve and OC Maintenance. Following the issuance of the Tap Notes, the Trust shall maintain the reserve account at a level not less than 1.00% of the aggregate outstanding note balance ($3,980,000 based on a post-tap aggregate note balance of $398,000,000), and shall build and maintain overcollateralization at a level equal to not less than 4.50% of the aggregate outstanding note balance ($17,910,000 based on a post-tap aggregate note balance of $398,000,000), in each case in accordance with the terms of the Indenture as supplemented by the Supplemental Indenture.
Section 5.2 — Covenants of the Bank
The Bank hereby covenants and agrees with the Underwriter as follows:
(a) Servicing. The Bank shall perform all of its obligations as Servicer under the Sale and Servicing Agreement, as amended by Amendment No. 1, in accordance with the terms thereof and in accordance with customary and usual servicing standards for servicing equipment-lease receivables of a type similar to those in the Receivables Pool. The Bank shall not resign as Servicer or delegate any material portion of its servicing obligations without the prior written consent of the Indenture Trustee and notice to the Underwriter.
(b) Receivables. The Bank shall maintain the eligibility of all Eligible Receivables in the Tap Pool and shall, in accordance with the terms of the Sale and Servicing Agreement, replace or repurchase, at the Bank's expense, any receivable in the Tap Pool that is subsequently determined not to have been an Eligible Receivable as of the date of its transfer to the Trust, or that otherwise fails to meet the eligibility criteria set forth in the Sale and Servicing Agreement. The repurchase price for any such receivable shall be the outstanding discounted receivable balance thereof, as determined in accordance with the Sale and Servicing Agreement.
(c) Financial Reporting. The Bank shall continue to file with the SEC all reports, schedules, forms, and other documents required to be filed by the Bank under the Exchange Act, including, without limitation, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any reports required under Regulation AB. The Bank shall also cause to be filed on behalf of the Trust all reports on Form 10-D and Form ABS-EE required under Regulation AB.
(d) Rating Agency Cooperation. The Bank shall cooperate fully with Pinnacle Ratings Group Inc. and Crestline Ratings International LLC in connection with their ongoing surveillance of the Class A-2 Notes (including the Tap Notes) and the underlying receivables pool. The Bank shall promptly provide to each Rating Agency any information, data, or documentation reasonably requested by such Rating Agency in connection with its surveillance activities, and shall provide reasonable access to its servicing personnel, systems, and records. The Bank shall promptly notify the Underwriter and the Indenture Trustee if either Rating Agency notifies the Bank of any actual or contemplated change in the rating assigned to the Class A-2 Notes.
(e) Notification. The Bank shall promptly notify the Underwriter and the Indenture Trustee in writing upon becoming aware of (i) any Servicer Default or event that with notice or lapse of time, or both, would constitute a Servicer Default under the Sale and Servicing Agreement, (ii) any material adverse change in the business, financial condition, or results of operations of the Bank, (iii) any action taken or threatened by the OCC, the FDIC, or any other regulatory authority against the Bank that could reasonably be expected to have a material adverse effect on the Bank's ability to perform its obligations as Originator or Servicer under the Transaction Documents, or (iv) any material increase in delinquencies, defaults, or losses in the Receivables Pool or in the Bank's equipment lease portfolio generally.
Section 5.3 — Covenants of the Underwriter
The Underwriter hereby covenants and agrees with the Trust and the Bank as follows:
(a) Compliance with Distribution Requirements. The Underwriter shall offer and sell the Tap Notes only in compliance with the Securities Act, the Exchange Act, and all applicable FINRA rules and regulations, and shall deliver or make available the Final Prospectus to each purchaser of the Tap Notes as required by law. The Underwriter shall maintain all records required by applicable law and FINRA rules in connection with the offering and sale of the Tap Notes.
(b) Delivery of Investor Allocations. The Underwriter shall allocate and deliver the Tap Notes to the following initial purchasers in the following amounts:
The Underwriter shall use commercially reasonable efforts to ensure that the foregoing allocations are settled on the Closing Date through DTC. The Underwriter shall be responsible for communicating settlement instructions to each initial purchaser and for coordinating with DTC to effectuate the delivery of the Tap Notes to the accounts designated by each initial purchaser.
ARTICLE VI — CONDITIONS PRECEDENT TO CLOSING
Section 6.1 — Conditions to Obligations of the Underwriter
The obligation of the Underwriter to purchase the Tap Notes on the Closing Date is subject to the satisfaction (or waiver by the Underwriter in its sole discretion) of each of the following conditions precedent:
(a) Supplemental Indenture. The Supplemental Indenture No. 2, dated as of April 19, 2024, among the Trust, the Bank, and Meridian Fiduciary Services, Inc., as Indenture Trustee, shall have been duly executed and delivered by all parties thereto, and a copy thereof, certified by an officer of the Indenture Trustee, shall have been delivered to the Underwriter.
(b) Amendment No. 1. Amendment No. 1 to the Sale and Servicing Agreement, dated as of April 19, 2024, among the Trust, the Bank (as Originator and Servicer), and the Indenture Trustee, shall have been duly executed and delivered by all parties thereto, and a copy thereof, certified by an officer of the Bank, shall have been delivered to the Underwriter.
(c) Opinion of Issuer's Counsel. The Underwriter shall have received an opinion of Calderwood & Harkness LLP, as Issuer's Counsel, dated as of the Closing Date (May 17, 2024), addressed to the Underwriter, the Indenture Trustee, and the Rating Agencies, in form and substance satisfactory to the Underwriter and Underwriter's Counsel, covering the following matters, among others:
(i) the due authorization, execution, and delivery by the Trust of this Agreement, the Supplemental Indenture, and the other Transaction Documents to which the Trust is a party;
(ii) the enforceability of this Agreement, the Supplemental Indenture, and the Tap Notes against the Trust in accordance with their respective terms;
(iii) a 10b-5 negative assurance letter with respect to the Final Prospectus, confirming that nothing has come to the attention of Issuer's Counsel that causes it to believe that the Final Prospectus (as of the Applicable Time and as of the Closing Date) contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(iv) a confirmation that the Trust is not required to register as an "investment company" under the Investment Company Act; and
(v) such other matters as the Underwriter may reasonably request.
Such opinion shall be signed by Francesca Morano, Partner, Calderwood & Harkness LLP.
(d) Opinion of Delaware Counsel. The Underwriter shall have received an opinion of Whitfield & Donahue LLP, as Delaware counsel, dated as of the Closing Date, addressed to the Underwriter, the Indenture Trustee, and the Rating Agencies, in form and substance satisfactory to the Underwriter and Underwriter's Counsel, covering the following matters:
(i) the due formation and valid existence of the Trust as a Delaware statutory trust under the Delaware Statutory Trust Act;
(ii) the characterization of the transfer of the Tap Pool receivables from the Bank to the Trust as a "true sale" under applicable Delaware law, and not as a secured loan or other financing arrangement;
(iii) the enforceability of the Transaction Documents under Delaware law;
(iv) a non-consolidation opinion confirming that the assets of the Trust would not be substantively consolidated with the assets of the Bank in a proceeding under the Federal Deposit Insurance Act or the United States Bankruptcy Code; and
(v) such other matters as the Underwriter may reasonably request.
Such opinion shall be delivered by Robert Whitfield, Partner, Whitfield & Donahue LLP, 1000 North King Street, Suite 500, Wilmington, Delaware 19801. The flat fee for such opinion shall be $25,000, payable by the Bank.
(e) Opinion of Underwriter's Counsel. The Underwriter shall have received an opinion of Hargrove, Sato & Chen LLP, as Underwriter's Counsel, dated as of the Closing Date, addressed to the Underwriter, in form and substance satisfactory to the Underwriter, covering such matters as the Underwriter may reasonably request. Such opinion shall be signed by Nina Hargrove, Partner, Hargrove, Sato & Chen LLP, 1585 Broadway, 28th Floor, New York, New York 10036.
(f) Officer's Certificate. The Underwriter shall have received an Officer's Certificate of Belmont Ridge Bank, National Association, dated as of the Closing Date, executed by Derek Ashworth, Treasurer & Head of Capital Markets, in the form attached hereto as Exhibit B, certifying as to the following:
(i) the truth and correctness in all material respects of each of the representations and warranties of the Bank contained in this Agreement and in the other Transaction Documents, as of the Effective Date and as of the Closing Date;
(ii) the absence of any Event of Default under the Indenture and any Servicer Default under the Sale and Servicing Agreement, and the absence of any event that with notice or lapse of time, or both, would constitute an Event of Default or a Servicer Default;
(iii) the compliance of each receivable in the Tap Pool with the eligibility criteria set forth in the Sale and Servicing Agreement, as amended by Amendment No. 1;
(iv) confirmation that the ratings assigned to the Class A-2 Notes by the Rating Agencies have not been downgraded, qualified, or withdrawn; and
(v) the Bank's compliance in all material respects with all applicable requirements of the OCC.
(g) Bring-Down Comfort Letter. The Underwriter shall have received a bring-down comfort letter from Velthorn Accounting Group LLP (345 Hudson Street, 14th Floor, New York, New York 10014), dated as of the Closing Date, addressed to the Underwriter, confirming that as of a date not more than three (3) Business Days prior to the Closing Date, nothing has come to the attention of Velthorn Accounting Group LLP that would require any modification to the original comfort letter dated April 19, 2024, previously delivered to the Underwriter. Such bring-down comfort letter shall be signed by Angela Ferris, Audit Partner. The aggregate fee for the original comfort letter, the bring-down comfort letter, and agreed-upon procedures in connection with the tap issuance shall be $40,000 (flat), payable by the Bank.
(h) Rating Confirmation. The Underwriter shall have received:
(i) a letter from Pinnacle Ratings Group Inc., signed by Lisa Okoro, Senior Director, confirming the "AAA(sf)" rating of the Class A-2 Notes (including the Tap Notes) and confirming that such rating has not been downgraded, qualified, or withdrawn and is not on review or watch for possible downgrade; and
(ii) a letter from Crestline Ratings International LLC, signed by Thomas Pratt, Vice President, confirming the "Aaa(sf)" rating of the Class A-2 Notes (including the Tap Notes) and confirming that such rating has not been downgraded, qualified, or withdrawn and is not on review or watch for possible downgrade.
The combined rating agency fees payable by the Bank in connection with the tap issuance shall be $75,000.
(i) Filing of Prospectus Supplement. The Prospectus Supplement shall have been filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act on or before April 22, 2024, and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Trust or the Bank, threatened by the SEC.
(j) Secretary's Certificate. The Underwriter shall have received a Secretary's Certificate of the Bank, dated as of the Closing Date, executed by the Corporate Secretary or Assistant Corporate Secretary of the Bank, attaching certified copies of (i) the resolutions of the board of directors (or a duly authorized committee thereof) of the Bank authorizing the execution, delivery, and performance of this Agreement, Amendment No. 1, and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, and (ii) the incumbency and specimen signatures of the officers of the Bank authorized to execute and deliver this Agreement and the other Transaction Documents on behalf of the Bank.
(k) Good Standing Certificates. The Underwriter shall have received (i) a certificate of good standing for the Trust issued by the Secretary of State of the State of Delaware, dated no earlier than five (5) Business Days prior to the Closing Date, and (ii) a certificate of corporate existence and good standing for the Bank issued by the OCC, dated no earlier than five (5) Business Days prior to the Closing Date.