Schedule To The Master Agreement

SCHEDULE to the Master Agreement Dated as of August 23, 2006 Between CALYON NEW YORK BRANCH (Party A), the New York Branch of Calyon, a French Bank Organized Under the Laws of the Republic of France and ACCREDITED HOME LENDERS, INC. (Party B), a ...

Exhibit 4.12

EXECUTION COPY

(Multicurrency-Cross Border)

SCHEDULE

to the

Master Agreement

dated as of August 23, 2006

between

CALYON NEW YORK BRANCH (“Party A”),

the New York branch of Calyon, a French bank organized under the laws of the Republic of France

and

ACCREDITED HOME LENDERS, INC. (“Party B”),

a corporation organized under the laws of

Delaware

This Amended and Restated Schedule to the Master Agreement amends and restates in its entirety the Schedule dated as of May 10, 2005, between Party A and Party B.

Part 1: Termination Provisions

In this Agreement:

 

(a) “Specified Entity” means:

in relation to Party A for the purpose of:

 

Section 5(a)(v),

   Not applicable.

Section 5(a)(vi),

   Not applicable.

Section 5(a)(vii),

   Not applicable.

Section 5(b)(iv),

   Not applicable.

and in relation to Party B for the purpose of:

 

Section 5(a)(v),

   All Affiliates.

Section 5(a)(vi),

   All Affiliates.

Section 5(a)(vii),

   All Affiliates.

Section 5(b)(iv),

   All Affiliates.

 

(b) “Specified Transaction” will have the meaning specified in Section 14 of this Agreement and shall also include any repurchase transactions, reverse repurchase transactions, buy/sellback transactions and securities lending transactions and any other related OTC transactions now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider or Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider or Specified Entity of such party).

 

(c) The “Cross Default” provisions of Section 5(a)(vi) will not apply to Party A and will apply to Party B.

The following provisions apply:

“Specified Indebtedness” will have the meaning specified in Section 14 of this Agreement.

“Threshold Amount” means the lesser of (i) USD 10 million or (ii) two percent (2%) of the Stockholders’ Equity of Party B, in the case of Party B (or its equivalent in any other currency).

 


For purposes hereof, “Stockholders’ Equity” means with respect to an entity, at any time, the sum at such time of (i) its capital stock (including preferred stock) outstanding, taken at par value, (ii) its capital surplus and (iii) its retained earnings, minus (iv) treasury stock, each to be determined in accordance with generally accepted accounting principles consistently applied at most recent quarter end.

 

(d) The “Credit Event Upon Merger” provisions of Section 5(b)(iv) will not apply to Party A and will apply to Party B.

 

(e) The “Automatic Early Termination” provision of Section 6(a) will not apply to Party A and will not apply to Party B.

 

(f) Payments on Early Termination. For the purpose of Section 6(e) of this Agreement, Loss and the Second Method will apply.

 

(g) “Termination Currency” means United States Dollars (“USD”).

 

(h) Additional Termination Events will apply. Each of the following shall constitute an Additional Termination Event with respect to which Party B shall be the sole Affected Party:

 

  (i) Financial Covenants. AHLHC shall fail to maintain:

 

  (A) at any time, a minimum Adjusted Tangible Net Worth of at least the sum of (1) $300,000,000 plus (2) 50% of AHLHC’s positive quarterly net income for such quarter from the calendar quarter beginning on October 1, 2006,

 

  (B) as of the last business day of each fiscal quarter, an Interest Coverage Ratio of at least 1.10:1.0,

 

  (C) at any time, a ratio of Non-Warehouse Debt to Adjusted Tangible Net Worth that is less than or equal to 2.0:1.0,

 

  (D) as of the last business day of any month, Unrestricted Cash And Cash Equivalents and available borrowing capacity of at least $20,000,000, which continues uncured for five (5) business days, or

 

  (E) at any time, a ratio of Recourse Debt to Tangible Net Worth Ratio that is less than or equal to 17.0:1.0.

 

  (ii) Net Earnings. AHLHC shall report net earnings for any six rolling calendar months of less than $1.00 on a consolidated basis in accordance with GAAP.

 

  (iii) Repo Agreement Default. An “Event of Default” (as such term is defined in the Repo Agreement) occurs and is continuing.

 

  (iv) Change of Control. A Designated Event (as defined below) occurs with respect to Party B. A “Designated Event” means that:

 

  (A) Party B or AHLHC dissolves, merges or consolidates with another entity (unless (1) it is the surviving party or (2) the entity into which it merges has equity and a market value of at least that of Party B or AHLHC immediately prior to such merger and such entity expressly assumes the obligations of the Party B at the time of such merger), or sells, transfers, or otherwise disposes of a material portion of its business or assets, other than sales, transfers or dispositions of mortgage loans in the ordinary course of Party B’s or AHLHC’s business;

 

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  (B) any Person or entity or any group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of Persons and/or entities, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), directly or indirectly, in one or more transactions, of securities of Party B (or other securities convertible into such securities) representing more than 50% of the combined voting power of all securities of Party B entitled to vote in the election of directors (other than a Person or entity owning such securities on the date of this Agreement); or

 

  (C) Party B shall cease to be a wholly-owned subsidiary of AHLHC.

 

  (vi) Material Adverse Change. Party B has experienced or is experiencing a material adverse change, determined by Party A in Party A’s sole discretion, in its business, assets, or operations or financial condition. For the purpose of the foregoing Termination Event, Party B shall be the Affected Party.

Capitalized terms used in this Part 1(h) shall have the meanings set forth below:

Adjusted Tangible Net Worth” means, for any Person, Net Worth of such person plus (a) Subordinated Debt (provided that Subordinated Debt shall not be taken into account to the extent that it would cause Adjusted Tangible Net Worth to be comprised of greater than 25% of Subordinated Debt) plus minority interest in Accredited Mortgage Loan REIT Trust as shown on the most recent financial statement of Seller, minus (b) (i) servicing rights, and (ii) all intangible assets, including goodwill, patents, tradenames, trademarks, copyrights, franchises, any organization expenses, deferred expenses, prepaid expenses, prepaid assets, receivables from shareholders, unconsolidated Affiliates or employees, and any other asset as shown as an intangible asset on the balance sheet of such Person on a consolidated basis as determined at a particular date in accordance with GAAP.

AHLHC” means Accredited Home Lenders Holding Co. and its Subsidiaries on a consolidated basis.

Consolidated Debt” means, at any time, the aggregate principal amount of Indebtedness of AHLHC outstanding at such time as reflected on the consolidated balance sheet of AHLHC, prepared in accordance with GAAP.

EBITDA” means, for any period, Net Income for such period on a consolidated basis, plus, without duplication and to the extent reflected as a charge in the statement of such Net Income for such period, the sum of (a) total income tax expense, (b) interest expense, (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Net Income for such period, losses on sales of assets outside of the ordinary course of business), and (f) any other noncash charges, and minus, to the extent included in the statement of such Net Income for such period, the sum of (a) any extraordinary income or gains (including, whether or not otherwise includable as a separate item in the statement of such Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (b) any other noncash income (other than any income represented by a receivable that in the ordinary course would be expected to be paid in cash), all as determined on a consolidated basis.

Indebtedness of AHLHC” means AHLHC’s (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of property (whether real or personal, tangible or intangible) or services (other than accounts payable arising in the ordinary course of AHLHC’s business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by AHLHC, (d) obligations which are evidenced by notes, acceptances, or

 

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similar instruments, (e) capitalized lease obligations, (f) rate hedging obligations, (g) contingent obligations of any type which are reportable on AHLHC’s balance sheet in accordance with GAAP, (h) obligations for which AHLHC is obligated pursuant to or in respect of a letter of credit or similar instrument and (i) repurchase obligations or liabilities of Party B with respect to accounts or notes receivable and chattel paper sold by AHLHC.

Interest Coverage Ratio” means, for any applicable computation period, the ratio of (a) EBITDA to (b) Interest Expense.

Interest Expense” means, for any applicable computation period, all interest paid or accrued during such period by AHLHC on a consolidated basis, determined in accordance with GAAP.

Net Income” means, for any period, the consolidated net income (or loss) for such period, determined on a consolidated basis in accordance with GAAP.

Non-Warehouse Debt” means, at any time, Consolidated Debt minus Warehouse Debt.

Recourse Debt to Adjusted Tangible Net Worth Ratio” means, at any time, the ratio of (a) Consolidated Debt minus the liabilities related to securitizations which are accounted for as financings under Financial Accounting Standards Board (FASB) Rule 140 to (b) Adjusted Tangible Net Worth.

Repo Agreement” means the Fourth Amended and Restated Master Repurchase Agreement Governing Purchases and Sales of Mortgage Loans, dated as of June 23, 2006, between Lehman Brothers Bank, FSB, Accredited Mortgage Loan REIT Trust and Party B, dated as of the date hereof, as amended from time to time.

Unrestricted Cash and Cash Equivalents” means, as of any date of determination, the sum of (a) the aggregate amount of unrestricted cash and (b) the aggregate amount of unrestricted cash equivalents (valued at the fair market value). As used in this definition, “Unrestricted” means the specified asset is not subject to any liens or claims of any kind in favor of any Person.

Warehouse Debt” shall mean Indebtedness of AHLHC, whether or not it is recourse, that is secured or otherwise backed by Party B’s mortgage loans, mortgage-backed securities or other mortgage assets, and that is used generally by Party B to provide it with financing or liquidity for the origination or acquisition by it of mortgage loans, mortgage-backed securities or other mortgage assets in Party B’s ordinary course of business.

 

(i) Additional Event of Default. An “Event of Default” with respect to which Party B shall be the Defaulting Party under and as defined in the ISDA Master Agreement, dated as of the date hereof, between Lehman Brothers Special Financing Inc. and Party B (as amended from time to time) shall constitute an Event of Default hereunder with respect to Party B as the sole Defaulting Party.

Part 2: Tax Representations

 

(a) Payer Tax Representations. For the purpose of Section 3(e) of this Agreement, Party A and Party B will each make the following representation:

It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Sections 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on (i) the accuracy of any representation made by the other party

 

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pursuant to Section 3(f) of this Agreement, (ii) the satisfaction(s) of the agreement of the other party contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement,

provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) of this Agreement by reason of material prejudice to its legal or commercial position.

 

(b) Payee Tax Representations. For the purpose of Section 3(f) of this Agreement:

 

  (i) Each payment received or to be received by it in connection with this Agreement will be effectively connected with its conduct of a trade or business in the United States.

 

  (ii) Party B represents that it is a corporation duly organized and validly existing under the laws the State of California and its federal taxpayer identification number is 33-0426859.

Part 3: Agreement to Deliver Documents

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable:

 

(a) Party A and Party B will deliver forms and/or documents described in Section 4(a)(iii) of this Agreement upon reasonable demand by the other party.

 

(b) Other documents to be delivered are:

 

Party required to
deliver document
  

Form/Document/Certificate

   Date by which
to be delivered
   Covered by
Section 3(d)
Party A and
Party B
   Incumbency certificate or other evidence reasonably satisfactory to the other party of the authority and genuine signature of the individual signing the Agreement and any Credit Support Document on behalf of such party to execute the same.    Upon
execution
of this
Agreement.
   Yes
Party A and
Party B
   Evidence reasonably satisfactory to the other party of the authority of such party and its Credit Support Provider to enter into the Agreement, any Credit Support Document and each Transaction entered into hereunder.    Upon
execution
of this
Agreement.
   Yes

 

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Party required to
deliver document
  

Form/Document/Certificate

   Date by which
to be delivered
   Covered by
Section 3(d)
Party A and Party
B
   A copy of the annual report (i) in the case of Party A, Party A and (ii) in the case of Party B, AHLHC, containing audited consolidated financial statements for such fiscal year certified by independent public accountants and prepared in accordance with generally accepted accounting principles consistently applied.    As soon as
available
and in any
event
within 90
days of the
end of each
fiscal year
of
AHLHC.
   Yes
Party B    For its most recent fiscal quarter, a copy of the unaudited financial statements of (i) in the case of Party A, Party A and (ii) in the case of Party B, AHLHC, prepared in accordance with generally accepted accounting principles consistently applied.    As soon as
available
and in any
event
within 60
days of the
end of each
fiscal
quarter of
AHLHC.
   Yes
Party A and
Party B
   Any Credit Support Document(s) specified in Part 4 of this Schedule.    Upon
execution
of this
Agreement.
   No
Party B    An opinion of counsel to Party B substantially in the form of Exhibit A to this Schedule.    Upon
execution
of this
Agreement.
   No
Party B    All notices, reports, documents, certificates information, statements or instructions required to be delivered to Reference Party A (as defined in the Confirmation) under any Program Documents and such other documents as Party A may reasonable request from time to time.    Upon
request.
   Yes
Party B    A certificate of an authorized financial officer of Party B certifying that no Additional Termination Event has occurred and the calculations of the financial covenants set forth in Part 1(h)(i) of this Schedule for said period and the methodology used in computing said financial covenants, in form and detail satisfactory to Party A.    Within 30
days after
the end of
each
calendar
quarter or
30 days
after
request by
Party A.
   Yes

 

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Party required to
deliver document
  

Form/Document/Certificate

   Date by which
to be delivered
   Covered by
Section 3(d)
Party B    Notice of Amendment to any Program Document.    Upon
execution
of such
amendment.
   Yes

Part 4: Miscellaneous

 

(a) Addresses for Notices. For the purpose of Section 12(a) of this Agreement:

Address for notices or communications to Party A:

 

Address:   1301 Avenue of the Americas,
  New York, New York 10019
Attention:   Treasury Department
Telephone No.:   (212) 261-7310
Facsimile No.:   (212) 459-3167
  For all purposes.

Address for notices or communications to Party B:

 

Address:   Accredited Home Lenders, Inc.
  15090 Avenue of Science,
  San Diego, California 92128
Attention:   Katy Hudson
Telephone No.:   858-676-2177
Facsimile No.:   866-278-5876
  For all purposes.

 

(b) Process Agent. For the purpose of Section 13(c) of this Agreement:

 

Party A appoints as its Process Agent:

  Not applicable.

Party B appoints as its Process Agent:

  Not applicable.

 

(c) Offices. The provisions of Section 10(a) will apply to this Agreement.

 

(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:

Party A is not a Multibranch Party.

Party B is not a Multibranch Party.

 

(e) Calculation Agent. The Calculation Agent is Party A.

 

(f) Credit Support Document. Details of any Credit Support Document, each as amended, extended, supplemented or otherwise modified in writing from time to time, and each of which is incorporated by reference in, constitutes part of, and is in connection with, this Agreement and each Confirmation (unless provided otherwise in a Confirmation) as if set forth in full in this Agreement or such Confirmation, is a Credit Support Document:

 

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In the case of Party A:

None.

In the case of Party B:

Credit Support Annex annexed hereto which supplements, forms part of, and is subject to, this Agreement.

 

(g) Credit Support Provider.

Credit Support Provider means in relation to Party A:     Not applicable.

Credit Support Provider means in relation to Party B:     Not applicable.

 

(h) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAWS PROVISIONS THEREOF, OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of this Agreement will apply to any Transactions.

 

(j) “Affiliate” will have the meaning specified in Section 14 of this Agreement.

 

(k) Jurisdiction. Section 13(b) is hereby amended by: (i) deleting in the second line of subparagraph (i) thereof the word “non-”; and (ii) deleting the final paragraph thereof.

Part 5: Other Provisions

 

(a) Representations. Section 3 of this Agreement is hereby amended by adding the following additional subsections:

 

  “(g) No Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of the Transaction will not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party will be deemed to be an assurance or guarantee as to the expected results of that Transaction.

 

  (h) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction.

 

  (i) Status of Parties. The other party is not acting as a fiduciary for or an advisor to it in respect of that Transaction.

 

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  (j) No Agency. It is entering into this Agreement, including each Transaction, as principal and not as agent of any person or entity.

 

  (k) Eligible Contract Participant. It is an “eligible contract participant” within the meaning of Section 1a(12) of the Commodity Exchange Act.”

 

(b) Set-off. Section 6 of this Agreement is hereby amended by adding the following new subsection 6(f):

 

  (f) Set-off.

 

  (i) In addition to any rights of set-off a party may have as a matter of law or otherwise, upon the occurrence of an Event of Default or an Additional Termination Event and the designation of an Early Termination Date pursuant to Section 6 of the Agreement with respect to a party (“X”), the other party (“Y”) will have the right (but not be obliged) without prior notice to X or any other person to set-off or apply any obligation of X owed to Y (and to any Affiliate of Y) (whether or not matured or contingent and whether or not arising under this Agreement, and regardless of the currency, place of payment or booking office of the obligation) against any obligation of Y (and of any Affiliate of Y) owed to X (whether or not matured or contingent and whether or not arising under this Agreement, and regardless of the currency, place of payment or booking office of the obligation).

 

  (ii) If the amount of an obligation is unascertained, Y may in good faith estimate that amount and set-off in respect of the estimate, subject to the relevant party accounting to the other when the amount of the obligation is ascertained.

 

  (iii) This clause (f) shall not constitute a mortgage, charge, lien or other security interest upon any of the property or assets of either party to this Agreement.

 

(c) Notices. For the purposes of subsections (iii) and (v) of Section 12(a), the date of receipt shall be presumed to be the date sent if sent on a Local Business Day or, if not sent on a Local Business Day, the date of receipt shall be presumed to be the first Local Business Day following the date sent.

 

(d) Service of Process. The penultimate sentence of Section 13(c) shall be amended by adding the following language at the end thereof: “if permitted in the jurisdiction where the proceedings are initiated and in the jurisdiction where service is to be made.”

 

(e) Waiver of Trial By Jury. Insofar as is permitted by law, each party irrevocably waives any and all rights to trial by jury in any legal proceeding in connection with this Agreement or any Transaction, and acknowledges that this waiver is a material inducement to the other party’s entering into this Agreement and each Transaction hereunder.

 

(f) Accuracy of Specified Information. Section 3(d) is hereby amended by adding in the third line thereof after the word “respect” and before the period the words “or, in the case of audited or unaudited financial statements or balance sheets, a fair presentation of the financial condition of the relevant person.”

 

(g) Confirmation. Party A and Party B each agrees and acknowledges that the only Transaction that is or will be governed by this Agreement is the Transactions evidenced by the one Confirmation dated on the date hereof (it being understood that, in the event such Confirmation shall be amended (in any respect), such amendment shall not constitute (for purposes of this paragraph) a separate Transaction or a separate Confirmation).

 

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(h) Severability. Except as otherwise provided in Sections 5(b)(i) or 5(b)(ii) of the Agreement in the event that any one or more of the provisions contained in this Agreement should be held invalid, illegal, or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits and expectations of the parties to this Agreement. The parties shall endeavor, in good faith negotiations, to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

(i) Consent to Recording. The parties agree that each may electronically record all telephonic conversations between marketing and trading personnel in connection with this Agreement and that any such recordings may be submitted in evidence in any Proceedings relating to this Agreement.

 

(k) Furnishing Specified Information. Section 4(a)(iii) is hereby amended by inserting “promptly upon the earlier of (i)” in lieu of the word “upon” at the beginning thereof and inserting “or (ii) such party learning that the form or document is required before the word “any” on the first line thereof.

 

(l) Consent to Disclosure. Party B consents to Party A effecting such disclosure as Party A may deem appropriate to enable Party A to transfer Party B’s records and information, to process and execute Party B’s instructions, or in pursuance of Party B’s or Party A’s commercial interest, to any of its Affiliates. For the avoidance of doubt, Party B’s consent to disclosure includes the right on the party of Party A to allow access to any intended recipient of Party B information to the records of Party A by any means.

 

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The parties executing this Schedule have executed the Master Agreement and have agreed as to the contents of this Schedule.

 

CALYON NEW YORK BRANCH

(Name of Party)

 

ACCREDITED HOME LENDERS, INC.

(Name of Party)

By:  

/s/ IAN CHEUNG

 

By:

 

/s/ CHARLES O. RYAN

Name:   Ian Cheung  

Name:

 

Charles O. Ryan

Title:   Director  

Title:

 

Securitization Coordinator

By:  

/s/ RICARDO L. GOMES

   
Name:   Ricardo L. Gomes    
Title:   Vice President    

 

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EXHIBIT A to Schedule

[Form of Opinion of Counsel]

[Date]                                                                         

[Other Counterparty]

Ladies and Gentlemen:

I have acted as counsel to [counterparty], a [                                 ] corporation (“Party [A][B]”), and am familiar with matters pertaining to the execution and delivery of the Master Agreement (the “Master Agreement”) dated as of [date] between Accredited Home Lenders, Inc. (“Party B”) and Calyon New York Branch (“Party A”).

In connection with this opinion, I have examined, or have had examined on my behalf, an executed copy of the Master Agreement, certificates and statements of public officials and officers of Party B and such other agreements, instruments, documents and records as I have deemed necessary or appropriate for the purposes of this opinion.

Based on the foregoing but subject to the assumptions, exceptions, qualifications and limitations hereinafter expressed, I am of the opinion that:

 

  1. Party B is a corporation duly incorporated, validly existing and in good standing under the laws of [                ].

 

  2. The execution, delivery and performance of the Master Agreement, by or on behalf of Party B, are within its corporate power, have been duly authorized by all corporate action and do not conflict with any provision of its certificate of incorporation or by-laws.

 

  3. The Master Agreement has been duly executed and delivered by Party B and constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms.

 

  4. To the best of my knowledge no consent, authorization, license or approval of or registration or declaration with, any governmental authority is required in connection with the execution, delivery and performance of the Master Agreement by Party [A][B].

The foregoing opinions are subject to the following assumptions, exceptions, qualifications and limitations:

A. My opinion in paragraph 3 above is subject to (i) the effect of any bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally (including, without limitation, the effect of statutory or other laws regarding fraudulent or other similar transfers), (ii) general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law, (iii) the equitable discretion of the court before which any proceeding therefor may be brought, (iv) the application of judicial decisions involving statutes or principles of equity which have held that certain covenants and other provisions of agreements, including those providing for the acceleration of obligations upon the occurrence of events therein described, are unenforceable in circumstances where it can be demonstrated that the enforcement of such provisions is not reasonably necessary for the protection of the party invoking the right to accelerate, (v) such requirements of good

 

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faith, fair dealing and commercial reasonableness as may be imposed by the law of the State of New York on the exercise by a party of its contractual rights and remedies, (vi) possible judicial application of foreign laws or foreign government actions affecting creditors’ rights, and (v) the validity, binding effect or enforceability, under certain circumstances, of contractual provisions with respect to indemnification or waiving defenses to obligations where such indemnification or such waivers are against public policy.

B. I am qualified to practice law in [            ] and render no opinion on the laws of any jurisdiction other than the laws of [            ].

C. My opinions are limited to the present laws and to the facts as they presently exist. I assume no obligation to revise or supplement this opinion should the present laws of the jurisdictions referred to in paragraph B above be changed by legislative action, judicial decision or otherwise.

D. This letter is rendered to you in connection with the Master Agreement [and the Guarantee] and the transactions related thereto and may not be relied upon by any other person or by you in any other context or for any other purpose. This letter may not be quoted in whole or in part, nor may copies thereof be furnished or delivered to any other person, without the prior written consent of Party B, except that you may furnish copies hereof (i) to your independent auditors and attorneys, (ii) to any state or local authority having jurisdiction over you or over Party [A][B], (iii) pursuant to the order of any legal process of any court of competent jurisdiction or any governmental agency, and (iv) in connection with any legal action arising out of the Master Agreement.

E. I have assumed with your permission (i) the genuineness of all signatures by each party other than Party B, (ii) the authenticity of documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as copies, and (iii) the due execution and delivery, pursuant to due authorization, of the Master Agreement by each party other than Party B.

F. I have also assumed for the purpose of this opinion that the Master Agreement constitute the legal valid and binding obligation of Party [A][B] in accordance with New York law by which is governed.

G. I express no opinion as to the prohibition on transfers in Section 7(a) of the Master Agreement Terms in any case in which its operation would conflict with Section 9-406 or Section 9-408 of the Uniform Commercial Code as in effect in the State of New York.

Very truly yours,

 

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