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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 1, 1999
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MCM Capital Group, Inc.
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(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
Delaware 000-26489 48-1090909
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
</TABLE>
500 West First Street, Hutchinson, Kansas 67501
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (800) 759-0327
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
MCM Capital Group, Inc. (the "Company"), through its wholly-owned
subsidiary Midland Credit Management, Inc., entered into a Loan Sale Agreement
(the "Agreement") with MBNA America Bank, N.A. to purchase certain charged off
credit card receivables. The Loan Sale Agreement became effective on September
1, 1999. MBNA is one of the leading credit card issuers in the United States.
The Company filed a press release announcing the Agreement on August
26, 1999. A copy of the press release is filed herewith as Exhibit 99.1 and is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.1 Loan Sale Agreement described in Item 5 (1)
99.1 Press Release dated August 26, 1999
___________
(1) Certain information in this exhibit will be omitted and filed
separately with the Securities and Exchange Commission
pursuant to a confidential treatment request under Rule 24b-2
of the Securities and Exchange Act of 1934, as amended.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MCM Capital Group, Inc.
By /s/ R. Brooks Sherman
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R. Brooks Sherman
Executive Vice President
and Chief Financial Officer
Dated: October 1, 1999
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Exhibit Index
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.1 Loan Sale Agreement described in Item 5 (1)
99.1 Press Release dated August 26, 1999
___________
(1) Certain information in this exhibit will be omitted and filed
separately with the Securities and Exchange Commission
pursuant to a confidential treatment request under Rule 24b-2
of the Securities and Exchange Act of 1934, as amended.
</TABLE>
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Exhibit 10.1
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST UNDER RULE 24b-2 OF THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED. THE CONFIDENTIAL INFORMATION ON PAGES 2, 4, 5, 7, 8,
9, 12, 16, 17, 18, 19, EXHIBIT D AND EXHIBIT E HAS BEEN REPLACED WITH ASTERISKS.
________________________________________________________________________________
________________________________________________________________________________
LOAN SALE AGREEMENT
DATED AND EFFECTIVE AS OF SEPTEMBER 1, 1999
BY AND AMONG
SELLER: MBNA AMERICA BANK, N.A.
AND
BUYER: MIDLAND CREDIT MANAGEMENT, INC.
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LOAN SALE AGREEMENT
THIS LOAN SALE AGREEMENT (this "Agreement") is dated and effective as
of the day and year as set forth on the cover page of this Agreement by and
among MBNA AMERICA BANK, N.A. (the "Seller"), and MIDLAND CREDIT MANAGEMENT,
INC. (the "Buyer").
RECITALS:
Recital 1. Seller desires (1) to sell certain loans, representing
credit card and credit line receivables, as identified on the Initial Loan
Schedule (as defined herein) a copy of which is attached hereto as Schedule 1
(the "Existing Loans") and (ii) to sell from time to time during the term of
this Agreement certain additional Loans (as defined herein) which are described
in Section 2.3 hereof and are charged off by the Seller ("Additional Loans");
Recital 2. The Seller has negotiated with various entities with respect
to the sale of the Existing Loans and the Additional Loans and has reached an
agreement to sell the Existing Loans to the Buyer and has reached an agreement
to sell, the Additional Loans to the Buyer for the consideration and under the
express terms, provisions, conditions and limitations as set forth herein;
Recital 3. Seller is willing, subject to the express terms, provisions,
conditions, limitations, waivers and disclaimers as set forth herein, to sell,
transfer, assign and convey to Buyer all of Seller's right, title and interest
in, to and under the Existing Loans and the Additional Loans (collectively, the
"Loans"); and
NOW, THEREFORE, in consideration of the mutual promises herein set
forth and other valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Seller and Buyer agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
For purposes of this Agreement, the parties hereto agree to the
following terms, which shall have the meanings indicated:
Section 1.1. "Additional Loans" means Loans, in addition to the
Existing Loans, which are described in Section 2.3 of this Agreement and are to
be purchased from the Seller by the Buyer under the terms of this Agreement from
time to time on the Additional Loans Transfer Dates.
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
Section 1.2. "Additional Loans Cut-Off Date" means with respect to the
Additional Loans, the first calendar day of each calendar month, provided,
however, that the first Additional Loans Cut-Off Date shall be October 1, 1999;
each such Additional Loans Cut-Off Date shall constitute the cut-off date with
respect to Loans to be sold on the immediately following Additional Loans
Transfer Date.
Section 1.3. "Additional Loans Transfer Date" means, in each calendar
month, the * Business Day following the Receipt Date occurring in such
month; provided, however, that the first Additional Loans Transfer Date shall be
October 15, 1999 and provided further, that no Additional Loans Transfer Dates
shall occur after the Termination Date.
Section 1.4. "Affiliate" means any affiliate of Buyer.
Section 1.5. "Agreement" means this Loan Sale Agreement, including the
cover page and all Addenda, Exhibits and Schedules hereto.
Section 1.6. "Bill of Sale and Assignment" means the document to be
delivered in accordance with Section 3.1 to Buyer on or before each Transfer
Date with respect to the Loans purchased under this Agreement, substantially in
the form attached hereto as Exhibit C, together with the Loan Schedule
describing the Loans being sold on such Transfer Date.
Section 1.7. "Business Day" means a day that is not a Saturday, Sunday
or legal holiday recognized by the federal government.
Section 1.8. "Buyer" means Midland Credit Management, Inc. at the
time of original execution of this Agreement and, from time to time, upon
assignment of the rights and obligations hereunder to an Affiliate as provided
in Section 11.2. of this Agreement, Buyer shall mean such Affiliate.
Section 1.9. "Claim" means any claim, demand, cause of action,
judgment, loss, damage, penalty, fines, forfeitures, fees, liability, cost and
expense (including attorneys' fees, whether suit is instituted or not), whether
known or unknown, liquidated or contingent.
Section 1.10. "Current Balance" means the approximate unpaid balance in
United States Dollars for each Loan sold hereunder. The Current Balance for the
Existing Loans is as set forth in the Initial Loan Schedules and the Current
Balance for each Additional Loan shall be the approximate unpaid balance in
United States Dollars for such Additional Loan as set forth in a Loan Schedule
delivered by the Seller to the Buyer at the time of the sale of the Additional
Loan. The figure provided as the
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Current Balance for any Loan may include interest (accrued or unaccrued), costs,
fees and expenses and it is possible that the figure provided as the Current
Balance for any Loan may not reflect credits for payments made by or on behalf
of any Obligor prior to the applicable Cut-Off Date. This figure may also
reflect payments made by or on behalf of any Obligor which have been deposited
and credited to the Current Balance of such Loan, but that may subsequently be
returned to Seller due to insufficient funds to cover such payments. Buyer
acknowledges, understands and agrees (i) that Seller makes no representations or
warranties whatsoever, express or implied, as to the accuracy of the Current
Balance, and (ii) that Buyer shall have no right, whatsoever, to make any claim
against Seller should the actual unpaid balance of any Loan be different from
the Current Balance of such Loan set forth in the Loan Schedule delivered to the
Buyer in connection with the sale of such Loan, except as set forth in Section
8.5 hereof.
Section 1.11. "Cut-Off Date" means, with respect to the Existing Loans,
the Initial Cut-Off Date and, with respect the Additional Loans sold on any
Additional Loans Transfer Date, the immediately preceding Additional Loans
Cut-Off Date.
Section 1.12. "Evidence of Indebtedness" means with respect to each
Loan: (a) each loan agreement, line of credit agreement, or other evidence of
indebtedness for such Loan, judgment, deficiency or charge-off; (b) any judgment
against any Obligor; (c) any settlement agreements or other evidence of
compromise by the creditor relating to the amounts due under any Loan or (d) any
other evidence, including, without limitation, any Loan payment history data or
computer printouts, creditor notations or any other Loan summary information
upon which a creditor could reasonably rely in asserting that the same
represents a balance due and owing on a right of collection. THE EXISTENCE OF AN
EVIDENCE OF INDEBTEDNESS SHALL EVIDENCE AN UNPAID AND OUTSTANDING CLAIM AGAINST
AN OBLIGOR BUT SHALL NOT BE DEEMED TO IMPLY THAT THE DEBT EVIDENCED THEREBY IS
ENFORCEABLE. THE EVIDENCE OF INDEBTEDNESS MAY BE SUBJECT TO BANKRUPTCY OR OTHER
ENFORCEMENT OR COLLECTION RESTRICTIONS. The Evidence of Indebtedness may
include, without limitation, original documents or copies thereof, whether by
photocopy, microfiche, microfilm or other reproduction process. Such Evidence of
Indebtedness shall be provided to the Buyer on a case-by-case basis where proof
of debtor's obligation to pay is required, pursuant to the requirements and
restrictions set forth in Exhibit E to this Agreement. Buyer expressly
acknowledges that the sole Evidence of Indebtedness to be delivered to Buyer on
any Transfer Date under the terms and provisions of this Agreement for any Loans
shall be the information set forth on the Loan Schedule provided to the Buyer on
computer tape or diskette, with any amendments or
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
changes as shall be forwarded to the Buyer pursuant to the terms and provisions
of this Agreement.
Section 1.13. "Existing Loans" means the Loans set forth in the Initial
Loan Schedule, being the Loans sold on the Existing Loans Transfer Date.
Section 1.14. "Existing Loans Purchase Price" means an amount equal to
* of the Current Balance of the Existing Loans, which Purchase Price is to
be paid on the Transfer Date.
Section 1.15. "Existing Loans Transfer Date" means September 15, 1999.
Section 1.16. "Financial Instruments Trust Account" means the account
designated by Seller from time to time into which Buyer shall deposit the
Purchase Price.
Section 1.17. [Intentionally deleted]
Section 1.18. "Information" means the confidential information and
other information about the Loans supplied by the Seller, from time to time, to
the Buyer and any work products or other materials produced from or
incorporating such information.
Section 1.19. "Initial Cut-Off Date" means September 1, 1999.
Section 1.20. "Initial Loan Schedule" means the Loan Schedule
describing the Existing Loans to be transferred on September 15, 1999 which
shall be delivered to the Buyer on or prior to the Existing Loans Transfer Date
a copy of which Initial Loan Schedule shall be attached hereto as the initial
schedule contained in Schedule 1 hereto.
Section 1.21. "Loan Schedule" means the Loan schedule delivered on
computer tape or diskette for any sale of the Loans purchased by Buyer pursuant
to the terms and provisions of this Agreement or repurchased by Seller pursuant
to the provisions of Article 8, and with respect to the sale of Loans to the
Buyer, setting forth at least the following information concerning each Loan:
the loan numbers, if any, for Seller (but not necessarily the loan numbers
maintained or assigned by Seller), the name, address (including state and zip
code), Social Security number and available telephone numbers of Obligor, name
of any co-maker (if available), the date of charge-off, the last payment date,
the interest rate immediately preceding charge off (if available) and the
Current Balance of each of the Loans as approximated by Seller. A copy of the
Loan Schedules for the Existing Loans and a copy of the Loan Schedule for each
sale of Additional Loans shall be attached hereto as Schedule 1.
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
Section 1.22. "Loans" means (a) the obligations sold from time to time
pursuant to this Agreement as identified in each Loan Schedule delivered by the
Seller to the Buyer and which obligations represent unsecured credit card and
credit line receivables which have been charged off by the Seller; (b) all
rights, powers, liens or security interests of the Seller relating to the
obligations identified in subsection (a) of this definition; (c) any judgments
founded upon an Evidence of Indebtedness, to the extent attributable thereto,
and any lien arising therefore; and (d) the proprietary interest of Seller in
any Evidence of Indebtedness, forming the subject matter of any litigation
(including, without limitation, any foreclosure, judgment, deficiency or
charge-off) or bankruptcy to which Seller is a party or claimant. Nothing in
this definition shall be deemed to imply that the Loans are enforceable; the
Loans may constitute unenforceable Loans. "Loan" refers to an individual Loan
and "Loans" refers, collectively, to all of the Loans purchased by Buyer
pursuant to this Agreement including the Existing Loans and Additional Loans.
Section 1.23. "Obligor" means with respect to each Loan, the obligor(s)
on an Evidence of Indebtedness, including, without limitation, any and all
makers, and the guarantors, sureties or other persons or entities liable on the
Loan.
Section 1.24. "Purchase Price" means, with respect to the Existing
Loans sold on the Initial Loans Transfer Date, the Existing Loans Purchase Price
and, with respect to the Additional Loans sold on any Additional Loans Transfer
Date, the purchase price for such Additional Loans determined as set forth in
Section 2.4 of this Agreement.
Section 1.25. "Receipt Date" means a date, not later than the *
calendar day of each calendar month, commencing in September, being the date on
which the Buyer receives from the Seller a computer tape or electronic file
containing the list of Additional Loans to be sold on the Additional Loans
Transfer Date in such month.
Section 1.26. "Retained Claims" means with respect to each Loan, the
claims or causes of action retained by Seller pursuant to Article XVI.
Section 1.27. "Retention Price" means that amount calculated in
accordance with the provisions of Section 5.2.
Section 1.28. "Termination Date" means February 20, 2001, provided,
however, that if this Agreement is terminated pursuant to Article XII of this
Agreement, the Termination Date shall be such earlier date as is determined by
the Seller or the Buyer in accordance with the terms of Article XII.
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Section 1.29. "Termination Event" means a Termination Event designated
as such by the Seller or the Buyer in accordance with the terms of Article XII.
Section 1.30. "Transaction Documents" means this Agreement, the
Confidentiality Agreement attached hereto as Exhibit F, and, with respect to the
parties thereto, each Assignment and Acceptance Agreement entered into pursuant
to Section 11.2 hereof, and, with respect to each of such documents, all
addenda, exhibits and schedules thereto.
Section 1.31. "Transfer Date" means each date on which Loans are to be
transferred from the Seller to the Buyer and on which the Purchase Price is due;
Transfer Date includes each Existing Loans Transfer Date and each Additional
Loans Transfer Date.
Section 1.32. "Transfer Documents" means the Bill of Sale and
Assignment in substantially the form of Exhibit C hereto (accompanied by a Loan
Schedule), which Bill of Sale and Assignment the Buyer and Seller hereby deem
appropriate for the transfer of Seller's right, title and interest in and to the
Loans purchased by Buyer pursuant to this Agreement.
Section 1.33. [Intentionally deleted]
Section 1.34. "Wire Transfer Instructions" means the instructions for
wire transferring the Purchase Price to Seller as set forth on Exhibit D
attached hereto or as set forth in any other written notice from the Seller to
the Buyer.
Section 1.35. Interpretation of Use of the Term "Buyer". Wherever in
this Agreement the term "Buyer" is used, such term shall refer to the entity
which is then the Buyer hereunder, provided, however, that with respect to
obligations incurred and actions taken by an entity while it was the Buyer and
with respect to the servicing and other ongoing matters related to Loans
purchased by an entity while it was a Buyer hereunder, the term "Buyer" shall
include such prior Buyers and assignment of the rights and obligations hereunder
from one Buyer to the next shall not relieve any entity from the obligations it
incurred while it was the Buyer hereunder or from the ongoing obligations with
respect to Loans purchased while such entity was the Buyer hereunder.
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
ARTICLE II
PURCHASE AND SALE OF THE LOANS
Section 2.1. Agreement to Sell and Purchase Loans. Seller agrees to
sell, and Buyer agrees to purchase on the Existing Loans Transfer Date the
Existing Loans described on the Initial Loan Schedule, at the Existing Loans
Purchase Price and subject to the terms, provisions, conditions, limitations,
waivers and disclaimers set forth in this Agreement. Seller agrees to sell, and
Buyer agrees to purchase, on each Additional Loans Transfer Date, the Additional
Loans (whether now existing or hereafter generated) described in the Loan
Schedule provided by the Seller with respect to such sale, at the price and
subject to the terms, provisions, conditions, limitations, waivers and
disclaimers set forth in this Agreement. The Seller's right, title and interest
to the Loans purchased by the Buyer shall be transferred and assigned by
delivery of the Transfer Documents to the Buyer. BUYER EXPRESSLY ACKNOWLEDGES
AND AGREES THAT THE ORIGINAL ACCOUNT NUMBER WHICH IDENTIFIED ANY LOAN (PRIOR TO
ITS CHARGE OFF BY THE SELLER AND THE ASSIGNMENT OF A NEW ACCOUNT NUMBER) AND THE
ACCOUNT RELATING TO THE ORIGINAL ACCOUNT NUMBER, ARE NOT BEING PURCHASED UNDER
THIS AGREEMENT AND THAT BUYER WILL NOT ASSERT ANY OWNERSHIP OR OTHER INTEREST
OVER THE ORIGINAL ACCOUNT NUMBER OR THE ACCOUNT RELATING THERETO. SELLER AGREES
TO PROVIDE THE ORIGINAL ACCOUNT NUMBER TO BUYER SOLELY FOR THE PURPOSE OF
ALLOWING BUYER TO USE THE ORIGINAL ACCOUNT NUMBER IN ITS COLLECTION ACTIVITIES
RELATED TO THE LOANS.
Section 2.2. Existing Loans. The Purchase Price due on the Existing
Loans Transfer Date shall be paid by the Buyer to the Seller prior to the close
of business on the Existing Loans Transfer Date. Each such payment must be made
in immediately available funds in United States dollars by wire transfer to the
Financial Instruments Trust Account in accordance with the Wire Transfer
Instructions.
Section 2.3. Sale and Amount of Additional Loans. On each Additional
Loans Transfer Date the Buyer will purchase those Additional Loans designated on
the Loan Schedule and in the Transfer Documents for such Transfer Date. The
amount of Existing Loans or Additional Loans sold by the Seller and purchased by
the Buyer on any Existing Loans Transfer Date or Additional Loans Transfer Date
shall be equal to: (i) if the Existing Loans Transfer Date or Additional Loans
Transfer Date occurs during the period from September 1, 1999 through February
28, 2000, no more than * nor less than *, as measured by the aggregate principal
balances of the Additional Loans or Existing Loans to be transferred, shall be
sold and purchased on each Existing loans Transfer Date or Additional Loans
Transfer Date; (ii) if the Additional Loans Transfer Date
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
occurs during the period from March 1, 2000 through August 31, 2000, no more
than * nor less than *, as measured by the aggregate principal balances of the
Additional Loans to be transferred, shall be sold and purchased on each
Additional Loans Transfer Date; and (iii) if the Additional Loans Transfer Date
occurs during the period from September 1, 2000 through the Termination Date, no
more than * nor less than *, as measured by the aggregate principal balances of
the Additional Loans to be transferred, shall be sold and purchased on each
Additional Loans Transfer Date.
Qualifying Additional Loans will be those loans which the Seller has
"charged off" within a period of 70 days immediately preceding the Transfer Date
of such Loans. The parties agree that the Seller may elect to retain loans which
may qualify as Additional Loans and may retain loans which are within one of the
categories described in Section 5.1 of this Agreement. The parties hereto agree
that the Seller may sell loans which qualify as Additional Loans to other third
party purchasers, provided, however, that Seller will abide by the selection
procedure restrictions provided below.
The Seller agrees that in determining which charged off loans to sell
as Additional Loans and which to retain, the Seller will not use selection
procedures after charge off which would materially alter the character or nature
of the pools of loans sold to the Buyer. The parties acknowledge that Seller's
current policies and procedures shall not be deemed to constitute adverse
selection procedures. In determining which loans it will charge off in any
period, the Seller will charge off delinquent loans prior to their * day of
delinquency, with limited exceptions for accounts held back from charge off
pursuant to Seller's current procedures. In selecting loans for sales to
different purchasers, including Buyer, Seller will use random selection
procedures to draw specific pools from the available loans. Not less than *
Business Days prior to each Additional Loans Transfer Date, the Seller will
notify the Buyer in writing of the aggregate amount of the Current Balances of
all Loans to be sold on such Additional Loans Transfer Date and the Purchase
Price of such Additional Loans to be sold on such Transfer Date and will provide
Buyer with any change in Wire Transfer Instructions for such Additional Loans
Transfer Date.
Section 2.4. Payment of Purchase Price for Additional Loans. The
Purchase Price for Additional Loans shall be determined as provided in this
Section 2.4. On each Additional Loans Transfer Date, the Purchase Price for the
Additional Loans transferred on such date shall be paid by the Buyer to the
Seller prior to the close of business on such date. The Purchase Price from such
Additional Loans must be paid in immediately available funds in United States
dollars by wire transfer to the Financial Instruments Trust Account in
accordance with the Wire Transfer Instructions.
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
The Purchase Price of the Additional Loans sold on an Additional Loans
Transfer Date shall be an amount equal to * of the Current Balance of the
Additional Loans sold by the Seller on such Additional Loans Transfer Date.
Section 2.5. Agreement to Assign/Buyer's Right to Act. On each Transfer
Date, after Seller has confirmation of the receipt of the Purchase Price due on
such date, Seller shall deliver to Buyer a Bill of Sale and Assignment,
substantially in the form of Exhibit C hereto, executed by an authorized
representative of Seller, which Transfer Documents shall sell, transfer, assign,
set-over, quitclaim and convey to Buyer, without recourse, warranty or
representation, all right, title and interest of Seller in and to each of the
Loans sold on such Transfer Date, and the right to all principal and/or interest
and/or other amounts due under the Loans and/or other proceeds of any kind paid
thereon after the applicable Cut-Off Date, but excluding any and all payments,
proceeds or other consideration received by or on behalf of Seller on or before
the applicable Cut-Off Date with respect to such Loans, regardless of whether
timely paid or applied, and excluding any amounts due or collected by Seller in
connection with any Retained Claims. Upon each sale of Loans, the Loan Schedule
relating to such Loans shall be attached to the Transfer Documents, identifying
the Loans purchased by Buyer.
Section 2.6. Payments Received. If Seller receives any credits,
payments or other consideration distributed or paid by or on behalf of any
Obligor with respect to the Loans prior to or on the applicable Cut-Off Date,
Seller shall be entitled to accept such payments or other consideration and
Buyer shall not be entitled to any credit, discount, refund or reimbursement by
Seller of any portion of the Purchase Price. If Seller shall receive any other
credits, payments or other consideration distributed or paid by or on behalf of
any Obligor, with respect to the Loans after the applicable Cut-Off Date, Seller
shall pay over and/or deliver such payments, or other consideration to Buyer
(without interest thereon from Seller) within * days after the applicable
Transfer Date and, if deemed necessary or appropriate by Seller, with an
endorsement of payments tendered to Seller in the form substantially as follows:
"Pay to the order of [name of Buyer] without recourse and without
representations or warranties of any type, kind, character or nature, express or
implied." If any Loan is repurchased by Seller pursuant to Article V or VIII
hereof, Seller shall not transfer to Buyer any payments or other consideration,
regardless of when received. Seller may indicate on the records related to any
of the Loans the date of receipt and amount of any payments. If Seller has
deposited payments received from any Obligor and issues a check or payment
therefore to Buyer, Buyer shall bear the risk that any such payment so deposited
by Seller may be
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returned due to insufficient funds. Seller shall have a period of thirty (30)
days after the date Seller delivers to Buyer payments made by or on behalf of
any Obligor on or after the Cut-Off Date to notify Buyer in writing that any
such payments were returned due to insufficient funds and specifying the amount
thereof, whereupon Buyer shall pay promptly, but not later than thirty (30) days
following receipt of such notice, to Seller or to such entity as Seller shall
designate, the amount of such payment by check and identifying thereon the
effective date of the Sale. If, with respect to any repurchased Loan or any loan
not transferred to Buyer, Seller sends to Buyer any funds or Buyer receives any
funds from any Obligor, then Buyer shall immediately notify Seller and Buyer
shall pay such funds to Seller within thirty (30) days of Buyer's receipt of
such funds.
ARTICLE III
TRANSFER OF LOANS AND LOAN DOCUMENTS
Section 3.1. Assignment of Loans and Loan Documents/Paid Off Loans.
Seller shall, on or before each Transfer Date, deliver the Transfer Documents to
Buyer by regular or overnight mail to the address of Buyer set forth on Exhibit
B to this Agreement. Buyer shall bear the risk of transportation of the Transfer
Documents. The Bill of Sale and Assignment shall have the same effect as an
individual and separate bill of sale and assignment of each and every Loan. The
Seller agrees that it will attach to this Agreement and maintain in its files
copies of each of the Loan Schedules. The failure of Seller to execute a
separate assignment of the Evidence of Indebtedness and/or endorse any Evidence
of Indebtedness, shall not constitute a default on the part of the Seller
hereunder and Buyer's sole recourse shall be to request additional documentation
pursuant to Section 3.2 below. THE SELLER WILL NOT DELIVER ANY ADDITIONAL
DOCUMENTS TO BUYER OTHER THAN THE TRANSFER DOCUMENTS ON THE TRANSFER DATE.
Seller reserves the right to retain copies of all or any portion of the
documents delivered to the Buyer.
Section 3.2. Delivery of Additional Documents. All requests by Buyer
for additional documentation after a Transfer Date shall be governed by the
delivery and transfer provisions of Exhibit E. Seller shall have no obligation
to deliver to the Buyer any documents or information that may exist but which is
not in Seller's possession, or which relates to Loans retained by Seller. Buyer
further agrees, acknowledges, confirms and understands that in the event that
Buyer requests Seller to execute and deliver assignments or other documents in
addition to the Transfer Documents, Buyer shall furnish Seller with copies of
the proposed additional assignments or other documents for review, analysis,
approval or amendment by Seller, in its sole discretion. The responsibility for
all costs, fees and expenses of preparing, executing and delivering any such
additional
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assignments or such other documents as well as Seller's reasonable attorney's
fees in connection with a review of such additional assignments or other
documents shall be the sole responsibility of Buyer and shall be payable upon
demand from Seller. Seller shall be under no obligation to execute such
additional requested assignments or other documents. Buyer shall also be
responsible for and shall pay the costs, fees, taxes and expenses of the filing
and recording, if any, of the originals of such additional assignments or other
documentation.
ARTICLE IV
SERVICING OF THE LOANS
Section 4.1. Servicing After Transfer Date. The Loans shall be sold and
conveyed to Buyer on a servicing-released basis. As of each Transfer Date, all
rights, obligations, liabilities and responsibilities with respect to the
servicing of the Loans sold on such Transfer Date shall pass to Buyer, and
Seller shall be discharged from all liability therefore, except for any
applicable indemnification obligation, as provided in Section 10.2 hereof.
Seller shall have no obligation to perform any servicing activities with respect
to the Loans from and after the Transfer Date of such Loans.
Section 4.2. Interim Servicing/Buyer Bound. Until the applicable
Transfer Date, Seller shall continue to service the Loans to be transferred and,
in connection therewith, Seller shall have the right, among other things, to
postpone any pending litigation or bankruptcy matter until after such Transfer
Date. Buyer shall be bound by the commercially reasonable actions taken by
Seller with respect to any Loan prior to the Transfer Date of such Loan. BUYER
SHALL TAKE NO ACTION TO COMMUNICATE WITH ANY OBLIGOR OR ITS ACCOUNTANTS OR
ATTORNEYS OR ENFORCE OR OTHERWISE SERVICE OR MANAGE ANY SUCH LOAN UNTIL AFTER
THE TRANSFER DATE OF SUCH LOAN. In no event shall Seller be deemed a fiduciary
for the benefit of Buyer with respect to the Loans, or any Loan.
Section 4.3. Buyer Servicer Requirements/Hold Harmless and Indemnity.
Buyer shall be responsible for complying with all state and federal laws, rules,
regulations and other statutory requirements, if any, with respect to the
ownership and/or servicing and/or collection of any of the Loans from and after
the Transfer Date of such Loan including, without limitation, the obligation to
notify any Obligor of the transfer of servicing rights from Seller to Buyer.
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<PAGE> 13
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
ARTICLE V
REPURCHASE OF LOAN AND REFUND OPTION OF SELLER
Section 5.1. Seller's Right to Notification of Claims and Actions
Buyer shall promptly notify Seller of any Claim, threatened Claim or
pending or threatened arbitration or other legal proceeding by any Obligor
against Seller that arises from or relates to any of the loans purchased
hereunder.
Section 5.2. Retention Refund. If Seller determines in its sole
discretion that any of the circumstances set forth in Section 5.1 exist with
respect to any Loan and Seller elects to retain or repurchase the Loan, Seller
shall refund a portion of the Purchase Price relating to such Loan equal to the
amount determined according to the following formula: (i) (a) the current
outstanding principal balance of the Loan (or if such loan is to be retained
prior to transfer to the Buyer the amount set forth on the Loan Schedule
containing the Loan being retained); multiplied by (b) * then (ii) the
amount determined under the preceding clause (i), shall be decreased by the
aggregate amount of other payments, credits or other consideration, if any,
attributable to such Loan only to the extent that such credits or other
consideration were actually paid over or delivered by the related Obligors or
the Seller to the Buyer.
ARTICLE VI
NO RIGHT TO REPURCHASE
OTHER THAN SELLER'S RIGHT TO RETAIN OR REPURCHASE A LOAN PURSUANT TO
ARTICLE V, OR SELLER'S DUTY TO REPURCHASE A LOAN PURSUANT TO THE TERMS AND
PROVISIONS OF ARTICLE VIII, BUYER ACKNOWLEDGES AND AGREES THAT THE LOANS MAY BE
UNENFORCEABLE LOANS AND MAY HAVE LITTLE OR NO VALUE AND THAT SELLER SHALL HAVE
NO OBLIGATION TO REPURCHASE ANY LOAN SOLD HEREUNDER.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer hereby represents, warrants and covenants, to and with Seller, as
of the effective date of this Agreement, as of the Effective Date of each
Assignment and Acceptance Agreement entered into as provided in Section 11.2 of
this Agreement and as of each Transfer Date that:
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<PAGE> 14
Section 7.1. No Collusion. Neither Buyer, its affiliates, nor any of
their respective officers, partners, agents, representatives, employees or
parties in interest (i) has in any way colluded, conspired, connived or agreed
directly or indirectly with any other bidder, firm or person to submit a
collusive or sham bid or offer, or any bid other than a bona fide bid, in
connection with the selection of the Buyer to purchase the Loans subject to this
Agreement, or (ii) has, in any manner, directly or indirectly, sought by
agreement or collusion or communication or conference with any other bidder,
firm or person to fix the price or prices, or to fix any overhead, profit or
cost element of the bid price or terms of the agreement the bid price or terms
of the agreement of any other bidder with respect to the selection of the Buyer
to purchase the Loans subject to this Agreement, or to secure any advantages
against Seller.
Section 7.2. Authorization. Buyer is duly and legally authorized to
enter into this Agreement and the other Transaction Documents and has complied
with all laws, rules, regulations, charter provisions and bylaws to which it may
be subject or by which its assets may be bound and that the undersigned
representative is authorized to act on behalf of and bind Buyer to the terms of
this Agreement. Buyer, if a corporation, will deliver to Seller,
contemporaneously with this Agreement (or, where applicable, with the Assignment
and Acceptance Agreement described in Section 11.2 of this Agreement), a
certified copy of a resolution of its Board of Directors authorizing Buyer's
entry into this Agreement through such representative, together with such
documents as evidence Buyer's good standing and authority. If Buyer is not a
corporation, Buyer shall deliver to Seller contemporaneously with this Agreement
(or, where applicable, with the Assignment and Acceptance Agreement described in
Section 11.2 of this Agreement) such evidence as the Seller may reasonably
require evidencing Buyer's legal authority to enter into this Agreement (or,
where applicable, the Assignment and Acceptance Agreement described in Section
11.2 of this Agreement) and purchase the Loans, including without limitation,
any partnership agreements if Buyer is a partnership, or trust agreements, if
Buyer is a trust.
Section 7.3. Binding Obligations. Assuming due authorization, execution
and delivery by Seller, this Agreement and each of this other Transaction
Documents and all of the obligations of Buyer hereunder and thereunder are the
legal, valid and binding obligations of Buyer, enforceable in accordance with
their respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law.)
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<PAGE> 15
Section 7.4. No Breach or Default. The execution and delivery of this
Agreement (or, where applicable, the Assignment and Acceptance Agreement
described in Section 11.2 of this Agreement) and the performance of its
obligations hereunder by Buyer will not conflict with any provision of any law
or regulation to which Buyer is subject or by which any of its assets may be
bound or conflict with or result in a breach of or constitute a default under
any of the terms, conditions or provisions of any agreement or instrument to
which Buyer is a party or by which it or any of its assets may be bound, or any
order or decree applicable to Buyer.
Section 7.5. Nondisclosure and Compliance with Transaction Documents.
Buyer is in full compliance with its obligations under the terms of the
Confidentiality Agreement, attached hereto as Exhibit F and the terms thereof
are hereby incorporated herein, subject to Buyer's ownership rights and
interests acquired by Buyer hereunder.
Section 7.6. Identity. Buyer is a "United States person" within the
meaning of Paragraph 7701(a)(30) of the Internal Revenue Code of 1986, as
amended.
Section 7.7. No Affiliation With Seller. Except as may have been
previously disclosed to Seller in writing, Buyer is not or has not been
affiliated, directly or indirectly, with Seller, or any of its respective
agents, affiliates or employees.
Section 7.8. Assistance of Third Parties. Buyer hereby agrees,
acknowledges, confirms and understands that Seller shall have no responsibility
or liability to Buyer arising out of or related to any third party's failure to
assist or cooperate with Buyer. In addition, Buyer is not relying upon the
continued actions or efforts of Seller or any third party in connection with its
decision to purchase the Loans. The risks attendant to the potential failure or
refusal of third parties to assist or cooperate with Buyer and/or Seller in the
effective transfer, assignment, and conveyance of the purchased Loans, and/or
assigned rights shall be borne by Buyer.
Section 7.9. Enforcement/Legal Actions/Unfair Collection Practices.
Buyer covenants, agrees, warrants and represents that Buyer shall not institute
any enforcement or legal action or proceeding in the name of Seller or any
subsidiary or affiliate thereof. Buyer also represents, warrants and covenants
not to take any enforcement action against any Obligor that would be
commercially unreasonable and Buyer shall not misrepresent, mislead, deceive, or
otherwise fail adequately to disclose to any particular Obligor the identity of
Buyer as the owner of the Loans. Buyer further represents, warrants and
covenants not to use, adopt, exploit, or allude to Seller or any name derived
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<PAGE> 16
therefrom or confusingly similar therewith or the name of any other local, state
or federal agency or association to promote Buyer's sale, enforcement,
collection, or management of the Loans. Buyer covenants, agrees, warrants and
represents that it will not violate any laws relating to unfair credit
collection practices in connection with any of the Loans transferred to Buyer
pursuant to this Agreement. Buyer agrees, acknowledges, confirms and understands
that there may be no adequate remedy at law for a violation of the terms,
provisions, conditions and limitations set forth in this Section 7.9 and Seller
shall have the right to seek the entry of an order by a court of competent
jurisdiction enjoining any violation hereof. Buyer agrees to notify Seller
within ten (10) business days of notice or knowledge of any Claim or demand.
Section 7.10. Status of Buyer. Buyer represents, warrants and certifies
to Seller that it is (i) a financial institution, (ii) an institutional
purchaser including a sophisticated purchaser that is in the business of buying
or originating loans of the type being purchased or that otherwise deals in such
loans in the ordinary course of the Buyer's business, or (iii) an entity that is
defined as an accredited investor under the federal securities laws. Buyer
covenants, agrees, represents and warrants that all information provided to
Seller or its agents by or on behalf of Buyer in connection with this Agreement
and the transactions contemplated hereby is true and correct in all material
respects and does not fail to state any fact required to make the information
contained therein not misleading.
Section 7.11. No Broker's/Finder's Fees. Buyer has not dealt with any
broker, agent or finder in connection with the transaction contemplated by this
Agreement that would give rise to a claim for a brokerage commission or finder's
fee. Buyer hereby indemnifies and agrees to defend and hold harmless Seller from
and against any claims for brokerage fees or commissions of any broker, agent or
finder resulting from the transaction contemplated by this Agreement. Buyer
acknowledges that Seller shall have no liability for the payment of Buyer's
brokerage fees, commissions or finder's fees in connection with the transaction
contemplated by this Agreement.
Section 7.12. Buyer Insurance Requirements. Buyer shall, at its sole
cost and expense, procure and maintain in full force and effect the following
insurance coverages with an insurance carrier which is at least "A" rated by
Best.
<TABLE>
<S> <C>
General Liability $2,000,000 General Aggregate
$2,000,000 Product Aggregate
$1,000,000 Each Occurrence
Excess Liability $5,000,000 Each Accident
$5,000,000 Aggregate
</TABLE>
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<PAGE> 17
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
Seller must be provided a certificate of insurance evidencing that such coverage
is in effect prior to execution of this Agreement and upon each assignment to a
subsequent Buyer as provided in Section 11.2 hereof. All certificates of
insurance shall be amended to name Seller and its affiliates as additional
insured parties, and shall require that Seller be provided with at least 30 days
advance written notice of cancellation or material change in the stated coverage
of such insurance. Amended certificates of insurance shall be delivered to the
attention of the Seller's Corporate Insurance Department at the address provided
in Exhibit A, and approved by said department prior to the commencement of any
collection efforts by the Buyer on the Loans. Buyer shall furnish to Seller
renewal certificates of insurance, on an annual basis, until all collection
efforts with respect to the Loans have ceased.
Section 7.13. No Proceeding. There is no litigation or administrative
proceeding before any court, tribunal or governmental body presently pending or,
to the knowledge of Buyer, threatened against Buyer which would have a material
adverse effect on the transactions contemplated by, or Buyer's ability to
perform its obligations under, this Agreement, or any of the other Transaction
Documents.
Section 7.14. Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants set forth in this Article shall
continue notwithstanding the closing on the sale of any Loans and
notwithstanding the occurrence of a Termination Date.
ARTICLE VIII
LIMITED REPURCHASE/REPRESENTATIONS AND WARRANTIES OF SELLER
Section 8.1. Limited Repurchase at Buyer's Option. The Buyer may, once,
at any time within * days of the Transfer Date of a specific Loan pool, submit a
listing of Loans and require the Seller to repurchase Loans from such pool, in
the event that, with respect to any Loan on such list, prior to the applicable
Cut-Off Date:
1. All Obligors have filed a bankruptcy proceeding as of the applicable
Cut-Off Date which has not been adjudicated or discharged and the Loan
is listed or is reasonably likely to be listed as one of the
obligations to be extinguished in such proceeding; or,
2. All Obligors were declared legally dead prior to the applicable
Cut-Off Date; or,
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<PAGE> 18
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
3. The Seller, or any of its duly appointed agents, had delivered to
all Obligors a release of liability or satisfaction of their
obligations to the Seller; or
4. That the Seller, acting alone or in concert with its duly appointed
agents, knowingly created a forged, fraudulent or fictitious Loan; or
5. That the Seller, on the applicable Cut-Off Date, did not have good
and marketable title to the Loan,(except for any defect in title, lien
or encumbrance arising from, related to, or resulting from (i) the
expiration of any applicable statute of limitations, or (ii) Seller's
inability to produce documentation for such Loan, either of which shall
negate Seller's obligation to repurchase the Loan pursuant to the terms
of this Section 8.1.5); or
6. That, prior to the applicable Transfer Date, the Seller was not in
substantial compliance with any material provisions of state and
federal consumer credit laws, including, without limitation,
the-Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Debt Collection Practices Act and the Fair Credit Billing Act, that
Seller was required to comply with in its origination (if the Loan was
originated by the Seller) or servicing of the Loan; or
7. That, prior to the applicable Transfer Date, the Loan was the
subject of litigation or other legal proceedings, which are valid,
active and filed prior to such Transfer Date.
Section 8.2. Repurchase of Loans. In the event that Buyer gives Seller
written notice of Buyer's election to have Seller repurchase Loans pursuant to
the provisions of Section 8.1, and supplies the Seller with evidence
satisfactory to Seller that the same constitutes Loans subject to repurchase, on
or before * days after the Transfer Date of such Loan (the "Repurchase Period"),
then Seller shall repurchase the Loan(s) identified in such notice for an amount
equal to the Retention Price calculated in accordance with the terms of Section
5.2. Buyer and Seller agree that with respect to any individual monthly Loan
sale pool, Seller will only be obligated to perform this repurchase and its
attendant procedures and operations once, and that Buyer will submit only one
notification, during the applicable * day period form the Transfer Date.
Repurchase by the Seller pursuant to the provisions of this Article
VIII shall constitute the sole and exclusive remedy of the Buyer. Except for the
remedies in this Section 8.2, Buyer
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<PAGE> 19
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
hereby waives any and all rights and remedies to sue Seller in law or equity for
damages and other relief, including, without limitation, actual, special,
consequential or punitive damages. Seller shall have no obligation to repurchase
any Loan for which notice and all supporting evidence have not been received by
Seller within the * day period following the Transfer Date of such Loan. Within
thirty (30) days of receiving the Retention Price from Seller, Buyer shall
reconvey the repurchased Loan to Seller using the same form of Bill of Sale and
Assignment Seller used to transfer the Loan to Buyer, along with any amounts due
or collected by Buyer in connection with such Loan and release its security
interest on any repurchased Loan.
Section 8.3. Representations and Warranties of Seller. The Seller
hereby represents and warrants, to the Buyer, as of the effective date of this
Agreement and as of each Transfer Date that:
(a) Seller is a national banking association duly organized, validly
existing and in good standing under the laws of the United States with
full power and authority to enter into this Agreement to sell the Loans
and to carry out the terms and provisions hereof;
(b) The execution and delivery of this Agreement and the performance
hereunder have been duly authorized on or prior to the effective date
of this Agreement, by all necessary action on the part of the Seller
and no provision of applicable law or regulation or the charter or
bylaws of Seller or any judgment, injunction, order, decree or other
instrument binding upon Seller is or will be contravened by Seller's
execution and delivery of this Agreement or Seller's performances
hereunder;
(c) Assuming due authorization, execution and delivery by Buyer, this
Agreement and all of the obligations of Seller hereunder are the legal,
valid and binding obligations of Seller, enforceable in accordance with
the terms of this Agreement, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
(d) No authorization, consent, approval, license, qualification or
formal exemption from, nor any filing, declaration or registration
with, any governmental agency or regulatory authority or any other body
is required in connection with the execution, delivery or performance
by Seller of this Agreement, which authorization, consent,
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<PAGE> 20
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
approval, license, qualification or formal exemption from, or filing,
declaration or registration has not been obtained on or prior to the
first Transfer Date; and
(e) No authorization, consent, approval, license, qualification or
formal exemption from, nor any filing, declaration or registration
with, any governmental agency or regulatory authority or other body is
required in connection with the sale of any or all of the Loans to be
sold on the first Transfer Date, which authorization, consent,
approval, license, qualification or formal exemption, or filing,
declaration or registration has not been obtained on or prior to such
date.
Section 8.4. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants set forth in this Article shall
continue notwithstanding the closing on the sale of any Loans and
notwithstanding the occurrence of a Termination Date.
Section 8.5. Discrepancies in Current Balance. In the event that during
the Repurchase Period either party gives notice to the other that the difference
between the Current Balance as reflected on the Loan Schedule and the actual
current balance of the Loan (after the application of all credits, payments,
interest, costs, fees, expenses and deductions for returned payments) (the
"Discrepancy") exceeds ten per cent (10%) of the Current Balance as reflected on
the Loan Schedule, the parties hereto agree that: (i) if the Current Balance as
reflected on the Loan Schedule is less than the actual current balance, the
Buyer shall pay to the Seller an amount equal to the amount of the Discrepancy
multiplied by *; and (ii) if the Current Balance as reflected on the Loan
Schedule is more than the actual current balance, the Seller shall pay to the
Buyer an amount equal to the amount of the Discrepancy multiplied by *.
ARTICLE IX
BUYER'S EVALUATION AND ACCEPTANCE OF RISK OF
LOANS SOLD "AS-IS"
Buyer hereby represents, warrants, acknowledges and agrees to the
following:
Section 9.1. Independent Evaluation. Buyer's decision to enter into
this Agreement and to purchase the Loans pursuant to this Agreement is and was
based upon Buyer's own independent evaluation of information deemed relevant by
Buyer, including, but not limited to, the information made available by Seller
to the Buyer, and Buyer's independent evaluation of the Loans and
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<PAGE> 21
related information. Buyer acknowledges and agrees that, while some information
concerning the Existing Loans was made available to Buyer for review prior to
the execution of this Agreement, such information, through no fault of Seller,
may not be complete and Buyer acknowledges that no information is currently
available concerning the Additional Loans and the Additional Loans may or may
not be substantially similar to the Existing Loans. The Seller shall not be
liable for the failure to include any information in the materials made
available to the Buyer for review. Buyer has relied solely on its own
investigation and it has not relied upon any oral or written information
provided by Seller or its employees, contractors, officers, representatives,
directors or agents.
Section 9.2. Due Diligence. Buyer has been urged, invited and directed
to conduct such due diligence review and analyses of the Information together
with such records as are generally available to the public from local, county,
state and federal authorities, record keeping offices and courts (including,
without limitation, any bankruptcy courts in which any Obligor(s), if any, may
be subject to any pending bankruptcy proceedings), as Buyer deemed necessary,
proper or appropriate in order to make a complete informed decision with respect
to the purchase and acquisition of the Loans.
Section 9.3. Economic Risk. Buyer acknowledges that the Loans may have
limited or no liquidity and Buyer has the financial wherewithal to own the Loans
for an indefinite period of time and to bear the economic risk of an outright
purchase of the Loans and a total loss of the Purchase Price for the Loans.
Buyer acknowledges that the Loans may be unenforceable Loans.
Section 9.4. Loans Sold As Is. With respect to this paragraph, the term
Seller shall include its affiliates, agents, directors, officers,
representatives, contractors and employees. THE BUYER ACKNOWLEDGES AND AGREES
THAT THE SALE OF ALL LOANS MADE BY SELLER PURSUANT TO THIS AGREEMENT SHALL BE
WITHOUT RECOURSE, REPRESENTATION OR WARRANTY, AND THAT SELLER HAS NOT MADE, DID
NOT MAKE AND SPECIFICALLY DISCLAIMS (AND BUYER IS NOT RELYING ON SELLER WITH
RESPECT TO) ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR
GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL
OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO
THE FOLLOWING:
(a) THE MARKETABILITY, VALUE, QUALITY OR CONDITION OF ANY LOAN OR
LOANS;
(b) THE VALIDITY, ENFORCEABILITY OR COLLECTIBILITY OF THE EVIDENCE
OF INDEBTEDNESS;
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<PAGE> 22
(c) THE COMPLIANCE OF THE LOANS WITH ANY STATE OR FEDERAL USURY
LAWS AND REGULATIONS APPLICABLE THERETO;
(d) THE ACCURACY OR COMPLETENESS OF ANY INFORMATION PROVIDED BY
THE SELLER TO THE BUYER, INCLUDING, WITHOUT LIMITATION, THE
ACCURACY OF ANY SUMS SHOWN AS CURRENT BALANCE OR ACCRUED
INTEREST AMOUNTS DUE UNDER THE LOANS; AND
(e) ANY OTHER MATTERS PERTAINING TO THE LOANS.
IN ADDITION, SELLER EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. BUYER ACKNOWLEDGES AND
AGREES THAT BUYER IS PURCHASING THE LOANS BASED UPON BUYER'S INDEPENDENT
EXAMINATION, STUDY, INSPECTION AND KNOWLEDGE OF THE LOANS AND THAT BUYER IS
RELYING UPON ITS OWN DETERMINATION OF THE QUALITY, VALUE AND CONDITION OF THE
LOANS AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. BUYER
ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH
RESPECT TO THE LOANS WAS OR WILL BE OBTAINED FROM A VARIETY OF SOURCES AND THAT
SELLER HAS NOT MADE OR WILL NOT BE OBLIGATED TO MAKE AN INDEPENDENT
INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND SELLER MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OR SUCH INFORMATION. BUYER
ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT UNDERTAKEN TO CORRECT ANY
MISINFORMATION OR OMISSION OF INFORMATION WHICH MIGHT BE NECESSARY TO MAKE ANY
INFORMATION DISCLOSED TO SUCH BUYER NOT MISLEADING IN ANY RESPECT. FINALLY BUYER
SHALL BE DEEMED TO UNDERSTAND THAT ANY DOCUMENTS EXCLUDED FROM THE INFORMATION
PROVIDED TO BUYER COULD CONTAIN INFORMATION WHICH, IF KNOWN TO BUYER, COULD HAVE
A MATERIAL IMPACT ON ITS DETERMINATION OF VALUE OF THE LOANS. EXECUTION OF THIS
AGREEMENT SHALL CONSTITUTE AN ACKNOWLEDGMENT BY BUYER THAT THE EXISTING LOANS
WERE ACCEPTED AND ADDITIONAL LOANS WILL BE ACCEPTED WITHOUT REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED OR OTHERWISE IN AN "AS IS", "WHERE IS" AND "WITH
ALL FAULTS" CONDITION BASED SOLELY ON BUYER'S OWN INSPECTION. NO EVENT OR
CONDITION SHALL ENTITLE BUYER TO REFUSE TO PURCHASE A LOAN OR TO REQUEST SELLER
TO REPURCHASE A LOAN, EXCEPT AS SPECIFIED IN THIS AGREEMENT.
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<PAGE> 23
ARTICLE X
INDEMNIFICATION
Section 10.1. Buyer's Indemnification. From and after the first
Transfer Date, Buyer shall defend, indemnify and hold harmless Seller or
Seller's agents, affiliates, employees, contractors, officers, directors and
representatives against and from any and all liability for, and from and against
any and all losses or damages Seller may suffer as a result of any Claim or
threatened Claim that Seller shall incur or suffer as a result of (i) any act or
omission of Buyer or Buyer's agents, affiliates, employees, contractors,
officers, assignees, directors and representatives in connection with the Loans
and its purchase of the Loans, pursuant to the Agreement, or (ii) the breach or
inaccuracy of any of Buyer's representations or warranties as set forth in this
Agreement and in the other documents executed in connection with the selection
of the Buyer to enter into this agreement and the sale of the Loans, or (iii)
the breach of any of Buyer's covenants as set forth in this Agreement and in the
other documents executed in connection with Buyer's purchase of the Loans or in
the Confidentiality Agreement attached hereto as Exhibit F or (iv) any Claim or
threatened Claim by any Obligor regarding any assignment, enforcement, servicing
or administration of the Loans by Buyer or Buyer's agents, affiliates,
employees, contractors, officers, directors, assignees and representatives on or
after the applicable Transfer Date of such Loan.
Section 10.2. Seller's Indemnification. From and after the first
Transfer Date, Seller shall defend, indemnify and hold harmless Buyer or Buyer's
agents, affiliates, employees, contractors, officers, directors and
representatives against and from any and all liability for, and from and against
any and all losses or damages Buyer may suffer as a result of any Claim or
threatened Claim that Buyer shall incur or suffer as a result of (i) any act or
omission of Seller or Seller's agents, affiliates, employees, contractors,
officers, assignees, directors and representatives in connection with the Loans
and its sale of the Loans, pursuant to the Agreement, (ii) the breach or
inaccuracy of any of the Seller's representations or warranties as set forth in
this Agreement and in the other documents executed by the Seller in connection
with the sale of the Loans, or (iii) the breach of any of Seller's covenants as
set forth in this Agreement and in the other documents executed in connection
with Seller's sale of the Loans, or (iv) any Claim or threatened Claim by any
Obligor regarding any assignment, enforcement, servicing or administration of
the Loans by Seller or Seller's agents, affiliates, employees, contractors,
officers, directors, assignees and representatives arising prior to the
applicable Transfer Date of such Loan.
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<PAGE> 24
ARTICLE XI
ASSIGNMENT OF RIGHTS TO THIRD PARTIES
Section 11.1. Assignment of Agreement; Assignment of Loans. Buyer may
assign this Agreement to an Affiliate as provided in Section 11.2. of this
Agreement and may assign the Loans for purposes of collateralizing financing
arrangements as provided in Section 11.3. of this Agreement. Except as provided
in Sections 11.2. and 11.3. of this Agreement, Buyer shall not assign, encumber,
transfer or convey its rights under this Agreement or any Loan purchased
pursuant to the terms of this Agreement, without the prior written consent of
Seller, in each instance, which approval shall not be unreasonably withheld. ALL
REQUESTS TO ASSIGN OR TRANSFER BUYER'S INTEREST IN, TO OR UNDER THIS AGREEMENT
MUST BE MADE IN WRITING AND RECEIVED BY SELLER PURSUANT TO THE NOTICE PROVISIONS
OF THIS AGREEMENT.
Notwithstanding any consent by Seller to any assignment or transfer of
this Agreement or any Loan, no assignee or transferee shall, except in
compliance with the terms of Section 11.2. or 11.3. below, further assign or
transfer this Agreement or any Loan without Seller's prior written consent in
each instance. No assignment or transfer of the Agreement or any Loan shall
relieve Buyer of any of its liabilities or obligations under this Agreement.
Each transferee of this Agreement shall be bound by all of the terms and
provisions of this Agreement, and Buyer shall remain liable for all obligations
of Buyer to Seller hereunder, notwithstanding such assignment.
Section 11.2. Assignment to Affiliate. Such entity as may from time to
time be the Buyer hereunder may assign all of its rights and obligations with
respect to the purchase and sale of Additional Loans occurring after such
assignment to an Affiliate provided that assignor, assignee and the Seller enter
into an Assignment and Acceptance Agreement, substantially in the form of
Exhibit I attached hereto and, upon on delivery of such Assignment and
Acceptance Agreement to the Seller, the assignee named in such document shall,
as of the Effective Date set forth in such Agreement, become the Buyer under the
terms of this Agreement and shall be bound by the terms of this Agreement and
shall, as of the time of such assignment be deemed to have made all of the
representations, warranties and covenants of the Buyer set forth in Article VII
of this Agreement. Each such assignment shall be effective only if such
assignment is made to an Affiliate.
Section 11.3. Assignment of Loans. The Buyer and any Affiliate may
assign its rights under this Agreement and the Loans purchased hereunder to a
bank or to or through any other
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<PAGE> 25
entity as collateral for a loan or other funding arrangement to be made for the
purposes of financing the purchase of such Loans and the Buyer or any Affiliate
may assign its rights under this Agreement and the Loans into a trust or other
special purpose entity for purpose of providing collateral in the context of a
securitization of such Loans as a financing vehicle for the Buyer or an
Affiliate. Any Loan assigned pursuant this Section 11.3 may not be subsequently
sold, assigned or transferred to any person or entity (a "subsequent
assignee") unless Seller grants its prior written consent, which consent may not
be unreasonably withheld or delayed. Provided, however, that Seller's consent is
not required if: (a) such subsequent assignee has a positive net worth of not
less than $10,000,000; (b) such subsequent assignee does not have a history of
collection law violations and has the necessary expertise to collect the Loans
in compliance with applicable law; or (c) such subsequent assignee has not
materially breached an agreement with the Seller or a third party relating to
confidentiality, sale purchase or collection of any debt obligation. Provided
that the selling, transferring or assigning entity (the "transferor") does not
have knowledge to the contrary, after due inquiry by the transferor, the
transferor may rely on the written representations of the subsequent assignee
that it is an entity to whom such sale assignment or transfer is permitted
without Seller's consent pursuant to this Section 11.3 and may sell transfer and
assign Loans without Seller's consent. Notwithstanding the transfer of Loans and
any of its rights under this Agreement pursuant to the terms of this Section
11.3, the Buyer which transfers such Loans or rights shall remain liable for all
obligations of the Buyer hereunder and with respect to such Loans and/or rights.
ARTICLE XII
TERMINATION EVENTS
Section 12.1. Termination Events Related to the Buyer. If any one or
more of the following events occurs, it shall, at the option of the Seller,
constitute a Termination Event:
1. Failure of the Buyer (i) to pay in full the Existing Loans
Purchase Price on the Existing Loans Transfer Date or (ii) to
pay the full Purchase Price for Additional Loans on the
applicable Additional Loans Transfer Date and such failure is
not corrected in three Business Days.
2. Any representation, warranty, certification or statement of
the Buyer made or contained in this Agreement or any of the
other Transaction Documents or in any agreement, instrument,
certificate, statement or
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other writing furnished in connection herewith or with a
purchase of Loans pursuant hereto, shall prove to have been
false or inaccurate in any material respect on the date as
of which such representation or warranty was made; provided
that if such falsity or inaccuracy is such that it can
reasonably be corrected, then it shall not result in a
Termination Event being declared unless it continues to be
false or inaccurate in any material respect for a period of 30
days after the date on which written notice thereof has been
given to the Buyer by the Seller.
3. Failure of the Buyer to comply with any other covenant or
agreement made by the Buyer in this Agreement or the
Transaction Documents after the Seller has given written
notice of such failure to the Buyer and the Buyer has not,
within 30 days after receipt of such notice, corrected such
failure.
4. The Buyer shall institute proceedings for liquidation,
readjustment, arrangement or composition (or for any related
or similar purpose) under any law relating to financially
distressed debtors, their creditors or property, or shall
consent to (or fail to object to in a timely manner) the
institution of any such proceedings against the Buyer; or the
Buyer shall be insolvent (within the meaning of any applicable
law), or shall be unable, or shall admit in writing its
inability, to pay its debts as they become due, or shall make
an assignment for the benefit of creditors or enter into any
arrangement for the adjustment or composition of debts or
claims; or a court or other governmental authority or agency
having jurisdiction in the premises shall enter a decree or
order (i) for the appointment of a receiver, liquidator,
assignee, trustee, custodian or sequestrator (or other similar
official) of the Buyer or of any part of its property, or for
the winding-up or liquidation of its affairs; and such decree
or order shall remain in force undischarged and unstayed for a
period of more than sixty (60) days, or (ii) for the
sequestration or attachment of any material part of the
property of the Buyer, without its unconditional return to the
possession of the Buyer, or its unconditional release from
such sequestration or attachment, within sixty (60) days
thereafter; or a court or other governmental authority or
agency having jurisdiction in the premises shall enter a
decree or order approving or acknowledging as properly filed,
or any party commences against the Buyer, a petition or
proceedings for liquidation, rehabilitation, readjustment or
composition (or for any related or similar purpose)
25
<PAGE> 27
under any law relating to financially distressed debtors,
their creditors or property, and any such decree or order
shall remain in force undischarged and unstayed for a period
of more than sixty (60) days.
5. The Office of the Comptroller of the Currency shall revise,
amend, alter, augment or change its regulations, rules,
guidelines, interpretations or policies in a manner which
results in the accelerated charge off of loans.
6. The Buyer shall suffer a material adverse change, which, in
the commercially reasonable opinion of the Seller, (i) would
affect the Buyer's ability to perform its duties and
responsibilities pursuant to the terms and provisions of this
Agreement; or (ii) would materially and adversely affect
Buyer's financial condition or its ability to continue its
business operations, taken as a whole.
If any of the events described in 1 through 6 above shall occur, the
Seller may elect to cause such event to be a Termination Event by giving notice
thereof to the Buyer that as a result of the occurrence of such event, the
Seller has determined to terminate this Agreement and the Seller shall designate
a Termination Date which shall not be prior to the date on which the notice is
delivered to the Buyer.
Section 12.2. Termination Events Related to the Seller. If any one or
more of the following events occurs, it shall, at the option of the Buyer,
constitute a Termination Event:
1. Failure of the Seller (i) to tender the Existing Loans for
sale to the Buyer on the Existing Loans Transfer Dates or (ii)
if loans have been charged off by the Seller and are not
retained by the Seller, to tender Additional Loans for sale to
the Buyer on any Additional Loans Transfer Date, and in either
case, such failure is not corrected in three Business Days.
2. Failure of the Seller to comply with any other covenant or
agreement made by the Seller in this Agreement after the Buyer
has given written notice of such failure to the Seller and the
Seller has not, within 30 days after receipt of such notice,
corrected such failure.
3. Any representation, warranty, certification or statement of
the Seller made or contained in this Agreement or in any
agreement, instrument, certificate, statement or other writing
furnished in connection herewith or with a purchase of Loans
pursuant hereto, shall prove to have been false or inaccurate
in any
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material respect on the date as of which such representation
or warranty was made; provided that if such falsity or
inaccuracy is such that it can reasonably be corrected, then
it shall not result in a Termination Event being declared
unless it continues to be false or inaccurate in any material
respect for a period of 30 days after the date on which
written notice thereof has been given to the Seller by the
Buyer.
4. The Seller shall institute proceedings for liquidation,
readjustment, arrangement or composition (or for any related
or similar purpose) under any law relating to financially
distressed debtors, their creditors or property, or shall
consent to (or fail to object to in a timely manner) the
institution of any such proceedings against the Seller; or the
Seller shall be insolvent (within the meaning of any
applicable law), or shall be unable, or shall admit in writing
its inability, to pay its debts as they become due, or shall
make an assignment for the benefit of creditors or enter into
any arrangement for the adjustment or composition of debts or
claims; or a court or other governmental authority or agency
having jurisdiction in the premises shall enter a decree or
order (i) for the appointment of a receiver, liquidator,
assignee, trustee, custodian or sequestrator (or other similar
official) of the Seller or of any part of its property, or for
the winding-up or liquidation of its affairs; and such decree
or order shall remain in force undischarged and unstayed for a
period of more than sixty (60) days, or (ii) for the
sequestration or attachment of any material part of the
property of the Seller without its unconditional return to the
possession of the Seller, or its unconditional release from
such sequestration or attachment, within sixty (60) days
thereafter; or a court or other governmental authority or
agency having jurisdiction in the premises shall enter a
decree or order approving or acknowledging as properly filed,
or any party commences against the Seller, a petition or
proceedings for liquidation, rehabilitation, readjustment or
composition (or for any related or similar purpose) under any
law relating to financially distressed debtors, their
creditors or property, and any such decree or order shall
remain in force undischarged and unstayed for a period of more
than sixty (60) days.
5. After the Initial Closing Date, Seller changes its
underwriting or collection standards and procedures in a way
which, in the commercially reasonable judgment of the Buyer,
materially and adversely affects the value
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<PAGE> 29
of the Additional Loans sold to the Buyer; provided that the
Buyer has given the Seller written notice that such change
materially and adversely affects the value of the Additional
Loans and the Seller has not, within 30 days after receipt of
such notice, corrected such change. During such 30-day period,
the parties agree to negotiate in good faith and use their
best efforts to arrive at a mutually acceptable solution to
prevent a termination of this Agreement.
If any of the events described in 1 through 5 above shall occur, the
Buyer may elect to cause such event to be a Termination Event by giving notice
thereof to the Seller that as a result of the occurrence of such event, the
Buyer has determined to terminate this Agreement and the Buyer shall designate a
Termination Date which shall not be prior to the date on which the notice is
delivered to the Seller.
Section 12.3. Termination of Obligation to Buy and Sell Loans. If a
Termination Event occurs under this Article XII, from and after such Termination
Date so designated, the obligation of the Buyer to buy loans hereunder and the
obligation of the Seller to sell loans hereunder shall terminate, however, the
obligation and rights of the parties hereto with respect to Loans previously
sold hereunder and with respect to other obligations and rights hereunder shall
continue.
ARTICLE XIII
Additional Remedies For Buyer's Default
Section 13.1. Additional Remedies for Buyer's Default. IF THE SELLER
ELECTS TO TERMINATE BUYER'S RIGHTS TO PURCHASE LOANS UNDER THIS AGREEMENT, ALL
LOANS AND THE ACCOMPANYING RIGHTS ASSIGNED FOR WHICH THE SELLER HAS NOT RECEIVED
THE FULL PURCHASE PRICE SHALL REVERT TO SELLER, AND SELLER SHALL BE ENTITLED TO
RE-SELL THE PACKAGES AND ALL OF THE LOANS IN ANY MANNER SELLER DEEMS
APPROPRIATE, FREE AND CLEAR OF ALL CLAIMS OF BUYER. THIS PROVISION SHALL NOT BE
DEEMED TO LIMIT SELLER'S RIGHT TO SEEK ADDITIONAL DAMAGES (AT LAW OR IN EQUITY)
FOR ANY BREACH BY BUYER OF THE TERMS, COVENANTS AND CONDITIONS SET FORTH HEREIN.
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ARTICLE XIV
FILES AND RECORDS
Section 14.1. Conformity to Law. Buyer agrees, at its sole cost and
expense, to abide by all applicable state and federal laws, rules and
regulations regarding the handling, maintenance, servicing and collection of all
Loans and in the maintenance of all documents and records relating to the Loans
purchased hereunder, including, but not limited to, the length of time such
documents and records are to be retained, and making any disclosures to Obligors
as may be required by law.
ARTICLE XV
INFORMATIONAL TAX REPORTING
Section 15.1. Informational Tax Reporting. Buyer hereby agrees to
perform all obligations with respect to federal and/or state tax reporting
relating to or arising out of the Loans sold and assigned pursuant to this
Agreement including, without limitation, the obligations with respect to Forms
1098 and 1099 and backup withholding with respect to the same, if required, for
the year 1999 and thereafter. Seller reserves the right to notify Buyer that
Seller shall file such reporting forms relating to the period of the year 1999
or any subsequent year for which Seller owned the Loan. Upon reasonable request,
each party will provide the requesting party with copies, delivered in a
commercially reasonable format, of their respective Forms 1098 and 1099.
ARTICLE XVI
RETAINED CLAIMS
Section 16.1. Retained Claims. Buyer and Seller agree that the sale of
the Loans pursuant to this Agreement shall exclude the transfer to Buyer of any
and all claims and/or causes of action Seller has or may have (i) against
officers, directors, employees, insiders, accountants, attorneys, other persons
employed by Seller, underwriters or any other similar person or persons who have
caused a loss to Seller in connection with the initiation, origination or
administration of any of the Loans, or (ii) against any third parties involved
in any alleged fraud or other misconduct relating to the making or servicing of
any of the Loans, or (iii) against any other party from whom Seller contracted
services in connection with any of the Loans.
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<PAGE> 31
ARTICLE XVII
NOTICES
Section 17.1. Notices. All notices, waivers, demands, requests and
other communications required or permitted by this Agreement (collectively,
"Notices") shall be in writing and given as follows by (a) personal delivery,
(b) established overnight commercial courier with delivery charges prepaid or
duly charged, or (c) registered or certified mail, return receipt requested,
first class postage prepaid. All Notices which relate to any of the Loans shall
specify the Transfer Date of such Loans. Such Notices shall be addressed to the
Buyer at the address set forth on Exhibit B to this Agreement and incorporated
herein or with respect to Buyers subsequent to the initial Buyer to the address
provided in the Assignment and Acceptance Agreement. Such Notices shall be sent
to Seller at the address set forth on Exhibit A to this Agreement and
incorporated herein. Notices so given by personal delivery shall be presumed to
have been received upon tender to the applicable natural person designated below
to receive notices or, in the absence of such a designation, upon tender to the
person signing this Agreement on behalf of the applicable party. Notices so
given by overnight courier shall be presumed to have been received the next
Business Day after delivery to such overnight commercial courier. Notices so
given by mail shall be presumed to have been received on the third (3rd) day
after deposit into the United States postal system. All copies to the applicable
persons or entity(ies) designated above to receive copies shall be given in the
same manner as the original Notice, and such giving shall be a prerequisite to
the effectiveness of any Notice.
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ARTICLE XVIII
WAIVER AND RELEASE
Section 18.1. Waiver and Release. Buyer, its affiliates, officers,
directors, successors or assignees thereof, and all subsequent transferees of
the Loans, and all others claiming by or through Buyer or subsequent
transferees, hereby disclaim and waive any right or cause of action they may now
or in the future have against Seller, and any of Seller's respective
contractor's officers, directors, employees, attorneys, agents, and predecessors
in interest as a result of the purchase of the Loans; provided, however, that
this waiver and release shall not extend to any liability of Seller arising from
Seller's failure to perform its obligations in accordance with the terms of this
Agreement or any liability of Seller to Buyer indemnified pursuant to Section
10.2. In addition, Buyer, its affiliates, officers, directors, successors or
assignees thereof, and all subsequent transferees of the Loans, and all others
claiming by or through Buyer or subsequent transferees, hereby release Seller,
its agents, officers, directors, representatives, contractors, employees,
attorneys and their successors and assigns, from any and all Claims arising from
or related to the Loans or arising out of the violation of any applicable laws
(including, without limitation, state and federal securities laws), except for
Claims indemnified pursuant to Section 10.2.
ARTICLE XIX
TERM OF AGREEMENT
Section 19.1. Term of Agreement. Notwithstanding that this Agreement
may be terminated at any time in accordance with the provisions of Article 12
hereof, the initial term of this Agreement shall commence on the first Transfer
Date and shall end on February 20, 2001.
Section 19.2. [Intentionally deleted]
Section 19.3. Effect of Termination. Effective on the Termination Date,
the Seller's obligation to sell Loans and the Buyer's obligation to purchase
Loans hereunder shall terminate, however, obligations and rights provided under
this Agreement and the other Transaction Documents and with respect to Loans
previously sold hereunder shall continue.
ARTICLE XX
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[Intentionally deleted]
ARTICLE XXI
MISCELLANEOUS PROVISIONS
Section 21.1. Severability. If any term, covenant, condition or
provision hereof is unlawful, invalid, or unenforceable for any reason
whatsoever, and such illegality, invalidity, or unenforceability does not affect
the remaining parts of this Agreement, then all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the invalid
or unenforceable part had not been included. In addition, the parties hereto
agree to amend the Agreement to add a legally valid and enforceable provision,
which will provide the same or similar economic benefits or other benefits to
the affected party as the deleted, unenforceable or invalid provision.
Section 21.2. Rights Cumulative; Waivers. The rights of each of the
parties under this Agreement are cumulative and may be exercised as often as any
party considers appropriate under the terms and conditions specifically set
forth. The rights of each of the parties hereunder shall not be capable of being
waived or varied otherwise than by an express waiver or variation in writing.
Any failure to exercise or any delay in exercising any of such rights shall not
operate as a waiver or variation of that or any other such right. Any defective
or partial exercise of any of such rights shall not preclude any other or
further exercise of that or any other such right. No act or course of conduct or
negotiation on the part of any party shall in any way preclude such party from
exercising any such right or constitute a suspension or any variation of any
such right.
Section 21.3. Headings. The headings of the Articles and Sections
contained in this Agreement are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or any provision hereof.
Section 21.4. Construction. Unless the context otherwise requires,
singular nouns and pronouns, when used herein, shall be deemed to include the
plural of such noun or pronoun, and pronouns of one gender shall be deemed to
include the equivalent pronoun of the other gender.
Section 21.5. Assignment. Subject to the restrictions set forth in
Article XI, this Agreement and the terms, covenants, conditions, provisions,
obligations, undertakings, rights and benefits hereof, including the Addenda,
Exhibits and Schedules hereto, shall be binding upon, and shall inure to the
benefit of,
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<PAGE> 34
the undersigned parties and their respective heirs, executors, administrators,
representatives, successors and assigns.
Section 21.6. Prior Understandings. This Agreement supersedes any and
all prior discussions and agreements among Seller and Buyer with respect to the
purchase of the Loans and other matters contained herein, and the Transaction
Documents contain the sole and entire understanding between the parties hereto
with respect to the transactions contemplated herein.
Section 21.7. Integrated Agreement. The Transaction Documents hereto
constitute the final complete expression of the intent and understanding of
Buyer and Seller. This Agreement shall not be altered or modified except by a
subsequent writing, signed by Buyer and Seller.
Section 21.8. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall constitute one and the same instrument, and any party
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be deemed to be binding when executed by the Buyer and the
Seller and signature pages have been exchanged by the parties hereto via
facsimile. Telecopy signatures shall be deemed valid and binding to the same
extent as original signatures.
Section 21.9. Non-Merger/Survival. Each and every covenant made by
Buyer or Seller in the Transaction Documents including, without limitation, any
representation, warranty, covenant and any indemnity shall survive the execution
and delivery of the Transfer Documents and this Agreement and shall not merge
into the Transfer Documents, but instead shall be independently enforceable.
Section 21.10. Governing Law/Choice of Forum. This Agreement shall be
construed, and the rights and obligations of Seller and Buyer hereunder
determined, in accordance with the laws of the State of Delaware.
Section 21.11. No Third-Party Beneficiaries. Each of the provisions of
this Agreement is for the sole and exclusive benefit of the parties hereto, and
none of the provisions of this Agreement shall be deemed to be for the benefit
of any other person or entity.
Section 21.12. Calculation of Calendar/Business Days. If any date
(whether calculated on the basis of calendar days or Business Days) upon which
or by which action is required under this Agreement (except for any Additional
Loans Cut-Off Date which may occur on a non-Business Day) is a Saturday, Sunday
or legal holiday recognized by the federal government, then the date for such
action shall be extended to the first day that is after
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such date and is not a Saturday, Sunday or legal holiday recognized by the
federal government.
34
<PAGE> 36
IN TESTIMONY WHEREOF, the parties hereto have executed this Agreement.
BUYER: Midland Credit Management, Inc.
By: /s/ Robert E. Koe
-----------------
Name:
Title: CEO
SELLER: MBNA America Bank, N.A.
By: [Illegible]
-----------
Name:
Title:
35
<PAGE> 37
SCHEDULE 1
Loan Schedule
<TABLE>
<CAPTION>
Seller Name Loan Asset No. Obligor Last Name Current
Balance
(approximate)
<S> <C> <C> <C>
MBNA AMERICA BANK, N.A
- ------------------------ --------------------- -------------------- --------------
EXISTING PORTFOLIO
Total Number of Accounts: Aggregate Current Balance:
FORWARD FLOW
Total Number of Accounts: Aggregate Current Balance:
</TABLE>
36
<PAGE> 38
EXHIBIT A
IDENTITY OF SELLER
Name: MBNA AMERICA BANK, N. A.
Address: 400 CHRISTIANA ROAD, NEWARK, DELAWARE 19713
City/State/Zip Code
Contact Person: Manager of Sales Support
Attention: Bill Young
Telephone No.: (302) 458-0511
Telecopy No.: (302) 458-0672
A-1
<PAGE> 39
EXHIBIT B
IDENTITY OF BUYER
Name: Midland Credit Management, Inc.
Address: 500 West First Street, Hutchinson, KS 67504-0576
Contact Person: John A. Chandler
Telephone No.: (316) 663-1236
Telecopy No.: (316) 665-0140
Tax I.D./SS No.: 48-0581733
and upon assignment to an Affiliate pursuant to the provisions of Section 11.2
of the Agreement to which this Exhibit is attached, such Affiliate
B-1
<PAGE> 40
EXHIBIT C
BILL OF SALE AND ASSIGNMENT OF LOANS
The undersigned Assignor ("Assignor") on and as of the date hereof
hereby absolutely sells, transfers, assigns, sets-over, quitclaims and conveys
to_______________ a ___________ organized under the laws of _________
("Assignee") without recourse and without representations or warranties of any
type, kind, character or nature, express or implied, all of Assignor's right,
title and interest in and to each of the loans identified in the loan schedule
("Loan Schedule") attached hereto (the "Loans"), together with the right to all
principal, interest or other proceeds of any kind with respect to the Loans
remaining due and owing as of the Cut-Off Date applicable to such Loans as set
forth in the Loan Sale Agreement pursuant to which the Loans are being sold
(including but not limited to proceeds derived from the conversion, voluntary or
involuntary, of any of the Loans into cash or other liquidated property).
DATED: _______, 19__.
ASSIGNOR: MBNA AMERICA BANK, N.A.
Name:
Title:
C-1
<PAGE> 41
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment
request.
EXHIBIT D
WIRE TRANSFER INSTRUCTIONS
Bank Name: MBNA AMERICA BANK, N.A. - NEWARK, DE
ABA Number: *
Credit to Account:
Account Number:
Reference: Please indicate that the funds are loan sale
proceeds, along with your name.
Attention: David Penkrot
Conditions:
In order to assure proper allocation of funds to Buyer's purchase
price, this information must be included on all wire transfers.
D-1
<PAGE> 42
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
EXHIBIT E
DELIVERY OF CREDIT APPLICATIONS
AND STATEMENTS
Seller will deliver to Buyer copies of the credit applications and statements
for the Loans upon receipt of payment of $5.00 per application or statement (or
other available information to be provided under the terms of Section 1.10 of
this Agreement) requested by Buyer, within * after the Transfer Date of such
Loan, if such documents are available. With respect to any such request, Seller
shall have * from the receipt of the Buyers request to deliver the requested
documents, provided the number of requests does not exceed two hundred (200)
items in any one calendar month. Otherwise, Seller shall have * from the receipt
of the Buyer's request to deliver the requested documents. Buyer expressly
acknowledges that Seller only retains the credit applications for a period of
five (5) years and that documentation may not exist with respect to the Loans
purchased by Buyer.
E-1
<PAGE> 43
EXHIBIT F
CONFIDENTIALITY AGREEMENT
WHEREAS, the MBNA America Bank, N.A. and certain of its affiliates and
subsidiaries ("Seller") shall from time to time, either directly or indirectly,
make available to Midland Credit Management, Inc. ("Bidder") a
______________________ having its principal office in Hutchinson, KS ("Principal
Office"), Customer lists, documents, individual account information, trade
secrets, business practices and techniques, strategies, development and
marketing plans which are proprietary or confidential (collectively the
"Information");
WHEREAS, Seller is offering for sale certain financial debt instruments
(the "Assets"). In connection therewith, Bidder has requested permission to
review and inspect the Information. It is specifically acknowledged by Bidder
that the Information is confidential and/or proprietary in nature and that
damages to Seller may result if the information is revealed, even after sale.
Therefore, Seller has required the Bidder to execute and deliver this Agreement
as a condition of its review and inspection of the Information.
NOW, THEREFORE, in consideration of being granted the opportunity to
review and inspect the Information, and for other valuable and lawful
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Bidder agrees that its review and inspection of the Information
shall be solely to conduct due diligence, on its own behalf, for the sole
purpose of determining whether or not to submit a bid to purchase some of all of
the Assets, and for no other purposes. Bidder shall have no authority to use the
Information for any other purpose or in any other manner. Bidder agrees to
secure and safeguard the Information in strict accordance with the requirements
of this Confidentiality Agreement and Seller's instructions, as communicated by
Seller to Bidder from time to time during the term of this Agreement. Bidder
shall only permit access to the Information to those employees of Bidder who
need such access to perform their job duties.
2. In the event Bidder is instructed by Seller to destroy the
Information, Bidder shall destroy all of the Information in strict accordance
with Seller's then current destruction policy, which currently includes, but is
not limited to, the following:
(a) Degauss or physically destroy through a bonded service company
approved by Seller, the original and all whole or partial copies of any
Information contained on any type of tape media.
(b) Delete the original and all whole or partial copies of any
Information contained on any of the Bidder's storage media.
(c) Shred the original and all whole and partial copies of any
Information contained on any type of hardcopy media.
F-1
<PAGE> 44
3. Bidder shall hold all Information in strict and absolute confidence
and shall not trade, give away, barter, lend, send, sell (collectively
"transfer") any Information and shall not make any copies of the Information of
any type whatsoever except as absolutely required for the completion of the due
diligence examination by Bidder. In the event Bidder generates any Information
in any medium whatsoever, Bidder hereby agrees that all such Information
generated by Bidder shall be covered by all the terms and conditions of this
Confidentiality Agreement, including, but not limited to, the provisions on
protection of confidentiality and damages for any violation.
4. Bidder agrees that it will not provide or otherwise disclose any
Information to any other organization or individual under any circumstances, and
Bidder specifically, but not by way of limitation, agrees that no subcontractors
shall be provided any Information unless agreed to in writing by Seller prior to
any such disclosure.
5. In view of the confidential nature of the Information, Bidder
warrants that all employees, subcontractors, agents and officers of Bidder
("Qualified Persons") who work with the Information shall be made aware of the
obligations contained in this Confidentiality Agreement and shall be under
strict legal obligation not to copy, transfer or disclose the Information, or
make any other use of the Information other than as specifically described
herein. The foregoing is in addition to Bidder's strict legal obligation not to
transfer any of the Information and/or reproduce the Information.
6. Bidder shall be responsible for any damages incurred by Seller that
result from any acts or omissions of Bidder or its Qualified Persons in their
handling of and protection of Information and the Bidder shall be liable for any
such breach.
Because the Information provided by Seller to Bidder is extremely
valuable and completely proprietary, and because the nature of this asset make
an evaluation of damages after a valuation of this Agreement impossible, in the
event the Information is handled in a fashion that violates this Confidentiality
Agreement by Bidder, or its Qualified Persons, Seller will be entitled to
damages of twenty-five dollars ($25.00) for each name or address used in
violation of this Confidentiality Agreement, with the amount of damages not to
exceed five hundred thousand dollars ($500,000) per breach.
In addition, Bidder agrees that Seller would suffer immediate and
irreparable harm in the event any Information is used in a manner not permitted
by this Confidentiality Agreement. In the event of a breach or the threatened
breach of the provisions of this Confidentiality Agreement, Seller shall be
entitled to injunctive relief restraining Bidder from such breach or threatened
breach and to enforce the provisions herein. Nothing herein shall be construed
as prohibiting Seller from pursuing any other remedy on account of such breach
or threatened breach. No forbearance, failure or delay in exercising any such
right, power, or remedy shall operate as a waiver thereof or preclude its
further exercise.
7. By execution of this Agreement, Bidder hereby agrees to indemnify,
defend (through attorneys reasonably acceptable to Seller and its successors and
assigns) and hold Seller and all
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officers, directors, employees, and agents of Seller harmless from and against
any and all claims, causes of action, damages, losses, costs (including
reasonable and necessary attorney's fees) and liabilities of any nature, which
may at any time be assessed against or suffered by Seller directly or indirectly
relating to or arising out of a breach of this Agreement by the Bidder or its
Qualified Persons.
8. Seller requires and Bidder agrees to comply with certain specific
process requirements. Bidder agrees that Seller shall have the right upon one
day's notice to Bidder to perform audits or engage the services of its auditors
to examine Bidder's use of the Information and evaluate compliance with this
Confidentiality Agreement. Reports shall be generated as a result of these
audits which may contain reasonable requirements for the handling of
Information. Upon presentment to Bidder by Seller, these process requirements
shall be binding upon Bidder, shall be deemed to be part of this Confidentiality
Agreement, and shall be attached hereto as Addendum A,
9. Neither the Bidder or its Qualified Persons shall communicate with
any debtor, guarantor, debtor's or guarantor's accountant or attorney or any of
Seller's employees, managers or attorneys relative to any Asset without the
prior written consent of the Seller. The Bidder acknowledges that (i) the
Information may contain customer information subject to the Right to Financial
Privacy Act, and (ii) any similar state or federal privacy act, debtor/creditor
act, or common law.
10. In no instance shall any Information constitute an asset or
property of Bidder in any bankruptcy or insolvency proceeding or in any
situation where Bidder is subject to any receivership, conservatorship or
liquidation or if Bidder in any other way has its activities or powers
restricted by or vested in any governing person or body, and the Information may
not be assigned and/or may not accrue to any estate, person, trustee, receiver,
creditor, court or to any creditor appointed committee or receiver.
11. Notification as to breach of this Confidentiality Agreement shall
be by certified mail, return-receipt requested, at the following addresses:
Seller: MBNA America Bank, N.A.
1100 N. King Street
Wilmington, DE 19884-0124
Attn: Andrew Baum
Bidder: Midland Credit Management, Inc.
500 W. 1st Street, P.O. Box 576
Hutchinson, KS 67504-0576
Attn: Frank Chandler, President
12. In the event of any inconsistency between this Confidentiality
Agreement and any prior agreements, oral or written, on the subject matter
herein, this Confidentiality Agreement shall prevail. Except as otherwise
provided in Section 9 of this Confidentiality Agreement, amendment
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of this Agreement must be in a writing signed by Seller and Bidder. This
Confidentiality Agreement supplements any and all confidentiality agreements
entered into by the parties unless specifically named herein. This
Confidentiality Agreement only establishes the agreement between the parties as
to confidentiality, and does not establish any agreement as to any other
matters.
13. The restrictions in this Agreement shall terminate as to any of the
Assets acquired by the Bidder, provided, however, that any claim by Seller based
on a breach of this Agreement occurring prior to such acquisition shall survive
the acquisition unless waived by Seller in writing. In addition, the Asset Sale
Agreement executed between Seller and Bidder for assets acquired may contain
further Confidentiality requirements. The terms and conditions of this Agreement
shall remain in full force and effect as to any Assets not acquired by the
Bidder. The Bidder shall destroy or, at Seller's request, deliver to Seller any
compilations, studies, notes or other documents or records that contain or
reflect Information relating to the Assets not acquired by the Bidder.
14. This Confidentiality Agreement is governed by the laws of the State
of Delaware. Bidder consents to submit to the jurisdiction of the courts of the
Stale of Delaware and of the United States of America located in the State of
Delaware for any actions, suits or proceedings arising out of or relating to
this Agreement.
15. Bidder shall make no reference to any contractual arrangements with
Seller or to Seller in any other manner in any advertising, promotional
literature or other public statement, in any medium whatsoever, without the
prior written consent of Seller. In the event of a breach of this provision
Seller may terminate this Confidentiality Agreement and/or any agreements
through which Bidder provides services to Seller.
16. In the event Bidder receives a request to disclose all or any of
the Information pursuant to a subpoena, order of court of competent jurisdiction
or by judicial or administrative agency or legislative body or committee, Bidder
agrees to: (a) immediately notify the Seller of the existence, terms and
circumstances surrounding such request; (b) consult with Seller on the
advisability of taking legally available steps to resist or narrow such request;
and (c) if disclosure of such Information is required or deemed advisable,
exercise its best efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such portion of the Information to be
disclosed which Seller designates. Bidder shall be entitled to reimbursement for
its expenses, including the fees and expenses of its counsel, in connection with
action taken pursuant to this paragraph by law or by any governmental regulatory
authority, but is otherwise subject to all restrictions described herein.
17. If any part of this Confidentiality Agreement shall for any reason
be found or held invalid or unenforceable by any court or governmental agency of
competent jurisdiction, such invalidity or unenforceability shall not affect the
remainder of this Confidentiality Agreement which shall survive and be construed
as if such invalid or unenforceable part of portions had not been contained
herein. In addition, the parties to this Agreement agree to amend the Agreement
to add a provision, which is legally valid and enforceable, which will provide
the same economic or protective benefits as the invalid or unenforceable
provision.
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18. This Agreement shall be deemed binding when executed by the Bidder
and the original or a telecopy thereof is received by Seller. Telecopy
signatures shall be deemed valid and binding to the same extent as the original.
19. Bidder acknowledges and understands that Seller makes no
representations or warranties whatsoever, express or implied, with respect to
the content, completeness or accuracy of the Information. Bidder hereby release
Seller and its respective agents, officers, directors, attorneys, employees,
contractors and representatives from all claims, causes of action, losses,
damages, liabilities, judgments, costs and expense (including, without
limitation, attorney's fees, whether suit is instituted or not) assorted against
or incurred by Bidder by reason of the Information.
20. This Confidentiality Agreement shall be binding upon the parties
hereto, their successors, personal representatives and assigns. Except as herein
above provided, this Confidentiality Agreement shall not be altered, assigned or
modified except by written instrument executed by the parties hereto and shall
remain in effect unless terminated by Seller, in writing by certified mail,
return-receipt requested, at the Principal Office of the Bidder, care of the
President or Chief Executive Officer. This Confidentiality Agreement shall
control all Information provided to Bidder by Seller and shall survive
termination of all other agreements or arrangements between Seller and Bidder.
This Confidentiality Agreement shall be effective when signed below by
Bidder or Bidder's agent. The undersigned warrants that he/she has the necessary
authority to sign this instrument and to bind Bidder.
Executed this ______ day of ______________, _________.
FOR: Midland Credit Management, Inc. MBNA America Bank, N.A.
BY:
Name Name
Title Title
Printed Name Printed Name
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<PAGE> 48
EXHIBIT I
FORM OF
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (the "Assignment Agreement")
dated as of ______, 199_ is entered into among __________________("Assignor"),
___________________("Assignee") and MBNA America Bank, N.A. (the "Seller").
Reference is made to the Loan Sale Agreement dated ____________, as
amended and modified from time to time (the "Loan Sale Agreement") between
______________ and Seller. Terms defined in the Loan Sale Agreement are used
herein with the same meaning.
The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of ______, 199_ (the "Effective Date") all of the
Assignor's rights and obligations under the Loan Sale Agreement with respect to
the purchase and sale of Additional Loans occurring after such Effective date
("Future Sales"). From and after the Effective Date (i) the Assignee shall be
the "Buyer" under, and be bound by the provisions of the Loan Sale Agreement and
have the rights and obligations of the Buyer thereunder with respect to Future
Sales and (i) the Assignor shall relinquish its rights and be released from it
obligations under the Loan Sale Agreement with respect to Future Sales. The
Assignee hereby makes all of the representations, warranties and covenants set
forth in Article VII of the Loan Agreement as of the Effective Date.
Notwithstanding anything to the contrary herein contained, the representations
and warranties made by the Seller to the Assignor in the Loan Sale Agreement
shall survive, with respect to the Assignor, the assignment effected by this
Agreement.
This Assignment Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
The terms set forth above are hereby agreed to by
______________________, as Assignor
By: __________________________________
Name: _________________________________
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<PAGE> 49
Title: ________________________________
_____________________, as Assignee
By: ___________________________________
Name: ________________________________
Title: ________________________________
___________________________, as Seller
By: _____________________________________
Name: _________________________________
Title: _________________________________
Address and information relating to the Assignee:
Name:
Address:
Contact Person:
Telephone No.:
Telecopy No.:
Tax I.D./ss No.:
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<PAGE> 1
Exhibit 99.1
Thursday August 26
Company Press Release
MCM Capital Group, Inc. Signs Forward Flow Agreement With MBNA
HUTCHINSON, Kansas--(BUSINESS WIRE)--Aug. 26, 1999--MCM Capital Group, Inc.
(NASDAQ: MCMC - news) announced today that it has entered into a forward flow
agreement with a subsidiary of the MBNA Corporation to purchase certain charged
off credit card receivables. MBNA is one of the leading credit card issuers in
the United States. Terms of the agreement were not disclosed.
"We are very excited at the prospect of forging a long term partnership with an
industry leader," commented Robert E. Koe, MCM Capital's President and CEO.
"This forward flow agreement gives us a steady supply of purchased accounts and
is part of our strategy of becoming a servicer of choice to the country's
leading credit card issuers."
Eric D. Kogan, MCM's Chairman, added, "We are very pleased with such a positive
development for MCM. As a rapidly growing company, we know the keys to success
in this business include entering into forward flow agreements and servicing
receivables profitably. MCM has executed this plan historically, and will
continue to do so to deliver value to its shareholders."
MCM Capital Group, Inc. acquires and collects delinquent consumer receivables.
On July 14, 1999 MCM Capital Group, Inc. completed its initial public offering
of common stock and is listed on NASDAQ under the symbol MCMC.
The statements in this press release that are not historical facts, including
most importantly, those statements preceded by, or that include the words "may",
"believes", "expects", "anticipates" or the negation thereof, or similar
expressions, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve risks, uncertainties and other factors which may cause the
actual results, performance or achievements of MCM Capital Group, Inc. (the
"Company") and its subsidiaries to be materially different from any future
results, performance or achievements express or implied by such forward-looking
statements. Such factors include, but are not limited to, the following: the
Company's ability to recover sufficient amounts on receivables to fund
operations; the Company's ability to hire and retain qualified personnel to
recover the Company's receivables efficiently; the availability of financing;
the availability of sufficient receivables at prices consistent with our return
targets; the Company's ability to renew its current forward flow agreements at
favorable terms; the success of the Company in identifying systems and programs
that are not Year 2000 compliant; unexpected costs associated with Year 2000
compliance or the business risk associated with Year 2000 non-compliance by
suppliers; changes in, or failure to comply with, government regulations; the
costs, uncertainties and other effects of legal and
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administrative proceedings and other risks and uncertainties detailed in the
Company's Securities and Exchange Commission filings. The Company will not
undertake and specifically declines any obligation to publicly release the
result of any revisions to any forward-looking statements to reflect events or
circumstances after the date of such statements to reflect events or
circumstances after anticipated or unanticipated events. In addition, it is the
Company's policy generally not to make any specific projections as to future
earnings, and the Company does not endorse any projections regarding future
performance that may be made by third parties.
Contact:
MCM Capital Group, Inc.
R. Brooks Sherman
Executive V.P. and Chief Financial Officer
800/265-8825
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