Exhibit 10.1
CREDIT AGREEMENT
BY AND BETWEEN
MRC RECEIVABLES CORPORATION,
AS BORROWER
AND
CFSC CAPITAL CORP. VIII,
AS LENDER,
DATED AS OF DECEMBER 20, 2000
<PAGE>
CREDIT AGREEMENT
This Credit Agreement (this "AGREEMENT") is made as of December 20,
2000, by and between MRC RECEIVABLES CORPORATION, a Delaware corporation (the
"BORROWER") and CFSC CAPITAL CORP. VIII, a Delaware corporation (the "LENDER").
RECITALS
WHEREAS, the Borrower may from time to time wish to purchase a pool or
pools of assets, which assets include charged off credit card accounts and other
delinquent or deficiency consumer obligations.
WHEREAS, the Borrower has requested that the Lender consider making
loans to the Borrower from time to time to finance a portion of the purchase
price to be paid by the Borrower for such pools of assets.
WHEREAS, the Lender has agreed to consider making such financing
available to the Borrower pursuant to the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Lender and the Borrower
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in the PREAMBLE hereto have the meanings therein
assigned to them;
(b) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) all accounting terms, unless otherwise specified, shall be deemed
to refer to Persons and their subsidiaries on a consolidated basis in
accordance with GAAP; and
<PAGE>
(e) "including" shall mean including but not limited to; "from", when
used with respect to a period of time, shall mean from and including; and
"to", when used with respect to a period of time, shall mean to and
including; and
(f) if any action or event is to occur on a day that is not a Business
Day, then such action or event shall occur on the first Business Day
occurring thereafter.
"ACCEPTED BORROWING REQUEST" shall have the meaning set forth in
SECTION 2.1(B).
"ACCOUNT" means an obligation of an Obligor to pay money, whether
under a credit card arrangement, open account balance, installment sales or
payment agreement, deferred payment contract or any other arrangement
whatsoever, as set forth and described in a Purchase Agreement, and all unpaid
balances due from the Obligors with respect to such obligations, together with
all documents evidencing such Obligors' agreement to make payment of such unpaid
balances, including without limitation each credit card application or
agreement, and each promissory note, loan agreement, receivable, chattel paper,
payment agreement, contract, installment sales agreement or other obligation or
promise to pay of an Obligor, all as described and referred to in a Purchase
Agreement.
"AFFILIATED PARTY" means a Person which is related to, affiliated with
or controlled by, or under common control with, or common ownership of, the
Borrower, the Servicer or MCM Capital Group.
"AGREEMENT" means this Credit Agreement and all exhibits thereto, as
the same may be amended or restated from time to time.
"ASSET" shall mean, with respect to an Asset Pool, each Account and
any property or other right obtained by the Borrower in connection with
collection of any such Account or in substitution therefor, all of which
constituting a part of the Asset Pool into which such Account was initially
delivered.
"ASSET POOL" shall mean all Accounts and other Assets described in a
Borrowing Request or an Accepted Borrowing Request, as the context may require,
together with (a) each and every Asset obtained in replacement or satisfaction
of or substitution for, any such Account so purchased, (b) each and every item
of property obtained by the Borrower as a result of its collection activities
with respect to any such Account, (c) each and every item of collateral or
security, including all security interests, liens, guarantees and other
interests securing payment of any Account, and all other rights and interests of
the Borrower with respect to each Account, (d) each judgment rendered against an
Obligor in respect of an Account, together with all lien rights related thereto,
(e) Asset Pool Proceeds derived from or paid or payable with respect thereto,
together with any and all earnings thereon and (f) each and every other right,
claim and interest associated therewith.
2
<PAGE>
"ASSET POOL EQUITY CONTRIBUTION" shall mean, with respect to each
Asset Pool, that portion of the Total Cost of an Asset Pool not funded with
proceeds of a Loan, which, unless otherwise approved by the Lender in an
Approved Borrowing Request, shall in no event be less than ten percent (10%) of
such Total Cost.
"ASSET POOL PROCEEDS" shall mean, with respect to an Asset Pool, any
and all monies, payments, revenues, income, receipts, collections, recoveries
and other proceeds or assets, representing collected available funds, net of
checks returned for insufficient funds, received or otherwise recovered on or
with respect to Assets in such Asset Pool (net of Permitted Third-Party Costs
and Permitted Third-Party Fees retained by Permitted Third Parties out of
collections received by such Permitted Third Parties) including (without
limitation) (a) payments of principal, interest, fees, late charges,
insufficient funds charges, guaranty payments and any interest thereon, credit
insurance payments and other cash receipts on account of any Asset in such Asset
Pool, (b) interest on the Collateral Account or any other account created in
connection herewith, (c) court-awarded legal fees and expenses, court-awarded
reimbursement of fees, costs and expenses, (d) legal fees, credit insurance
costs, guaranty fees and other amounts recovered on account of any Asset in such
Asset Pool, to the extent the obligation giving rise thereto has previously been
paid or is otherwise not due and payable with any such receipts, (e)
settlements, compromises, liquidations, foreclosure proceeds, dispositions,
sales, transfers or other proceeds, whether cash or otherwise, received as a
result of or in any way in connection with collection activities related to any
Asset or in connection with the sale, transfer or disposition of any Asset
constituting a part of such Asset Pool, (f) payments, fees, rebates, refunds,
commissions, kickbacks, rakeoffs, discounts, deductions, whether cash or
otherwise, received by Borrower, or any Affiliated Party, as a result of or in
any way in connection with collection activities related to any Asset or in
connection with the sale, disposition or transfer of any Asset constituting a
part of such Asset Pool, and (g) proceeds from the sale of Accounts pursuant to
SECTION 3.4 of this Agreement.
"ASSET POOL SELLER" shall mean, with respect to an Asset Pool, the
party described in a Borrowing Request which has agreed to sell a specified
Asset Pool to the Borrower pursuant to the terms and conditions of a Purchase
Agreement.
"ASSET POOL SHORTFALL AMOUNT" shall have the meaning set forth in
SECTION 2.9.
"BANKRUPT ACCOUNT" means any Account the Obligor of which is subject
to (i) a petition filed under the United States Bankruptcy Code by or against
such Obligor, (ii) a decree or order for relief in a bankruptcy, insolvency,
readjustment of debt or similar proceeding enforced by a court of supervising
authority having jurisdiction in respect of such Obligor, or (iii) the
appointment of a trustee in bankruptcy, conservator or receiver for such Obligor
in any bankruptcy, insolvency, readjustment of debt or similar proceeding.
"BASE RATE" shall mean the rate of interest published from time to
time as the "prime rate" in the WALL STREET JOURNAL under the heading MONEY
RATES, with each change in the base rate becoming effective on the corresponding
3
<PAGE>
day any change in such "prime rate" is so published; provided, however, that (i)
if more that one such "prime rate" is published therein, the base rate shall be
the highest such rate and (ii) if the "prime rate" is no longer published
therein, the base rate shall be a substantially comparable index selected by the
Lender in its reasonable discretion.
"BORROWER" shall have the meaning specified in the PREAMBLE.
"BORROWING DATE" shall have the meaning specified in SECTION 2.1(D).
"BORROWING REQUEST" shall have the meaning set forth in SECTION
2.1(A).
"BULK TRANSFER" shall have the meaning set forth in SECTION 3.4.
"BULK TRANSFER CONSENT REQUEST" shall have the meaning set forth in
SECTION 3.4.
"BUSINESS DAY" shall mean any day other than (a) a Saturday or Sunday
and (b) a day on which banking institutions in the states of California or
Minnesota are authorized or obligated by law, executive order or governmental
decree to be closed.
"CHANGE OF CONTROL" shall mean any event, circumstance or occurrence
(i) that results in MCM Capital Group holding and owning less than one hundred
percent (100%) of the issued and outstanding equity interests in the Borrower or
(ii) that results in MCM Capital Group holding and owning less than one hundred
percent (100%) of the issued and outstanding equity interests in the Servicer.
"CHANGE OF KEY MANAGEMENT" shall mean (i) Carl C. Gregory III shall
cease to be the Chief Executive Officer of MCM Capital Group, the Servicer or
the Borrower, (ii) James Brandon Black shall cease to be the Executive Vice
President of MCM Capital Group, the Servicer or the Borrower, or (iii) Carl C.
Gregory III or James Brandon Black shall cease to be active in the day-to-day
management of MCM Capital Group, the Servicer or the Borrower.
"CLOSING DATE" shall mean the date on which all of the conditions
precedent in SECTION 4.1 have been satisfied.
"COLLATERAL ACCOUNT" shall mean a collateral account opened and
maintained by the Collateral Agent, for the benefit of the Lender, pursuant to
the Collateral Account Agreement.
"COLLATERAL ACCOUNT AGREEMENT" shall mean the Collateral Account
Agreement by and among the Borrower, the Servicer, the Lender and the Collateral
Agent as to the deposit of Asset Pool Proceeds to the Collateral Account, as the
same may be amended or restated from time to time.
4
<PAGE>
"COLLATERAL AGENT" shall initially mean Wells Fargo Bank Minnesota,
National Association, and if thereafter replaced, shall mean any replacement or
permitted successor or assignee thereof pursuant to the Collateral Account
Agreement.
"CONTINGENT PAYMENT" shall mean, with respect to each Asset Pool, a
payment in an amount equal to the amount determined by multiplying the
Contingent Payment Percentage and the amount of all remaining Asset Pool
Proceeds generated from Assets in such Asset Pool for a Distribution Period
after the payments contemplated in SECTION 2.8(A) through SECTION 2.8(J) for
such Distribution Period have been made with respect to such Asset Pool.
"CONTINGENT PAYMENT PERCENTAGE" shall have the meaning specified on
EXHIBIT E attached hereto.
"DEFAULT" shall mean an event that, with giving of notice or passage
of the grace period (if any) or both, would constitute an Event of Default.
"DEFAULT RATE" shall have the meaning set forth in SECTION 2.3(B).
"DISTRIBUTION DATE" shall mean, with respect to an Asset Pool, each
Friday commencing on the second Friday occurring more than five (5) Business
Days following the Borrowing Date for such Asset Pool and each Friday thereafter
until all Assets constituting a part of such Asset Pool have been collected,
sold, abandoned or otherwise disposed of pursuant to the terms of this Agreement
or otherwise to the satisfaction of the Borrower and the Lender.
"DISTRIBUTION PERIOD" shall mean, with respect to each Distribution
Date, the period of time commencing with the Friday occurring two (2) weeks
prior to the applicable Distribution Date and ending on the Thursday first
occurring after such Friday; PROVIDED, HOWEVER, with respect to an Asset Pool,
the initial Distribution Period shall mean the period of time commencing with
the Borrowing Date and ending on the second Friday occurring after such
Borrowing Date.
"DISTRIBUTION REPORT" shall mean, with respect to a Distribution
Period, a report setting forth, by Asset Pool, the Asset Pool Proceeds,
Servicing Fees, outstanding balances of Loans, Permitted Third-Party Costs and
Permitted Third-Party Fees netted from Asset Pool Proceeds by Permitted Third
Parties, NAN Net Negative Permitted Third-Party Costs, and other relevant
information to determine the use and application of Asset Pool Proceeds during
such Distribution Period.
5
<PAGE>
"DISTRIBUTION REPORT DATE" shall mean, with respect to a Distribution
Date, the second Business Day immediately preceding such Distribution Date.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EQUITY RETURN" shall mean, with respect to the Borrower's Asset Pool
Equity Contribution in an Asset Pool, as to the applicable Distribution Period,
an annual rate equal to the Weighted Average Interest Rate (exclusive of any
default increment added to the interest payable to the Lender with respect to
the Loans under SECTION 2.3(B)).
"EVENT OF DEFAULT" shall have the meaning specified in SECTION 8.1.
"EXCLUSIVITY AGREEMENT" means that certain letter agreement, dated as
of the Closing Date, among the Lender, the Borrower, the Servicer and MCM
Capital Group as to the Lender's exclusive right to finance certain Assets
acquired by the Borrower, the Servicer, MCM Capital Group and/or affiliated
parties (as defined in the Exclusivity Agreement), subject to the terms and
conditions contained therein.
"EXCLUSIVITY PERIOD" shall have the meaning given such term in the
Exclusivity Agreement.
"FACILITY" shall mean the Lender's willingness to consider making
loans to the Borrower in the sole discretion of the Lender on a revolving basis
in an aggregate outstanding amount of up to $75,000,000 or such higher amount as
the Lender shall determine in its sole discretion, pursuant to the terms and
conditions of this Agreement.
"FACILITY TERMINATION DATE" shall mean December 31, 2004.
"FLOATING RATE" shall have the meaning specified on EXHIBIT E attached
hereto.
"FORWARD FLOW PURCHASE AGREEMENT" shall have the meaning specified in
SECTION 2.1(C).
"GAAP" shall mean generally accepted accounting principles.
"INDEMNITEES" shall have the meaning specified in SECTION 9.6.
"LENDER" shall have the meaning specified in the PREAMBLE.
"LENDER'S PARENT CORPORATION" has the meaning specified in EXHIBIT F.
"LOAN" shall mean, with respect to an Asset Pool, the loan made by the
Lender to the Borrower pursuant to SECTION 2.1.
6
<PAGE>
"LOAN COLLATERAL" shall have the meaning set forth in SECTION 3.1.
"LOAN COSTS" shall mean those out-of-pocket payments, costs and
expenses paid or incurred by the Lender pursuant to SECTION 9.5(B).
"LOAN DOCUMENTS" shall mean this Agreement, the Security Agreement,
the Collateral Account Agreement, the Servicing Agreement, the Exclusivity
Agreement, the Accepted Borrowing Requests, and, as and when issued, each Note
and any other instrument, document or agreement entered into by the Borrower or
the Servicer for the benefit of the Lender to evidence or secure any Loan, in
each case as amended, supplemented or modified with the consent of the Lender
from time to time.
"LOAN MATURITY DATE" shall mean, with respect to a Loan, the final
maturity date specified in the Note evidencing the Borrower's obligation to
repay such Loan, which in no event shall be later than twenty-seven (27) months
after the Borrowing Date with respect to such Loan.
"MCM CAPITAL GROUP" shall mean MCM Capital Group, Inc, a Delaware
corporation, which is the parent corporation of the Borrower and the Servicer
and which is a publicly traded company.
"MIDLAND CREDIT" shall mean Midland Credit Management, Inc., a Kansas
corporation.
"NAN NET NEGATIVE PERMITTED THIRD-PARTY COSTS" shall mean, with
respect to an Asset Pool, the amount of Permitted Third-Party Costs expended
with respect to the Assets in such Asset Pool which have been paid from sources
other than collections arising from the Assets in such Asset Pool and which have
not been previously reimbursed through distributions of NAN Net Negative
Permitted Third-Party Costs in accordance with the provisions of SECTION 2.8.
"NATIONAL ATTORNEY NETWORK" shall mean the National Attorney Network,
a division of TSYS Total Debt Management, Inc.
"NOTE" shall mean, with respect to an Asset Pool, the promissory note
of the Borrower payable to the order of the Lender, as described in SECTION 2.2,
evidencing a Loan made by the Lender with respect to such Asset Pool pursuant to
SECTION 2.1, including all replacements, extensions, amendments, restatements
and substitutions therefor.
"OBLIGOR" shall mean the customer, obligor, maker, borrower or other
party primarily obligated to pay an Account.
"PERMITTED RELEASE VALUE" shall have the meaning set forth in SECTION
3.4.
7
<PAGE>
"PERMITTED SALE" shall have the meaning set forth in SECTION 3.4.
"PERMITTED SALE OF A BANKRUPT ACCOUNT" shall have the meaning set
forth in SECTION 3.4.
"PERMITTED THIRD PARTY" means (i) any member of the National Attorney
Network, and (ii) any other Person that the Lender has agreed in writing to be a
Permitted Third Party.
"PERMITTED THIRD-PARTY COSTS" shall mean all out-of-pocket costs and
expenses incurred by a Permitted Third Party retained or otherwise engaged by
the Servicer in connection with collection actions or proceedings related to the
enforcement or collection of any Account, which may be retained by such
Permitted Third Party solely out of collections collected by such Permitted
Third Party.
"PERMITTED THIRD-PARTY FEES" shall mean, with respect to an Asset
Pool, the amount of any fees or compensation paid or owed to a Permitted Third
Party retained or otherwise engaged by the Servicer under fee or compensation
arrangements that are contingent upon, and determined by referenced to, the
amounts recovered in respect of the related Accounts, which may be retained by
such Permitted Third Party solely out of collections collected by such Permitted
Third Party.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PLAN" shall mean an employee benefit plan or other plan maintained
for employees and covered by Title IV of ERISA.
"PROJECTED ACCRUAL SCHEDULE" shall have the meaning set forth in
SECTION 2.1(A).
"PURCHASE AGREEMENT" shall mean the asset or account purchase and sale
agreement by and between the Borrower and an Asset Pool Seller pursuant to which
such Asset Pool Seller agrees to sell (i) a specified Asset Pool to the Borrower
for a specified purchase price, or (ii) a number of Asset Pools to the Borrower
pursuant to a Forward Flow Purchase Agreement.
"PURCHASE EXPENSES" shall mean, with respect to an Asset Pool, the
lesser of (a) the maximum estimated expenses to be incurred in connection with
the purchase of an Asset Pool, as set forth in the related Accepted Borrowing
Request, or (b) the sum of (i) any brokers' fees incurred in connection with
acquisition of an Asset Pool, not to exceed one percent (1%) (or such higher
percentage as the Lender, in its sole discretion, shall agree to in writing) of
8
<PAGE>
the proposed purchase price for such Asset Pool and (ii) the out-of-pocket legal
costs and expenses incurred by the Borrower and the Lender in connection with
the negotiation, preparation and consummation of the related Purchase Agreement,
the closing of the purchase by the Borrower of such Asset Pool and the making of
the Loan or Loans secured by such Asset Pool and (iii) out-of-pocket costs and
expenses incurred by the Borrower in connection with its due diligence and
analysis investigation of the Asset Pool, but only to the extent an estimate of
such costs and expenses were disclosed in the Accepted Borrowing Request.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement, dated as of the Closing Date, between MCM Capital Group and the
Lender, as the same may be amended or restated from time to time.
"REPORTABLE EVENT" shall have the meaning assigned to that term in
Title IV of ERISA.
"RE-WRITE NOTE" shall mean a promissory note issued by an Obligor in
favor of the Borrower in replacement or settlement of the Account of such
Obligor.
"SECURITY AGREEMENT" shall mean the Security Agreement, dated as of
the Closing Date, from the Borrower to the Lender pursuant to which the Borrower
grants to the Lender a security interest in, among other things, all Loan
Collateral to secure payment of the Loans and other obligations hereunder, as
the same may be amended or restated from time to time.
"SERVICER" shall initially mean Midland Credit, and, if thereafter
replaced, shall mean any replacement servicer or any permitted successor or
assign thereof; PROVIDED, HOWEVER, that all representations, warranties,
covenants and financial information and defaults with respect to the Servicer in
this Agreement shall be applicable only to Midland Credit, as Servicer, and not
to a replacement servicer engaged by the Lender pursuant to the terms of this
Agreement.
"SERVICER'S COLLECTION ACCOUNT" shall mean account #4496-809732
maintained by the Servicer with Wells Fargo Bank, National Association, or such
other collection account as may be approved in writing from time to time by the
Lender, which account the Servicer shall use solely for receipt of collections,
and if Midland Credit is replaced as Servicer, such other collection account as
may be approved in writing from time to time by the Lender.
"SERVICER'S LOCKBOX" shall mean the lockbox maintained by the Servicer
with Wells Fargo Bank, National Association, or such other lockbox as may be
approved in writing from time to time by the Lender, and if Midland Credit is
replaced as Servicer, such other lockbox with such other financial institution
as may be approved in writing from time to time by the Lender.
9
<PAGE>
"SERVICING AGREEMENT" shall mean the Servicing Agreement, dated as of
the Closing Date, by and among the Borrower, the Servicer and the Lender, as the
same may be amended or restated from time to time, and if Midland Credit is
replaced as Servicer, any servicing agreement entered into between the Lender
and such replacement servicer, as the same may be amended or restated from time
to time.
"SERVICING FEE" shall mean, with respect to an Asset Pool, the fee
payable to the Servicer for services rendered in connection with the collection
of the Assets constituting a part of such Asset Pool, as determined in
accordance with the Servicing Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, (i) any
corporation of which more than 50% of the outstanding shares of capital stock
having general voting power under ordinary circumstances to elect a majority of
the board of directors of such corporation, irrespective of whether or not at
the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency, is at the time directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries, or by one or more other Subsidiaries, (ii) any partnership of
which 50% or more of the partnership interests therein are directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries, or by one or more other Subsidiaries, and (iii) any limited
liability company or other form of business organization the effective control
of which is held by such Person, such Person and one or more other Subsidiaries,
or by one or more other Subsidiaries.
"TERMINATION EVENT" shall have the meaning set forth in SECTION 6.1 of
the Servicing Agreement.
"TEST PERIOD" shall mean, with respect to an Asset Pool, a period
commencing on the Borrowing Date for such Asset Pool and continuing through and
including (i) if the Borrowing Date was on or before the tenth (10th) day of a
calendar month, the last Distribution Date occurring in the calendar month in
which the Borrowing Date occurred, and (ii) if the Borrowing Date was after the
tenth (10th) day of a month, the last Distribution Date occurring in the next
occurring month; and in either event thereafter each period commencing on the
first day occurring after the previous Test Period and continuing through the
last Distribution Date occurring in the next occurring calendar month (unless
otherwise agreed to in writing by the Lender and the Borrower) until all Assets
constituting a part of such Asset Pool have been collected, sold, abandoned or
otherwise disposed of to the satisfaction of the Borrower and the Lender.
"TEST REPORT" shall have the meaning set forth in SECTION 6.1(D).
"TOTAL COST" shall mean, with respect to an Asset Pool, an amount
equal to the sum of (a) the price actually paid by the Borrower to purchase such
Asset Pool pursuant to the related Purchase Agreement (which in no event shall
be greater than the purchase price (and closing adjustments) with respect
10
<PAGE>
thereto approved by the Lender in the Accepted Borrowing Request for such Asset
Pool) and (b) all Purchase Expenses actually incurred by the Borrower or the
Lender in connection with consummation of such purchase by the Borrower, or
making of the Loan to finance such purchase.
"UCC" means the Uniform Commercial Code as in effect from time to time
in Minnesota or in any state whose laws are held to govern the creation,
perfection or foreclosure of any security interest granted pursuant to the
Security Agreement.
"WARRANT AGREEMENT" shall mean the Warrant Agreement, dated as of the
Closing Date, between MCM Capital Group and the Lender, as the same may be
amended or restated from time to time.
"WARRANT DOCUMENTS" shall mean, collectively, the Warrant Agreement,
the Registration Rights Agreement and the Warrants.
"WARRANTS" shall mean the Warrants issued pursuant to the Warrant
Agreement.
"WEIGHTED AVERAGE INTEREST RATE" shall have the meaning specified in
SECTION 2.4(A).
ARTICLE II
LOAN FACILITIES
SECTION 2.1 LOANS TO PURCHASE ASSET POOLS.
(a) REQUESTS FOR BORROWING. From time to time during the period from
the Closing Date to and including the Facility Termination Date, the
Borrower may present to the Lender written information describing a
particular Asset Pool (i) with respect to which the Borrower intends to
submit an offer to purchase and (ii) requesting that the Lender make a Loan
to the Borrower to finance ninety percent (90%) of the Total Cost of such
Asset Pool. Each such request for a Loan hereunder shall be in
substantially the form of EXHIBIT A hereto (each a "BORROWING REQUEST"),
and shall be accompanied by the relevant bid package (including the
proposed Purchase Agreement to be entered into if the Borrower is the
successful bidder for such Asset Pool; PROVIDED, HOWEVER, if the Purchase
Agreement is a Forward Flow Purchase Agreement, the proposed Purchase
Agreement shall be provided to the Lender with respect to the first
Borrowing Request related to such Forward Flow Purchase Agreement), all
material information known to the Borrower regarding the Accounts
comprising such Asset Pool, the proposed Servicing Fee for collection of
such Accounts, projections of the Borrower's anticipated recoveries, cash
flows and net returns to be obtained upon collection of such Accounts, a
11
<PAGE>
projection of the combined interest and Contingent Payments to be paid to
the Lender over the expected term of such Asset Pool as contemplated in
Treasury Regulation ss. 1.1275-4(b), which projection shall constitute the
accrual for federal income tax purposes, of the Borrower's interest
deductions and the Lender's interest income with respect to such Asset Pool
(the "PROJECTED ACCRUAL SCHEDULE"). Within three (3) Business Days after
the Lender's receipt of a Borrowing Request and such related items from the
Borrower, the Lender shall accept the Borrowing Request, reject the
Borrowing Request, request one or more changes to the Borrowing Request or
request additional information reasonably related to the Borrowing Request.
If the Lender has requested one or more changes to a Borrowing Request, the
Borrower shall either, in the Borrower's sole discretion, (i) promptly
respond to the Lender's request by either incorporating all or part of such
requested change or changes into the Borrowing Request, or (ii) promptly
provide a written refusal to incorporate such change or changes as
requested by the Lender. If the Lender has requested additional information
reasonably related to the Borrowing Request, the Borrower shall either, in
the Borrower's sole discretion, (i) promptly respond to the Lender's
request by providing all or part of such additional information to the
Lender, or (ii) promptly provide written notice to the Lender that such
requested additional information is not available to Borrower and cannot be
obtained or prepared by reasonable efforts by the Borrower. Within two (2)
Business Days after the Lender's receipt of the Borrower's written response
to the Lender's request for one or more changes to the Borrowing Request or
for additional information reasonably related to a Borrowing Request, the
Lender shall, in its sole discretion, accept or reject such Borrowing
Request. The Lender's failure to either (i) accept or reject a Borrowing
Request within the above-described period of three (3) Business Days (or
within the above-described extended period in the event one or more changes
to a Borrowing Request is requested by the Lender or additional information
is reasonably requested by the Lender) or (ii) request changes or
additional information pursuant to this SECTION 2.1(A) within the
above-described period of three (3) Business Days, shall be deemed a
rejection of the Borrowing Request by the Lender. Notwithstanding anything
in the foregoing to the contrary, the Lender's decision to accept or reject
a Borrowing Request (other than a Borrowing Request for a second or
subsequent one (1) month period under a Forward Flow Purchase Agreement
which is addressed in SECTION 2.1(C)) shall be in the Lender's sole and
absolute discretion and the Lender may decline any Borrowing Request for
any reason (or no reason), without notification, justification or
explanation, and without regard to whether or not the Lender has given any
prior indication of interest or oral approval with respect to the specified
Asset Pool. The Borrower and the Lender contemplate that the Borrower shall
present to the Lender Borrowing Requests for Assets Pools which will
generally produce a ratio of Asset Pool Proceeds collected to Total Cost,
assuming a forty-eight (48) month collection period, of not less than 2 to
1.
12
<PAGE>
(b) ACCEPTANCE OF BORROWING REQUEST. Any acceptance of a Borrowing
Request shall be evidenced by the Lender's execution and return to the
Borrower of such Borrowing Request (each an "ACCEPTED BORROWING REQUEST").
An Accepted Borrowing Request delivered to the Borrower by the Lender shall
constitute the Lender's commitment, subject to satisfaction of all of the
conditions in SECTIONS 4.2 and 4.3 of this Agreement, to make a Loan to the
Borrower to fund a specified percentage of the Total Cost of the Asset
Pool, as set forth in such Accepted Borrowing Request. An Accepted
Borrowing Request shall expire and shall have no further force or effect if
(i) the Borrower is not the successful bidder for the specified Asset Pool
at a purchase price which is not in excess of the anticipated purchase
price described in such Borrowing Request, (ii) the Borrower does not
consummate its purchase of such Asset Pool pursuant to the terms and
conditions of the related Purchase Agreement and as contemplated in the
related Accepted Borrowing Request within thirty (30) calendar days
following issuance of the Accepted Borrowing Request by the Lender (unless
(A) such period of time is extended in writing by the Lender or (B) the
Asset Pool Seller has unilaterally extended the closing date for purchase
of an Asset Pool and the Borrower is unable to contest any such extension)
or (iii) a Default or Event of Default shall then exist under this
Agreement and shall not have been waived in writing by the Lender.
(c) ADDITIONAL PROVISIONS RELATING TO ACCOUNTS AND OTHER ASSETS
PURCHASED UNDER FORWARD FLOW PURCHASE AGREEMENTS. The Borrower and the
Lender contemplate that certain of the Purchase Agreements will provide for
the purchase by the Borrower from an Asset Pool Seller of Accounts and
other Assets on a periodic basis for a specified period of time (for
example, the monthly purchase of Accounts and other Assets during a
specified period of time) (each such Purchase Agreement is herein called a
"FORWARD FLOW PURCHASE AGREEMENT"). If the Borrower requests, the Lender
will consider financing Accounts and other Assets to be purchased by the
Borrower during a period of six (6) consecutive months or less (or such
longer period as the Lender shall agree to consider) under a Forward Flow
Purchase Agreement. In connection with a Forward Flow Purchase Agreement,
the Borrower shall submit to the Lender a separate Borrowing Request for
Assets to be purchased during the next one (1) month period under such
Forward Flow Purchase Agreement, and if, pursuant to this SECTION 2.1(C),
the Lender approves such purchase in the applicable Accepted Borrowing
Request, then the Accounts and other Assets to be purchased in such one (1)
month period under such Forward Flow Purchase Agreement shall constitute a
single Asset Pool for all purposes of this Agreement and the other Loan
Documents. In connection with the Borrowing Request for the first one (1)
month period under a Forward Flow Purchase Agreement, the Borrower shall
include with such Borrowing Request, in addition to the items required
under SECTION 2.1(A) with a Borrowing Request, a detailed description of
the number of months during which Assets are to be purchased under such
Forward Flow Purchase Agreement, the purchase price and maximum amount of
Assets to be purchased in each such month under such Forward Flow Purchase
Agreement and a description of the quality and characteristics of the
Assets to be purchased during each month under such Forward Flow Purchase
Agreement. In connection with the Borrowing Request for the second or any
subsequent one (1) month periods under a Forward Flow Purchase Agreement,
the Borrower shall include with such Borrowing Request such information as
the Lender shall reasonably require to confirm that the purchase price and
amount of the Assets being purchased during such month are consistent with
the purchase price and the maximum amount specified for such month in the
first Borrowing Request related to such Forward Flow Purchase Agreement and
to confirm that the quality and characteristics of the Assets to be
13
<PAGE>
purchased during such month are consistent with the description of the
quality and characteristics of Assets purchased in the first Borrowing
Request related to such Forward Flow Purchase Agreement and to confirm the
consistency of other matters in the Borrowing Request for such month are
consistent with other matters set forth in the Borrowing Request related to
the first month under such Forward Flow Purchase Agreement. So long as no
Default or Event of Default exists and so long as the Assets to be
purchased in such second or subsequent one (1) month period under such
Forward Flow Purchase Agreement are consistent with the purchase price,
amount, quality and characteristics and other matters set forth in the
Borrowing Request related to the first month under such Forward Flow
Purchase Agreement, the Lender shall approve the Borrowing Request for such
second or subsequent month pursuant to an Accepted Borrowing Request. Each
Loan made by the Lender with respect to an Asset Pool purchased under a
Forward Flow Purchase Agreement shall be (i) subject to the conditions of
SECTION 4.2 and SECTION 4.3, and (ii) made in a single advance in
accordance with the general funding procedures provided in Section 2.1(d).
(d) GENERAL FUNDING PROCEDURES. The Borrower shall provide the Lender
with not less than one (1) Business Days prior written notice of the
scheduled closing date for purchase of an Asset Pool described in an
Accepted Borrowing Request and shall request funding of the related Loan on
or after such closing date (each a "BORROWING DATE"). Prior to (and as an
additional condition to) the Lender funding the Loan, the Borrower shall
transfer to the Lender the Borrower's Asset Pool Equity Contribution for
the related Asset Pool, net of all Purchase Expenses paid or incurred by
the Borrower. Upon receipt by the Lender of such funds from the Borrower
and upon satisfaction of all of the conditions set forth in SECTIONS 4.2
and 4.3 of this Agreement, the Lender shall make the Loan to the Borrower
as specified in the related Accepted Borrowing Request by transferring the
amount of the Loan, together with the Borrower's Asset Pool Equity
Contribution received by the Lender, to the Asset Pool Seller in purchase
of the related Asset Pool on (or immediately prior to) the closing date for
purchase of such Asset Pool.
SECTION 2.2 OBLIGATION TO REPAY LOANS; ISSUANCE OF NOTES. Each Loan
made by the Lender with respect to an Asset Pool under SECTION 2.1 shall be an
individual single-advance term loan and shall be evidenced by a separate
promissory note of the Borrower, prepared by the Lender, payable to the order of
the Lender in the original principal amount of the Loan, dated as of the
14
<PAGE>
Borrowing Date and in substantially the form of EXHIBIT B (each a "NOTE"). The
unpaid principal amount of each Note shall bear interest, be payable and be
secured, as provided in this Agreement, such Note and the Security Agreement.
SECTION 2.3 INTEREST ON LOANS. The Borrower hereby agrees to pay
interest on the unpaid principal balance of the Loans for the period commencing
on the Borrowing Date for the initial Loan and continuing thereafter until all
of the Loans are paid in full, in accordance with the following:
(a) Prior to the occurrence of an Event of Default, the aggregate
outstanding principal balance of the Loans shall bear interest at an annual
rate at all times equal to the Floating Rate.
(b) From and after the occurrence of an Event of Default and
continuing thereafter until such Event of Default shall be remedied to the
written satisfaction of the Lender or shall be waived in writing by the
Lender, the aggregate outstanding principal balance of the Loans shall bear
interest at an annual rate at all times equal to the sum of (i) the
Floating Rate, PLUS (ii) two percent (2%) (the "DEFAULT RATE").
(c) Notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, all agreements with respect to
interest in this Agreement and the other Loan Documents between the
Borrower and the Lender are hereby limited so that in no contingency or
event whatsoever shall the total liability for payments in the nature of
interest exceed the applicable limits imposed by any applicable usury laws.
If any payments in the nature of interest made under this Agreement or any
other Loan Document are held to be in excess of the limits imposed by any
applicable usury laws, it is agreed that any such amount held to be in
excess shall be considered payment of principal in respect of the
applicable Loan, and the aggregate indebtedness under this Agreement and
the other Loan Documents shall be reduced by such amount so that the total
liability for payments in the nature of interest shall not exceed the
applicable limits imposed by any applicable usury laws, in compliance with
the desires of the Borrower and the Lender.
SECTION 2.4 COMPUTATION AND PAYMENT OF INTEREST ON THE LOANS;
COMPUTATION AND PAYMENT OF EQUITY RETURN ON ASSET POOL EQUITY CONTRIBUTIONS.
(a) COMPUTATION AND PAYMENT OF INTEREST ON THE LOANS. Interest
accruing on the Loans shall be computed on the basis of the actual number
of days elapsed in a year of three hundred sixty-five (365) days. To the
extent that the aggregate outstanding principal balance of the Loans from
time to time exceeds $25,000,000, the Lender shall determine the weighted
average interest rate for all such Loans for the applicable Distribution
Period based upon the aggregate principal balance of the Loans below, at
and above $25,000,000 as of the last day of such Distribution Period (the
"WEIGHTED AVERAGE INTEREST RATE") and the actual interest applicable to
each such Loan during the next subsequent Distribution Period shall be
15
<PAGE>
determined by the Lender based upon such Weighted Average Interest Rate and
the actual outstanding principal balance of each such Loan during each day
of such next subsequent Distribution Period. If the Asset Pool Proceeds
received with respect to an Asset Pool and available to pay interest as
provided in SECTION 2.8 are sufficient to pay in full interest accruing
during the applicable Distribution Period on the Loan related to such Asset
Pool, the amount of such accrued interest shall be due and payable in
arrears on the related Distribution Date for such Asset Pool; otherwise,
any deficiency between the Asset Pool Proceeds available to pay such
interest on such Distribution Date and the amount of interest which accrued
during the applicable Distribution Period shall be capitalized as of such
Distribution Date by increasing the outstanding principal balance of such
Loan by such deficiency amount. If any such capitalization of interest
would cause the outstanding principal balance of a Loan to exceed the face
amount of the Note related to such Loan, upon request of the Lender, the
Borrower shall execute and deliver to the Lender a replacement Note in a
face amount equal to such increased outstanding principal balance of such
Loan; PROVIDED, HOWEVER, nothing therein shall be construed to require the
execution and delivery of any such replacement Note.
(b) COMPUTATION AND PAYMENT OF EQUITY RETURN ON ASSET POOL EQUITY
CONTRIBUTIONS. With respect to a given Asset Pool, the Equity Return
accruing on the Borrower's Asset Pool Equity Contribution related to such
Asset Pool shall be computed on the basis of the actual number of days
elapsed in a year of three hundred sixty-five (365) days. If the Asset Pool
Proceeds received and available to pay the Equity Return on the Borrower's
Asset Pool Equity Contribution for such Asset Pool as provided in SECTION
2.8 are sufficient to pay in full the Equity Return accruing during the
applicable Distribution Period on such Asset Pool Equity Contribution, the
amount of such accrued Equity Return shall be due and payable in arrears on
the related Distribution Date for such Asset Pool; otherwise, any
deficiency between the Asset Pool Proceeds available to pay such Equity
Return on such Distribution Date and the amount of the Equity Return which
accrued during the applicable Distribution Period shall be capitalized as
of such Distribution Date by increasing the outstanding amount of the
Borrower's Asset Pool Equity Contribution for such Asset Pool by such
deficiency amount.
SECTION 2.5 PAYMENT OF PRINCIPAL AND INTEREST ON LOANS. Interest
accruing on a Loan during a Distribution Period shall be payable on the related
Distribution Date, but only to the extent available in accordance with SECTION
2.8. Principal of each Loan shall be finally due and payable on the Loan
Maturity Date for such Loan, as specified in the Note evidencing such Loan. In
addition, principal payments prior to the applicable Loan Maturity Date on each
Loan shall be made in an amount equal to the Asset Pool Proceeds available for
such payment on such date, as provided in SECTION 2.8. The Borrower may prepay
any Loan, in whole or in part, at any time and from time to time, without
premium or penalty; PROVIDED, HOWEVER, that (i) no such prepayment shall
terminate or satisfy the Borrower's obligation to pay Contingent Payments with
respect to the related Asset Pool for any such Loan, and (ii) any such
16
<PAGE>
prepayment can only be made from Asset Pool Proceeds received with respect to
the Asset Pool for such Loan and not with any other proceeds or funds from any
other source, unless otherwise approved in writing by the Lender.
SECTION 2.6 CONTINGENT PAYMENTS. The Borrower agrees to pay to the
Lender a Contingent Payment with respect to each Asset Pool, payable on each
Distribution Date for such Asset Pool in an amount equal to that portion of the
Asset Pool Proceeds available for payment thereof as provided in SECTION 2.8(K).
Payment in full of any Loan made in respect of an Asset Pool shall in no way
affect the obligation of the Borrower to pay to the Lender the Contingent
Payments with respect to such Asset Pool as provided herein. The Borrower and
the Lender agree that all Contingent Payments with respect to an Asset Pool will
be treated as interest for United States federal income tax purposes and that
the Borrower's interest deductions and the Lender's interest income with respect
thereto shall accrue in accordance with the Projected Accrual Schedule for such
Asset Pool delivered by the Borrower pursuant to SECTION 2.1(A) and accepted by
the Lender pursuant to SECTION 2.1, as required and determined in accordance
with the noncontingent bond method described in Treasury Regulation 1.1275-4(b).
SECTION 2.7 COLLECTION AND DEPOSIT OF ASSET POOL PROCEEDS. Except as
otherwise provided in SECTION 2.9, each Loan shall be paid out of Asset Pool
Proceeds collected with respect to the related Asset Pool. All Asset Pool
Proceeds received by the Servicer or the Borrower will be deposited, on a daily
basis, to the Collateral Account. To the extent that Asset Pool Proceeds are
received by check or otherwise in the Servicer's Lockbox or are received through
the Servicer's preparation of "laser checks", the Servicer will cause such Asset
Pool Proceeds to be deposited directly into the Collateral Account. To the
extent that Asset Pool Proceeds are received (whether by wire transfer, money
order or otherwise) in the Servicer's Collection Account, the Servicer shall
transfer all Asset Pool Proceeds on a daily basis from the Servicer's Collection
Account to the Collateral Account. Except for the temporary deposit of Asset
Pool Proceeds in the Servicer's Collection Account as provided in the preceding
sentence, neither the Servicer nor the Borrower shall commingle any Asset Pool
Proceeds collected with respect to the Asset Pools with any moneys or other
funds which are not Asset Pool Proceeds. The Collateral Account shall be an
interest bearing account and all interest earned on amounts on deposit therein
shall constitute, and be treated as, Asset Pool Proceeds collected with respect
to the Asset Pools. Asset Pool Proceeds shall be held in the Collateral Account
until the applicable Distribution Date. Not later than 3:00 p.m., Minneapolis,
Minnesota time, on the applicable Distribution Report Date, the Servicer shall
deliver to the Lender the Distribution Report for the related Distribution
Period which shall set forth, by Asset Pool, the Asset Pool Proceeds, all Asset
Pool Proceeds collected through NAN, all Permitted Third-Party Costs and all
Permitted Third-Party Fees related to NAN, NAN Net Negative Permitted
Third-Party Costs, Servicing Fees, outstanding balances of Loans, Permitted
Third-Party Costs and Permitted Third-Party Fees netted by Permitted Third
Parties, and other relevant information to determine the use and application of
the Asset Pool Proceeds deposited to the Collateral Account during such
Distribution Period, and the Lender will make its determinations as to
distributions of Asset Pool Proceeds deposited in the Collateral Account during
17
<PAGE>
such Distribution Period in accordance with SECTION 2.8. In no event shall any
Asset Pool Proceeds be distributed from the Collateral Account without the prior
written consent of the Lender as to each such distribution.
SECTION 2.8 DISTRIBUTION OF ASSET POOL PROCEEDS. Upon delivery to the
Collateral Agent of the Lender's written authorization for distributions to be
made from the Collateral Account as contemplated in SECTION 2.7, Asset Pool
Proceeds deposited in the Collateral Account with respect to an Asset Pool for
the applicable Distribution Period shall be distributed on the related
Distribution Date for such Asset Pool, in accordance with the following:
(a) FIRST, to the Collateral Agent, an amount equal to all fees and
expenses due and owing to the Collateral Agent with respect to such Asset
Pool;
(b) SECOND, to the Servicer for reallocation by the Servicer to the
applicable Asset Pools or to the applicable asset pools of other Persons,
an amount equal to the NAN Net Negative Permitted Third-Party Costs related
to such Asset Pool;
(c) THIRD, to the Servicer, an amount equal to the Servicing Fee, if
any, payable to the Servicer with respect to such Asset Pool Proceeds;
(d) FOURTH, to the Lender, an amount equal to all unpaid Loan Costs
paid or incurred by the Lender with respect to the Loan related to such
Asset Pool;
(e) FIFTH, to the Lender, an amount equal to all accrued and unpaid
interest on the related Loan for such Asset Pool for such Distribution
Period;
(f) SIXTH, to the Borrower, an amount equal to all accrued and unpaid
Equity Return on the Borrower's Asset Pool Equity Contribution for such
Asset Pool for such Distribution Period;
(g) SEVENTH, to the Lender, an amount equal to the outstanding
principal of the related Loan for such Asset Pool, until such Loan shall
have been paid in full;
(h) EIGHTH, to the Lender, an amount equal to any Asset Pool Shortfall
Amount then outstanding with respect to any other Asset Pool, for
application to payment of such Asset Pool Shortfall Amount;
(i) NINTH, if such Asset Pool has had an Asset Pool Shortfall Amount
which has been paid from other Asset Pools, to such other Asset Pools on a
pro rata basis (based upon the respective amounts of such Asset Pool
Shortfall Amount paid from such other Asset Pools) until such Asset Pool
Shortfall Amount shall have been fully repaid to such other Asset Pools;
18
<PAGE>
(j) TENTH, to the Borrower, an amount equal to the Asset Pool Equity
Contribution made by the Borrower with respect to such Asset Pool, until
such Asset Pool Equity Contribution shall have been repaid in full;
(k) ELEVENTH, to the Lender, its Contingent Payment for such Asset
Pool; and
(l) TWELFTH, to the Borrower, the remainder of the Asset Pool Proceeds
for such Asset Pool.
SECTION 2.9 ASSET POOL SHORTFALLS. If (a) as of the last day of any
Test Period (excluding the two (2) Test Periods immediately following the
Borrowing Date for the Loan related to such Asset Pool) for a given Asset Pool,
the Asset Pool Proceeds received and disbursed pursuant to SECTION 2.8 through
such date with respect to an Asset Pool are less than eighty-five percent (85%)
of the projected Asset Pool Proceeds to be received and disbursed pursuant to
SECTION 2.8 through such date (as set forth in the bid package submitted by the
Borrower as a part of the Borrowing Request for such Asset Pool), or (b) a Loan,
and all accrued interest thereon, is not paid in full on or before its Loan
Maturity Date, or (c) an Event of Default exists and has not been waived in
writing by the Lender, and the Lender determines that, in its judgment, the
remaining Asset Pool Proceeds which the Lender projects will be received with
respect to a given Asset Pool and applied to the related Loan will be
insufficient to repay such related Loan, and all accrued interest thereon, on or
before the applicable Loan Maturity Date; then, in the case of (a), (b) or (c)
above, upon written notice from the Lender to the Borrower and the Servicer, the
amount of any shortfall of Asset Pool Proceeds from the projected Asset Pool
Proceeds to be received and disbursed pursuant to SECTION 2.8 through such date
pursuant to (a), or the unpaid amount of the Loan, and all accrued interest
thereon, pursuant to (b), or the shortfall estimated by the Lender in its
discretion in the case of (c) (each herein, an "ASSET POOL SHORTFALL AMOUNT")
shall be paid, as provided in SECTION 2.8(H), from Asset Pool Proceeds collected
with respect to one or more other Asset Pools designated by the Lender, in its
sole and absolute discretion, for such period of time, as the Lender, in its
sole and absolute discretion, shall require, but in no event longer than the
continuing existence of such Asset Pool Shortfall Amount. Nothing in this
SECTION 2.9 shall be deemed to limit or restrict the rights and remedies
available to the Lender as a result of the occurrence of a Default or Event of
Default under this Agreement or as a result of a Termination Event under the
Servicing Agreement.
ARTICLE III
COLLATERAL FOR LOANS; CUSTODY, SERVICING AND COLLECTIONS
SECTION 3.1 PLEDGE OF ASSET POOL COLLATERAL. To secure the due and
prompt payment of each Loan, together with all interest thereon and Contingent
Payments payable in connection therewith, and all other obligations of the
Borrower to the Lender arising hereunder or under any other Loan Document in
connection with an Asset Pool, the Borrower shall grant to the Lender a first
19
<PAGE>
and prior security interest in, lien on and pledge of all assets of the
Borrower, including all right, title, claim and interest of the Borrower in and
to all Assets of or related to each and every Asset Pool, of any kind, nature or
description, whether now owned or hereafter acquired, wherever located,
howsoever arising or created and whether now existing or hereafter arising,
including without limitation each and every Account and any and all liens,
claims and property securing payment of the indebtedness evidenced by such
Account (if any), and all property realized, collected or obtained in connection
with or as a result of collections made on account of any Account, and any and
all Asset Pool Proceeds paid or received with respect to any Asset Pool, whether
deposited to or held in the Servicer's Collection Account, the Collateral
Account or otherwise, and all rights of the Borrower under each and every
Purchase Agreement related to an Asset Pool, together with such additional
property of the Borrower as is set forth and described in, and pursuant to the
terms and conditions of, the Security Agreement, as the same may be amended and
supplemented from time to time (herein the "LOAN COLLATERAL").
SECTION 3.2 PERFECTION OF SECURITY INTERESTS IN PERSONAL PROPERTY
COLLATERAL. The Borrower agrees to deliver to the Lender (or its designated
custodial agent), at any time upon the Lender's request, each promissory note,
chattel paper, installment sales agreement or other instrument with respect to
which perfection may be obtained by possession, and shall execute such financing
statements, together with any and all other instruments, assignments or
documents and take such other actions as may be required, to perfect and to
continue the perfection of the Lender's security interest in all Loan
Collateral. Notwithstanding the foregoing, so long as no Event of Default
exists, the Lender shall permit the Servicer, as agent for the Lender (for the
sole purpose of perfecting the Lender's security interest in Re-Write Notes) to
retain possession of Re-Write Notes subject to the following conditions: (a)
each such Re-Write Note in the possession of the Servicer shall have an original
allonge endorsement in the form of EXHIBIT C firmly affixed thereto, executed by
the Borrower in favor of the Lender, and (b) the aggregate face amount of all
Re-Write Notes in the possession of the Servicer shall not at any time exceed
two percent (2%) of the aggregate original face amount of all Assets in all
Asset Pools.
SECTION 3.3 SERVICING OF ASSET POOLS. The Borrower has engaged the
Servicer to manage, service, administer, make collections and pursue enforcement
proceedings with respect to each Asset in accordance with the provisions of the
Servicing Agreement. The Borrower shall perform all of its obligations under the
Servicing Agreement. Pursuant to the terms of the Servicing Agreement,
immediately upon the occurrence of a Termination Event, the Lender, in its sole
discretion and without any notice to or consent from the Borrower, may (i)
terminate the Servicer then acting in such capacity under the Servicing
Agreement, (ii) appoint a replacement servicer acceptable to the Lender, (iii)
enter into a replacement servicing agreement with such replacement servicer
which replacement servicing agreement shall contain such terms and conditions,
including as to the servicing fee which shall be payable to such replacement
servicer, as shall be acceptable to the Lender in its reasonable discretion,
including, without limitation, a confidentiality provision in substantially the
form of SECTION 9.16 of this Agreement, and/or (iv) make payments of the
servicing fee to such replacement servicer in the order of priority specified in
SECTION 2.8 of this Agreement for payments of the Servicing Fee to the Servicer.
20
<PAGE>
SECTION 3.4 AUTHORITY TO SETTLE OR SELL LOAN COLLATERAL. The Borrower
shall not, and the Servicer shall be instructed not to, compromise, sell, settle
or accept a Re-Write Note with respect to any Asset for an amount which, when
added to the prior Asset Pool Proceeds with respect to such Asset, is less than
three (3) times (in terms of the % of unpaid balance) the purchase price paid by
the Borrower for such Asset (herein, with respect to each Asset, the "PERMITTED
RELEASE VALUE"); PROVIDED, HOWEVER, notwithstanding the foregoing, with respect
to any Bankrupt Account, without the consent of the Lender, the Borrower may,
and the Borrower may instruct the Servicer to, sell such Bankrupt Account to a
third party who is not an Affiliated Party in an arm's length transaction for a
minimum sales price of 7.5% of the face amount of such Bankrupt Account (each
such sale is herein called a "PERMITTED SALE OF A BANKRUPT ACCOUNT"). If an
amount proposed for compromise, settlement, sale (other than a Permitted Sale of
a Bankrupt Account) or acceptance of a Re-Write Note with respect to any Asset
is in excess of the Permitted Release Value established for such Asset, the
Servicer may proceed without the consent of the Lender to compromise, sell,
settle or accept a Re-Write Note for such Asset for such higher amount.
Notwithstanding the foregoing, without first obtaining the Lender's prior
written consent, the Borrower shall not agree to any sale (other than a
Permitted Sale of a Bankrupt Account), assignment or other transfer involving
Accounts from more than one (1) Obligor (a "BULK TRANSFER"). In the event that
the Borrower wishes to request Lender to consent to a Bulk Transfer, the
Borrower shall deliver to the Lender no later than ten (10) Business Days
preceding the proposed date of such Bulk Transfer, a Bulk Transfer Consent
Request in substantially the form of EXHIBIT D attached hereto (a "BULK TRANSFER
CONSENT REQUEST"). The Lender shall provide its written consent or withhold its
written consent within five (5) Business Days of receipt of such Bulk Transfer
Consent Request. The Lender's failure to provide to the Borrower its written
consent to a Bulk Transfer Consent Request shall be deemed a withholding of the
Lender's written consent. In the event the Lender provides its written consent
to a Bulk Transfer of Accounts, the Servicer will be paid a sales fee not to
exceed the actual out-of-pocket servicing and sale expenses incurred by the
Servicer (and approved by the Lender) in connection with such Bulk Sale in lieu
of the applicable Servicing Fee. Any Bulk Transfer of Accounts to which Lender
has provided its written consent or any Permitted Sale of a Bankrupt Account is
sometimes referred to as a "PERMITTED SALE". Upon deposit into the Collateral
Account of the Asset Pool Proceeds generated from a Permitted Sale or upon
receipt by the Collateral Agent for deposit into the Collateral Account of
immediately available funds representing the Asset Pool Proceeds generated from
a Permitted Sale, such Permitted Sale shall be free and clear of any lien or
security interest of the Lender, and the Lender, upon request of the Borrower,
shall execute and deliver to the Servicer UCC releases prepared by the Servicer,
in form and content acceptable to the Lender, with respect to the Accounts sold
or transferred pursuant to such Permitted Sale. Upon request of the Borrower,
the Lender shall provide prior to the closing of a Permitted Sale a "payment
letter" in form and content acceptable to the Lender which will provide that,
among other things, upon receipt by the Collateral Agent for deposit into the
Collateral Account of immediately available funds by the date and in the amount
21
<PAGE>
specified in such "payment letter", the Lender shall execute and deliver UCC
releases prepared by the Servicer, in form and content acceptable to the Lender,
with respect to the Accounts sold or transferred pursuant to such Permitted
Sale.
SECTION 3.5 EXCHANGE OF ASSETS WITH ASSET POOL SELLERS. In the event
that the Borrower shall exchange or return Assets with any Asset Pool Seller,
the Borrower shall promptly notify the Lender of such exchange or return and
shall provide such information with respect to such exchange or return as Lender
shall reasonably require. The Servicer shall not be entitled to any Servicing
Fee with respect to any such exchange or return. Any Asset so exchanged shall
become and thereafter be an Asset of the Asset Pool from which the exchange was
made.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1 CONDITIONS PRECEDENT TO THIS AGREEMENT BECOMING EFFECTIVE.
This Agreement shall become effective upon the Lender's receipt of each of the
following, dated as of the Closing Date, and in form and substance satisfactory
to the Lender:
(a) This Credit Agreement, properly executed on behalf of the
Borrower.
(b) The Security Agreement, properly executed on behalf of the
Borrower.
(c) The Collateral Account Agreement, properly executed on behalf of
the Collateral Agent, the Borrower, the Servicer and the Lender.
(d) The Servicing Agreement, properly executed on behalf of the
Servicer, the Borrower and the Lender.
(e) The Exclusivity Agreement executed on behalf of all parties
thereto.
(f) The Warrant Documents, properly executed on behalf of MCM Capital
Group and the Lender.
(g) Current searches of the appropriate records of the Secretaries of
State for California, Arizona and Delaware and the Official Records of San
Diego, California, showing that (i) no state or federal tax liens have been
filed and remain in effect against the Borrower or the Servicer, (ii) no
financing statements or other notifications or filings have been filed and
remain in effect against the Borrower or against the Servicer's Collection
Account or Asset Proceeds therein, other than those for which the Lender
has received an appropriate release, termination or satisfaction or those
permitted in accordance with SECTION 7.1.
22
<PAGE>
(h) Certified copies of the resolutions of the board of directors of
the Borrower, evidencing approval of all Loan Documents to which the
Borrower is a party and the other matters contemplated thereby.
(i) Certified copies of the resolutions of the board of directors of
the Servicer, evidencing approval of all Loan Documents to which the
Servicer is a party and the other matters contemplated thereby.
(j) Certified copies of the resolutions of the board of directors of
MCM Capital Group, evidencing approval of all Loan Documents and Warrant
Documents to which MCM Capital Group is a party and the other matters
contemplated thereby.
(k) Copies of the articles of incorporation and bylaws of the
Borrower, the Servicer and MCM Capital Group, respectively, certified by
the secretary or assistant secretary of the Borrower, Servicer or MCM
Capital Group, respectively, as being a true and correct copy thereof.
(l) Certificates of good standing of the Borrower, the Servicer and
MCM Capital Group, respectively, dated not more than sixty (60) days prior
to the Closing Date, and, if required under the laws of any state, evidence
satisfactory to the Lender that each of the Borrower, the Servicer and MCM
Capital Group, respectively, is qualified to conduct its business in each
state where it presently conducts such business, if the failure to be so
qualified would have a material adverse effect on its business, operations
or the performance of its obligations under the Loan Documents or Warrant
Documents to which it is a party.
(m) Acknowledgment copies of effective financing statements filed on
or prior to the Closing Date, naming the Lender as secured party and the
Borrower, as debtor, or such other similar instruments or documents as may
be necessary or, in the opinion of the Lender, desirable under the UCC or
any comparable law of all appropriate jurisdictions.
(n) A signed copy of a certificate of the secretary or assistant
secretary of the Borrower which shall certify the names of the officers of
the Borrower authorized to sign the Loan Documents to which the Borrower is
a party and the other documents or certificates to be delivered pursuant to
this Agreement by the Borrower, including Borrowing Requests, together with
the true signatures of such officers. The Lender may conclusively rely on
such certificate until it shall receive a further certificate of the
secretary or assistant secretary of the Borrower canceling or amending the
prior certificate and submitting the signatures of the members named in
such further certificate.
23
<PAGE>
(o) A signed copy of a certificate of the secretary or assistant
secretary of the Servicer which shall certify the names of the officers of
the Servicer authorized to sign the Loan Documents to which the Servicer is
a party and the other documents or certificates to be delivered pursuant
thereto by the Servicer or any of its officers, together with true
signatures of such officers. The Lender may conclusively rely on such
certificate until it shall receive a further certificate of the secretary
or assistant secretary of the Servicer canceling or amending the prior
certificate and submitting the signatures of the officers named in such
further certificate.
(p) A signed copy of a certificate of the secretary or assistant
secretary of MCM Capital Group which shall certify the names of the
officers of MCM Capital Group authorized to sign the Loan Documents and the
Warrant Documents to which MCM Capital Group is a party and the other
documents or certificates to be delivered pursuant thereto by MCM Capital
Group or any of its officers, together with true signatures of such
officers. The Lender may conclusively rely on such certificate until it
shall receive a further certificate of the secretary or assistant secretary
of MCM Capital Group canceling or amending the prior certificate and
submitting the signatures of the officers named in such further
certificate.
(q) A signed copy of an opinion of counsel for the Borrower, the
Servicer and MCM Capital Group, addressed to the Lender, in form and
content acceptable to the Lender.
(r) Evidence of all insurance required to be maintained by the
Servicer under the provisions of the Servicing Agreement.
(s) Consolidated financial statements for MCM Capital Group and its
Subsidiaries, including, without limitation, the Servicer, for the period
ended September 30, 2000.
(t) Such other items as shall be requested by the Lender.
Following the Lender's determination that each of the conditions precedent set
forth in this SECTION 4.1 have been satisfied, the Lender shall deliver a letter
confirming the satisfaction of the conditions precedent set forth in SECTION
4.1.
SECTION 4.2 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the
Lender to make each Loan shall be subject to the further conditions precedent
that the Lender shall have issued an Accepted Borrowing Request with respect
thereto and shall have received, on or before the applicable Borrowing Date for
such Loan, except as may be modified in the Accepted Borrowing Request, each of
the following with respect to such Loan, in form and substance satisfactory to
the Lender:
24
<PAGE>
(a) A copy of the Purchase Agreement for the related Asset Pool,
properly executed on behalf of the Borrower and the Asset Pool Seller,
pursuant to which the Asset Pool Seller shall have agreed to transfer all
Assets constituting a part of such Asset Pool to the Borrower, effective as
of the Borrowing Date, free and clear of all liens, claims and encumbrances
except those disclosed in the related Purchase Agreement, together with a
copy of (i) any transfer or assignment documents required pursuant to the
Purchase Agreement, (ii) the UCC-1 Financing Statement executed by the
Asset Pool Seller, as debtor, in favor of the Borrower, as secured party,
with an adequate description of the Assets contained in the Asset Pool
being acquired and (iii) the written instruction executed by the Asset Pool
Seller which sets forth the wiring instructions for such Asset Pool Seller.
(b) A Note dated as of the Borrowing Date in the principal amount of
the related Loan, properly completed and executed by the Borrower.
(c) Receipt by the Lender of the Borrower's Asset Pool Equity
Contribution with respect to the related Asset Pool, net of any Purchase
Expenses paid or incurred by the Borrower in connection with consummation
of the Borrower's purchase of such Asset Pool.
(d) A duplicate copy of the computer disk containing information
regarding the Accounts being purchased by the Borrower, as provided by the
Asset Pool Seller pursuant to the Purchase Agreement.
(e) Such evidence as the Lender may reasonably request to verify the
Total Cost of the Asset Pool.
SECTION 4.3 REPRESENTATIONS AND WARRANTIES UPON MAKING A LOAN. The
obligation of the Lender to make each Loan shall be subject to the further
condition precedent that on the Borrowing Date the following statements shall be
true and accurate in all material respects and the Borrower, by requesting such
Loan shall be deemed to have represented and certified that:
(a) The representations, warranties and covenants of the Borrower set
forth in ARTICLE V are true and correct on and as of such date as though
made on such date and shall be deemed to have been made on such date,
except to the extent that any such representations, warranties and
covenants pursuant to their terms relate solely to an earlier date.
(b) No event has occurred and is continuing, or would result from the
making of such Loan, which constitutes a Default or an Event of Default.
(c) Upon payment of the purchase price specified in the related
Purchase Agreement to the Asset Pool Seller and consummation of the
purchase contemplated in such Purchase Agreement, the Borrower will have
25
<PAGE>
good title to all Accounts being transferred thereunder free and clear of
all liens, claims and other interests other than the liens granted to the
Lender as contemplated herein and other than as provided in such Purchase
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as of the date
hereof and as of each Borrowing Date as follows:
SECTION 5.1 EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE OFFICE. The
Borrower is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and is duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by it makes such licensing or
qualification necessary and where failure to obtain such licensing or
qualification would have a material adverse effect on the Borrower or its
ability to perform its obligations hereunder. The Borrower has all requisite
power and authority, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents. Within the last twelve (12) months, the Borrower has done business
only under its name as specified herein. As of the Closing Date, the chief
executive office and principal place of business of the Borrower is located at
the address set forth in SECTION 9.4, and all of the Borrower's records relating
to its businesses are kept at that location. The Borrower will not change its
chief executive office or principal place of business without sixty (60) days
prior written notice to the Lender. The Borrower's federal employer
identification number is ____________.
SECTION 5.2 AUTHORIZATION FOR BORROWINGS; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents, and Loans from time to time obtained hereunder, have been duly
authorized by all necessary legal action and do not and will not (a) require any
consent or approval which has not been obtained prior to the Closing Date, (b)
require any authorization, consent or approval by, or registration, declaration
or filing with, or notice to, any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any third party,
except such authorization, consent, approval, registration, declaration, filing
or notice as has been obtained, accomplished or given prior to the date hereof,
(c) violate any provision of any material law, rule or regulation or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the articles of incorporation or bylaws of the Borrower, (d)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected, or (e) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned or hereafter acquired by the Borrower.
26
<PAGE>
SECTION 5.3 LEGAL AGREEMENTS. The Loan Documents constitute, and the
Notes, when and as executed and delivered, will constitute, the legal, valid and
binding obligations and agreements of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law).
SECTION 5.4 INCORPORATION AND SUBSIDIARIES. The Borrower was
incorporated on December 12, 2000 and has no Subsidiaries.
SECTION 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender the consolidated financial statements of MCM
Capital Group and its Subsidiaries, including the Servicer, as of September 30,
2000. Such financial statements fairly present the financial condition of MCM
Capital Group and its Subsidiaries, including the Servicer as of September 30,
2000, and the results of their respective operations and cash flows for the
periods then ended and were prepared in accordance with GAAP. From September 30,
2000 through the Closing Date, there has been no material adverse change in the
business, properties or condition (financial or otherwise) of MCM Capital Group
and its Subsidiaries, including the Servicer.
SECTION 5.6 LITIGATION. As of the Closing Date, there are no actions,
suits or proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting MCM Capital Group and its Subsidiaries, including the
Borrower and the Servicer, or the properties of MCM Capital Group and its
Subsidiaries, including the Borrower and the Servicer, before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if determined adversely to MCM Capital Group and its
Subsidiaries, including the Borrower and the Servicer, could have a material
adverse effect on the financial condition, properties or operations of MCM
Capital Group and its Subsidiaries.
SECTION 5.7 TAXES. The Borrower has paid or caused to be paid to the
proper authorities when due all federal, state and local taxes required to be
withheld by it (other than any taxes which are being contested in good faith and
by proper proceedings and for which the Borrower shall have set aside on its
books adequate reserves therefor). The Borrower has filed all federal, state and
local tax returns which to the knowledge of the officers of the Borrower, are
required to be filed, and the Borrower has paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by it to the extent such taxes have become due (other than
any taxes which are being contested in good faith and by proper proceedings and
for which the Borrower shall have set aside on its books adequate reserves
therefor).
27
<PAGE>
SECTION 5.8 TITLE AND LIENS. The Borrower has good and marketable
title to all Loan Collateral (or will have good and marketable title to all Loan
Collateral on the date of purchase of such Loan Collateral), free and clear of
all mortgages, security interests, liens and encumbrances, except for covenants,
restrictions, rights, easements and minor irregularities in title which do not
materially interfere with the business or operations of the Borrower as
presently conducted and except as provided in the applicable Purchase
Agreements. In addition, no financing statement naming the Borrower as debtor is
on file in any office except only to perfect security interests permitted by
SECTION 7.1 and except with respect to Assets which have been sold pursuant to
the provisions of SECTION 3.4 of this Agreement.
SECTION 5.9 PLANS. The Borrower does not maintain and has not in the
past maintained any Plan. The Borrower has not received any notice or has any
knowledge to the effect that it is not in full compliance with any of the
requirements of ERISA. No Reportable Event or other fact or circumstance which
may have an adverse effect on the Plan's tax qualified status exists in
connection with any Plan. The Borrower does not have:
(a) any accumulated funding deficiency within the meaning of ERISA; or
(b) any liability or know of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which are or which
may become payable to participants or beneficiaries of any such Plan).
SECTION 5.10 DEFAULT. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the financial condition,
properties or operations of the Borrower.
SECTION 5.11 SUBMISSIONS TO LENDER. All financial and other
information regarding the Borrower, the Servicer, MCM Capital Group and its
Subsidiaries provided to the Lender (including, but not limited to the completed
background questionnaires) by or on behalf of the Borrower or the Servicer in
connection with the Borrower's request for any Loan and the credit facilities
contemplated hereby is true and correct in all material respects and, as to
projections, valuations or pro forma financial statements for the Borrower, the
Servicer or MCM Capital Group and its Subsidiaries, or any Asset Pool, present a
good faith opinion as to such projections, valuations and pro forma condition
and results. The foregoing information regarding the Borrower, the Servicer, MCM
Capital Group and its Subsidiaries which has been provided to the Lender
contains no omissions which would cause such information to be materially
misleading. All information provided to the Lender with respect to the Assets,
the Asset Pools, the Asset Pool Proceeds and related matters by or on behalf of
the Borrower or the Servicer is, to the knowledge of the Borrower, true and
correct in all material respects and, to the knowledge of the Borrower, does not
contain any omissions which would cause such information to be materially
misleading.
28
<PAGE>
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as any principal or interest evidenced by any Note, any
Contingent Payment or any Loan Costs under the Loan Documents shall remain
unpaid or outstanding or so long as the Exclusivity Period shall continue,
whichever shall be later, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
SECTION 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail reasonably acceptable to the Lender:
(a) As soon as available, and in any event within one hundred twenty
(120) days after the end of each fiscal year of MCM Capital Group, a copy
of the annual audit report of MCM Capital Group and its Subsidiaries,
including, without limitation, the Borrower and the Servicer, with the
opinion of their respective certified public accountants (which opinion
shall not contain any "going concern" qualification as to MCM Capital Group
or the Servicer and which shall not contain any other qualification as to
the Loan Collateral, the Borrower or as to the ability of MCM Capital Group
or the Servicer to perform any of its respective obligations under any Loan
Document to which it is a party), which annual report shall include the
consolidated balance sheets and the consolidated statements of earnings,
shareholder's equity and cash flows for the fiscal year then ended for MCM
Capital Group and its Subsidiaries, all in reasonable detail and all
prepared in accordance with GAAP, applied on a consistent basis, together
with (i) internally prepared consolidating balance sheets and consolidating
statements of earnings, shareholder's equity and cash flows for the fiscal
year then ended for the Borrower and the Servicer, all in reasonable detail
and all prepared in accordance with GAAP, applied on a consistent basis,
and (ii) a certificate of the chief financial officer of, and on behalf of,
the MCM Capital Group stating that such financial statements are true and
accurate in all material respects.
(b) As soon as available and in any event within sixty (60) days after
the end of each of the first three quarters of each fiscal year of MCM
Capital Group, a copy of the interim unaudited financial statements of MCM
Capital Group and its Subsidiaries, including, without limitation, the
Borrower and the Servicer, which financial statements shall include the
consolidated balance sheets and the consolidated statements of earnings,
shareholder's equity and cash flows as of the end of such quarter for MCM
29
<PAGE>
Capital Group and its Subsidiaries, and the consolidating balance sheets
and the consolidating statements of earnings, shareholder's equity and cash
flows as of the end of such quarter for the Borrower and the Servicer, all
in reasonable detail and stating in comparative form the figures for the
corresponding date and period in the previous fiscal year, all prepared in
accordance with GAAP, applied on a consistent basis (provided that so long
as MCM Capital Group is a reporting company, delivery of the Form 10Q filed
by MCM Capital Group with respect to a fiscal quarter shall satisfy the
requirement for quarterly consolidated financial statements under this
section), together with a certificate of the chief financial officer of,
and on behalf of, MCM Capital Group stating that such financial statements
(or Form 10Q), subject to year-end audit adjustments, are true and accurate
in all material respects.
(c) As soon as available and in any event within twenty (20) days
after the end of such quarter of each calendar year, actual and projected
collections and the expected internal rate of return for each Asset Pool
(the IRR Model).
(d) As soon as available and in any event within fifteen (15) days
after the end of each Test Period, a report which sets forth as of the end
of such Test Period all Asset Pool Proceeds collected and distributed
pursuant to SECTION 2.8 through the end of such Test Period for the Asset
Pools (for each Asset Pool separately and for all Asset Pools combined) and
the Asset Pool Proceeds projected by the Borrower to be collected and
distributed pursuant to SECTION 2.8 through the end of such Test Period for
such Asset Pools (for each Asset Pool separately and for all Asset Pools
combined) in the bid packages submitted by the Borrower as a part of the
Accepted Borrowing Requests for such Asset Pools (the "TEST REPORT").
(e) Not later than 3:00 p.m., Minneapolis, Minnesota time, two (2)
Business Days immediately preceding each Distribution Date, (i) a
Distribution Report for the applicable Distribution Period setting forth by
Asset Pool, the Asset Pool Proceeds, outstanding balance of the Loans, if
any, and other relevant information to determine the use and application of
the Asset Pool Proceeds deposited to the Collateral Account during the
Distribution Period immediately preceding such Distribution Date, (ii) a
cash receipts report by Asset, (iii) a wire transfer report (stating wire
transfer instructions and amounts), and (iv) such other reports as the
Lender shall reasonably require regarding the Asset Pools or the Asset Pool
Proceeds.
(f) As soon as available and in any event within twenty (20) days
after the end of each calendar month, (i) a bank reconciliation statement
for the Collateral Account and the Servicer's Collection Account, (ii) an
Asset detail report (including all Asset related information), (iii) the
current unpaid acquisition balance of the Assets (by product type) for each
Asset Pool, (iv) the current unpaid acquisition balance of the Assets (by
geographic state) for each Asset Pool, (v) a summarized status report
(summary information by status code for each Asset Pool), (vi) a summarized
asset pool report (summary information by Asset Pool), (vii) a computer
30
<PAGE>
diskette or tape with all information necessary to enable the Lender to
perform all of the Servicer's servicing obligations under the Servicing
Agreement, together with all data and data field information necessary to
enable the Lender or a replacement servicer to maintain a continuous
availability to perform the servicing obligations of the Servicer under the
Servicing Agreement, (viii) a report showing the aggregate face amount of
all Re-Write Notes in the possession of the Servicer and showing such face
amount as a percentage of the aggregate original face amount of all Assets
in all Asset Pools, and (ix) such other reports as the Lender shall
reasonably require regarding the Asset Pools or the Asset Pool Proceeds.
(g) As promptly as practicable (but in any event not later than five
(5) Business Days) after an officer of the Borrower obtains knowledge of
the occurrence of any breach or default by the Borrower in the performance
of any of its obligations under any Loan Document to which the Borrower is
a party, any breach or default by the Servicer in the performance of any of
its obligations under any Loan Documents to which the Servicer is a party
or any breach or default by MCM Capital Group of any of its obligations
under any Loan Documents to which MCM Capital Group is a party, notice of
such occurrence, together with a detailed statement by a responsible
officer of the Borrower, the Servicer or MCM Capital Group, as applicable,
of the steps being taken to cure the effect of such event.
(h) As soon as available and in any event not later than January 31 of
each year, financial performance projections prepared for MCM Capital Group
and its Subsidiaries for such year and the two (2) following years which
have been approved by the board of directors of MCM Capital Group.
(i) As soon as available and in any event within sixty (60) days after
the end of each of the first three (3) quarters of each fiscal year and
within one hundred and twenty (120) days after the end of each fiscal year
of MCM Capital Group, a written report prepared by the chief financial
officer of MCM Capital Group, which compares the actual financial
performance of MCM Capital Group and its Subsidiaries with the financial
performance projections (as the same may be adjusted by the board of
directors of MCM Capital Group from time to time) delivered to the Lender
pursuant to SECTION 6.1(H) above.
(j) As soon as available and in any event within sixty (60) days after
the end of each quarter of each fiscal year of MCM Capital Group, a written
compliance certificate, in form and detail acceptable to the Lender,
prepared by the chief financial officer of MCM Capital Group, which shall
evidence whether (and the computations as to whether) the Borrower is in
compliance with the requirements of SECTION 6.12 and SECTION 6.13 of this
Agreement as of the end of such quarter.
31
<PAGE>
(k) As promptly as practicable (but in any event not later than five
(5) Business Days) after the Borrower obtains knowledge thereof notice of
any pending or threatened litigation against the Borrower which, if
successful, would likely result in a judgment of $50,000 or more.
(l) As promptly as practicable (but in any event not later than five
(5) Business Days) after the Borrower obtains knowledge thereof, notice of
any pending or threatened litigation against the Servicer or MCM Capital
Group which must be reported in a Form 8K filed by MCM Capital Group or
which, if successful, would likely result in a judgment of $250,000 or
more.
(m) As promptly as practicable (but in any event not later than five
(5) Business Days) after the filing thereof, copies of all financial
reports and other filings of any kind which MCM Capital Group shall file
with the Securities and Exchange Commission or any national securities
exchange.
(n) As promptly as practicable (but in any event not later than five
(5) Business Days) after their distribution, copies of all financial
statements, proxy statements and other communications which MCM Capital
Group shall have distributed to its shareholders.
(o) Such other information respecting any Asset Pool or the financial
condition of the Borrower, the Servicer or MCM Capital Group as the Lender
may from time to time reasonably request.
The Lender acknowledges that certain information provided to it pursuant to this
Agreement, including, without limitation, pursuant to this SECTION 6.1, may
consist of material nonpublic information regarding MCM Capital Group and its
Subsidiaries, and Lender acknowledges and agrees that it is aware (and that any
Person to whom any such information may be disclosed as permitted by this
Agreement has been, or upon receiving such information will be, advised) of the
restrictions imposed by federal and state securities laws on a Person possessing
material nonpublic information regarding an issuer of securities. In the event
the Borrower is required to provide to the Lender material nonpublic information
regarding MCM Capital Group and its Subsidiaries pursuant to this Agreement,
including, without limitation, pursuant to this SECTION 6.1, and to the extent
that applicable federal securities laws, rules and regulations require that the
Lender execute and deliver a confidentiality agreement in connection with its
receipt of such material nonpublic information, upon request of the Borrower,
the Lender will execute and deliver a confidentiality agreement which has been
prepared by the Borrower and which is consistent with the minimum requirements
for confidentiality agreements set forth in such federal securities laws, rules
and regulations. Notwithstanding any other provision in this Agreement, this
paragraph shall survive and continue to be binding against Lender after any
sale, conveyance, assignment or transfer by any such Person of any of the Notes
or the Warrants.
32
<PAGE>
SECTION 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION;
VERIFICATION OF COLLECTION Activity. The Borrower will keep, and will cause the
Servicer and MCM Capital Group to keep, accurate books of record pertaining to
the operations, business and financial condition of the Borrower, the Servicer
or MCM Capital Group, as applicable, and such other matters as the Lender may
from time to time reasonably request with respect to the Asset Pools, the
Borrower, the Servicer or MCM Capital Group, in which true and complete entries
will be made in accordance with GAAP consistently applied and, upon request of
and reasonable notice by the Lender, will permit any officer, employee, attorney
or accountant for the Lender to audit, review, make extracts from or copy any
and all corporate and financial books and records of the Borrower, MCM Capital
Group (reasonably related to the Borrower or the Servicer and the performance
under the Loan Documents) or the Servicer (other than books and records which
relate solely to assets being serviced by the Servicer for Persons other than
the Borrower), at all reasonable times during ordinary business hours, to
discuss the affairs of the Borrower, the Servicer or MCM Capital Group,
including the purchase, servicing, collection or liquidation of the Asset Pools,
with any of its officers, employees or agents and to conduct a review of the
Borrower's and the Servicer's respective books and records with respect to the
purchase, servicing, collection and disposition of the Asset Pools. In
connection with the Lender's exercise of the inspection rights granted to the
Lender pursuant to this SECTION 6.2, the Lender will use reasonable efforts not
to interfere with the preparation by employees and agents of MCM Capital Group
and its Subsidiaries of financial statements or other reports or filings
required by applicable federal securities laws, rules and regulations.
SECTION 6.3 COMPLIANCE WITH LAWS. The Borrower will (a) comply with
the requirements of applicable laws and regulations, the non-compliance with
which would materially and adversely affect its business or its financial
condition, (b) comply with all applicable debt collection laws, regulations,
ordinances and requirements and will obtain any and all licenses, permits and
similar approvals required for the collection or servicing of any Account
constituting a part of an Asset Pool and (c) use and keep its assets, and will
require that others use and keep its assets, only for lawful purposes, without
material violation of any federal, state or local law, statute or ordinance.
SECTION 6.4 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it prior to the date on which forfeiture of any such property may
occur, (b) all federal, state and local taxes required to be withheld by it, and
(c) all lawful claims for labor, materials and supplies which, if unpaid, would
by law become a lien or charge upon any properties of the Borrower; PROVIDED,
HOWEVER, that the Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which the Borrower
has set aside on its books adequate reserves therefor.
33
<PAGE>
SECTION 6.5 MAINTENANCE OF PROPERTIES. The Borrower will keep and
maintain all of its properties necessary or useful in its business in good
condition, repair and working order (normal wear and tear excepted); PROVIDED,
HOWEVER, that nothing in this SECTION 6.5 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties if such
discontinuance is, in the reasonable judgment of the Borrower, desirable in the
conduct of the Borrower's business and not disadvantageous in any material
respect to the Lender.
SECTION 6.6 PRESERVATION OF LEGAL EXISTENCE. The Borrower will
preserve and maintain its legal existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
SECTION 6.7 SPECIAL PURPOSE ENTITY. The Borrower will (a) own no
assets, and not engage in any business, other than the assets and transactions
specifically contemplated by the Loan Documents, (b) not incur any indebtedness
or obligation, secured or unsecured, direct or indirect, absolute or contingent,
other than as contemplated hereby, (c) not make any loans or advances to any
third party (other than Assets), and shall not acquire obligations or securities
of any Affiliated Party, (d) pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) only from its own assets,
(e) do all things necessary under applicable law and its organizational
documents to observe organizational formalities and to preserve its existence,
and will not amend, modify or otherwise change its articles of incorporation or
bylaws, or suffer the same to be amended, modified or otherwise changed, without
the prior written consent of the Lender, which consent shall not be unreasonably
withheld, (f) maintain all of its books, records, financial statements and bank
accounts separate from those of any Affiliated Parties, (g) be, and at all times
will hold itself out to the public as, a legal entity separate and distinct from
any other entity (including any Affiliated Party), correct any known
misunderstanding regarding its status as a separate entity, conduct business in
its own name, not identify itself or any Affiliated Party as a division or part
of the other and maintain and utilize separate stationary, invoices and checks,
(h) maintain adequate capital for the normal obligations reasonably foreseeable
in a business of its size and character and in light of its contemplated
business operations, (i) not engage in or suffer any dissolution, winding-up,
liquidation, consolidation or merger in whole or in part, (j) except to the
extent permitted in SECTION 2.7, not commingle its funds or other assets with
those of any Affiliated Party or any other Person, (k) maintain its assets in
such a manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any Affiliated Party or any other
Person, (l) not and will not hold itself out to be responsible for the debts or
obligations of any other Person and (m) be formed and organized solely for the
purpose of holding, directly or indirectly, the Assets and not hold or own any
assets other than the Assets, Asset Proceeds and assets related thereto.
SECTION 6.8 INSURANCE. The Borrower will use reasonable efforts to
require, pursuant to the Servicing Agreement, that the Servicer maintains all
insurance coverages required under SECTION 2.10 of the Servicing Agreement and
that the Borrower and the Lender are named beneficiaries of each such policy.
34
<PAGE>
SECTION 6.9 ARMS-LENGTH TRANSACTIONS. The Borrower will conduct, and
will use best efforts to require, pursuant to the Servicing Agreement, the
Servicer to conduct, all collection activities and all sales, transfers and
dispositions relating to the Assets on an arms-length basis and so as to cause
all collections and all consideration received (net of Permitted Third-Party
Costs and Permitted Thirty-Party Fees retained by Permitted Third Parties out of
collections received by such Permitted Third Parties) upon the sale, transfer or
disposition of an Asset to (i) become and constitute Asset Pool Proceeds, and
(ii) be distributed as Asset Pool Proceeds in accordance with SECTION 2.8 of
this Agreement.
SECTION 6.10 PURCHASE AGREEMENTS. The Borrower will comply with each
of its obligations under each of its Purchase Agreements.
SECTION 6.11 RIGHT OF LENDER TO PLACE A SAMPLING OF ASSETS WITH
INDEPENDENT SERVICER. In accordance with the terms and conditions set forth and
described in SECTION 2.11 of the Servicing Agreement, the Borrower will permit
the Lender to select certain Assets for placement for servicing with an
independent third-party servicer.
SECTION 6.12 CONSOLIDATED NET WORTH. The Borrower shall cause MCM
Capital Group to maintain at all times a consolidated net worth of not less than
$7,000,000.
SECTION 6.13 POSITIVE CASH FLOW. The Borrower shall cause MCM Capital
Group to have a positive consolidated cash flow for each fiscal quarter of MCM
Capital Group, commencing with the fiscal quarter of MCM Capital Group ending on
December 31, 2000. As used in this SECTION 6.13, the term "cash flow" means,
with respect to the applicable period of determination, total cash collections,
less direct cash collection expenses, and less all other cash operating costs,
including cash general and administrative overhead expenses.
SECTION 6.14 EMPLOYMENT OF CHIEF FINANCIAL OFFICER. On or before March
1, 2001, the Borrower shall have caused MCM Capital Group to employ a chief
financial officer.
35
<PAGE>
ARTICLE VII
NEGATIVE COVENANTS
So long as any principal or interest evidenced by any Note, any
Contingent Payment or any Loan Costs under the Loan Documents shall remain
unpaid or outstanding or so long as the Exclusivity Period shall continue,
whichever shall be later, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
SECTION 7.1 LIENS. The Borrower will not create, incur or suffer to
exist any pledge, lien, security interest, assignment or transfer upon or of any
of its assets, including, without limitation, the Loan Collateral, now owned or
hereafter acquired, or assign or otherwise convey any right to receive
collections or other income with respect thereto, except for the liens and
security interests created in favor of the Lender under the Security Agreement
and except as provided in the applicable Purchase Agreements.
SECTION 7.2 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. Except as otherwise permitted in accordance with SECTION 3.4, the
Borrower will not sell, lease, assign, transfer or otherwise dispose of all or
any part of its assets (whether in one transaction or in a series of
transactions) to any other Person, and will not liquidate, dissolve or suspend
its business operations.
SECTION 7.3 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.
SECTION 7.4 ACCOUNTING. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
SECTION 7.5 MODIFICATION OR TERMINATION OF AGREEMENTS. The Borrower
will not terminate, amend or modify any of the Loan Documents without the prior
written consent of the Lender.
SECTION 7.6 NO COMMISSIONS OR REBATES ON DISPOSITIONS OR COLLECTIONS.
The Borrower will not accept or receive or agree to accept or receive, nor allow
the Servicer or any other Affiliated Party to accept or receive or agree to
accept or receive, any rebate, refund, commission, fee (other than the Servicing
Fee), kickback or rakeoff, whether cash or otherwise and whether paid by or
originating with the Obligor or any other party (including but not limited to
brokers and agents), as a result of or in any way in connection with collection
activities related to any asset or in connection with the sale, disposition,
transfer or servicing of any Asset constituting a part of an Asset Pool.
36
<PAGE>
SECTION 7.7 DIVIDENDS AND DISTRIBUTIONS. The Borrower will not declare
or pay any dividend or other distribution in respect of any stock of the
Borrower, or directly or indirectly apply any assets of the Borrower to the
redemption, retirement, purchase or other acquisition of any stock of the
Borrower; PROVIDED, HOWEVER, (i) so long as no Default or Event of Default shall
exist, the Borrower may declare and pay dividends in respect of stock of the
Borrower to the extent that such dividends have been declared and paid in
compliance with all applicable laws, and (ii) if one or more Defaults or Events
of Default shall exist and shall not have been waived in writing by the Lender,
the Borrower may declare and pay a dividend in respect of stock of the Borrower
only if (A) all or a part of such dividend is used to cure, and does in fact
cure, all existing Defaults and Events of Default and (B) such dividend is
declared and paid in compliance with all applicable laws.
ARTICLE VIII
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 8.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) default in the payment of any interest on or principal of any Note
when and as required in SECTIONS 2.5 or 2.8; or
(b) default in the payment of the entire remaining principal balance
of any Note, and all accrued interest thereon, on the Loan Maturity Date
for such Note, unless the Lender, in its sole and absolute discretion,
determines that it is likely that the entire remaining principal balance of
such Note, and all accrued interest thereon, will be paid in full within
ninety (90) days after such Loan Maturity Date as a result of the
application of the provisions of SECTION 2.9; or
(c) default in the payment of the entire remaining principal balance
of any Note, and all accrued interest thereon, within ninety (90) days
after such Loan Maturity Date for each Note; or
(d) default in the payment of any Contingent Payment or any other
fees, costs or expenses required to be paid by the Borrower under this
Agreement when and as required in SECTION 2.8 or any other Loan Document;
or
(e) default in the performance, or breach, of any covenant or
agreement of the Borrower in this Agreement (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and the continuance of such default
or breach for a period of fifteen (15) calendar days after the Lender has
given to the Borrower a written notice specifying such default or breach
and requiring it to be remedied; or
37
<PAGE>
(f) the Borrower, the Servicer or MCM Capital Group shall be or become
insolvent, or admit in writing its inability to pay its debts as they
mature, or make a general assignment for the benefit of creditors; or the
Borrower, the Servicer or MCM Capital Group shall apply for or consent to
the appointment of any receiver, trustee, or similar officer for it or for
all or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of
the Borrower, the Servicer or MCM Capital Group and shall not be discharged
within sixty (60) days of appointment; or the Borrower, the Servicer or MCM
Capital Group shall institute (by petition, application, answer, consent or
otherwise) any insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it under
the laws of any jurisdiction; or any such proceeding shall be instituted
(by petition, application or otherwise) against the Borrower, the Servicer
or MCM Capital Group; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower, the Servicer or MCM
Capital Group and such shall remain unstayed or undismissed for sixty (60)
days; or
(g) a voluntary petition naming the Borrower, the Servicer or MCM
Capital Group, as debtor, is filed under the United States Bankruptcy Code,
or an involuntary petition naming the Borrower, the Servicer or MCM Capital
Group, as debtor, is filed under the United States Bankruptcy Code and such
involuntary petition shall remain undismissed for sixty (60) days; or
(h) any representation or warranty made by the Borrower in this
Agreement shall prove to have been incorrect in any material respect or any
representation or warranty by the Borrower (or any of its officers) in any
Borrowing Request, or in any other certificate, instrument, or statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement, shall not satisfy the standard applicable to such representation
or warranty as set forth in SECTION 5.11 of this Agreement in any material
respect when made; or
(i) the rendering against the Borrower of a final judgment, decree or
order for the payment of money in excess of $50,000 (unless the payment of
such judgment in excess of $50,000 is fully insured) and such judgment,
decree or order remains unsatisfied and unstayed for more than sixty (60)
days; or
(j) the rendering against the Servicer or MCM Capital Group of a final
judgment, decree or order for the payment of money in excess of $250,000
(unless the payment of such judgment in excess of $250,000 is fully
insured) which materially and adversely affects the ability of the Servicer
or MCM Capital Group to perform its obligations under the Loan Documents to
which it is a party and such judgment, decree or order remains unsatisfied
and unstayed for more than sixty (60) days; or
38
<PAGE>
(k) a default or breach under any other Loan Document (other than the
Servicing Agreement) or a Termination Event under the Servicing Agreement;
or
(l) any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan of MCM Capital
Group, the Borrower or the Servicer or for the appointment by the
appropriate United States District Court of a trustee to administer any
such Plan, shall have occurred and be continuing thirty (30) days after
written notice to such effect shall have been given to the Borrower by the
Lender; or any such Plan shall have been terminated, or a trustee shall
have been appointed by an appropriate United States District Court to
administer any such Plan, or the Pension Benefit Guaranty Corporation shall
have instituted proceedings to terminate any Plan or to appoint a trustee
to administer any such Plan; or
(m) the Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the
ordinary course, or shall sell, assign, transfer or otherwise dispose of
all or any part of its assets (whether in one transaction or in a series of
transactions) other than as permitted in accordance with SECTION 3.4; or
(n) the Servicer or MCM Capital Group shall liquidate, dissolve,
terminate or suspend its business operations or otherwise fail to operate
its business in the ordinary course; or
(o) the Servicer or MCM Capital Group shall sell, lease, assign,
transfer or otherwise dispose of all or a substantial part of its assets
(whether in one transaction or in a series of transactions) which
materially and adversely affects the Loan Collateral or the ability of MCM
Capital Group or the Servicer to perform its obligations under the Loan
Documents to which it is a party; or
(p) the Borrower, the Servicer or MCM Capital Group shall fail to pay,
withhold, collect or remit any tax or tax deficiency when assessed or due
(other than any tax or tax deficiency which is being contested in good
faith and by proper proceedings and for which it shall have set aside on
its books adequate reserves therefor) or notice of any state or federal tax
liens shall be filed or issued (other than with respect to any taxes or tax
deficiencies which are being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor); or
(q) a default under any note, agreement or other evidence of
indebtedness or similar obligation of the Borrower (other than a default
whose breach is elsewhere in this SECTION 8.1 specifically dealt with) or
39
<PAGE>
under any instrument under which such evidence of indebtedness or similar
obligation has been issued or by which it is governed and the expiration of
the applicable period of grace, if any, specified in such evidence of
indebtedness or other instrument; or
(r) a continuing default in the payment of $100,000 or more under any
note, agreement or other evidence of indebtedness or similar obligation of
the Servicer or MCM Capital Group evidencing indebtedness (other than a
default whose breach is elsewhere in this SECTION 8.1 specifically dealt
with) or under any instrument under which such evidence of indebtedness or
similar obligation has been issued or by which it is governed and the
expiration of the applicable period of grace, if any, specified in such
evidence of indebtedness or other instrument; or
(s) a Change of Control shall occur; or
(t) a Change of Key Management shall occur at a time when the
aggregate outstanding principal balance of the Loans is $20,000,000 or more
and one hundred eighty (180) days shall have passed after the occurrence of
such Change of Key Management; PROVIDED, HOWEVER, if a Change of Key
Management involves only Carl C. Gregory III or James Brandon Black (and
not both Carl C. Gregory III and James Brandon Black), then such Change of
Key Management shall not be an Event of Default if, within the
above-described 180-day period, a new officer shall be employed to replace
Carl C. Gregory III or James Brandon Black, as applicable, which new
replacement officer is reasonably acceptable to the Lender; or
(u) a material adverse change shall occur in the financial, business
or operational condition of the Borrower as compared to the status of the
Borrower as of the date of this Agreement; or
(v) a material adverse change shall occur in the financial, business
or operational condition of the Servicer or MCM Capital Group as compared
to the status of the Servicer or MCM Capital Group as of the date of this
Agreement, which material adverse change materially impacts the ability of
the Servicer or MCM Capital Group to perform its obligations under any Loan
Document to which it is a party.
(w) as of the last day of any two (2) consecutive Test Periods
(excluding the two (2) Test Periods immediately following the Borrowing
Date for the initial Loan made under this Agreement), the actual Asset Pool
Proceeds received and distributed pursuant to SECTION 2.8 as of the last
day of such two (2) Test Periods for all Asset Pools (on a combined basis)
is less than eighty-five percent (85%) of the Asset Pool Proceeds projected
to be collected and distributed pursuant to SECTION 2.8 by the Borrower for
such Asset Pools (on a combined basis) as of the last day of such two (2)
Test Periods in the bid packages submitted by the Borrower as a part of the
Accepted Borrowing Requests for such Asset Pools; or
40
<PAGE>
(x) any of the following shall occur: (i) entry of a court order which
enjoins, restrains or in any way prevents the Borrower, the Servicer or MCM
Capital Group from conducting all or any material part of its business
affairs in the ordinary course of business, or (ii) withdrawal or
suspension of any license required for the conduct of any material part of
the business of the Borrower, the Servicer or MCM Capital Group, or (iii)
any asset of the Borrower is subject to an order or writ granting a motion
or action to replevy, sequester, garnish, attach or levy against such
asset, or (iv) any assets of the Servicer or MCM Capital Group having a
fair market value of $500,000 or more in the aggregate are subject to an
order or writ granting a motion or action to replevy, sequester, garnish,
attach or levy against such assets and such order or writ remains
undismissed or unstayed for sixty (60) days.
SECTION 8.2 RIGHTS AND REMEDIES UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT. Upon the occurrence and continuation of an Event of Default or at any
time thereafter until such Event of Default is remedied or waived to the written
satisfaction of the Lender, the Lender may exercise any or all of the following
rights and remedies with respect to outstanding Loans:
(a) by notice to the Borrower, declare the entire unpaid principal
amount of all Notes, or any of them, all interest accrued and unpaid
thereon, and all other amounts payable under this Agreement to be forthwith
due and payable whereupon such Note or Notes, as the case may be, all such
accrued interest, all such amounts and all Contingent Payments (to the
extent funds are available therefor in accordance with SECTION 2.8) shall
become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower;
(b) terminate the existing Servicing Agreement and enter into a new
servicing agreement with a replacement servicer selected by the Lender in
its sole discretion, to service and collect all or any part of the Loan
Collateral, with such replacement servicer acting in its own name, but on
behalf of the Borrower and/or the Lender and taking direction solely and
exclusively from the Lender, with such replacement servicing agreement
containing such terms and conditions, including as to the servicing fee
which shall be payable to such replacement servicer, as shall be acceptable
to the Lender in its reasonable discretion and with payments of the
servicing fee to such replacement servicer being made in the order of
priority specified in SECTION 2.8 of this Agreement for payment of the
Servicing Fee to the Servicer;
(c) direct the Servicer then in place to take all steps necessary to
collect or otherwise liquidate the Loan Collateral in accordance with such
procedures and for such sale prices as the Lender shall specify and apply
all Asset Pool Proceeds resulting therefrom in accordance with SECTION 2.8,
provided that each Asset Pool shall be deemed to have an Asset Pool
Shortfall Amount in an amount equal to the unpaid principal balance of, and
all accrued interest on, the related Loan therefor; and
41
<PAGE>
(d) exercise and enforce any and all rights and remedies available to
the Lender under any Loan Document or otherwise by law or agreement,
including, without limitation, against any or all Loan Collateral securing
payment of outstanding Loans;
PROVIDED, HOWEVER that (i) except as expressly provided in the Servicing
Agreement, no Servicing Fee shall be payable with respect to any Asset Pool
Proceeds received as a result of any actions specified above if the Lender
effects collection thereof without the assistance of the Servicer and (ii) no
Asset Pool Proceeds shall be paid to the Borrower pursuant to SECTION 2.8(F),
(J) or (L) with respect to any Asset Pool until all Loan Costs and all
outstanding Loans, together with all interest thereon, shall have been paid in
full, whereupon all remaining Asset Pool Proceeds for each Asset Pool shall be
distributed in accordance with the provisions of SECTION 2.8.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in SECTION 8.1(G), the entire unpaid principal amount of all Notes,
all interest accrued and unpaid thereon, and all other amounts payable under
this Agreement (including Contingent Payments) shall be immediately due and
payable without presentment, demand, protest or notice of any kind.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the
part of the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
SECTION 9.2 AMENDMENTS, REQUESTED WAIVERS, ETC. No amendment,
modification, termination or waiver of any provision of any Loan Document or
consent to any departure by the Borrower therefrom shall be effective unless the
same shall be in writing and signed by the Lender. Any waiver or consent given
hereunder shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
SECTION 9.3 SEVERABILITY CLAUSE. Any part, provision representation or
warranty of this Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
42
<PAGE>
provision, representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereto waive any provision of law which
prohibits or renders void or unenforceable any provision hereof. If the
invalidity of any part, provision, representation or warranty of this Agreement
shall deprive any party of the economic benefit intended to be conferred by this
Agreement, the parties shall negotiate in good faith to develop a structure the
economic effect of which is as nearly as possible the same as the economic
effect of this Agreement without regard to such invalidity.
SECTION 9.4 NOTICES. Any notices, consents, directions, demands or
other communications given under this Agreement (unless otherwise specified
herein) shall be in writing and shall be deemed to have been duly given when
delivered in person or by overnight delivery at, or telecopied to the respective
addresses or telecopy numbers, as the case may be, set forth below (or to such
other address or telecopy numbers as either party shall give notice to the other
party pursuant to this SECTION 9.4):
If to the Borrower:
MRC Receivables Corporation
5775 Roscoe Court
San Diego, California 92123
Attention: General Counsel
Telephone: (858) 309-6960
Telecopy: (858) 309-6977
If to the Lender:
CFSC Capital Corp. VIII
12700 Whitewater Drive
Minnetonka, MN 55343
Attention: Jon Taxdahl
Telephone: (952) 984-3469
Telecopy: (952) 984-3898
SECTION 9.5 REIMBURSEMENT OF THE LENDER'S COSTS AND EXPENSES.
(a) OUT-OF-POCKET COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE
PREPARATION, EXECUTION AND DELIVERY OF THE LOAN DOCUMENTS AND THE WARRANT
DOCUMENTS. The Borrower and the Lender agree that all out-of-pocket costs
and expenses incurred by the Lender in connection with the preparation,
execution and delivery of the Loan Documents and the Warrant Documents,
43
<PAGE>
including, without limitation, legal fees and expenses of counsel, UCC
searches, recording fees, and other similar expenses paid or incurred by
the Lender, shall constitute Purchase Expenses with respect to the initial
Asset Pool purchased by the Borrower, and the Lender shall be reimbursed
for all such out-of-pocket costs and expenses from Loan proceeds made
available for purchase of such Asset Pool; PROVIDED, HOWEVER, in the event
that the Borrower does not submit any Borrowing Requests to the Lender
during the first twelve (12) months following the execution of this
Agreement or all of the Borrowing Requests submitted by the Borrower during
the first twelve (12) months following the execution of this Agreement are
rejected by the Lender, then the Borrower will reimburse the Lender for
fifty percent (50%) of the legal fees and expenses incurred by the Lender
to its outside counsel in connection with the preparation, execution and
delivery of the Loan Documents and the Warrant Documents.
(b) OUT-OF-POCKET COSTS AND EXPENSES INCURRED BY THE LENDER IN
CONNECTION WITH ADMINISTERING, AMENDING, DOCUMENTING, RECORDING, FILING,
INSURING OR ENFORCING THE LOAN DOCUMENTS OR THE LOAN COLLATERAL AFTER
FUNDING. All out-of-pocket costs and expenses incurred by the Lender in
connection with administering, amending, documenting, recording, filing,
perfecting, maintaining, insuring or enforcing any Loan Document or any
Loan Collateral which are incurred after funding of the related Loan shall
constitute Loan Costs with respect to the related Asset Pool for which they
were incurred (or pro rata among all Asset Pools if not attributable to one
such Asset Pool) and shall be payable as such in accordance with SECTION
2.8.
SECTION 9.6 INDEMNITY. In addition to the payment of out-of-pocket
costs and expenses pursuant to SECTION 9.5, the Borrower agrees to indemnify,
defend and hold harmless the Lender and each of its respective participants,
parent corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees and
agents (the "Indemnitees"), from and against (i) to the extent not included as
Purchase Expenses, any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of this Agreement and the other Loan Documents or the making of any
Loans and (ii) any and all liabilities, losses, damages, penalties, judgments,
suits, claims, costs and expenses of any kind or nature whatsoever (including,
without limitations, the reasonable fees and disbursements of counsel) in
connection with any investigative, administrative or judicial proceedings,
whether or not such Indemnitee shall be designated a party thereto, which may be
imposed on, incurred by or asserted against such Indemnitee, in any manner
relating to or arising out of or in connection with, the making of any Loans or
entering into this Agreement or any other Loan Documents or the use or intended
use of the proceeds of the Loans or the collection of Assets, excepting,
however, from the foregoing any such liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses resulting from collection actions
undertaken by the Lender, or by a replacement servicer appointed by the Lender,
44
<PAGE>
or the willful misconduct or gross negligence of an Indemnitee. If any
investigative, judicial or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon request of such Indemnitee,
the Borrower, or counsel designated by the Borrower and reasonably satisfactory
to the Indemnitee, will resist and defend such action, suit or proceeding to the
extent and in the manner reasonably directed by the Indemnitee, at the
Borrower's sole cost and expense. Each Indemnitee will use its best efforts to
cooperate in the defense of any such action, suit or proceeding. If the
foregoing undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, the Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the indemnified liabilities contemplated hereby which is permissible
under applicable law. The obligations of the Borrower under this SECTION 9.6
shall survive termination of this Agreement.
SECTION 9.7 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
SECTION 9.8 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.
(a) GOVERNING LAW. Except as otherwise provided in the Security
Agreement, the Loan Documents shall be governed by, and construed in
accordance with, the laws of the State of Minnesota.
(b) JURISDICTION. The Borrower hereby irrevocably submits to the
non-exclusive jurisdiction of any federal court sitting in Minneapolis or
St. Paul, Minnesota, in any action or proceeding arising out of or relating
to this Agreement or any of the other Loan Documents, and the Borrower
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such federal court. The Borrower
hereby irrevocably waives, to the fullest extent it may effectively do so,
the defense of an inconvenient forum to the maintenance of such action or
proceeding. The Borrower irrevocably consents to the service of copies of
the summons and complaint and any other process which may be served in any
such action or proceeding by the mailing of copies of such process, by
certified mail, return receipt requested, to the Borrower at its addresses
specified in SECTION 9.4 above. To the extent permitted by applicable law,
and without limiting any right to appeal, the Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this SECTION 9.8(B) shall affect the
right of either party to serve legal process in any other manner permitted
by law or affect the right of either party to bring any action or
proceeding against the other party or its property in the courts of other
jurisdictions.
45
<PAGE>
(C) WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR ANY
INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.
SECTION 9.9 INTEGRATION. This Agreement comprises the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to such subject matter, superseding all prior oral
or written understandings.
SECTION 9.10 AGREEMENT EFFECTIVENESS. This Agreement shall become
effective upon delivery of fully executed counterparts hereof to each of the
parties hereto.
SECTION 9.11 HEADINGS DESCRIPTIVE. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
SECTION 9.12 ASSIGNMENT. This Agreement shall be binding upon the
Borrower and the Lender and their respective successors and assigns, except that
the Borrower may not transfer or assign any or all of its rights or obligations
hereunder without the prior written consent of the Lender. The Lender hereby
expressly reserves the right, without any prior notice to or consent of the
Borrower, the Servicer or MCM Capital Group, to (i) sell, transfer, assign and
convey to any Permitted Lender Affiliate (defined below) any or all of its
rights or obligations under this Agreement or under the other Loan Documents
with respect to any Loan or Note, (ii) enter into any "swap" arrangement in the
ordinary course of business with respect to any Loan or Note so long as such
"swap" arrangement is guaranteed by Lender's Parent Corporation, and (iii) sell
undivided participating interests in or with respect to any or all of its rights
or obligations under this Agreement or under the other Loan Documents or with
respect to any Loan or Note so long as the Lender shall at all times have
primary liability with respect to the Lender's obligations under this Agreement
and the other Loan Documents and the Borrower, the Servicer and MCM Capital
Group shall only be required to deal with the Lender with respect to this
Agreement and the other Loan Documents. In addition, in the event that the
Lender has terminated the Servicing Agreement with the Servicer as a result of a
Termination Event, the Lender hereby expressly reserves the right to sell,
transfer, assign and convey to any Person any or all of its rights or
obligations under this Agreement or under the other Loan Documents. Except as
permitted above in this SECTION 9.12, the Lender will not sell, transfer, assign
or convey its rights or obligations under the Agreement and the other Loan
Documents without the prior written consent of the Borrower. As used in this
SECTION 9.12, the term "Permitted Lender Affiliate" means any Subsidiary of
Lender's Parent Corporation.
SECTION 9.13 ADVICE FROM INDEPENDENT COUNSEL. The parties hereto
understand that this Agreement is a legally binding agreement that may affect
such party's rights. Each party hereto represents to the other that it has
46
<PAGE>
received legal advice from counsel of its choice regarding the meaning and legal
significance of this Agreement and that it is satisfied with its legal counsel
and the advice received from it.
SECTION 9.14 JUDICIAL INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, it is agreed that a court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against any person by reason of the rule
of construction that a document is to be construed more strictly against the
person who itself or through its agent prepared the same, it being agreed that
all parties hereto have participated in the preparation of this Agreement.
SECTION 9.15 USE OF LENDER'S NAME. The Borrower hereby agrees that,
except as may be required by applicable law or legal proceedings, neither the
Borrower nor the Servicer shall refer to or use the name "CFSC Capital Corp.
VIII" or any of the other names referred to in EXHIBIT F, or any such name in
any manner in any collection or enforcement activities with respect to any Asset
or in any advertising, printed material, electronic medium or other medium,
without first obtaining the Lender's prior written consent. The Lender shall
have no obligation to give any such written consent and may withhold the same in
its sole and absolute discretion.
SECTION 9.16 CONFIDENTIALITY OF INFORMATION. The Borrower and the
Lender agree that the terms of the transaction set forth in this Agreement and
the Loan Documents, along with the form of this Agreement and the Loan Documents
and all information regarding one or more Asset Pools in connection with a
Borrowing Request and all confidential, proprietary and non-public information
regarding MCM Capital Group, the Servicer, the Borrower and their respective
subsidiaries and affiliates and their business operations, procedures, methods
and plans (together with all notes, analysis, compilations, studies and other
documents, whether prepared by the Borrower, the Lender, MCM Capital Group, the
Servicer and their respective subsidiaries and affiliates, others, which contain
or otherwise reflect such information (collectively, the "CONFIDENTIAL
INFORMATION") shall be considered confidential. Therefore, the Borrower and the
Lender agree not to disclose any Confidential Information to any Person, except
for affiliates of the Borrower or the Lender, as the case may be, nor provide
copies of the Loan Documents, or earlier drafts of such Loan Documents, to any
person, except for affiliates of the Borrower or the Lender, provided, however,
that the Borrower and the Lender may disclose any such Confidential Information
(i) to any party contemplated in this Agreement for purposes contemplated
hereunder (including to any permitted assignee of any such parties' rights)
provided that such party shall be informed of the confidential nature of the
Confidential Information and shall agree to maintain its confidentiality in
accordance with this SECTION 9.16; (ii) to the directors, employees, auditors,
counsel or affiliates of the Lender or the Borrower, each of whom shall be
informed of the confidential nature of the Confidential Information; (iii) as
may be required by any municipal, state, federal or other regulatory body having
or claiming to have jurisdiction over such party; PROVIDED, HOWEVER, any filings
or other disclosures made to the Securities and Exchange Commission or any
similar regulatory authority shall not disclose the name of the Lender's Parent
Corporation and shall disclose only the general range of the Servicing Fees
applicable under this Agreement or the other Loan Documents (or to the extent
copies of any of the Loan Documents are submitted, such copies shall be redacted
to not disclose the name of the Lender's Parent Corporation and not disclose the
actual Servicing Fees applicable under the Agreement or the other Loan
Documents, except to the extent that the Securities and Exchange Commission or
such similar regulatory expressly requires, by a written direction to MCM
Capital Group, that such information be disclosed, (iv) in order to comply with
any law, order, regulation, regulatory request or ruling applicable to such
party; PROVIDED, HOWEVER, any filings or other disclosures made to the
Securities and Exchange Commission or any similar regulatory authority shall not
disclose the name of the Lender's Parent Corporation and shall disclose only the
47
<PAGE>
general range of Servicing Fees applicable under this Agreement or the other
Loan Documents (or to the extent copies of any of the Loan Documents are
submitted, such copies shall be redacted to not disclose the name of the
Lender's Parent Corporation and not disclose the actual Servicing Fees
applicable under the Agreement or the other Loan Documents, except to the extent
that the Securities and Exchange Commission or such similar regulatory expressly
requires, by a written direction to MCM Capital Group, that such information be
disclosed, or (v) in the event any such party is legally compelled (by
interrogatories, requests for information or copies, subpoena, civil
investigative demand or similar process) to disclose any such Confidential
Information. This SECTION 9.16 shall be inoperative as to those portions of the
Confidential Information which are or become generally available to the public
or to the Lender on a non-confidential basis from a source other than the
Borrower or were known to the Lender on a non-confidential basis prior to its
disclosure by the Borrower.
SECTION 9.17 EFFECTIVE DATE AND TERMINATION. This Agreement shall
become effective upon execution and shall remain in force until the later of (i)
the full performance of all obligations of the Borrower hereunder (including but
not limited to the payment in full of all principal and interest with respect to
all Loans and all Contingent Payments), and (ii) the Facility Termination Date.
[SIGNATURE PAGE FOLLOWS]
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
MRC RECEIVABLES CORPORATION
By
-------------------------------------
Its
-------------------------------------
CFSC CAPITAL CORP. VIII
By
-------------------------------------
Its
-------------------------------------
49
