Exhibit 10.2
EXECUTION COPY
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (“this Agreement”) is made as of
July 25, 2003, by and between Patriot Capital Markets, LLC, a Delaware limited
liability company (“Lender”), with an address at 28 Thorndal Circle,
Darien, CT 06820, and Midland Funding NCC-1 Corporation, a Delaware corporation
(the “Borrower”), with an address at 5775 Roscoe Court, San Diego, CA
92123. The Lender and the Borrower (sometimes singularly referred to as a
“Party” and collectively referred to as “Parties”) agree as
follows:
RECITALS
A. The Borrower has entered into certain Purchase Agreements listed on the
attached Exhibit B (collectively, the “Purchase Agreements”), pursuant
to which the Borrower has purchased from the selling financial institutions
identified on Exhibit B (collectively, the “Sellers”) the pools of
Receivables listed on the attached Exhibit C (collectively, the “Purchased
Receivables”).
B. The Borrower desires to pledge the Purchased Receivables as security for
the Loan (the “Loan”) made by the Lender of the Loan Amount to the
Borrower, subject to the terms and conditions herein set forth, and the Lender
has agreed to loan the Loan Amount to the Borrower.
NOW, THEREFORE, in consideration of the premises and agreements herein
contained, the Lender and the Borrower hereby agree as follows:
DEFINITIONS
Certain capitalized terms used in this Agreement shall have the respective
meanings assigned to them in Appendix A attached hereto. All references herein
to “the Agreement” or “this Agreement” are to this Loan and
Security Agreement as it may be amended and supplemented from time to time,
including the Exhibits hereto.
SECTION 1. THE LOAN.
1.1 The Loan Amount. Subject to satisfaction of the conditions precedent
specified in Article 3 of this Agreement, on the Closing Date, the Lender will
loan $1,775,278.65 (the “Loan Amount”) to the Borrower.
1.2 Disbursement Procedures. On the terms and subject to the conditions set
forth herein, unless the parties agree otherwise in writing, the Lender shall,
on the Closing Date, remit $1,760,278.65, which amount is equal to the Loan
Amount less $15,000 in legal expenses incurred by the Lender in connection with
the making of the Loan, by wire transfer of immediately available federal funds
to the Borrower’s designated account.
1.3 The Note. The Loan to the Borrower in the Loan Amount shall be
evidenced by, and recorded on, a Note substantially in the form attached hereto
as Exhibit A. The Lender is hereby authorized to make the appropriate notations
on the schedule annexed to the Note for purposes of recording the Loan to the
Borrower in the Loan Amount or repayment thereof; provided, however, the failure
of the Lender to make, or any error in making, any such notation shall not
limit, expand or otherwise affect the obligations of the Borrower hereunder.
1.4 Interest. The Note shall bear interest on the Principal Balance from
the Closing Date at the Borrowing Rate. Interest shall accrue and be payable
from and after the Closing Date on the basis of actual days elapsed and a year
of 365 or 366 days, as applicable and shall be paid as specified in Section 2.2.
1.5 Principal Balance. The Principal Balance of the Note shall be repaid on
each Remittance Date as specified in Section 2.2. Except as set forth in this
Section 1.5, the Note may not be paid or prepaid from any other funds on any
date prior to the Maturity Date without the consent of the Lender; provided,
however, that the Note may be paid or prepaid upon the occurrence of either of
the following events: (i) the Principal Balance shall have been reduced to 10%
or less of the Loan Amount; or (ii) the Lender shall have declared the unpaid
Principal Balance and accrued interest on the Note to be immediately due and
payable following the occurrence of an Event of Default as provided in Section
7.2 of this Agreement.
SECTION 2. APPLICATION OF PROCEEDS.
2.1 Servicer and Servicing Agreement. Pursuant to the Servicing Agreement,
Midland Credit Management, Inc. has agreed to act as the Servicer with respect
to the Purchased Receivables. As a condition of this Agreement, the Borrower has
assigned for security all of its rights under the Servicing Agreement to Lender.
The Servicer’s rights and obligations are set forth in the Servicing
Agreement.
2.2 Application of Proceeds. On each Remittance Date until such time as all
Obligations have been satisfied, or until the Servicer and the Lender shall have
determined (which determination shall be made in a commercially reasonable
manner) that the Receivables have been exhausted, the Borrower shall cause the
Servicer to remit to the Lender from the Remittance Account all Collections in
respect of the related Remittance Period and all investment earnings on amounts
on deposit in the Remittance Account. On each Monthly Report Date, the Lender
shall apply all funds received by it in respect of the collection month to which
such Monthly Report Date relates, as set forth on the Monthly Reconciliation
Report (“Available Funds”), in the following order, priority and
amounts:
first, to the Lender, reimbursement of any assessed and unpaid
Obligations other than the Principal Balance and interest thereon;
second, to the Lender, from Available Funds remaining after the
application in clause first, interest at the Borrowing Rate on the
Principal Balance from and including the preceding Monthly Report Date (or,
in the case of the initial Monthly Report Date, the Closing Date) to, but
not including, the subject Monthly Report Date;
third, to the Lender, from Available Funds remaining after the
applications in clauses first and second, principal in reduction of the
Principal Balance, until the Principal Balance is reduced to zero; and
fourth, any remaining Available Funds to the Borrower.
SECTION 3. CONDITIONS PRECEDENT.
3.1 The Loan. The funding by the Lender of the Loan Amount hereunder is
subject to the satisfaction of the following conditions precedent (or to the
waiver by the Lender of any of such conditions precedent):
(a) The Financing Documents. The Borrower shall have delivered to the
Lender the duly executed Financing Documents and any documents required
herein or therein or reasonably requested by the Lender in connection
therewith.
(b) Collateral. The Borrower shall have filed, or authorized the
Lender to file, such financing statements as the Lender requires in
connection with the creation of a perfected security interest in the
Collateral and to secure payment in full for all Obligations due hereunder.
(c) Certified Resolutions and Corporate Documents. The Borrower shall
have delivered to the Lender certified copies of (i) resolutions of its
board of directors, which are reasonably satisfactory to the Lender,
authorizing the execution, delivery and performance of this Agreement, the
Note, and all other Financing Documents and any documents and instruments
delivered hereunder or thereunder and (ii) its Certificate of Incorporation
and Bylaws.
(d) Acquisition of Purchased Receivables by the Borrower. The Borrower
shall have performed all of its obligations required to be performed on or
before the Closing Date under the Purchase Agreements.
(e) Opinion. The Lender shall receive one or more Opinions of Counsel,
satisfactory in form and substance to the Lender and from counsel
satisfactory to the Lender, with respect to such matters as Lender shall
reasonably request.
(f) Representations and Warranties. All representations and warranties
in this Agreement and the Financing Documents shall be true and correct on
and as of the Closing Date.
(g) No Default. As of the Closing Date, there shall exist or shall
have occurred no default by the Borrower in the performance of any of its
obligations under any of the Financing Documents.
(h) Documentation and Proceedings. All corporate and legal proceedings and
all instruments in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to the Lender
and Lender’s counsel, and the Lender shall have received all information
and copies of all documents, including records of corporate proceedings and
governmental recording and filing offices as the Lender or Lender’s
counsel, shall have requested, such documents to be certified by proper
authorities where appropriate.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
To induce the Lender to enter into this Agreement and to make the Loan
provided for herein, the Borrower hereby makes the following representations and
warranties:
4.1 Organization and Standing. The Borrower is, and will continue to be,
duly organized and a validly existing corporation in good standing under the
laws of the State of Delaware, with all requisite power and authority to own and
operate its properties and assets, to conduct the businesses in which it is
engaged or proposes to engage and to consummate the Borrower’s role in the
transactions contemplated in the Financing Documents, has been duly qualified as
a foreign corporation in each jurisdiction where required by the conduct of its
business or its ownership of properties, and has not adopted any resolutions or
taken any action leading to liquidation.
4.2 Power and Authority. The Borrower has all requisite power and authority
to execute, deliver, and carry out the terms and provisions of the Financing
Documents to which the Borrower is a party, and the Borrower has duly and
properly taken all necessary action to permit and authorize the Borrower’s
execution, delivery and performance of the Obligations under the Financing
Documents, and the consummation of the Borrower’s role in the transactions
contemplated herein and therein.
4.3 Binding Obligations. The Financing Documents executed by the Borrower
have been duly authorized, executed and delivered by the Borrower and each
constitutes a legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms except as enforceability may be limited by
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in law or in equity.
4.4 Compliance With Other Instruments. The Borrower is not in violation of,
or default under, any Requirement of Law, any agreement or instrument to which
it is a party or by which it is bound or to which any of its properties or
assets are subject, which violation or default would have a material adverse
effect on the Borrower or its ability to perform its duties under the Financing
Documents or which would affect the legality or enforceability of this
Agreement. The execution, delivery and performance on the Closing Date by the
Borrower of and in accordance with the Financing Documents, and any document
required to be delivered hereunder or thereunder, the consummation of the
Borrower’s role in the transactions contemplated herein or therein and the
compliance with the terms and provisions hereof or thereof will not contravene
any Requirement of Law to which the Borrower is subject (including without
limitation any applicable consumer credit servicing or bankruptcy laws,
statutes, rules or regulations) and will not, in any material respect, violate,
conflict with or result in any breach of any of the terms, covenants, conditions
or provisions of, or constitute a default under, or result in the creation or
imposition of any security interest (other than the security interest in favor
of the Lender) upon any of the property or assets of the Borrower pursuant to
the terms of, any indenture, mortgage, deed of trust, agreement or other
instrument to which the Borrower is a party or by which its properties or assets
are bound or may be subject.
4.5 Litigation. There are no actions, suits, proceedings or investigations
pending or, to the Borrower’s knowledge, threatened against or affecting
the Borrower or its properties or assets, or to which the Borrower or its
properties or assets is subject, nor is there any outstanding judgment, order,
writ, injunction, decree or award affecting the Borrower or its properties or
assets before any court or before any federal, state, municipal or other
governmental department, commission, board, bureau or agency, which, either
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on its business, assets, properties or financial
condition, or which in any manner could reasonably be expected to materially
impair the Purchased Receivables or which could reasonably be expected to affect
the legality or enforceability of this Agreement or the Financing Documents, and
the Borrower does not know of any basis for any such suit, proceeding, or
investigation.
4.6 No Material Adverse Laws, Contracts, Etc. The Borrower is not obligated
under any contract or agreement or under any law, regulation or decree which
materially and adversely affects its ability to perform its obligations under
the Financing Documents or which materially and adversely affects the value of
the Purchased Receivables or which would affect the legality or enforceability
of the Financing Documents.
4.7 Consents by Authority. Except for the filing of financing statements by
the Lender, all actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency, that are necessary in connection with
the execution, delivery and performance by the Borrower of its obligations which
it was required to perform as of such date under the Financing Documents, have
been duly taken, given or obtained, as the case may be, are in full force and
effect on the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation by the Borrower of the Borrower’s role in the
transactions contemplated by the Financing Documents and the performance by the
Borrower of its obligations hereunder and thereunder.
4.8 No Finder’s or Broker’s Fees. Other than broker’s fees
incurred in connection with the purchase of certain of the Purchased
Receivables, all of which have been paid by the Sellers, there are no
broker’s or finder’s fees payable to any Person in connection with
this Agreement or the transactions contemplated herein.
4.9 Capabilities. Assuming the Loan proceeds are advanced to the Borrower,
the Borrower has or is projected to have or will contract for adequate capital,
assets, liquidity, personnel, facilities, equipment, software, systems
capability and competence to perform its obligations hereunder and under the
other Financing Documents.
4.10 Securities Laws. The Borrower is not required to register as an
“investment company” under the Investment Company Act of 1940, as
amended, and the execution and delivery of the Note as contemplated
hereunder is exempt from the registration requirements of the Securities
Act of 1933, as amended, and applicable state securities laws.
4.11 Disclosure. The representations and warranties and other statements of
fact made by the Borrower to the Lender in the Financing Documents and in any
certificates, exhibits and schedules attached hereto or thereto (including any
such documents furnished by electronic medium) or furnished to the Lender or
their designee by the Borrower in connection with the Loan, taken as a whole, do
not on the date as of which such statements were made contain any material
misstatement of fact or omit to state a material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which they were made, not misleading in their presentation of the Borrower
and its business. The information provided with respect to the Purchased
Receivables and the Purchase Agreements by or on behalf of the Borrower, taken
as a whole, is, to the Borrower’s knowledge, true and correct in all
material respects and, to the Borrower’s knowledge, does not contain any
material omissions which would cause such information to be materially
misleading with respect to the Purchased Receivables taken as a whole. Borrower
makes no representation or warranty concerning the forecasts, estimates, pro
forma information, projections and statements as to anticipated future
performance or conditions, and the assumptions on which they were based, except
that as of the date made (i) such forecasts, estimates, pro forma information,
projections and statements were based on the good faith assumptions of the
management of the Borrower and (ii) such assumptions were believed by such
management to be reasonable. Such forecasts, estimates, pro forma information,
projections and statements, and the assumptions on which they were based, may or
may not prove to be correct. There is no fact or condition existing as of the
date hereof which materially and adversely affects, or to the Borrower’s
knowledge, in the future is reasonably anticipated to materially and adversely
affect, the condition (financial or otherwise), or prospects, of the Borrower or
the Purchased Receivables taken as a whole.
4.12 Foreign Person. The Borrower is not a “foreign person”
within the meaning of Section 1445(f)(3) of the Code.
4.13 ERISA. The Borrower has no Plans.
4.14 Margin Stock. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying “margin stock” (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System), and no proceeds of the Loan will be used for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any margin stock or
extending credit to others for such purpose.
4.15 Liens and Encumbrances. The Receivables are owned by the Borrower free
and clear of any lien other than the security interest in favor of the Lender.
All actions (including UCC filings) necessary in any jurisdiction to give the
Lender a first priority perfected lien under the UCC in each Receivable acquired
by the Borrower have been performed.
4.16 Dealings with Obligor. To the Borrower’s actual knowledge, no
action or omission on the part of the Sellers would give rise to any right under
the FDCPA on the part of any Obligor to bring any action or claim that would
result in a material adverse effect on the Borrower or the Purchased Receivables
taken as a whole. Neither the Borrower nor any of its Affiliates has knowingly
advanced funds to, induced, or solicited any advance of funds from a party other
than the Obligor or any co-debtor or guarantor, directly or indirectly, for the
payment of any amount required by any Account.
4.17 Location of Place of Business. The Borrower’s primary place of
business is located at 5775 Roscoe Court, San Diego, CA 92123.
4.18 Lack of Reliance. Independently and without reliance upon the Lender,
the Borrower, to the extent it deems appropriate, has made and shall continue to
make its own independent investigation of the merits and risks involved in its
role under this Agreement and the other transactions contemplated hereby and the
Lender shall not have any duty or responsibility, either initially or on a
continuing basis, to provide the Borrower with any information concerning the
Servicer.
SECTION 5. COVENANTS OF BORROWER.
The Borrower hereby covenants and agrees that from the date hereof and
until payment in full of the principal of and interest on the Note, unless the
Lender shall otherwise consent in writing, the Borrower will:
5.1 Payments. Ensure that principal, interest and any other amounts payable
are duly and punctually paid in accordance with the priorities set forth in
Section 2.2 and as otherwise provided herein.
5.2 Business and Existence. Perform all things necessary to preserve and
keep in full force and effect its existence and comply with each Requirement of
Law, the non-compliance with which would materially and adversely affect its
business or its financial condition. The Borrower shall not engage in any line
of business other than pursuit, negotiation, acquisition and ownership of the
Receivables and related assets. The Borrower shall notify the Lender not less
than 30 days in advance of any change in location of its place of business.
Without prior written consent of the Lender, which consent shall not be
unreasonably withheld, delayed or conditioned, the Borrower shall not amend its
Certificate of Incorporation except for the Restated Certificate pursuant to
which Borrower will become a special purpose entity or Bylaws or change its
jurisdiction of incorporation. The Borrower shall comply with all of the
provisions of its Certificate of Incorporation and Bylaws.
5.3 Indebtedness and Expenses. Not incur, create or suffer to exist any
Indebtedness, other than Indebtedness in respect of this Agreement, the Note and
the Financing Documents, and pay and discharge all of its indebtedness,
obligations and expenses promptly in accordance with this Agreement and the
other Financing Documents and normal terms and practices of its business, before
the same shall become in default, as well as all lawful claims for labor,
materials and supplies which otherwise, if unpaid, might become a material lien
upon its properties or assets or any part thereof.
5.4 Payment of Taxes and Assessments. Pay when due all taxes, assessments
and other governmental charges or levies which become due and payable by the
Borrower to any political entity, subdivision or department thereof under any
law now or hereafter in force or effect. The Borrower however, shall not be
required to pay any tax, charge, levy or assessment so long as the Borrower
shall contest, in good faith and at its cost and expense, in its own name and
behalf, the amount or validity thereof, in an appropriate manner or by
appropriate proceedings which shall operate during the pendency thereof to
prevent the collection of or other realization upon the tax, assessment, levy or
charge so contested, provided that no such contest shall subject the Lender to
the risk of any liability and that the Borrower shall take appropriate reserves
or provide appropriate bond or collateral in respect thereof. Each such contest
shall be promptly prosecuted to final conclusion (subject to the right of the
Borrower to settle any such contest) and the Borrower will, and will require the
Servicer to, promptly after the final determination of such contest or
settlement thereof (including any appeals), pay and discharge the amounts which
shall be levied, assessed or imposed or determined to be payable therein,
together with all penalties, fines, interests, costs and expenses thereon or
incurred in connection therewith. The Borrower shall give, and shall require the
Servicer to give, the Lender prompt written notice of any such contest.
5.5 Notice of Event of Default. At the time of the Borrower’s first
actual knowledge (with actual knowledge by the Servicer or any officer or
employee of the Servicer being deemed knowledge of the Borrower for this
purpose) of an Event of Default or a Default, furnish the Lender with prompt
written notice of the occurrence of any such event or condition.
5.6 Additional Information; Further Assurances.
(a) Furnish, and require the Servicer to furnish, as applicable, such other
information in the possession of or reasonably obtainable by the Borrower or the
Servicer regarding the operations, business affairs and financial condition of
Borrower or the Servicer or their properties or assets (including but not
limited to the Receivables) as the Lender may reasonably request for the purpose
of determining compliance with the Financing Documents or the status of the
Receivables, including but not limited to true and exact copies of their books
of account (related to this Agreement, the Financing Documents and the
Receivables) and any audit reports prepared by any governmental agency or
authority related to the Borrower or this Agreement, the Financing Documents or
the Receivables and all information furnished to any governmental agency or
authority related to the Borrower or this Agreement, the Financing Documents or
the Receivables; provided, however, that any information provided to the Lender
pursuant to this Section 5.6 shall be held confidential by the Lender; and
(b) Take such further actions as the Lender may reasonably request for the
purpose of obtaining or preserving the full benefits to the Lender of this
Agreement and of the rights and powers herein granted to the Lender, including
the filing of any financing or continuation statements under the UCC.
5.7 Right of Inspection/Right of Audit.
(a) Permit, and require the Servicer to permit, at reasonable times
and intervals and upon reasonable prior notice, any person who is
designated by the Lender to visit and inspect any of the properties, books,
systems, procedures, financial reports and records of Borrower and the
Servicer (related to this Agreement, the Financing Documents and the
Receivables) and to discuss their affairs, finances and accounts as the
Lender may reasonably request for the purpose of determining compliance
with the Financing Documents or the status of the Receivables. (b) Permit,
and require the Servicer to permit, the Lender to, on not less than 15
days’ prior notice, or, if an Event of Default has occurred, on not
less than one day’s prior notice, conduct an audit of the properties,
books, systems, procedures, financial reports and records of the business
activities and operations conducted by the Borrower and the Servicer in
connection with its performance under this Agreement and the other
Financing Documents, during regular business hours, at the location the
records are then kept by the Borrower and the Servicer.
5.8 Liens. Not contract, create, incur or suffer to exist, and require the
Servicer not to contract, create, incur or suffer to exist, any security
interest in any of the Receivables acquired from the Sellers, whether now owned
or hereafter acquired, except Permitted Liens.
5.9 Notification of Litigation, Liens, Material Events. Promptly notify,
and require the Servicer to promptly notify, the Lender in writing of (i) any
litigation or dispute whether pending or threatened, of which the Borrower has
actual knowledge which could materially affect the Borrower, and if requested by
the Lender, deliver to the Lender copies of all pleadings, unprivileged relevant
correspondence and similar documentation relating thereto, (ii) any lien,
security interest or attachment asserted against any of the Receivables and
(iii) the occurrence of any other event or the discovery of any other
information known to Borrower which could reasonably be expected to have a
material adverse effect on the aggregate market value of the Purchased
Receivables or on the security interests granted with respect thereto.
5.10 Maintenance of First Priority. Take all such action, and require the
Servicer to take all such action, as may from time to time be necessary to
maintain the ownership interest of the Borrower in the Receivables and of the
security interests of the Lender, in the Receivables, including all notices,
waivers and recording, filing, rerecording and refiling of any documents as set
forth in the Servicing Agreement to maintain the ownership interest of the
Borrower or the security interests of the Lender and the perfection and priority
thereof. In addition, the Borrower shall, and shall require the Servicer to,
execute and deliver such further documents set forth in the Servicing Agreement
and take such further action as the Lender may reasonably request in order to
confirm the ownership interest of the Borrower or security interests of the
Lender, and to preserve and protect the priority of such security interests, the
rights of the Borrower under the Purchase Agreements and the rights of the
Lender under this Agreement and any Financing Document.
5.11 Consolidation, Merger, Sale of Assets. Not (i) wind up, liquidate, or
dissolve its affairs, enter into any transaction of merger or consolidation,
convey or transfer its properties and assets substantially as an entirety, (ii)
convey, sell, lease or otherwise dispose of (a) all or substantially all of the
Receivables; or (b) any portion of the Receivables; provided, however, that the
Borrower may from time to time convey, sell, lease or otherwise dispose of
Receivables (y) which are Bankrupt Accounts (as such term is defined in the
Servicing Agreement) to a third party who is not an Affiliated Party (as such
term is defined in the Servicing Agreement) in an arm's length transaction;
provided that any such transaction is in the normal course of business; or (z)
pursuant to an agreement in which the purchase price percentage is not less than
the applicable purchase price percentage paid by Borrower for the Receivables
being sold, in each case as set forth in the applicable Purchase Agreements,
(iii) institute any bankruptcy or insolvency proceeding or consent to the
institution of the same, or (iv) create any partnership, joint venture or
subsidiary, in each case without the prior written consent of Lender, which
consent shall not be unreasonably withheld, delayed or conditioned.
5.12 Other Agreements.
(a) Not enter into any agreement containing any provision which would
cause an Event of Default hereunder or which would be violated or breached
by the performance of Borrower’s obligations under the Financing
Documents or under any document or instrument delivered or to be delivered
by Borrower hereunder or thereunder.
(b) Enforce the material obligations of the Servicer under the
Servicing Agreement and of each of the Sellers under the Purchase
Agreements, as applicable, and each other party under any other material
agreement to which Borrower is a party, and not grant any material waiver
or release or permit any material amendment of any such document without
the written consent of the Lender, which consent shall not be unreasonably
withheld, delayed or conditioned.
5.13 Capability. Maintain, or contract to maintain, and require the
Servicer to maintain, or contract to maintain, adequate capital, assets,
liquidity, personnel, facilities, equipment, software, systems capability and
competence to perform its obligations hereunder and under the Financing
Documents.
5.14 Approvals and Licenses. Maintain, and require the Servicer to
maintain, all consents, approvals, authorizations, orders, rights, licenses,
franchises, and permits, if any, required by or from any federal, state or other
governmental authority or agency, for the conduct of its business and the
ownership of its properties, or otherwise obtain a waiver or variance thereof or
qualify for an exemption therefrom.
5.15 Change in Accounting Policies. Not change its accounting policies or
reporting practices, except as allowable pursuant to GAAP, consistently applied.
5.16 Financial Statements. Cause the Servicer to deliver to the Lender the
financial statements specified in Sections 4.2(a) and (b) of the Servicing
Agreement.
5.17 Fraudulent Activities; Violations of Law. Not engage in, and no Person
under its direct control or direction shall engage in, any fraudulent activity
or other activity which would constitute a knowing violation of a Requirement of
Law.
5.18 Lender’s Reliance. Borrower acknowledges that the Lender is
entering into the transactions contemplated by this Agreement in reliance
upon Borrower’s identity as a legal entity that is separate from the
Servicer and that the Lender will be adversely affected if Borrower does
not enforce its respective rights under the Servicing Agreement. Therefore,
from and after the date of execution and delivery of this Agreement,
Borrower shall take all reasonable steps, including, without limitation,
all steps that the Lender may from time to time reasonably request, to
maintain Borrower’s identity as a separate legal entity and to make it
manifest to third parties that Borrower is an entity with assets and
liabilities distinct from those of the Servicer and any Affiliates thereof
and not just a division of Servicer or any other Affiliate. Without
limiting the generality of the foregoing and in addition to the other
covenants
set forth herein, Borrower shall:
(a) maintain its own separate books and records and bank accounts;
(b) at all times hold itself out to the public as a legal entity
separate from the its Affiliates and any other Person;
(c) file its own tax returns, if any, as may be required under
applicable law, to the extent not part of a consolidated group filing a
consolidated return or returns, and pay any taxes so required to be paid
under applicable law;
(d) not commingle its assets with assets of any other Person (except
as contemplated by the Financing Documents), and maintain the assets in a
manner that facilitates their identification and segregation from those of
its Affiliates and other Persons;
(e) conduct its business in its own name;
(f) maintain separate financial statements;
(g) ensure that any financial statements of any Affiliate of Borrower
which are consolidated to include the Borrower contain detailed notes
clearly stating that (a) all of the Borrower’s assets are owned by the
Borrower, and (b) the Borrower is a separate entity with its own separate
creditors that will be entitled to be satisfied out of the Borrower’s
assets prior to any value in the Borrower becoming available to the
Borrower’s equity holders;
(h) pay its own liabilities only out of its own funds;
(i) not permit any Affiliate of Borrower, except an officer of the
Borrower, to be, nor to hold itself out to be, responsible for the debts of
the Borrower or the decisions or actions in respect of the daily business
and affairs of the Borrower;
(j) maintain an arm’s length relationship with its Affiliates;
(k) pay the salaries of its own employees, if any;
(l) require that any full-time employees of the Borrower identify
themselves as such and not as employees of any Affiliate of Borrower
(including without limitation, by means of providing appropriate employees
with business or identification cards identifying such employees as the
Borrower’s employees);
(m) not hold out its credit as being available to satisfy the
obligations of others;
(n) allocate fairly and reasonably with its Affiliates any overhead
for shared office space;
(o) correct any known misunderstanding regarding its separate
identity;
(p) ensure that the Borrower’s operating expenses will not be
borne by any Affiliate of Borrower;
(q) use separate stationery, invoices and checks;
(r) not pledge its assets for the benefit of any other Person;
(s) maintain adequate capital in light of its contemplated business
purposes, cash flow and the financing contemplated by the Financing
Documents;
(t) ensure that no Affiliate of Borrower shall, directly or
indirectly, name the Borrower or enter into any agreement to name the
Borrower as a direct or contingent beneficiary or loss payee of any
insurance policy with respect to property of any Affiliate;
(u) cause the Board of Directors to meet at least annually or act
pursuant to written consent and keep minutes of such meetings and actions
and observe all other Delaware corporate law formalities; and
(v) not acquire any obligations or securities of an Affiliate.
SECTION 6. COLLATERAL.
6.1 Security Interest in Collateral. To secure the payment and performance
to the Lender of the Obligations, the Borrower hereby grants to the Lender a
continuing security interest of first priority in (subject to Permitted Liens)
and lien upon all the following Property and interests in Property of the
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(a) all Purchased Receivables;
(b) all Related Property;
(c) all property constituting (i)deposit accounts or (ii)security
interests in property financed under Purchased Receivables, claims under
guaranties and other property or security held by or granted to secure
payment of the Purchased Receivables by the Obligor obligated thereon;
(d) all other General Intangibles, whether now owned or hereafter
created or acquired by the Borrower or in which the Borrower now has or
hereafter acquires any interest, including all rights of Borrower against
Sellers under the Purchase Agreements;
(e) all monies and other Property of any kind, now or at any time or
times hereafter, owned by the Borrower or a bailee of the Borrower;
(f) all contracts, contract rights, chattel paper, instruments and
documents of the Borrower;
(g) all rights, claims or choses in action of the Borrower;
(h) all of the Borrower’s interest in the Remittance Account;
(i) all accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (a), (b), (c), (d), (e), (f),
(g) and (h) above, including proceeds of and unearned premiums with respect
to insurance policies insuring any of the Collateral; and
(j) all books and records (including customer lists, credit files,
computer print-outs, and other computer materials and records) of the
Borrower pertaining to any of (a), (b), (c), (d), (e), (f), (g), (h) and
(i) above.
6.2 Location of Collateral. All tangible Collateral and Collateral in the
form of books and records will at all times be kept by the Borrower or Servicer,
as appropriate, at the business location set forth in Section 4.17 and shall
not, without the prior written approval of the Lender, be moved therefrom,
except as necessary for the collection of an Account.
6.3 Administration of Receivables.
(a) Upon and after the occurrence of an Event of Default (which has
not been waived or cured if permitted under Section 7), the Lender or, if
so directed by the Lender, the Servicer shall have the exclusive right to
settle or adjust all disputes and claims directly with any Obligor and to
compromise the amount or extend the time for payment of the Receivables
upon such terms and conditions as the Lender may deem advisable. Upon
notice by the Lender, after the occurrence of an Event of Default, which
notice may be given in the Lender’s sole discretion, the Borrower
shall relieve the Servicer of any further authority and future
administrative obligations with respect to the Receivables.
(b) If any Receivable includes a charge for any tax payable to any
governmental authority, the Lender is authorized, after the occurrence of
an Event of Default, to pay the amount thereof to the proper governmental
authority for the Receivable and charge the Borrower therefor. The Borrower
shall notify the Lender if any Receivable includes any tax payable to any
governmental authority and, in the absence of such a notice (i)with respect
to any Receivable, the Borrower shall be deemed to have made a
representation and warranty to the Lender that, to the Borrower’s
knowledge, no portion of such Receivable is payable to any governmental
authority and (ii) the Lender shall have the right to retain the full
proceeds of the Receivable. In no event shall the Lender be liable for any
taxes to any governmental authority that may be due by the Borrower by
reason of the sale and delivery of any Receivable.
(c) Upon and following the occurrence of a Default or an Event of
Default and while such Default or Event of Default is continuing, any of
the Lender’s officers, employees or agents shall have the right in the
name of the Lender, any designee of the Lender or the Borrower, to verify
the validity, amount or any other matter relating to any Receivables by
mail, telephone, telegraph or otherwise. The Borrower shall cooperate fully
with the Lender in an effort to facilitate and promptly conclude any such
verification process.
SECTION 7. DEFAULT
7.1 Events of Default. The occurrence and continuation of any one or more
of the following events prior to the payment in full by the Borrower of the Note
shall constitute an “Event of Default” under this Agreement:
(a) Payment Default. The Borrower shall default in the payment of (i)
any principal of or interest on the Loan when due (whether at stated
maturity, upon acceleration or at mandatory or optional prepayment), it
being understood that no notice or cure period will be required for any
such event to constitute an Event of Default), or (ii) any other amount
payable by it hereunder or the Note and such default shall have continued
unremedied for three (3) Business Days.
(b) Target Principal Balance. On any Monthly Report Date, the
Principal Balance of the Note, after giving effect to any payment in
respect of principal on such Monthly Report Date, shall equal or exceed the
Target Principal Balance corresponding to such Monthly Report Date as set
forth on Exhibit D of this Agreement.
(c) Representations and Warranties. Any representation or warranty
made by the Borrower under the Financing Documents or any certificate,
exhibit or other document required thereunder is false, misleading,
incomplete or untrue in any material respect (an “Untrue Matter”)
as of the date made and such Untrue Matter is not cured within fifteen days
from the date that the Borrower knows of such Untrue Matter.
(d) Covenants. (1) Any covenant, term, agreement or condition
contained in this Agreement is breached by the Borrower or (2) any other
covenant, term, agreement or condition contained in the Financing Documents
is breached by the Borrower or Servicer, and such breach continues
unremedied for a period of fifteen days after the date that the Borrower or
the Servicer knows of such breach.
(e) Bankruptcy or Insolvency. The Borrower (i) is dissolved, (ii)
fails or is unable or admits in writing its inability to pay its debts
generally as they become due, (iii) commences a voluntary case in
bankruptcy or any other action or proceeding for any other relief under any
law affecting creditors’ rights that is similar to a bankruptcy law,
(iv) consents by answer or otherwise to the commencement against it of an
involuntary case in bankruptcy or any other such action or proceeding, or
an involuntary case in bankruptcy or any other such action or proceeding in
respect of the Borrower or any of its properties is commenced and is not
dismissed on or before the sixtieth day after the commencement thereof, (v)
makes an assignment for the benefit of creditors, (vi) files a petition or
applies to any tribunal for the appointment of a custodian, receiver or any
trustee for all or a substantial part of its assets, (vii) by any act or
omission indicates its consent, approval of, or acquiescence in the
appointment of a receiver, custodian or trustee for all or a substantial
part of its property, (viii) is adjudicated a bankrupt, (ix) becomes
insolvent however otherwise evidenced, or (x) ceases to continue as a going
concern.
(f) Fraudulent Conveyances. The Borrower conceals, removes or permits
to be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them, or makes or permits
a transfer of any of its property which transfer is fraudulent under any
bankruptcy, fraudulent conveyance or similar law.
(g) Judgments. Any (i) uninsured judgment, (ii) judgment which is not
fully insured or (iii) order for the payment of money, that is equal to or
greater than $50,000 shall be rendered against the Borrower (unless the
payment of such amount in excess of $50,000 is fully insured) and such
judgment or order shall continue unsatisfied and unstayed for a period of
60 days.
(h) Breach of Agreement. Any security interest created hereunder or
pursuant to the Financing Documents shall cease to be a valid and perfected
first priority security interest in favor of the Lender in the Purchased
Receivables.
(i) Breach of the Purchase Agreements. Any (i) breach or violation by
Borrower of any provisions of a Purchase Agreement, but only such breaches
or violations which would give rise to a right to terminate Borrower’s
rights under such agreement, and which continue after the expiration of any
applicable notice or cure periods allowed thereunder or (ii) failure by
Borrower to enforce its rights under the Purchase Agreements, which
failure, in the Lender’s reasonable discretion, shall have a material
adverse effect on the Borrower’s ability to meet its obligations under
this Agreement or any other Financing Document and which is not cured
within fifteen days from the date that the Borrower receives notice of such
breach from the Lender.
(j) Servicer Termination. The occurrence of a Termination Event under
the Servicing Agreement.
7.2 Effect of Event of Default. If any Event of Default shall occur, in
addition to taking any action pursuant to Section 6.5 and Section 7.3, the
Lender may, at its sole option, by written notice to the Borrower declare the
entire unpaid Principal Balance of and accrued interest on the Note to be
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by the Borrower. The
Lender may also exercise any or all of the rights and remedies (i) provided to
the Lender pursuant to the Financing Documents and (ii) available to a secured
creditor under the UCC of the applicable jurisdiction, as the same may be
amended from time to time, including without limiting the foregoing, the right
to take possession of and sell the Collateral. Except as set forth elsewhere in
this Section 7, the occurrence of an Event of Default may only be cured by
written waiver from the Lender (and not by the passage of time or remedying of
the circumstances which led to such Event of Default).
7.3 Power of Attorney. The Borrower hereby makes, constitutes and appoints
the Lender its true and lawful attorney-in-fact, in its name place and stead, or
otherwise, upon the occurrence of any Event of Default (which has not been
waived or cured if permitted under Section 7):
(a) To take all actions and to execute, acknowledge, obtain and
deliver any and all writings deemed advisable by the Lender in order to
exercise any rights of the Borrower with respect to the Collateral or to
receive and enforce any payment or performance due to the Borrower with
respect to the Collateral;
(b) To give any notices, instructions or other communications to any
person or entity in connection with the Collateral;
(c) To demand and receive all performance due under or with respect to
the Collateral and to take all lawful steps to enforce such performances
and except for any claim or cause of action against the Lender, to
compromise and settle any claim or cause of action of the Borrower arising
from or related to the Collateral and give acquittances and other
discharges relating thereto; and
(d) To file any claim or proceeding or to take any other action, in
the name of the Borrower, Lender or otherwise, to enforce performances due
under or related to the Collateral and to protect and preserve the right,
title and interest of the Lender thereunder.
The foregoing power of attorney is a power coupled with an interest and
shall be irrevocable so long as any portion of the obligations of the Borrower
hereunder remains contingent, unmatured, unliquidated, unpaid or unperformed.
The Lender shall have no obligation to exercise any of the foregoing rights and
powers in any event.
SECTION 8. MISCELLANEOUS.
8.1 Non-Recourse Financing. None of the Borrower’s lenders,
representatives or Affiliates will have any personal liability for the repayment
of any portion of the Principal Balance or the fulfillment of any of the
Borrower’s obligations under this Agreement or any Financing Document.
Lender’s sole recourse will be to the assets and income of the Borrower.
8.2 Indemnification.
(a) The Borrower agrees to indemnify and hold the Lender (including
its Affiliates) harmless from all liabilities, damages, claims, losses,
judgments, reasonable costs and expenses, including reasonable
attorneys’ fees, incurred by Lender arising out of or resulting from
the performance or failure to perform by the Borrower of its obligations
and its failure to comply with any applicable Requirements of Law.
(b) The Lender will indemnify and hold harmless the Borrower from all
liabilities, damages, claims, losses, judgments, reasonable costs and
expenses, including reasonable attorneys’ fees, incurred by the
Borrower arising out of or resulting from the performance or failure to
perform the Lender’s obligations, and the Lender’s failure to
comply with any applicable Requirements of Law.
8.3 Set-off. In addition to any rights and remedies of the Lender
provided by law or existing under any instrument, document or agreement
relating to the Obligations, if an Event of Default exists, the Lender is
authorized at any time and from time to time, without prior notice to the
Borrower, Servicer or any other party, any such notice being waived by
Borrower, the Servicer and any such other party to the fullest extent
permitted by law, to set off and apply any and all monies or deposits at
any time held by or for the benefit of, and other indebtedness at any time
owing by the Lender to or for the credit or the account of the Borrower
against any and all Obligations, now or hereafter existing, irrespective of
whether or not the Lender shall have made demand under this Agreement or
any Financing Document. The Lender agrees promptly to notify Borrower after
any such set-off and application made by the Lender; provided, however,
that, the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Lender under this Section 8.3
are in addition to the other rights and remedies (including other rights of
set-off) which the Lender may have.
8.4 Notices. Any notice, demand, request, approval, consent or other
communication (collectively “Notice”) concerning this Agreement
or any matter arising in connection with this Agreement shall be in
writing, personally delivered, or sent by telecopier, data transmission,
overnight courier or mailed by certified mail, return receipt requested,
and shall be deemed to have been duly given upon receipt:
If to the Lender to: PATRIOT CAPITAL MARKETS, LLC
28 Thorndal Circle
Darien, CT 06820
ATTN: Chief Investment Officer
If to the Borrower to: MIDLAND FUNDING NCC-1 CORPORATION
5775 Roscoe Court
San Diego, CA 92123
ATTN: Corporate Secretary
8.5 Transactional Expenses. The Borrower shall pay all Post-Closing
Transactional Expenses and all other Obligations (except principal and interest)
on or before the thirtieth (30th) day following Borrower’s receipt of
invoices for the same. All Transactional Expenses and other Obligations which
are not so paid shall be capitalized (“Capitalized Transactional
Expenses”) and shall become part of the Principal Balance on the
immediately succeeding Monthly Report Date.
8.6 Relationship Between Parties. The relationship between the Lender and
the Borrower shall be solely one of commercial lender and borrower, and nothing
contained in this Agreement or in any Financing Document shall constitute the
parties as partners or co-venturers with one another.
8.7 Confidentiality.
(a) The Borrower and the Lender agree that the terms of this
Agreement, all other Financing Documents, and the Loan made or to be made
hereunder are confidential and shall not be disclosed by either party to
any other Person without the other party’s prior written consent
except (a) to each Party’s counsel, (b) to each party’s
Affiliates, investors, prospective investors or lenders (c) as required by
law or the rules and regulations of the Securities and Exchange Commission,
any applicable stock exchange or trading market, or (d) as specifically
contemplated by this Agreement or the other Financing Documents. It is
understood that the parties hereto may make customary references to this
transaction in their financial statements.
(b) Notwithstanding anything herein to the contrary, each party hereto
may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the transaction contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to such party or such person relating to such
tax treatment and tax structure. This authorization is not intended to
permit disclosure of any other information including terms or details not
relevant to the tax treatment or the tax structure of this transaction or
the transactions designated by the Financing Documents.
8.8 Termination. This Agreement shall continue in full force and effect
until all Obligations and undertakings of the Borrower hereunder and under any
other Financing Document have been fully discharged or performed.
8.9 Amendments. The provisions of this Agreement, and any other Financing
Document, may from time to time be amended, modified or waived with the consent
of the Borrower and the Lender if such amendment, modification or waiver is in
writing and signed by the Lender and the Borrower.
8.10 Waivers. No party shall be deemed to have waived any of its rights or
remedies hereunder or under any other Financing Document unless such waiver is
in writing and signed by such party and then only to the extent specifically
recited. No failure to exercise and no delay or omission in exercising any
right, remedy or recourse on the part of either party shall operate or be deemed
as a waiver of such right, remedy or recourse hereunder or thereunder or
preclude any other or further exercise thereof. A waiver or release on any one
occasion shall not be construed as continuing, as a bar to, or as a waiver or
release of any subsequent right, remedy or recourse on any subsequent occasion.
All rights and remedies of each party, whether pursuant to this Agreement, or
any other Financing Document, or any other document or instrument delivered
hereunder or thereunder, shall be cumulative and concurrent and may be exercised
singly, successively or concurrently at the sole discretion of such party and
may be exercised as often as occasion therefor may exist. The rights of each
party hereunder or any such document or instrument shall be in addition to all
other rights and remedies provided at law or in equity.
8.11 Transferability of Agreement. 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 and any purported
assignment without such written consent shall be null and void. The Lender may
transfer and assign to any Person (including any Affiliate) any or all of its
rights or obligations hereunder and under the other Financing Documents without
the prior written consent of the Borrower.
8.12 Replacement Note. Upon the loss, theft, destruction or mutilation of
the Note, the Borrower shall execute and deliver in lieu thereof a new Note in
the same initial principal amount and with such notations on the schedule
attached to such Note as shall evidence all payments in reduction of the
Principal Balance prior to the date of delivery of such replacement Note.
8.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK WITHOUT APPLICATION OF CONFLICT OF LAW PRINCIPLES
(OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK).
8.14 Submission to Jurisdiction. The Borrower hereby consents to the
jurisdiction of the federal district court located within the County of New
York, State of New York, with respect to all actions or proceedings relating to
this Agreement, the Note, the other Financing Documents and the Purchased
Receivables, and the Borrower waives any objection which it may have based on
improper venue or forum non conveniens to the conduct of any proceeding in any
such court and waives personal service of any and all process upon it, and
consents that all such service of process be made by registered or certified
mail or by messenger directed to it at the address of the Borrower set forth in
Section 7.3 and that service so made, shall be deemed to be completed upon the
earlier of actual receipt and five Business Days after the same shall have been
posted to the Borrower’s address in accordance herewith. THE PARTIES EACH
WAIVE ANY RIGHT TO TRIAL BY JURY. 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 (if such a procedure is available under
applicable law) or in any other manner provided by law. Nothing contained in
this section shall affect the right of the Lender to serve legal process in any
other manner permitted by law or to bring any action or proceeding in the courts
of any jurisdiction against the Borrower or to enforce a judgment obtained in
the courts of any other jurisdiction.
8.15 Enforceability of Agreement. Should any one or more of the provisions
of this Agreement be determined to be illegal or unenforceable, all other
provisions, nevertheless, shall remain effective and binding on the parties
hereto and such provisions shall be deemed revised to the minimum extent
necessary to render it enforceable.
8.16 Titles. Titles of the Sections of this Agreement are merely for
convenience in reading and shall be deemed not to be a part of this Agreement
and shall be ignored in construing any provision hereof.
8.17 Entire Agreement. This Agreement (including all Exhibits hereto), the
Financing Documents and the Note shall constitute the full and entire
understanding and agreement of the parties hereto and there are no further or
other agreements or undertakings, written or oral, in effect between the parties
relating to the subject matter hereof unless expressly referred to herein or
therein. All prior negotiations, agreements, representations, warranties,
statements and undertakings concerning the subject matter hereof between the
parties hereto are superseded by this Agreement.
8.18 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
* * * * *
IN WITNESS WHEREOF, the Parties have signed this Loan and Security
Agreement as of the date set forth in the first paragraph of this Agreement.
LENDER:
PATRIOT CAPITAL MARKETS, LLC
By: /s/ Charles A. Forbes, Jr.
Charles A. Forbes, Jr.
Its: Chief Investment Officer
BORROWER:
MIDLAND FUNDING NCC-1 CORPORATION
By: /s/ Carl C. Gregory, III
Carl C. Gregory, III
Its: President
APPENDIX A
DEFINITIONS
“Account” shall mean each relationship comprising a personal
loan, line of credit, lease or other credit transaction established pursuant to
an Account Agreement, the Receivables from which are purchased by the Borrower
pursuant to a Purchase Agreement.
“Account Agreement” shall mean the retail installment sales
contract, lease, credit agreement or other agreement or agreements pursuant to
which a Person is obligated to pay for borrowed money or leased property under a
credit plan.
“Account Control Agreement” shall mean that account control
agreement with respect to the Remittance Account by and among the Lender, the
Borrower, the Servicer and the bank named therein, which is in substantially the
form attached hereto as Exhibit E.
“Affiliate” means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors,
managers and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the other Person,
whether through ownership of voting securities, by contract or otherwise.
“Authorized Officer,” with respect to the Borrower, means the
Person or other signatory authorized by or pursuant to the Borrower’s
Bylaws.
“Available Funds” shall have the meaning specified in Section
2.2.
“Borrower” shall have the meaning specified in the preamble to
this Agreement.
“Borrowing Rate” shall mean, as to any Monthly Report Date, a per
annum rate equal to 15.00%.
“Business Day” shall mean any day other than a Saturday, Sunday
or any other day on which banks are required or authorized to be closed in New
York, New York.
“Capitalized Transactional Expenses” shall have the meaning
specified in Section 8.5 of this Agreement.
“Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute, and the regulations promulgated and
the rulings issued thereunder.
“Collateral” shall mean all of the Property and interests in
Property described in Section 6.1 of this Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and performance
of any of the Obligations.
“Collections” shall have the meaning specified in Article I of
the Servicing Agreement.
“Default” shall mean an event or condition which, with the
passage of time or the giving of notice or both, would constitute an Event of
Default.
“ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute, and the
regulations promulgated and the rulings issued thereunder.
“ERISA Affiliate” shall mean any trade or business (whether or
not incorporated) which, together with the Borrower, is treated as a single
employer under Title IV of ERISA or Section 414 of the Code.
“Event of Default” shall have the meaning specified in Section
7.1 of the Agreement.
“FDCPA” shall mean the Fair Debt Collection Practices Act of
1977, as amended.
“Financing Documents” means the Agreement, the Servicing
Agreement, the Account Control Agreement and any related agreement or document
contemplated thereunder.
“GAAP” shall mean accounting principles generally accepted in the
United States of America, as in effect from time to time.
“General Intangibles” shall have the meaning it is given under
the UCC as in effect in the State of New York.
“Indebtedness” shall mean, with respect to any Person, any amount
payable by such Person pursuant to an agreement or instrument involving or
evidencing money borrowed or received, the advance of credit, a conditional sale
or a transfer with recourse or with an obligation to repurchase (other than
customary “putback” rights given in connection with a sale of
Accounts), or pursuant to a lease with substantially the same economic effect as
any such agreement or instrument, to which such Person is a party as debtor,
borrower or guarantor, all obligations of such Person to purchase securities (or
other property) which arise out of or in connection with the sale of the same or
substantially similar securities or property and all non-contingent obligations
of such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument.
“Initial Transactional Expenses” shall mean all out-of-pocket
costs and expenses incurred by the Lender (including attorneys’ fees and
expenses) in connection with the consummation of the transactions contemplated
by the Financing Documents.
“Lender” shall mean Patriot Capital Markets, LLC, a Delaware
limited liability company.
“Loan” shall have the meaning specified in the Recitals to this
Agreement.
“Loan Amount” shall have the meaning specified in Section 1.1 of
the Agreement.
“Maturity Date” shall mean the Monthly Report Date occurring in
October, 2005.
“Monthly Reconciliation Report” shall have the meaning specified
in Article I of the Servicing Agreement.
“Monthly Report Date” shall have the meaning specified in Article
I of the Servicing Agreement.
“Multiemployer Plan” shall mean a “multiemployer plan”
as defined in Section 4001(a) (3) of ERISA.
“Note” shall mean the secured promissory note executed by the
Borrower evidencing the Principal Balance, in substantially the form of Exhibit
A to the Agreement.
“Obligations” means all present and future liabilities,
obligations and indebtedness of the Borrower owing to the Lender under or in
connection with this Agreement, including amounts owed in respect of the
Principal Balance, Unpaid Interest, Transactional Expenses, and indemnities.
“Obligor” shall mean the customer, obligor, maker, borrower or
other party primarily obligated to pay an Account.
“Opinion of Counsel” shall mean a written opinion of counsel and
who, in the case of opinions delivered to the Lender, shall be reasonably
satisfactory to the Lender.
“Permitted Liens” shall mean, with respect to the Purchased
Receivables, (i) inchoate liens in respect of taxes not due and payable, and
(iii) security interests created pursuant to the Financing Documents.
“Person” shall mean any legal person, including any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of
similar nature.
“Plan” shall mean any employee benefit plan, other than a
Multiemployer Plan, which is subject to Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code or Section 302 of ERISA,
and either (i) is maintained for employees of the Borrower or any ERISA
Affiliate or in which any such employees participate or to which contributions
are made by the Borrower or any ERISA Affiliate, or (ii) has at any time within
the preceding five years been maintained for employees of the Borrower or any
ERISA Affiliate or any Person which was at such time an ERISA Affiliate or in
which any such employees participated at such time, or (iii) with respect to
which the Borrower or any ERISA Affiliate could be subjected to any liability
under Title IV of ERISA (including without limitation Section 4069 of ERISA) in
the event that such plan has been or were to be terminated.
“Post-Closing Transactional Expenses” shall mean all
out-of-pocket costs and expenses incurred by the Lender in connection with the
interpretation, enforcement, exercise of rights or amendment (in each case,
whether or not definitive action is taken) of the Financing Documents.
“Principal Balance” shall mean, on any Business Day (i) the sum
of (a) the Loan Amount as of the Closing Date, (b) the aggregate amount of
Unpaid Interest on all previous Monthly Report Dates, and (c) all Post-Closing
Transactional Expenses which have become Capitalized Transactional Expenses on
any Monthly Report Date on or before such Business Day, minus (ii) amounts paid
to the Lender in reduction of the Principal Balance pursuant to clause fourth of
Section 2.2 of the Agreement.
“Property” shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
“Purchase Agreements” shall have the meaning specified in the
Recitals to this Agreement.
“Purchased Receivables” shall have the meaning specified in the
Recitals to this Agreement.
“Receivable” shall mean any outstanding indebtedness of an
Obligor under an Account Agreement (including any unpaid finance charges and
other charges relating thereto) arising from a loan for borrowed money or a
lease for leased property, including any deficiency balance remaining after the
application of sale proceeds from any property securing such property.
“Related Property” shall mean all rights, title and interest of
the Borrower under and in the Servicing Agreement and the Purchase Agreements,
including the ownership interests of the Borrower in Purchased Receivables
acquired thereunder.
“Remittance Account” shall mean the account established by the
Servicer in accordance with Section 2.9 of the Servicing Agreement.
“Remittance Date” shall have the meaning specified in Article I
of the Servicing Agreement.
“Remittance Period” shall have the meaning specified in Article I
of the Servicing Agreement.
“Requirement of Law” shall mean, as to any Person, any law,
treaty, rule or regulation, determination or order of any arbitrator or a court
or other governmental authority, judgment, decree, franchise or permit in each
case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
“Sellers” shall have the meaning specified in the Recitals to
this Agreement.
“Servicer” shall mean Midland Credit Management, Inc., a Kansas
corporation.
“Servicing Agreement” shall mean the Servicing Agreement among
the Borrower, the Servicer and the Lender, dated as of July 25, 2003, relating
to the servicing of the Purchased Receivables.
“Servicing Fee” shall mean the Servicing Fee received by the
Servicer in accordance with Section 3.1 of the Servicing Agreement.
“Target Principal Balance” shall mean, with respect to any
Monthly Report Date, the dollar amount corresponding to such Monthly Report Date
as set forth on Exhibit D of this Agreement.
“Termination Event” shall have the meaning specified in Section
1.1 of the Servicing Agreement.
“Transactional Expenses” shall mean the Initial Transactional
Expenses and the Post-Closing Transactional Expenses.
“UCC” shall mean the Uniform Commercial Code as in effect in a
jurisdiction at any time.
“Unpaid Interest” shall mean, on a Monthly Report Date, the
amount, if any, by which the amount owing pursuant to clause second of Section
2.2 of the Agreement exceeds the amount of Available Funds in respect of such
Monthly Report Date applied in payment of such owing amounts.
