Exhibit 10.4 [***] TEXT OMITTED AND FILED SEPARATELY CONFIDENTIAL TREATMENT REQUESTED SUPPLEMENT TO SERVICING AGREEMENT (With Consent and Agreement) This SUPPLEMENT TO SERVICING AGREEMENT “Supplement”) is entered into this 22nd day of May 2000, by and among WEST CAPITAL FINANCIAL SERVICES CORP. (“West”), a California corporation, as servicer (as servicer, the “Current Servicer”), WEST CAPITAL RECEIVABLES CORPORATION I, a California corporation (the “Borrower”), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as collateral agent (the “Collateral Agent”), and MIDLAND CREDIT MANAGEMENT, INC., a Kansas corporation (individually “MCM” or as the successor servicer, the “Servicer”). RECITALS A. The Current Servicer, the Borrower and the Collateral Agent are parties to that certain Servicing Agreement, dated as of January 29, 1998 (the “Current Servicing Agreement”). Pursuant to the Current Servicing Agreement, the Current Servicer services, on behalf of the Borrower and the Collateral Agent, a pool of charged-off consumer accounts that are owned by the Borrower (the “Pool”). The Pool is pledged by the Borrower to the Collateral Agent as security for the obligations of the Borrower pursuant to that certain Credit Agreement, dated as of January 29, 1998, by and among the Borrower, Daiwa Finance Corporation (“Daiwa”), as the lender (the “Lender”), and West, as the seller and the servicer (as amended, the “Credit Agreement”), and pursuant to the Note (as defined below). Pursuant to the Credit Agreement, the Borrower issued a certain Note to the Lender, dated January 29, 1998, in the original principal amount of Sixty Million Dollars ($60,000,000.00) (the “Note”). The Lender has participated a portion of the Note to SunAmerica Inc., a Delaware Corporation (“SunAmerica”), and may further participate the Note to third parties (SunAmerica, as such participant, and such additional participants, collectively, the “Participants”). The Credit Agreement has been amended by that certain First Amendment to Credit Agreement, dated June 28, 1999. B. There are currently one or more Events of Default, as defined in, and pursuant to, the Credit Agreement, and Servicer Termination Events, as defined in, and pursuant to, the Current Servicing Agreement, which give the Collateral Agent on behalf of the Lender the current right to terminate the Current Servicer as servicer under and pursuant to the Current Servicing Agreement. Additionally, the Current Servicer is having liquidity difficulties and has advised the Lender that it likely will not be able to continue to service the Pool. C. West has agreed to sell its servicing platform and certain other assets to an affiliate of MCM pursuant to that certain Asset Purchase Agreement, dated as of May 11, 2000, by and between Midland Acquisition Corporation, a Delaware corporation, and West (the “Purchase Agreement”). MCM is willing to assume the obligations as successor servicer to the Current Servicer, pursuant to the terms and conditions of this Supplement. The Borrower, the Lender, the Collateral Agent and the Participants are willing to accept MCM as the successor servicer. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants contained herein, the parties agree as follows: 1 [***] Omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.
ARTICLE I DEFINITIONS 1.1 Definitions. The following terms shall have the meaning set forth in this Section 1.1. Any capitalized term in this Supplement that is not defined in this Supplement shall have the meaning set forth in the Current Servicing Agreement, either directly or by reference to another document or agreement. “Additional Servicing Fee” means, for any Payment Date, a fee in the amount of [***%] of the Servicing Fee Collections and the proceeds from the sale of Bankruptcy Receivables to the extent included in Net Collections during the preceding Measurement Period; provided, that, the Additional Servicing Fee shall only be payable on any Payment Date if (a) with respect to each Payment Date occurring in July, 2000 and August, 2000, the Lender Net Collections for the immediately preceding Measurement Period exceed 100 percent (100%) of the aggregate Projected Lender Net Collections for such Measurement Period, and (b) with respect to all Payment Dates thereafter, both (A) the Lender Net Collections for the immediately-preceding Measurement Period were equal to or exceeded 100 percent (100%) of the aggregate Projected Lender Net Collections for such Measurement Period, and (B) the aggregate Lender Net Collections for the immediately preceding three (3) Measurement Periods exceed 100 percent (100%) of the aggregate Projected Lender Net Collections for such three (3) Measurement Periods; provided that, if any sale of Designated Receivables occurs pursuant to Section 4.6 below during a Measurement Period, the Projected Lender Net Collections for such shortened Measurement Period will be calculated on a per diem basis based on the number of Business Days of such month. “Advance Date” means each Friday or such other agreed-upon day of each week during which the Servicer (or the Trustee by a sweep of the Lockbox Account) remits Net Collections to the Receivables Revenue Account, provided, that, if any Friday or other agreed- upon day is not a Business Day, then the Advance Day shall be the first Business Day occurring thereafter. “Applicable Hourly Rate” means the hourly rate of the officers and employees of the Servicer as set forth on Exhibit A. “Bankruptcy Receivable” means a Designated Receivable with respect to which the obligor is the debtor in a bankruptcy proceeding. “Base Servicing Fee” means for any Advance Date, an amount equal to the aggregate of (i) [***%] of the Servicing Fee Collections, (ii) [***%] of the proceeds from the sale of Bankruptcy Receivables pursuant to Section 4.5 that, in the aggregate, do not exceed $250,000 (or with the prior written consent of the Lender, such greater amount in a month), and (iii) [***%] of all Third Party Collections received since the immediately-preceding Advance Date, or, with respect to the first Advance Date, since the Effective Date; provided, that the Base Servicing Fee payable with respect to Third Party Collections shall only be payable to the extent such Third Party Collections (net of the amount of collection or contingency fee paid to or deducted by any Person arising from Designated Receivables for which there is a collection or contingency fee that is payable to any person other than the Servicer) that are deposited in the Receivable Revenue Account. The Base Servicing Fee shall also include the reimbursements (as additional servicing fee) as provided for and pursuant to the penultimate paragraph of Section 4.6 and Section 4.12. 2 [***] Omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.
“Collection Measurement Period” means, on any Payment Date, for purposes of Section 6.1(f), the three (3) Measurement Periods immediately preceding the applicable Payment Date. “Collection Policies” means the Servicer's written collection policies and procedures applicable to the collection of the Designated Receivables, updated as of May 22, 2000, a certified copy of which has been delivered to the Lender. “Current Service” means West Capital Financial Services Corp., a California corporation. “Current Servicer Liabilities” has the meaning given in Section 2.1. “Current Servicing Agreement” means the Current Servicing Agreement without reference to this Supplement. “Effective Date” means May 22, 2000. “Exhausted Receivable” means a Designated Receivable (or the obligor thereof) that fall into one of the following groupings: 1. Expiration of the 7 year Federal Credit Bureau Reporting Period, no payment activity and a bad address and/or phone. 2. Expiration of the legal statute for a particular state, no payment activity, balance <$1,000, low credit bureau scores and a bad address and/or phone. 3. Chapter 7 Bankruptcy. 4. Death of all parties on the account and no verifiable estate. 5. Cease and Desist requests from customers that are out of the state legal statute or in states where litigation is not prudent. 6. Balance <$300 that did not respond to a direct mail solicitation. 7. No calls, skip tracing, mailing or other efforts to collect for any period of seven months from and after January 1, 2000. “Existing Defaults” means the existing Events of Default and Servicer Termination Events as defined in and pursuant to the Credit Agreement or Current Servicing Agreement respectively, or any other event, occurrence or set of facts existing before or as of the Effective Date that could, or with the passage of time or the giving of notice would, allow the Collateral Agent or the Lender to exercise any rights or remedies against or with respect to the Designated Accounts, the Current Servicer or the Borrower as a result thereof. “Expiration Date” means the earliest of (i) the end of the Servicing Term, (ii) the effective date the Servicer is removed as the Servicer pursuant to the second sentence of Section 4. 1, as a result of a Servicer Termination Event, or (iii) the Collateral Agent, at the direction of the Lender, delivers to the Borrower and the Servicer a written notice of the 3
Collateral Agent's election, at the direction of the Lender, to sell all, or substantially all, of the then remaining Designated Receivables after and during the continuation of a Servicer Termination Event. “Forbearance Period” means the period of time commencing on the Effective Date and ending on the Expiration Date. “Lender Net Collections” means, for any Payment Date, the amount of Net Collections received in the immediately preceding Measurement Period less the amount of Base Servicing Fees and Additional Servicing Fees paid in respect of such immediately preceding Measurement Period. “Liguidity Event” means any of the following transactions occurring on or prior to the Expiration Date (i) any transaction, sale, conveyance or transfer of any of the Designated Receivables, or any interest directly or indirectly therein, other than the sale of Bankruptcy Receivables pursuant to Section 4.5 of this Supplement or the sale by the Lender of Exhausted Receivables, whereby the Lender (or any Participant) receives or has a right to receive, any cash proceeds or other monetary payment, or (ii) either (A) any securitization of any of the Designated Receivables, or (B) any structured finance transaction that is secured by any of the Designated Receivables and that receives not less than an investment grade rating from the Standard & Poor’s Rating Services, Moody’s Investor Services, Inc., Duff & Phelps, Fitch IBCA, or any other nationally-recognized rating agency. “Measurement Period” means a calendar month. “Net Collections” means the aggregate of (i) all monies (other than Third Party Collections) deposited in the Receivables Revenue Account representing collected available funds, net of checks returned for insufficient funds, received or otherwise recovered from or for the account of a Designated Receivable, other than in connection with a sale thereof (the “Servicing Fee Collections''), and (ii) all Third Party Collections (net of the amount of collection or contingency fee paid to or deducted by any Person arising from Designated Receivables for which there is a collection or contingency fee that is payable to any person other than the Servicer), but only to the extent such amounts are deposited in the Receivables Revenue Account, provided that, proceeds from the sale of Bankruptcy Receivables pursuant to Section 4.5 that, in the aggregate, do not exceed $250,000 (or with the prior written consent of the Lender, such greater in a month) in a month shall be included as Net Collections. “Payment Date” means the 20th day of each calendar month, commencing on June 20, 2000, provided that if the 20th day of any calendar month is not a Business Day, then the Payment Date shall be the first occurring Business Day thereafter. “Protected Lender Net Collections” means for any Measurement Period the amount set forth for such period in the column entitled “Projected Net Cash to Daiwa” in Exhibit B attached to this Supplement. “Responsible Officer” means the president or the chief financial officer of the Servicer or any officer or employee who has management responsibility with respect to the deposit or transfer of any Net Collections of Designated Receivables. “Servicer” means MCM, as the successor servicer. 4
“Servicer Report” means a report of the Servicer in the form of Exhibit C hereto. “Servicer Termination Event” has the meaning set forth in Article VI of this Supplement. “Servicing Agreement” means from and after the Effective Date, the Current Servicing Agreement as supplemented and amended by this Supplement. “Servicing Term” means period of time commencing on the Effective Date and ending two years thereafter, or, if earlier, the date on which the Servicer ceases to be the Servicer by termination without cause, pursuant to the second sentence of Section 4.1 of this Supplement. “Third Party Collections” means the gross collections, net of checks returned for insufficient funds, on Designated Receivables for which there is a collection or contingent fee payable to any party other than the Servicer, including without limitation National Attorney Network (NAN) or any third party collection agency. 1.2 General. The words “herein,” “hereof,” “hereunder,” and other words of similar import refer to this Supplement as a whole, including the Schedules and Exhibits hereto, as the same may from time to time be amended or supplemented, and not to any particular section, subsection or clause contained in this Supplement. References herein to an Exhibit, Schedule, Section, subsection or clause refer to the appropriate Exhibit or Schedule to, or Section, subsection or clause in this Supplement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. ARTICLE 11 TERMINATION OF CURRENT SERVICER; OTHER MATTERS 2.1 The Current Servicer is terminated as the “Servicer” effective on the Effective Date. Neither such termination nor this Supplement, as to the Servicer, shall in any way reduce, or limit or release the Current Servicer from, any of the duties, obligations, responsibilities, indemnities or liabilities arising out of actions, omissions, events or facts that exist before or as of the Effective Date, whether provided by the terms of the Current Servicing Agreement, or arising by operation of law or otherwise (the “Current Servicer Liabilities”). The Current Servicer, at the Servicer's sole cost and expense, shall use commercially reasonable efforts to cooperate with the Lender, the Collateral Agent and the Servicer with the orderly transition of the servicing obligations and responsibilities from and after the Effective Date to the Servicer, including without limitation the transfer to the Servicer for administration by it of all cash amounts that at the Effective Date are held or should have been held for deposit, or shall thereafter be received with respect to a Designated Receivable and the delivery to the Servicer of copies of all files and records concerning the Designated Receivables. The Current Servicer shall not be required to maintain the current errors and omissions insurance policy of the Current Servicer required pursuant to Section 2.01(g) of the Current Servicing Agreement. Nothing in this Supplement or the Servicing Agreement is intended to or shall be read that the Servicer is in any way assuming any of the Current Servicer Liabilities or any other obligation, 5
responsibility or liability for any acts or omissions (i) of the Current Servicer, or (ii) of any person or events occurring prior to the Effective Date or on or after the Expiration Date. 2.2 Notwithstanding anything to the contrary contained herein, in the Credit Agreement or any of the Program Documents, the parties hereto acknowledge that after the Effective Date, West, the Current Servicer, intends to wind down its activities and shall not take any actions to collect the Pool. Accordingly, the parties hereto agree (a) that from and after the Effective Date, the Current Servicer shall have no further obligations under the Servicing Agreement, (b) that each of West and the Borrower (each of West and Borrower, in any capacity, the “West Parties”) will have no liability to any of the parties hereto resulting from or arising out of actions or omissions taken by any person (other than such West Party) from and after the Effective Date and (c) that the Collateral Agent, the Servicer and the Lender covenant not to sue any West Party for any such action. 2.3 The parties hereto agree that the West Parties shall not be required to comply with or perform under the covenants contained in (i) Sections 5.01(c)(second sentence only), 5.01(d)(provisions relating compliance with Collection Policies and Procedures only), 5.01(e)(ii), 5.01(h), 5.01(i), 5.01(j), 5.01 (m) and 5.01(o) and Article 6 of the Credit Agreement (ii) Sections 5(d)(last sentence only, which shall be an obligation of the Servicer), 5(e), 6.02(a)(clause (ii) of which shall be an obligation of the Servicer), 6.02(d), 6.03(second sentence only, which shall be an obligation of the Servicer) and 6.05(which investment direction shall be provided by the Lender) of the Security Agreement and (iii) Sections 5.01(b)(second and third sentences only), 5.01(c), 5.01(e), 5.01(f), 5.01(h), 5.01(i), 5.01(k), 6.01, 6.02, 6.03, 6.04, 6.05, 6.06 and 9.04 and Article 8 of the Receivable Acquisition Agreement. Lender acknowledges that the principal place of business and chief executive office of the West Parties shall be moved to the address set forth under the Borrowers signature on this Supplement. Lender acknowledges that any action taken by Servicer is not an action taken by Borrower. 2.4 The Borrower, the Lender, the Servicer and the Participants further agree that at any time after the Effective Date the Borrower may, at its option, transfer to the Lender (and the Participants) all of its right, title and interest in and to the Pool in satisfaction of all of the Borrower's obligations to the Lender under the Program Documents. Upon any such Transfer, the Lender, the Servicer and the Participants shall enter into a new servicing agreement containing provisions substantially similar (but with the same economic terms) to the Servicing Agreement. 2.5 All obligations and liabilities of the West Parties under the Credit Agreement, all Program Documents and this Supplement from and after the Effective Date shall be limited to the proceeds of the Pool, and the Servicer and the Lender agree to look solely to such proceeds for any recourse for reimbursement of any fees, expenses, damages, losses, obligations, liabilities or breaches under such documents; provided, however, that recourse for the obligations and liabilities of the Current Servicer existing prior to the Effective Date under the Current Servicing Agreement shall not be so limited. ARTICLE III FORBEARANCE During the Forbearance Period (1) none of the Collateral Agent, Lender, Daiwa, or any Participant shall (A) exercise any rights or remedies pursuant to the Program Documents 6
with respect to any Existing Defaults, or (B) prior to the occurrence and continuation of a Servicer Termination Event, sell or direct or instruct the sale of any of the Designated Receivables, except as provided in Section 4.6 of this Supplement, and (ii) interest on the Note shall accrue at the Interest Rate as if none of the Existing Defaults occurred or are continuing, provided, that, upon the occurrence of a Servicer Termination Event interest on the Note shall accrue, from and after the Effective Date, at the interest rate applicable for the occurrence and continuation of an Event of Default. From and after the Expiration Date, each of the Collateral Agent, the Lender, Daiwa, and any Participant may exercise any rights or remedies that it may have pursuant to any of the Program Documents as a result of any of (i) the Existing Defaults or (ii) any Event of Default or Servicer Termination Event as defined in and pursuant to the Credit Agreement or the Servicing Agreement, respectively. Notwithstanding the foregoing, in the event the Borrower becomes subject to, and is a debtor, directly or by consolidation with West or any other affiliate of West in any bankruptcy proceeding, each of the Collateral Agent, the Lender, Daiwa, and any Participant may exercise any rights or remedies that it may have pursuant to the Credit Agreement, the Servicing Agreement or any of the Program Documents provided that none of them shall take any action or consent to any action that results or may result in (i) the liquidation or sale of any of the Designated Accounts other than as provided in this Supplement, (ii) removal of the Servicer other than as provided in this Supplement, (iii) any reduction, limit or delay of the payment of any fees or compensation or amounts payable to the Servicer pursuant to the Servicing Agreement, or (iv) the impairment, limitation or restriction of any rights, powers or remedies that the Servicer may have pursuant to the Servicing Agreement. ARTICLE IV SERVICING 4.1 Successor Servicer Appointment. MCM is hereby appointed the successor servicer from and after the Effective Date. MCM shall serve as Servicer during the Servicing Term subject to the Lender's and the Collateral Agent's right to (i) terminate the Servicer without cause, upon the Collateral Agent, at the direction of the Lender, giving the Servicer not less than 270 days' prior written notice of such termination, provided, that, no such prior written notice of termination shall be given prior to September 1, 2000, or (ii) remove the Servicer, at the direction of the Lender, upon the occurrence and continuation of a Servicer Termination Event. Except as may be required under Article 7 of the Purchase Agreement, MCM as Servicer shall have no duty, obligation or liability with respect to any obligations, liabilities or responsibilities of the Current Servicer accruing or to be performed prior to the Effective Date. MCM as Servicer makes no representations or warranties regarding (i) any of the Designated Receivables, (ii) the performance of the Current Servicer pursuant to the Current Servicing Agreement or (iii) the Borrower or West or any other party, other than the Servicer, with respect to, or relating to, any of the Program Documents. All information regarding the Designated Receivables provided by MCM in carrying out its obligations under the Servicing Agreement, whether in the form of the Servicer Reports or otherwise, shall be based solely upon MCM's actual knowledge concerning such information and MCM makes no representation or warranty otherwise. Except as specifically contemplated hereby, the Servicer shall not make any arrangement with respect to any Designated Receivable under which any third party has a Lien on any Designated Receivable. Any referral by the Servicer of any Designated Receivable to a third-party servicer, attorney or collection agency shall be in the conformity with the Collection Policies. 7
4.2 Compensation. As compensation for the performance of its obligations as Servicer pursuant to the Servicing Agreement, the Servicer shall be entitled to receive (and the Collateral Agent shall pay to the Servicer upon written instruction from the Lender, which instruction the Lender agrees to give) (i) on each Advance Date, the Base Servicing Fee; and (ii) on each Payment Date, the Additional Servicing Fee, if applicable. Notwithstanding any provision in the Program Documents, the right of the Servicer to receive the Base Servicing Fee and the Additional Servicing Fee shall be senior in right of payment or distribution to any other person or entity pursuant to the Program Documents, other than the payment of the Collateral Agent Fee and Expenses to the Collateral Agent and fees payable to the backup servicer, if any. 4.3 Standard of Care. MCM shall carry out its obligations and perform its duties under the Servicing Agreement using the degree of skill and attention that MCM exercises with respect to all comparable defaulted consumer receivables that it services for itself or others. Notwithstanding the foregoing and any other provisions to the contrary contained in this Supplement or the Servicing Agreement, except for the payment, deposit and distribution of monies or a breach of a covenant of the Servicer in the Servicing Agreement, MCM shall be liable in connection with the performance of its duties under the Servicing Agreement only for its gross negligence or willful misconduct. 4.4 Lockbox Reports, Information and Insurance. (a) Lockbox. The Servicer shall perform as required of the "Servicer" pursuant to Section 6.01 of the Security Agreement with respect to the Lockbox. (b) Servicer Report. The Servicer shall deliver the Servicer Report at such times as the "Monthly Servicer Report" was required to have been delivered pursuant to the Current Servicing Agreement. The Servicer shall only represent and warrant that the information in the Servicer Reports is correct as to the knowledge of the Servicer. In addition, the Servicer will, at its expense, also provide such additional reports and such information regarding the Pool, and collections and distributions thereof as is reasonably requested by West or the Borrower, including without limitation in connection with financial and tax reporting, provided that, all such information shall be solely to the Servicer's actual knowledge without any further representation or warranty. If the Servicer is requested by the Lender to provide any reports or information other than the Servicer Report, the Servicer shall promptly be paid, as additional servicing fee, according to the Applicable Hourly Rate for providing such additional reports or information. (c) Financial Statements. So long as the parent corporation of MCM is subject to the reporting requirements of Section 13(d) or (g) of the Securities Exchange Act of 1934, as amended, the Servicer shall not be required to deliver copies of its quarterly and annual financial statements at the times set forth under to Section 2.05(b) and (c) of the Servicing Agreement, but shall instead deliver copies of such financial information at the time the parent corporation of MCM makes its filings on Form 10-Q or 10K for such period. (d) Insurance. The policy limits for the errors and omissions policy and the general comprehensive liability policy required pursuant to Section 2.01(g) of the Servicing Agreement shall be $3,000,000 per occurrence and $3,000,000 in the aggregate. 8
4.5 Exhausted Receivables and Bankruptcy Receivables. (a) Recall Exhausted Receivables. Each Servicer Report shall contain a listing of Exhausted Receivables. The Lender may at any time, upon written notice to the Servicer, recall servicing (for the benefit of Lender and the Participants) in connection with any Exhausted Receivables and remove the Servicer as servicer of such Exhausted Receivables. Upon such removal the Servicer shall cease servicing such Exhausted Receivables and shall promptly turn over to the Lender, or to such person or entity identified by the Lender, the original collection file, including collector comments for such removed Exhausted Receivables. The Servicer shall reasonably cooperate with the removal, transfer or transition of any such removed Exhausted Receivable. If the Servicer shall receive any collections after such removal such collections shall be counted as Servicer Fee Collections. Any sale proceeds of such Exhausted Receivables shall not be considered Net Collections. (b) Sale of Certain Receivables. From time to time the Servicer may sell Exhausted Receivables with the prior written consent of the Lender and upon such terms and conditions acceptable to the Lender. The Servicer may also sell all Bankruptcy Receivables consistent with the Current Servicer's historic practices and procedures. The Servicer shall deliver to the Lender and the Collateral Agent no later than three (3) Business Days preceding the date of such sales a certificate of the Servicer identifying the Bankruptcy Receivables (as the case may be) to be sold, and the general terms upon which the Servicer plans to sell such Designated Receivables. The Borrower hereby grants to the Servicer a limited power of attorney for the sole purpose of selling, pursuant to this Section 4.5, Exhausted Receivables and Bankruptcy Receivables on an as-is-where-is basis, without representation or warranty (express or implied) by the Borrower, without indemnity by or further obligation or liability on the part of the Borrower, and with an express acknowledgement from the buyer of such receivables give any representations or warranties in connection with any such sale (other than customary representations and warranties solely with regard to its servicing of the Designated Receivables to be sold), and the Borrower shall not be required to give any representation or warranty in connection with any such sale (other than reasonable and customary representations regarding (a) due incorporation, (b) due authorization, execution and delivery, (c) title, and (d) absence of litigation, in each case only to the extent the Borrower is able to give such representation or warranty and in each case with such disclosure as the Borrower in its sole and absolute discretion deems appropriate). 4.6 Sale of all Designated Receivables. The Collateral Agent or the Borrower, with the consent of the Lender, may sell all, or substantially all, of the Designated Receivables then subject to the Servicing Agreement upon payment to the Servicer directly from the proceeds of such sale (i) all accrued and unpaid Base Service Fees and Additional Servicing Fees, and (ii) a breakage fee (the “Breakage Fee”) (as computed below): 9
Months in Servicing Term in which Sale Occurs Breakage Fee* 1 - 6 6 month Servicing Fee 7 - 12 4 month Servicing Fee 13 - 18 2 month Servicing Fee 19 - 24 None Provided that, no Breakage Fee shall be payable if, at the time of the sale, either (i) the Borrower and the Designated Receivables are subject to a pending Bankruptcy proceeding as a direct result of an action of the Servicer or any affiliate of the Servicer, or (ii) there is a continuing Servicer Termination Event that has not been waived by the Lender; provided further, that, no such fee shall be paid if the Servicer or an Affiliate continues to service the Designated Receivables for the purchaser thereof. *The relevant Servicing Fee for the Breakage Fee shall be computed on the basis of the sum of the Base Servicing Fee and the Additional Servicing Fee during the prior 6-month, 4-month and 2-month period, as applicable. The Servicer shall be given not less than 30 days prior written notice of such sale, which notice shall identify the Designated Receivables to be sold and contain the proposed date of such sale and the manner in which the sale shall be effected. The Servicer shall, at its cost and expense, cooperate with (based upon reasonable requests by) the Collateral Agent, the Borrower and the Lender to effect any such sale, provided, that, if such sale does not close, the Servicer shall be promptly paid, as additional servicing fee, according to the Applicable Hourly Rate for such cooperation. The Servicer shall not be required to give any representation or warranties (other than customary representations and warranties solely with regard to its servicing of the Designated Receivables to be sold) in connection with any such sale and the Borrower shall not be required to give any representation or warranty in connection with any such sale (other than reasonable and customary representations regarding (a) due incorporation, (b) due authorization, execution and delivery, (c) title, and (d) absence of litigation, in each case only to the extent the Borrower is able to give such representation or warranty and in each case with such disclosure as the Borrower in its sole and absolute discretion deems appropriate).. To the extent that any Designated Receivable sold hereunder is subject to any pending collection and/or contingent fee agreement, other than the Servicing Agreement, then the transfer of such Designated Receivable shall be made subject to the rights of any such entity or person and the terms of such sale shall require the purchaser to assume the collection and/or contingent fee agreement to the extent applicable to a Designated Receivable for which either (i) judgment has been entered and continues to be valid, or (ii) there is and continues to be a valid and enforceable payment plan. 4.7 Liquidity Event. The Servicer shall also be paid an additional fee upon the closing of a Liquidity Event in such amount as is mutually agreeable by the Servicer and the Lender; provided, that any fee that exceeds 2.5% of the consideration received shall require the written consent of the Participants. 4.8 Information Furnished. Section 2.04(e) of the Servicing Agreement shall be amended as to the Servicer to read as follows: 10
All information furnished by the Servicer to the Borrower, the Lender or the Collateral Agent, with respect to the Designated Receivables and the Collections will, to the best knowledge of the Servicer, be true and correct in all material respects at the time such information is furnished. 4.9 Indemnity. The Current Servicer and its assigns, transferees, participants, employees and officers shall also be an “Indemnified Party.” Section 5.09(h) of the Servicing Agreement shall be amended to read in its entirety as follows: Any claim brought by any person (other than an Indemnified Party) against an Indemnified Party arising from (i) any gross negligence or willful misconduct of the Servicer, its employees, or any of its affiliates in servicing, administering or collecting any Designated Receivables or (ii) any failure of the Servicer to comply with any applicable law, rule or regulation with respect to the collection of any Designated Receivables. 4.10 Inapplicable Provisions. The following provisions of the Servicing Agreement shall be deleted: (i) Section 2. 01(f) (ii) Exhibit B; (ii) Clause (a) of Section 3.02; (iii) Section 5.06; and (iv) Sections 5.09(a) through (g). 4.11 Court Costs in Litigation Process. Notwithstanding any other provision of the Servicing Agreement or any of the Program Documents, the Servicer is authorized to apply funds collected by third-party collections attorneys to the reimbursement of court costs advanced by such attorneys in other collections lawsuits filed with respect to Designated Receivables placed for collection litigation. 4.12 Provisions for Incurred Expenses. In the event that the Servicer ceases to be the servicer of all or a portion of the Designated Receivables due to the sale of Designated Receivables or the exercise of the Lender's remedies following a Servicer Termination Event, the Servicer shall be entitled to reimbursement, as additional servicing fee, for previously unreimbursed court costs advanced with respect to Designated Receivables that are at the time of termination of servicing or at any time prior to termination of servicing subject to litigation. ARTICLE V REPRESENTATIONS OF MCM The Servicer hereby makes the following representations in substitution for Section 2.03 the Servicing Agreement, on which the Borrower, the Collateral Agent, the 11
Lender and the Participants are relying in accepting MCM as the successor servicer. The representations shall speak both as of the execution and delivery of this Supplement and on the Effective Date. 5.1 Organization and Good Standing. MCM is duly organized and validly existing as a corporation in good standing under the laws of the state of its incorporation, with corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and has full corporate power, authority and legal right to service the Designated Receivables and to perform its obligations pursuant to the Servicing Agreement. 5.2 Due Qualification. MCM is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Designated Receivables) requires such qualification, licenses and approvals except where the failure to be qualified or to obtain such qualifications, licenses and approvals would not have a material adverse effect on its abilities to service the Designated Receivables and to perform its obligations pursuant to the Servicing Agreement. 5.3 Power and Authority. MCM has the corporate power and authority to execute and deliver this Supplement and to carry out its terms and the terms of the Servicing Agreement; and the execution, delivery and performance of this Supplement and the Servicing Agreement have been duly authorized by MCM by all necessary corporate action. 5.4 Binding Obligations. This Supplement and the Servicing Agreement constitute the legal, valid and binding obligations of MOM, enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general principles of equity (whether considered in a proceeding in equity or at law). 5.5 No Violation. The fulfillment by MCM of the terms of this Supplement and the Servicing Agreement do not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of MCM, or conflict with or breach any of the material terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any material indenture or agreement to which MCM is a party or by which it shall be bound; nor violate, any law, order, rule or regulation applicable to MCM of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over MCM or its properties; which breach, default, conflict, Lien or violation would have, or would have, a material adverse effect. 5.6 Reguired Consents. All approvals, authorizations and consents of any Person required in connection with the execution and delivery by MCM of this Supplement, the performance by MCM of the transactions contemplated by this Supplement and the Servicing Agreement and the fulfillment by MCM of the terms hereof and thereof have been obtained (or will be obtained prior to the time required) and are in full force and effect, if the failure to have such would have a material adverse affect on the ability of the Servicer to perform pursuant to the Servicing Agreement. 5.7 No Litigation. There are no lawsuits, administrative proceeds or investigations pending or, to the best knowledge of the Servicer, overtly threatened against the 12
Servicer before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality relating to the Servicer's collection activities which, if adversely determined, would have a material adverse effect on the ability of the Servicer to perform pursuant to the Servicing Agreement. 5.8 Compliance. The Servicer has complied with all Requirements of Law in respect of the conduct of its business and ownership of its property, except where the failure to comply does not materially adversely affect its ability to perform its obligations hereunder or has no reasonable likelihood of resulting in any material liability for the Borrower, the Lender and the Collateral Agent. ARTICLE VI SERVICER TERMINATION EVENTS 6.1 Servicer Termination Events. The occurrence of any one of the following events shall with respect to the Servicer be a “Servicer Termination Even” which are in full substitution for the Service Termination Events contained in Section 4.01 of the Current Servicing Agreement. (a) the Servicer fails to make any payment, transfer or deposit pursuant to the Servicing Agreement on the day when due, in each case that continues unremedied for a period of two (2) Business Days after the earlier to occur of (x) actual discovery by a Responsible Officer of the Servicer, or (y) the date on which written notice requiring the same to be remedied has been given to the Servicer by Lender; (b) any representation or warranty made by the Servicer in this Supplement or the Servicing Agreement or in any certificate or report delivered pursuant to the Servicing Agreement shall prove to have been incorrect in any material respect when made and such is not cured within thirty (30) days after the earlier to occur of (x) actual discovery by a Responsible Officer of the Servicer, or (y) the date on which written notice requiring the same to be remedied has been given to the Servicer by Lender; provided, however, that if any such breach is reasonably remediable within 180 days after its occurrence, such breach shall not be a Servicer Termination Event hereunder for such period of time (but not longer than 180 days following the occurrence thereof) as the Servicer is attempting to remedy it; (c) any failure on the part of the Servicer to observe or perform any covenant of the Servicer set forth in the Servicing Agreement which is not cured within 30 days after the earlier to occur of (x) actual discovery by responsible officer of the Servicer, or (y) the date on which written notice requiring the same to remedied has been given to the Servicer by the Lender; (d) the Servicer shall fail to deliver any monthly Servicer Report required to be delivered under the Servicing Agreement on or before the day when due, and such failure continues unremedied for a period of three (3) Business Days; (e) it shall become unlawful for any reason for the Servicer to continue to service the Designated Receivables or otherwise perform its obligations under the Servicing Agreement or the Servicer shall cease to possess all material and necessary licenses to carry out its obligations under the Servicing Agreement; provided if the Servicer can continue 13
servicing the Designated Receivables and perform its obligations under the Servicing Agreement without one or more material and necessary licenses that the failure to have does not have a material adverse effect on the Lender or the Servicer's performance under the Servicing Agreement, the Servicer shall have ninety (90) days to obtain such licenses after the earlier to occur of (x) actual discovery by a Responsible Officer of the Servicer, or (y) the date on which written notice requiring the same to be remedied has been given to the Servicer by Lender; (f) For any Measurement Period ending on or after September 30, 2000, both (i) the Lender Net Collections for the Collection Measurement Period then ending are less than 90% of the Projected Lender Net Collections for such Collection Measurement Period (the amount of any such deficit, a “Shortfall”) and (ii) there was also a Shortfall for the immediately-preceding Measurement Period for the Collection Measurement Period then ended; provided that no Servicer Termination Event shall occur under this clause (f) if and to the extent that as of the last day of any Measurement Period (A) the aggregate Lender Net Collections from all prior Measurement Periods exceeded 90% of the Projected Lender Net Collections from all such prior Measurement Periods such surplus then exceeds the applicable Shortfall (as determined in clause (i) above) in the current Collection Measurement Period or (B) the Servicer pays to the Lender for application to the amounts owing pursuant to the Note an amount equal to or greater than the applicable Shortfall (as determined in clause (i) above after application of clause (A) above) in the current Collection Measurement Period; (g) the Servicer's consolidated stockholder's equity as required to be shown on its consolidated financial statements is less than $5,000,000; (h) the Servicer shall consent to the appointment of a conservator, receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to it or of or relating to all or substantially all of its property; (i) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; (j) the Servicer shall be in default in the payment of any debt in excess of $100,000 beyond any applicable grace or cure period and which default is not currently waived; (k) the Servicer shall be in breach in the performance of any material agreement or material contract beyond any applicable grace or cure period and such breach is not cured or currently waived within forty-five (45) days of such breach; or (l) the removal of the Servicer as Servicer under any securitization of the Servicer during the continuation of an Event of Default or Servicer Termination Event thereunder. 6.2 Rights and Remedies. Upon the occurrence and continuation of a Servicer Termination Event, the Collateral Agent and the Lender shall have such rights and remedies as it may have pursuant to the Program Documents as a result of such Servicer Termination Event. 14
ARTICLE VII MISCELLANEOUS 7.1 Notices, etc. All notices and other communications under the Servicing Agreement shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be faxed or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received. 7.2 Complete Agreement Successors and Assigns: Relationship of Parties. The Servicing Agreement constitutes the complete agreement between the parties hereto with respect to the subject matter hereof and supersedes all existing agreements and all oral, written or other communications between them concerning its subject matter. The Servicing Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that the Servicer shall not assign any of its rights or obligations hereunder without the prior written consent of the Lender. The parties are entering into this Supplement and the Servicing Agreement as independent contractors. In no event shall either party be deemed an agent, employee, joint venturer or partner of the other. 7.3 No Waiver. None of the undertakings, agreements, warranties, covenants or representations of the Servicer contained in the Servicing Agreement and no Servicer Termination Event shall be deemed to have been suspended or waived unless such suspension or waiver is by an instrument in writing signed by an officer of the Collateral Agent at the direction of the Lender. Any failure by the Borrower, the Servicer, the Lender or the Collateral Agent, at any time or times, to require strict performance by any other party of any provision of the Servicing Agreement shall not waive, affect or diminish its respective right thereafter to demand strict compliance and performance therewith. Any suspension or waiver by the Collateral Agent of a Servicer Termination Event shall not suspend, waive or affect any other Servicer Termination Event, whether the same is prior or subsequent thereto and whether of the same or of a different type. 7.4 Severabilily. Any provision of the Servicing Agreement which is prohibited 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. 7.5 Amendments; Governing Law. The Servicing Agreement and the rights and obligations of the parties hereunder (a) may not be changed orally but only by an instrument in writing signed by the party against which enforcement is sought and (b) shall be construed in accordance with and governed by the laws of the State of New York. 7.6 Counterparts. This Supplement may be executed in any number of copies (including copies sent by facsimile or other electronic transmission), and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument. 15
7.7 Headings. Section headings used in this Supplement and the Servicing Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Supplement or the Servicing Agreement. [Remainder of page Intentionally blank.] 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. WEST CAPITAL RECEIVABLES CORPORATION I, a California corporation By: ___________________________________ Its: ___________________________________ _________________________________________ _________________________________________ Facsimile: ________________________________ _________________________________________ “Borrower” WEST CAPITAL FINANCIAL SERVICES CORP., a California corporation By: ___________________________________ Its: ___________________________________ _________________________________________ Facsimile: ________________________________ “Current Servicer” NORWEST BANK MINNESOTA, N.A., as Collateral Agent By: ___________________________________ Name: ____________________________ Title: ____________________________ MAC N9311-161 Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 Facsimile: 612-667-3464 “Collateral Agent” S-1
MIDLAND CREDIT MANAGEMENT, INC. a Kansas corporation By: ________________________________ Name: __________________________ Title: __________________________ 4302 East Broadway Road Phoenix, Arizona 85040 Facsimile: 602-707-5509 “Servicer” Consented and agreed to this 22_ day of May 2000 DAIWA FINANCE CORPORATION By: _/s/ H. [illegible]_______________ Its: __EVP______________________ _______________________________ _______________________________ Facsimile: _____________________ “Lender” SUNAMERICA INC., a Delaware Corporation, as participant By: ___________________________ Its: ___________________________ _______________________________ _______________________________ Facsimile: ______________________ “Participant” S-2