MASTER LOAN AND SERVICING AGREEMENT dated as of December 21, 2006 by and among EAR CAPITAL I, LLC as Borrower and DRV CAPITAL, LLC as Servicer and DEBT RESOLVE, INC. as Parent of Borrower and Servicer and SHERIDAN ASSET MANAGEMENT, LLC as Lender
EXHIBIT
10.1
dated
as
of December 21, 2006
by
and
among
EAR
CAPITAL I, LLC
as
Borrower
and
DRV
CAPITAL, LLC
as
Servicer
and
DEBT
RESOLVE, INC.
as
Parent
of Borrower and Servicer
and
SHERIDAN
ASSET MANAGEMENT, LLC
as
Lender
▇▇▇▇▇▇
& ASSOCIATES, P.C.
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
TABLE
OF CONTENTS
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Page
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ARTICLE
I
|
THE
LOANS
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1
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Section
1.1
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Definitions
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1
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Section
1.2
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The
Loans
|
1
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|
Section
1.3
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Procedures
for Loans
|
2
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|
Section
1.4
|
The
Note
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2
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|
Section
1.5
|
Financed
Amount
|
2
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|
Section
1.6
|
Interest
|
2
|
|
Section
1.7
|
Conditions
to Loans; Loan Closings
|
3
|
|
Section
1.8
|
Repayment
of Principal, Fixed Interest and Lender’s Residual
|
5
|
|
Section
1.9
|
Survival
of Obligation to Pay the Lender’s Residual
|
6
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|
Section
1.10
|
Principal
|
6
|
|
Section
1.11
|
Asset
Management Fee
|
6
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|
ARTICLE
II
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COLLATERAL,
COLLECTIONS AND DISTRIBUTIONS
|
6
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|
Section
2.1
|
Perfection
of Lender’s Security Interest
|
6
|
|
Section
2.2
|
Administration
of Collateral and Collections
|
7
|
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF BORROWER AND SERVICER
|
10
|
|
Section
3.1
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Corporate
Existence and Power
|
10
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|
Section
3.2
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Authorization
|
10
|
|
Section
3.3
|
Compliance
with Law and Other Agreements
|
11
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Section
3.4
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Litigation
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11
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|
Section
3.5
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Ownership;
Liens
|
11
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|
Section
3.6
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No
Materially Adverse Contracts
|
11
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|
Section
3.7
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Disclosure
|
12
|
-i-
|
Section
3.8
|
Government
Approval
|
12
|
|
Section
3.9
|
Professional
Capability
|
12
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|
Section
3.10
|
Limited
Authority over Custodial Account
|
12
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|
Section
3.11
|
Credit
and Collection Policy
|
12
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ARTICLE
IV
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ASSET
SERVICING
|
12
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Section
4.1
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Servicer
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12
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|
Section
4.2
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Replacement
Servicer
|
13
|
|
Section
4.3
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Duties
of Servicer
|
13
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|
Section
4.4
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Servicer’s
Indemnification
|
14
|
|
Section
4.5
|
Termination
of Servicer
|
15
|
|
Section
4.6
|
Rights
of Servicer Upon the Occurrence of a Servicer Termination
Event
|
17
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|
ARTICLE
V
|
COVENANTS
OF BORROWER AND SERVICER
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17
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Section
5.1
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Business
and Existence
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17
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|
Section
5.2
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Payment
of Obligations and Expenses
|
18
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|
Section
5.3
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Payment
of Taxes and Assessments
|
18
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|
Section
5.4
|
Notice
of Event of Default
|
18
|
|
Section
5.5
|
Asset
Information
|
18
|
|
Section
5.6
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Other
Information
|
19
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|
Section
5.7
|
Right
of Inspection
|
19
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|
Section
5.8
|
Asset
Portfolio Acquisition List
|
19
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|
Section
5.9
|
Compliance
Certificate
|
19
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|
Section
5.10
|
Reimbursement
of Collection and Enforcement Expenses
|
19
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|
Section
5.11
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Liens;
Other Debt
|
19
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|
Section
5.12
|
Consolidation,
Merger, Sale of Collateral; Changes to Organizational
Documents
|
20
|
|
Section
5.13
|
Other
Agreements
|
20
|
|
Section
5.14
|
Use
of Loan Proceeds
|
20
|
-ii-
|
Section
5.15
|
Notification
of Legal Process
|
20
|
|
Section
5.16
|
Transactions
with Affiliates
|
20
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|
Section
5.17
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Annual
Financial Statements
|
20
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|
Section
5.18
|
Quarterly
Financial Statements
|
20
|
|
Section
5.19
|
Single
Purpose Entity
|
21
|
|
Section
5.20
|
Collections
Policy
|
22
|
|
Section
5.21
|
Minimum
Monthly Payment Policy
|
22
|
|
Section
5.22
|
Amendments
to Asset Purchase Agreement
|
22
|
|
Section
5.23
|
Transactions
Involving Collateral
|
22
|
|
Section
5.24
|
Further
Assurance on Third Party Financings
|
22
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|
Section
5.25
|
Custodial
Account
|
23
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|
ARTICLE
VI
|
DEFAULT
|
23
|
|
Section
6.1
|
Events
of Default
|
23
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|
Section
6.2
|
Effect
of Event of Default
|
24
|
|
ARTICLE
VII
|
DEFINITIONS
|
25
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|
ARTICLE
VIII
|
MISCELLANEOUS
|
31
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|
Section
8.1
|
Survival
of Representations and Warranties
|
31
|
|
Section
8.2
|
Cure
|
31
|
|
Section
8.3
|
Relationship
between Parties
|
31
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|
Section
8.4
|
Confidentiality
|
32
|
|
Section
8.5
|
Amendment
and Modification
|
32
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|
Section
8.6
|
Waivers
|
32
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|
Section
8.7
|
Assignment
and Transferability of Loan Agreement; Loan Participations
|
32
|
|
Section
8.8
|
Actions
in Connection with Bankruptcy
|
33
|
|
Section
8.9
|
GOVERNING
LAW; JURISDICTION; VENUE
|
33
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|
Section
8.10
|
WAIVER
OF JURY TRIAL
|
33
|
-iii-
|
Section
8.11
|
Severability
and Enforceability of Loan Agreement
|
34
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|
Section
8.12
|
Titles
and Headings
|
34
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|
Section
8.13
|
Accounting
Terms
|
34
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|
Section
8.14
|
Notices
|
34
|
|
Section
8.15
|
Entire
Agreement
|
35
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|
Section
8.16
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Borrower’s
and Servicer’s Indemnification
|
36
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|
Section
8.17
|
Savings
Provision
|
36
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|
Section
8.18
|
Consent
|
36
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|
Section
8.19
|
Catastrophic
Event
|
36
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Section
8.20
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Conflicts
|
37
|
|
Section
8.21
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Further
Assurances
|
37
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|
Section
8.22
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Counterparts
|
37
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|
Section
8.23
|
Telecopier
Execution and Delivery
|
37
|
-iv-
EXHIBITS
|
Exhibit
A
|
FORM
OF PROPOSAL
|
|
Exhibit
B
|
FORM
OF SECURED PROMISSORY NOTE
|
|
Exhibit
C
|
FORM
OF SECURITY AGREEMENT
|
|
Exhibit
D
|
FORM
OF REMITTANCE REPORT
|
|
Exhibit
E
|
CLOSING
COSTS FOR INITIAL LOAN
|
|
Exhibit
F
|
FORM
OF COLLATERAL REPORT
|
-v-
THIS
MASTER
LOAN AND SERVICING AGREEMENT
is made
and entered into as of December 21, 2006 (this “Loan
Agreement”),
by
and among EAR
Capital I, LLC,
a
Delaware limited liability company (“Borrower”),
DRV
Capital, LLC,
a
Delaware limited liability company (“DRV
Cap”),
Debt
Resolve, Inc.,
a
Delaware corporation and the parent of DRV Cap and, indirectly, of Borrower,
(“Debt
Resolve”),
and
Sheridan
Asset Management, LLC,
a
Delaware limited liability company (“Lender”).
RECITALS
WHEREAS,
Borrower
and DRV Cap desire that Lender make one or more Loans to finance Borrower’s
acquisition of Assets from various Asset Sellers (as such terms are defined
in
Article VII
of this
Loan Agreement).
WHEREAS,
Lender
is willing to make the Loans, up to an aggregate principal amount of Twenty
Million Dollars ($20,000,000), subject to the terms and conditions herein set
forth.
WHEREAS,
DRV
Cap, Borrower
and Lender desire that DRV Cap shall service the Assets, and DRV Cap is willing
to perform such duties.
NOW
THEREFORE,
in
consideration of the foregoing premises and the agreements hereinafter set
forth, each of Debt Resolve, Borrower, DRV Cap and Lender hereby agree as
follows:
ARTICLE
I
THE
LOANS
Section
1.1 Definitions. Capitalized
terms used in this Loan Agreement are defined in Article VII
hereof.
Section
1.2 The
Loans.
Subject
to the terms and conditions set forth in this Loan Agreement and the other
Loan
Documents, Lender agrees to make one or more term loans (each, a “Loan”
and
collectively, the “Loans”),
all
of such Loans, collectively, having an aggregate original principal amount
not
to exceed the amount of Twenty Million Dollars ($20,000,000), in order to
finance Borrower’s acquisitions of Assets; provided,
however,
that
unless otherwise expressly agreed to in writing by Lender, in no event shall
Lender be required to make a Loan from and after the first to occur of: (a)
the
three (3) year anniversary of the date of this Loan Agreement, and
(b) the termination of this Loan Agreement, in accordance with its terms.
The Loans will not be made on a revolving basis.
Debt
Resolve shall, until the three (3) year anniversary date of this Loan
Agreement, (i) implement all of its and its Affiliates’ proposed and actual
acquisitions of Assets through Borrower (unless otherwise permitted under
Section 1.3(c)),
and
(ii) first offer to Lender, exclusively, in accordance with Section 1.3,
the
right and opportunity to make Loans to Borrower in accordance with this Loan
Agreement in order to finance each of such proposed and actual acquisitions
of
Assets. Further, Debt Resolve hereby agrees that, during the term of this Loan
Agreement, it shall not conduct, directly or indirectly, through one or more
Affiliates (other than DRV Cap in the case of acquisitions permitted under
Section 1.3(c)),
any
activity substantially similar to the business of Borrower, without the prior
express written consent of Lender.
Section
1.3 Procedures
for Loans.
(a) Proposals.
Borrower shall request each such Loan by presenting a Proposal to Lender for
the
acquisition of a specific Asset Portfolio.
-1-
(b) Acceptance. Lender
shall have five (5) Business Days from the date of its receipt of the
Proposal to accept or reject the Proposal, such acceptance or rejection to
be in
Lender’s sole and absolute discretion. If Lender accepts the Proposal, then such
acceptance shall be in writing in the form of a signed acceptance and consent
to
the Proposal evidenced at the end thereof. If Lender does not respond within
five (5) Business Days after Lender’s receipt of the Proposal, then Lender
shall be deemed to have rejected the Proposal. All Loans from Lender to Borrower
shall be made at Lender’s sole and absolute discretion. Lender shall have no
obligation to make any Loan except pursuant to and in accordance with the terms
and conditions of this Loan Agreement. Any acceptance delivered by Lender to
Borrower may be withdrawn by Lender for any reason at any time prior to
Borrower’s submission of a written and binding bid to the respective Asset
Seller for the purchase of the respective Asset Portfolio. For the purposes
of
this Section 1.3(b),
if an
Asset Seller permits use of an online bid, then such online bid shall be
considered a written bid.
(c) Rejected
Proposals.
If a
Proposal is rejected by Lender, then the Asset Portfolio which is the subject
of
such Proposal may only be acquired, in whole and not in part, by DRV Cap through
an Affiliate of DRV Cap which is not Borrower and which is not a subsidiary
of
Borrower. Such Affiliate will be responsible for obtaining its own financing
for
such acquisition from third party sources, which may not include Borrower or
any
subsidiary thereof. If any such Affiliate desires to acquire only some of the
Assets in such Asset Portfolio, then such desired Assets must first be reoffered
to Lender in a new Proposal.
Section
1.4 The
Note.
The
Loans shall be evidenced by the Note duly executed by Borrower in the form
attached hereto as Exhibit B.
The
Note shall bear interest on the amount of each Loan commencing on the applicable
Borrowing Date for such Loan, shall represent a borrowing by Borrower in the
amount of such Loan from the Borrowing Date for such Loan, and shall mature
on
the Maturity Date for the last Loan outstanding. Payments on the Note will
be
made in accordance with Sections 1.8,
1.10
and
2.2.
Section
1.5 Financed
Amount.
Lender
shall not make any Loan in an original principal amount greater than ninety
percent (90%) of the Cost of the Asset Portfolio to be purchased by
Borrower with the proceeds of such Loan. The
remainder of the Cost of such Asset Portfolio (i.e., ten percent (10%))
shall be funded by Borrower.
Section
1.6 Interest.
(a) Fixed
Interest.
Fixed
interest shall accrue on the unpaid principal balance of the Note from the
applicable Borrowing Date, at the rate of twelve percent (12%) per annum
(“Fixed
Interest”),
and
is payable in accordance with Section 2.2
commencing on the Distribution Date occurring in the first full calendar month
immediately following the applicable Borrowing Date. Fixed Interest will be
computed on the basis of the actual number of days that principal remains unpaid
and a 360-day year. Fixed Interest shall be payable in arrears on each
successive Distribution Date for the amount accrued during the immediately
preceding calendar month, until payment in full of such Loan in accordance
with
the terms of Section 2.2.
Notwithstanding the fact that Asset Liquidation Proceeds shall be paid directly
to Lender on the date of consummation of the event generating such Asset
Liquidation Proceeds rather than on the next applicable Distribution Date,
Fixed
Interest on the Loan relating to the Assets which generated such Asset
Liquidation Proceeds shall accrue for the entire calendar month for the month
in
which such Asset Liquidation Proceeds were paid to Lender, and such Fixed
Interest shall be calculated on the balance of such Loan at the beginning of
such month.
-2-
(b) Default
Interest.
Upon
the occurrence of an Event of Default, Fixed Interest shall accrue at a rate
(the “Default
Rate”)
equal
to the lesser of (i) eighteen percent (18%) per annum, or
(ii) the maximum interest rate permitted by law.
Section
1.7 Conditions
to Loans; Loan Closings.
This
Loan Agreement shall be effective upon its execution and delivery by each of
Debt Resolve, Borrower, Lender and DRV Cap; provided,
however,
that
each Loan is subject to the satisfaction or express written waiver of the
following conditions precedent on or before the applicable Borrowing Date for
such Loan:
(a) Conditions
to Initial Loan.
The
obligation of Lender to advance the initial Loan hereunder is subject to the
satisfaction or express written waiver of the following conditions precedent
on
or before the applicable Borrowing Date:
(i) Closing
Costs.
Borrower shall have paid to Lender, by certified bank check or wire transfer
of
immediately available funds, at least one (1) Business Day in advance of
the initial closing hereunder, Lender’s initial closing costs as set
forth in
Exhibit E attached
hereto, or, with Lender’s express prior written consent, such amounts may be
included as part of the Cost of the first Asset Portfolio purchased with the
proceeds of the initial Loan hereunder.
(ii) Loan
Documents.
All of
the Loan Documents shall have been fully executed on behalf of the applicable
parties.
(iii) Certified
Resolutions.
Borrower and Servicer shall each have delivered to Lender certified copies
of
resolutions or other evidence of limited liability company action (as
applicable) authorizing the execution, delivery and performance of each of
the
Loan Documents to which it is a party (including, without limitation, the
borrowing of Loans subsequent to the initial Loan) and the acquisition of Asset
Portfolios (including Asset Portfolios relating to Loans subsequent to the
initial Loan).
(iv) Opinions.
Lender
shall have received opinions from each of Borrower’s counsel and Servicer’s
counsel regarding the existence of Borrower and Servicer, their limited
liability company authority to enter into each of the Loan Documents to which
they are a party, the enforceability of the Loan Documents under New York law,
and the creation and perfection of Lender’s security interest in the
Collateral.
(v) Borrower
and Servicer Organizational Documents.
Lender
shall have received the following with respect to each of Borrower and Servicer:
(A) a recent (within thirty (30) days of the date of this Loan
Agreement) Good Standing Certificate issued by the Secretary of State of the
applicable jurisdiction of their respective formation, (B) a copy of the
certificate or articles of formation, as the case may be, certified by the
Secretary of State of the applicable jurisdiction of their respective formation,
and (C) current operating agreement or limited liability company agreement,
as the case may be, certified by an authorized officer, manager, member, or
partner, as applicable.
(vi) Credit
and Collection Policy.
Servicer shall deliver to Lender a true, correct and complete copy of its Credit
and Collection Policy.
(b) Conditions
to Loans.
The
obligation of Lender to advance each Loan hereunder is subject in each case
to
the satisfaction or express written waiver of the following conditions precedent
on or before the applicable Borrowing Date:
-3-
(i) Proposal
and Acceptance.
Borrower shall have delivered to Lender a complete Proposal, including all
schedules thereto, relating to the requested Loan, duly executed in writing
by
an authorized officer, manager, member, or partner, and the Proposal shall
have
been accepted and agreed to in writing by Lender as provided
hereunder.
(ii) Officer’s
Certificates.
(A) Borrower shall have caused an authorized officer (or manager, member or
partner, as applicable) to deliver to Lender a certification to Lender that
as
of such Borrowing Date, that no Event of Default exists and that, to the
knowledge of Borrower, there exists no condition, event or act which, with
the
giving of notice or passage of time, or both, would constitute an Event of
Default, and (B) Servicer shall have caused an authorized officer (or
manager, member or partner, as applicable) to deliver to Lender a certification
to Lender that as of such Borrowing Date, that no Servicer Termination Event
exists and that, to the knowledge of Servicer, there exists no condition, event
or act which, with the giving of notice or passage of time, or both, would
constitute a Servicer Termination Event.
(iii) Asset
Purchase Agreement Documentation.
Lender
shall have received all information and copies of all documents relating to
the
respective Asset Purchase Agreement as Lender shall reasonably request.
Notwithstanding the above, Borrower shall deliver to Lender, or Lender’s agent,
a true, correct and complete copy of both the proposed Asset Purchase Agreement
and the related ▇▇▇▇ of sale or other transfer document, together with an
accurate and detailed description of the Assets constituting Collateral
sufficient for filing with a UCC-1 financing statement, each of which shall
be
acceptable to Lender in its sole and absolute discretion.
(iv) No
Event of Default.
As of
such Borrowing Date, there shall exist no Event of Default and, to the knowledge
of Borrower, no condition, event or act which, with the giving of notice or
passage of time, or both, would constitute an Event of Default.
(v) Representations
and Warranties.
All
representations and warranties of Borrower and Servicer contained herein shall
be true and correct in all material respects on such Borrowing Date, with the
same force and effect as though such representations and warranties had been
made at such time except to the extent such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties will be true and correct in all material respects as of such earlier
date or, in the case of financial statements, shall refer to the financial
statements last delivered to Lender.
(vi) Acquisition
of Asset Portfolio by Borrower.
Borrower (and Servicer, if applicable) and the Asset Seller shall have performed
all of their respective obligations under the respective Asset Purchase
Agreement as of the respective Borrowing Date. Contemporaneously with the
closing of the Loan, Borrower shall pay the full amount of the purchase price
of
the Asset Portfolio and the Asset Seller shall transfer to Borrower the Asset
Portfolio pursuant to the terms of such Asset Purchase Agreement, free and
clear
of all liens, claims and encumbrances.
(vii) Delivery
of Documents.
Borrower shall, at Lender’s request, have delivered to Lender, or to Lender’s
counsel or agent, copies of all Account Documents relating to the Assets in
such
Asset Portfolio then in its possession that are Chattel Paper or Instruments,
and will immediately deliver (or cause the Asset Seller to deliver) upon its
receipt (or right to receive) any additional Account Documents that are Chattel
Paper or Instruments as may be reasonably requested by Lender; provided,
however,
that
all such Instruments must be delivered to Lender or Lender’s counsel or agent
within the time necessary for Lender to obtain a first priority perfected
purchase money security interest therein. To the extent that Servicer holds
any
such Chattel Paper or Instruments, Servicer shall hold them in a custodial
capacity as bailee for Lender.
-4-
(viii) Compliance
with Agreements.
Borrower shall have otherwise complied with all of the terms and conditions
of
the Loan Documents.
(ix) Frequency.
Notwithstanding anything to the contrary herein, Lender shall make no more
than
four (4) Loans in any given calendar month, unless Lender expressly
consents to a greater amount in writing, in its sole and absolute
discretion.
(c) Closing.
Unless
otherwise expressly agreed to by Borrower and Lender in writing, upon the
satisfaction of the conditions precedent set forth in this Section 1.7,
the
closing in regard to such Asset Purchase Agreement and the respective Loan
will
take place at Lender’s offices, or at such other place as Lender shall designate
in its sole and absolute discretion, and in such manner as Lender shall, in
its
sole and absolute discretion, deem advisable, including, but not limited to,
the
procedure and manner of funding of the Loan.
Section
1.8 Repayment
of Principal, Fixed Interest and Lender’s Residual.
Borrower
covenants to repay Loan principal amounts under the Note pursuant to the
amortization schedule set forth in Schedule 2
of each
Proposal, to pay Fixed Interest on all outstanding principal, and to pay the
Lender’s Residual, as more particularly set forth in Section 2.2
hereof.
Any
prepayments of any principal or Fixed Interest may only be made out of
Borrower’s share of Gross Collections as allocated in Section 2.2(b).
Section
1.9 Survival
of Obligation to Pay the Lender’s Residual.
Borrower’s obligation to pay the Lender’s Residual with respect to each Asset
Portfolio and its corresponding Loan shall not be discharged upon payment in
full of the principal amount of such Loan or of the Note, and Borrower’s
obligation to pay the Lender’s Residual with respect to such Asset Portfolio
shall continue (and the Asset Portfolio Net Collections thereof shall continue
to be distributed in accordance with Section 2.2
hereof).
Section
1.10 Principal.
(a) Amortization.
Principal payments for each Loan shall be made in accordance with the
twenty-four (24) month Portfolio Amortization Schedule set forth in
Schedule 2
to the
Proposal for such Loan (specifically, the minimum payments set forth therein),
and in accordance with Section 2.2
hereof.
If Borrower wants to make any changes to such Portfolio Amortization Schedule,
then Borrower shall submit such requested changes to Lender in writing, with
a
written explanation of the need for such changes. Any such requested changes
to
such Portfolio Amortization Schedule shall be subject to Lender’s prior written
approval.
(b) Prepayment
of Principal.
Except
as otherwise expressly provided for in Section 2.2
hereof,
principal may not be prepaid in whole or in part.
-5-
Section
1.11 Asset
Management Fee.
An Asset
Management Fee shall be paid to Lender in accordance with Section 2.2
hereof.
ARTICLE
II
COLLATERAL,
COLLECTIONS
AND DISTRIBUTIONS
Section
2.1 Perfection
of Lender’s Security Interest.
Borrower
shall take all commercially reasonable steps and incur such expenses, or
reimburse Lender for such expenses, as may be necessary or advisable in order
to
perfect Lender’s security interest in the Collateral, including, without
limitation, (a) appropriate notations on the computer records with respect
to the Asset Portfolios, (b) physical delivery to Lender or its designated
agent of Account Documents with respect to the Assets that are Chattel Paper
or
Instruments, or (c) preparation, filing or recording of an assignment,
financing statement, notice or other writing, such being subject to Lender’s
express written approval in its sole and absolute discretion. Borrower
authorizes Lender to file financing statements to perfect Lender’s security
interest in the Collateral and agrees to execute, acknowledge and deliver all
such further and additional instruments and documents, and take such other
actions, as may be reasonably necessary or advisable, or as Lender or its
counsel may reasonably request from time to time, in order to preserve, perfect
and maintain Lender’s rights hereunder, under the Security Agreement, and under
each of the other Loan Documents.
Section
2.2 Administration
of Collateral and Collections.
(a) Payment
and Receipt Processing.
Borrower and/or Servicer shall instruct all collection agencies or Persons
acting as such to submit Collections directly to the Custodial Account, as
established by Borrower for the benefit of Lender. Borrower shall direct that
any and all other Collections (other than Asset Liquidation Proceeds) from
parties other than Obligors shall be deposited into the Custodial Account.
Borrower shall direct that any and all Asset Liquidation Proceeds (e.g. the
net
proceeds of sales of Assets or of putback rights against Asset Sellers, etc.)
shall be paid directly to Lender by wire transfer of immediately available
funds
to an account specified by Lender.
(b) Distribution
of Payments and Collections.
For
each
Asset Portfolio, all Collections received by the Cutoff Date on account of
servicing the Assets in such Asset Portfolio, together with earned interest,
if
any, on such amounts, and net of any amounts paid as a result of putback rights
from third parties (such Collections, plus such interest and net of such amounts
paid, in the aggregate, the “Asset
Portfolio Net Collections”),
will
be distributed (or allocated, in the case of Asset Liquidation Proceeds which
have previously been paid directly to Lender) by Borrower pursuant to this
Loan
Agreement on each Distribution Date in the following order, and as may be more
particularly specified in the Remittance Report for the Loan associated with
such Asset Portfolio, which Remittance Report shall be in the form attached
hereto as Exhibit D,
and
which must be delivered to Lender (together with the monthly bank statement
for
the Custodial Account for the prior calendar month) sufficiently prior to such
Distribution Date such that Lender may review such Remittance Report and, if
need be, discuss same with Borrower such that such Remittance Report may be
revised to the extent necessary so that it may be expressly approved in writing
by Lender, as such approval is required prior to Borrower making any
distributions relating to such Asset Portfolio:
(i) First,
to the
custodian bank for the Custodial Account for payment of applicable
fees;
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(ii) Second,
to
Lender for any unreimbursed payments or advances made by Lender for the
protection of the Collateral as the Lender deemed necessary or advisable, and
for reasonable out-of-pocket expenses incurred by Lender or its agents with
respect to enforcement of the Note in connection with such Loan as Lender
reasonably deemed necessary or advisable, with respect to such Asset Portfolio
(any and all of the foregoing, “Lender
Advances”);
(iii) Third,
to
Servicer for the Servicing Fees as set forth in Schedule 1
of the
relevant Proposal for such Asset Portfolio, as have been previously expressly
agreed to in writing by Lender, and out of which Servicer shall pay the
Servicing Expenses relating to such Asset Portfolio, as specified in the
Proposal for such Asset Portfolio;
(iv) Fourth,
<Intentionally Deleted.>;
(v) Fifth,
to
Lender in an amount equal to Lender’s Asset Management Fee, calculated with
respect to such Asset Portfolio;
(vi) Sixth,
to
Lender in payment of the accrued but unpaid Fixed Interest due (in accordance
with Section 1.6(a))
on the
Loan associated with such Asset Portfolio. If the Asset Portfolio Net
Collections remaining after the distributions set forth in subparagraph (i)
through
subparagraph (v)
above
are not sufficient to pay all such Fixed Interest, then Borrower may apply
towards such Fixed Interest payment any Asset Portfolio Net Collections from
one
or more other Asset Portfolios, each of which must have sufficient Asset
Portfolio Net Collections to make the distributions with respect to such other
Asset Portfolio as are required in subparagraph (i)
through
subparagraph (vii)(C)
of this
Section 2.2(b)
(collectively, the “Required
Distributions”)
(each
such qualifying other Asset Portfolio, a “Qualifying
Asset Portfolio”).
Each
such application shall be limited to the amount by which the Asset Portfolio
Net
Collections of such Qualifying Asset Portfolio exceed the amount which is
required for the Required Distributions for such Qualifying Asset Portfolio.
Any
such application of Asset Portfolio Net Collections from any Qualifying Asset
Portfolio shall require Borrower to deliver to Lender together with the
Remittance Report a written analysis of its justification for such application
and a reasoned projection of when the Asset Portfolio Net Collections for such
Asset Portfolio shall return to a level sufficient for it to pay the Required
Distributions for such Asset Portfolio. If, in the event of any need to apply
excess Asset Portfolio Net Collections under this subparagraph (vi),
there
exists more than one Qualifying Asset Portfolio from which to apply excess
Asset
Portfolio Net Collections, then applications shall be made from such Qualifying
Asset Portfolios in the order set forth in subparagraph (vii)(E)
below.
If after the application of all available excess Asset Portfolio Net Collections
from all available Qualifying Asset Portfolios there remains any accrued but
unpaid Fixed Interest due, then the amount of the deficiency shall be paid
directly by Borrower to Lender from its own account and Borrower will be
entitled to repayment of such amount as provided under subparagraph (viii)
as
Borrower’s Contributions;
(vii) Seventh:
(A) first,
to
Lender in payment of principal of the Loan associated with such Asset Portfolio
in accordance with the Proposal relating thereto and pursuant to the Portfolio
Amortization Schedule set forth in Schedule 2
attached
to such Proposal (subject to any changes made thereto pursuant to and in
accordance with Section 1.10(a)),
or in
accordance with the pro rata monthly progress payments which may be required
under subparagraph (x)
below;
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(B) second,
to Lender as additional payment of principal of the Loan associated with such
Asset Portfolio, until such time as Lender has received the entire balance
of
principal with respect to such Loan;
(C) third,
if
there exists any Event of Default with respect to any Loan, then to Lender
to be
applied to such interest, principal or other amounts due and owing to Lender
with respect to such Loan, including any such amounts payable to Lender pursuant
to subparagraph (ix)
of this
Section 2.2(b),
as a
result of such Event of Default on such Loan;
(D) if
the
Cutoff Date is in a month which is the 6th,
12th,
or
18th
month
amortization target for the Loan associated with such Asset Portfolio or any
month in which pro rata monthly progress payments for such Loan are required
under subparagraph (x)
below,
and the Asset Portfolio Net Collections remaining after the distributions set
forth in subparagraph (i)
through
subparagraph (vi)
above
are not sufficient to pay the amount of principal then due under subparagraph (vii)(A)
above,
then Borrower may apply towards such principal payment Asset Portfolio Net
Collections from one or more Qualifying Asset Portfolios, each of which
(1) remains a Qualifying Asset Portfolio after any contributory allocations
under subparagraph (vi)
above,
and (2) has satisfied its most recent 6th,
12th,
or
18th
month
amortization target. Each such application shall be limited to the amount by
which the Asset Portfolio Net Collections of such Qualifying Asset Portfolio
exceed the amount which is required for the Required Distributions for such
Qualifying Asset Portfolio. Any such application of Asset Portfolio Net
Collections from any Qualifying Asset Portfolio shall require Borrower to
deliver to Lender together with the Remittance Report a written analysis of
its
justification for such application and a reasoned projection of when the Asset
Portfolio Net Collections for such Asset Portfolio shall return to a level
sufficient for it to pay the Required Distributions for such Asset Portfolio.
If, in the event of any need to apply excess Asset Portfolio Net Collections
under this subparagraph (vii)(D),
there
exists more than one Qualifying Asset Portfolio from which to apply excess
Asset
Portfolio Net Collections, then applications shall be made from such Qualifying
Asset Portfolios in the order set forth in subparagraph (vii)(E)
below.
If after the application of all available excess Asset Portfolio Net Collections
from all available Qualifying Asset Portfolios there remains any principal
then
due under subparagraph (vii)(A)
above
with respect to such Asset Portfolio, then the amount of the deficiency shall
be
paid directly by Borrower to Lender from its own account and Borrower will
be
entitled to repayment of such amount as provided under subparagraph (viii)
as
Borrower’s Contributions;
(E) if,
in
the event of any need to apply excess Asset Portfolio Net Collections under
subparagraph (vi)
above or
subparagraph (vii)(D)
above,
there exists more than one Qualifying Asset Portfolio from which to apply excess
Asset Portfolio Net Collections, then applications shall be made from such
Qualifying Asset Portfolios in the following order:
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(1) first,
from those Qualifying Asset Portfolios which have no remaining outstanding
principal balance with respect to the Loan associated with such Qualifying
Asset
Portfolio, and which are then distributing Asset Portfolio Net Collections
under
subparagraph (ix)
below;
(2) second,
from those Qualifying Asset Portfolios which have no remaining outstanding
principal balance with respect to the Loan associated with such Qualifying
Asset
Portfolio, and which are then distributing Asset Portfolio Net Collections
under
subparagraph (viii)
below.
(viii) Eighth,
upon
the payment in full of all accrued and outstanding Fixed Interest and all
outstanding principal of the Loan associated with such Asset Portfolio, unless
applied to another Asset Portfolio under subparagraph (vi)
above or
subparagraph (vii)(D)
above as
excess Asset Portfolio Net Collections, to Borrower, until such time as Borrower
has received the balance of Borrower’s Contributions made with respect to such
Loan. If there exists any Event of Default with respect to any Loan, then no
distribution under this subparagraph shall be made hereunder until such Event
of
Default has been cured in full;
(ix) Ninth,
upon
the payment in full of all accrued and outstanding Fixed Interest and all
outstanding principal of the Loan associated with such Asset Portfolio, a
percentage equal to the Lender’s Residual Percentage of the remaining Asset
Portfolio Net Collections with respect to such Asset Portfolio will be
distributed to Lender (the “Lender’s
Residual”),
and,
if no Event of Default has occurred and is continuing, then a percentage equal
to the Borrower’s Residual Percentage of the remaining Asset Portfolio Net
Collections with respect to such Asset Portfolio will be distributed to Borrower
(the “Borrower’s
Residual”);
and
(x) Tenth,
notwithstanding the above, if under either subparagraph (vi)
or
subparagraph (vii)
there is
either (A) a Borrower’s Contribution, or (B) an application of excess
Asset Portfolio Net Collections from a Qualifying Asset Portfolio, then, with
respect to the Asset Portfolio with respect to which the Borrower’s Contribution
or application of excess Asset Portfolio Net Collections was made, Borrower
shall be required to make pro rata monthly progress payments under subparagraph (vii)(A)
above
toward the next scheduled amortization targets for the Loan associated with
such
Asset Portfolio.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF BORROWER AND SERVICER
To
induce
Lender to make Loans under this Loan Agreement, each of Borrower and Servicer
severally makes the following representations and warranties as to itself (and,
in the case of Sections 3.2
and
3.3,
Borrower also makes the representations and warranties relating to Debt
Resolve), which shall survive the execution and delivery of the Loan Documents
and shall be deemed to be made as of each Borrowing Date and shall continue
in
full force and effect until payment in full by Borrower of all amounts payable
hereunder or under the Loan Documents and the termination of this Loan
Agreement.
Section
3.1 Corporate
Existence and Power.
Each of
Borrower and Servicer is a duly organized and validly existing limited liability
company in good standing under the laws of the State of Delaware with all
requisite power and authority to own and operate its property and assets, to
conduct the businesses in which it is engaged or proposes to engage, and to
execute, deliver, and perform its obligations under the Loan Documents to which
it is a party. Borrower does business only under the name of “EAR Capital I,
LLC.”
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Section
3.2 Authorization.
The
execution, delivery and performance of the Loan Documents by Borrower and
Servicer have been duly authorized by all necessary limited liability company
action. The execution, delivery and performance of the Loan Agreement by Debt
Resolve have been duly authorized by all necessary corporate action. Each of
Borrower, Debt Resolve and Servicer has duly authorized, executed and delivered
the Loan Documents to which it is a party, and each such Loan Document, assuming
the due authorization and execution thereof by Lender, constitutes its legal,
valid and binding obligation, enforceable against Borrower, Debt Resolve or
Servicer, as applicable, in accordance with its respective terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
creditor’s rights generally and by general principles of equity.
Section
3.3 Compliance
with Law and Other Agreements.
Each of
Borrower, Debt Resolve and Servicer is not in violation of, or in default under,
any terms of its certificate or articles of formation, operating agreement
or
limited liability company agreement, certificate of incorporation, or bylaws,
as
applicable, or any law or governmental regulation applicable to it or any
agreement to which it is a party, which violation or default would have a
Material Adverse Effect. The execution, delivery, and performance by Borrower,
Debt Resolve or Servicer of the Loan Documents to which they are a party, the
consummation of the transactions contemplated herein or therein and the
compliance with the terms and provisions hereof or thereof will not contravene
any material provision of any law or regulation to which Borrower, Debt Resolve
or Servicer is subject or any order or decree of any court of governmental
authority applicable to Borrower, Debt Resolve or Servicer, and will not result
in any material breach of or constitute a default under any indenture, mortgage,
deed of trust, agreement or other instrument to which Borrower, Debt Resolve
or
Servicer is a party or by which it or its properties are bound, or result
(except as contemplated by this Loan Agreement and the Security Agreement)
in
the creation or imposition of any Lien on any of the property or assets of
Borrower or Servicer. Each of Borrower and Servicer holds all of the permits,
licenses, certificates, consents and other authorizations of applicable
governmental entities required by law to own and service the Asset Portfolios,
the absence of which would have a Material Adverse Effect.
Section
3.4 Litigation.
There
are no actions, suits, proceedings, or investigations pending, or, to the
knowledge of Borrower, threatened, against or affecting Borrower, Servicer,
any
of their respective subsidiaries or the principals thereof, or any of their
respective properties, nor is there any outstanding judgment, order, writ,
injunction, decree or award affecting Borrower, Servicer, any of their
respective subsidiaries or the principals thereof, or any of their respective
properties before any court or before any federal, state, municipal or other
governmental department, commission, board, bureau or agency, which, either
separately or in the aggregate, is reasonably likely to have a Material Adverse
Effect, and neither Borrower nor Servicer knows of any basis for any such suit,
proceeding, or investigation.
Section
3.5 Ownership;
Liens.
Beginning on the applicable Borrowing Date, Borrower has a valid, first priority
ownership interest in the respective Assets, free and clear of all Liens other
than (a) the Lien in favor of Lender created pursuant to the Security
Agreement, (b) the lien of taxes not yet due and payable, and (c) the
lien, if any, of attorneys or others in possession of Collateral for the
purposes of collection.
Section
3.6 No
Materially Adverse Contracts.
Neither
Borrower nor Servicer is obligated under any contract or agreement or under
any
law, regulation or decree which is reasonably likely to have a Material Adverse
Effect.
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Section
3.7 Disclosure.
The
Loan Documents and the certificates, exhibits and schedules attached thereto
or
furnished to Lender by Borrower or Servicer in connection with the closing
of
any Loan, do not contain any untrue statement of a material 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. To the best knowledge of each of Borrower and Servicer, except
as
previously disclosed to Lender in writing, there is no fact or condition
existing as of the date hereof which has, or in the future is reasonably like
to
have, a Material Adverse Effect.
Section
3.8 Government
Approval.
Except
for the filing of financing statements with respect to Borrower, or as may
be
provided in the Asset Purchase Agreements, neither Borrower nor Servicer is
required to obtain any order, consent, approval or authorization of, or
presently required to make any declaration or filing with any governmental
authority in connection with, their respective execution, delivery or
performance of any Asset Purchase Agreement or any Loan Document.
Section
3.9 Professional
Capability.
Each of
Borrower and Servicer have (a) appropriate and sufficient personnel and
management with appropriate and sufficient experience to properly undertake
and
implement the obligations of Borrower and Servicer, respectively, under the
Loan
Documents, and (b) established and instituted proper and necessary controls
and procedures to manage and operate the acquisitions and servicing,
respectively, contemplated to be implemented by the Loan Documents.
Section
3.10 Limited
Authority over Custodial Account.
Borrower has no authority to withdraw funds from the Custodial Account, except
as authorized in Section 2.2(b)
of this
Loan Agreement or unless otherwise as expressly directed and consented to in
writing by Lender.
Section
3.11 Credit
and Collection Policy.
The
Credit and Collection Policy delivered by Servicer to Lender is true, correct
and complete in all material respects.
ARTICLE
IV
ASSET
SERVICING
Section
4.1 Servicer.
The
servicing, administering, and collection of the Assets shall be conducted by
a
qualified servicer which agrees to perform the customary duties, obligations
and
covenants of a servicer, subject and pursuant to the terms of this Loan
Agreement and the other Loan Documents. The term “Servicer”
as
used
in this Loan Agreement shall mean, initially, DRV Cap, and subsequently, any
subsequent servicer expressly approved in advance by Lender in writing in its
sole discretion, together with, in each and every case, each and every agent
and
third party expressly approved by Lender to act for or on behalf of such
servicer. DRV Cap hereby accepts such duties, obligations and covenants and
agrees to serve as the initial Servicer hereunder. Servicer shall be entitled
to
receive Servicing Fees from Collections (but calculated excluding Asset
Liquidation Proceeds) received on account of each particular Asset Portfolio
as
provided in the applicable Proposal and Section 2.2.
Servicer shall be responsible for the costs of agency and law firm system setup
in connection with servicing the Assets. Servicer may subcontract services
to
outside service providers with Lender’s express prior written approval. Servicer
shall, at its expense, conduct on-site audits of subcontractors and vendors
retained to service any of the Assets. Notwithstanding anything to the contrary
contained in this Loan Agreement, all servicing and collection contracts and/or
agreements entered into by either Borrower or Servicer in regard to servicing
the Assets shall contain industry standard terms and provisions and shall be
expressly approved in advance by Lender in writing.
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Section
4.2 Replacement
Servicer.
If the
initial Servicer (or any replacement Servicer) is terminated as Servicer
pursuant to Section 4.5
below,
then Borrower shall select a replacement Servicer and, upon Lender’s express
written approval and consent to such replacement Servicer, shall enter into
a
new servicing agreement with such replacement Servicer containing
industry-standard terms and provisions and providing for such Servicing Fees
and
such other terms and conditions as Lender may expressly approve in writing;
provided,
however,
that
each such replacement Servicer shall agree in writing (an original copy of
which
shall be delivered to Lender) to comply with, and be bound by, all of the terms,
provisions and conditions of this Loan Agreement to which the initial Servicer
hereunder is bound, subject to such other terms and conditions set forth in
the
new servicing agreement as Lender may expressly approve in writing.
Borrower
may not terminate the engagement of any Servicer or transfer or assign the
responsibility of servicing the Assets from Servicer to any other Person without
the express prior written consent of Lender.
Section
4.3 Duties
of Servicer.
(a) Credit
and Collection Policy.
For
each Asset Portfolio, Servicer shall manage, service, administer, and collect
the Assets in accordance with the respective provisions of the Credit and
Collection Policy, as in effect from time to time, with the goal of achieving
the projections in the applicable Portfolio Budget attached as Schedule 3
to the
Proposal for such Asset Portfolio.
(b) Standard
of Care.
In
performing its duties and obligations under this Loan Agreement, Servicer will
comply with all applicable Credit and Collection Laws and will apply in
performing such duties and obligations, those standards, policies and procedures
which are the higher or most stringent of either (i) commercially
reasonable standards, policies and procedures, or (ii) those standards,
policies and procedures which Servicer applies with respect to assets owned
by
Servicer or that Servicer services for, at least in part, its own benefit or
the
benefit of Borrower, and which, in either case, are not financed by Servicer
or
any Affiliate thereof, and which is not related to or part of any transaction
with Lender pursuant to the Loan Documents or any successor documents. In
performing its duties and obligations hereunder, Servicer shall maintain all
state and federal licenses, permits and franchises necessary for it to perform
its responsibilities hereunder, and shall not impair the rights of Borrower
or
Lender in the Collateral.
(c) Credit
and Collection Policy Changes.
Servicer shall make no changes to its Credit and Collection Policy without
the
express prior written consent of Lender.
(d) Insurance.
Servicer shall maintain an errors and omissions insurance policy providing
coverage in an amount of not less than $1,000,000 and a fidelity bond in an
amount of not less than $100,000, in each case, in such form as is customary
for
loan servicers acting in respect of consumer loans on behalf of institutional
investors therein. Borrower and Lender shall be named as additional insureds
under such insurance policy, and as beneficiaries under such bond, and shall
be
furnished with not less than thirty (30) calendar days prior written notice
before any amendment or cancellation thereof.
(e) Defend
Against Claims Through Servicer.
Servicer shall defend Borrower’s and Lender’s right, title and interest to and
in the Collateral against all claims of third parties claiming through or under
Servicer.
(f) No
Transfers of Assets.
Servicer shall not sell, pledge, assign, or transfer to any other Person, or
grant, create, incur, assume, permit or suffer to exist any Lien on any assets
of Borrower, including the Collateral, other than as permitted by the Loan
Documents or as otherwise agreed to by Lender.
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(g) General.
Servicer shall collect all payments due under the Assets, account for such
payments, comply with the Custodial Account procedures, set up a program for
collecting data and records, storing such records, and making reports to Lender
with respect to the Collateral in substantially the form attached hereto as
Exhibit F
(each, a
“Collateral
Report”)
and
collections on the Assets, as reflected in the Remittance Reports. Servicer
shall provide Lender with such Collateral Reports and Remittance Reports in
electronic form at Lender’s request, subject to Lender’s right to approve the
Remittance Report provided for in Section 2.2.
The
Collateral Reports and Remittance Reports shall be submitted to Lender by the
fifth (5th) Business Day after the Cutoff Date.
(h) Term.
Servicer shall commence servicing each Asset Portfolio on the date such Asset
Portfolio is acquired by Borrower and shall continue servicing such Asset
Portfolio until the earlier of (i) the collection, resolution, disposition
or charge-off of the entire Asset Portfolio to Borrower’s and Lender's
satisfaction, (ii) the appointment of a new Servicer under Section 4.5,
or
(iii) the written agreement of Borrower and Lender stating
otherwise.
(i) No
Subcontracting Without Consent.
Notwithstanding anything to the contrary contained in this Loan Agreement,
Servicer shall not enter into any servicing or collection contracts or
agreements with third parties in regard to servicing the Assets without Lender’s
express prior written approval.
Section
4.4 Servicer’s
Indemnification.
Servicer agrees to indemnify, defend and hold Lender harmless from and against
any and all losses, damages, costs, claims, expenses (including reasonable
attorneys fees) and liabilities to third parties growing out of or resulting
from (i) the failure of Servicer to comply with all applicable Credit and
Collection Laws; (ii) the actions of any of the agents, representatives or
employees of Servicer taken in connection with the collection activities with
respect to the Assets; (iii) the misapplication (whether negligent or
intentional), misappropriation, conversion or theft of any part of the
Collateral by any officer, director, manager, employee, agent or representative
of Servicer; (iv) a Servicer Termination Event, or (v) fraud or
material misrepresentation by Servicer.
Section
4.5 Termination
of Servicer.
(a) Notwithstanding
anything to the contrary contained in this Loan Agreement, the occurrence and
continuance of any of the following shall constitute a “Servicer
Termination Event”:
(i) the
occurrence and continuance of an Event of Default by Servicer
hereunder;
(ii) Servicer
has breached any of the terms and conditions of Section 4.3
and has
not cured such breach within five (5) calendar days;
(iii) Servicer’s
failure to deliver any Collateral Report and/or any Remittance Report to Lender
by the fifth (5th) Business Day after the Distribution Date by which such
report was due;
(iv) Servicer’s
failure to transfer, deposit or deliver to Lender any proceeds, or make any
payment, in each case as required under this Loan Agreement or any other Loan
Document, and such failure remains unremedied for more than three (3)
Business Days;
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(v) Unless
as
otherwise provided herein, any breach by Servicer of any covenant, term,
agreement or condition contained in any Loan Document to which it is a party
(other than any failure to pay under Section 6.1(a)
or
provide reports in a timely manner), which breach has a Material Adverse Effect,
and the same shall continue unremedied for a period of fifteen (15)
calendar days after the Servicer has or reasonably should have had notice
thereof (provided,
however,
that
such fifteen (15) calendar day period shall only be applicable if Servicer
uses diligent efforts during such time to cure such breach) or such other amount
of time permitted for cure that is specifically provided herein;
(vi) Servicer
delegates its duties under this Loan Agreement, except to the extent that
Servicer retains responsibility to Lender for the performance of such duty
or to
the extent otherwise permitted hereby;
(vii) an
involuntary proceeding shall be commenced or an involuntary petition shall
be
filed in a court of competent jurisdiction seeking (A) relief in respect of
Servicer, or of a substantial part of the property or assets of Servicer, under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other federal or state bankruptcy, insolvency, receivership
or
similar law, (B) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Servicer or for a substantial
part of the property or assets of Servicer, or (C) the winding-up or
liquidation of Servicer; and such proceeding or petition or appointment shall
continue undismissed for sixty (60) days or an order or decree approving or
ordering any of the foregoing shall be entered;
(viii) Servicer
shall (A) voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code as now constituted or
hereafter amended, or any other federal or state bankruptcy, insolvency,
receivership or similar law, (B) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or the filing of
any
petition described in clause (vii) above, (C) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator or similar
official for Servicer or for a substantial part of the property or assets of
Servicer, (D) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (E) make a general
assignment for the benefit of creditors, (F) become unable, admit in
writing its inability or fail generally to pay its debts as they become due,
or
(G) take any action for the purpose of effecting any of the
foregoing;
or
(ix) any
representation or warranty made by Servicer in this Loan Agreement, any
certificate, any Collateral Report and/or Remittance Report delivered pursuant
to this Loan Agreement shall prove to have been false or misleading when made
in
any respect that has a Material Adverse Effect, and the same shall continue
unremedied for a period of fifteen (15) calendar days after the earlier to
occur of (A) discovery by a senior officer of Servicer, and (B) the
date on which written notice thereof, requiring the same to be remedied, shall
have been received by a senior officer of Servicer; provided,
however,
that
such fifteen (15) calendar day period shall only be applicable if Servicer
uses diligent efforts during such time to cure such breach;
-14-
(b) Upon
any
Servicer Termination Event and after any allotted cure period as may be set
forth above if such Servicer Termination Event shall be continuing, Lender
may
notify Servicer and Borrower in writing that Servicer is terminated and shall
cease all future servicing of the Assets after a certain date and time (the
“Replacement
Date”)
no
later than five (5) Business Days after the date of such notice, and that
all such future servicing shall be undertaken by a new Servicer. Borrower shall
then, in accordance with Section 4.2,
designate a new Servicer (which is acceptable to and expressly approved in
writing by Lender) and enter into a new servicing contract with such new
Servicer by the Replacement Date which contract shall comply with Section 4.2
and
shall provide for the new Servicer to commence servicing the Assets on the
Replacement Date. If Borrower fails to designate a new Servicer acceptable
to
Lender by the third (3rd)
calendar day prior to the Replacement Date, then Lender may designate the new
Servicer (and which new Servicer may, but need not, be Lender (or its
designee)). Upon receipt of such written termination notice Servicer
shall
terminate its activities as Servicer hereunder and facilitate as quickly as
commercially practicable, the transition of the performance of such activities
to the new Servicer prior to the Replacement Date, and the new Servicer shall
assume each and all of Servicer’s said obligations to service and administer the
Assets, on the terms and subject to the conditions herein set forth and Servicer
shall use its best efforts to assist the new Servicer in assuming
such obligations. Upon Lender’s request following the termination of Servicer
hereunder, Servicer shall refer inquiring Obligors to a telephone number
provided by Lender or Lender’s designee and shall forward all correspondence
received from Obligors to Lender or Lender’s designee within three (3)
Business Days following Servicer’s receipt of such correspondence.
(c) If
Servicer (or any subsequent Person acting as Servicer) is terminated as Servicer
and servicing is to be performed by a new Servicer, then such new Servicer
shall
(i) enter into a new servicing agreement with Borrower (or with Lender, on
Borrower’s behalf, if Lender designates the new Servicer) containing
industry-standard terms and provisions and providing for such Servicing Fees
and
such other terms and conditions as to which Borrower may agree and Lender may
expressly approve in writing (or to which Lender may agree, if Lender designates
the new Servicer), and (ii) enter into, in order to have all the rights and
assume all the duties and obligations of Servicer under this Loan Agreement,
including without limitation this Section 4.5,
a
written agreement (an original copy of which shall be delivered to Lender)
to
comply with, and be bound by, all of the terms, provisions and conditions of
this Loan Agreement to which the initial Servicer hereunder is bound, subject
to
such other terms and conditions as may be set forth in the new servicing
agreement.
Section
4.6 Rights
of Servicer Upon the Occurrence of a Servicer Termination
Event.
Upon
the occurrence and during the continuance of a Servicer Termination Event and
following the appointment of a new Servicer,
the
power and authority of Servicer, as initial Servicer (or any subsequent Person
acting as the Servicer), to collect the Assets in the ordinary course of
business shall be deemed to be immediately revoked and terminated, and with
or
without such general notification, and, subject
to the limitations and requirements of Section 4.3,
the new
Servicer shall have the authority to do one or more of the
following:
(a) issue
a
receipt to any person obligated to pay any amount on account of any Asset,
which
shall be a full and complete release, discharge, and acquittance to such person
to the extent of any amount so paid to the new Servicer
(b) endorse
the name of Borrower and/or Servicer or any subsequent Person acting as Servicer
(as applicable) upon any check, draft, instrument, receipt, instruction, or
other document or item, including all items evidencing payment upon any Asset
or
other indebtedness constituting Collateral, for which the new Servicer is hereby
granted an irrevocable power of attorney, which grant is coupled with an
interest; or
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(c) endorse
or otherwise execute all instruments, instructions or other documents,
agreements, or items on behalf of Borrower and/or Servicer or any subsequent
Person acting as the Servicer, as shall be reasonably deemed by the new Servicer
to be necessary or advisable in order to collect upon any Collateral or protect
Lender’s security interest in any Collateral, for which the new Servicer is
hereby granted an irrevocable power of attorney, which is coupled with an
interest.
ARTICLE
V
COVENANTS
OF BORROWER AND SERVICER
Each
of
Borrower and Servicer (where applicable) covenants and agrees that from the
date
hereof and until payment in full of the Note and of all other amounts due under
this Loan Agreement:
Section
5.1 Business
and Existence.
Each of
Borrower and Servicer will perform all things necessary to preserve and keep
in
full force and effect its limited liability company existence and use its
commercially reasonable efforts to comply in all material respects with all
laws
applicable to it. Borrower will not engage in any line of business other than
purchasing consumer and commercial loan receivables and the holding and
collection of the Assets, without the prior written consent of Lender. Except
for cash, business equipment, supplies, hardware, software and/or contract
rights incidental to the operation of Borrower as contemplated by this Loan
Agreement and those Assets it is allowed to purchase subject to Sections 1.2,
1.3(b),
and
5.24,
Borrower will not own assets other than the Assets.
Section
5.2 Payment
of Obligations and Expenses.
Borrower will pay and discharge all of its indebtedness, obligations and
expenses promptly in accordance with normal terms and practices of its business,
before the same shall become delinquent, as well as all lawful claims for labor,
materials and supplies which otherwise, if unpaid, might become a lien or charge
upon its properties or assets or any part thereof. Borrower shall not be
required to pay any obligation so long as Borrower shall contest, in good faith
and at its own cost and expense, 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
obligations so contested; provided,
however,
that no
such contest shall subject Lender to the risk of any liability. Borrower shall
give Lender prompt written notice of any such contest.
Section
5.3 Payment
of Taxes and Assessments.
Borrower shall pay when due all taxes, assessments and other governmental
charges or levies which become due and payable by Borrower to any political
entity, subdivision or department thereof under any law now or hereafter in
force or effect. Borrower, however, shall not be required to pay any tax, charge
or assessment so long as 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 Lender to the risk of any liability. Borrower shall give Lender prompt
written notice of any such contest.
Section
5.4 Notice
of Event of Default.
As soon
as practicable after an officer of Borrower or Servicer has knowledge of an
Event of Default or any condition which, with the passage of time could become
an Event of Default, Borrower or Servicer, as the case may be, will furnish
Lender with written notice of the occurrence of any such event or the existence
of any such condition which constitutes or upon written notice or lapse of
time
could constitute an Event of Default.
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Section
5.5 Asset
Information.
Each of
Borrower and Servicer will provide Lender sufficient information to allow Lender
to make an informed decision with respect to a Proposal. Such information shall
include, but not be limited to, a complete Proposal (including all schedules
thereto) relating to the requested Loan and any information supporting such
complete Proposal, information provided to Borrower by Asset Sellers related
to
the proposed Assets, internally generated stratifications and analyses of the
proposed Assets, asset portfolio write-ups prepared by Borrower, key assumptions
used in projecting future cash flows of the proposed Assets, historical numbers
on the proposed Assets, and proposed Asset Purchase Agreements.
Notwithstanding the foregoing, the failure to provide any requested information
other than that expressly specified in the immediately preceding sentence shall
not constitute a default or Event of Default hereunder, and Lender’s sole remedy
in such event shall be to reject the subject Proposal.
Section
5.6 Other
Information.
Each of
Borrower and Servicer will furnish such other information regarding the
operations, business affairs and financial condition of Borrower or Servicer
or
their respective properties or assets (including, but not limited to, the Assets
or other Borrower assets) as Lender may reasonably request for the purpose
of
determining compliance with the Loan Documents.
Section
5.7 Right
of Inspection.
Upon
request of reasonable notice by Lender, each of Borrower and Servicer shall
permit any person designated by Lender, at Lender’s expense, to visit and
inspect any of the properties, books and financial reports of Borrower or
Servicer and to discuss its affairs, finances and accounts related to the Loans,
all at such reasonable times during ordinary business hours of Borrower or
Servicer and as often as Lender may reasonably request for the purpose of
determining compliance with the Loan Documents, or the status of the Assets
and/or the Collateral; provided,
however,
that
Lender will use reasonable efforts to conduct (or have conducted) any such
examination or inspection so as to minimize disruptions to the operations of
Borrower or Servicer.
Section
5.8 Asset
Portfolio Acquisition List.
Borrower shall furnish to Lender, no later than five (5) calendar days
after each month-end, a list of the Asset Portfolios, if any, acquired by
Borrower or its Affiliates during the previous month. Such list shall be
certified by an officer of Borrower as to its completeness and include the
following pieces of information: name of Asset Seller; size of Asset Portfolio;
purchase price; and general collateral characteristics.
Section
5.9 Compliance
Certificate.
Each of
Borrower and Servicer will deliver to Lender, within forty-five (45)
calendar days after the end of each calendar quarter, a certificate dated as
of
the end of the quarter in question and signed by a responsible officer of such
party stating (i) that as of the date thereof no Event of Default has
occurred and is continuing or exists (or, if an Event of Default exists, the
nature thereof), (ii) that all respective representations and warranties of
Borrower or Servicer, as the case may be, set forth in this Loan Agreement
remain true and correct in all material respects as of the date of such
compliance certificate, and (iii) that each has carried out its respective
obligations under this Loan Agreement in all material respects.
Section
5.10 Reimbursement
of Collection and Enforcement Expenses.
Borrower will reimburse Lender, upon demand, for any and all costs, including
reasonable attorneys’ fees and expenses, actually incurred by Lender or its
agents in either collecting any sums payable by Borrower under the Loan
Documents or enforcing any of Borrower’s obligations under the Loan
Documents.
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Section
5.11 Liens;
Other Debt.
Neither
Borrower nor Servicer will sell, transfer or assign any part of the Collateral,
except as permitted herein or as may be agreed to by Lender, or contract,
create, or incur any Liens upon or grant any security interest in any of the
Collateral, whether now owned or hereafter acquired, except (i) the Lien in
favor of Lender created pursuant to the Security Agreement, (ii) the lien
of taxes not yet due and payable, and (iii) the lien, if any, of attorneys
or others in possession of Collateral for the purposes of collection. Borrower
will not incur any debt, secured or unsecured, direct or contingent (including
guarantying any obligation), other than the Loans or accounts payable and
accruals incurred in the ordinary course of Borrower’s business.
Section
5.12 Consolidation,
Merger, Sale of Collateral; Changes to Organizational
Documents.
Borrower will not (a) wind up, liquidate, or dissolve its affairs,
(b) enter into any transaction of merger or consolidation, or
(c) convey, sell, lease or otherwise dispose of the Collateral or any part
thereof, except in the normal course of collections on the Asset Portfolios;
provided,
however,
that
any disposition of any nature of any item of Collateral (other than in the
normal course of collections) shall require the prior express written approval
of Lender. Borrower will not amend its certificate of incorporation or its
articles of formation or bylaws or limited liability company or partnership
agreement (as applicable) without the prior express written consent of Lender,
determined in Lender’s reasonable discretion.
Section
5.13 Other
Agreements.
Neither
Borrower nor Servicer will enter into any agreement containing any provision
that would be violated or breached by the performance of their respective
obligations under any Loan Document.
Section
5.14 Use
of Loan Proceeds.
Borrower shall apply the proceeds of the Loans only to pay the Cost of the
Asset
Portfolios and for no other purpose.
Section
5.15 Notification
of Legal Process.
Each of
Borrower and Servicer will promptly notify Lender of any attachment or other
legal process levied against any of the Collateral and any information received
by Borrower or Servicer relative to the Collateral that may materially or
adversely affect the value thereof or the rights and remedies of Lender with
respect thereto.
Section
5.16 Transactions
with Affiliates.
Borrower will not, either directly or indirectly, enter into any contracts,
agreements or transactions, including but not limited to, brokerage contracts,
property management agreements, sales contracts for the providing of any other
goods or services, or the reimbursement or payment of any fees or expenses,
with
any of its shareholders, officers, directors, managers, partners or members,
or
with any of Borrower’s Affiliates (including, without limitation, Servicer) or
any entities owned in whole or in part by Borrower or its shareholders,
officers, directors, managers, partners or members, without the express prior
written consent of Lender.
Lender
hereby approves and consents to DRV Cap being engaged as the initial Servicer
hereunder.
Section
5.17 Annual
Financial Statements.
Each of
Borrower and Servicer shall, no later than one hundred twenty (120)
calendar days after their respective fiscal year end, provide to Lender annual
financial statements prepared in accordance with generally accepted accounting
principles, consistently applied, and certified as correct by a senior and
knowledgeable officer or manager of Borrower or Servicer, as the case may
be.
Borrower
shall also, by such deadline, provide to Lender a copy of any audited financial
statements which its parent company, DRV Cap, may provide to DRV Cap’s
shareholders or the general public with respect to such fiscal year, together
with any and all schedules or other financial materials that Borrower provides
to DRV Cap in order to facilitate the preparation of DRV Cap’s audited financial
statements.
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Section
5.18 Quarterly
Financial Statements.
Each of
Borrower and Servicer shall, no later than forty-five (45) calendar days
after the end of each of their respective fiscal quarters, provide to Lender
financial statements for such quarter prepared in accordance with generally
accepted accounting principles, consistently applied, and certified as correct
by a senior and knowledgeable officer or manager of Borrower or Servicer, as
the
case may be.
Borrower
shall also, by such deadline, provide to Lender a copy of any financial
statements which its parent company, DRV Cap, may provide to DRV Cap’s
shareholders or the general public with respect to such fiscal quarter, together
with any and all schedules or other financial materials that Borrower provides
to DRV Cap in order to facilitate the preparation of DRV Cap’s audited financial
statements.
Section
5.19 Single
Purpose Entity.
If
Borrower and Lender agree in writing to utilize a single purpose entity as
Borrower,
then the
following terms and conditions shall apply:
(a) Compensation
of Employees, Agents and Consultants; Limitation on Agency.
Any
employee, consultant, director, manager, or agent of Borrower will be
compensated from Borrower’s own bank accounts for services provided to Borrower.
Borrower will engage no agents other than (i) Servicer to service the
Assets, and (ii) those expressly agreed to in writing by Lender in its sole
and absolute discretion.
(b) Servicing
Fees.
Borrower is contracting with Servicer in this Loan Agreement to perform all
operations required on a daily basis to service the Assets. Borrower will pay
Servicing Fees to Servicer from Collections as specified in this Loan Agreement.
Borrower does not expect to incur any material indirect or overhead expenses
for
items shared between Borrower and Servicer which are not reflected in documented
service or administration fees. To the extent, if any, that Borrower and
Servicer share items of expenses not reflected in its respective service or
management fees (including, without limiting, legal, auditing, and other
professional services),
such expenses will be allocated to the extent practical on the basis of actual
use of the services rendered, and otherwise on a basis reasonably related to
actual use or value of services rendered.
(c) Expenses.
Borrower’s operating expenses will not be paid by Servicer.
(d) Books
and Records.
Borrower’s books and records will be maintained separately from those of
Servicer.
(e) Financial
Statements.
Any
financial statements of Servicer which are consolidated to include Borrower
shall contain detailed notes clearly stating that Borrower is a separate legal
entity with its own separate creditors which will be entitled to be satisfied
out of Borrower’s assets prior to any value in Borrower becoming available to
Borrower’s equityholders.
(f) Holding
of Funds and Assets.
The
assets of Borrower will be maintained in a manner that facilitates their
identification and segregation from those of Servicer. Funds or other assets
of
Borrower will not be commingled with those of Servicer. Borrower shall not
maintain joint bank accounts or other depository accounts to which Servicer
(other than in its capacity as Servicer in the exercise of its servicing
responsibilities under this Loan Agreement) has independent access. No funds
of
Borrower will at any time be pooled with any funds of Servicer other than while
such funds are in the Custodial Account.
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(g) Separate
Legal Entities.
Borrower acknowledges that all the parties entering into the Loan Documents,
and
any other related documents, do so in reliance on Borrower’s identity as a legal
entity separate from Servicer.
(h) Arm’s
Length Relationships.
Borrower will maintain arm’s length relationships with Servicer and its
Affiliates. Neither Borrower nor Servicer nor any of their respective Affiliates
will be or will hold itself out to be responsible
for the debts of the other or the decisions or actions relating to the daily
business and affairs of the other.
(i) Loans
to Other Parties.
Except
for Borrower’s Contributions, Borrower will not make any loans or advances to
any third party (including, without limitation, any Affiliate).
Section
5.20 Collections
Policy.
Servicer shall be entitled to make exceptions to its general collections policy
for individual Obligors, but only to the extent as is provided for in its Credit
and Collection Policy.
Section
5.21 Minimum
Monthly Payment Policy.
Without
the express prior written consent of Lender, Servicer shall not change its
general collections policy regarding minimum monthly payments from that as
set
forth in its Credit and Collection Policy. Subject to the foregoing, Servicer
shall be entitled to make exceptions to its general collections policy for
individual Obligors under the same terms and conditions as it makes exceptions
for other cardholders in portfolios of credit card receivables that it owns
or
services so long as such exceptions (in the aggregate) are not likely to have
a
Material Adverse Effect.
Section
5.22 Amendments
to Asset Purchase Agreement.
Borrower will not amend, modify or terminate any Asset Purchase Agreement
without the express prior written consent of Lender.
Section
5.23 Transactions
Involving Collateral.
Except
for Borrower’s Contributions and comparable advances made in the ordinary course
of servicing, neither Borrower, Servicer, nor any of Borrower’s Affiliates will
lend or invest money in, or borrow from, any Person that purchases all or any
portion of the Collateral, or any interest therein, without the prior express
written consent of Lender.
Section
5.24 Further
Assurance on Third Party Financings.
Notwithstanding Section 1.2,
if DRV
Cap (or any Affiliate thereof permitted in accordance with Section 1.3(c)
to
acquire a rejected Asset Portfolio) receives financing approval from a third
party on any proposed purchase of an Asset Portfolio for which Lender has
rejected the Proposal to fund the purchase of, then Borrower and Debt Resolve
shall represent, warrant and reasonably demonstrate to Lender in writing that
(a) no Material Adverse Effect shall result from, and that Lender shall not
be adversely affected by, the consummation of any such third party financing
and
the acquisition of such Asset Portfolio by such permitted Affiliate, and
(b) the Asset Portfolio for which such third party financing has been
received has been presented to such third party financier in the same light
and
on the same (or less favorable to such financier) terms and conditions as it
was
initially presented to Lender in the relevant Proposal that was rejected by
Lender.
Section
5.25 Custodial
Account.
Borrower and Servicer shall each cooperate fully with Lender and with any
relevant third parties in the establishment of the Custodial Account. Borrower
and Servicer shall each cooperate fully with Lender and the financial
institution providing the Custodial Account so that Lender shall have, on an
ongoing basis, unrestricted online access to such Custodial Account over the
Internet so that Lender may access account statements and daily account
activity.
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ARTICLE
VI
DEFAULT
Section
6.1 Events
of Default.
The
occurrence of any one or more of the following events shall constitute an
“Event
of Default”
under
this Loan Agreement:
(a) Payment.
Failure
to make any payments of Fixed Interest, principal, or other amounts payable
to
Lender with respect to any Loan under the Note, this Loan Agreement or any
other
Loan Document within three (3) Business Days after the Distribution Date on
which such payment is due;
(b) Reports.
Failure
to submit any Remittance Report or any Collateral Report on or before the
fifth (5th)
Business Day after the Distribution Date by which such report was
due.
(c) Representations
and Warranties.
Any
representation or warranty made by Borrower or Servicer in any Loan Document
shall prove to be false, misleading, incomplete or untrue in any respect when
made that has a Material Adverse Effect and, if susceptible of being remedied,
has not been remedied within fifteen (15) Business Days after Borrower has
or reasonably should have had notice thereof;
(d) Covenants.
Any
breach by Borrower, Debt Resolve or Servicer of any covenant, term, agreement
or
condition contained in any Loan Document, which breach (other than a breach
by
Debt Resolve of Section 1.2)
has a
Material Adverse Effect, and the same shall continue unremedied for a period
of
fifteen (15) Business Days after Borrower has or reasonably should have had
notice thereof or for such other amount of time permitted for cure that may
be
specifically provided for in such Loan Document; provided,
however,
that
either such time period shall only be applicable if the breaching party uses
diligent efforts during such time to cure such breach;
(e) Bankruptcy
or Insolvency.
(i) The commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower and such proceeding shall not be dismissed within
sixty (60) calendar days after the date of filing; (ii) Borrower is
unable, or admits in writing its inability, to pay its recourse debts as they
become due; (iii) Borrower makes an assignment for the benefit of
creditors; (iv) Borrower 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; (v) Borrower, 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;
(vi) Borrower is adjudicated a bankrupt; (vii) Borrower becomes
insolvent however otherwise evidenced; or (viii) Borrower ceases doing
business as a going concern;
(f) Default
in or Breach of Other Agreements.
The
occurrence and continuance of an “Event of Default” under the Loan Agreement or
any other Loan Document, or the enforcement of remedies under any other
agreement to which Borrower (or Servicer, as the case may be) is a party by
another party thereto following the occurrence of any default or event of
default thereunder or the breach by Borrower (or Servicer, as the case may
be)
thereunder, which enforcement has a Material Adverse Effect;
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(g) Judgments.
An
uninsured portion of any judgment or order for the payment of money is entered
against Borrower for more than One Hundred Thousand Dollars ($100,000) and
such
judgment is not, within thirty (30) calendar days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal;
(h) Ownership;
Liens.
Borrower shall fail for any reason to have a valid, first priority ownership
interest or valid first priority perfected security interest in the Assets,
or
if Lender shall fail to have a first priority perfected security interest in
the
Collateral;
(i) Ownership
and Control of Borrower and DRV Cap.
(i) DRV Cap (while it serves as Servicer hereunder) shall experience a
Change of Control, or (ii) DRV Cap ceases to own, directly or indirectly,
one hundred percent (100%) of the capital stock and/or membership interests
or other equity interests, as the case may be, of Borrower;
(j) Servicer
Termination Event.
The
occurrence and continuance past any applicable cure period of a Servicer
Termination Event;
(k) Loss
or Damage.
The
occurrence of loss, theft, damage or destruction of any material portion of
the
Collateral, or the making of any seizure, unauthorized sale or other
unauthorized transfer of any Collateral; or
(l) Failure
to Enforce Asset Purchase Agreement.
Borrower shall fail to diligently pursue enforcement of and remedies under
any
Asset Purchase Agreement or related document if either Borrower or DRV Cap
(or
any subsequent Servicer) becomes aware of, or should, through the exercise
of
the standard of care and conduct required of each of them by this Loan
Agreement, be reasonably expected to become aware of, any material breach
thereof by another party thereto or there exists a material risk of financial
harm with respect to the value of the applicable Asset or Assets.
Section
6.2 Effect
of Event of Default.
(a) Upon
the
occurrence and during the continuance of any Event of Default, Lender may at
its
option, by written notice to Borrower, declare the entire unpaid principal
balance of the Note, and all other amounts due hereunder, immediately due and
payable, without presentment, demand, protest or further notice of any kind,
all
of which are expressly waived by Borrower.
(b) An
Event
of Default with respect to any Loan shall be deemed an Event of Default with
respect to all other Loans, it being Borrower’s and Lender’s intention that the
Loans be fully cross-defaulted.
(c) Upon
any
Event of Default which continues beyond any applicable cure period, if any,
Lender may, by written notice to Servicer, direct that, during the continuance
of such Event of Default, all Collections be applied in accordance with Lender’s
written instructions and in accordance with the Loan Documents, and Lender
may
exercise its rights under Section 4.5(b)
hereunder as if a Servicer Termination Event has occurred such that Lender
may
replace Servicer with a new Servicer selected by Lender.
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ARTICLE
VII
DEFINITIONS
For
purposes of this Loan Agreement, the following terms shall have the following
meanings:
“Account
Documents”
means,
with respect to the Assets, all customer agreements, notes, security agreements,
financing statements, and such other evidences of indebtedness or documents
and
all electronic media containing any of the foregoing.
“Affiliate”
means,
as to any specified Person, (a) any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with,
such specified Person, and (b) each officer, director, manager, managing
member, or general partner of such specified Person, and (c) each Person
who is the beneficial owner of, or part of a family group which collectively
owns, ten percent (10%) or more of any class of voting equity interest in
such specified Person. For the purposes of this definition, “control” when used
with respect to any specified Person shall mean that any other Person shall
be
deemed to “control” such specified Person if the other Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such specified Person, whether through the ownership
of a voting equity interest, or by contract. The terms “controlling” and
“controlled” shall have meanings correlative to the foregoing.
“Agent”
has the
meaning set forth in Section 8.16.
“Assets”
means
non-performing, sub-performing, charged-off or otherwise distressed consumer
debt obligations, consisting of consumer credit card debt or lease obligations,
business credit card debt or lease obligations, consumer loans, and/or other
small balance consumer receivables, that are identified in a Proposal or the
acquisition of which by Borrower has been expressly approved in writing by
Lender and are made subject to the Loan Documents, and including any amendments,
modifications, replacements or renewals of such consumer debt
obligations.
“Asset
Liquidation Proceeds”
means
any and all proceeds which may be generated by any sale or other disposition
of
an Asset or from any exercise of any putback, refund or other similar rights
against any Asset Seller, or which may otherwise be received from any Asset
Seller, in each case net of fees and expenses of the transaction (including
broker’s fees, accounting fees, rating agency fees and legal fees and
expenses).
“Asset
Management Fee”
means,
with respect to any Asset Portfolio, an amount payable to Lender equal to one
percent (1%) of the Gross Collections received subsequent to the most
recent prior Cutoff Date and on or prior to the applicable Cutoff
Date.
“Asset
Portfolio”
means
each pool or grouping of Assets purchased from time to time by Borrower from
an
Asset Seller.
“Asset
Portfolio Net Collections”
has the
meaning set forth in Section 2.2(b).
“Asset
Purchase Agreement” means
the
agreement under which the Borrower has agreed to purchase Assets from an Asset
Seller.
“Asset
Seller” means
the
Person from whom Borrower acquires Assets.
“Borrower”
has the
meaning set forth in the preamble to this Loan Agreement.
-23-
“Borrower’s
Contribution”
means,
with respect to a Loan, the sum of (a) Borrower’s financial contribution
toward payment of the Cost with respect to the related Asset Portfolio,
(b) any Closing Costs and Asset Management Fees not otherwise paid at the
closing of such Loan, as may be expressly approved in writing by Lender, and
(c) any Fixed Interest and principal relating to such Loan, in each case
paid by Borrower from its own account in accordance with Section 2.2(b).
“Borrower’s
Residual”
has the
meaning set forth in Section 2.2(b)(ix).
“Borrower’s
Residual Percentage”
means,
with respect to each Asset Portfolio, a percentage equal to thirty
percent (30%).
“Borrowing
Date”
means,
with respect to any Loan, the date of funding of such Loan.
“Business
Day”
means
any day other than a Saturday or Sunday, or a date on which Lender, Borrower,
Servicer or commercial banks in the State of New York generally are closed
for
regular business; provided,
however,
that
notwithstanding the forgoing, any such day on which Borrower or Servicer is
conducting normal business operations shall be a Business Day for the purpose
of
determining the Cutoff Date.
“Change
of Control”
means,
with
respect to any particular Person: (i) a sale of sixty percent (60%) or more
(based on fair market value) of the assets of such Person; (ii) a merger or
consolidation involving such Person in which such Person is not the surviving
entity and the equityholders of such Person immediately prior to the completion
of such transaction hold, directly or indirectly, less than fifty percent (50%)
of the beneficial ownership (within the meaning of Rule l3d-3 promulgated
under the Exchange Act, or comparable successor rules) of the securities of
the
surviving entity (excluding any equityholders who possessed a beneficial
ownership interest in the surviving entity prior to the completion of such
merger or consolidation transaction); (iii) a reverse merger involving such
Person in which such Person is the surviving entity but the equity of such
Person outstanding immediately preceding the merger are converted by virtue
of
the merger into other property, whether in the form of securities, cash or
otherwise, and the equityholders of such Person immediately prior to the
completion of such transaction hold, directly or indirectly, less than fifty
percent (50%) of the beneficial ownership (within the meaning of Rule l3d-3
promulgated under the Exchange Act, or comparable successor rules) of the
surviving entity or, if more than one entity survives the transaction, the
controlling entity; (iv) an acquisition by any other Person or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by such original Person or any Affiliate thereof) of
the
actual or beneficial ownership (within the meaning of Rule l3d-3
promulgated under the Exchange Act, or comparable successor rules) of securities
of such original Person representing at least thirty percent (30%) of the
combined voting power entitled to vote in the election of directors; or,
(v) if the individuals who, as of the date of this Loan Agreement, are
members of such Person’s Board of Directors (the "Incumbent
Board”),
cease
for any reason to constitute more than fifty-one percent (51%) of such Person’s
Board of Directors. (If the election, or nomination for election by such
Person's equityholders, of any new member of such Person’s Board of Directors is
approved by a vote of at least fifty percent (50%) of the Incumbent Board,
then
such new member of such Person’s Board of Directors shall be considered as a
member of the Incumbent Board.)
“Chattel
Paper”
means
any "chattel paper," as such term is defined in the Code, now owned or hereafter
acquired by Borrower.
-24-
“Closing
Costs”
means
the legal fees and expenses and the other fees and expenses approved by Lender
for the initial Loan, to be paid by Borrower, as set forth in Exhibit E
attached
hereto.
"Code"
means
the Uniform Commercial Code as the same may, from time to time, be enacted
and
in effect in the State of New York; provided,
however,
that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Lender's
Lien on any Collateral is governed by the Uniform Commercial Code as enacted
and
in effect in a jurisdiction other than the State of New York, then the term
"Code" shall mean the Uniform Commercial Code as from time to time enacted
and
in effect in such other jurisdiction solely for purposes of the provisions
thereof relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions.
“Collateral”
has the
meaning set forth in the Security Agreement.
“Collateral
Report”
has the
meaning set forth in Section 4.3(g).
“Collections”
means,
with respect to any Asset Portfolio, all payments made by Obligors on account
of
the Assets in such Asset Portfolio, together with any other collections, income,
interest, principal, penalty, late fees, extension fees, prepayment fees, or
other fees on account of the Assets in such Asset Portfolio, and including
Asset
Liquidation Proceeds.
“Cost”
means,
for each Asset Portfolio, the Borrower’s purchase price plus such other fees as
may be set forth in the Total Closing Costs and Funding Schedule attached as
Schedule 4
to the
Proposal for such Asset Portfolio and as expressly approved by Lender in advance
in writing.
“Credit
and Collection Policy”
means
those credit, collection, customer relations and customer service policies
and
practices and other written policies and procedures of Borrower or Servicer,
as
the case may be.
“Credit
and Collection Laws”
means
state and federal laws governing the business of collecting consumer debt,
including without limitation, the Fair Debt Collection Practices Act, the
Federal Consumer Credit Protection Act and Regulation Z issued thereunder,
the Federal Equal Credit Opportunity Act and Regulation B issued thereunder
and the United States Bankruptcy Code, and, for each of the foregoing, the
rules
and regulations promulgated thereunder.
“Custodial
Account”
means an
account (which shall be a lockbox or blocked account, at Lender’s discretion)
which Borrower shall establish and maintain as a custodial account in trust
for
the benefit of Lender until the Loans have been paid in full, to which Lender
shall have online access to account statements and account activity.
“Cutoff
Date”
means
the last Business Day of each calendar month.
“Debt
Resolve”
has the
meaning set forth in the preamble to this Loan Agreement.
“Default
Rate”
has the
meaning set forth in Section 1.6(b).
“Disclosing
Party”
has the
meaning set forth in Section 8.4.
“Distribution
Date”
means
the fifth (5th)
Business Day of the calendar month immediately following (a) the previous
Cutoff Date, or (b) for a recent Loan, the first full month following the
Borrowing Date of such Loan.
-25-
“DRV
Cap”
has the
meaning set forth in the preamble to this Loan Agreement.
“Event
of Default”
has the
meaning set forth in Article VI.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and any successor statute,
and
the rules and regulations promulgated thereunder.
“Fixed
Interest”
has the
meaning set forth in Section 1.6(a).
“Governing
State”
means
the State of New York.
“Gross
Collections”
means
all Collections received by the Cutoff Date on account of servicing the Assets,
unreduced for expenses, fees and costs of servicing and/or collection, or for
any other reason.
“Indemnifying
Party”
has the
meaning set forth in Section 8.16.
“Instrument”
means
any "instrument," as such term is defined in the Code, now owned or hereafter
acquired by Borrower, wherever located.
“Lender”
has the
meaning set forth in the preamble to this Loan Agreement.
“Lender’s
Advances”
has the
meaning set forth in Section 2.2(b)(ii).
“Lender’s
Residual”
has the
meaning set forth in Section 2.2(b)(ix).
“Lender’s
Residual Percentage”
means,
with respect to each Asset Portfolio, a percentage equal to seventy
percent (70%).
"Lien"
means a
lien, security interest, pledge, hypothecation, collateral assignment, charge,
encumbrance, or other right or claim of any Person other than an unfiled lien
for tax accrued but not yet payable.
“Loan”
and
“Loans”
have the
meaning set forth in Section 1.2.
“Loan
Agreement”
has the
meaning set forth in the preamble to this Master Loan and Servicing
Agreement.
“Loan
Documents”
mean,
collectively, this Loan Agreement, the Note, all Proposals (and each Schedule
attached thereto), the Security Agreement, each Asset Purchase Agreement to
which Borrower is a party, and all other documents, reports, instruments or
certificates delivered pursuant to or in connection with any of the foregoing
or
any of the transactions contemplated by any of the foregoing.
“Material
Adverse Effect”
means,
with respect to any event or circumstance, a material adverse effect
on:
(a) the
ability of Borrower (or applicable party, as the context requires) to perform
its obligations under any Loan Document to which it is a party;
(b) the
validity or enforceability of any Loan Document;
(c) the
status, existence, perfection, priority, or enforceability of any lien or
security interest granted to Lender pursuant to the Loan Documents;
or
-26-
(d) the
validity, enforceability or collectibility of the Assets, taken as a
whole.
“Maturity
Date”
means
the maturity date for principal and accrued but unpaid Fixed Interest on each
Loan, which shall be the first to occur of (i) the
twenty-fourth (24th)
Distribution Date following the applicable Borrowing Date, or (ii) the date
of acceleration pursuant to Section 6.2.
“Note”
means
that certain Secured Promissory Note, substantially in the form of Exhibit B
attached
hereto, issued by Borrower to Lender on or about the date hereof, evidencing,
in
the aggregate, all the Loans contemplated by this Loan Agreement, and subject
to
amendment or supplement to reflect any additional lending by Lender in
accordance with any potential extension or renewal of this Loan Agreement that
has been agreed upon in writing by all of the parties to this Loan
Agreement.
“Notice”
has the
meaning set forth in Section 8.14.
“Obligor”
means
each signer, co-signer, guarantor or other person responsible for payment of
an
Asset.
“Person”
means
any natural person, limited liability company, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, governmental
agency or political subdivision or any other entity, whether acting in an
individual, fiduciary or other capacity.
“Pool”
means,
with respect to any and each calendar quarter, any and all Asset Portfolios
acquired by Borrower during such calendar quarter, the acquisition of which
was
funded by Loans from Lender in accordance with this Loan Agreement.
“Portfolio
Amortization Schedule”
means
the amortization schedule set forth in Schedule 2
to a
Proposal approved by Lender in writing.
“Portfolio
Budget”
means,
with respect to each Asset Portfolio, a strategic budget developed by Borrower
and submitted as part of the Proposal for, and approved in writing by Lender
for, such Asset Portfolio, representing Borrower’s good faith estimate of the
projected cash inflows and outflows, including Servicing Fees and other
expenses.
“Proposal”
means a
written proposal from Borrower to Lender requesting a Loan in connection with
Borrower’s purchase of a specific Asset Portfolio, such proposal to be
substantially in the form of Exhibit A
attached
hereto.
“Qualifying
Asset Portfolio”
has the
meaning set forth in Section 2.2(b)(vi).
“Remittance
Report”
means a
report, substantially in the form of Exhibit D
attached
hereto, submitted by the fifth (5th) Business Day of each month by Servicer
to Lender listing Gross Collections and any disbursements or expenses paid
or
received during the prior month and the proposed disbursements on account of
the
Assets serviced by Servicer during such prior month pursuant to Section 2.2,
and
expressly approved by Lender in writing prior to the Distribution Date. A
Remittance Report shall be prepared for each separate Asset Portfolio and shall
include, among other things, a detailed description of each application of
excess Asset Portfolio Net Collections to or from such Asset Portfolio as may
be
permitted under Section 2.2(b).
“Replacement
Date”
has the
meaning set forth in Section 4.5.
-27-
“Required
Distributions”
has the
meaning set forth in Section 2.2(b)(vi).
“Security
Agreement”
means
that certain Security Agreement, substantially in the form of Exhibit C
attached
hereto, entered into by Borrower and Lender on or about the date hereof,
pursuant to which Borrower shall assign to and grant Lender a security interest
in the respective Assets and related Collateral, as such agreement may be
amended, restated, or otherwise modified from time to time in accordance with
the terms thereof.
“Servicer”
has the
meaning set forth in Section 4.1.
“Servicer
Termination Event”
has the
meaning set forth in Section 4.5.
“Servicing
Expenses”
means,
with respect to each Asset Portfolio, all customary and reasonable third party
costs actually incurred by Servicer in connection with its collection activities
hereunder relating to such Asset Portfolio, including, but not limited to,
attorneys fees and expenses, filing and service fees, execution fees, court
costs, skip trace costs, media costs, and other costs and expenses, up to,
in
the aggregate for such Asset Portfolio, the amount provided for in the Proposal
for such Asset Portfolio and agreed to in writing by Lender, or as otherwise
expressly agreed to in writing in advance by Lender.
“Servicing
Fees”
means,
with respect to each Asset Portfolio, the Portfolio Servicing Fees set forth
as
a percentage of Gross Collections (but excluding Asset Liquidation Proceeds)
in
Schedule 1
attached
to the Proposal relating to such Asset Portfolio and approved by Lender in
writing at the time of Borrower’s acquisition of such Asset Portfolio, which are
expected to be in accordance with the following:
|
Asset
Category
|
Servicing
Fee
|
|||
|
Prime
accounts (no prior collection agency or law firm)
|
34
|
%
|
||
|
Secondary
accounts (one prior collection agency or law firm)
|
39
|
%
|
||
|
Tertiary
accounts (two prior collection agencies or law firms)
|
44
|
%
|
||
|
Quarternary
accounts (three or more prior collection agencies or law
firms)
|
47
|
%
|
||
|
Out
of statute accounts
|
54
|
%
|
||
ARTICLE
VIII
MISCELLANEOUS
Section
8.1 Survival
of Representations and Warranties.
All
representations and warranties of Borrower and Servicer made herein shall be
true and correct in all material respects as of each Borrowing Date and shall
survive the Borrowing Date and the execution and delivery of this Loan
Agreement, the Security Agreement, and the Note, and shall continue in full
force and effect until payment in full by Borrower of all amounts payable
hereunder, under the Security Agreement or under the Note.
-28-
Section
8.2 Cure.
Lender
shall have the right to cure any default by Borrower upon any lease, insurance
policy, indenture, security agreement, mortgage, deed of trust, agreement or
other instrument to which Borrower is a party or by which its properties are
bound or may be subject if such default shall in any manner affect Lender’s
rights hereunder, or in and to the Collateral, or the ability of Borrower to
perform its obligations hereunder or under the Security Agreement or the Note,
and Borrower shall immediately reimburse Lender for any amounts paid by Lender
or its agents to cure such defaults.
Section
8.3 Relationship
between Parties.
The
relationship between Lender and Borrower shall be solely one of commercial
lender and borrower, and nothing contained in this Loan Agreement or in any
Loan
Document shall constitute the parties as partners or joint or co-venturers
with
one another or with any other party, or as agents for one another or for any
other party with regard to any activities contemplated by this Loan Agreement
or
otherwise, or render any party liable for any debts or obligations of any other
party.
Borrower
and Servicer shall each indemnify, defend, and hold and save Lender harmless
from any and all claims of any nature which may be asserted against Lender
as
being the agent, partner, or joint or co-venturer of Borrower or
Servicer.
Section
8.4 Confidentiality.
Borrower, Servicer and Lender each agree to use all commercially reasonably
efforts (equivalent to the efforts such parties apply to maintain the
confidentiality of their own confidential information) to maintain as
confidential all information with respect to the Assets, any Proposal, the
terms
of the Loan Documents or other confidential information regarding the business
of the others (to the extent such confidential information was provided by
or on
behalf of one or more of the other parties), except that disclosure may be
made
as required by law or judicial or administrative process or in connection with
the enforcement of this Loan Agreement or any other Loan Document, and except
that Lender, as the “Disclosing
Party”
may
disclose such information (a) to Persons employed or engaged by the
Disclosing Party in evaluating, approving, structuring or administering the
Loans and Commitments, (b) to any bona fide or potential assignee of Lender
or participant in a Loan that has agreed in writing to comply with the covenant
contained in this Section (and any such bona fide or potential assignee or
participant may disclose such information to Persons employed or engaged by
them
as described in clause (a) above); (c) to any bona fide or potential
investor in Lender, but only to the extent of the terms of the Loan Documents
and general performance information with respect to Lender’s interest in the
Loans, (d) as required or requested of any governmental authority or
reasonably believed by the Disclosing Party to be compelled by, or required
under, any regulation or law (including, without limitation, any securities
regulation or law), or any court decree, subpoena or legal or administrative
order or process; (e) as, on the advice of the Disclosing Party’s counsel,
is required by law; (f) in connection with the exercise of any right or
remedy under the Loan Documents or in connection with any litigation to which
the Disclosing Party is a party; or (g) that ceases to be confidential
through no fault of the Disclosing Party.
Section
8.5 Amendment
and Modification.
Any
amendments or modifications to any provisions of this Loan Agreement, the Note
or any other Loan Document must be (a) in writing, and (b) signed by
each of the parties thereto.
Section
8.6 Waivers.
No
party shall be deemed to have waived any of its rights or remedies hereunder,
under the Note or under any other Loan Document unless such waiver is
(a) in writing, and (b) 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 any 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 the parties, whether pursuant
to
this Loan Agreement, the Note, the Security Agreement, or any other Loan
Document, shall be cumulative and concurrent and may be exercised singularly,
successively or concurrently, at the sole and absolute discretion of the subject
party, and may be exercised as often as occasion therefor may exist.
-29-
Section
8.7 Assignment
and Transferability of Loan Agreement; Loan
Participations.
This
Loan Agreement shall be binding upon Borrower, Servicer, Lender and each of
their respective successors and permitted assigns; provided,
however,
that
(a) neither Borrower nor Servicer may transfer or assign any or all of
their respective rights or obligations hereunder without the prior express
written consent of Lender; and (b) Lender may, upon written notice to
Borrower and Servicer, transfer and assign any or all of its rights or
obligations hereunder or under any Loan or the Note or any other Loan Document,
including, without limitation, the sale of participations in any Loan or the
Note to any party who will be bound by this Agreement. This Loan Agreement
shall
be for the benefit of Lender and those of its affiliated funds which agree
to
become a party to this Loan Agreement.
Section
8.8 Actions
in Connection with Bankruptcy.
Without
the necessity of an evidentiary hearing and without the necessity or requirement
that Lender establish or prove the value of the Collateral (or any other
collateral pledged to Lender pursuant to the Loan Documents), or the lack of
adequate protection of Lender's interest in the Collateral (or any other
collateral pledged to Lender pursuant to the Loan Documents), Lender shall
be
entitled to the immediate termination of the automatic stay of 11 U.S.C.
§ 362 in order to permit Lender to exercise all of its rights and remedies
in respect of the Collateral (or any other collateral pledged to Lender pursuant
to the Loan Documents), the existence of this provision constituting sufficient
"cause" for purposes of 11 U.S.C. § 362(d)(1). Borrower agrees not to
directly or indirectly oppose or otherwise defend against the termination of
the
automatic stay. Any reasonable attorney's fees and other expenses incurred
by
Lender in connection with Borrower's bankruptcy or any of the other aforesaid
events shall be additional indebtedness of Borrower.
Section
8.9 GOVERNING
LAW; JURISDICTION; VENUE.
THIS
LOAN AGREEMENT, THE NOTE, AND ALL OTHER LOAN DOCUMENTS, AND WITHOUT LIMITATION
ANY QUESTIONS CONCERNING THE INTERPRETATION OR ENFORCEMENT THEREOF, SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
GOVERNING STATE. The parties hereto each hereby irrevocably submit to the
jurisdiction of any state or federal court sitting in the Governing State over
any suit, action or proceeding arising out of or relating to a Loan or the
Loan
Documents. The parties hereto each irrevocably waive, to the fullest extent
permitted by law, any objection that any such party may now or hereafter have
to
the laying of venue of any such suit, action or proceeding brought in any such
court and any claims that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Nothing in this Section
shall limit the right of Lender to bring proceedings against any other party
hereto in the courts of any other jurisdiction. Borrower, Debt Resolve and
DRV
Cap each agree that any forum other than the Governing State is an inconvenient
forum and that a suit brought by Borrower, Debt Resolve or DRV Cap against
Lender in a court of any state other than the Governing State should be
forthwith dismissed or transferred to a court located in the Governing State
by
that court.
Section
8.10 WAIVER
OF JURY TRIAL.
BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT
TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE PARTIES ARISING
OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH, THIS LOAN AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
-30-
Section
8.11 Severability
and Enforceability of Loan Agreement.
If
any
one or more of the terms or provisions of this Loan Agreement shall be
determined by a court of competent jurisdiction to be illegal, invalid or
unenforceable in such jurisdiction, then all other terms and provisions hereof
shall remain effective and binding on the parties hereto, and such illegal,
invalid or unenforceable term or provision shall be deemed modified, for
purposes of performance of this Loan Agreement in such jurisdiction, to the
extent necessary to render it lawful, valid and enforceable, or, if such a
modification is not possible without materially altering the intention of the
parties hereto (in which case no such modification shall occur), then such
term
or provision shall be severed herefrom solely for purposes of performance of
this Loan Agreement in such jurisdiction, but shall remain a part of this Loan
Agreement for purposes of performance in all other jurisdictions. The validity
of the remaining terms and provisions of this Loan Agreement shall not be
affected by such modification or severance, except that if any such severance
materially alters the intentions of the parties hereto as expressed herein,
then
the parties hereto shall use their respective best reasonable efforts to agree
to appropriate equitable amendments to this Loan Agreement in light of such
severance, and if no such agreement is reached within a reasonable period of
time, then any party hereto may initiate arbitration under the then current
rules of the American Arbitration Association to determine such appropriate
equitable amendments.
Section
8.12 Titles
and Headings.
The
titles and headings of the Articles, Sections, and paragraphs of this Loan
Agreement (a) are merely for convenience of reference only in reading this
Loan Agreement, (b) shall not be construed to alter, modify or interpret
the meaning of the provisions under said titles and headings, and (c) shall
not have any effect on the construction or interpretation of the content of
this
Loan Agreement.
Section
8.13 Accounting
Terms.
All
accounting terms used in this Loan Agreement shall have the meanings ascribed
to
them by generally accepted accounting principles, consistently
applied.
Section
8.14 Notices.
Unless
otherwise required or provided by this Loan Agreement, all demands, notices,
approvals and other communications hereunder (including Borrower’s and
Servicer’s reporting obligations set forth herein) (each such communication, a
"Notice")
shall
be in writing and shall be served personally, delivered by facsimile or sent
by
a national overnight delivery or courier company, and addressed as set forth
below. Any such Notices shall be deemed delivered upon delivery or refusal
to
accept delivery as indicated in writing by the person attempting to make
personal service, or by similar written advice from the overnight delivery
company; provided,
however,
that if
any such Notice shall be sent by telecopier to the telecopier number, if any,
set forth below, then such Notice shall be deemed given at the time and on
the
date of successful machine transmittal (except if sent after 5:00 p.m.
recipient's time, then the Notice shall be deemed given at 9:00 a.m. on the
next
Business Day). Each party hereto shall make an ordinary, good faith effort
to
ensure that it will accept or receive Notices that are given in accordance
with
this Section 8.14,
and
that any Person to be given Notice actually receives such Notice. Any party
to
whom Notices are to be sent pursuant to this Loan Agreement may from time to
time change its address and/or facsimile number for future communication
hereunder by giving Notice in the manner prescribed herein to all other parties
hereto; provided,
however,
that
the address and/or facsimile number change shall not be effective until
five (5) Business Days after the Notice of change has been
given.
-31-
|
If
to Lender, to:
|
With
a Copy to:
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|
Sheridan
Asset Management, LLC
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61
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Debt
Resolve,
Inc.
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MetLife
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If
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With
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EAR
Capital I, LLC
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▇▇▇▇▇▇▇▇▇
Traurig, LLP
MetLife
Building
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If
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With
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DRV
Capital, LLC
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▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, LLP
MetLife
Building
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Section
8.15 Entire
Agreement.
This
Loan Agreement (including all Exhibits hereto), and the Security Agreement,
Proposals, Note, and all other Loan Documents 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. All prior negotiations, agreements, representations and warranties,
statements and undertakings concerning the subject matter hereof between the
parties are superseded by this Loan Agreement and the other Loan
Documents.
Section
8.16 Borrower’s
and Servicer’s Indemnification.
Debt
Resolve (solely with respect to clauses (a), (b), (c), (e) and (f) below),
Borrower and DRV Cap (each, on “Indemnifying
Party”)
agree
to jointly and severally indemnify, defend and hold Lender (and each of its
officers, directors, managers, members, employees, agents and representatives
(each, an “Agent”))
harmless from and against any and all losses, damages, costs, claims, expenses
(including reasonable attorneys fees) and liabilities to third parties growing
out of or resulting from (a) the failure of any such Indemnifying Party (or
of any Agent thereof) to comply with the Credit and Collection Laws;
(b) the actions of any of the Agents of any such Indemnifying Party taken
in connection with the collection activities with respect to the Assets;
(c) the misapplication (whether negligent or intentional),
misappropriation, conversion or theft of any part of the Collateral by any
Agent
of any such Indemnifying Party; (d) the failure to pay and discharge any
liens, encumbrances or security interests in the Collateral (other than liens
granted to Lender to secure repayment of Loans) created or which could be
created as a result of the actions of any such Indemnifying Party (or of any
Agent thereof); (e) fraud or material misrepresentation of Borrower, DRV
Cap, any Affiliate of either of them, or any Agent of either of the foregoing;
(f) the misapplication of receipts or proceeds from the Collateral received
by any such Indemnifying Party after notice of default on any Loan which are
not
applied to the outstanding balance of the Note, to payment of debt service
on
any Loan, or to the payment of any other amounts payable under this Loan
Agreement, or (g) the breach by any such Indemnifying Party of this Loan
Agreement.
-32-
Section
8.17 Savings
Provision.
All
agreements between Borrower and Lender are hereby expressly limited so that
in
no contingency or event whatsoever, whether by reason of acceleration of
maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to Lender for the use, forbearance, loaning or
detention of the indebtedness evidenced hereby exceed the maximum permissible
amount under applicable law. If from any circumstances whatsoever, fulfillment
of any provisions hereof or of any other Loan Document at any time given shall
exceed the maximum permissible amount under applicable law, then the obligation
to be fulfilled shall automatically be reduced to an amount which complies
with
applicable law, and if from any circumstances Lender should ever receive as
interest an amount which would exceed the highest lawful rate of interest,
then
such amount which would be in excess of such lawful rate of interest shall
be
applied to the reduction of the principal balance evidenced hereby and not
to
the payment of interest. This provision shall control every other provision
of
all agreements between Borrower and Lender and shall also be binding upon and
available to any subsequent holder of the Note.
Section
8.18 Consent.
Whenever in this Loan Agreement or in any other Loan Document the consent or
approval of Lender is contemplated, such consent or approval may be granted
or
withheld by Lender in its sole and absolute discretion.
Section
8.19 Catastrophic
Event.
If any
one or more members of Borrower’s or Servicer’s senior management is injured or
incapacitated in an accident or other occurrence, or if Borrower’s or Servicer’s
facilities become significantly damaged or destroyed, in whole or in part,
by
any Act of God, or by any other force
majeure,
and
this Loan Agreement is currently not then in default, then all time limits
contained in this Loan Agreement shall be extended for a fifteen (15)
calendar day period to allow for the recovery of such Person, or in the
alternative, to allow for parties to be authorized by Lender to take over
Servicer and/or Borrower, and/or for Borrower or Servicer to reestablish their
facilities. After any such extension hereunder, all such time limits shall
return to as originally set forth in this Loan Agreement.
Section
8.20 Conflicts.
If a
conflict arises between any of the terms and provisions of this Loan Agreement
and those of any of the other Loan Documents, then the terms and provisions
of
this Loan Agreement shall prevail and control.
Section
8.21 Further
Assurances.
Each of
Borrower and Servicer agrees to execute and deliver to Lender such instruments
and documents, and to take such actions, as Lender may, from time to time,
reasonably request in order to effectuate the purpose of, and carry out the
terms and provisions of, this Loan Agreement and each of the other Loan
Documents.
-33-
Section
8.22 Counterparts.
This
Loan Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and
the same instrument. The signature of any party hereto on any counterpart shall
be deemed to be a signature to each counterpart, and such signed counterpart
may
be appended to any other counterpart. Any counterpart of this Loan Agreement
which has attached to it separate signature pages which collectively contain
the
signatures of all of the parties hereto shall for all purposes be deemed to
be a
fully-executed instrument.
Section
8.23 Telecopier
Execution and Delivery.
Agreement may be executed by one or more of the parties hereto, and an executed
copy of this Loan Agreement, or the signature page hereof, may be delivered
by
one or more parties hereto by telecopier or other similar electronic
transmission device pursuant to which the signature of or on behalf of such
party can be legibly seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. Notwithstanding the foregoing,
each of the parties hereto shall promptly execute and deliver to each other
party an original hard copy of this Loan Agreement in addition to any facsimile,
telecopy or other electronic reproduction hereof previously executed and
delivered. Any Proposal, any Remittance Report, and any Collateral Report may
be
executed and delivered by telecopier or other similar electronic transmission
device pursuant to which the signature of or on behalf of Borrower (or Servicer,
as applicable) can be legibly seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. Notwithstanding the
foregoing, Borrower (or Servicer, as applicable) shall promptly execute and
deliver to Lender an original hard copy of any such Proposal or Remittance
Report in addition to any facsimile, telecopy or other electronic reproduction
thereof previously executed and delivered.
(The
remainder of this page was intentionally left blank - signature page
follows.)
-34-
IN
WITNESS WHEREOF,
the
undersigned have executed this Loan Agreement as of the date first above
written.
| BORROWER: | ||
| EAR CAPITAL I, LLC | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Chief
Executive Officer
|
||
| SERVICER: | ||
| DRV CAPITAL, LLC | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Chief
Executive Officer
|
||
| PARENT: | ||
|
DEBT RESOLVE, INC.
(solely with respect to Sections 1.2, 1.7, and 5.24
and Articles VI, VII and VIII)
|
||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Chief
Executive Officer
|
||
| LENDER: | ||
| SHERIDAN ASSET MANAGEMENT, LLC | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Manager
|
||
(Signature
page to Master Loan and Servicing Agreement)
-35-