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Encore Capital Group Inc – ‘8-K’ for 8/22/03 – EX-10

On:  Friday, 8/22/03, at 10:15am ET   ·   For:  8/22/03   ·   Accession #:  1084961-3-43   ·   File #:  0-26489

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  As Of                Filer                Filing    For·On·As Docs:Size

 8/22/03  Encore Capital Group Inc          8-K:7       8/22/03   17:561K

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report -- form8k_082203                     HTML     33K 
 4: EX-4        Amen- Restated Reg Rights                           HTML     19K 
 3: EX-4        Amend Reg Rights                                    HTML    113K 
 2: EX-4        Reg Rights Agreement                                HTML     93K 
 5: EX-4        Warrant Agrmt                                       HTML     72K 
 7: EX-10       Acknowlege Guarantee                                HTML     33K 
12: EX-10       Amend No. 1                                         HTML     20K 
16: EX-10       Exclusivity Agrmt                                   HTML     25K 
 6: EX-10       Fifth Amend to Lease                                HTML     15K 
14: EX-10       First Amend Svc Agrmt                               HTML     17K 
10: EX-10       Letter Agreement                                    HTML     10K 
15: EX-10       Second Amend Svc Agrmt                              HTML     20K 
 8: EX-10       Servicing Agreement                                 HTML     59K 
13: EX-10       Servicing Agreement                                 HTML    130K 
11: EX-10       Servicing Agreement 12-27-00                        HTML     29K 
 9: EX-10       Supplement to Svc Agrmt                             HTML     71K 
17: EX-21       Subsidiaries                                        HTML      7K 


EX-10   —   Servicing Agreement

This exhibit is an HTML Document rendered as filed.  [ Alternative Formats ]

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  Exhibit 10.3  

                                                                   Exhibit 10.3

                                        [***] TEXT OMITTED AND FILED SEPARATELY
                                               CONFIDENTIAL TREATMENT REQUESTED

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                              SERVICING AGREEMENT

                         Dated as of January 29, 1998

                                     Among

                     WEST CAPITAL FINANCIAL SERVICES CORP.

                                As the Servicer

                    WEST CAPITAL RECEIVABLES CORPORATION I

                                As the Borrower

                                      And

                  NORWEST BANK MINNESOTA, NATIONAL ASSOCATION

                            As the Collateral Agent

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[***]  Omitted pursuant to a request for confidential treatment. The omitted
material
has been filed separately with the Securities and Exchange Commission.



                              SERVICING AGREEMENT

                         Dated as of January 29, 1998

                   WEST  CAPITAL   FINANCIAL   SERVICES   CORP.,  a  California
corporation  (“WestCap”,  and, in its capacity as servicer hereunder,  together
with its  successors  and  permitted  assigns,  the  “Servicer”),  WEST CAPITAL
RECEIVABLES  CORPORATION  I, a California  corporation  (the  “Borrower”),  and
NORWEST BANK MINNESOTA,  NATIONAL ASSOCIATION,  a national banking association,
as  collateral  agent  (in such  capacity,  together  with its  successors  and
permitted assigns, the “Collateral Agent”) agree as follows:.

                             W I T N E S S E T H:

                  WHEREAS,  the Borrower  has entered into a Credit  Agreement,
dated  as of  January  29,  1998  (as it may  from  time to  time  be  amended,
supplemented,   or  modified,   the  “Credit  Agreement”)  with  Daiwa  Finance
Corporation  (the  “Lender”)  and  WestCap,  pursuant  to which the Lender will
make advances  (“Advances”) to the Borrower from time to time secured,  in part
by the Designated Receivables (as hereinafter defined); and

                  WHEREAS,   the  Borrower  has   requested   the  Servicer  to
undertake  the  collection  and  servicing  responsibilities  in respect of the
Designated  Receivables,  all upon the  terms  and  subject  to the  conditions
hereinafter set forth; and

                 WHEREAS,  it is a condition precedent to the obligation of the
Lender to make  Advances  under the Credit  Agreement  that the  Borrower,  the
Servicer  and the  Collateral  Agent shall have  executed  and  delivered  this
Servicing Agreement;

                  NOW,  THEREFORE,  to induce the Lender to make the  Advances,
the Borrower and the Servicer  hereby agree with the  Collateral  Agent for the
benefit of the Secured Parties (as hereinafter defined) as follows:

                                   ARTICLE I

                                  DEFINITIONS

                  Section 1.01  Definitions.  Unless otherwise  defined herein,
terms used herein  shall have the meanings  specified  in the Credit  Agreement
or the Security  Agreement;  as used in this  Agreement,  the  following  terms
shall have the following meanings:

                  “Account  Agreement”  means an agreement  pursuant to which a
Receivable was incurred.

                                       -1-



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“Agreement” means this Servicing Agreement, as it may from time to time be amended, supplemented or otherwise modified in accordance with the terms hereof “Indemnified Amount” has the meaning specified in Section 5.09. “Indemnified Parties” has the meaning specified in Section 5.09. “Monthly Servicer Report” means a report of the Servicer in the form of Exhibit A hereto. “Put-Back Period” means, with respect to any Portfolio, the time period (as specified in the Bank Agreement pursuant to which such Portfolio was purchased) during which the Borrower may require the Selling Bank to repurchase Designated Receivables in such Portfolio as a result of a breach of representations or warranties or because they do not meet eligibility standards. “Servicing Fee'' has the meaning specified in Section 2.02. The Servicing Fee shall be reduced by the applicable percentage (as set forth in Section 2.02) of any Collections with respect to which the Servicing Fee has already been paid which Collections are subsequently reversed for insufficient funds or similar reasons. Servicer Termination Event has the meaning specified in Section 4.01. Section 1.02 General. The words “herein,” “hereof,” “hereunder,” and other words of similar import refer to this Agreement as a whole, including the Schedules and Exhibits hereto, as the same may from time to time be amended or supplemented, and not to any particular section, subsection or clause contained in this Agreement. References herein to an Exhibit, Schedule, Section, subsection or clause refer to the appropriate Exhibit or Schedule to, or Section, subsection or clause in this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. ARTICLE II SERVICING AND ADMINISTRATION Section 2.01 Servicing. (a) The Servicer shall manage, collect and administer all Designated Receivables, shall exercise all discretionary powers involved in such management, collection and administration and shall, except as otherwise specified in this Agreement, bear all costs and expenses incurred in connection therewith that may be necessary or advisable and permitted for carrying out the transactions contemplated by this Agreement, all in accordance with the Collection Policies and -2-


Procedures  and the other terms and  conditions of this  Agreement,  including,
without  limitation,  determining  whether  and  where to bring  legal  actions
against  Obligors,  including  arranging  with  appropriate  attorneys  for the
bringing  of  such  legal  action  and  collecting  judgments  secured  by such
attorneys.  The Servicer shall have full power and  authority,  acting alone or
through  any  party  properly  designated  by it,  to do any and all  things in
connection  with  such  servicing,   and  administration   which  it  may  deem
necessary or desirable;  provided,  however,  that the Servicer  shall exercise
the same degree of care that it exercises in handling  similar  matters for its
own account and will create and  administer  policies and practices  consistent
with the policies and  practices  applied with respect to its own  receivables.
The  Servicer  shall  comply at all  times in all  material  respects  with its
policies,  practices,  procedures and internal  controls in effect at such time
with respect to the servicing and  collection  of the  Designated  Receivables.
The  Servicer's  management,  collection and  administration  of the Designated
Receivables   hereunder  shall  comply  in  all  material   respects  with  all
applicable  Requirements  of Laws.  All servicing  activities  hereunder by the
Servicer and its employees  shall be conducted from the  Servicer's  offices at
5775 Roscoe  Court,  San Diego,  CA or at such other  locations as to which the
Collateral Agent is provided 30 days' advance written notice.

                  (b)      On  the  Initial  Closing  Date,  the  Lockbox,  the
Lockbox Account,  the Receivables Revenue Account and the Receivables  Purchase
Account  shall  each  have  been   established  to  the   satisfaction  of  the
Collateral  Agent.   Except  as  set  forth  in  the  Collection  Policies  and
Procedures,   the  Servicer  shall  instruct   Obligors   making   payments  on
Designated Receivables to direct all such payments to the Lockbox.

                  (c)      Except   during  the   continuance   of  a  Servicer
Termination  Event,  the Servicer shall deposit all Collections  received by it
from time to time in the Lockbox  Account as  promptly  as  possible  following
receipt  thereof,  but in no event later than the Business Day  following  such
receipt.  All Collections  received by the Servicer will, pending remittance to
the Lockbox  Account,  be held in trust by the  Servicer for the benefit of the
Collateral Agent.

                  (d)      Funds  representing  Collections  on  deposit in the
Lockbox  Account shall be disbursed by the Lockbox Bank in accordance  with the
Security  Agreement.  In no event shall the Servicer have any right to make any
withdrawals  or transfers of  Collections  from the Lockbox  Account  except as
specified in this Agreement.

                 (e)       Subject  to  Article  IV,  the   obligation  of  the
Servicer  to service the  Designated  Receivables  is personal to the  Servicer
and shall not be assignable by the Servicer  without the prior written  consent
of the  Lender,  which  approval  the  Lender  may  withhold  in its  sole  and
absolute  discretion,  and the parties recognize that it would be difficult for
any other  Person to perform  such  obligations.  Accordingly,  the  Servicer's
obligation  to  service  the   Designated   Receivables   hereunder   shall  be
specifically  enforceable  and  shall  be  absolute  and  unconditional  in all
circumstances,  including,  without  limitation,  after any termination of this
Agreement until the appointment of a successor servicer.

                                       -3-



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(f) The Servicer's method of compensating its employees who will be assigned to collection of the Designated Receivables (including any incentive programs) is set forth on Exhibit B hereto. The Servicer shall notify the Borrower and the Lender at least seven days prior to any change in such method. Compensation levels shall be set by the Servicer in its sole discretion. (g) The Servicer shall maintain, at its sole expense, an errors and omissions policy and a general comprehensive liability policy, each with a financially sound and reputable insurer acceptable to the Lender. Such errors and omissions policy shall insure the Servicer for not less than $ 1,000,000 per occurrence and $5,000,000 in the aggregate and shall name the Collateral Agent for the benefit of the Secured Parties as an additional insurer or loss payee with respect to the Servicer's indemnification obligations hereunder. The Servicer shall provide to the Collateral Agent and the Lender, on the Initial Closing Date and from time to time thereafter upon any change in or renewal of such errors and omissions policy, an original certificate of insurance evidencing such policy. The Servicer shall not take any action to cancel or terminate such policy unless a substantially similar policy is in effect providing the same coverage. The Servicer shall instruct its insurance carrier to notify the Borrower, the Lender and the Collateral Agent concurrently with the delivery of any notice regarding the termination or cancellation by the issuer of such policy. (h) The Servicer shall create, on its system, computerized records for all of the Designated Receivables, which records shall include all of the information delivered to the Servicer by the Borrower or a Selling Bank on each Closing Date and which records, from and after the Closing Date, shall become the property of the Borrower, subject to the lien and security interest of the Collateral Agent (for the benefit of the Secured Parties) under the Security Agreement, and shall be updated by the Servicer from time to time. When a Portfolio is delivered by the Borrower to the Servicer for servicing hereunder, the Servicer shall, by not later than the end of the Put-Back Period, identify Designated Receivables which are subject to repurchase under the Bank Agreement related to such Portfolio and promptly deliver to the Selling Bank, with copies to the Borrower, the Lender and the Collateral Agent, a magnetic tape or diskette (accompanied by a hard-copy printout) identifying such Designated Receivables and all other documentation required to effectuate such repurchase under such Bank Agreement. In addition, the Servicer shall handle all correspondence and communications from Obligors in a manner similar to that in which it handles the same with respect to its own receivables. (i) In performing its services hereunder, the Servicer shall (a) use the name of the Selling Bank only to the extent permitted under the relevant Bank Agreement and (b) report all Designated Receivables to the relevant credit bureau as being owned by the Borrower. (j) In accordance with the Collection Policies and Procedures, the Servicer shall offer Obligors the opportunity to enter into Rewritten Receivables as a means of repaying their obligations. Notwithstanding that the Servicer shall be the nominal party to the Rewritten Receivables, all right, title and interest thereto shall be the exclusive property of the Borrower subject to the lien and security interest of the Collateral Agent. Immediately upon execution of any Rewritten Receivable, the Servicer shall affix thereto a legend clearly stating that all right, title and -4-


interest  thereto  shall be the exclusive  property of the Borrower  subject to
the lien and security  interest of the Collateral  Agent.  On the last Business
Day of each month,  or at such other time as is  requested  by the Lender,  the
Servicer  shall  deliver  the  original  of each  Rewritten  Receivable  to the
Collateral Agent.

                  Section 2.02 Servicing Compensation.        As           sole
compensation  (except  as  specifically  set forth  herein)  for its  servicing
activities  hereunder  and  reimbursement  (except  as  specifically  set forth
herein) for certain of its expenses as set forth  herein,  the  Servicer  shall
be  entitled  to receive a  servicing  fee (the  “Servicing  Fee”) in an amount
equal to [***%] of all  Collections  received  by the  Servicer  and  deposited
into the Lockbox Account;  provided,  however, that the Servicing Fee shall not
be payable  with respect to (a) any  Collections  to the extent that they are a
result of repurchase of Designated  Receivables  by a Selling Bank or indemnity
payments  from  a  Selling  Bank,  (b)  the  proceeds  of  any  Disposition  of
Designated  Receivables  deemed  to be  “uncollectible”  under  the  Collection
Policies and Procedures or (c) the proceeds of any  Securitization  Transaction
involving  Designated  Receivables.  The  Servicing Fee shall be paid solely as
and to the extent set forth in Section 6 of the Security Agreement.

                  Except  as  otherwise   specified   herein,   the  Servicer's
expenses include all expenses
incurred by the  Servicer in  connection  with its  activities  hereunder.  The
Servicer  shall be required to pay such  expenses for its own account and shall
not be entitled  hereunder  to any  payment or  reimbursement  therefore  other
than the Servicing Fee.

                  Section 2.03  Representations  and  Warranties.  The Servicer
hereby makes the following  representations  and warranties on which the Lender
has relied in making the Advances to the Borrower:

                  (a)      Organization  and Good  Standing.  The Servicer is a
corporation  duly  organized,  validly  existing and in good standing under the
laws of the State of California,  and has full corporate  power,  authority and
the  legal  right  to own  its  properties  and  conduct  its  business  as now
conducted,  and to execute,  deliver and  perform  its  obligations  under this
Agreement and each other Program Document to which it is a Party.

                  (b)      Due   Qualification.   The   Servicer  (i)  is  duly
qualified to do business and is in good  standing as a foreign  corporation  in
each  jurisdiction  where such  qualification  is necessary in order to perform
its duties  hereunder if the failure to be so  qualified  would have a Material
Adverse  Effect,  (ii) has  obtained  all  licenses  and  approvals as required
under  federal  and  state  law  that  are  necessary  to  perform  its  duties
hereunder,  except  where the failure to obtain such  license or approval  does
not  materially  adversely  affect  its  ability  to  perform  its  obligations
hereunder  and  has no  reasonable  likelihood  of  resulting  in any  material
liability to the Borrower,  the Lender or the Collateral  Agent and (iii) is in
compliance with its certificate of incorporation and bylaws.

                  (c)       Due  Authorization.  The  execution,  delivery  and
performance  of this  Agreement  and  each  Program  Document  to which it is a
party by the Servicer have been duly

                                       -5-

[***]  Omitted pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.



authorized  by all necessary  corporate  action on its part and do not and will
not contravene any provision of its certificate of incorporation or bylaws.

                  (d)      Binding Obligation.  This Agreement and each Program
Document  to which it is a party  constitutes  the  legal,  valid  and  binding
obligation  of the  Servicer,  enforceable  against it in  accordance  with its
terms,  subject to  bankruptcy,  insolvency  or other  similar  laws  affecting
creditors’  rights  generally  and to  general  principles  of equity  (whether
considered in a proceeding in equity or at law).

                  (e)      No  Conflict.  The  execution  and  delivery of this
Agreement  and each  Program  Document to which it is a party by the  Servicer,
the  performance  by the  Servicer  of the  transactions  contemplated  by this
Agreement  and  each  Program   Document  to  which  it  is  a  party  and  the
fulfillment  of the terms hereof and thereof  applicable to the Servicer do not
and will not conflict with,  violate,  result in any breach of any of the terms
or  provisions  of, or constitute  (with or without  notice or lapse of time or
both) a default  under,  any  Requirement  of Law applicable to the Servicer or
any  indenture,   contract,  agreement,   mortgage,  deed  of  trust  or  other
instrument  to which it is a party or by which it or any of its  properties  is
bound.

                  (f)      No  Litigation.  Except as  otherwise  disclosed  in
writing to the Lender,  there are no lawsuits,  administrative  proceedings  or
investigations  pending or, to the best  knowledge of the Servicer,  threatened
against the Servicer before any court,  regulatory body,  administrative agency
or other tribunal or  governmental  instrumentality  relating to the Servicer's
collection  activities  which have a  reasonable  likelihood  of  resulting  in
liability to the Servicer in excess of $ 10,000.

                   (g)      All    Consents     Required.     All    approvals,
authorizations,  consents,  orders,  licenses or other actions of any Person or
of any  Governmental  Authority  required in connection  with the execution and
delivery by the Servicer of this  Agreement and each Program  Document to which
it  is  a  party,   the  performance  by  the  Servicer  of  the   transactions
contemplated  by this  Agreement  and each  Program  Document  to which it is a
party and the  fulfillment  by the  Servicer  of the terms  hereof and  thereof
have been  obtained (or will be obtained  prior to the time  required)  and are
in full force and effect.

                  (h)      Taxes.   The Servicer  has filed all federal,  state
and local tax returns,  in each case  required to be filed and has paid or made
adequate  provision  for  the  payment  of all  taxes,  assessments  and  other
governmental  charges  shown due thereon  except where such taxes,  assessments
or charges are being contested in good faith.

                  (i)      Compliance.      The Servicer has complied  with all
Requirements  of Law in respect of the conduct of its  business  and  ownership
of its  property,  except  where  the  failure  to comply  does not  materially
adversely  affect its ability to perform its  obligations  hereunder  or has no
reasonable   likelihood  of  resulting  in  any  material   liability  for  the
Borrower, the Lender and the Collateral Agent.

                                       -6-



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(j) Servicing. Since December 3 1, 1997, there has been no material adverse change in the ability of the Servicer to manage, collect or administer the Designated Receivables. The Servicer has delivered to the Lender a true and complete copy of the Collection Policies and Procedures. Each of the representations and warranties set forth in this Section 2.03(a) shall be deemed to be restated on each day on which Advances are made under the Credit Agreement and shall survive execution and delivery of this Agreement. Section 2.04 Covenants of the Servicer. From and after the Closing Date until this Agreement is terminated: (a) Compliance with Requirements of Law. The Servicer shall (i) duly satisfy its obligations in all material respects on its part to be fulfilled under or in connection with each Designated Receivable, including, without limitation, all of its obligations under each Bank Agreement, (ii) maintain in effect all material qualifications required under Requirements of Law in order to service properly each Designated Receivable and (iii) comply in all material respects with all other Requirements of Law in connection with servicing each Designated Receivable. (b) No Rescission or Cancellation. The Servicer shall not consent to any rescission or cancellation of any Designated Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority or in accordance with the Collection Policies and Procedures. (c) Protection of Rights. The Servicer shall not take any action, nor omit to take any action, which would materially impair the rights of the Borrower, the Lender or the Collateral Agent in any Designated Receivable, nor shall it reschedule, revise or defer payments due on any Designated Receivable, except in accordance with the Collection Policies and Procedures. (d) Custodian, Further Assurances. The Servicer shall, at its own cost and expense, (i) maintain books and records with respect to the Designated Receivables and copies of all documents relating to each of the foregoing, as well as all documents received from the Selling Bank, as custodian for the Borrower and the Collateral Agent and (ii) indicate clearly on the electronic records relating to the Designated Receivables, including, without limitation, all such records received from any Selling Bank, that the Designated Receivables have been transferred and assigned to the Borrower and are subject to the lien and security interest of the Collateral Agent and that all moneys payable thereunder have been assigned to the Collateral Agent. The Servicer shall take all actions requested by the Lender or the Collateral Agent in order to effectuate the intentions of the parties hereto that the Collateral Agent be entitled to all Collections and that the Designated Receivables be the sole property of the Borrower subject to the lien and security interest of the Collateral Agent. -7-


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(e) Information Furnished. All information furnished by the Servicer to the Borrower, the Lender or the Collateral Agent with respect to the Designated Receivables and the Collections will be true and correct in all material respects at the time such information is furnished and will not omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading under the circumstances made. (f) Taxes. The Servicer will file all federal, state and local tax returns, in each case required to be filed by the Servicer and pay or make adequate provision for the payment of all taxes, assessments and other governmental charges shown due thereon except where such taxes, assessments or charges are being contested in good faith. (g) Collection Policies and Procedures. The Servicer shall not amend or modify the Collection Policies and Procedures without the prior written consent of the Lender. (h) Servicer Not to Resign. The Servicer shall not resign from the duties and obligations imposed upon it pursuant hereto except upon its determination that its continued performance hereunder will no longer be permissible under applicable law, as evidenced by an opinion of counsel delivered to the Lender. No such resignation shall be effective until the appointment of a successor servicer under Section 4.02. Section 2.05 Monthly Servicer Reporting Requirements. The Servicer shall provide the following reports and information to the Lender and (with respect to subsection (a) below, to the Collateral Agent): (a) Within 15 days following the end of each calendar month, the Monthly Servicer Report with respect to all Designated Receivables as of the end of such calendar month, and a magnetic medium containing a copy of the Servicer's central data file pertaining to the Designated Receivables. (b) Within 60 days following the end of each fiscal quarter of the Servicer, unaudited financial statements for the Servicer, including a balance sheet as of the end of such fiscal quarter and an income statement for such fiscal quarter, all certified by the chief financial officer of the Servicer as having been prepared in accordance with GAAP consistently applied. (c) Within 120 days following the end of the Servicer's fiscal year, financial statements for the Servicer, including a balance sheet as of the end of such fiscal year and an income statement for such fiscal year, prepared in accordance with GAAP consistently applied and certified by the Servicer's independent certified public accountants as having been so prepared. (d) Upon the reasonable request of the Lender, such lists, records, statistics and credit information regarding the Designated Receivables and the Collections as shall be requested by the Lender. -8-


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(e) Promptly (but in any event not later than two Business Days) after the Servicer's learning thereof, notice to the Borrower, the Lender and the Collateral Agent of all litigation or administrative proceedings commenced or threatened against the Servicer by Governmental Authorities where the same has a reasonable likelihood of having a Material Adverse Effect and of all other material litigation or administrative proceedings commenced or threatened against the Servicer by Obligors, including any and all written communications questioning the Servicer's compliance, in any material respect, with any Requirement of Law, together with regular (but not less frequently than monthly) updates as to material developments regarding such litigation, proceedings or communications. ARTICLE III OTHER MATTERS RELATING TO THE SERVICER. Section 3.01 Access to Certain Documentation and Information Regarding the Designated Receivables. The Servicer shall provide to the Borrower, the Lender and the Collateral Agent and each of their respective agents and representatives full access to its books and records relating to the Designated Receivables and to all documentation and other computer records regarding the Designated Receivables, such access being afforded without charge but only during normal business hours upon reasonable advance notice, subject to the Servicer's normal security and confidentiality procedures and at offices designated by the Servicer. Such access shall include the ability to monitor telephone calls made to or received from Obligors by employees of the Servicer. Section 3.02 Merger. Consolidation or Transfer of Assets. The Servicer shall not consolidate with or merge with or into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person; provided, however, that the Servicer may merge or consolidate with any Person if (a) after giving effect to such merger, no Event of Default or Incipient Event of Default shall have occurred, (b) the Person surviving such merger or consolidation agrees in writing to be bound by the terms hereof and (c) the Servicer provides the Borrower, the Lender and the Collateral Agent with prior written notice of such merger or consolidation not less than 30 days prior thereto. ARTICLE IV SERVICER TERMINATION EVENTS Section 4.01 Servicer Termination Events. If any one of the following events (each, a “Servicer Termination Event”) shall occur: (a) any failure by the Servicer to make any payment, transfer or deposit required pursuant to this Agreement within three Business Days after it is due or to give instructions or notice within one Business Day after it is required pursuant to this Agreement; -9-


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(b) any failure on the part of the Servicer duly to observe or perform in any material respect any of its other covenants or agreements (not described in paragraph (a) above or (e) below) set forth in this Agreement, or any provision of the Collection Policies and Procedures, which failure materially adversely affects the rights of the Borrower, the Lender or the Collateral Agent and continues unremedied for a period of 10 Business Days following the date of such failure provided, however, that if any such default is, in the reasonable judgment of the Lender, remediable within 180 days after its occurrence, such default shall not be an Event of Default hereunder for such period of time (but not longer than 180 days following the occurrence thereof) as the Servicer is attempting to remedy it; (c) any representation, warranty or certification made by the Servicer in this Agreement or in any certificate or report delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made provided, however, that if any such breach is, in the reasonable judgment of the Lender, remediable within 180 days after its occurrence, such breach shall not be an Event of Default hereunder for such period of time (but not longer than 180 days following the occurrence thereof) as the Servicer is attempting to remedy it; (d) there shall occur a change in the stockholders of the Servicer in which the majority control of the Servicer shall be transferred to another Person or group of Persons (other than the Note Purchaser and its Affiliates) acting in concert; (e) the Servicer shall (i) fail to maintain insurance as required pursuant to Section 2.0 1 (g), (ii) fail to follow any instructions given by the Lender or the Collateral Agent in accordance herewith within a reasonable period of time, (iii) fail to deliver any Monthly Servicer Report required to be delivered under Section 2.05 within three Business Days after the time set forth in such Section or (iv) be unable to perform its responsibilities hereunder for 10 consecutive Business Days due to any reason, including force majeure; (f) the Servicer shall consent to the appointment of a conservator, receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to it or of or relating to all or substantially all of its property, or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make any assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; then, the Collateral Agent, upon receipt of instructions from the Lender, by notice then given in writing to the Servicer, shall terminate all of the rights and obligations of the Servicer under this -10-


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Agreement; provided, however, that upon the occurrence of an event described in subsection (f) above, such termination shall be automatic without notice thereof by any party. Section 4.02 Consequence of Termination or Resignation. Upon the effectiveness of any termination hereof, all authority and power of the Servicer under this Agreement shall terminate; and, without limitation, the Lender or its designee is hereby authorized and empowered (upon the failure of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in fact or otherwise, all documents and other instruments upon the failure of the Servicer to execute or deliver such documents or instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Servicer agrees that no termination of this Agreement shall be effective until such time as a successor servicer shall have been appointed and that it will cooperate with the Collateral Agent and any successor servicer in effecting the termination of the responsibilities and rights of the Servicer to conduct servicing hereunder, including, without limitation, the transfer to such successor servicer of all authority of the Servicer to service the Designated Receivables provided for under this Agreement, including, without limitation, all authority over all Collections which shall on the date of transfer be held by the Servicer for deposit, or which have been deposited by the Servicer in the Lockbox Account or the Receivables Revenue Account, or which shall thereafter be received with respect to the Designated Receivables. Upon any termination of the Servicer hereunder, the Servicer shall promptly transfer its electronic records relating to the Designated Receivables to the successor servicer in such electronic form as such successor servicer may reasonably request and shall promptly deliver to such successor servicer all other records, correspondence -and documents necessary for the continued servicing of the Designated Receivables in the manner and at such times as such successor servicer shall reasonably request. ARTICLE V MISCELLANEOUS Section 5.01 Notices, etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be faxed or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications, sent by other means shall be effective when received. Section 5.02 Complete Agreement, Successors and Assigns. Relationship of Parties. This Agreement constitutes the complete agreement between the parties hereto with respect to the subject matter hereof and supersedes all existing agreements and all oral, written or other communications between them concerning its subject matter. This Agreement shall be binding upon -11-
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the parties hereto and their respective successors and permitted assigns and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that the Servicer shall not assign any of its rights or obligations hereunder without the prior written consent of the. Lender. The parties are entering into this Agreement as independent contractors. In no event shall either party be deemed an agent, employee, joint venturer or partner of the other. Section 5.03 No Waiver. None of the undertakings, agreements, warranties, covenants or representations of the Servicer contained in this Agreement and no Servicer Termination Event shall be deemed to have been suspended or waived unless such suspension or waiver is by an instrument in writing signed by an officer of the Collateral Agent. Any failure by the Borrower, the Lender or the Collateral Agent, at any time or times, to require strict performance by any other party of any provision of this Agreement shall not waive, affect or diminish its respective right thereafter to demand strict compliance and performance therewith. Any suspension or waiver by the Collateral Agent of a Servicer Termination Event shall not suspend, waive or affect any other Servicer Termination Event, whether the same is prior or subsequent thereto and whether of the same or of a different type. Section 5.04 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 5.05 Amendments: Governing Law.This Agreement and the rights and obligations of the parties hereunder (a) may not be changed orally but only by an instrument in writing signed by the party against which enforcement is sought and (b) shall be construed in accordance with and governed by the laws of the State of New York. Section 5.06 Setoff: The Servicer hereby irrevocably and unconditionally waives all right of set-off that it may have under contract (including this Agreement), applicable law or otherwise with respect to any funds or monies of the Borrower, the Lender or the Collateral Agent at any time held by or in the possession of the Servicer. Section 5.07 Further Assurances. The Servicer agrees to do such further acts and things and to execute and deliver to the Borrower, the Lender and the Collateral Agent such additional assignments, agreements, powers and instruments as are reasonably required by such Person to carry into effect the purposes of this Agreement or to better assure and confirm unto each such Person its rights, powers and remedies hereunder. Section 5.08 Counterparts. This Agreement may be executed in any number of copies (including copies sent by facsimile or other electronic transmission), and by the different -12-


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parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument. Section 5.09 Indemnity by the Servicer.Without limiting any other rights which the Borrower, the Lender or the Collateral Agent may have hereunder or under applicable law, the Servicer hereby agrees to indemnify the Borrower, the Lender-and the Collateral Agent and each of their respective assigns, transferees, participants, employees and officers (each, an “Indemnified Party”) from and against any and all damages, claims, losses, liabilities and related costs and expenses, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”), awarded against or incurred by any Indemnified Party arising out of or as a result of: (a) the characterization in any Monthly Servicer Report or other statement made by the Servicer of any Designated Receivable as an Eligible Receivable which is not an Eligible Receivable as of the date of such Monthly Servicer Report or statement; (b) any representation or warranty or statement made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement which shall have been incorrect in any material respect when made; (c) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Designated Receivable; or the failure of any Designated Receivable to conform to any such applicable law, rule or regulation; (d) any failure of the Servicer to perform its duties or obligations in accordance with the provisions hereof, (e) the commingling of Collections of Designated Receivables by the Servicer at any time with other funds of the Servicer or any of its Affiliates; (f) any investigation, litigation or proceeding related to this Agreement or in respect of any Designated Receivable or Related Security, except to the extent any such investigation, litigation or proceeding relates to a possible matter involving an Indemnified Party for which neither the Servicer nor any of its Affiliates (other than the Borrower) is at fault; (g) any failure of the Servicer to comply with its covenants contained herein; or -13-


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(h) any claim brought by any Person other than an Indemnified Party arising from any activity by the Servicer or any of its Affiliates or any subservicer in servicing, administering or collecting any Designated Receivable; It is expressly agreed and understood by the parties hereto (a) that the foregoing indemnification is not intended to, and shall not, constitute a guarantee of the collectibility or payment of the Designated Receivables and (b) that nothing in this Section 3.02 shall require the Servicer to indemnify any Person (A) for Designated Receivables which are not collected, not paid or uncollectable on account of the insolvency, bankruptcy or financial inability to pay of the applicable Obligor (except to the extent that any Designated Receivable was not an Eligible Receivable on the Closing Date related thereto), (B) for damages, losses, claims or liabilities or related costs or expenses resulting from such Person's gross negligence or willful misconduct or (C) for any income taxes or franchise taxes incurred by such Person arising out of or as a result of this Agreement or in respect of any Designated Receivable. The obligations of the Servicer to indemnify the Indemnified Parties hereunder shall survive the termination of this Agreement or the resignation or removal of the Servicer. Following payment of Indemnified Amounts hereunder by the Servicer, the Servicer shall be entitled to assert any claims against any Selling Bank pursuant to the applicable Bank Agreement that the Borrower would be entitled to assert in relation to the matters in respect of which the Indemnified Amounts were paid. If any Indemnified Party shall become aware of any even or occurrence whereby it claims, or may claim or desire, indemnity hereunder, such Indemnified Party shall notify the Servicer in writing promptly upon becoming aware of such event or occurrence; provided, however, that failure to provide such notice shall not relieve the Servicer of any of its responsibilities under this Section 5.10. The Servicer at the request of any Indemnified Party shall have the obligation to contest or defend against any such event or occurrence, including any investigation, litigation, proceeding or action giving rise to a claim for an Indemnified Amount, and the Servicer in any event may participate in the defense thereof with legal counsel of its choice. If any Indemnified Party requests the Servicer to defend against such investigation, litigation, proceeding or action, the Servicer shall promptly do so and the Indemnified Party shall have the right to participate in such defense, at its expense, with legal counsel of its own choice. The Servicer shall not settle, or enter into an agreement to settle, any such investigation, litigation, proceeding or action without the prior written consent of such Indemnified Party. Any and all amounts payable by the Servicer as indemnification under this Section 5. 10 shall be due and payable within ten days following the entry of a final non-appealable judgment in respect of such amount, except that, if prior to such entry an Indemnified Party at any time is required to pay such amount, the Servicer shall pay such amount at such time. Section 5.10 Headings. Section headings used in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. -14-


                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.

                                                     WEST CAPITAL RECEIVABLES
                                                     CORPORATION I

                                                     By:  _____/s/ Carl C. Gregory, III  _
                                                     Name:   Carl C. Gregory, III
                                                     Title:  President/CEO

                                                     5775 Roscoe Ct.
                                                     San Diego, CA 92123

                                                     WEST CAPITAL FINANCIAL SERVICES CORP.

                                                     By:  _____/s/ Carl C.Gregory, III  _
                                                     Name:   Carl C. Gregory, III
                                                     Title: President/CEO

                                                     5775 Roscoe Ct.
                                                     San Diego, CA 92123

                                                     NORWEST BANK MINNESOTA, N.A.,
                                                     as Collateral Agent

                                                     By:  _____/s/ Thomas D. Wraalstad___
                                                     Name:    Thomas D.Wraalstad
                                                     Title: Corporate Trust Officer

                                                     Sixth Street and Marquette Avenue
                                                     Minneapolis, MN 55479-0070

                                        S-1




Dates Referenced Herein

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Filed on / For Period End:8/22/03None on these Dates
1/29/981
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