AMENDED AND RESTATED SERVICING AGREEMENT dated as of May 19, 2008 among PALISADES ACQUISITION XVI, LLC, as the Borrower, PALISADES COLLECTION, L.L.C., as the Servicer, and BMO CAPITAL MARKETS CORP., as the Collateral Agent
Exhibit 10.2
AMENDED AND RESTATED SERVICING AGREEMENT
dated as of May 19, 2008
among
PALISADES ACQUISITION XVI, LLC,
as the Borrower,
PALISADES COLLECTION, L.L.C.,
as the Servicer,
and
BMO CAPITAL MARKETS CORP.,
as the Collateral Agent
AMENDED AND RESTATED SERVICING AGREEMENT
THIS AMENDED AND RESTATED SERVICING AGREEMENT is entered into effective as of May 19
, 2008 (as
amended, supplemented or otherwise modified from time to time, the “Servicing Agreement”),
among PALISADES ACQUISITION XVI, LLC, a Delaware limited liability company (the
“Borrower”), PALISADES COLLECTION, L.L.C., a Delaware limited liability company
(“Palisades Collection”), as the initial servicer of the Receivables (in such capacity, the
“Servicer”), and BMO CAPITAL MARKETS CORP. (“BMO CM”), as collateral agent for the
Secured Parties (in such capacity, the “Collateral Agent”), as acknowledged and agreed to
by Fairway Finance Company, LLC and Bank of Montreal.
R E C I T A L S
1. The Borrower, Palisades Collection, Fairway Finance Company, LLC, a Delaware limited
liability company (together with its successors and permitted assigns, the “Lender”), BMO
CM, as administrative agent for the Lender (in such capacity, the “Administrator”) and as
Collateral Agent, and Bank of Montreal, as liquidity agent for the Liquidity Providers (in such
capacity, the “Liquidity Agent”), are parties to the Receivables Financing Agreement, dated
as of March 2, 2007 (as amended, supplemented or otherwise modified from time to time, the
“Receivables Financing Agreement”), pursuant to which, on the terms and subject to the
conditions set forth therein, the Lender agreed to make Loans to the Borrower.
2. The Borrower and the Collateral Agent are parties to the Security Agreement, dated as of
March 2, 2007 (as amended, supplemented or otherwise modified from time to time, the “Security
Agreement”), pursuant to which the Borrower granted to the Collateral Agent, for the benefit of
the Secured Parties, a security interest in the Collateral, as security for the Obligations.
3. The Borrower requested Palisades Collection undertake certain collecting and servicing
responsibilities in respect of the Receivables, and Palisades Collection, as the Servicer, agreed
to undertake such responsibilities and accept such bailment.
4. In connection therewith, the Borrower, the Servicer and the Collateral Agent entered into
that certain servicing agreement, dated as of March 2, 2007 (the “Existing Servicing
Agreement”).
5. After March 2, 2007, the Servicer entered into certain Subservicing Agreements with
Subservicers, and the parties hereto desire to amend and restate this Servicing Agreement to
reflect material changes in the obligations of the Servicer hereunder in connection with such
Subservicing Agreements.
6. The Borrower, the Servicer and the Collateral Agent have determined to amend and restate
the Existing Servicing Agreement in its entirety.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Borrower, the
Servicer and the Collateral Agent agree that the Existing Servicing Agreement is hereby amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
Section 1.1 Definitions.
Whenever used in this Servicing Agreement, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this Article (such meanings to be equally
applicable to both the singular and plural forms of the terms defined and to all genders):
“Administrator” has the meaning set forth in the first Recital.
“Borrower” has the meaning set forth in the Preamble.
“Collateral Agent” has the meaning set forth in the Preamble.
“Exempted Receivables” means Judgment Asset Receivables and Paying Receivables.
“Judgment Asset Receivables” means each Receivable (a) that is in active litigation
or (b) for which a judgment has been rendered within the preceding 120 days or (c) that is in post
judgment enforcement or (d) at any time prior to the second anniversary of that certain
Subservicing Agreement, dated as of March 2, 2007 (as amended or otherwise modified from time to
time), that has been identified by the Subservicer named therein as subject to litigation;
provided, however, in the case of a sale by the Borrower of Receivables that are judgments that are
non-liquidating and have no post-judgment enforcement activity occurring or imminent, such
Receivables shall not be deemed to be Judgment Asset Receivables.
“Lender” has the meaning set forth in the first Recital.
“Liquidation Expenses” means all court costs, arbitration fees, broker fees and costs
and reasonable out-of-pocket expenses that are incurred by the Servicer or any Subservicer in
connection with the collection or liquidation of any Receivable or related collateral, if any, such
expenses including, without limitation, legal and arbitration fees and expenses (including, but not
limited to, service of process fees), any file fees and foreclosure or repossession expenses and
any unreimbursed amount expended by the Servicer or Subservicer pursuant to Section 3.02
(to the extent such amount is reimbursable under the terms of Section 3.02) respecting the
related Receivable.
“Liquidation Proceeds” means cash received in connection with the collection or
liquidation of Receivables or related collateral, if any, whether through sale or otherwise.
“Loan Agreement” means the fourth amended and restated loan agreement, dated as of
July 11, 2006, as amended (the “Loan Agreement”) among the Servicer, as borrower
representative, the other credit parties signatory thereto, Israel Discount Bank of New York, as
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administrative agent as collateral agent for itself and the lenders party thereto, and as
co-lead arranger, and the lenders party thereto.
“Officer’s Certificate” means a certificate signed by the Chief Executive Officer, the
President, the Chief Financial Officer, a Manager or any Vice President of the Borrower or the
Servicer, as the case may be, and delivered to the Collateral Agent or the Servicer (as
applicable), as required by this Servicing Agreement.
“Palisades Collection” has the meaning set forth in the Preamble.
“Paying Receivables” means each Receivable, the Obligor of which (a) is currently
paying under a payment plan or (b) accounts that have active garnishments, attachments, lien
proceedings or other involuntary, judicial executions or (c) has committed to enter into a payment
plan or to remit the full or agreed settlement amount thereof within the next 60 days.
“Receivables Financing Agreement” has the meaning set forth in the first
Recital.
“Security Agreement” has the meaning set forth in the second Recital.
“Servicer” means Palisades Collection or its successor in interest, or any successor
Servicer appointed as provided in Section 5.02.
“Servicer Extension Notice” has the meaning set forth in Section 5.03.
“Servicer Termination Event” has the meaning set forth in Section 5.01.
“Servicing Agreement” has the meaning set forth in the Preamble.
“Servicing Fee” means as to any Collection Period and any Receivable, the monthly fee
payable to the Servicer, which, so long as Palisades Collection is the Servicer, shall be (i) the
product of the percentage applicable to the class of Receivable for such Receivable, as set forth
on Schedule 1 hereto, multiplied by the Collections (determined excluding clauses (c) and
(d) of such definition) on such Receivable received during such Collection Period or (ii) such
other Servicing Fee set forth on Schedule 1 hereto; provided, further, that the Servicer
shall be paid a one-time supplemental management fee of $8,226,278 no later than May 31, 2008. The
Servicing Fee for any successor Servicer shall be determined as provided in Section 5.02.
“Subservicer” means any Person that is providing servicing, management and/or
administration services with respect to some or all of the Receivables under one or more
Subservicing Agreement pursuant to Section 4.01.
“Subservicing Agreement” means one or more written contracts between the Servicer and
any Subservicer relating to the servicing, management and/or administration of some or all of the
Receivables as provided in Section 4.01, each as set forth on Schedule 2. References to
the “servicing” of Receivables by a Subservicer shall be deemed to including the management and
administration of Receivables.
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“Unifund Servicing Agreement” shall mean, collectively, that certain master servicing
agreement, dated as of March 28, 2008, that certain management agreement, dated as of March 28,
2008, and that certain confidentiality agreement, dated as of March 5, 2007, each entered into
between the Servicer and Unifund CCR Partners.
“Unmatured Servicer Termination Event” shall mean any event that, if it continues
uncured, will, with lapse of time or notice or lapse of time and notice, constitute a Servicer
Termination Event.
“W&A Subservicing Agreement” shall mean that certain subservicing agreement, dated as
of March 2, 2007, between the Servicer and Wolpoff & Xxxxxxxx, L.L.P., together with that certain
addendum, effective July 17, 2007, by and among the Servicer, BMO CM, Wolpoff & Xxxxxxxx, L.L.P.,
the Borrower and Axiant, LLC.
Section 1.2 Terms Defined in Receivables Financing Agreement. Capitalized terms not
otherwise defined herein shall have the respective meanings assigned to such terms in the
Receivables Financing Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1 Representations, Warranties and Covenants of Servicer. (a) The Servicer
hereby represents, warrants and covenants to the Collateral Agent (for the benefit of the Secured
Parties) that:
(i) the Servicer is duly organized, validly existing and in good standing as a limited
liability company under the laws of the State of Delaware and is qualified to transact business in
and is in good standing under the laws of each state in which it is necessary for it to be so
qualified in order to carry on its business as now being conducted and has all licenses necessary
to carry on its business as now being conducted; the Servicer has the full power and authority to
own its property, to carry on its business as presently conducted, and to execute, deliver and
perform this Servicing Agreement and each other Transaction Document to which the Servicer is a
party; the execution, delivery and performance of this Servicing Agreement and each other
Transaction Document to which the Servicer is a party by the Servicer and the consummation of the
transactions contemplated hereby and thereby have been duly and validly authorized by all necessary
limited liability company action on the part of the Servicer; and this Servicing Agreement and
each other Transaction Document to which the Servicer is a party evidences the legal, valid,
binding and enforceable obligation of the Servicer, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’
rights generally and by general principles of equity.
(ii) the Servicer is not required to obtain the consent of any other party or obtain the
consent, license, approval or authorization of, or make any registration or declaration with, any
governmental authority, bureau or agency in connection with the execution,
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delivery, performance, validity or enforceability of this Servicing Agreement or any other
Transaction Document to which the Servicer is a party;
(iii) the consummation of the transactions contemplated by this Servicing Agreement and the
other Transaction Documents to which the Servicer is a party and the fulfillment of the terms
hereby and thereby will not result in the breach of any term or provision of the limited liability
company agreement of the Servicer or result in the breach of any term or provision of, or conflict
with or constitute a default under or result in the acceleration of any obligation under, any
agreement, indenture or loan or credit agreement or other instrument to which the Servicer or its
property is subject, or result in the violation of any law, rule, regulation, order, judgment or
decree to which the Servicer or its property or the Receivables are subject;
(iv) the Servicer is not a party to, bound by or in breach or violation of any indenture or
other agreement or instrument, or subject to or in violation of any statute, order or regulation of
any court, regulatory body, administrative agency or governmental body having jurisdiction over it,
that materially and adversely affects, or may in the future be reasonably expected to materially
and adversely affect, the ability of the Servicer to perform its obligations under this Servicing
Agreement or any other Transaction Document to which the Servicer is a party;
(v) there are no actions, suits or proceedings pending or, to the knowledge of the Servicer,
threatened against the Servicer, before or by any court, administrative agency, arbitrator or
governmental body with respect to any of the transactions contemplated by this Servicing Agreement,
that will, if determined adversely to the Servicer, affect the validity or enforceability hereof or
materially and adversely affect the Servicer’s ability to perform its obligations under this
Servicing Agreement or any other Transaction Document to which the Servicer is a party;
(vi) attached as Exhibit A hereto is, in all material respects, a true, complete and correct
copy of the List of the Receivables as of the Closing Date;
(vii) as of the Transfer Date, the Servicer (i) is not “insolvent” (as such terms is defined
in §101(32)(A) of the Bankruptcy Code), (ii) is able to pay its debts as they become due, and (iii)
does not have unreasonably small capital for the business in which it is engaged or for any
business or transaction in which it is about to engage;
(viii) all certificates, reports, financial statements and similar writings furnished by the
Servicer at anytime to the Collateral Agent or the Administrator under or in connection with this
Servicing Agreement or pursuant to any requirement of, or in response to any request of any such
party under the Receivables Financing Agreement or any other Transaction Document have been, and
all such certificates, reports, financial statements and similar writings hereafter furnished by
the Servicer to such parties will be, true and accurate in every respect material to the
transactions contemplated hereby on the date as of which any such certificate, report, financial
statement or similar writing was or will be delivered, and shall not
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omit to state any material facts or any facts necessary to make the statements contained
therein, in light of the circumstances under which they were made, not materially misleading;
(ix) the Servicer will comply in all material respects with all applicable laws, rules,
regulations and orders of all governmental authorities (including those which relate to the
Receivables) the violation of which could have a Material Adverse Effect;
(x) the Servicer will preserve and maintain its limited liability company existence, rights,
franchises and privileges in the jurisdiction of its organization, and qualify and remain qualified
in good standing as a foreign organization in the jurisdiction where its principal place of
business and its chief executive office are located and in each other jurisdiction where the
failure to preserve and maintain such existence, rights, franchises, privileges and qualifications
could have a Material Adverse Effect.
(xi) the Servicer will keep books and records that accurately reflect all of Servicer’s
business affairs and transactions, maintain and implement administrative and operating procedures
(including, without limitation, an ability to re-create records evidencing the Receivables in the
event of the destruction of the originals thereof) and keep and maintain all documents, books,
records and other information reasonably necessary or advisable for the collection of all
Receivables;
(xii) except in connection with litigation, actions and proceedings in the ordinary course and
relating to the Receivables relating to the Servicer’s servicing duties as contemplated by the
Accepted Servicing Practices, the Servicer will furnish to the Administrator, the Collateral Agent:
(A) As soon as possible, and in any event within three Business Days after, the
Servicer receives notice thereof, any settlement of, judgment (including a judgment
with respect to the liability phase of a bifurcated trial) in or commencement of,
any labor controversy, litigation, investigation, action or proceeding of the type
described in Section 2.01(v) and, upon the Collateral Agent’s or the
Administrator’s request, copies of all non-confidential or non-privileged
documentation relating thereto;
(B) As soon as possible and in any event within three Business Days of the
Servicer’s knowledge thereof, notice of any material adverse development in
previously disclosed litigation, investigation or proceeding;
(C) Promptly and in any event within three Business Days of the Servicer’s
knowledge thereof, notice of any other event or circumstance that, in the reasonable
judgment of the Servicer, could have a Material Adverse Effect on the Servicer and
notice of any accounting impairment of the “cumulative collection curve” required in
accordance with the Servicer’s standard accounting procedures;
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(D) As soon as possible and in any event within three Business Days after the
occurrence of each Servicer Termination Event and each Unmatured Servicer
Termination Event, notice of such occurrence setting forth details of such event and
the action that Servicer proposes to take with respect thereto; and
(E) Promptly, from time to time, such other information, documents, records or
reports respecting the Receivables, or the condition or operations, financial or
otherwise, of the Servicer as the Collateral Agent or the Administrator may from
time to time reasonably request.
(xiii) subject to Section 2.01(a)(x), the Servicer will maintain (and will obtain and
maintain on behalf of the Borrower) all licenses, permits, charters and registrations which are
material to the performance of its or the Borrower’s obligations under this Servicing Agreement and
each other Transaction Document to which the Servicer or the Borrower is a party;
(xiv) except pursuant to, or as contemplated by, the Transaction Documents, the Servicer shall
not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist voluntarily or, for a period in excess of 10 days, involuntarily any Adverse Claims naming
the Servicer as debtor upon or with respect to any of the Collateral;
(xv) the Servicer will not make any change in its instructions to Obligors regarding payments
to be made to the Servicer or any Subservicer that could adversely affect the collectibility of any
Receivable;
(xvi) the Servicer will comply with Section 9.1.7 of the Receivables Financing
Agreement;
(xvii) the Servicer shall ensure that any filings, notices, consents or recordings required to
perfect the transfer of the Receivable Assets (excluding up to $100,000 worth of Receivable Assets
in the aggregate) have been duly made (or will be made prior to March 30, 2007) and the Borrower,
and the Collateral Agent as assignee, has the same rights as Originator has or would have (if
Originator or the Sellers were still the owner of such Receivables) against the Obligors;
(xviii) the Servicer shall ensure that, with respect to each Receivable (excluding up to
$100,000 of Receivables in the aggregate) related to judgments, all required notices and recordings
with respect to the related transfer of such Receivable have been filed or otherwise made of record
with the applicable court on the first date after the Transfer Date when the Servicer makes any
filings or appearances with such court, except where in the reasonable judgment of the Servicer or
any applicable Subservicer, filing of such notices and recordings is not cost-effective and in the
best interests of the Borrower; and
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(xix) the Servicer will maintain with responsible insurance companies, such insurance as may
be required by any law or governmental regulation or court decree or order applicable to it and
such other insurance, to such extent and against such hazards and liabilities, as is customarily
maintained by companies similarly situated, including, without limitation (1) an errors and
omissions insurance policy and (2) a blanket employee dishonest coverage.
(b) The Borrower hereby represents, warrants and covenants to the Collateral Agent (for the
benefit of the Secured Parties) and the Servicer that:
(i) the Borrower is duly organized, validly existing and in good standing as a limited
liability company under the laws of the State of Delaware and is qualified to transact business in
and is in good standing under the laws of each state in which it is necessary for it to be so
qualified in order to carry on its business as now being conducted; the Borrower has the full power
and authority to own its property, to carry on its business as presently conducted, and to execute,
deliver and perform this Servicing Agreement; the execution, delivery and performance of this
Servicing Agreement by the Borrower and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary partnership action on the part of the
Borrower; and this Servicing Agreement evidences the legal, valid, binding and enforceable
obligation of the Borrower, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally and by
general principles of equity.
(ii) the Borrower is not required to obtain the consent of any other party or obtain the
consent, license, approval or authorization of, or make any registration or declaration with, any
governmental authority, bureau or agency in connection with the execution, delivery, performance,
validity or enforceability of this Servicing Agreement;
(iii) the consummation of the transactions contemplated by this Servicing Agreement and the
fulfillment of the terms hereof will not result in the breach of any term or provision of the
limited liability company agreement of the Borrower or result in the breach of any term or
provision of, or conflict with or constitute a default under or result in the acceleration of any
obligation under, any agreement, indenture or loan or credit agreement or other instrument to which
the Borrower or its property is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Borrower or its property or the Receivables are subject;
(iv) the Borrower is not a party to, bound by or in breach or violation of any indenture or
other agreement or instrument, or subject to or in violation of any statute, order or regulation of
any court, regulatory body, administrative agency or governmental body having jurisdiction over it,
that adversely affects, or may in the future be reasonably expected to adversely affect, the
ability of the Borrower to perform its obligations under this Servicing Agreement; and
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(v) there are no actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against the Borrower, before or by any court, administrative agency, arbitrator or
governmental body with respect to any of the transactions contemplated by this Servicing Agreement.
Upon discovery by the Borrower, the Servicer or the Collateral Agent of a breach of any of the
representations and warranties set forth in this Section 2.01, the party discovering such
breach shall give prompt written notice thereof to the other parties.
Section 2.2 Indemnity of Initial Servicer. Without limiting any other rights which
any such Person may have hereunder or under applicable law, the initial Servicer hereby agrees to
indemnify each Indemnified Party forthwith on demand, from and against any and all Indemnified
Amounts awarded against or incurred by any of them arising out of or relating to the failure of the
Servicer to perform its obligations under any Transaction Document, excluding,
however, Indemnified Amounts to the extent determined by a court of competent jurisdiction
to have resulted from gross negligence or willful misconduct on the part of such Indemnified Party.
Without limiting the foregoing, but subject to the exclusions set forth in the immediately
preceding sentence, the initial Servicer hereby agrees to indemnify each Indemnified Party for
Indemnified Amounts arising out of or relating to:
(a) the breach of any representation or warranty made by the Servicer (or any
of its respective officers) under or in connection with this Agreement or the other
Transaction Documents, any Periodic Report or any other information, report or
certificate delivered by the Servicer pursuant hereto or thereto, which shall have
been false or incorrect in any material respect when made or deemed made;
(b) the failure to take any action necessary by the Servicer to comply in any
material way with any applicable law, rule or regulation with respect to any
Receivable or the nonconformity of any Receivable with any such applicable law, rule
or regulation;
(c) the failure to vest and maintain vested in the Collateral Agent a
first-priority perfected security interest in all the Receivables or the other
Collateral, free and clear of any Adverse Claim, other than an Adverse Claim arising
solely as a result of an act of Lender or the Collateral Agent, or any assignee of
Lender or the Collateral Agent;
(d) the failure or delay in filing financing statements or other similar
instruments or documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivables or other Collateral;
(e) failure or delay in delivering any notices, obtaining any consents or
recording any transfers or pledge necessary to perfect the ownership interest of the
Borrower or security interest of the Collateral Agent, in the Receivables and other
Collateral, free and clear of any Adverse Claim;
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(f) any failure of the Servicer to perform its duties or obligations in
accordance with the provisions of this Servicing Agreement, the Receivables
Financing Agreement or any provision contained in any other Transaction
Document; or
(g) the commingling of the proceeds of the Receivables or other Collateral at
any time with other funds.
If for any reason the indemnification provided above in this Section 2.02 is
unavailable to an Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
the initial Servicer shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by such Indemnified Party, on the one hand, and the Servicer,
on the other hand, but also the relative fault of such Indemnified Party, on the one hand, and the
Servicer, on the other hand, as well as any other relevant equitable considerations.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1 Servicer to Act as Servicer of Receivables. The Servicer shall service,
manage and administer the Receivables on behalf of the Borrower and the Collateral Agent (for the
benefit of the Secured Parties) and shall have full power and authority, acting alone and/or
through Subservicers as provided in Section 4.01, to do any and all things that it may deem
reasonably necessary or desirable in connection with such servicing and administration and that do
not violate any of the material terms of this Servicing Agreement or the Accepted Servicing
Practices. Consistent with the terms of this Servicing Agreement and the Accepted Servicing
Practices, the Servicer may waive, modify or vary any term of any Receivable or consent to the
postponement of strict compliance with any such term or in any manner, grant indulgence to any
Obligor under a Receivable if, in the Servicer’s reasonable determination, such waiver,
modification, postponement or indulgence is not adverse to the interests of the Borrower, the
Collateral Agent or any of the Secured Parties. Without limiting the generality of the foregoing,
the Servicer in its own name or in the name of the Borrower is hereby authorized and empowered by
the Borrower when the Servicer believes it appropriate in its best judgment to execute and deliver,
on behalf of the Borrower, any and all instruments of satisfaction or cancellation, or of partial
or full release or discharge and all other comparable instruments, with respect to the Receivables.
The Servicer shall service, manage and administer the Receivables in accordance with
applicable law, including the Fair Debt Collection Practices Act of 1968, as amended, and
comparable state statutes, and by employing such procedures (including collection procedures) and
degree of care, in each case as are customarily employed by the Servicer in servicing, managing and
administering contracts owned or serviced by the Servicer comparable to the Receivables. The
Servicer shall take all actions that are necessary or desirable to maintain continuous perfection
of security interests granted by the Obligors in any collateral securing the Receivables,
including, but not limited to, recording, registering, giving notice, obtaining consents, filing,
re-recording, re-registering and refiling security agreements, financing
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'
statements, continuation statements, notices, recordings or communications with court or other
instruments as are necessary to maintain the security interest granted by the Obligors under the
respective Receivables or as are required to perfect any Transfer of the Receivable Assets. The
Servicer shall comply at all times in all material respects with the Accepted Servicing Practices
and shall not take any action to impair the Collateral Agent’s security interest in any Receivable
or related collateral, if any, except to the extent allowed under this Servicing Agreement,
consistent with Accepted Servicing Practices or required by law.
The Servicer shall, at its expense, make, procure, execute and deliver such financing
statement or statements, or amendments thereof or supplements thereto, or other instruments,
certificates and supplemental writings, and do and deliver all acts, things, writings and
assurances as necessary in order to comply with the UCC, or any other applicable law, to preserve
and protect the security interest granted under the Transaction Documents and the priority of such
security interest.
The Servicer may perform any of its duties pursuant to this Servicing Agreement, including
those delegated to it pursuant to this Servicing Agreement, through Subservicers appointed by the
Servicer, including Affiliates of the Servicer; provided, that, in each such delegation to
a Subservicer: (i) such Subservicing Agreement shall be entered into in accordance with Section
4.01; and (ii) the Administrator, the Lender and the Collateral Agent shall have the right to
look solely to the Servicer for performance. Notwithstanding any such delegation of a duty, the
Servicer shall remain obligated and liable for the performance of such duty as if the Servicer were
performing such duty. No later than June 30, 2008, each Subservicer shall agree in writing, to the
extent not provided for in a Subservicing Agreement, to the following terms, in form reasonably
acceptable to the Administrator: (i) following the termination of the servicing by the Servicer
hereunder, the Collateral Agent may, at its option, (y) become, or appoint, an assignee under such
Subservicing Agreement or (z) after no
more than thirty (30) days prior written notice to the Subservicer, terminate the Subservicer under
the related Subservicing Agreement (other than under the W&A Subservicing Agreement, except in
connection with a Subservicer Termination Event (as defined therein), or under the Unifund
Subservicing Agreement, except in connection with a Servicer Event of Default (as defined therein))
with respect to the Receivables other than Exempted Receivables, (ii) the Subservicer shall deposit
all Collections received by such Subservicer directly into the Collection Account or an account
designated in writing by the Administrator to the Servicer and the Subservicer, and the Subservicer
will not, without the prior written consent of the Administrator, follow the instructions of the
Servicer with respect to the depositing of Collections, (iii) the Subservicer will, upon the
request of the Collateral Agent, deliver to the Collateral Agent information with respect to the
Receivables as reasonably requested and (iv) the Subservicer shall agree to provide the
Administrator with the same audit and inspection rights provided to the Servicer and its lenders
under the related Subservicing Agreement.
The Servicer may take such actions as are necessary to discharge its duties as the Servicer in
accordance with this Servicing Agreement, including the power to execute and deliver on behalf of
the Borrower such instruments and documents as may be customary, necessary or desirable in
connection with the performance of the Servicer’s duties under this Servicing Agreement (including
consents, waivers and discharges relating to the Receivables and related collateral, if any, and
such instruments or documents as may be necessary to effect liquidation of
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any Receivable or related collateral, if any). In furtherance thereof, the Borrower hereby
irrevocably appoints the Servicer as its attorney-in-fact to execute on its behalf such documents
or instruments as are necessary to effect the liquidation of any Receivable or related collateral,
if any.
Section 3.2 Collection of Receivable Payments; Collection Account. The Servicer shall
comply in all material respects with generally accepted collection industry standards and policies
and procedures of the Servicer and shall at all times in all material respects follow the Accepted
Servicing Practices in collecting and attempting to collect all payments called for under the terms
and provisions of the Receivables, and shall use servicing procedures generally accepted in the
collection industry for similar accounts and as otherwise expressly provided by this Servicing
Agreement; provided, however, that the Servicer shall not be obligated to institute
any action unless it determines in its good faith judgment that Liquidation Proceeds that would be
realized in connection therewith would be sufficient for the reimbursement in full of its
out-of-pocket expenses pursuant to this Servicing Agreement. In connection with such action, the
Servicer shall follow such practices and procedures required by Section 3.01 and make
advances of its own funds for any out-of-pocket expenses incurred. The Servicer shall be
reimbursed for Liquidation Expenses (including advances) by retention of the required reimbursement
from Liquidation Proceeds and shall deposit the excess of such proceeds in the Collection Account.
Subject to Section 3.06, the Servicer shall deposit in the Collection Account no later
than 1 Business Day following receipt thereof by the Servicer the following amounts received by it:
(i) All Liquidation Proceeds, including, without limitation, all principal, finance charges,
interest, late payment fees, insurance proceeds and extension fees and all other amounts and
charges but net of (x) charge backs (attributable to errors in posting, returned checks), (y)
rights of offset for amounts that should not have been paid or that must be refunded as the result
of a successful claim or defense under bankruptcy or similar laws, and (z) proceeds to be retained
by the Servicer for reimbursement of Liquidation Expenses; and
(ii) Any other proceeds of any Receivables or property acquired in respect thereof and any
other Collections received by the Servicer, in respect of the purchase price for Receivables
purchased by Borrower from Originator pursuant to Section 4.1 of the Sale Agreement.
From the time of receipt of any of the amounts specified in the preceding three clauses of
this paragraph until deposit thereof in the Collection Account, the Servicer shall segregate such
amounts from other funds held by it. The Servicer shall not deposit or otherwise credit to the
Collection Account, or cause or permit to be so deposited or credited by any Person, any amounts
not representing proceeds of the Collateral. The Servicer agrees that it has no ownership right or
interest in amounts on deposit in the Collection Account, except that which may arise indirectly
through a right to receive distributions from the Collection Account under this Servicing Agreement
or under the Receivables Financing Agreement. The Servicer shall have the right to request the
Collateral Agent to withdraw the following amounts from the Collection Account for payment to the
Servicer on each Distribution Date or such other dates consented to by the Administrator: (a)
chargebacks attributable to errors in posting, returned
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checks, or rights of offset for amounts that should not have been paid or that must be
refunded as a result of a successful claim or defense under bankruptcy or similar laws (to the
extent such amounts have not already been retained by the Servicer pursuant to clause (i)
and (ii) of this paragraph) and (b) amounts deposited in error by the Servicer (and the
Collateral Agent may rely on the Servicer’s calculation of such chargebacks and amounts).
Notwithstanding the foregoing, in those cases where a Subservicer is servicing a Receivable
pursuant to a Subservicing Agreement, the Servicer shall cause the Subservicer, pursuant to the
Subservicing Agreement, to deposit all Collections received directly or indirectly by the
Subservicer into the Collection Account (net of any servicing fee (not in excess of the Servicing
Fee with respect thereto)) within 2 Business Days of its receipt thereof in respect of the
Receivables being subserviced by such Subservicer or as otherwise set forth on Schedule 2
hereto.
Section 3.3 Custodial Arrangements.
(a) Subject to the terms and conditions of this Section, the Servicer shall maintain custody
and possession of the Receivable Files with respect to the Receivables (for the benefit of the
Secured Parties).
(b) To the extent any Receivable Files or any portion thereof are held by the Servicer in
accordance with Section 3.03(a), the Servicer agrees to act with reasonable care, using
that degree of skill and care that it exercises with respect to similar contracts owned and/or
serviced by it. The Servicer shall promptly report to the Collateral Agent and the Administrator
any material failure by it to hold such Receivable Files as herein provided and shall promptly take
appropriate action to remedy such failure. In connection with holding any Receivable Files, the
Servicer agrees not to assert, and shall cause each related Subservicer not to assert any
beneficial ownership interests in the Receivables. The Servicer agrees to indemnify the Collateral
Agent, the other Secured Parties and the Borrower, and their respective officers, directors,
employees, partners and agents for any and all liabilities, obligations, losses, damages, payments,
costs, or expenses of any kind whatsoever that may be imposed on or incurred by any such Person
arising from the negligence or willful misconduct of the Servicer in holding of the Receivable
Files pursuant to Section 3.03(a); provided, however, that the Servicer
will not be liable to the extent that any such amount resulted from the gross negligence or willful
misconduct of such Person.
(c) The Servicer shall not, without the prior written consent of the Administrator, deliver or
release to the Borrower or any other Person any Receivable Files (or the security interest in the
related collateral, if any) except (i) to the Subservicers, (ii) in the ordinary course of
its business in connection with the release of collateral securing such Receivable after
satisfaction of the related indebtedness thereunder and (iii) in connection with a purchase of a
Receivable pursuant to the Sale Agreement or the Receivables Financing Agreement. Upon the request
of the Administrator following the occurrence of a Termination Event, the Servicer shall deliver to
the Collateral Agent all Receivable Files held by the Servicer.
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Section 3.4 Reports to Collateral Agent and Borrower.
(a) Except as set forth on Schedule 2 hereto, the Servicer shall prepare and deliver,
on behalf of the Borrower, the Periodic Report in accordance with Section 9.1.8(c) of the
Receivables Financing Agreement.
(b) The Servicer shall verify that Receivables included as Eligible Receivables, for purposes
of determining the Borrowing Base, are in fact Eligible Receivables as of the date of such Periodic
Report.
Section 3.5 Annual Statement as to Compliance. The Servicer will deliver to the
Borrower, the Collateral Agent and the Administrator on or before April 30 of each year, beginning
with April 30, 2008, an Officer’s Certificate stating that (i) a review of the activities of the
Servicer during the preceding calendar year and of performance under this Servicing Agreement has
been made under such officer’s supervision, (ii) to the best of such officer’s knowledge, based on
such review, the Servicer has fulfilled all its obligations under this Servicing Agreement
throughout such year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status thereof and (iii) to
the best of such officer’s knowledge, each Subservicer has fulfilled its obligations, or, if there
has been a default in the fulfillment of such obligations, specifying such default known to such
officer and the nature and status thereof.
Section 3.6 Servicing Compensation. The Servicer, as compensation for its activities
hereunder, shall be entitled to receive the Servicing Fee, which, except as set forth on
Schedule 2 hereto, shall be payable by the Borrower on each Distribution Date from funds on
deposit in the Collection Account in accordance with Section 4.2 of the Receivables
Financing Agreement; provided, however, in all instances with respect to Exempted
Receivables and otherwise, prior to the occurrence of a Termination Event or Unmatured Termination
Event (which has not been waived), the Servicer may withhold the Servicing Fee payable thereto with
respect to any Collections from the amount to be deposited thereby into the Collection Account.
The Servicer shall be required to pay all expenses incurred by it in connection with its
servicing activities hereunder (including payment of the fees and expenses of any Subservicer) and
shall not be entitled to reimbursement therefor except as specifically provided in Section
3.02.
Section 3.7 Receivable Reviews. To the extent permitted under applicable law any time
during regular business hours and upon at least five Business Days’ prior notice (so long as no
Servicer Termination Event or Unmatured Servicer Termination Event has occurred within such
calendar year), the Servicer shall permit the Administrator or its agents or representatives (i)
to examine and make copies of, and abstracts from, the Receivable Files and of all books, records
and documents (including, without limitation, computer tapes and disks) in possession or under
control of the Servicer or any Subservicer (to the extent permissible under the related
Subservicing Agreement) relating to the Receivables, (ii) to cause such books and records to be
audited by independent public accounts selected by the Administrator and (iii) to visit the offices
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and properties of the Servicer for the purposes of examining such materials described above,
and to discuss matters related to the Receivables with any of the officers and employees of the
Servicer having knowledge of such matters. Any activities undertaken by the Administrator in
connection with items (i) through (iii) above, shall be at the expense of the Servicer;
provided, however, that the Servicer shall not be required to pay for more than two
audits in any calendar year unless a Termination Event or Unmatured Termination Event has occurred
and is continuing, in which event such audits may be as frequently as the Administrator may
determine in its sole discretion.
ARTICLE IV
SUBSERVICERS
SUBSERVICERS
Section 4.1 Subservicing Agreements Between Servicer and the Subservicers. The
Servicer, with the prior written consent of the Administrator (if such Subservicing Agreement is
with a Subservicer other than each Subservicer listed on Schedule 2 hereto, as amended or
supplemented from time to time with the prior written consent of the Administrator), may enter into
Subservicing Agreements with one or more Subservicers for the servicing and administration of some
or all of the Receivables. References in this Servicing Agreement to actions taken or to be taken
by the Servicer in servicing the Receivables include actions taken or to be taken by a Subservicer
on behalf of the Servicer. Each Subservicing Agreement shall provide for each Subservicer to
service the related Receivables in accordance with Accepted Servicing Practices; provided, that no
Subservicing Agreement shall provide for the servicing of Receivables on terms and conditions that
would result in the failure of the Servicer to comply with the terms and conditions of this
Servicing Agreement (including the modifications set forth on Schedule 2 hereto, as may be
amended from time to time) in any material respect. Each Subservicer may hire third party vendors,
provided that such Subservicers remain at all times in compliance with the related Subservicing
Agreement. The Servicer hereby acknowledges that it is holding the Receivable Files and any other
items of the Collateral in its possession from time to time for the related Receivables as bailee
of Borrower and the Collateral Agent (for the benefit of the Secured Parties) in accordance with
Section 3.03.
Section 4.2 Obligation of Servicer. Notwithstanding any Subservicing Agreement, any
of the provisions of this Servicing Agreement relating to agreements or arrangements between the
Servicer or a Subservicer or reference to actions taken through a Subservicer or otherwise, the
Servicer shall remain obligated to the Borrower and the Collateral Agent for the servicing,
managing and administering of the Receivables in accordance with the provisions of Section
3.01 without diminution of such obligation or liability by virtue of such Subservicing
Agreements or arrangements or by virtue of indemnification from a Subservicer and to the same
extent and under the same terms and conditions as if the Servicer alone were servicing, managing
and administering the Receivables. The Servicer shall be entitled to enter into any agreement with
a Subservicer for indemnification of the Servicer and nothing contained in this Servicing Agreement
shall be deemed to limit or modify such indemnification.
Section 4.3 No Contractual Relationship Between a Subservicer and Borrower or Collateral
Agent. Any Subservicing Agreement that may be entered into and any other
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transactions or services relating to the Receivables involving a Subservicer in its capacity
as such and not as an originator shall be deemed to be between a Subservicer and the Servicer alone
and the Borrower and the Collateral Agent shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to a Subservicer except as set
forth in Section 4.04.
Section 4.4 Assumption or Termination of Subservicing Agreement by Collateral Agent.
In the event the Servicer shall for any reason no longer be the servicer of the Receivables
(including by reason of a Servicer Termination Event), the successor Servicer shall, at the
direction of the Administrator, in accordance with Section 3.01: (i) assume all of the
rights and obligations of the Servicer under one or more Subservicing Agreements that may have been
entered into by giving notice of such assumption to the related Subservicer or Subservicers within
ten (10) Business Days of the termination of the Servicer as servicer of the Receivables or (ii)
except with respect to Exempted Receivables, terminate all of the rights and obligations of any
Subservicer under the related Subservicing Agreement. Upon the giving of such notice, the
successor Servicer shall be deemed to have assumed all of the Servicer’s interest therein and to
have replaced the Servicer as a party to the Subservicing Agreement to the same extent as if the
Subservicing Agreement had been assigned to the assuming party except that the Servicer and the
Subservicer, if any, shall not thereby be relieved of any accrued liability or obligations under
the Subservicing Agreement and the Subservicer, if any, shall not be relieved of any liability or
obligation to the Servicer that survives the assignment or termination of the Subservicing
Agreement.
The predecessor Servicer shall, upon request of the successor Servicer (at the expense of the
predecessor Servicer), deliver to the assuming party all documents and records relating to the
Subservicing Agreement and the Receivables then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the orderly and efficient
transfer of the Subservicing Agreement to the assuming party.
ARTICLE V
SERVICER TERMINATION EVENT
SERVICER TERMINATION EVENT
Section 5.1 Servicer Termination Event. “Servicer Termination Event,”
wherever used herein, means any one of the following events:
(i) the Servicer shall fail, or fail to cause any Subservicer, to deposit all amounts required
to be deposited in the Collection Account by the Servicer or Subservicer when required to be
deposited under this Servicing Agreement and such failure shall continue unremedied for 1 Business
Day after the Servicer has knowledge or notice thereof, other than with respect to administrative
errors not to exceed $10,000 of Collections in any Collection Period for which such grace period
shall be 5 Business Days after the Servicer has knowledge or notice thereof; or
(ii) the Servicer shall fail to observe or perform in any material respect any other of the
covenants or agreements on the part of the Servicer contained in this Servicing
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Agreement or any other Transaction Document to which it is a party and such failure shall
continue unremedied for a period of twenty (20) days after the Servicer has knowledge or notice
thereof;
(iii) a decree or order of a court or agency or supervisory authority having jurisdiction in
the premises in an involuntary case under any present or future federal or state bankruptcy,
insolvency or similar law or appointing a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the Servicer;
(iv) the Servicer shall consent to the appointment of a conservator or receiver or liquidator
in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar
proceedings of, or relating to, the Servicer or of, or relating to, all or substantially all of the
property of the Servicer;
(v) the Servicer shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of, or commence a voluntary case under, any
applicable insolvency or reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations;
(vi) the Servicer shall have breached any of the representations and warranties set forth in
Section 2.01 in any material respect and the Servicer shall have failed to cure such breach
within ten (10) days of its receipt of a notice of such breach;
(vii) a Change in Control shall have occurred with respect to the Servicer (if Palisades
Collection is the Servicer);
(viii) (a) the amendment of any Subservicing Agreement without the prior written consent of
the Administrator or (b) the Servicer or Borrower enters into a new Subservicing Agreement with
respect to the Receivables without the written consent of the Administrator;
(ix) an Event of Default (as defined in the Loan Agreement) has occurred under such facility
which has not been waived prior to termination of the rights of the Servicer under this Servicing
Agreement; or
(x) a Termination Event shall have occurred under the Receivables Financing Agreement.
If a Servicer Termination Event shall occur (which has not been waived), then, and in each and
every such case, the Administrator may, by notice in writing to the Servicer (with a copy to the
Borrower and the Collateral Agent), terminate all of the rights and obligations of the Servicer
under this Servicing Agreement and in and to the Servicer’s interest in and to the
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Receivables and the proceeds thereof (except with respect to a Subservicer’s right to collect
Exempted Receivables pursuant to the applicable Subservicing Agreement or as otherwise set forth on
Schedule 2 hereto), subject to compensation, rights of reimbursement, indemnity and
limitation on liability to which the Servicer is then entitled, and the Servicer shall immediately
provide each Subservicer with a copy of such notice. Such notice shall specify, to the extent
possible, the timing and method of transition to a successor Servicer. On and after the receipt by
the Servicer of such written notice and upon the effective date of the transfer to the new Servicer
specified in such notice, all authority and power of the Servicer under this Servicing Agreement,
whether with respect to the Receivables or otherwise, shall pass to and be vested in the successor
Servicer appointed pursuant to Section 5.02; provided, however, that the
successor Servicer shall not (i) be liable with respect to prior actions or omissions of the
predecessor Servicer or (ii) be required to make advances pursuant to the terms of this Servicing
Agreement; and, without limitation, such Person is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and
other instruments, and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the transfer and endorsement
or assignment of the Receivables and related documents, or otherwise. The Servicer agrees to
cooperate with such responsibilities and rights hereunder, including, without limitation, the
transfer to such party for administration by it of all cash amounts that shall at the time be
credited to the Collection Account or thereafter be received with respect to the Receivables. If
the Servicer is terminated pursuant to this Section 5.01, then the Servicer shall bear all
of the costs and expenses of transferring the duties and obligations of the Servicer to a successor
Servicer; provided, however, that if the Servicer fails to bear all such costs and
expenses the successor Servicer shall be entitled to reimbursement from amounts realized on the
related collateral, if any, by retention of such amounts prior to the distribution of any
Collections from the Collection Account in accordance with Section 4.2 of the Receivables
Financing Agreement.
Section 5.2 Appointment of Successor. On and after the time the Servicer receives a
notice of termination pursuant to Section 5.01, the Administrator may appoint (and provide
written notice of such appointment to the Collateral Agent) a successor Servicer, and such
appointee shall be the successor in all respects to the Servicer in its capacity as the Servicer
under this Servicing Agreement and the Receivables Financing Agreement; provided,
however, that the successor Servicer shall not (i) be liable with respect to prior actions
or omissions of the predecessor Servicer or (ii) be required to make advances pursuant to the terms
of this Servicing Agreement. As compensation therefor, the successor Servicer shall be entitled to
all funds relating to the Receivables that the Servicer would have been entitled to receive if the
Servicer had continued to act hereunder; provided, however, the Administrator may
approve such additional amounts based upon servicing bids obtained thereby.
Section 5.3 Term of Servicer. Upon 30 days prior written notice, the Servicer may be
removed by the Borrower (with the prior written consent of the Administrator), such removal to
become effective upon the approval of a successor Servicer by the Administrator and the acceptance
of such appointment by such Servicer; provided that such successor Servicer shall assume
the obligations provided for in Section 4.04.
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Section 5.4 Term of Agreement. This Agreement shall terminate upon the earlier of:
(i) the final and full payment of Obligations under the Receivables Financing Agreement and (ii)
any provision of this Servicing Agreement providing for termination hereunder.
ARTICLE VI
MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS
Section 6.1 Amendments, Etc. No amendment, modification or waiver of, or consent with
respect to, any provision of this Servicing Agreement shall be effected unless the same shall be in
writing and signed and delivered by each of the Borrower, the Servicer and the Collateral Agent,
and then any such waiver or consent shall be effected only in the specific instance and for the
specific purpose for which given.
Section 6.2 Acknowledgment of Servicer and Subservicers. The Servicer hereby
acknowledges that pursuant to the Security Agreement, the Borrower has assigned its rights (but not
its obligations) under this Servicing Agreement for collateral purposes to the Collateral Agent
(for the benefit of the Secured Parties). The Servicer hereby consents to such assignment and
agrees that upon request from the Collateral Agent after the occurrence of a Termination Event, the
Servicer shall provide all services described in this Servicing Agreement for the benefit of the
Collateral Agent (for the benefit of the Secured Parties) in accordance with the terms of this
Servicing Agreement. The parties hereto acknowledge and agree that each Servicer Termination
Event, if any, existing on May 11, 2008, and each Termination Event (as defined in the Receivables
Financing Agreement), if any, existing on May 11, 2008, arising in connection with any
discrepancies in the terms of this Servicing Agreement and any Subservicing Agreement (other than
with respect to the W&A Subservicing Agreement, which had been entered into between the Servicer
and Wolpoff & Xxxxxxxx, L.L.P. with the consent of BMO CM) is hereby waived and shall be deemed to
have been remedied for every purpose under the Transaction Documents.
Section 6.3 Notices. Any notice required or permitted to be given under this
Servicing Agreement shall be in writing and shall be mailed by express mail, postage prepaid, or
personally delivered to an officer of the receiving party. All such communications shall be
mailed, sent or delivered to the parties at their respective addresses as set forth opposite their
respective signatures to the Receivables Financing Agreement, or as to any party at such other
address as shall be designated by such party in a written notice to each other party complying as
to delivery with the terms of this Section. All such notices and other communications shall, if
properly addressed and sent by pre-paid courier service, be deemed given when received; any notice
or other communication, if transmitted by facsimile, shall be deemed given when transmitted and
receipt thereof has been confirmed by telephone or electronic means.
Section 6.4 GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK OTHER THAN THOSE SET FORTH
IN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK.
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Section 6.5 Successors and Assigns. This Servicing Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, the Secured Parties and their successors and
assigns; provided, however, neither the Borrower nor the Servicer may assign its
rights, obligations or duties hereunder without the prior written consent of the Administrator,
except as otherwise set forth in this Servicing Agreement.
Section 6.6 Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Servicing Agreement shall be for any reason whatsoever held
invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Servicing Agreement and shall in no
way affect the validity or enforceability of the other provisions of this Servicing Agreement.
Section 6.7 Consent to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS SERVICING AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS SERVICING
AGREEMENT, EACH OF THE BORROWER AND THE SERVICER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER AND THE SERVICER
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
SERVICING AGREEMENT OR ANY DOCUMENT RELATED HERETO.
Section 6.8 Counterparts. This Servicing Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together shall constitute one
and the same instrument.
Section 6.9 Survival. The rights and remedies with respect to the indemnification
provisions of Section 2.02 shall be continuing and shall survive any termination of this
Agreement and any termination of any initial Servicer’s rights to act as a “Servicer” hereunder or
under any other Transaction Document.
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IN WITNESS WHEREOF, the Borrower, the Servicer and the Collateral Agent have caused their
names to be signed hereto by their respective officers thereunto duly authorized, all as of the day
and year first above written.
| PALISADES ACQUISITION XVI, LLC |
||||
| By: | /s/ Xxxxxxxx Xxxxx | |||
| Name: | Xxxxxxxx Xxxxx | |||
| Title: | Manager | |||
| PALISADES COLLECTION, L.L.C., as the Servicer |
||||
| By: | /s/ Xxxxxxxx Xxxxx | |||
| Name: | Xxxxxxxx Xxxxx | |||
| Title: | Manager | |||
| BMO CAPITAL MARKETS CORP. as the Collateral Agent |
||||||||
| By: | /s/ Xxxx Xxxxxxx | |||||||
| Name: | Xxxx Xxxxxxx | |||||||
| Title: | Managing Director | |||||||
| ACKNOWLEDGED AND AGREED: | |||||||||
| FAIRWAY FINANCE COMPANY, LLC | |||||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | ||||||||
| Name: | Xxxxxx X. Xxxxxxx | ||||||||
| Title: | Vice President | ||||||||
| ACKNOWLEDGED AND AGREED: | ||||||||
| BANK OF MONTREAL | ||||||||
| By: | /s/ Xxxxxx Xxxx | |||||||
| Name: | Xxxxxx Xxxx | |||||||
| Title: | Vice President | |||||||
SCHEDULE 1
SERVICING FEE SCHEDULE
Servicing Fees relating to Receivables (a) with respect to which the Servicer has not engaged a
Subservicer or (b) under the W&A Subservicing Agreement:
| CLASS OF RECEIVABLE | PERCENTAGE | |||
Receivables directly being serviced by the Servicer or a Subservicer; provided, for the purposes of clarification, that
any Receivable subserviced by a vendor under a Subservicing
Agreement, will not be deemed to be directly serviced by the
Servicer or a Subservicer
|
24 | % | ||
All Bankrupt Receivables |
50 | % | ||
All Receivables outside of the related statute of limitations |
50 | % | ||
All other Receivables |
30 | % | ||
Notwithstanding the foregoing, the Servicer will undertake reasonable best efforts to reduce the
fee paid to the Subservicer under the W&A Subservicing Agreement by 4%, to the extent W&A utilizes
information obtained by the Servicer in connection with the Unifund Servicing Agreement, and, in
connection therewith, reduce the corresponding Servicing Fee by such amount.
Servicing Fees relating to Receivables under the Unifund Subservicing Agreement:
| • | 35% of gross collections (as defined in the master servicing agreement, dated as of March 28, 2008, between the Servicer and Unifund CCR Partners) | ||
| • | plus $275,000 per month through May 2009, inclusive | ||
| • | plus 3% of gross cash receipts (as defined in the management agreement), dated as of March 28, 2008, between the Servicer and Unifund CCR Partners) for the first $500,000,000 of gross cash receipts on all Receivables under this Servicing Agreement | ||
| • | plus 7% of gross cash receipts (as defined in the management agreement), dated as of March 28, 2008, between the Servicer and Unifund CCR Partners) thereafter on all Receivables under this Servicing Agreement |
Servicing Fees relating to Receivables under the Allied Subservicing Agreement, the FMS
Subservicing Agreement, the FMS Inc. Subservicing Agreement, the Penncro Subservicing Agreement,
the Active Subservicing Agreement, the Constar Subservicing Agreement, the AC Subservicing
Agreement and the Plaza Subservicing Agreement:
| • | 50% of gross cash receipts |
Servicing Fees relating to Receivables under the TRAKAmerica Subservicing Agreement:
| • | For Receivables identified as “recalls”: 32% of gross cash receipts or | ||
| • | For Receivables identified as “Telecom accounts”: 30% of gross cash receipts for a six-month trial period or | ||
| • | For all other Receivables, 30% of gross cash receipts plus |
| • | For all Receivables (a) for which a judgment has been rendered within the preceding three years or (b) for which suit had been filed in the preceding twelve months that is in post judgment enforcement, in each case to the extent such Receivable has been closed or recalled from the Subservicer for reasons unrelated to the Subservicer’s breach of or failure to perform under the Subservicing Agreement before payments or promises for payments have been made, a 5% non-contingent fee payable upon such closing or recall |
Gross cash receipts for each Receivable means, for each Subservicing Agreement other than the W&A
Subservicing Agreement and the Unifund Servicing Agreement, gross collections on such Receivable
net, in the case of the TRAKAmerica Subservicing Agreement, court costs.
SCHEDULE 2
MODIFICATION SCHEDULE
MODIFICATIONS TO SECTION 1.01:
None.
MODIFICATIONS TO SECTION 1.02:
None.
MODIFICATIONS TO SECTION 2.01:
None.
MODIFICATIONS TO SECTION 2.02:
None.
MODIFICATIONS TO SECTION 3.01:
None.
MODIFICATIONS TO SECTION 3.02:
| • | Weekly net Collections under the Allied Subservicing Agreement, the Active Subservicing Agreement, the Plaza Subservicing Agreement, the FMS Inc. Subservicing Agreement, the Penncro Subservicing Agreement, the Constar Subservicing Agreement, the AC Subservicing Agreement and the TRAKAmerica Subservicing Agreement are remitted to the Servicer by the following Tuesday | ||
| • | Weekly net Collections under the Unifund Subservicing Agreement are remitted to the Servicer by the following Wednesday | ||
| • | Weekly net Collections under the FMS Subservicing Agreement are remitted to the Servicer by the third business day of the following week |
For purposes of clarification, the collection accounts to which remittances are made by each
Subservicer will be revised in accordance with Section 3.02.
MODIFICATIONS TO SECTION 3.03:
None.
MODIFICATIONS TO SECTION 3.04:
| • | Reports under the Unifund Subservicing Agreement are furnished to the Servicer monthly by the 12th of each month | ||
| • | Reports under the Allied Subservicing Agreement, the Penncro Subservicing Agreement, the Constar Subservicing Agreement, the AC Subservicing Agreement and the FMS Inc. Subservicing Agreement are furnished to the Servicer monthly by the last Tuesday of each month | ||
| • | Reports under the FMS Subservicing Agreement are furnished to the Servicer monthly by the 10th of each month | ||
| • | Reports under the Active Subservicing Agreement, the Plaza Subservicing Agreement and the TRAKAmerica Subservicing Agreement are furnished to the Servicer monthly by the last Wednesday of each month |
MODIFICATIONS TO SECTION 3.05:
None.
MODIFICATIONS TO SECTION 3.06:
As compensation for and reimbursements in connection with its duties thereunder, each Subservicer
shall be entitled to withhold an amount equal to the Servicing Fee plus, in the case of the
Non-Agency Subservicers, unreimbursed Liquidation Expenses from remittances of Collections as
compensation under the related Subservicing Agreement. “Non-Agency Subservicers” means the
Subservicers under the W&A Subservicing Agreement, the Unifund Subservicing Agreement and the
TRAKAmerica Subservicing Agreement.
MODIFICATIONS TO SECTION 3.07:
None.
MODIFICATIONS TO SECTION 4.01:
| • | Unifund CCR Partners pursuant to the Unifund Subservicing Agreement | ||
| • | Wolpoff & Xxxxxxxx, L.L.P. and Axiant, LLC pursuant to the W&A Subservicing Agreement | ||
| • | Allied International Credit Corp. pursuant to the agency collection agreement, dated October 5, 2007 (the “Allied Subservicing Agreement”), between Allied International Credit Corp. and the Servicer | ||
| • | FMS Investment Corp. pursuant to the agency collection agreement, dated December 13, 2006 (the “FMS Subservicing Agreement”), between FMS Investment Corp. and the Servicer | ||
| • | Active Credit Services, Inc. pursuant to the agency collection agreement, dated April 20, 2006 (the “Active Subservicing Agreement”), between Active Credit Services, Inc. and the Servicer | ||
| • | Aid Associates Inc. dba Plaza Associates pursuant to the agency collection agreement, dated April 11, 2006 (the “Plaza Subservicing Agreement”), between Aid Associates Inc. dba Plaza Associates and the Servicer |
| • | Data Search NY, Inc. d/b/a TRAKAmerica pursuant to the collection management agreement, dated December 12, 2007 (the “TRAKAmerica Subservicing Agreement”), between Data Search NY, Inc. d/b/a TRAKAmerica dba TRAKAmerica and the Servicer | ||
| • | FMS Inc. pursuant to the agency collection agreement, dated November 15, 2007, (the “FMS Inc. Subservicing Agreement”), between FMS Inc. and the Servicer | ||
| • | Penncro Associates, Inc. pursuant to the agency collection agreement, dated October 4, 2007 (the “Penncro Subservicing Agreement”), between Penncro Associates, Inc. and the Servicer | ||
| • | Constar Financial Services, LLC pursuant to the agency collection agreement, dated November 11, 2007 (the “Constar Subservicing Agreement”), between Constar Financial Services, LLC and the Servicer | ||
| • | American Coriadus International LLC pursuant to the agency collection agreement, dated September 13, 2007 (the “AC Subservicing Agreement”), between American Coriadus International LLC and the Servicer |
Notwithstanding anything in this Servicing Agreement to the contrary, with respect to each of the
Allied Subservicing Agreement, the FMS Subservicing Agreement, the FMS Inc. Subservicing Agreement,
the Penncro Subservicing Agreement, the Active Subservicing Agreement, the Plaza Subservicing
Agreement, the Constar Subservicing Agreement, the AC Subservicing Agreement and the TRAKAmerica
Subservicing Agreement, the Servicer shall enter into new Subservicing Agreements with the related
Subservicers on the same terms and conditions as set forth in the existing Subservicing Agreements,
subject to adjustment by June 30, 2008, as applicable, in accordance with Section 3.01 of this
Servicing Agreement.
MODIFICATIONS TO SECTION 4.02:
None.
MODIFICATIONS TO SECTION 4.03:
None.
MODIFICATIONS TO SECTION 4.04:
None.
MODIFICATIONS TO SECTION 5.01:
See modifications to Section 3.06 of this Schedule 2 with respect to the right of the
Subservicer to withhold amounts in respect of compensation and Liquidation Expenses.
MODIFICATIONS TO SECTION 5.02:
None.
MODIFICATIONS TO SECTION 5.03:
None.
MODIFICATIONS TO SECTION 5.04:
None.
MODIFICATIONS TO SECTION 6.01:
None.
MODIFICATIONS TO SECTION 6.02:
None.
MODIFICATIONS TO SECTION 6.03:
None.
MODIFICATIONS TO SECTION 6.04:
None.
MODIFICATIONS TO SECTION 6.05:
None.
MODIFICATIONS TO SECTION 6.06:
None.
MODIFICATIONS TO SECTION 6.07:
None.
MODIFICATIONS TO SECTION 6.08:
None.
MODIFICATIONS TO SECTION 6.09:
None.
MODIFICATIONS TO SCHEDULE 1:
None.
OTHER MATERIAL MODIFICATIONS TO SERVICING AGREEMENT:
None.
ARTICLE 1. |
DEFINITIONS | 2 | ||||
Section 1.01 |
Definitions | 2 | ||||
Section 1.02 |
Terms Defined in Receivables Financing Agreement | 4 | ||||
ARTICLE 2. |
REPRESENTATIONS, WARRANTIES AND COVENANTS | 4 | ||||
Section 2.01 |
Representations, Warranties and Covenants of Servicer | 4 | ||||
Section 2.02 |
Indemnity of Initial Servicer | 9 | ||||
ARTICLE 3. |
ADMINISTRATION AND SERVICING OF RECEIVABLES | 10 | ||||
Section 3.01 |
Servicer to Act as Servicer of Receivables | 10 | ||||
Section 3.02 |
Collection of Receivable Payments; Collection Account | 12 | ||||
Section 3.03 |
Custodial Arrangements | 13 | ||||
Section 3.04 |
Reports to Collateral Agent and Borrower | 14 | ||||
Section 3.05 |
Annual Statement as to Compliance | 14 | ||||
Section 3.06 |
Servicing Compensation | 14 | ||||
Section 3.07 |
Receivable Reviews | 14 | ||||
ARTICLE 4. |
SUBSERVICERS | 15 | ||||
Section 4.01 |
Subservicing Agreements Between Servicer and the Subservicers | 15 | ||||
Section 4.02 |
Obligation of Servicer | 15 | ||||
Section 4.03 |
No Contractual Relationship Between a Subservicer and Borrower or Collateral Agent | 15 | ||||
Section 4.04 |
Assumption or Termination of Subservicing Agreement by Collateral Agent | 16 | ||||
ARTICLE 5. |
SERVICER TERMINATION EVENT | 16 | ||||
Section 5.01 |
Servicer Termination Event | 16 | ||||
Section 5.02 |
Appointment of Successor | 18 | ||||
Section 5.03 |
Term of Servicer | 18 | ||||
Section 5.04 |
Term of Agreement | 19 | ||||
ARTICLE 6. |
MISCELLANEOUS PROVISIONS | 19 | ||||
Section 6.01 |
Amendments, Etc | 19 | ||||
Section 6.02 |
Acknowledgment of Servicer | 19 | ||||
Section 6.03 |
Notices | 19 | ||||
Section 6.04 |
GOVERNING LAW | 19 | ||||
Section 6.05 |
Successors and Assigns | 20 | ||||
Section 6.06 |
Severability of Provisions | 20 | ||||
Section 6.07 |
Consent to Jurisdiction | 20 | ||||
Section 6.08 |
Counterparts | 20 | ||||
Section 6.09 |
Survival | 20 |
Exhibits |
||||||
Exhibit A |
List of Receivables | |||||
Schedules |
||||||
Schedule 1 |
Servicing Fee Schedule | |||||
Schedule 2 |
Modification Schedule |
