EXHIBIT 10.02
LOAN LOSS REIMBURSEMENT AGREEMENT
This Loan Loss Reimbursement Agreement (this "Agreement") is entered into
as of January 8, 1998 between, on the one hand PACIFIC SOUTHWEST BANK, a
federally chartered savings bank ("PSB"), NAFCO HOLDING COMPANY, LLC, a
Delaware limited liability company ("NAFCO"), and ADVANTAGE FUNDING GROUP,
INC., a Delaware corporation ("Advantage"), and, on the other hand, MONACO
FINANCE, INC., a Colorado corporation ("Monaco").
RECITALS
A. PSB, NAFCO, Advantage, and Pacific USA Holdings Corp., a Texas
corporation ("Pacific USA"), and PCF Service, LLC, a Delaware limited
liability company are parties to that certain Amended and Restated Asset
Purchase Agreement, dated as of January 8, 1998 (as amended or modified from
time to time, the "Asset Purchase Agreement").
B. The execution of this Agreement is required pursuant to the Asset
Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms, when used herein, will have the following
meanings:
"Acquired Loans" has the meaning set forth in the Asset Purchase
Agreement; provided that "Acquired Loans" shall not include any Repurchased
Auto Loan after the date of the repurchase thereof.
"Advantage Loan Purchase Agreement" has the meaning set forth in the
Asset Purchase Agreement.
"Auto Loan" means a consumer Automobile loan, including installment sales
contracts, arising from the sale of Automobiles.
"Auto Loan Balance" means, at any time any determination thereof is to be
made: (a) the aggregate outstanding principal balance of the Acquired Loans
as of the close of business on the Cut-Off Date, determined after deduction of
all payments of principal received with respect to the Acquired Loans on or
before the close of business on the Cut-Off Date; minus (b) the principal
balance (as of the Cut-Off Date) of any Repurchased Auto Loans.
"Automobiles" means new and used automobiles and light trucks (i.e.,
light duty trucks with a maximum load capacity of 2,000 pounds), the purchase
of which the related Obligors financed by Auto Loans.
"Business Day" means any day, other than a Saturday or a Sunday, or
another day on which commercial banks in the States of New York, Colorado, or
Texas are required, or authorized by law, to close.
"Closing Date" has the meaning set forth in the Asset Purchase Agreement.
"Covered Loss" means either a Net Initial Loss or a Net Subsequent Loss
and "Covered Losses" means, subject to Section 2(a)(i) hereof, all Net
Initial Losses and/or Net Subsequent Losses; provided that "Covered Losses"
shall not include accrued and unpaid interest pertaining to Net Uncovered
Losses.
"Cut-Off Date" has the meaning set forth in the Asset Purchase Agreement.
"Defaulted Acquired Loan" means any Acquired Loan (a) that, by its terms,
has more than ten percent (10%) of any installment of principal or interest
that is 120 or more days contractually past due as measured from the date such
Scheduled Payment is due in accordance with the provisions of such Acquired
Loan or (b) that the applicable Servicer has determined to be uncollectible in
accordance with the governing Servicing Agreement and the written credit
procedures and policies (consistent with the requirements of this Agreement
and the Servicing Agreement) in effect from time to time of such Servicer as
approved by PSB (which approval shall not be unreasonably withheld).
"Designee" means any Person to which Monaco has assigned, in accordance
with the provisions of this Agreement, any of its rights to receive payments
of Covered Losses, its rights under this Agreement, including, without
limitation, Monaco's rights to enforce the duties and obligations of the
Related Parties under this Agreement with respect to any Acquired Loan, and
Monaco's rights under and with respect to the Letters of Credit.
"Expenses" means, with respect to Defaulted Acquired Loans and at any
time any determination thereof is to be made, all expenses (without
duplication of amounts) incurred by Monaco (or the Designee(s)) or any
Servicer in connection with the foreclosure, conservation, collection, and/or
liquidation of such Defaulted Acquired Loans and/or the related Automobiles,
as more specifically identified and subject to the limitations set forth on
Exhibit E-1 attached hereto.
"Federal Funds Rate" means, for any day, the rate, per annum (rounded
upwards, if necessary, to the nearest 0.01%), equal to the weighted average of
the rates of overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day as published by
the Federal Reserve Bank of New York on the Business Day immediately following
such day; provided that, if the day for which such rate is to be determined
is not a Business Day, then the "Federal Funds Rate" for such day shall be
such rate on such transactions on the immediately following Business Day as
published on the Business Day immediately following such Business Day.
"Insurance Proceeds" means, with respect to any Acquired Loan and at any
time any determination thereof is to be made, an amount equal to the proceeds
paid by any insurer pursuant to any insurance policy covering such Acquired
Loan or the related Automobile or any other insurance policy that relates to
such Acquired Loan, but excluding the proceeds of any such insurance policy
that are applied to the restoration or repair of the related Automobile or
released to the Obligor in accordance with customary loan servicing
procedures.
"Letter of Credit" means, as appropriate, the Net Initial Losses Letter
of Credit and the Net Subsequent Losses Letter of Credit.
"Letter of Credit Bank" means: (a) Bankers Trust Company; (b) any other
financial institution whose long term debt, as of the date of its proposed
issuance of a Letter of Credit, is rated at least A3 by Xxxxx'x Investors
Service, Inc. and A- by Standard & Poor's Rating Services; (c) any other
financial institution that meets all of the following criteria: (i) such
financial institution has a total risk based capital ratio of not less than
10%; (ii) such financial institution has a Tier 1 ratio of not less than 6;
(iii) such financial institution has a CAMELS rating of 1 or 2; and (iv) such
financial institution has total assets of not less than $2,000,000,000; or (d)
any other financial institution that is acceptable to Monaco and/or the
Designee(s) in its and/or their sole discretion.
"Letters of Credit" means, collectively, the Net Initial Losses Letter of
Credit and the Net Subsequent Losses Letter of Credit.
"Loan Purchase Agreements" has the meaning set forth in the Asset
Purchase Agreement.
"Monaco's Accountants" means, at any time, the firm of independent
accountants retained by Monaco.
"NAFCO Loan Purchase Agreement" has the meaning set forth in the Asset
Purchase Agreement.
"Net Initial Losses" means the initial amount of Net Losses incurred up
to an aggregate amount equal to seven and one-half percent (7.5%) of the Auto
Loan Balance.
"Net Initial Losses Letter of Credit" means: (a) an irrevocable stand-by
letter of credit, substantially in the form attached hereto as Exhibit N-1,
with such changes, if any, as Monaco and the Designee(s) may approve, in the
original face amount of seven and one-half percent (7.5%) of the Auto Loan
Balance as of the close of business on the Cut-Off Date, issued by a Letter of
Credit Bank on behalf of PSB, NAFCO, and Advantage, and naming Monaco and/or
the Designee(s) as sole beneficiary(ies), and any amendments or extensions
thereof as permitted by the terms thereof or by the terms of Sections
2(a)(iv)(A) and (C) hereof; or (b) any letter of credit issued, in accordance
with the terms hereof (including Sections 2(a)(iv)(A) and (C) hereof), in
substitution for (i) the letter of credit referred to in clause (a) of this
definition or (ii) any letter of credit previously issued in accordance with
the terms hereof (including Section 2(a)(iv)(A) and (C) hereof) in
substitution for the letter of credit referred to in clause (a) of this
definition.
"Net Losses" means, at any time any determination thereof is to be made
for the period commencing on the Cut-Off Date and ending on such determination
date, an amount (not less than zero) equal to the sum of: (a) the Unpaid
Principal Balance of all Defaulted Acquired Loans minus all actual Net
Recoveries; plus (b) all accrued and unpaid interest on the Unpaid Principal
Balance of each Defaulted Acquired Loan for a period not to exceed
seventy-five (75) days; plus (c) all Expenses. For purposes of calculating
"Net Losses," accrued and unpaid interest with respect to any Defaulted
Acquired Loan that is a Precomputed Auto Loan shall be calculated as if such
Auto Loan were bearing interest calculable on a simple interest basis.
"Net Losses Report" means a report in the form of Exhibit N-2 attached
hereto.
"Net Principal Balance" means, with respect to any Precomputed Auto Loan,
the net payoff therefor less any accrued but unpaid late charges, all as of
the due date of the last full Scheduled Payment or, if more recent, the due
date of the last periodic payment of principal thereon.
"Net Recoveries" means, at any time any determination thereof is to be
made, an amount equal to all recoveries with respect to all Defaulted Acquired
Loans from whatever source, including, without limitation, all Proceeds, all
Insurance Proceeds, all payments from the related Obligor, and all amounts
recovered from the related Originator pursuant to the applicable Originator
Agreement or otherwise.
"Net Subsequent Losses" means Net Losses, up to an aggregate amount equal
to seven and one-half percent (7.5%) of the Auto Loan Balance, which are
incurred after the Net Initial Losses and the Net Uncovered Losses have been
incurred.
"Net Subsequent Losses Letter of Credit" means: (a) an irrevocable
stand-by letter of credit, substantially in the form attached hereto as
Exhibit N-1, with such changes, if any, as Monaco and the Designee(s) may
approve, in the original face amount of seven and one-half percent (7.5%) of
the Auto Loan Balance as of the close of business on the Cut-Off Date, issued
by a Letter of Credit Bank on behalf of PSB, NAFCO, and Advantage, and naming
Monaco and/or the Designee(s) as sole beneficiary(ies), and any amendments or
extensions thereof as permitted by the terms thereof or by the terms of
Sections 2(a)(iv)(B) and (C) hereof; or (b) any letter of credit issued, in
accordance with the terms hereof (including Sections 2(a)(iv)(B) and (C)
hereof), in substitution for (i) the letter of credit referred to in clause
(a) of this definition or (ii) any letter of credit previously issued in
accordance with the terms hereof (including Sections 2(a)(iv)(B) and (C)
hereof) in substitution for the letter of credit referred to in clause (a)
of this definition.
"Net Uncovered Losses" means Net Losses, up to an aggregate amount equal
to ten percent (10%) of the Auto Loan Balance, which are incurred after the
Net Initial Losses have been incurred.
"Obligor" means, with respect to an Acquired Loan, the Person primarily
obligated to make payments in respect thereto.
"Originator" means the originator of an Acquired Loan.
"Originator Agreement" means the agreement pursuant to which Advantage or
NAFCO, as the case may be, originally acquired an Acquired Loan.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, limited liability company, trust,
association, joint venture, governmental authority or any other entity of
whatever nature.
"Precomputed Auto Loan" means any Acquired Loan under which earned
interest (which may be referred to in the Acquired Loan as an "add-on finance
charge") and principal is determined according to the sum of periodic balances
or the sum of monthly balances or the sum of digits or any equivalent method
commonly referred to as the "Rule of 78s."
"Procedures" means the agreed upon accountants' review procedures set
forth on Exhibit P-1 attached hereto.
"Proceeds" means, with respect to a Defaulted Acquired Loan, any cash
amounts received in connection with the liquidation of such Defaulted Acquired
Loan, whether through foreclosure sale or other final disposition of such
Defaulted Acquired Loan or the related Automobile (other than Insurance
Proceeds), and any other cash amounts received in connection with the sale or
other disposition of such Defaulted Acquired Loan or the related Automobile.
"PSB's Accountants" means, at any time, the firm of independent
accountants retained by PSB, which, initially, shall be KPMG Peat Marwick.
"Related Parties" means, collectively, PSB, NAFCO, and Advantage.
"Reported Net Losses" shall have the meaning set forth in Section
2(b)(i) hereof.
"Repurchased Auto Loan" means any Acquired Loan repurchased (a) pursuant
to Section 4 of the Advantage Loan Purchase Agreement, or (b) pursuant to
Section 4 of the NAFCO Loan Purchase Agreement.
"Responsible Officers" means, with respect to any Person, the President,
any Executive Vice President, any Senior Vice President, the Chief Financial
Officer, the servicing manager, and any other officer of such Person having
responsibility or knowledge of the matters being reviewed.
"Scheduled Payment" means each payment due in respect of, and in
accordance with the provisions relating to, any Acquired Loan.
"Servicer" means the servicer of an Acquired Loan.
"Servicing Agreement" means an agreement pursuant to which a third party
Servicer agrees to service the Acquired Loans.
"Settlement Accountants" means Deloitte & Touche, L.L.P.
"Stated Amount" means, at any time any determination thereof is to be
made, the maximum amount available to be drawn under the Letter of Credit
without regard to whether any conditions to drawing could then be met.
"Unpaid Principal Balance" means, at any time any determination thereof
is to be made with respect to any Defaulted Acquired Loan: (a) if such
Defaulted Acquired Loan is an Auto Loan bearing interest calculable on a
simple interest basis, the then unpaid principal amount of Defaulted Acquired
Loan; or (b) if such Defaulted Acquired Loan is a Precomputed Auto Loan, the
then Net Principal Balance thereof.
Section 2. Covered Losses Reimbursement.
(a) Reimbursement for Covered Losses. On the Closing Date, the
Related Parties shall cause the Letters of Credit to be issued for the benefit
of Monaco and the Designee(s).
(i) Maximum Covered Losses. Monaco and the Designee(s)
may make a drawing under the Letters of Credit solely in accordance with the
terms and conditions thereof and the terms and conditions set forth herein
and, specifically, in Section 2(a)(ii) hereof. Neither Monaco nor any of
the Designees shall be entitled to be reimbursed for Covered Losses (whether
under the Letters of Credit, this Agreement, or otherwise) in an aggregate
amount in excess of fifteen percent (15%) of the Auto Loan Balance; provided
that the foregoing shall not limit Monaco's and/or any Designee's right to a
drawing in accordance with Section 2(a)(ii)(A)(2) and/or Section
2(a)(ii)(B)(2) hereof.
(ii) Timing and Amount of Drawings.
(A) All drawings under the Net Initial Losses Letter
of Credit shall be made solely in accordance with the terms thereof. Monaco
(or the Designee(s)) shall be entitled to make a drawing under the Net Initial
Losses Letter of Credit: (1) for any Net Initial Losses detailed in a Net
Losses Report one (1) Business Day following the date such report and the
related Accountants' Letter have been delivered to PSB in accordance with
Section 2(b)(i); and (2) for the Stated Amount thereof on or within five (5)
Business Days of the current expiration date of such Letter of Credit if it is
not extended or an alternative Letter of Credit (issued in accordance with the
terms hereof) is not provided prior to five (5) Business Days prior to the
current expiration date of such Letter of Credit.
(B) All drawings under the Net Subsequent Losses
Letter of Credit shall be made solely in accordance with the terms thereof.
Monaco (or the Designee(s)) shall be entitled to make a drawing under the Net
Subsequent Losses Letter of Credit: (1) for any Net Subsequent Losses
detailed in a Net Losses Report one (1) Business Day following the date such
report and the related Accountants' Letter have been delivered to PSB in
accordance with Section 2(b)(i); and (2) for the Stated Amount thereof on or
within five (5) Business Days days of the current expiration date of such
Letter of Credit if it is not extended or an alternative Letter of Credit
(issued in accordance with the terms hereof) is not provided prior to five (5)
Business Days prior to the current expiration date of such Letter of Credit.
(iii) Excess Drawings. If:
(A) pursuant to Section 2(b)(iv), either (1)
Monaco's Accountants and PSB's Accountants have resolved all exceptions
contained in an Exception Report (including, without limitation, the
determination of the actual amount of a disputed Net Loss which is a Covered
Loss), or (2) the Settlement Accountants have resolved the exceptions
contained in an Exception Report (including, without limitation, the
determination of the actual amount of a disputed Net Loss which is a Covered
Loss); and, as a result of such resolution and/or determination, the amount of
drawings made by Monaco and/or the Designee(s) under any Letter of Credit at
the time of such determination exceeds the amount to which Monaco and/or the
Designee(s) were otherwise entitled to draw; or
(B) a Net Losses Report indicates that, as a result of
the receipt of actual Net Recoveries, the amount of drawings made by Monaco
and/or the Designee(s) under any Letter of Credit exceeds the amount to which
Monaco and/or the Designee(s) were otherwise entitled to draw (any excess
amount under Section 2(a)(iii)(A) or this Section 2(a)(iii)(B) being an
"Excess Amount");
then such Excess Amount shall be subtracted from the next succeeding amount of
Covered Losses for which Monaco and/or the Designee(s) may draw under the
Letters of Credit; provided that, if no such succeeding amount may be drawn,
Monaco shall (or shall cause the Designee(s) to) refund, within ten (10) days
following written demand therefor, such amount to PSB together with interest
thereon from the date drawn until paid at the Federal Funds Rate; provided
that, if such amount is not repaid within thirty (30) days following demand
therefor, then the interest rate thereon shall thereafter automatically
increase to the Federal Funds Rate plus five percent (5%) per annum.
(iv) Changes to the Letters of Credit. If, at any time,
the Stated Amount of the Letters of Credit exceeds, by Two Hundred Fifty
Thousand Dollars ($250,000) or more, fifteen percent (15%) of the then Auto
Loan Balance minus the amount of all drawings previously made under the
Letters of Credit, then the Related Parties shall be entitled:
(A) to either: (1) on their behalf, cause the
issuance, in substitution for the then existing Net Initial Losses Letter of
Credit, by a Letter of Credit Bank of a new irrevocable stand-by letter of
credit, substantially in the form attached hereto as Exhibit N-1, with such
changes, if any, as Monaco and the Designee(s) may approve, and naming Monaco
and/or the Designee(s) as sole beneficiary(ies), in an original face amount
equal to the sum of (y) seven and one-half percent (7.5%) of the then Auto
Loan Balance minus (z) the amount of all drawings previously made under the
Net Initial Losses Letter of Credit; or (2) cause an amendment of the then
existing Net Initial Losses Letter of Credit to reduce the Stated Amount
thereof to an amount equal to the sum of (1) seven and one-half percent (7.5%)
of the then Auto Loan Balance minus (2) the amount of all drawings previously
made under the Net Initial Losses Letter of Credit; and
(B) to either: (1) on their behalf, cause the
issuance, in substitution for the then existing Net Subsequent Losses Letter
of Credit, by a Letter of Credit Bank of a new irrevocable stand-by letter of
credit, substantially in the form attached hereto as Exhibit N-1, with such
changes, if any, as Monaco and the Designee(s) may approve, and naming Monaco
and the Designee(s) as sole beneficiary(ies), in an original face amount equal
to the sum of (y) seven and one-half percent (7.5%) of the then Auto Loan
Balance minus (z) the amount of all drawings previously made under the Net
Subsequent Losses Letter of Credit; or (2) cause an amendment of the Net
Subsequent Losses Letter of Credit to reduce the Stated Amount thereof to an
amount equal to the sum of (1) seven and one-half percent (7.5%) of the then
Auto Loan Balance minus (2) the amount of all drawings previously made under
the Net Subsequent Losses Letter of Credit.
(C) Notwithstanding anything to the contrary contained
in this Section 2(a)(iv), no more than two (2) substitute letters of credit
and/or amendments to each Letter of Credit may be obtained under this Section
2(a)(iv) in any calendar year during the term hereof. All costs and expenses
of Monaco and/or any of the Designees incurred in connection with any such
substitute letters of credit and/or amendments to any Letter of Credit shall
be paid for by the Related Parties.
(b) Net Losses Reports.
(i) Delivery of Reports. No later than three (3)
Business Days prior to the fourteenth day of each calendar month during the
term of this Agreement, Monaco shall submit to PSB (and concurrently submit a
copy to PSB's Accountants and the Designee(s)) a Net Losses Report detailing
all Net Losses (for any period, the "Reported Net Losses") incurred during the
calendar month then ended or, in the case of the first Net Losses Report, if
applicable, during the period from the Cut-Off Date through the end of the
first calendar month following month of the Closing Date. Each Net Losses
Report submitted to PSB shall be certified as being true and correct in all
material respects and in compliance with this Agreement in all material
respects by the Chief Financial Officer of Monaco. Such Net Losses Report
shall also be accompanied by the related Accountants' Letter.
(ii) Accountants' Letters. Prior to submitting to PSB
the Net Losses Report required by Section 2(b)(i), Monaco shall submit a
draft Net Losses Report to Monaco's Accountants for review. Within five (5)
Business Days of receipt of such draft, Monaco's Accountants shall execute and
deliver (by fax on otherwise) a letter to Monaco (with respect to any draft
Net Losses Report, an "Accountants' Letter") stating that: (A) such
accountants have reviewed such draft Net Losses Report in accordance with the
Procedures; and (B) based upon such accountants' review, such accountants did
not have any exceptions to the calculations set forth therein.
(iii) Exception Reports. Each Net Losses Report
delivered to PSB shall be reviewed by PSB's Accountants in accordance with the
Procedures. Within ten (10) Business Days of receipt by PSB of the Net Losses
Report for each of the months of March, June, September, and December during
the term hereof, if PSB's Accountants shall, in connection with their review
of such Net Losses Report and the Net Losses Reports for the immediately
preceding two (2) calendar months, have noted any exceptions to such Net
Losses Reports, then PSB's Accountants shall deliver an exception report (with
respect to such Net Losses Reports, an "Exception Report") to PSB, Monaco, the
Designee(s), and Monaco's Accountants detailing such exception(s). Failure to
timely deliver an Exception Report on or before the expiration of the ten (10)
Business Day review period set forth above shall constitute PSB's acceptance
of each of the related Net Losses Reports.
Resolution of Exceptions. If an Exception Report is timely delivered,
Monaco's Accountants and PSB's Accountants shall attempt to resolve the
exceptions noted therein (including, without limitation, the amount of any
disputed Net Loss(es) or the amount of any excess drawing(s) under any Letter
of Credit). If Monaco's Accountants and PSB's Accountants cannot resolve the
exceptions within five (5) Business Days following the delivery of a timely
Exception Report, such accountants shall jointly submit the applicable Net
Losses Report(s) and the related Exception Report(s) to the Settlement
Accountants. Within ten (10) Business Days of receiving such documents, the
Settlement Accountants shall finally and conclusively resolve all exceptions
(including, without limitation, the amount of any disputed Net Loss(es) or the
amount of any excess drawing(s) under any Letter of Credit). The costs and
expenses of the services of the Settlement Accountants shall be paid equally
by Monaco and PSB.
Section 3. Covenants of Monaco.
(a) Compliance with Laws. Monaco shall comply in all material
respects with all applicable laws, rules, regulations and orders with respect
to it, its business and properties and all Acquired Loans.
(b) Inspection. Monaco shall provide, and shall use its best
efforts to cause each other Servicer, if any, to provide (and shall use its
best efforts to include an express covenant in the Servicing Agreement
requiring such Servicer to provide) PSB and its authorized agents and
representatives (i) reasonable access during regular business hours to all
records of Monaco and such Servicer relating to the Acquired Loans and any
assets related thereto and (ii) reasonable access during normal business hours
to Responsible Officers of Monaco and such Servicer to provide information and
answer questions concerning the Acquired Loans and any assets related thereto.
Any on-site examination pursuant to this paragraph shall be conducted in a
manner that does not unreasonably interfere with Monaco's or such Servicer's
normal operations, and all fees and expenses incurred by PSB in connection
with any such examination shall be borne by PSB.
(c) Servicing Reports. Monaco shall, with respect to each Acquired
Loan for which it is the Servicer, and shall use its best efforts to cause
each other Servicer, if any, to (and shall use its best efforts to include an
express covenant in the Servicing Agreement requiring such Servicer to), (i)
provide to PSB the servicing reports specified and described in, and at the
times set forth in, the Servicing Agreement ("Servicing Reports") with respect
to the Acquired Loans serviced by such Servicer and (ii) provide to PSB such
other information related to the Acquired Loans or any assets related thereto
as PSB may reasonably request. Monaco shall, with respect to each Acquired
Loan for which it is the Servicer, and shall use its best efforts to cause
each other Servicer to (and shall use its best efforts to include an express
covenant in the Servicing Agreement requiring such Servicer to), prepare
separate Servicing Reports covering only the Acquired Loans serviced by such
Servicer.
(d) Standard of Care. Irrespective of whether Monaco (and/or the
Designee(s)) shall have made a drawing under the Letter(s) of Credit with
respect to any Acquired Loan that is a Defaulted Acquired Loan, Monaco shall,
with respect to each Acquired Loan for which it is the Servicer, and shall
require that each other Servicer, if any, (and shall include an express
covenant in the Servicing Agreement requiring such Servicer to) to, in
managing, administering, servicing, enforcing and making collections on the
Acquired Loans serviced by it and the related Automobiles, exercise that
degree of skill, care, prudence and diligence consistent with customary and
usual standards of practice of prudent institutional servicers of motor
vehicle loan portfolios of credit quality similar to the Acquired Loans, and
with at least the same degree of skill, care, prudence, and diligence which
the applicable Servicer customarily exercises with respect to motor vehicle
loan contracts of similar credit quality and interest in motor vehicle loans
owned or originated by it.
(e) Servicer Replacement. Except to the extent Monaco is required
to change or terminate any Servicer in connection with a securitization or
warehouse facility transaction, Monaco shall not change or terminate any
Servicer without the prior written consent of PSB, which consent shall not
unreasonably withheld; provided that Monaco may, without the consent of PSB,
terminate either Electronic Data Systems or CSC Logic/MSA L.L.P. d/b/a Loan
Servicing Enterprises as Servicer as long as Monaco is the successor Servicer.
Monaco shall not permit any material change to any servicing procedures or
standards applicable to any Acquired Loan which would have the effect of
lowering existing servicing standards, without the prior written consent of
PSB which consent shall not be unreasonably withheld.
(f) Certain Actions. Monaco shall, with respect to each
Acquired Loan for which it is the Servicer, and shall use its best efforts to
cause each other Servicer, if any (and shall use its best efforts to include
an express covenant in the Servicing Agreement requiring such Servicer to),
to, pursue reasonable remedies available against the applicable Obligor and
Originator in order to minimize Net Losses with respect to each Acquired Loan.
Section 4 Representations and Warranties of Monaco.
(a) Organization and Good Standing. Monaco is a corporation
duly organized, validly existing and in good standing under the law of the
State of Colorado and is qualified to do business in each other state where
the nature of its business requires it to qualify, except to the extent that
the failure to so qualify would not in the aggregate materially adversely
affect the ability of Monaco to perform its obligations hereunder.
(b) Authorization. Monaco has the power, authority and legal
right to execute, deliver and perform under the terms of this Agreement and
the execution, delivery and performance of this Agreement has been duly
authorized by Monaco by all necessary corporate action.
(c) Binding Obligation. This Agreement, assuming the due
authorization, execution and delivery hereof by the other parties hereto,
constitutes a legal, valid and binding obligation of Monaco, enforceable
against Monaco in accordance with its terms except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws (whether statutory, regulatory or decisional) now or hereafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to certain equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought, whether a proceeding at law or in
equity.
(d) No Violation. The consummation of the transactions
contemplated by the fulfillment of the terms of this Agreement will not
conflict with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a default under the
organizational documents or bylaws of Monaco, or any indenture, agreement,
mortgage, deed of trust or other instrument to which Monaco is a party or by
which it is bound, or in the creation or imposition of any lien upon any of
its properties pursuant to the terms of such indenture, agreement, mortgage,
deed of trust or other such instrument, or violate any law, or any order, rule
or regulation applicable to Monaco of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over Monaco or any of its properties.
(e) Approvals. All approvals, authorizations, consents,
orders or other actions of any person, or of any court, governmental agency or
body or official, required in connection with the execution and delivery of
this Agreement have been or will be taken or obtained on or prior to the
Closing Date.
Section 5. Representations, Warranties, and Covenants of the Related
Parties.
(a) Organization and Good Standing. PSB is a bank duly
organized, validly existing and in good standing under the laws of the United
States of America and is qualified to do business in each other State where
the nature of its business requires it to qualify, except to the extent that
the failure to so qualify would not in the aggregate materially adversely
affect the ability of PSB to perform its obligations hereunder. NAFCO is a
limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware and is qualified to do
business in each other state where the nature of its business requires it to
qualify, except to the extent that the failure to so qualify would not in the
aggregate materially adversely affect the ability of NAFCO to perform its
obligations hereunder. Advantage is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in each other state where the nature of its business
requires it to qualify, except to the extent that the failure to so qualify
would not in the aggregate materially adversely affect the ability of
Advantage to perform its obligations hereunder.
(b) Authorization. Each of the Related Parties has the power,
authority and legal right to execute, deliver and perform under the terms of
this Agreement and the execution, delivery and performance of this Agreement
has been duly authorized by each of the Related Parties by all necessary
corporate or other necessary action.
(c) Binding Obligation. This Agreement, assuming the due
authorization, execution and delivery hereof by Monaco, constitutes a legal,
valid and binding obligation of each of the Related Parties, enforceable
against each of the Related Parties in accordance with its terms except that
(A) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws (whether statutory, regulatory or decisional)
now or hereafter in effect relating to creditors' rights generally and (B) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to certain equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought, whether a
proceeding at law or in equity.
(d) No Violation. The consummation of the transactions
contemplated by the fulfillment of the terms of this Agreement will not
conflict with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a default under the
organizational documents or bylaws, as applicable, of each of the Related
Parties, or any indenture, agreement, mortgage, deed of trust or other
instrument to which any of the Related Parties is a party or by which any of
the Related Parties is bound, or in the creation or imposition of any lien
upon any of its properties pursuant to the terms of such indenture,
agreement, mortgage, deed of trust or other such instrument, or violate any
law, or any order, rule or regulation applicable to any of the Related Parties
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over any of the
Related Parties or any of their respective properties.
(e) Approvals. All approvals, authorizations, consents,
orders or other actions of any person, or of any court, governmental agency or
body or official, required in connection with the execution and delivery of
this Agreement have been or will be taken or obtained on or prior to the
Closing Date.
(f) Letter of Credit Bank. Notwithstanding anything to
the contrary contained herein, the Related Parties shall use their best
efforts to have each Letter of Credit Bank be a financial institution referred
to in clause (a) or clause (b) of the definition of "Letter of Credit
Bank" contained herein. The use of such Persons' best efforts shall include,
but not be limited to, the provision of cash collateral to fully secure the
Related Parties' (or any of their) reimbursement obligations to such financial
institution in respect of the Letter(s) of Credit.
Section 6 No Third Party Beneficiary. Except as contemplated by
Section 9 hereof, no creditor or third party having dealings with Monaco
shall have the right to enforce the duties or obligations of any of the
Related Parties hereunder or to pursue any other right or remedy hereunder or
at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, Monaco and the Designee(s).
Section 7 Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
and delivered as to each party hereto, the Designee(s), the Monaco
Accountants, and the PSB Accountants, by a nationally recognized overnight
courier, at its address set forth as follows:
To Monaco and/or the Designee(s):
Monaco Finance, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
To PSB, NAFCO, or Advantage:
c/o Pacific USA Holdings Corp.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. XxXxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Pacific USA Holdings Corp.
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Monaco's Accountants:
Ehrhardt, Keefe, Xxxxxxx & Xxxxxxx
0000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
PSB's Accountants:
KPMG Peat Marwick
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
All such notices and communications shall not be effective until received by
the party to whom such notice or communication is addressed.
Section 8 No Waiver; Remedies. No failure on the part of either
party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any other remedies provided by law.
Section 9 Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and their
respective successors and permitted assigns. None of the Related Parties may
assign its rights or obligations under this Agreement without the express
prior written consent of Monaco. Notwithstanding anything to the contrary
contained in Section 6hereof, Monaco may assign all of its rights hereunder
(including, without limitation, its rights to receive payments for Covered
Losses, its rights to enforce the duties and obligations of the Related
Parties hereunder with respect to any Acquired Loan, and its rights under and
with respect to the Letter of Credit) upon prior written notice of the same to
PSB of the identity of such assignee and the terms of the assignment;
provided that such assignment may be made by Monaco solely: (a) in
connection with a securitization or warehouse facility transaction; and (b) in
connection with any such securitization or warehouse facility transaction, to
the trustee or the servicer or to a subsidiary of Monaco that is a special
purpose entity. PSB shall have no right to consent to or otherwise approve or
disapprove any such assignee; however, Monaco shall provide PSB a copy of the
executed assignment document (and all other documents which relate to such
assignment) within five (5) Business Days of the execution thereof. Except as
otherwise permitted under this Xxxxxxx 0, Xxxxxx may not assign its
obligations hereunder (including but not limited to all obligations of Monaco
under Sections 2 and 3 hereof) or otherwise assign its rights hereunder
without the express prior written consent of PSB.
Section 10 Amendments; Consents and Waivers; Entire Agreement. No
modification, amendment or waiver of, or with respect to, any provision of
this Agreement, and all other agreements, instruments and documents delivered
thereto, nor consent to any departure by any party from any of the terms or
conditions thereof shall be effective unless it shall be in writing and signed
by each of the parties hereto (including any Designee(s)). Any waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. This Agreement and the documents referred to herein embody
the entire agreement of the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to the
subject hereof.
Section 11 Securitization Matters. Notwithstanding anything to the
contrary contained herein, each of the parties hereto agrees that, in
connection with any securitization transaction contemplated under Section 9
hereof, such party shall take such actions (including, without limitation, the
amendment or modification of this Agreement or the Letter of Credit and the
delivery of opinions of counsel) as shall be reasonably required by MBIA
Insurance Corporation (or similar entity) and/or any rating agency involved in
any such securitization transaction; provided that Monaco shall pay all of
the reasonable out-of-pocket expenses, including, without limitation,
attorneys' fees, incurred by each such party in taking such action(s);
provided further that no party hereto shall be required to take any such
action if, in the good faith determination of such party, such action would
materially and adversely affect such party.
Section 12 Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation, shall not in
any way be affected or impaired thereby in any other jurisdiction.
Section 13 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.
(A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS.
(B) IN ANY LEGAL ACTION RELATING TO THIS AGREEMENT OR
RELATING TO ANY OTHER DEALINGS AND NEGOTIATIONS BETWEEN THE PARTIES, EACH
PARTY AGREES (I) TO THE EXERCISE OF JURISDICTION OVER IT BY A FEDERAL COURT
SITTING IN DALLAS, TEXAS OR DENVER, COLORADO; AND (II) IF EITHER PARTY BRINGS
A LEGAL ACTION, IT SHALL BE INSTITUTED IN ONE OF THE COURTS SPECIFIED IN
SUBPARAGRAPH (I) ABOVE.
(C) THE PARTIES EACH HEREBY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY LEGAL ACTION WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
Section 14 Termination of Agreement. This Agreement shall
terminate upon the earlier of (a) the reimbursement to Monaco (or its assigns
under Section 9 hereof) of all Covered Losses required to be reimbursed
under Section 2(a) hereof, or (b) the date all Acquired Loans have either
been paid in full, or become Defaulted Acquired Loans and any amounts
reimbursable to Monaco in accordance with Section 2 hereof have been paid to
Monaco (or its assigns under Section 9 hereof). Upon termination of this
Agreement, Monaco shall deliver to the Related Parties a written termination
and release of this Agreement.
Section 15 Execution in Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and both of which when taken
together shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
PACIFIC SOUTHWEST BANK,
a federally chartered savings bank
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: Executive Vice President
NAFCO HOLDING COMPANY, LLC,
a Delaware limited liability company
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
ADVANTAGE FUNDING GROUP, INC.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Vice President
MONACO FINANCE, INC.,
a Colorado corporation
By: /s/ Xxxxx X. Xxxxxxx
Name:
Title: Executive Vice President
EXHIBIT E-1
EXPENSE CATEGORIES AND LIMITATIONS
1. All costs related to the sale of a vehicle:
-- Auction
-- Sales fees
-- Commissions
2. All costs related to repossessions of vehicles paid to outside
parties:
-- Repossession fees
-- Skip Tracing fees
-- Storage fees
-- Investigation fees
-- Transport fees
-- Legal fees and court costs
3. All repair costs of repossessed and abandoned vehicles:
-- Non-insured repair costs
-- Insured repair costs subject to subsequent reimbursement
-- Repair costs for abandoned vehicles
-- Repair costs for skips
4. Force Placed or VSI insurance premiums
