EXHIBIT 10.2
COLLECTION SERVICES AGREEMENT
THIS AGREEMENT
("Agreement") is made and entered into this 3 rd day of
December, 2008, by and between UAC AM Collection, LLC, a Minnesota
limited liability company ("Agency") and SHAC, Inc., an Arkansas
corporation ("Client") whereby Agency has agreed to attempt to
collect, as an independent contractor, certain accounts receivable,
notes and other instruments which represent monies and obligations
due to Client by third parties, all as identified on the attached
Exhibit A (hereinafter collectively referred to as the
"Portfolio").
WHEREAS, Client
desires to retain the services of Agency to assist Client in the
collection of the Portfolio related to its "buy here, pay here"
business operated under the name of "Auto Master" from its retail
sales locations in the States of Arkansas, Texas, Oklahoma and
Missouri; and
WHEREAS, Client
has decided to engage Agency to perform the collection services
previously performed by Client's and Client's affiliates' employees
from the various former Auto Master retail locations and its Euless
collection center.
NOW, THEREFORE, in
consideration of the mutual covenants, terms and conditions herein
contained, the parties agree as follows:
1.
Portfolio . The contents of Exhibit "A" notwithstanding, the
Portfolio shall not include receivables charged off by Client in
the Client's ordinary course of business before the execution of
this Agreement. As to any accounts receivable, notes, contract
rights and related lien enforcement and collection abilities
comprising the Portfolio which Client has assigned to Agency for
collection, Agency shall exercise reasonable care and its best
efforts to lawfully collect the Portfolio pursuant to this
Agreement. Client hereby designates Agency as its sole and
exclusive agency for collection of the Portfolio. Agency shall
directly and through affiliated entities, collect payments from
customers in the Portfolio at all of the sixteen (16) Auto Master
retail sales locations (collectively referred to as the "Dealership
Facilities") which continue to be operated by Agency's affiliate,
Interstate Auto Group, Inc. and its affiliates. Agency shall
utilize the services of its own employees to collect the Portfolio
and shall utilize Client's Euless collection center location
pursuant to an Office Sharing Agreement of even date herewith for
purposes of performing a substantial portion of the services to be
provided hereunder.
2.
Warranties . (a) In collecting the Portfolio, Agency
covenants, warrants and represents to Client that (i) Agency shall
comply with all applicable laws, rules and regulations, (ii) shall
engage only in activities and actions and use only collection tools
and methods which fully comply with all applicable laws, rules and
regulations, and (iii) to modify or eliminate any of its
activities, actions, tools or methods deemed unreasonable pursuant
to any written instructions Agency may receive from Client. In
addition, Agency covenants, warrants and represents that it shall
obtain and maintain at all times wherever licenses and bonds are
required in any jurisdiction where collection efforts by Agency on
behalf of Client occur, and fulfill whatever other requirements as
are required in order to properly perform the terms and conditions
of this Agreement.
(b)
Client covenants, warrants and represents that it is the absolute
and exclusive owner of the Portfolio, subject only to that certain
lien in favor of JPMorgan Chase Bank, N.A. and/or Wells Fargo,
N.A., or their affiliates (singularly or collectively, hereinafter
the "Lender"), and that (i) Client has obtained the permission of
the Lender for purposes of entering into this Agreement for the
arrangements hereunder and the consent of the Lender for the
payment of all fees due to Agency hereunder, (ii) Client has the
full authority and has received all necessary authorizations to
enter into the terms and conditions of this Agreement, (iii) all
title and related documentation for the Portfolio has been properly
evidenced, recorded, completed and filed with all necessary
governmental agencies to perfect a proper security interest in the
assets securitizing each installment sales contract comprising the
Portfolio and is in the possession of the Client, (iv) all of the
financial and accounting information provided by the Client to the
Agency with respect to the Portfolio is current, accurate and
complete in all material respects, (v) as of the date of entering
into this Agreement, the Portfolio has an outstanding balance of
$71,606,471, and (vi) not more than 40% of the active outstanding
balance of the Portfolio is one day or more delinquent as of
November 21, 2008. Client makes no warranties or representations
concerning the quality of the Portfolio.
3.
Fees . Agency shall receive a fee of fifteen percent (15%)
for its efforts in collecting any and all payments resulting from
the Portfolio up to the cumulative receipt of $25,000,000. After
the cumulative receipt of $25,000,000 from the Portfolio collection
efforts up to a cumulative receipt of $35,000,000, Agency's
collection fees shall be fifty percent (50%) of all Portfolio
collections received in excess of $25,000,000. After the cumulative
receipt of $35,000,000 from the Portfolio collection efforts,
Agency shall receive one hundred percent (100%) of the collection
proceeds from the Portfolio on the next $1,000,000. After the
cumulative receipt of $36,000,000 from the Portfolio collection
efforts, Agency shall collect the remaining Portfolio on behalf of
the Client for a fee of forty percent (40%) of all proceeds
received. For purposes of defining the collection proceeds
resulting from the Portfolio, all payments of principal, interest
and penalties, repossession collateral recoveries, fees and any
other customer payments shall be included. Agency shall be entitled
to all such fees on the cumulative amounts collected by or paid to
Agency or Client on Portfolio income. Agency shall be responsible
for the payment of all costs and expenses associated with the
collection of the Portfolio, including all of Agency's employee and
payroll costs, operating fees, repossession fees, attorneys' fees
and court costs associated with the efforts for collection, and
similar and related costs. The receipt of any proceeds by Client or
Agency during the term of this Agreement from the Portfolio shall
be counted in and deemed a part of the cumulative receipts
collected by Agency on behalf of Client and Client shall be
entitled to its fee thereon even if such amounts are paid directly
to or collected by the Client. Client agrees to provide a full,
detailed accounting to Agency on a monthly basis for any such
receipts, and less comprehensive daily and weekly reports in a
mutually acceptable format. Any proceeds received by Client or
Agency resulting from the repossessed vehicles in the possession of
Client as of the date hereof as identified on Exhibit B attached
hereto shall not be included in the cumulative sum of the Portfolio
collected and will belong 100% to the Client. Agency shall receive
no fee for collections on loans charged off by Client before the
execution of this Agreement.
4.
Direct payments . Client shall promptly notify Agency (on no
less than a weekly basis) of any and all payments received from or
arrangements made directly with Client's Portfolio accounts. Agency
shall be entitled to its fees as provided above for Client's
receipt of such direct payments.
5.
Records . Agency shall keep complete and accurate records
with respect to the Portfolio and all actions taken with respect
thereto, which records Agency shall provide Client with full access
to inspect, copy, audit and/or review upon Client's reasonable
request during normal business hours upon three (3) days written
notice to Agency. In addition, Agency will provide Client with a
daily report of receipts and a weekly and monthly status report on
all efforts to collect the Portfolio without cost to Client.
Employees hired by Agency will be permitted to interact with the
Client's employees at the shared office facility in Euless, Texas.
During the period of the Agency's collection of the Portfolio,
Client shall also have reasonable access to all of Agency's records
relating to the Portfolio at any of the Dealership Facilities
during normal business hours. Agency shall have the final say as to
all efforts required or deemed reasonably necessary by Agency for
the collection of the Portfolio, but Agency will provide progress
reports and meet with the Client and its staff on a monthly basis
or as otherwise reasonably requested to address any collection
issues and to discuss the status of Agency's collection efforts on
the Portfolio. During the term of this Agreement, Agency shall use
its best efforts to continue collecting the Portfolio in the
ordinary course of business. Agency may sell all or any portion of
the Portfolio to a third party only with the prior written consent
of Client, which may be withheld for any or no reason. Any such
proceeds shall be treated as cumulative receipts from the Portfolio
for which Agency shall be entitled to its fee receipts as provided
under paragraph 3 hereof.
6.
Remittance . Agency shall establish a separate deposit
account (hereafter, "Trust Account") at a financial institution
approved by Client, in which to deposit all collections of the
Portfolio, and no other funds shall be commingled therewith. All
funds in the Trust Account shall be the sole and exclusive property
of Client. Once each banking day, Agent shall transmit via an
Automated Clearing House ("ACH") debit entry, the collected funds,
less Agent's fee, to a deposit account designated by Client.
Simultaneously, Agency shall transmit to its own deposit account
via ACH debit entry that portion of the collections representing
Agent's fee. Agency acknowledges that it shall collect monies on
the Portfolio for the benefit of and as a trustee of Client. Client
shall be responsible for returned item charges to the Trust
Account, and Agency shall be responsible for refunding fees
collected on returned items. These matters shall be reconciled
daily prior to the transmission of funds from the Trust Account.
The Trust Account shall be reconciled by Agency on a daily basis
and a detailed report, in a mutually satisfactory format, shall be
provided to Client on a daily basis.
7.
Agency Auth
