PURCHASE AND SALE
AGREEMENT
This Purchase
and Sale Agreement (the “Agreement”) is made as of
February 5, 2007, between GREAT SENECA FINANCIAL CORPORATION,
PLATINUM FINANCIAL SERVICES CORPORATION, MONARCH CAPITAL
CORPORATION, COLONIAL CREDIT CORPORATION, CENTURION CAPITAL
CORPORATION, SAGE FINANCIAL CORPORATION and HAWKER FINANCIAL
CORPORATION (collectively, the “Sellers,” and each a
“Seller”), corporations under the laws of the State of
Maryland, located at 700 King Farm Blvd., Rockville, Maryland 20850
and PALISADES ACQUISITION XV, LLC (“Buyer”), a Delaware
limited liability company organized under the laws of the State of
Delaware with its headquarters/principal place of business at 210
Sylvan Avenue, Englewood Cliffs, New Jersey 07632.
WHEREAS, the
Sellers desire to sell and Buyer desires to purchase certain of the
Accounts on the terms and conditions hereinafter
provided:
NOW, THEREFORE, in
consideration of the mutual promises herein, Buyer and Sellers
agree as follows:
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1.1
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“ Account Document(s)
” means, with respect to any Account, any application,
agreement, billing statement, notice, correspondence or other
information in the Sellers’ possession that relates to an
Account. An Account Document may include, without limitation,
original documents or copies thereof, whether by photocopy,
microfiche, microfilm or other reproduction process.
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1.2
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“ Account(s) ”
means those credit card and other consumer installment credit
agreement accounts and receivables (including, without limitation,
judgments) listed on the Asset Schedule (attached hereto as
Exhibit 1) with outstanding balances of $6,912,428,982.00
which are subject to adjustment as of the Cutoff Date (as defined
below) in accordance with Section 2.2.
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1.3
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“ Affiliate ”
means, when used with reference to a specified Person, any other
Person who directly controls, is controlled by, or is under common
control with, the specified Person. For purposes of this
definition, “control” means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person that is a
corporation, limited liability company, partnership, trust, or
other entity, whether through ownership of voting securities or
interests, by contract, or otherwise..
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1.4
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“ Closing Date ”
means Friday, February 16, 2007, or such other date mutually
agreed to by Buyer and the Sellers provided that Buyer shall have
the continuing right to postpone the Closing Date until a date on
or before March 31, 2007.
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1.5
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“ Cutoff Date ”
means 8 PM Friday, February 2, 2007, provided that if the
Closing does not occur until after March 5, 2007 as a result
of Buyer’s decision to postpone the Closing Date and due to
no fault of Seller, the Cutoff Date shall be deemed to be the
Closing Date .
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1.6
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“ Cutoff File ”
means the electronic file containing the file of the Accounts
actually purchased by Buyer on the Closing Date reflecting activity
as of the Cutoff Date.
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1.7
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“ Debtor ” means
the person or persons in whose name(s) an Account was
established.
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1.8
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“ Diligence File
” means the electronic file containing information relating
to Seller’s accounts delivered by, or on behalf of, Sellers
to Buyer on, or about, January 25, 2007.
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1.9
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“ Litigation ”
means any action, proceeding, claim, lawsuit, arbitration, audit,
hearing, or investigation commenced, brought, conducted, or
threatened by or before, or otherwise involving, any governmental
authority or any third party, other than any routine collection
action instituted by, or on behalf of, a Seller or any action
instituted to execute a lien against the assets of a
Debtor.
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1.10
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“ Person ” means
any individual, corporation, partnership, joint venture, limited
liability company, trust, governmental authority, or other
entity.
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1.11
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“ Purchase Price
” means $300,000,000.00, subject to Pre-Closing Adjustment
pursuant to Section 2.2.
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1.12
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“ Purchase Price
Percentage ” means that percentage obtained when the
Purchase Price is divided by the total outstanding Account balances
as of the Cutoff Date.
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1.13
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“ Sellers’
Knowledge ” means the actual knowledge, without
investigation, of any Seller, its Affiliates, agents or
representatives.
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2.
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PURCHASE AND SALE OF
ACCOUNTS
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2.1
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Purchase and Sale
. On the basis of, and
subject to, the representations, warranties and covenants of the
Buyer contained in this Agreement, the Sellers agree to sell,
assign and transfer to Buyer, and Buyer agrees to purchase from the
Sellers, on the Closing Date all right, title and interest of
Sellers in the Accounts. Buyer has made an independent
investigation, as it deems necessary, as to the nature, validity,
collectibility, enforceability and value of the Accounts, and as to
all other facts that Buyer deems material to Buyer’s
purchase. Buyer enters into this Agreement solely on the basis of
that investigation and Buyer’s own judgment. Buyer has made
an independent determination that the Purchase Price represents the
Accounts’ fair and reasonable value. Buyer acknowledges that
the sale and assignment are without warranty of any kind;
including, without limitation, warranties pertaining to validity,
collectibility, accuracy or sufficiency of information, except as
stated in Article 3 below; and is without recourse to the
Sellers except as
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specifically
set forth within the Agreement. Buyer further acknowledges that it
is not acting in reliance on any representation by the Sellers,
except as set forth in Article 3 below.
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2.2
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Pre-Closing Adjustment
. The Purchase Price
amount stated in Section 1.6 shall be adjusted as
follows:
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The Sellers
shall prepare a final statement of Accounts as of the Cut Off Date
( the “Closing Statement”). The Sellers may retain any
Account if (i) the Sellers determine, in their sole
discretion, that as of the Cut Off Date the representations set
forth in Section 3.3 are not true and correct with respect to
such Account; or (ii) the Sellers determine, in their sole
discretion, that there is a pending or threatened suit,
arbitration, bankruptcy proceeding or other legal proceeding or
investigation relating to such Account, or the Debtor of such
Account, naming the Sellers or otherwise involving the
Sellers’ interest therein in a manner unacceptable to the
Sellers, or the Sellers otherwise determine, in their sole
discretion, that such matter cannot be resolved and/or that the
Sellers’ interest therein cannot be adequately protected
without the Sellers owning such Account, provided that in either
case the Sellers shall, if requested by Buyer, in writing describe
such suit or investigation in detail reasonably acceptable to
Buyer. The Purchase Price will be decreased by an amount equal to
the product of (i) outstanding balance as of the Cut Off Date of
any such retained Account and (ii) the Purchase Price
Percentage. The Sellers will notify the Buyer of the adjusted
Purchase Price on or prior to the Closing Date. Sellers shall have
a right to provide replacement accounts for those retained as
Pre-Closing Adjustments of comparable value.
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(a)
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On
the date hereof Buyer shall, by wire transfer of immediately
available funds, make a deposit of $60,000,000.00 (the
“Deposit”) to Sellers, jointly, which shall be held by
Sellers as a deposit subject to the terms and conditions of this
Agreement and shall be refundable only as provided in section 13.1
of this Agreement. To the extent, if any, that Sellers are required
to return the Deposit to Buyer, Sellers shall be jointly and
severally liable for the return of the Deposit. If Closing has not
occurred by February 16, 2007 at 1pm, Buyer shall make an
additional deposit of $15,000,000.00 to be held by Sellers subject
to the terms and conditions of this Agreement and shall be
refundable only as provided in section 13.1 of this
Agreement.
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(b)
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Subject to satisfaction or waiver of
the conditions precedent set forth in Article 5 of this
Agreement, on or before 3:00 P.M., Eastern Time on the Closing
Date, Buyer shall pay, by wire transfer of immediately available
funds to an account, or accounts, specified by the Sellers, an
amount equal to the Purchase Price minus the Deposit. The Sellers
will be deemed to have simultaneously transferred, and
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shall
simultaneously transfer title to the Accounts to Buyer in
accordance with Section 2.4 below.
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(c)
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After Buyer has received Net
Payments from the Accounts equal to 150% of the Purchase Price,
Seller shall be entitled to 20% of future Net Payments. Buyer shall
provide monthly reports in a form and content reasonably
satisfactory to the Seller and remit to Seller, on a monthly basis,
Seller’s 20% of Net Payments earned during the prior month.
Seller may, at its sole expense, audit Buyer upon reasonable notice
and during normal business hours, to determine Buyer’s
compliance. For purposes of this clause, “ Net
Payments ” shall mean all collections and proceeds on
Accounts received by Buyer from any source, less any costs and fees
of collection or sales, disgoregments and amounts equal to the cost
of funds to Buyer and its Affiliates in financing the Purchase
Price To the extent that Buyer pays a brokerage fee in excess of
10% for the sale of accounts, said excess shall not be counted
against the above Net Payment calculation.
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2.4
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Transfer . Simultaneously with payment of the
Purchase Price, the Sellers and Buyer will execute and deliver to
each other a Bill of Sale substantially in the form of
Exhibit 2. The Sellers will provide to Buyer, on the Closing
Date, or at such other time as is mutually agreed to by the Buyer
and Sellers , a computer printout or magnetic tape (the
“ Closing Tape ”) listing the Accounts as of the
Cutoff Date that were purchased by the Buyer containing the
information set forth on the attached Exhibit 4. On the
Closing Date, Sellers will, by means of the aforesaid Bill of Sale
and this Agreement, transfer all Sellers’ right, title and
interest in the Accounts and Buyer will accept same and assume,
with respect to each Account, all of Sellers’ rights,
responsibilities, liabilities and obligations with respect to such
Accounts. Sellers shall also deliver executed Powers of Attorney in
the form attached as Exhibit 5 and such other transfer
documents as Buyer shall reasonably require on at least 48 hours
notice prior to the Closing.. If the Sellers receive any payments
of principal and/or interest by or on behalf of any Debtor with
respect to an Account between the Cutoff Date and the Closing Date,
Sellers shall hold such amounts in trust for Buyer and pay over
such amounts to Buyer, without interest thereon, within seven
(7) days after the Closing Date. If payments are received by
the Sellers from a Debtor on or after Closing Date, the Sellers
shall forward such payments, without interest thereon, to Buyer
within seven (7) days from date of receipt. Buyer may, at its
sole expense audit Sellers and their Affiliates and agents upon
reasonable notice during normal business hours to determine
Sellers’ compliance.
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2.5
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Notices, Regulatory Filings and
Fees, Sales, Use or Transfer Taxes . If any notices, regulatory filings
or fees, sales, use, transfer or other tax is required or assessed
or otherwise is or becomes required or payable as a result of the
transactions contemplated hereby, Buyer shall assume the obligation
to provide such notices, make such regulatory filings and pay such
filing fees and tax, to the extent such taxes relate to, or accrue
on or after the Closing Date.
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3.
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REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
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3.1 Due
Organization; Authorization; Litigation . Each Seller makes the
following representations and warranties as of the date hereof and
as of the Closing Date:
(a) The
Sellers are duly organized, existing and in good standing under the
laws of the State of Maryland and the Seller’s execution,
delivery, and performance of this Agreement are within the
Seller’s corporate powers and have been duly authorized by
all necessary corporate action. The execution and delivery of this
Agreement by Seller and the performance of its obligations
hereunder will not (i) conflict with or violate (A) the
organizational documents of Seller, or (B) any provision of
any law or regulation to which Seller is subject, or
(ii) conflict with or result in a breach of or constitute a
default (or any event which, with notice or lapse of time, or both,
would constitute a default) under any of the terms, conditions or
provisions of any agreement or instrument to which Seller is a
party or by which it is bound or any order or decree applicable to
Seller or result in the creation or imposition of any lien on any
of its assets or property. Seller has obtained all consents,
approvals, authorizations or orders of any court or governmental
agency or body, if any, required for the execution, delivery and
performance by Seller of this Agreement.
(b) No
Litigation is pending or to Seller’s Knowledge threatened
involving (i) any Seller that relates to any Accounts or
(ii) any Seller or its assets that, if adversely determined,
could have an adverse effect on this transaction or the value of
Accounts having an aggregate face amount of $5,000,000 or more or a
material adverse effect on any Seller’s financial
condition.
(c) Sellers have not utilized any
investment banker or finder in connection with the transaction
contemplated hereby who might be entitled to a fee or commission
upon consummation of the transactions contemplated in this
Agreement which might in any way or amount be the responsibility of
the Buyer or be a claim against, or with respect to, any
Accounts.
3.2
Representation As To Ownership and Assignability
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Each Seller makes
the following representations and warranties as to its Accounts as
of the date hereof and as of the Closing Date:
(a) Seller
has good and marketable title to the Accounts, is the sole owner
thereof and has full right to transfer and sell the Account free
and clear of any encumbrance, equity, lien, pledge, charge, claim,
security interest, obligation to third party collection agencies or
attorneys.
(b) Seller
has the right to assign the Accounts without the consent of any
Person and subject to no continuing duties or restrictions under
any purchase agreement to which a Seller or any predecessor in
interest is a party, except for any obligation specifically set
forth in this Agreement.
(c) The
Accounts have been originated, and have been maintained, collected
and serviced by a Seller and its predecessors in interest and their
respective agents and
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Affiliates, in
full compliance with applicable state and federal laws including,
without limitation and where applicable, without limitation, the
Truth in Lending Act, the Equal Credit Opportunity Act, the Fair
Debt Collection Practices Act, the Fair Credit Reporting Act, and
the Fair Credit Billing Act.
(d) The
cashflow reports delivered by Seller to Purchaser for the period of
twelve months prior to the Cutoff Date accurately reflect the gross
cash flow and collection activity with respect to the
Accounts.
(e) All
collection agents, servicers, attorneys and other persons who have
any claims with respect to efforts to collect on any Accounts have
been paid in full and no such claims, disputed or undisputed, are
outstanding, and no collection agents, servicers, attorneys and
other persons have any right to refuse to release the Accounts to
Purchaser free of any lien or claim, immediately upon
Seller’s request.
(f) The
Accounts listed in the Diligence File in the
“pre-litigation”, “pre-judgment” and
“judgment” categories, respectively, were properly
listed in those categories as of the date of the Diligence
File.
(g) That
as of the date of the Diligence File, the “statute of
limitations models” used by Sellers in the ordinary course of
business indicate that the applicable statute of limitations period
for instituting litigation has not expired for the Accounts listed
in the “pre-litigation”, “pre-judgment” and
“judgment” categories of the Diligence File.
Notwithstanding this representation, Buyer agrees that it shall be
responsible to determine the applicable Statute of Limitations for
all accounts in the sale.
(h) Seller’s inability to obtain
agreements, applications or other media with respect to any
Accounts that are listed in the “pre-litigation” and
“pre-judgment” categories of the Asset Schedule will
not have a material adverse affect on Buyer’s ability to
collect the portfolio of Accounts purchased from a
Seller.
(i) All
Accounts are closed and there are no requirements for future
advances of credit or other performance by Seller.
3.3
Representations Concerning Accounts . With respect to each
of its Accounts, except for those Accounts listed as
“Specials”, “Bankrupt” and “Deceased
in the Diligence and Cutoff Files and the file used to calculate
and prepare the Closing Statement, each Seller represents and
warrants that to the best of Seller’s Knowledge, as of the
Cutoff Date:
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(a)
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the
balance of the Accounts as will be reflected on the Closing Tape is
correct;
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(b)
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the
Accounts are valid and duly enforceable in accordance with their
terms;
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(c)
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the
debt represented by the Account has not been satisfied and/or the
stated balance on such Account has not been paid;
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(d)
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the
Accounts were not created as a result of fraud or forgery such that
all of the Debtors have no liability for such Account;
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(e)
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the
Debtor has not been released from liability on the
Account;
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(f)
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except as noted in the Diligence
File and the Cutoff File used to calculate and prepare the Closing
Statement, the Debtor has not filed bankruptcy nor have all of the
Debtors’ liability relating to the Account been discharged in
bankruptcy; and
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(g)
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except as noted in the Diligence
File and the Cutoff File used to calculate and prepare the Closing
Statement, all of the Debtors are not deceased.
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No Seller makes
any representations or warranties, express or implied, with respect
to any of the other Accounts other than as specifically set forth
in this Section 3.3 and Section 3.2, including
specifically, but not by way of limitation, any representation or
warranty regarding any information in any due diligence file given
to and reviewed by Buyer regarding Sellers’ analysis of
whether or not any Account is within any applicable statute of
limitation such that legal action to collect same would be
permitted by law.
3.4
Solvency . Each Seller represents and warrants that its sale
of Accounts to Buyer and its obligations under this
Agreement:
(a) were
not made in contemplation of its insolvency of any
Seller;
(b) were
not made with the intent to hinder, delay or defraud the respective
creditors of any Seller;
(c) will
be recorded in the records of such Seller and such records will be
continuously maintained by that party; and
(d) represents a bona fide and arm’s
length transaction undertaken for adequate consideration in the
ordinary course of business.
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3.5
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Remedies for Breach of
Representations Concerning Accounts .
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(a)
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Time Period. Buyer’s sole
remedy against Sellers for a breach of any of the representations
listed in Section 3.3 (individually, a “Breach”
and collectively, “Breaches”) shall be as set forth in
this Section 3.5(a). Buyer shall have no remedy for any
Breaches to the extent Breaches have occurred that relate to
Accounts having aggregate outstanding balances of $30,000,000.00
(“Breach Threshold”). Buyer must notify the Seller of
Breaches in excess of the Breach Threshold (any such Breaches being
referred to as “Compensable Breaches”) no later than
120 days from the Closing Date. Seller shall have, at its
option, the right to (i) cure such Compensable Breach in all
material respects, (ii) repurchase the affected Account(s) by
paying Buyer the Purchase Price Percentage multiplied by the
outstanding balance of such Account(s) as shown on the Closing
Tape. A Notice of Claim under this Section 3.5 must be
delivered by the Buyer to the Seller in writing and accompanied by
the documentation required under Section 3.5(b).
Notwithstanding anything in this Agreement to the contrary, the
Buyer’s failure to provide a Notice of Claim within the
applicable time period in accordance with this Section 3.5(a)
and 3.5(b) with respect to any claimed Compensable Breach of Seller
shall terminate and waive any rights Buyer may have to any remedy
for such Compensable Breach under this Agreement. Notwithstanding
anything in this Agreement to the contrary, this Section is not
intended to limit Buyer’s rights and remedies under
Section 10.2 with respect to claims and other matters asserted
by third parties.
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(b)
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Form of Notice Required. Buyer shall
notify Seller in writing of each Account that Buyer claims to be a
Compensable Breach by Seller as set forth above
(“Notice(s)”). All Notices shall contain the
customer’s name and applicable Seller’s account number
and shall be accompanied with at least the following applicable
documentary evidence reasonably satisfactory to the
Seller:
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Bankruptcies:
Credit Bureau with non-dismissed bankruptcies, or
Attorney name, case number, and date of filing, or
Copy of actual court papers, or approved third party service
(Banko, Inc.; Experian; Trans Union; or Equifax)
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Deceased:
Copy of death certificate, or
Credit bureau indicating date of death, or
Executor or attorney letter with date of death, or
approved third party service (Banko, Inc.; Experian; Trans
Union; or Equifax)
Settled or
Paid in Full:
Copy
of Seller letter verifying action
Copy of the canceled, final check (front and back)
Fraud:
Letter from or to Seller or Seller’s agent
Complaint in writing explaining event
Seller shall
make a determination within thirty (30) business days after
receipt of Buyer’s Notice, unless Seller’s delay in
responding is caused by or related to Buyer’s failure to
provide Seller with necessary information and documentation
required under this Section 3.4.
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(c)
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Repurchase Price
. If the Seller elects
to either repurchase the Accounts or reimburse the Buyer in the
amount of the Purchase Price Adjustment as set forth in
Section 3.4(a)(ii), the Seller shall not be obligated to make
payment on an Account by Account basis, but may elect to provide
such adjustment in a single payment within 30 days of notification,
at Seller’s option. The Seller makes no representation as to
the number of Accounts that may be subject to repurchase pursuant
to this section.
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4.
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REPRESENTATIONS AND WARRANTIES OF
BUYER
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Buyer
makes the following representations and warranties as of the date
hereof and as of the Closing Date:
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4.1
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Due Organization;
Authorization . Buyer is duly organized, existing
and in good standing as a limited liability company under the laws
of the State of Delaware. Buyer has full authority to execute,
deliver and perform this Agreement according to its
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