Exhibit 99.2
PARTICIPATION AND TERMINATION AGREEMENT
THIS PARTICIPATION AND TERMINATION AGREEMENT ("Agreement") is entered
into as of January 4, 2002 by and among EAGLE NATIONAL BANK, a national banking
association ("Eagle"); DOLLAR FINANCIAL GROUP, INC. (formerly known as Monetary
Management Corporation), a New York business corporation ("Dollar"); PAYDAY
PARTNERS, L.P., a Pennsylvania limited partnership ("Payday Partners"); MERLIN
HOLDINGS LLC, a Pennsylvania limited liability company ("Merlin"); S. MARSHALL
GORSON ("Gorson"); and JOHN PETRALIA ("Petralia"). Payday Partners, Merlin,
Gorson and Petralia are referred to herein as "Participants."
Background
This Agreement supplements that certain July 11, 1995 letter agreement
between Eagle and Dollar, as previously amended (the "Eagle-Dollar Agreement"),
and replaces that certain May 31, 2000 Master Participation Agreement between
Eagle and Payday Partners (the "Participation Agreement") and Eagle's agreements
with Gorson and Petralia concerning loan participations (the "Gorson-Petralia
Agreements"). All capitalized terms used herein and not otherwise defined shall
have the same meanings as in the Eagle-Dollar Agreement.
Eagle has been making short-term unsecured loans under the Eagle-Dollar
Agreement since 1995 (any such loans, whether currently outstanding or
originated on or after the date hereof, the "Loans;" no extensions of credit by
Dollar or its affiliates directly, or by any other lender for whom Dollar acts
as agent, shall be deemed to be "Loans" for purposes of this Agreement). Payday
Partners has been participating in the Loans since 2000 and Gorson and Petralia
have been participating in the Loans on terms substantially identical to Payday
Partners. On December 18, 2001, Eagle consented to the issuance by the Office of
the Comptroller of the Currency (the "OCC"), the federal banking agency with
regulatory jurisdiction over Eagle, of a consent order (the "Consent Order")
directing Eagle to take specified actions with respect to the program under
which Eagle makes the Loans (the "Program"). In order to comply with the Consent
Order, it is necessary for Eagle to enter into this Agreement and sell
participation interests in the Loans to Merlin and the other Participants.
In recognition of the foregoing, the parties hereto, intending to be
legally bound, hereby agree as follows:
Agreement
1. Certain Computations and Definitions.
(a) Each party's daily investment in the Loans is determined in accordance
with Section 3 hereof. Each party's average daily investment in the Loans for a
calendar quarter is computed by taking the sum of its investment in the Loans at
the end of each day in the calendar quarter and dividing by the number of days
in the quarter, including any days in the calendar quarter after termination of
the Agreement and/or after June 15, 2002.
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(b) Each party's "Percentage Interest" for a calendar quarter (or for
allocations or distributions based on results for a calendar quarter) equals the
product of (i) 100; and (ii) that party's average daily investment in the Loans
for the calendar quarter divided by the sum of all the parties' average daily
investments in the Loans for the calendar quarter.
(c) Any party's "share" of any item equals the dollar amount of the item
times the party's Percentage Interest for the calendar quarter in question (or
as of the end of the calendar quarter in question). For purposes of this
definition, a "party" includes any permitted delegee or assignee of a party.
(d) The "Standard Payment" for any Participant for a calendar quarter
equals 3.50% times the Participant's average daily investment in the Loans for
the calendar quarter.
(e) The "Net Charge-Offs" for a calendar quarter equal the aggregate
principal amount of Loans that have matured in the calendar quarter without
being repaid, renewed, rolled over or extended, net of any recoveries of
principal on charged-off Loans during the calendar quarter.
(f) The "Available Excess-Loss Funds" are the funds in the Excess-Loss
Reserve (as defined in Section 16 of the Eagle-Dollar Agreement) at the end of a
calendar quarter that Eagle shall properly charge to and withdraw from the
Excess-Loss Reserve under Section 16 of the Eagle-Dollar Agreement.
(g) "Eagle's Loss Burden" for a calendar quarter equals the lesser of (i)
3% of the principal amount of the Loans originated during the calendar quarter;
or (ii) 100% of the Net Charge-Offs for the calendar quarter.
(h) Each Participant's share of the "Net Losses," if any, for a calendar
quarter equals the Participant's share of the Net Charge-Offs, minus its share
of the Available Excess-Loss Funds, minus its share of Eagle's Loss Burden;
provided, however, that Net Losses shall not be less than zero.
(i) The term "Reinvestment Requirement" is defined in Section 2(c).
(j) The term "Deposit Accounts" is defined in Section 28.
(k) The term "Eligible Investments" means one or more of the following: (i)
direct obligations of, or obligations fully guaranteed as to timely payment of
principal and interest by, the United States or any agency or instrumentality
thereof, provided that such obligations are backed by the full faith and credit
of the United States; (ii) federal funds, certificates of deposit, time deposits
and bankers' acceptances with an original maturity of 365 days or less, of any
U.S. depository institution or trust company incorporated under the laws of the
United States or any state thereof subject to supervision and examination by
federal and/or state banking authorities and whose short-term debt obligations
at the time of any deposit therein have one of the two highest ratings by
Standard & Poor Rating Services ("S&P") and Moody's Investors Service, Inc.
("Moody's"), whose accounts are fully insured by the Federal Deposit Insurance
Corporation, and whose minimum long-term unsecured debt rating by S&P and
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Moody's is "AA" and "Aa2" respectively; (iii) commercial paper (with original
maturities of not more than 90 days) of any corporation incorporated under the
laws of the United States or any state thereof; (iv) short term investment funds
sponsored by any trust company or national banking association, incorporated
under the laws of the United States or any state thereof; and (v) interests in
any money market fund; provided, however, that each investment described in
(iii), (iv) and (v) shall (a) be rated by S&P, Moody's, and Fitch, Inc. in their
respective highest or second-highest rating categories; (b) exclude any callable
investments purchased at a premium; and (c) mature no later than 45 days from
acquisition, and provided further that no instrument described hereunder shall
evidence either the right to receive (x) only interest with respect to the
obligations underlying such instrument or (y) both principal and interest
payments derived from obligations underlying such instrument and the interest
and principal payments with respect to such instrument provided a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations.
(l) The term "FHLB" is defined in Section 7.
(m) The term "Funding Requirement" is defined in Section 3(h)(ii).
(n) The term "Intellectual Property Rights" means all forms of intellectual
property rights and protections that may be obtained for or may pertain to the
Loans and the related services provided by Dollar and Eagle, and Dollar's
confidential information and Marks, and may include, without limitation, all
right, title and interest in and to all: (i) trade secrets and all trade secret
rights and equivalent rights of Dollar arising under the common law, state law,
federal law and laws of foreign countries; (ii) customer lists, prospect lists,
Loan-collection algorithms, software, hardware and firmware at any time
heretofore used by Eagle or Dollar in connection with the Loans; (iii)
copyrights and other literary property or authors' rights, whether or not
protected by copyright or as a mask work, under common law, state law, federal
law and laws of foreign countries, used in connection with the Loans; and (iv)
proprietary indicia, trademarks, trade names, symbols, logos and/or brand names
of Dollar under common law, state law, federal law and laws of foreign countries
used at any time in connection with the Loans. "Intellectual Property Rights"
does not include any rights of Eagle in and to the name "Eagle National Bank" or
any variant thereof.
(o) The term "Marks" means all proprietary indicia, trademarks, trade
names, symbols, logos and/or brand names that Dollar has adopted or may adopt
from time to time to identify its services, including services involving the
Loans, or any related materials. Marks include, but are not limited to, Cash
'Til Payday(R), Loan Mart(R) and Money Mart(R).
(p) The term "Merchants" is defined in Section 5(d).
(q) The term "Necessary Investment" is defined in Section 3(f).
(r) The term "Notice Day" is defined in Section 3(h)(ii).
(s) The term "Payment Date" is defined in Section 2(a).
(t) The term "Reserve Account" is defined in Section 28(b).
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(u) The term "Transfer Account" is defined in Section 3(h)(ii).
(v) The term "Transfer Day" is defined in Section 3(h)(ii).
2. Certain Payments and Withdrawals.
(a) Within five (5) days after the end of the first calendar month of each
calendar quarter, Eagle shall pay each Participant in cash an amount equal to
the product of the Participant's anticipated Standard Payment for such calendar
quarter and a fraction equal to the number of days in such month divided by the
number of days in such calendar quarter. Within five (5) days after the end of
the second calendar month of each calendar quarter, Eagle shall pay each
Participant in cash an amount equal to the product of the Participant's
anticipated Standard Payment for such calendar quarter and a fraction equal to
the number of days in such month divided by the number of days in such calendar
quarter. Within fifteen (15) days after the end of each calendar quarter (the
"Payment Date"), Eagle shall pay each Participant in cash an amount equal to the
excess of (i) the Participant's Standard Payment for the calendar quarter; over
(ii) the payments made by Eagle to the Participant (or its predecessor) under
this Section 2(a) after the first two calendar months of the calendar quarter.
Eagle shall compute a Participant's anticipated Standard Payment for a calendar
quarter using the Participant's average daily investment in the Loans for the
calendar month(s) then elapsed.
(b) By the Payment Date for each calendar quarter Eagle shall pay Merlin,
as a fee in consideration of Merlin's commitments hereunder, 0.75% of Merlin's
average daily investment in the Loans for the calendar quarter or any part
thereof for a partial calendar quarter.
(c) In the event any Net Charge-Offs for a calendar quarter, Eagle shall,
by the Payment Date increase such Participant's investment in the Loans (the
"Reinvestment Requirement") (simultaneously giving effect to the reduction
described in Section 3(d)) by an amount equal to the lesser of (i) the
Participant's share of the Net Charge-Offs for such quarter, or (ii) the sum of
the Participant's share of Eagle's Loss Burden and the Participant's share of
the Available Excess-Loss Funds. In order to satisfy the Reinvestment
Requirement, Eagle shall first use its own funds in an amount equal to Eagle's
Loss Burden, and, only in the event Eagle's Loss Burden is insufficient to fully
fund the Reinvestment Requirement, Eagle shall withdraw Available Excess-Loss
Funds from the Excess-Loss Reserve in an amount necessary to fully fund the
Reinvestment Requirement.
3. Investments in the Loans.
(a) Eagle's investment in the Loans shall at all times be determined by
subtracting from the aggregate principal balance of the Loans (excluding Loans
that have not been repaid as of their maturity date, which are not deemed to be
outstanding for purposes of this Agreement or the Consent Order) the aggregate
investment in the Loans of all the Participants.
(b) As of the date hereof, the Participants' investments in the Loans are
as follows: Payday Partners - $6,175,000; Merlin - $6,000,000, Gorson -
$1,650,000; Petralia - $130,000.
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(c) A Participant's investment in the Loans shall be increased (and Eagle's
investment in the Loans shall accordingly be decreased) as of the end of any day
in which the Participant makes any cash payment to Eagle under Section 3(f) or
Eagle effects a withdrawal from the Transfer Account Sections 3(h)(iii).
(d) Subject to Section 2(c), if a Participant has Net Losses for a calendar
quarter, the Participant's investment in the Loans shall be reduced as of the
first day of the succeeding calendar quarter by the Participant's share of such
Net Losses.
(e) [Intentionally Omitted]
(f) On February 15, 2002 or any earlier date mutually acceptable to Eagle
and Merlin, Merlin shall have the first right to make an additional cash payment
to Eagle, as an investment in the Loans, as necessary to reduce Eagle's
investment in the Loans to $0 (the "Necessary Investment"). In its absolute
discretion, Merlin may waive this right, in favor of Dollar, by giving written
notice of its waiver to Dollar on or before February 1, 2002. If Merlin does not
waive its right, Merlin shall make the Necessary Investment; otherwise, Dollar
or its designee shall make the Necessary Investment.
(g) Except as expressly set forth herein, no party shall have any
obligation to increase its investment in the Loans at any time.
(h)
(i) On a daily basis, Eagle shall sell and Merlin shall purchase some or
all of Eagle's investment in the Loans, on the terms described below, provided
that, notwithstanding any language herein to the contrary, at any time upon ten
(10) business days' advance written to Eagle and Dollar, Merlin may transfer to
Dollar its rights and obligations under this Section 3(h) and, after the
effective date of the notice, Dollar (and not Merlin) shall be responsible for
purchasing (or causing Dollar's designee to purchase) Eagle's investment in the
Loans and otherwise complying with Merlin's obligations under this Section 3(h).
(ii) Commencing February 15, 2002, no later than 10:00 a.m. Eastern Time
on each business day (each, a "Notice Day"), or on a prior business day, Eagle
shall give Merlin notice of any anticipated increase in Eagle's investment in
the Loans (the "Funding Requirement") over the period beginning at the
commencement of business on the first day after the Notice Day and ending at the
close of business on such day, or if such day is not a business day, the close
of business on the next business day (each day during this period, whether or
not a business day, a "Transfer Day"). Subject to Section 3(h)(i) above, Merlin
shall deposit cash in an amount equal to or greater than the Funding Requirement
in a Merlin money market account at Eagle (the "Transfer Account") by the end of
the Notice Day. Notwithstanding anything else herein to the contrary, Merlin
shall have no obligation to invest under this Section 3 more than $25,000,000 in
the aggregate in the Loans.
(iii) At the close of business on each Transfer Day, Merlin shall be
deemed to have purchased an investment in the Loans equal to the lesser of (A)
the increase in the outstanding principal balance of the Loans as of such
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Transfer Day; or (B) the funds on deposit in the Transfer Account, and Eagle
shall withdraw the requisite funds from the Transfer Account as the purchase
price for this investment in the Loans.
(iv) Upon termination of its lending under the Program, Eagle shall
sell, and Merlin shall acquire, Eagle's remaining investment in the Loans.
(v) In order to secure its obligations under this Section 3(h), Merlin
hereby grants Eagle a first priority security interest in the Transfer Account
and all funds now or hereafter on deposit in the Transfer Account, as well as a
right to offset all funds in the Transfer Account against any obligations of
Merlin under this Section 3(h). Merlin authorizes Eagle to effect the
withdrawals contemplated hereby from the Transfer Account and designates Eagle
as its true and lawful agent and attorney-in-fact for such purpose. This
security interest shall terminate when Merlin's Percentage Interest is reduced
to 0% and Eagle shall take all requisite actions to evidence the termination of
this security interest.
(vi) In order to further secure its obligations under this Section 3(h)
and facilitate continued lending by Eagle in the event that Eagle underestimates
the increase in its investment in the Loans for any Transfer Day, no later than
February 15, 2002, Merlin shall provide Eagle with not less than $150,000 of
additional security in the form of cash (which may be deposited into the
Transfer Account), investment securities or instruments consistent with the
requirements of the Consent Order, sufficient for Eagle to realize not less than
$150,000 in the event of a default in any such obligation by Merlin. This
security interest shall terminate when this Agreement terminates and Eagle shall
take all requisite actions to evidence the termination of this security
interest.
(vii) Amounts in the Transfer Account shall not be treated as
investments in the Loans but amounts transferred from the Transfer Account under
this Section 3(h) shall be treated as such investments.
(viii) After February 15, 2002, Eagle shall not be required to fund any
Loan if, after funding such Loan, its investment in the Loans would exceed the
lesser of (A) $2 million; or (B) an amount equal to the funds on deposit in the
Transfer Account.
(i) Notwithstanding anything to the contrary herein:
(i) No party's investment in the Loans shall ever be deemed to be less
than $0 at any time.
(ii) In the event at any time that Eagle's investment in the Loans is $0
and the aggregate outstanding principal balance of the Loans would otherwise be
less than the Participants' aggregate investments in the Loans, the
Participants' investment in the Loans shall be deemed to have been reduced so
that the aggregate outstanding principal balance of the Loans equals the
Participants' aggregate investments in the Loans. The reductions of the
respective Participants shall be effected in accordance with any written notice
from Merlin to Eagle, Dollar and the other Participants, which notice specifies
that Merlin's investment in the Loans shall be reduced prior to the investments
of the other Participants or after the investments of the other Participants, as
the case may be. In the absence of any such notice, the reductions of the
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respective Participants (including Merlin) shall be effected pro rata on the
basis of their respective investments in the Loans.
(iii) Upon a reduction of the Participants' investment in the Loans by
virtue of Section 3(i)(ii), Eagle shall promptly distribute to the Participants
in cash the amounts by which their investments in the Loans have been reduced.
(iv) Upon termination of the Program, Eagle shall promptly distribute to
the Participants in cash their remaining investments in the Loans.
4. Dollar Contingent Performance of Obligations of Merlin.
Upon receipt of notice from Eagle that Merlin has failed to make any
required investment in the Loans, to make any required deposit to the Transfer
Account or to perform any other requirement hereunder, Dollar shall make or
cause a third party to make such additional investment or additional deposit or
shall perform or cause a third party to perform such additional requirement, and
Dollar or such third party shall succeed to the rights of Merlin with respect to
such additional investment or additional requirement. Dollar and/or any such
third party shall have the right to delegate any of Dollar's duties to any one
or more third parties, and any such third parties shall succeed to the rights of
Dollar in respect of such investment or requirement pro tanto. Notwithstanding
anything herein to the contrary, at any time Merlin may require Dollar or its
designee to purchase its investment in the Loans, by giving not less than
forty-five (45) days' advance written notice to both Dollar and Eagle at any
time on or prior to April 1, 2002 and not less than ninety (90) days' advance
written notice to both Dollar and Eagle at any time after April 1, 2002. If and
when Dollar or its designee acquires any investment in the Loans, it shall be
treated as a Participant for all purposes of this Agreement.
5. Continued Operation and Prompt Termination of Program in Conformity with the
Consent Order.
(a) At all times, Eagle shall ensure that its investment in the Loans does
not exceed the sum of (i) 100% of Eagle's Tier 1 capital; (ii) Eagle's Allowance
for Loan and Lease Losses; and (iii) the amount in the Excess-Loss Reserve after
all losses have been deducted therefrom. Dollar consents to Eagle retaining in
the Excess-Loss Reserve as of January 1, 2002 whatever funds are reasonably
required by Eagle to assure compliance with this requirement, provided that, on
or prior to February 15, 2002, Eagle shall refund to Dollar from the Excess-Loss
Reserve the amount by which the funds in the Excess-Loss Reserve exceed the
funds required to be in the Excess-Loss Reserve absent this Section 5(a).
(b) To facilitate the exercise by Eagle of appropriate control over the
Program, Dollar agrees to devote at least three full-time auditors and one
full-time audit supervisor to the Program.
(c) Neither Eagle nor Dollar shall advertise the availability of Loans
through print media, television, radio or telemarketing.
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(d) Absent OCC consent in accordance with the Consent Order, Dollar and
Eagle shall ensure that (i) Loans shall be originated only through Dollar or
through merchants who were engaged by Dollar prior to December 18, 2001
("Merchants"), and by no other parties; (ii) Loans shall be offered solely
through existing Dollar locations and current Merchant locations; (iii)
Merchants shall not be permitted to change their locations (or add new
locations) for offering Loans; and (iv) Eagle and Dollar shall not add new
Merchants or locations for offering Loans; provided, however, that nothing
herein shall preclude Dollar from relocating any of its existing stores.
(e) Dollar shall provide Eagle with daily reports, which reports shall be
complete, true and correct in all material respects, in a form consistent with
the parties' course of performance of the Eagle-Dollar Agreement: (i)
identifying the number and dollar amount of Loans outstanding, renewed,
rolled-over, refinanced and repaid; and (ii) detailing the status of specific
Loans in process of collection, Loan losses and related adjustments to Eagle's
Allowance for Loan and Lease Losses.
(f) Dollar presently intends, at the earliest practicable date, to make
arrangements to replace Eagle with another federally insured financial
institution as the lender for the Loans or, alternatively, to commence making
the Loans itself or through its affiliates; provided, however, that Eagle may
not be replaced by another federally insured financial institution without the
prior written consent of Merlin, which consent will not be unreasonably
withheld, if such financial institution would succeed to Eagle's rights and
obligations under this Agreement. Eagle and the Participants shall fully
cooperate with Dollar in these efforts. In all events, after June 15, 2002,
Eagle shall neither make, renew, extend, roll over, refinance or permit to
remain outstanding any Loans; provided, however, that nothing herein shall
preclude Eagle and its agents, including Dollar, from continuing to collect
charged-off Loans that have not been repaid in accordance with their terms by
June 15, 2002. While charged-off Loans are not deemed to be outstanding for
purposes of this Agreement or the Consent Order, the proceeds of charged-off
Loans shall be available for Eagle and the Participants, as their interests
shall appear.
(g) Without the written consent of both Dollar and Merlin, which consent
can be withheld for any reason, Eagle shall not sell any Loan or interest in any
Loan or create any security interest in any Loan or interest therein.
(h) The interests in the Loans of the respective Participants shall rank
pari passu, and no Participant shall have any preference or priority over any
other Participant in payments required hereunder.
6. Intellectual Property Rights; Payments.
At no time following June 15, 2002 shall Eagle use, challenge or assist
others to use or challenge Dollar's Intellectual Property Rights in the Marks or
the registration thereof or use or attempt to register any trademarks, trade
names or other proprietary indicia confusingly similar to the Marks. Following
June 15, 2002, all Intellectual Property Rights related to the business of
making loans similar to the Loans shall be and become the sole property of
Dollar, free and clear of all claims of Eagle, and Eagle shall thereupon
permanently discontinue all use of any of such Intellectual Property Rights in
connection with such loans; provided, however, that Eagle may use such
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Intellectual Property Rights in connection with accounting, record-keeping and
regulatory compliance in connection with the Program. In consideration of
Eagle's relinquishment of its Intellectual Property Rights in favor of Dollar,
Dollar paid Eagle $300,000 in cash on December 31, 2001 and hereby agrees to pay
Eagle $150,000 of additional cash by March 15, 2002 and $150,000 of additional
cash by June 15, 2002. Payments under this Section 6 shall not constitute
investments in the Loans.
7. Federal Home Loan Bank Advances.
Eagle shall apply the proceeds of any Merlin investment in the Loans,
including Merlin's initial $6 million investment under Section 3, to pay down or
pay off any outstanding advances to Eagle from the Federal Home Loan Bank of
Pittsburgh (the "FHLB"). Eagle shall not obtain any new FHLB advances secured by
the Loans unless (a) such advances are fully secured by investment securities in
the physical possession or control of the FHLB; and (b) the advances are
required to meet Eagle's liquidity needs.
8. Reporting.
Eagle shall furnish the Participants with monthly summary reports stating
the number and aggregate principal amount of all Loans outstanding, the status
of principal and interest collections and other amounts received by Eagle, and
default rates.
9. Administration of the Loans.
Eagle may, without the consent of any Participant, and to the extent the
following actions are consistent with customary and prudent administration
standards for loans of like tenor, and are based on Eagle's good faith
determination that such action is in the best interest of the Participants: (a)
agree to any modification of any document relating to or evidencing any Loan;
(b) waive the terms of any such document; or (c) exercise, or refrain from
exercising, or waive, any rights or powers that Eagle may have in respect
thereof. Upon the reasonable request of any Participant, Eagle shall provide the
Participant with a copy of any and all information concerning the Program as
may, from time to time, be provided by Dollar to Eagle. Eagle and Dollar shall
not amend the Eagle-Dollar Agreement without the prior written consent of
Merlin.
10. Due Authorization; Power; Etc.
Each party hereto represents and warrants that: (a) the making and
performance of this Agreement is within its power and has been duly authorized
by all necessary corporate and other appropriate action by it; (b) this
Agreement is in compliance with all laws and regulations applicable to it and
does not conflict with any agreement to which it is a party or by which it is
bound; and (c) this Agreement has been duly executed by it and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
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11. Notices.
Each notice or other communication under this Agreement shall be in
writing, shall be sent by messenger, by first class mail, or by fax and shall be
effective when received. Notices shall be sent as follows:
If to Eagle, to the following address (or to such other address as it may
designate from time to time):
Eagle National Bank
8045 West Chester Pike
Upper Darby, PA 19082
Attention: Murray Gorson, President
Telephone: (610) 853-4800
Telecopy: (610) 853-2562
with a copy to (which shall not constitute notice) to:
Jeremy T. Rosenblum, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Telephone: (215) 864-8505
Telecopy: (215) 2864-9062
If to Dollar, to the following address (or to such other address as it
may designate from time to time)
Dollar Financial Group, Inc.
1436 Lancaster Avenue
Berwyn, PA 19312-1288
Attention: Donald F. Gayhardt, President
Telephone: (610) 296-3400 x.125
Telecopy: (610) 296-7844
with a copy to (which shall not constitute notice) to:
Hilary B. Miller, Esq.
112 Parsonage Road
Greenwich, CT 06830-3942
Telephone: (203) 399-1320
Telecopy: (914) 206-3727
If to Payday Partners, to the following address (or such other address
as it may designate from time to time):
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Payday Partners, L.P.
c/o Payday Partners Management, Inc.
8049 West Chester Pike
Upper Darby, PA 19082-1317
Attention: Paul Castignani, Vice President
Telephone: (610) 853-4800
Telecopy: (610) 853-2562
If to Merlin, to the following address (or such other address as it may
designate from time to time):
Merlin Holdings LLC
100 Front Street, Suite 1410
West Conshohocken, PA 19428
Attention: John F. McGlinn II
Telephone: (610) 940-4492
Telecopy: (610) 940-4496
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12. Effect on Eagle-Dollar Agreement, Participation Agreement and
Gorson-Petralia Agreements.
This Agreement supplements the Eagle-Dollar Agreement and replaces the
Participation Agreement and the Gorson-Petralia Agreements; provided, however,
that Eagle shall not be relieved of any payment obligations under the
Participation Agreement and the Gorson-Petralia Agreements accrued for periods
ending on or before December 31, 2001.
13. Termination.
Except for any unfulfilled payment, indemnification or other obligations
hereunder, and except for any continuing efforts to collect charged-off Loans on
behalf of Eagle and/or the Participants, this Agreement shall terminate when (a)
no Loans are outstanding hereunder; (b) no Participant has any remaining
investment in the Loans; and (c) Dollar has given written notice to Eagle that
it will no longer be originating or servicing new Loans hereunder.
Notwithstanding anything else herein to the contrary, no additional Loans will
be participated pursuant to the terms of this Agreement after June 30, 2002, and
the Participants' investment in the Loans shall be amortized and distributions
shall be made in accordance with Section 3(i).
14. Entire Agreement.
This Agreement supplements the Eagle-Dollar Agreement and supersedes any
and all other agreements, oral or written, between the parties with respect to
the subject matter of this Agreement, and no other agreement, statement, or
promise relating to the subject matter of this Agreement shall be valid or
binding.
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15. Further Documents and Actions.
The parties shall promptly execute such documents and take such actions,
including the filing of financing statements, as are necessary or appropriate to
effectuate the intentions and undertakings set forth herein and to permit Eagle
to comply with the Consent Order and provided such documents and actions are not
inconsistent with the terms of this Agreement. Eagle hereby appoints Merlin as
its agent and attorney-in-fact for the purpose of filing any financing
statements reflecting Merlin's interests herein.
16. Successors and Assigns.
Subject to the provisions of this Agreement regarding assignment, this
Agreement shall be binding upon the successors and assigns of the respective
contracting parties.
17. Governing Law.
The validity of this Agreement and the rights and the duties of the
contracting parties shall be construed under and governed by the substantive
laws of the Commonwealth of Pennsylvania without regard to its conflict of law
principles.
18. Severability
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions shall not be affected thereby, and this Agreement shall
otherwise remain in full force and effect.
19. Modification and Amendment.
This Agreement may be modified or amended only by a writing signed by the
parties to this Agreement or their duly authorized agents.
20. Waiver.
No purported waiver relating to this Agreement shall have any force or
effect unless expressly set forth in writing by the waiving party.
21. Assignment.
Subject to Section 4, this Agreement shall not be assignable by any party
without the prior written consent of each of Eagle, Dollar and Merlin.
22. Arbitration.
Any claim or controversy arising out of or relating to this Agreement, or
the breach hereof, shall be settled and determined by non-binding arbitration by
a single arbitrator in Philadelphia, Pennsylvania in accordance with the then
current Commercial Rules and Expedited Procedures of the American Arbitration
Association.
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23. Title to the Loans.
Eagle hereby represents and warrants to the Participants, as of the date
hereof and throughout the term hereof, that: (a) the participation interests
sold to the Participants pursuant to this Agreement constitute undivided
ownership interests in the Loans; (b) no Loan or any interest therein has been
sold, transferred, assigned, participated, conveyed or pledged by Eagle to any
person or entity other than the Participants; (c) Eagle has good and marketable
title to each Loan, free and clear of all liens, encumbrances, security
interests, participations and rights of others, except for an FHLB lien as of
the date of this Agreement; and (d) immediately prior to the sale of the
participation interests to the Participants pursuant to this Agreement, Eagle
was the sole owner of the Loans and had full right and power to sell the
participation interests to the Participants.
24. No Partnership between Eagle, Dollar and the Participants; Dollar
Obligations.
This Agreement does not constitute a partnership or joint venture
agreement, and Eagle, Dollar and the Participants do not and shall not
constitute partners of each other by virtue of this Agreement. Except as
expressly set forth in Section 4 (with respect to which Dollar's sole liability
shall be to Merlin and Eagle and not to any other party or parties), Dollar's
obligations hereunder are owed solely to Eagle; none of the Participants shall
be deemed in privity with Dollar under this Agreement or to have the right to
enforce any of Dollar's obligations; and none of the Participants shall have the
right to seek or obtain any remedy from Dollar by virtue of any breach by
Dollar.
25. Intention of the Parties.
(a) The relationship between Eagle and the Participants hereunder is not
intended to be that of debtor and creditor, it being intended that the
Participants will hold undivided ownership interests in the Loans.
(b) It is the intention of the parties hereto that the sale to the
Participants of participation interests in the Loans pursuant to this Agreement
is an absolute sale of the participation interests (and the parties hereto agree
to treat the transfer of the participation interests as an absolute sale rather
than a secured financing), such that the FDIC shall not, by exercise of its
authority to disaffirm or repudiate contracts under Section 13(e) of the Federal
Deposit Insurance Act, have any right to reclaim, recover or recharacterize as
property of Eagle any participation interest transferred by Eagle to the
Participants.
(c) If, notwithstanding the parties' intent, the sale to the Participants
of participation interests in the Loans pursuant to this Agreement is held or
deemed not to be an absolute sale or is held or deemed to be a pledge of
security for a loan, Eagle and the Participants intend that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, with respect to such property Eagle shall be
deemed to have granted, as of the date of this Agreement, and does hereby grant,
to the Participants, a security interest in the entire right, title and interest
of Eagle in and to the Loans and all proceeds thereof, which security interest
shall be perfected and of first priority, except for an FHLB lien which Eagle is
required to have released under Section 28(a) hereof. In such event, with
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respect to such property, this Agreement shall constitute, and hereby is, a
security agreement under applicable law.
(d) Eagle hereby grants to the Participants a participation interest in
Eagle's entire right, title and interest to its right to indemnification from
Dollar (the "Indemnification Rights") under the terms of the Eagle-Dollar
Agreement on the same percentage basis as the Percentage Interests. If,
notwithstanding the parties' intent, the sale to the Participants of
participation interests in the Indemnification Rights pursuant to this Agreement
is held or deemed not to be an absolute sale or is held or deemed to be a pledge
of security for a loan, Eagle and the Participants intend that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, Eagle shall be deemed to have granted, as of
the date of this Agreement, and does hereby grant to the Participants a security
interest in Eagle's entire right, title and interest in and to its
Indemnification Rights and all proceeds thereof, which security interest shall
be perfected and of first priority, except for an FHLB lien which Eagle is
required to have released under Section 28(a) hereof. With respect to such
Indemnification Rights, this Agreement shall constitute, and hereby is, a
security agreement under applicable law.
(e) Eagle authorizes Participants to file financing statements with the
appropriate filing offices to evidence the sale of the participation interests
in the Loans and the Indemnification Rights pursuant to this Agreement and/or to
perfect the security interests granted above.
26. Phanco.
Eagle and Dollar hereby confirm their agreement that Dollar shall be solely
responsible for any further payments, costs, liabilities or damages relating to
the Phanco case. Notwithstanding the cessation of lending pursuant to the
Eagle-Dollar Agreement, the provisions of Section 31 of the Eagle-Dollar
Agreement shall survive for the full period of the statute of limitations of any
third-party claim indemnifiable thereunder.
27. Counterparts.
This Agreement may be executed in counterparts and when executed by all of
the parties in counterpart, each such counterpart will be deemed an original and
all such counterparts shall constitute one and the same instrument. An
electronic facsimile, photocopy or electronic mail copy of this Agreement or any
signature hereon shall be valid as an original.
28. Covenants of Eagle.
Section 21 of the Eagle-Dollar Agreement is hereby amended to specify that
amounts deposited in the Eagle and Dollar deposit accounts used to fund the
Loans or receive Loan payments (the "Deposit Accounts") shall be for the benefit
of Eagle and the Participants as their interests may appear.
On or before February 15, 2002 (and no later than the time of the payment
described in Section 3(f)), Eagle shall:
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(a) cause the FHLB to release the instruments evidencing the Loans, as
the same may now or hereafter exist, from its security interest as evidenced by
financing statement number 34051387 filed with the Pennsylvania Department of
State.
(b) establish at Eagle as separate, segregated accounts for the benefit
of Eagle and the Participants, as their interests may appear: (i) the Transfer
Account; (ii) the Deposit Accounts; and (iii) a reserve account (the "Reserve
Account"), into which Eagle shall deposit and immediately invest in Eligible
Investments an amount equal to the lesser of the aggregate investment of the
Participants or the amount of the Excess-Loss Reserve (as defined in Section 16
of the Eagle-Dollar Agreement), all of which shall be invested in Eligible
Investments; and
(c) grant to the Participants a security interest in the Transfer
Account, the Deposit Accounts and the Reserve Account.
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IN WITNESS WHEREOF, the undersigned hereby set their hands and seals to
this Agreement, with full knowledge of its contents and intending thereby to be
legally bound, as of the date first above written.
ATTEST: EAGLE NATIONAL BANK
/s/ MURRAY GORSON
By: Murray Gorson, President
ATTEST: DOLLAR FINANCIAL GROUP, INC.
/s/ JEFFREY A. WEISS
By: Jeffrey A. Weiss, President
ATTEST: PAYDAY PARTNERS L.P.
By: PAYDAY PARTNERS MANAGEMENT, INC.,
General Partner
/s/ PAUL CASTIGNANI
By: Paul Castignani, Vice President
ATTEST: MERLIN HOLDINGS LLC
/s/ JOHN F. McGLINN II
By: John F. McGlinn II
/s/ S. MARSHALL GORSON
Witness S. MARSHALL GORSON
/s/ JOHN PETRALIA
Witness JOHN PETRALIA
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