EXHIBIT 10.1
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement (hereinafter “Agreement”) is entered into as
of MARCH 23, 2011 (the “Effective Date”), by and between MONTEREY FINANCIAL
SERVICES, INC. (hereinafter “MFS”), a California corporation with its principal
place of business located at 4095 Avenida de la Plata, in Oceanside, California
92056 and, NAUTILUS, INC. (hereinafter, “SELLER”), a Washington corporation,
with its principal place of business located at 16400 SE Nautilus Drive,
Vancouver, WA 98683, with respect to the following facts:
RECITALS
A.
SELLER is in the business of providing certain products and services to various
individuals from time to time, and SELLER allows said individuals to finance the
cost of such products and services by entering into retail installment
contracts, promissory notes, security agreements, membership agreements and/or
other instruments (each, a “Contract” and collectively, the “Contracts”).
SELLER's services and/or products are described on Schedule “A” attached hereto
and incorporated herein by this reference.

B.
MFS is in the business of purchasing instruments such as the Contracts in its
ordinary course of business.

 
NOW, THEREFORE, in consideration of the above premises and of the
representations, warranties and agreements contained herein, the parties hereby
covenant and agree as follows:
AGREEMENT
1.    DEFINITIONS: The following terms shall have the following meaning as used
in this Agreement.
(a)“Assignment” means an Irrevocable Assignment substantially in the form
attached hereto as Exhibit “A”, transferring and assigning to MFS all of
SELLER's right, title and interest in and to a Purchased Contract, all payments
owed thereunder and all related guaranties and collateral therefore in a form
prescribed by MFS.
(b)“Authenticate(d)” means to sign, execute or otherwise adopt a symbol or
encrypt or similarly process a record in whole or in part, within the presence
of the authenticating person to identify the person and adopt or accept a
record.
(c)“Contract” has the meaning set forth in Recital A above and must be in a form
approved by MFS.
(d)“Contract/Credit Application” means an Authenticated Contract (which is in
original, executed form if on paper), an original credit application, and/or an
original credit report or statement concerning the Customer and any related
documents, information and Records from time to time required by MFS in
accordance with MFS' standard procedures.
(e)“Customer” means an individual who enters into a Contract with SELLER.
(f)“Default” means (i) a default in SELLER's repurchase obligations as set forth
in Section 6 hereof, in each case which has not been cured during any applicable
cure period, (ii) an Insolvency Event with respect to SELLER, (iii) the
existence of fraud affecting more than twenty-five percent (25%) by aggregate
outstanding principal amount of all Purchased Contracts then held by MFS or (iv)
the occurrence of a Product Failure Event affecting product(s) of Seller, the
purchase of which by Customers account for greater than twenty-five percent
(25%) by aggregate outstanding principal amount of all Purchased Contracts

 

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then held by MFS.
(g)“Defaulted Contract” has the meaning set forth in Section 6(b) hereof.
(h)“Event of Cancellation” shall, with respect to a Contract, refer to (i) the
occurrence of an event which causes a representation made by the SELLER in
connection with the Contract to be or become false or misleading in any material
respect whether or not true when made; (ii) a breach of any term of such
Contract, or of any related guaranty or credit support agreement, whether by the
or SELLER, including without limitation, failure of SELLER to deliver the
underlying products or services to any Customer; (iii) any Default; (iv)
notification by a Customer to SELLER or to MFS of its intent to cancel all or
any part of the Contract; or (v) if the SELLER and/or MFS is named in a lawsuit
over the actions or inactions of the SELLER in connection with a Contract.
(i)“Final Contract/Credit Application” means such documents or other Records as
MFS shall from time to time require in accordance with its standard procedures
in order to complete the purchase of a Contract and to pay the Purchase Price of
the Contract to SELLER including, without limitation, (i) an Assignment; (ii) if
the Purchased Contract is originally executed in paper form, the one and only
executed original of the Purchased Contract; or, (iii) any Uniform Commercial
Code financing statements necessary to perfect MFS' interest in the Purchased
Contract; and (iv) any other document, instrument or Record required by the
terms of MFS' written notice to SELLER pursuant to Section 2 below including,
without limitation, any guaranties or security agreements.
(j)“Insolvency Event” means, with respect to any person or entity, (1)
dissolution, liquidation or failure of a business to operate as a going concern;
(2) voluntarily or involuntarily filing bankruptcy, making an assignment,
arrangement or composition with or for the benefit of creditors, appointment of
a receiver; it shall become insolvent or unable to pay its debts as they become
due; or (3) it shall seek or become subject to the appointment of an
administrator, provisional liquidator, conservator, receiver, trustee, custodian
or other similar official for it or for all or substantially all its property;
(4) it shall have a secured party take possession of all or substantially all
its property or have a distress, execution, attachment, sequestration or other
legal process levied or enforced against all or substantially all its property
and such secured party shall maintain possession, or any such process is not
dismissed, discharged, stayed or restrained, in each case within 30 days
thereafter.
(k)“Product Failure Event” means, (i) with respect to a product of SELLER
delivered to a Customer in connection with a Purchased Contract (x) the
occurrence of a voluntary or involuntary recall or (y) the receipt by SELLER of
a valid warranty claim related to the failure of the product delivered by SELLER
in connection with a Purchased Contract together with all required documentation
and other material in support of such warranty claim and (ii) the failure by
SELLER to respond to such recall or warranty claim in substantial compliance
with the terms of SELLER's applicable product warranties or in substantial
compliance with applicable law.
(l)“Purchased Contract” means a Contract, the Customer of which meets all of the
credit and income requirements of MFS at the time it is purchased and which MFS
elects, in its sole discretion, to purchase pursuant to the terms hereof, and
does in fact purchase from SELLER. The term Purchased Contract shall not
describe Contracts which have been re-assigned or repurchased from MFS by
SELLER.
(m)“Purchase Price,” with respect to each Contract, means the amount set forth
on the attached Schedule “A”.
(n)“Repurchased Contract” means a Purchased Contract which has been repurchased
by SELLER pursuant to the terms hereof.
(o)“Record” means information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in perceivable form.
(p)“Repurchase Price” means the price at which SELLER is obligated to repurchase
a Purchased Contract from MFS, and shall be an amount equal to (i) the principal
outstanding balance of the Purchased Contract as of the original effective date
of purchase from SELLER, less all payments attributable to principal received by
MFS for such Purchased Contract, the result of which shall be multiplied by the

 

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original Purchase Price Rate as set forth in Schedule “A” attached hereto; plus
(ii) a Repurchase Fee in an amount set forth in Schedule “A” attached hereto.
(q)“Term,” has the meaning set forth on Schedule A hereto.
2.    PURCHASE OF CONTRACTS:
(a)    Subject to the terms and conditions of this Agreement, during the Term,
SELLER may submit Contracts to MFS from time to time and, upon such submission,
MFS shall have the option, but not the obligation, in its sole discretion and on
a case by case basis, to purchase all of SELLER'S right, title and interest in
and to the such Contracts submitted by SELLER. For the avoidance of doubt, the
Parties hereto agree and acknowledge that this Agreement does not obligate
SELLER to offer any Contracts to MFS, nor does it require MFS to purchase any
Contracts from SELLER.
(b)    With respect to Contracts in electronic form, a Contract will be deemed
to be “submitted” to MFS when such Contract is listed in MFS' data base stored
on a SQL Server 2000 located in a secured room at 4095 Avenida de la Plata,
Oceanside, CA 92056 or such other location as determined by MFS. With respect to
all other Contracts, a Contract will be deemed to be “submitted” to MFS when
such Contract is received by MFS. Upon Authentication of a Contract by a
Customer, SELLER shall provide to MFS the Contract/Credit Application. Upon
receipt thereof, MFS shall review the Contract/Credit Application and shall
notify SELLER whether it elects to exercise its option to purchase such Contract
by delivery of written notice to SELLER within ten (10) days after MFS' receipt
of the Contract/Credit Application. MFS' obligation to purchase any Contracts
shall be conditioned upon MFS' receipt of a complete Final Contract/Credit
Application with respect thereto in form and substance acceptable to MFS and any
other information MFS may reasonably request relating thereto. If MFS exercises
its right to purchase a Contract, SELLER shall submit a Final Contract/Credit
Application to MFS. If such Final Contract/Credit Application is in electronic
form, MFS and SELLER intend for MFS to have exclusive control over the Contract.
Toward that end, (a) the Contract shall bear a notation in the SQL Server 2000
that indicates that such Contract has been purchased by MFS; (b) the Contract
that bears the confirmation code entered by the Customer shall be deemed to be
the “single, authoritative copy” of such Contract (as such terms are used in
section 9-105(1) of the Uniform Commercial Code), and a single hard copy of such
Contract shall be clearly and conspicuously be labeled “AUTHORITATIVE COPY; (c)
such Contract (whether in electronic or hard copy form) may not be altered by
SELLER, and may be altered by MFS in accordance with law solely with respect to
payment terms, upon prior written notice to, and approval by, SELLER; (d) the
hard copy of the Contract bearing the legend “AUTHORITATIVE COPY” or
“AUTHORITATIVE REVISED COPY”, as applicable, shall be prima facie documentary
evidence of the single, authoritative copy of such Contract and shall be held by
MFS or its authorized agent; and (e) any other copies of the Contract printed
for any reason shall each be clearly and conspicuously labeled “COPY.” In no
event shall MFS assume or be delegated any of SELLER's duties, responsibilities,
liabilities or obligations to the Customer under any Contract and SELLER shall
remain liable therefore notwithstanding any assignment of a Purchased Contract
to MFS. The parties agree that MFS shall be entitled to directly receive and
retain any and all amounts due and payable under the Purchased Contracts. All
Purchased Contracts shall be sold to MFS subject to the representations,
warranties, covenants, agreements, terms and conditions set forth in this
Agreement, and shall be accompanied by an Assignment. SELLER acknowledges and
agrees that MFS shall be entitled to elect not to purchase or service any
Contract for any reason whatsoever in its sole and absolute discretion. In
addition MFS reserves the right to verbally verify the Contract with the
Customer thereunder.
3.    PREAPPROVAL
(a)    To pre-approve a Customer for purposes of having such Customer enter into
a Contract with SELLER, SELLER can either (1) use the OASYS system, MFS' online
instant approval process; or (2) send an original credit application and/or
credit report with respect to such Customer and any and all other

 

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documentation relating to the same to MFS for preapproval, which shall be given
or withheld in MFS' sole discretion. MFS shall then have the right, but not the
obligation, to either approve or reject such Customer.
(b)    MFS shall purchase each Contract preapproved in accordance with this
Section 3 when submitted in accordance with Section 2 within thirty (30) days
from the date of pre-approval; provided that there are no changes with respect
to such Customer, the information presented to MFS in connection with the
preapproval process, or the relating Contract/Credit Application. Within said
thirty (30) day period, SELLER shall send MFS the original Contract or Record,
the original Authenticated Contract/Credit Application, the certificate of
completion, if applicable, and employment information, if applicable. If this
information is not received by MFS within the thirty (30) day period, MFS will
have the option to reject the Contract or to re-qualify the same under MFS'
credit guidelines.
1.
FUNDING OF PURCHASE PRICE:

(a)Provided that no Event of Cancellation has occurred with respect to a
Contract that MFS has elected to purchase, MFS shall, within five (5) business
days after SELLER's submission of a complete Final Contract/Credit Application
to MFS, pay to SELLER the Purchase Price for each Purchased Contract less any
adjustment to Purchase Price, if applicable, as set forth in Schedule “A”.
2.REPRESENTATIONS AND WARRANTIES:
(a)SELLER hereby represents, warrants and covenants to MFS, its successors and
assigns, as of the date hereof and, with respect only to such Contract (the
“Relevant Contract”), and related credit application, as of the date(s) of
submission of such credit application and assignment of the Relevant Contract to
MFS pursuant to the terms hereof, that:
(1)If a corporation, partnership or limited liability company, SELLER is duly
organized and validly existing and in good standing in the state of its
incorporation as such, and has full power to carry on its business as it is
presently conducted including, without limitation, the sale of the Contracts, to
enter into this Agreement and to carry out the transactions contemplated hereby;
(2)The execution and delivery of this Agreement, the assignment of the Purchased
Contracts to MFS, and the performance by SELLER of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of SELLER,
including any action required under SELLER's governing instruments;
(3)The execution, delivery and performance of this Agreement and the assignment
of the Relevant Contract to MFS, and the execution of any other instrument
related to such Relevant Contract, constitute a legal, valid and binding
obligation of SELLER enforceable in accordance with its terms, without any
offsets or counterclaims, and no further actions are required for SELLER to
enter into this Agreement and such other instruments;
(4) As of the date hereof, all of SELLER's business operations are duly licensed
and permitted under all material federal, state and local laws, rules and
regulations of any governmental authority;
(5)As of the date hereof, SELLER has duly paid any and all license, franchise,
corporation or other taxes, fees, imposts, duties or charges levied, assessed or
imposed upon it or upon any of its properties of whatsoever kind or description
to the extent any such taxes, fees or amount affect the validity or
enforceability of the Relevant Contract;
(6)Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will constitute a violation or default of any
statute, rule or decree of any court, administrative agency or governmental body
to which SELLER is or may be subject;
(7)There are no agreements between SELLER or its agents and the Customer in
connection with the Relevant Contract and no express warranties have been or
will be made by SELLER or its agents to such Customer, except as set forth in
the Relevant Contract;
(8)SELLER and its agents have not participated in and have no knowledge of any

 

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fraudulent and/or misleading act in connection with any Relevant Contract;
(9)With respect to each Relevant Contract SELLER has taken commercially
reasonable steps to verify the identity of each Customer and such Customer's
legal capacity to enter such Contract and to confirm that the Customer has not
engaged in any fraud or misrepresentation with respect to the Relevant Contract,
and the Authentication provided by the named Customer is genuine;
(10)If a Relevant Contract is in electronic form, (a) SELLER has provided to the
Customer all disclosures in such form and manner as may be necessary to create a
valid and enforceable electronic contract, (b) the Customer has consented to
conducting the electronic transaction in accordance with applicable law; and (c)
the Relevant Contract was consummated through the SELLER's web site in
accordance with applicable law.
(11)Other than for a lack of enforceability caused by MFS or the provisions of
any form of Contract provided by MFS for use by SELLER in documenting Contracts
for purchase by MFS hereunder (the “MFS Form Contract”), the Relevant Contract
is valid, genuine and noncancellable, enforceable according to its terms
(including, but not limited to, terms related to interest rate or time price
differential), except where any such invalidity or unenforceability would not
modify the essential rights and obligations derived from the Relevant Contract,
and each transaction (including the application process and the origination of
the Relevant Contract) was at the time of its origination and is as of the date
of the assignment of the same to MFS, in compliance with applicable laws, rules
and regulations of any governmental authority whether federal, state, county,
municipal or otherwise including, without limitation, usury laws, electronic or
digital signature laws, electronic transaction laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, Federal Reserve
Board Regulations B, M and Z, state adaptations of the Consumer Credit
Protection Act (or parts thereof) and of the Uniform Consumer Credit Code and
any other consumer credit, equal opportunity, disclosure or repossession laws or
regulations applicable with respect to a particular Contract. SELLER shall not
utilize the MFS Form Contract with any Customer or Contract not offered to MFS
for purchase.
(12)The Relevant Contract is a valid deferred payment obligation for the amount
therein set forth and such Relevant Contract shall not be subject to any
disputes, offsets or counterclaims not caused by MFS after being assigned
hereunder, and the property, goods or services described in the Relevant
Contract have never been the subject of any other Contract between SELLER and
the Customer and the Relevant Contract has not been rescinded by SELLER or
Customer for any reason whatsoever, SELLER is not in breach under any obligation
to any Customer under the Relevant Contract, and has no actual knowledge of any
personal defenses that the Customer could raise against the enforcement of the
terms of any Contract; SELLER has no actual knowledge of any facts which may
result in the uncollectability or unenforecability of any Contract;
(13)All credit or other information reasonably relevant to a credit
determination concerning the Customer known to SELLER will have been disclosed
to MFS and such credit information and all other information supplied by SELLER
in connection with a Relevant Contract shall be, to SELLER's knowledge, true,
complete and correct as of the date . SELLER shall supplement such information
as necessary so that such information remains true, complete and correct; SELLER
has no knowledge of any facts, which presently or upon the occurrence of certain
events in the future, may result in the uncollectability and/or unenforceability
of the Relevant Contract; SELLER acknowledges that MFS will rely upon
information appearing on SELLER's records relating to all Contracts and Final
Contracts/Credit Applications, and in light of such acknowledgment, each item of
information contained in and appearing on such records accurately reflects their
true status;
(14)The Relevant Contract is current and the Customer is not in default with
respect to any term thereunder as of the date of submission of the related
Contract/Credit Application, Final Contract/Credit Application and Assignment in
respect of the Relevant Contract;
(15)SELLER owns the Relevant Contract submitted to MFS hereunder free and

 

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clear of any liens, charges, security interests, encumbrances or other
restrictions or transfer which may adversely affect MFS' rights with respect
thereto, including without limitation, MFS' rights under this Agreement to be
the assignee of all Purchased Contracts and to collect all monies due
thereunder, SELLER has the absolute right to sell, assign and transfer the
Relevant Contract free and clear of all rights of third parties, and upon
assignment MFS will obtain good title to such Relevant Contract free and clear
of any liens, charges, encumbrances or other restrictions whatsoever;
(16)The execution and delivery by SELLER of this Agreement and the assignment of
the Relevant Contract to MFS and the security interests granted to MFS from time
to time pursuant to the terms hereof, do not conflict with or constitute a
material breach or default with respect to any indenture, loan or credit
agreement, mortgage, lease, deed or other agreement to which it is a party or by
which it or its properties are bound and there are no suits or proceedings
pending or, to the knowledge of SELLER, threatened in any court or before any
regulatory commission, board or other administrative or governmental agency
against or affecting SELLER which could materially impair SELLER's ability to
perform its obligations hereunder;
(17)There is no litigation or other proceeding pending, or to the best of
SELLER's knowledge, threatened against SELLER that has a reasonable likelihood
of affecting SELLER'S ability to perform its material obligations under this
Agreement;
(18)SELLER has delivered to Customer all products and services required to be
delivered and/or performed in accordance with the Relevant Contract;
(19)SELLER has not made any false, fraudulent or misleading representation,
engaged in any unfair or deceptive trade practices with respect to the Relevant
Contract and has not made any statement, promise or representation about the
payment terms under the Relevant Contract, except as stated in writing in the
Relevant Contract; and
(20)The Relevant Contract has been serviced by SELLER in conformity with all
applicable laws, rules and regulations.
(b)The representations and warranties contained herein shall survive the
termination of this Agreement until the earlier of (i) thirty (30) months after
the expiration or earlier termination of this Agreement, or (ii) the date on
which all of SELLER's obligations hereunder have been fully performed.
6.    SELLER'S REPURCHASE OBLIGATIONS; MFS' PROTECTION AGAINST LOSSES UPON
DEFAULT:
(a)If, with respect to a Purchased Contract (i) SELLER knows or has reason to
know that such Purchased Contract is not the bona fide legal obligation of the
Customer, or the Contract and/or Authoritative Copy of thereof is the subject of
fraud, is invalid, or has been tampered with in any way; (ii) any of SELLER's
representations or warranties contained in this Agreement shall be materially
untrue or incorrect with respect to such Purchased Contract and such material
inaccuracy is reasonably likely to affect MFS' ability to collect amounts owed
under the Purchased Contract; (iii) the Customer does not receive the products
and/or services contracted for in such Contract or (iv) there is a Product
Failure Event with respect to the product received by Customer under such
Purchased Contract; then SELLER unconditionally agrees that it will, within
thirty (30) days after MFS' written notice and demand to SELLER, either and at
MFS' option (aa) repurchase such Purchased Contract for a price equal to the
Repurchase Price; or (bb) replace such Purchased Contract by assigning to MFS
all of its right, title and interest in and to Contract(s) owned by SELLER with
an aggregate outstanding principal balance identical to the Repurchase Price,
which substituted Contracts shall be subject to review and approval of MFS in
its sole discretion. In such event, MFS agrees to reassign the applicable
Purchased Contract to SELLER, AS IS, WHERE IS, WITHOUT RECOURSE OR WARRANTY OF
ANY KIND (except that MFS shall represent and warrant that it owns the
applicable Purchased Contract, has not transferred it to a third party, and
otherwise has the unencumbered right to reassign the Purchased Contract).
(b)In addition to SELLER's obligation to repurchase any Purchased Contracts
pursuant to Section 6(a) above, (i) if, after MFS engages in commercially
reasonable efforts to secure timely payment,

 

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the first scheduled consumer installment payment on any Purchased Contract
following said Purchased Contract's assignment to MFS is not made pursuant to
the regular repayment terms and conditions of the Purchased Contract, including
timing and amount (each, a “Defaulted Contract” and collectively, the “Defaulted
Contracts”), then in any of such events, SELLER shall, within thirty (30) days
after MFS' written notice of the Defaulted Contract, either and at MFS' option
(x) repurchase the Defaulted Contract; or (y) replace the Defaulted Contract(s)
on the terms set forth in Section 6(a) above. In addition to any remedy set
forth herein or available to MFS under applicable law and equity and in addition
to any other amounts owed by SELLER to MFS, MFS shall be entitled to offset any
and all amounts it and its affiliates and agents incur in connection with
collection efforts and efforts to remedy SELLER's Default under this Section
6(b) (including, without limitation, any travel costs).
(c)If SELLER is obligated to repurchase a Purchased Contract for any reason and
does not provide MFS with cash or an acceptable replacement Contract(s) as set
forth in this Section 6 within thirty (30) days following notice by MFS to
SELLER as provided in this Section 6 (the date said notice is given being
referred to herein as the “Notice Date”), then interest shall accrue on all
amounts owed by SELLER (including, without limitation, the Repurchase Price of
any Defaulted Contract and any costs incurred by MFS and its affiliates and
agents in connection with collection and remedial efforts relating to any such
Defaulted Contract or the repurchase of any Purchased Contract) to MFS at the
rate of one and one half percent (1.5%) per month under applicable law from the
Notice Date until paid in full.
7.    SECURITY AGREEMENT IN COLLATERAL: To secure the accuracy and full
performance of each of SELLER's representations, warranties, covenants and
obligations hereunder, SELLER hereby grants to MFS a first priority security
interest (the “Security Interest”) in all of SELLER's right, title and interest
in and to (i) all of the Purchased Contracts, and (iii) all proceeds of the
foregoing, when purchased by MFS, excluding any Purchased Contracts that are
repurchased by SELLER. The Purchased Contracts and all proceeds of the foregoing
are sometimes hereinafter collectively referred to as the “Collateral.” MFS may
file one or more original Uniform Commercial Code financing statements
describing the Collateral in all offices where appropriate as may be necessary
or advisable to perfect SELLER's security interest in the Collateral. The
transactions contemplated hereby are a full and absolute sale of the Purchased
Contracts, subject to the conditions herein, and no obligations and/or rights of
SELLER hereunder shall in any way be construed to imply or grant SELLER any
direct or indirect ownership interest and/or legal or equitable title in and/or
to the Purchased Contracts.
8.    RIGHT TO INSPECT: MFS (through any of its officers, employees, or agents)
shall have the right from time to time hereafter at its sole cost and expense to
audit and inspect the books and financial statements of SELLER to the extent the
same may have a reasonably foreseeable impact on MFS' ability to collect
Customer payments under the Purchased Contracts, and to check, test and appraise
the Collateral in order to verify financial condition or the amount, quality,
value, condition of, or any other matter relating to Collateral. The Parties
hereto further agree that SELLER, through any of its officers, employees, or
agents, shall have the right from time to time, to inspect MFS' accounting,
account notes, and payment history of all Purchased Contracts subject to the
payment recourse set forth under Section 6 of this Agreement.
9.    INDEMNIFICATION:
(a)SELLER and MFS each hereby agree to defend, indemnify and hold harmless each
other, and the other party's affiliates, subsidiaries, employees, officers,
directors, shareholders, attorneys and agents, from and against any and all
losses, claims, liabilities, demands and expenses whatsoever, including without
limitation reasonable attorneys' fees and costs arising out of or in connection
with any breach by the indemnifying party of its representations, warranties,
covenants or obligations hereunder.
 
(b)SELLER hereby agrees to defend, indemnify and hold harmless MFS, and its
affiliates, subsidiaries, employees, officers, directors, shareholders,
attorneys and agents, from and against any and all losses, claims, liabilities,
demands and expenses whatsoever, in contract or tort, including

 

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without limitation reasonable attorneys' fees and costs arising out of or in
connection with any breach by SELLER of its representations, warranties,
covenants, or obligations under this Agreement or any Contract, or arising out
of (i) SELLER's gross negligence or willful misconduct in the origination,
maintenance, collection or enforcement of any Contract, and (ii) the selection,
manufacture, purchase, acceptance or rejection by a Customer of any of the
products or services, as applicable, relating to any Purchased Contract, and the
delivery, possession, maintenance, use, condition, return or operation of any of
such products or services, as applicable, (including, without limitation, latent
and other defects in any product, whether or not discoverable by MFS or the
Customer). SELLER shall, upon request, defend any and all actions based on, or
arising out of, any of the foregoing. All indemnities and obligations contained
herein shall survive the expiration or termination of the Agreement and the
expiration or termination of any Purchased Contract.
 
(c)Notwithstanding the foregoing, neither Party shall be liable to the other for
indirect, consequential or punitive damages, nor damages based on lost profits
or lost opportunity, even if advised of the possibility of such damages.
 
10.    MFS' RIGHTS TO DEAL WITH PURCHASED CONTRACTS: MFS shall use commercially
reasonable efforts to collect amounts payable under the Purchased Contracts in
the ordinary course of business. MFS shall have the right to deal with all
Purchased Contracts and Customers in the sole exercise of its business judgment
and, without limiting the generality of the foregoing, may do the following
without notice to or consent by SELLER: (a) amend any Purchased Contract or
renew or extend the time for payment or performance or grant any other
indulgence to any Customer with respect to payment thereof; (b) make any
settlements or compromises therewith; (c) demand additional collateral or
release any collateral securing such Purchased Contract; (d) restructure, defer
or otherwise alter payment terms of such Purchased Contract; and (e) transfer or
assign any of its rights or obligations in regard of any Contract without the
prior written consent of SELLER. In exercising its rights to deal with Purchased
Contracts as set forth in this section, MFS shall make all such arrangements and
negotiations in accordance with applicable law. Any settlement, forbearance, or
other variation by MFS as contemplated under this section shall not cause
SELLER's Repurchase Price to be greater than it would have been in the absence
of the settlement, forbearance, or other variation. MFS' and SELLER's rights and
obligations hereunder shall remain unaffected by any such activities.
11.    COVENANTS OF SELLER: During the Term hereof, SELLER agrees to: (a)
cooperate with MFS in giving notice to the Customer of the assignment of the
Purchased Contract; (b) comply with all of SELLER's material representations,
warranties and other statutory and contractual obligations to the Customer; (c)
in the event SELLER receives any payment on a Contract, SELLER shall promptly
notify MFS of its receipt of the same and promptly forward such payment to MFS
and SELLER hereby irrevocably appoints MFS its attorney-in-fact to act in its
name and stead in regard of the Purchased Contracts, including without
limitation, the right to endorse or sign SELLER's name on all checks,
collections, receipts or other documents with regard to the Purchased Contracts,
as MFS deems necessary or appropriate, in its discretion, to protect MFS' right,
title and interest in and to the Contract and any security intended to be
afforded thereby, (d) give MFS written notice of any Default hereunder or any
claim known to SELLER which might adversely affect the rights of MFS hereunder
and (e) perform and fulfill its material obligations to Customers under
Contracts and/or agreements delivered to Customers
12.    DEFAULT AND REMEDIES: Upon the occurrence of a Default by, or with
respect to, SELLER, MFS may exercise any or all of the following remedies in
addition to any other remedies available to MFS under applicable law: (a)
declare all amounts payable hereunder to MFS to be immediately due and payable
(including, without limitation, the Repurchase Fees and any amounts due with
respect to the repurchase of Purchased Contracts (including interest accrued in
connection therewith) and withdraw and offset such amount from and against any
other amounts which may be due to SELLER hereunder (including amounts

 

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incurred by MFS and its affiliates and agents in connection with collection and
remedial efforts relating to any Default); (b) [***Confidential portion has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission] (c) terminate this Agreement; and/or (d) charge
interest on any all amounts owed by SELLER to MFS at the rate of one and one
half (1.5%) per month from the date MFS notifies SELLER of such obligation until
paid in full.
13.    MISCELLANEOUS:
a.
MFS and SELLER acknowledge that they are separate entities, each of which has
entered into this Agreement for independent business reasons. There shall be no
restriction on MFS' or SELLER's independent business judgment, including, but
not limited to, decisions regarding selection of a Customer, pricing, market
decisions or credit decisions hereunder.

b.
The provisions of this Agreement and the representations, rights and obligations
of the parties hereto shall survive the execution and delivery hereof, and
except as they relate to the offer, sale and purchase of additional Contracts,
shall survive the termination of this Agreement.

c.
Any notice required to be given hereunder shall be delivered personally, to the
extent applicable numbers and contact information are delivered by one party to
the other for such purposes, shall be sent by first class mail, postage prepaid,
return receipt requested, by overnight courier, or by facsimile or pdf or
electronic mail, to the respective parties at the addresses given in the
preamble of this Agreement, which addresses may be changed by the parties by
written notice conforming to the requirements of this Agreement. Any such notice
deposited in the mail shall be conclusively deemed delivered to and received by
the addressee four (4) days after deposit in the mail, if all of the foregoing
conditions of notice shall have been satisfied. All facsimile communications
shall be deemed delivered and received on the date of the facsimile, if (1) the
transmittal form showing a successful transmittal is retained by the sender, and
(b) the facsimile communication is followed by mailing a copy thereof to the
addressee of the facsimile in accordance with this paragraph. Any communication
sent by overnight courier shall be deemed delivered on the earlier of proof of
actual receipt or the first day upon which the overnight courier will guarantee
delivery.

d.
The parties agree that this Agreement has been executed and delivered in, and
shall be construed in accordance with the internal laws of the State of
California as applied to contracts between California residents entered into and
to be performed wholly within California. SELLER hereby consents to the
jurisdiction of any local, state or federal court located within the County of
San Diego, State of California; provided, however, nothing contained herein
shall preclude MFS from commencing any action hereunder in any Court having
jurisdiction thereof. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

e.
If at any time any provision of this Agreement shall be held by any court of
competent jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force and effect, but the illegality or unenforceability of such
provision shall have no effect upon and shall not impair the enforceability of
any other provision of this Agreement.

f.
This Agreement together with all schedules and exhibits attached hereto,
constitutes the entire agreement between the parties concerning the subject
matter hereof and incorporates all representations made in connection with
negotiation of the same. All prior or contemporaneous agreements,
understandings, representation, warranties and statements, oral or written,
relating to the subject matter hereof are superseded and are null and void. The
terms hereof may not be terminated, amended, supplemented or modified orally,
but only by an instrument duly executed by each of the parties hereto. The
recitals set forth above are incorporated herein by this reference.

g.
This Agreement and any amendments hereto shall be binding on and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.

 

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h.
In the event there is any conflict between this Agreement and any ancillary
agreements with respect to any Contract, the terms and conditions of this
Agreement shall control.

i.
If either party commences legal proceedings for any relief against the other
party arising out this Agreement, the losing party shall pay the prevailing
parties legal costs and expenses, including without limitation, reasonable
attorney's fees.

j.
This Agreement may be executed in one or more identical counterparts, all of
which shall together constitute one and the same instrument when each party has
signed one counterpart. To them as much extent permitted by applicable law, in
the event that any signature to this Agreement or any amendment hereto is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.

k.
Additional terms of this Agreement, all of which are hereby incorporated herein
by this reference, are set forth in the following schedules, addenda, exhibits
or riders attached hereto.

 
-THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives on the date first above
written.
SELLER:
MFS:
 
 
NAUTILUS, INC.
a Washington corporation
MONTEREY FINANCIAL SERVICES, INC.
a California corporation
 
 
By: /s/ Kenneth L. Fish
By: /s/ Chris Hughes
 
 
Print: Kenneth L. Fish
Print: Chris Hughes
 
 
Title: CFO
Title: Exec V.P.
 
 
Date: 3-23-2011
Date: 3-23-11
 
 
Federal Tax I.D.# 94-3002667
 

 
 

 

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SCHEDULE A
 
to that RECEIVABLES PURCHASE AGREEMENT
dated March 23, 2011
by and between
 
MONTEREY FINANCIAL SERVICES, INC.
and
NAUTILUS, INC.
 
 
 
I.
DESCRIPTION OF SELLERS SERVICES/PRODUCTS:

 
Individual consumer retail installment contracts for the purchase finance of
SELLER's Bowflex and Nautilus exercise equipment.
 
II.
PURCHASE PRICE:

 
[***Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
 
III.
ADJUSTMENTS TO PURCHASE PRICE:

 
[***Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
 
IV.
STIPULATIONS:

 
a.
First Payment recourse on all Purchased Contracts (as set forth in Section 6(b)
of the Agreement).

 
V.
REPURCHASE FEE:

 
[***Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.]
 
VI.
CUSTOMER CREDIT APPROVAL THROUGH OASYS:

 
a.
In connection with Contracts to be sold to MFS pursuant to this Agreement, prior
to entering into any retail installment agreement or Contract with prospective
Customers, for each such prospective Customer SELLER shall submit a credit
approval application through MFS' proprietary online credit approval system,
OASYS. It is understood and agreed that SELLER shall offer for sale to MFS, each
Contract which is approved through OASYS. SELLER and MFS acknowledge and agree
that despite the parties' best efforts to induce credit-approved consumers into
enter into a Contract, not all credit-approved consumers will do so.
Nevertheless, in an effort to forecast volume and gauge costs associated with
credit reviews, the parties hereto expect and believe that at least
[***Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.] of all Contracts
which MFS approves through OASYS will enter into a Contract, all of which SELLER
commits to offer for sale to MFS based on

 

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the terms set forth herein. Furthermore, it is the expectation and belief of the
SELLER and MFS that within ninety (90) days of the first Customer Contract being
submitted for credit review and offer to MFS for purchase, at least
[***Confidential portion has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.] of the credit
applications will result in credit approval based on the credit-approval
criteria and logic utilized by OASYS, and to be reviewed and agreed upon by both
SELLER and MFS.
b.
In an effort to ensure that approval and closure rate percentages set forth
above in section VI(a) of this Schedule A result in a relationship which is
mutually beneficial to both SELLER and MFS, the parties hereto agree that the
same approval and closure rate percentages may be reviewed on a quarterly basis
to determine if any adjustment or fees related thereto should be considered.

c.
SELLER shall pay MFS ten dollars ($10.00) for each duplicate credit application
submitted through OASYS.

 
VII.
TERM:

 
The Term of this Agreement is a period of one (1) year(s) commencing on the
Effective Date and ending on the first anniversary thereafter. The Term shall
automatically renew unless either party provides the other written notice at
least thirty (30) days of its intent not to renew the same. This Agreement may
be terminated prior to its intended expiration as follows:
 
a.
Immediately upon the occurrence of an Insolvency Event with respect to either
party;

 
b.
Upon the mutual written agreement of the parties hereto;

 
c.
By either party for any reason upon not less than thirty (30) days written
notice to SELLER;

 
d.
Immediately by MFS upon the occurrence of an event of Default by SELLER.

 
Notwithstanding the termination of this Agreement due to expiration of its Term,
SELLER's obligations to MFS under Section 11 hereunder shall continue with
respect to Purchased Contracts, and MFS shall be entitled to collect all
outstanding payments under all Purchased Contracts until they have been paid in
full.
 
 
 
ACKNOWLEDGEMENT (initialed):    /s/ KF_________     /s/ CH__________
SELLER        MFS
 
 
 
 

 

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EXHIBIT A
FORM OF IRREVOCABLE ASSIGNMENT
 
FOR VALUE RECEIVED, the undersigned (the “Assignor”) hereby sells, assigns and
transfers unto MONTEREY FINANCIAL SERVICES, INC., (“MFS”) a California
corporation (“Assignee”), its successors and assigns, all of Assignor's right,
title and interest in and to the contracts, promissory notes, security
agreements, membership agreements, instruments and accounts receivable (each, a
“Contract” and collectively, the “Contracts”) described on the attached Annex A,
together with the property described therein, if any, and all rights and
remedies thereunder, including all guaranties thereof or collateral security
therefor, without recourse or warranty except as provided herein. Assignor
authorizes Assignee to collect any and all installments and payments due on each
Contract and to take action thereunder which Assignor might otherwise take with
respect to each Contract. This Assignment is being delivered pursuant to and
upon all of the representations, warranties, covenants and agreements on the
part of the undersigned Assignor contained in that certain Receivables Purchase
Agreement, dated as of ___________, __, 2011. (the “Agreement”) between Assignor
and Assignee, which Agreement contains certain representations, warranties and
covenants from Assignor to Assignee, including, without limitation, certain
obligations on behalf of the Assignor to repurchase the Contracts or to replace
the Contracts upon the terms and conditions set forth therein. This Assignment
shall be governed by and interpreted in accordance with the terms of the
Agreement and the laws of the State of California. Capitalized terms used
herein, which are not defined herein, shall have the meanings set forth in the
Agreement.
Assignee may, without notice to Assignor, enter into any settlement, forbearance
or other variation in terms in connection with any Contract, or discharge or
release the obligations of the Obligor or other person, by operation of law or
otherwise, without affecting Assignor's liability hereunder, except that any
settlement, forbearance, or other variation by Assignee or its assigns shall not
cause Assignor's Repurchase Price to be greater than it would have been in the
absence of the settlement, forbearance, or other variation. Assignee's failure
or delay in enforcing any right hereunder does not constitute a waiver of that
right. Assignor shall not make any collections or repossessions with respect to
the Contracts.
Assignor hereby certifies on and as of the date hereof (a) that each and every
representation and warranty of the undersigned contained in the Agreement is
true and correct on and as of the date hereof in all material respects with the
same force and effect as if originally expressed on and as of the date hereof
and (b) that each of the conditions set forth in the Agreement with respect to
the purchase of the Contracts hereunder has been fulfilled or waived on the date
hereof.
Assignor does not delegate and Assignee shall not be required to assume any of
the duties, responsibilities, liabilities or obligations of Assignor under any
Contract assigned hereunder and Assignor shall remain liable therefore
notwithstanding the assignment contained herein.
IN WITNESS WHEREOF, the undersigned has executed this Form of Irrevocable
Assignment to be duly executed this _______ day of ____________________, 2011.
______________________________________
Print SELLER's Name Here
By: ___________________________________
 
Title: _________________________________