EXHIBIT 10.43.2
EXECUTION COPY
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CREDIT AND SECURITY AGREEMENT
dated as of May 1, 2001
by and among
TCS FUNDING V, INC.
as the Borrower,
THE CREDIT STORE, INC.,
as the Servicer,
and
XXXXXX & XXXXXXXXX INVESTMENTS CORPORATION,
as the Lender
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS ....................................................................................... 1
Section 1.1. Definitions ................................................................................ 1
ARTICLE II TERM LOAN ........................................................................................ 12
Section 2.1. Term Loan .................................................................................. 12
Section 2.2. Interest on the Loan ....................................................................... 12
Section 2.3. The Note ................................................................................... 13
Section 2.4. Use of Proceeds ............................................................................ 13
Section 2.5. Required Principal Payments; Prepayments ................................................... 13
Section 2.6. Payments ................................................................................... 14
Section 2.7 Taxes ...................................................................................... 14
Section 2.8. Conclusiveness of Statements; Survival of Provisions ....................................... 15
ARTICLE III ORDER OF DISTRIBUTION OF COLLECTIONS; ESCROW ACCOUNT ............................................ 15
Section 3.1. Distribution of the Security Interest Percentage of Collections During
the Regular Amortization Period ............................................................ 15
Section 3.2. Distribution of the Security Interest Percentage of Collections During
the Accelerated Amortization Period ........................................................ 16
Section 3.3. Borrower's Interest Percentage of Collections .............................................. 17
Section 3.4. Distribution of Reserve Account ............................................................ 17
ARTICLE IV COLLATERAL FOR OBLIGATIONS ....................................................................... 17
Section 4.1. Grant of Security Interest ................................................................. 17
Section 4.2. Covenants Regarding Eligible Receivables ................................................... 18
Section 4.3. Servicing .................................................................................. 18
Section 4.4. Lockbox, Collection Account ................................................................ 21
Section 4.5. Financing Statement ........................................................................ 22
Section 4.6. Further Documents .......................................................................... 23
Section 4.7. Limited Recourse ........................................................................... 23
ARTICLE V CONDITIONS OF LENDING ............................................................................. 23
Section 5.1. Conditions Precedent to the Loan ........................................................... 23
ARTICLE VI REPRESENTATIONS AND WARRANTIES ................................................................... 25
Section 6.1. Corporate and Company Existence and Power; Name; Chief Executive Office .................... 25
Section 6.2. Authorization for Borrowings; No Conflict as to Law or Agreements .......................... 26
Section 6.3. Legal Agreements ........................................................................... 26
Section 6.4. Subsidiaries ............................................................................... 26
Section 6.5. Financial Condition; No Adverse Change .................................................... 27
Section 6.6. Litigation ................................................................................ 27
Section 6.7. Taxes ..................................................................................... 27
Section 6.8. Titles and Liens .......................................................................... 28
Section 6.9. Plans ..................................................................................... 28
Section 6.10. Default ................................................................................... 28
Section 6.11. Submissions to Lender ..................................................................... 28
Section 6.12. Nature of Receivables ..................................................................... 28
Section 6.13. Compliance with Applicable Laws ........................................................... 29
Section 6.14. Compliance with Credit and Collection Policy .............................................. 29
Section 6.15. Not an Investment Company ................................................................. 29
Section 6.16. Federal Reserve Regulations ............................................................... 29
Section 6.17. Solvency .................................................................................. 30
ARTICLE VII AFFIRMATIVE COVENANTS ........................................................................... 30
Section 7.1. Reporting Requirements ..................................................................... 30
Section 7.2. Books and Records; Inspection and Examination .............................................. 32
Section 7.3. Compliance with Laws ....................................................................... 32
Section 7.4. Payment of Taxes and Other Claims .......................................................... 32
Section 7.5. Preservation of Existence .................................................................. 33
Section 7.6. Borrowing Base Ratio ....................................................................... 33
Section 7.7. Covenants Regarding the Receivables ........................................................ 33
ARTICLE VIII NEGATIVE COVENANTS ............................................................................. 33
Section 8.1. Sales, Liens, Etc. ......................................................................... 33
Section 8.2. Mergers, Acquisitions, Sales, Investments, Etc. ............................................ 33
Section 8.3. No Extension or Amendment of Receivables ................................................... 34
Section 8.4. Changes to Credit and Collection Policy .................................................... 34
Section 8.5. TCSI's Covenants ........................................................................... 34
ARTICLE IX EVENTS OF DEFAULT; RIGHTS AND REMEDIES ........................................................... 36
Section 9.1. Events of Default .......................................................................... 36
Section 9.2. Rights and Remedies ........................................................................ 37
ARTICLE X PARTICIPATIONS .................................................................................... 38
Section 10.1. Participation ............................................................................. 38
ARTICLE XI BANKRUPTCY REMOTE PROTECTIONS .................................................................... 38
Section 11.1. Composition of the Borrowers Board ........................................................ 38
Section 11.2. Compensation of Employees, Agents, and Consultants; Limitation on Agency .................. 38
Section 11.3. Servicing; Fees ........................................................................... 39
Section 11.4. Expenses .................................................................................. 39
Section 11.5. Mailing Address ........................................................................... 39
Section 11.6. Books and Records ......................................................................... 39
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Section 11.7. Financial Statements ...................................................................... 39
Section 11.8. Holding of Funds and Assets ............................................................... 39
Section 11.9. Insurance ................................................................................. 39
Section 11.10. Separate Legal Entities .................................................................. 39
Section 11.11. Arm's Length Relationships ............................................................... 40
ARTICLE XII MISCELLANEOUS ................................................................................... 40
Section 12.1. Assistance ................................................................................ 40
Section 12.2. No Waiver; Cumulative Remedies ............................................................ 40
Section 12.3. Amendments, Requested Waivers, Etc. ....................................................... 40
Section 12.4. Addresses for Notices, Etc. ............................................................... 40
Section 12.5. Costs and Expenses ........................................................................ 41
Section 12.6. Indemnity ................................................................................. 41
Section 12.7. Execution in Counterparts; Facsimile Signature ............................................ 42
Section 12.8. Governing Law; Jurisdiction; Waiver of Jury Trial ......................................... 42
Section 12.9. Integration ............................................................................... 43
Section 12.10. Agreement Effectiveness .................................................................. 43
Section 12.11. Advice from Counsel ...................................................................... 43
Section 12.12. Judicial Interpretation .................................................................. 43
Section 12.13. Binding Effect; No Assignment by Borrower; Third Party Beneficiary ....................... 43
Section 12.14. Severability of Provisions ............................................................... 43
Section 12.15. Headings ................................................................................. 43
Section 12.16. True Sale; Nonconsolidation .............................................................. 44
EXHIBIT A Form of Note
EXHIBIT B Borrowing Base Certificate
EXHIBIT C Solvency Certificate
EXHIBIT D CFO'S Certificate for Annual Financial Statements
EXHIBIT E CFO'S Certificate for Quarterly Financial Statements
EXHIBIT F List of Stock
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CREDIT AND SECURITY AGREEMENT
This CREDIT AND SECURITY AGREEMENT (the "Agreement") dated as
of May 1, 2001 is by and among TCS FUNDING V, INC., a Delaware corporation (the
"Borrower"), THE CREDIT STORE, INC. ("TCSI"), a Delaware corporation, acting as
the Servicer (in such capacity the "Servicer"), and XXXXXX & XXXXXXXXX
INVESTMENTS CORPORATION, a Minnesota corporation (the "Lender").
BACKGROUND INFORMATION
WHEREAS, the Borrower has requested the Lender to extend a
term loan to the Borrower in order to finance its purchases from TCSI of the
revolving credit card receivables in a designated pool of credit card accounts.
WHEREAS, the Borrower is willing to secure all of its
obligations to the Lender under this Agreement by granting to the Lender a
security interest in and lien upon all its receivables and certain other related
assets, as set forth herein.
WHEREAS, the Lender is willing, on the terms and subject to
the conditions set forth herein, to make such term loan available to the
Borrower.
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in the introductory paragraph have the
meanings therein assigned to them;
(b) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) all representations, warranties and covenants, and all
accounting terms, unless otherwise specified, shall be deemed to refer
to a Person and each of its consolidated Subsidiaries, on a
consolidated basis, in accordance with GAAP.
"Accelerated Amortization Period" means the period beginning
on the first day after the end of the Regular Amortization Period and ending on
the date on which the Loan Outstanding Amount and all accrued interest on the
Loan has been paid in full.
"Account" means a credit card account, the account receivables
of which are owned by the Borrower and that is an Eligible Account listed by
account number in the Account Schedule. The term "Account" refers to a
Substituted Account only from and after the date on which it is listed in a
supplement to the Account Schedule. An "Account" includes any "relationship
account" resulting from the earlier credit card having been reported as stolen.
"Account Agreement" means, with respect to any Account, the
related cardholder agreement between an Obligor and an Issuing Bank, as such
agreement may be amended, modified, or otherwise changed from time to time.
"Account Schedule" shall mean the schedule of Accounts of the
Borrower delivered to the Lender on the Closing Date in the form of a CD labeled
"TCS Funding V Closing Account Schedule," as amended or supplemented from time
to time pursuant to the terms of this Agreement.
"Adverse Claim" means a lien, security interest, charge,
encumbrance, or other right or claim of any Person other than an unfiled lien
for tax accrued but not yet payable.
"Affiliate" means, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, (i) ten percent (10%) or more of a Person
that is publicly held or (ii) fifty percent (50%) or more of a Person that is
privately held, of the stock, units, or equity (however, legally described)
having ordinary voting power in the election of directors or other analogous
controlling parties of such Person, (b) each Person that controls, is controlled
by or is under common control with such Person, or (c) each of such Person's,
officers, directors, joint venturers, and partners. For purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract, or
otherwise; provided, however, that the term "Affiliate" with respect to the
Borrower shall in no event include the Lender.
"Agreement" means this Credit and Security Agreement and all
exhibits, amendments and supplements hereto.
"Backup Servicer" means Xxxxx Fargo Bank Minnesota, National
Association and its successors and assigns and any other entity appointed as the
backup servicer by TCSI (with the consent of the Lender) or the Lender
(following a Servicer Termination Event) in accordance with this Agreement.
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"Backup Servicing Agreement" means the Backup Servicing
Agreement of even date herewith, by and among TCSI, the Borrower, the Backup
Servicer and the Lender, as the same may be amended, supplemented, or otherwise
modified from time to time or any agreement by and among the Servicer, the
Borrower, the Lender and any replacement backup servicer.
"Backup Servicing Fee" means all fees and expenses of the
Backup Servicer as set forth in Section 7 of the Backup Servicing Agreement,
including, at any time following termination of TCSI as Servicer pursuant to
Section 4.3(a), the fees payable to the Backup Servicer as the successor
Servicer.
"Borrower" means TCS Funding V, Inc., a Delaware corporation.
"Borrower Funded Receivables" means zero as of the Closing
Date and for any subsequent date of determination means the sum of (a) the
amount of Borrower Funded Receivables as of the preceding Settlement Date (or as
of the Closing Date with respect to the first Settlement Date), plus (b) the
excess of (i) all Receivables contributed or sold to the Borrower by TCSI during
the preceding Monthly Period minus (ii) all Receivables purchased by the
Borrower from TCSI during the preceding Monthly Period with the Security
Interest Percentage of Collections, plus (c) the product of the Borrower's
Interest Percentage (determined as of the preceding Settlement Date) and the
Finance Charge Receivables booked on the Accounts during the preceding Monthly
Period, minus (d) the product of the Borrower's Interest Percentage (determined
as of the preceding Settlement Date) and the Collections received during the
preceding Monthly Period.
"Borrower's Interest Percentage" means the Borrower's interest
in the Collections and other Collateral equal to the percent equivalent of a
fraction, (a) the numerator of which is the outstanding balance of all Borrower
Funded Receivables as of such date of determination and (b) the denominator of
which is the aggregate outstanding balance of all Receivables; provided,
however, that the Borrower's Interest Percentage shall not be less than zero.
"Borrowing Base Certificate" means a certificate in
substantially the form of Exhibit B, duly completed and certified by the
Borrower, pursuant to which the Borrower sets forth the Borrowing Base Ratio as
of a particular date.
"Borrowing Base Ratio" means the ratio, as measured on the
last day of each Monthly Period, expressed as a percentage, equal to (a) the
product of the Security Interest Percentage and the aggregate total outstanding
balance of those Eligible Receivables that are not more than sixty (60) days
past due of any payment due date as of such date divided by (b) the sum of (i)
the Loan Outstanding Amount on such date.
"Business Day" means any day other than a Saturday or Sunday
on which commercial banks are required to be open for business in Minnesota,
South Dakota and New York.
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"Closing Date" means the date on which the Loan is disbursed
under this Agreement.
"Collateral" means all of the Borrower's right, title, and
interest in and to (a) all Receivables, whether outstanding on the Closing Date
or arising thereafter, including, without limitation, any interest, Collections,
or other fees received by the Borrower with respect to the Receivables, (b) the
Collection Account and the Reserve Account and all money, investment property,
and security entitlements credited or related to such accounts, (c) all
Collections in respect of, and other proceeds of, the Receivables, including,
without limitation, net recoveries with respect to defaulted Receivables, (d)
all substitutions and replacements for any of the foregoing, (e) all the
Borrower's rights under the Receivables Purchase Agreement, and (f) all proceeds
of any of the foregoing.
"Collection Account" means that certain bank account numbered
00000000 maintained at Xxxxx Fargo Bank Minnesota, National Association (or any
replacement collection account satisfactory to the Lender) that is (a)
identified as the "TCS Funding V Collection Account", (b) in the Borrower's
name, and (c) pledged to the Lender pursuant to Section 4.1 of this Agreement.
"Collections" means (a) all funds which are received by the
Borrower or the Servicer from or on behalf of the Obligors or any other Person
in payment of any amounts owed in respect of the Receivables and (b) all
payments made by TCSI to the Borrower pursuant to Section 3.2(b) and Section 6.1
of the Receivables Purchase Agreement.
"Credit and Collection Policy" means those credit, collection,
customer relations and customer service policies and practices and other written
policies and procedures of the Servicer relating to the Receivables in effect on
the Closing Date, a copy of which were delivered to the Lender, as such
policies, practices and procedures may be amended, modified, or otherwise
changed from time to time.
"Default" means an event that, with the giving of notice or
the passage of time, or both, would constitute an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"EBITDA" means, for any period of determination, TCSI's net
income before deductions for income taxes, interest expense, depreciation and
amortization, all as determined in accordance with GAAP.
"Eligible Account" means an Account that has been marked on
the records of TCSI with a pool ID of 2001-004 and that satisfies each of the
following criteria as of the Closing Date:
(a) the Receivables in such Account are payable in United
States dollars;
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(b) the Obligor on such Account has provided, as its billing
address, an address located in the United States or its territories or
possessions or a United States military address;
(c) such Account has not been identified by the Borrower or
any of its Affiliates in its computer files as stolen or lost;
(d) such Account has not been sold, assigned or pledged to any
other party and does not have Receivables which, at such time, are
sold, assigned or pledged to any other party;
(e) the Receivables in such Account have not been charged off
unless such Account is subsequently reinstated;
(f) the Obligor on such Account is neither deceased nor
currently involved in a bankruptcy proceeding;
(g) the Obligor on such Account has made at least eight
consecutive monthly payments (as reported in the TCSI Consecutive
Payment Report) of at least the minimum payment required by the
applicable Account Agreement which, as of the end of any calendar
month, has prevented the Account from being more than 60 days
contractually delinquent and the Account was not more than 30 days
contractually delinquent at the end of the month in which the Closing
Date occurs; and
(h) such Account has not been cancelled.
"Eligible Investment" means one or more of the following types
of financial asset: (a) direct obligations of the United States of America or
any agency or instrumentality thereof whose obligations constitute the full
faith and credit obligations of the United States of America having a maturity
of one (1) year or less; (b) commercial paper rated "A-1" or better by Standard
and Poor's Ratings Services, a Division of The XxXxxx-Xxxx Companies, Inc.
("S&P") or "P-1" by Xxxxx'x Investors Service, Inc. ("Moody's"), (c) money
market funds rated AAA-m or AAA-mg by S&P or AAA by Moody's, or (d) repurchase
agreements covering financial assets that would otherwise be "Eligible
Investments" hereunder and which subject such assets to a first priority
perfected security interest granted by the seller, and certificates of deposit
or bankers' acceptances, in each case having a maturity of one (1) year or less
and issued by Persons having the short-term ratings described in clause (c)
above.
"Eligible Receivable" means any Receivable that:
(a) arises in an Eligible Account;
(b) is owned by the Borrower free and clear of encumbrances
and adverse claims and has not been sold, assigned or pledged to any
other party (unless such Receivables were repurchased free of all liens
or all liens were released prior to the pledge pursuant to this
Agreement);
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(c) complies with all applicable laws and other legal
requirements, whether federal or state, including, without limitation,
usury laws, the Federal Consumer Protection Act, the Fair Credit
Billing Act, the Federal Truth in Lending Act, and Regulation Z of the
Board of Governors of the Federal Reserve System;
(d) with respect to which all consents, licenses or
authorizations of, or registrations with, any governmental authority
required to be obtained or given by the Issuing Bank in connection with
the creation of such Receivable has been duly obtained;
(e) constitutes a "general intangible", "chattel paper" or an
"account" as defined in Section 9-106 of the Uniform Commercial Code in
the applicable state; and
(f) has been or will be billed to the related Obligor on such
Obligor's monthly statement in accordance with the terms of the
applicable Account Agreement and constitutes the legal, valid and
binding obligation of the Obligor, enforceable against such Obligor in
accordance with its terms (subject to general principles of equity and
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditor's rights generally) and is not subject to any
dispute, offset, counterclaim, or defense whatsoever.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
that is treated as a single employer under Section 414(b) or Section 414(c) of
the Code or, solely for purposes of Section 412 of the Code, that is treated as
a single employer under Section 414 of the Code.
"Event of Default" has the meaning specified in Section 9.1.
"Finance Charge Receivables" means, with respect to any day,
any Receivables in respect of periodic finance charges, over limit fees, late
charges, annual account fees, transaction charges, cash advance fees, and
similar fees and charges, excluding fees and charges for insurance and insurance
type products, such amounts to be calculated in accordance with the Servicer's
usual and customary practices.
"GAAP" means generally accepted accounting principles as in
affect from time to time applied on a basis consistent with the accounting
practices applied in the financial statements referred to in Section 6.5.
"Indemnitees" has the meaning specified in Section 12.6.
"Indemnified Liabilities" has the meaning specified in
Section 12.6.
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"Interest Rate Period" means each quarterly period from and
including a Settlement Date occurring in March, June, September or December to
but excluding the next succeeding Settlement Date.
"Issuing Bank" means First National Bank in Brookings, Bank of
Xxxxx or any other banks that are members of MasterCard(R) or VISA(R) from which
TCSI purchases credit card balances related to revolving credit card accounts
which are opened by such banks in connection with the transfer of balances by
TCSI to such Issuing Banks under a purchase or similar agreement.
"Lender" has the meaning specified in the introductory
paragraph.
"Loan" means the term loan by the Lender to the Borrower
pursuant to this Agreement.
"Loan Outstanding Amount" means, as of any date of
determination, the outstanding principal amount of the Loan.
"Lockbox Account" means the lockbox account referred to in the
Lockbox Agreement.
"Lockbox Agreement" means that certain Amended and Restated
Lockbox Agreement of even date herewith among TCSI (individually and as the
Servicer), the Borrower, Credit Store Services, Inc., a special purpose
subsidiary of TCSI, TCS Funding IV, Inc., a special purpose subsidiary of TCSI,
Xxxxx Fargo Bank South Dakota, N.A., Xxxxx Fargo Bank Minnesota, National
Association ("Xxxxx Fargo"), the Lender, The Varde Fund IV-A, L.P. and Coast
Business Credit, a division of Southern Pacific Bank, as such agreement may be
amended, restated, supplemented, modified or replaced from time to time,
including by the addition of additional parties pursuant to the terms thereof.
"Lockbox Paying Agent Agreement" shall mean that certain
Amended and Restated Paying Agent Agreement of even date herewith among TCSI
(individually and as the Servicer), the Borrower, Credit Store Services, Inc., a
special purpose subsidiary of TCSI, TCS Funding IV, Inc., a special purpose
subsidiary of TCSI, Xxxxx Fargo Bank South Dakota, N.A., Xxxxx Fargo Bank
Minnesota, National Association, the Lender, The Varde Fund IV-A, L.P. and Coast
Business Credit, a division of Southern Pacific Bank, as such agreement may be
amended, restated, supplemented, modified or replaced from time to time,
including by the addition of additional parties pursuant to the terms thereof.
"Material Adverse Effect" means, with respect to any event or
circumstance, a material adverse effect on:
(a) the business, financial condition, operations or prospects
of the Borrower (or applicable party, as the context requires);
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(b) the ability of the Borrower (or applicable party, as the
context requires) to perform its obligations under any Transaction
Document to which it is a party;
(c) the validity or enforceability of any Transaction
Document;
(d) the status, existence, perfection, priority, or
enforceability of any lien or security interest granted to the Lender
pursuant to the Transaction Documents; or
(e) the validity, enforceability or collectibility of the
Receivables, taken as a whole.
"Maturity Date" means (i) the earlier of May 1, 2005 or (ii)
the date on which all Obligations have been paid in full.
"Monthly Period" means a calendar month.
"Net Loss Rate" means, as of any Settlement Date, the
percentage equivalent of a fraction, the numerator of which is the net
charge-offs with respect to the Receivables during the three consecutive Monthly
Periods most recently ended and the denominator of which is the average of the
Receivables balances as of the close of business on the last day of each of the
three consecutive preceding Monthly Periods, such percent to be stated on an
annualized basis.
"Note" means the Note evidencing the Loan pursuant to Section
2.3, substantially in the form of Exhibit A hereto.
"Obligations" means (a) the Borrower's obligations in respect
of the due and punctual payment of principal of and interest on the Loan when
and as due, whether at maturity or upon any Settlement Date, by acceleration,
upon one or more dates set for prepayment or otherwise and (b) all fees,
expenses, indemnities, reimbursements and other obligations, monetary or
otherwise, of the Borrower under this Agreement.
"Obligor" means a Person obligated to make payments under an
Account, including any guarantor.
"Paying Agent" means Xxxxx Fargo Bank Minnesota, National
Association or its successors or assigns under the Paying Agent Agreement.
"Paying Agent Agreement" means the Paying Agent Agreement of
even date herewith by and among the Borrower, TCSI, the Lender and Xxxxx Fargo
Minnesota, National Bank, as the same may be amended, restated, supplemented or
otherwise modified, from time to time (or any agreement among the Servicer, the
Borrower, the Lender and any replacement agent), pursuant to which the
Collection Account and the Reserve Account will be established in the name of
the Borrower for the deposit of Collections and the distribution of funds
pursuant to Section 2.1 and Article III.
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"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for employees of the Borrower and covered by Title IV of ERISA.
"Prime Rate" for any Interest Rate Period means the rate set
forth in The Wall Street Journal under the heading Money Rates and described as
the "Prime Rate," as published on the business day immediately preceding the
first day of such Interest Rate Period; provided, however, that if such Prime
Rate is no longer published in The Wall Street Journal, the "Prime Rate" shall
be a substantially comparable rate based upon an index selected by the Lender in
its reasonable discretion.
"Receivables" mean all of the indebtedness of any Obligor
arising under the Accounts designated in the Account Schedule, as it may be
amended from time to time in accordance with this Agreement, including the right
to receive payment of any interest or finance charges and other obligations of
such Obligors with respect thereto.
"Receivables Purchase Agreement" means the Receivables
Purchase Agreement of even date herewith, by and between TCSI and the Borrower,
as the same may be amended, supplemented, or otherwise modified from time to
time in accordance with this Agreement.
"Regular Amortization Period" means the period commencing on
the Closing Date and ending on the earlier to occur of (i) May 1, 2002 or (ii)
the date on which an Event of Default occurs.
"Related Person" has the meaning given in Section 8.5.
"Reportable Event" has the meaning assigned to that term in
Title IV of ERISA.
"Reserve Account" means that certain bank account numbered
00000000 maintained at Xxxxx Fargo Bank Minnesota, National Association (or any
replacement reserve account satisfactory to the Lender) that is (a) identified
as the "TCS Funding V Reserve Account," (b) in the Borrower's name, and pledged
to the Lender pursuant to Section 4.1 of this Agreement.
"Security Interest Percentage" means the Lender's security
interest in the Collections and other Collateral expressed as a percentage which
shall be, as of any date of determination, 100% minus the Borrower's Interest
Percentage.
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"Servicer" has the meaning specified in Section 4.3.
Initially, TCSI shall act as Servicer.
"Servicer Termination Event" has the meaning specified in
Section 4.3(a).
"Servicing Fee" means, so long as TCSI is the Servicer, a
servicing fee of $5.00 per active Eligible Account for each Monthly Period,
payable to the Servicer monthly in arrears on each Settlement Date.
"Settlement Date" means the twentieth (20th) calendar day of
each month or, if such date is not a Business Day, the next succeeding Business
Day.
"Settlement Statement" has the meaning specified in Section
7.1(g).
"Solvent" means, with respect to any Person at any time, a
condition under which
(a) the fair value and present fair saleable value of such
Person's total assets is, on the date of determination, greater than
such Person's total liabilities (including contingent and unliquidated
liabilities) at such time;
(b) the fair value and present fair saleable value of such
Person's assets is greater than the amount that will be required to pay
such Person's probable liability on its existing debts as they become
absolute and matured ("debts" for this purpose includes all legal
liabilities, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed, or contingent);
(c) such Person is, and shall continue to be, able to pay all
of its liabilities as such liabilities mature; and
(d) such Person does not have unreasonably small capital with
which to engage in its current and in its anticipated business.
For purposes of this definition:
(i) the amount of a Person's contingent or
unliquidated liabilities at any time shall be that amount
which, in light of all the facts and circumstances then
existing, represents the amount which can reasonably be
expected to become an actual or matured liability;
(ii) the "fair value" of an asset shall be the amount
which may be realized within a reasonable time either through
collection or sale of such asset at its regular market value;
(iii) the "regular market value" of an asset shall be
the amount which a capable and diligent business person could
obtain for such asset from an
10
interested buyer who is willing to purchase such asset under
ordinary selling conditions; and
(iv) the "present fair saleable value" of an asset
means the amount which can be obtained if such asset is sold
with reasonable promptness in an arms-length transaction in an
existing and not theoretical market.
"Substituted Accounts" has the meaning given in Section 4.1.
"Tangible Net Worth" means TCSI's consolidated owner's equity,
plus debt subordinated to TCSI's senior debt, minus goodwill, patents,
trademarks, copyrights, franchises, formulas, leasehold interests, leasehold
improvements, non-compete agreements, engineering plans, deferred tax benefits,
organization costs, prepaid items, and any other assets of TCSI that would be
treated as intangible assets on TCSI's balance sheet prepared in accordance with
GAAP.
"Taxes" has the meaning specified in Section 2.7.
"TCSI Subordinated Debt" means collectively, a Subordinated
Promissory Note dated August 1, 1997 in the principal amount of $10,000,000 from
TCSI to J.L.B. of Nevada, Inc., a Subordinated Grid Promissory Note dated August
1, 1997 in the principal amount of $20,000,000 from TCSI to J.L.B. of Nevada,
Inc., a Subordinated Grid Promissory Note dated October 23, 1997 in the
principal amount of $5,000,000 from TCSI to J.L.B. of Nevada, Inc., and a
Subordinated Grid Promissory Note dated November 21, 1997 in the principal
amount of $5,000,000 from TCSI to J.L.B. of Nevada, Inc.
"Transaction Documents" means this Agreement, the Note, the
Lockbox Agreement, the Lockbox Paying Agent Agreement, the Paying Agent
Agreement, the Receivables Purchase Agreement, and the Backup Servicing
Agreement, as any of the foregoing may be amended, supplemented, amended and
restated, or otherwise modified from time to time in accordance with this
Agreement.
"Trigger Event" means any of the following events shall have
occurred and is continuing, unless such event is waived in writing by the
Lender:
(a) the Net Loss Rate exceeds 21%;
(b) the three month average payment rate of the Receivables is
less than 5.75%;
(c) the Borrowing Base Ratio is less than 143%; or
(d) a Servicer Termination Event.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the State of Minnesota and the State of South Dakota.
11
ARTICLE II
TERM LOAN
Section 2.1. Term Loan. The Lender hereby agrees, on the terms
and subject to the conditions set forth in this Agreement, to make a Loan to the
Borrower on the Closing Date in an amount equal to the least of (a) $4,000,000,
(b) seventy percent (70%) of the outstanding balance of Eligible Receivables as
of the Closing Date or (c) an amount that results in a Borrowing Base Ratio of
not less than 143%. On the Closing Date, the Borrower shall deposit $285,714 of
the Loan proceeds in the Reserve Account.
Section 2.2. Interest on the Loan. The Borrower hereby agrees
to pay interest on the unpaid principal amount of the Loan for the period
commencing on the Closing Date until the unpaid principal amount of the Loan is
paid in full, as follows:
(a) Interest Rate. Subject to Section 2.2(b) below, the
outstanding principal balance of the Loan shall bear interest (i) from
and including the Closing Date to but excluding the first anniversary
of the Closing Date, at the rate of 11.5% per annum and (ii) from and
including the first anniversary of the Closing Date until the Loan is
paid in full, at a rate per annum equal to the sum of (x) the Prime
Rate in effect on the first day of the relevant Interest Rate Period
and (y) 2.50%.
(b) Default Interest. If the Borrower shall default in the
payment of the principal of or interest on the Loan becoming due
hereunder, whether by scheduled maturity, notice of prepayment,
acceleration or otherwise, the Borrower shall pay interest, to the
extent permitted by applicable law, on such defaulted amount up to (but
not including) the date of actual payment (after as well as before
judgment) at a rate per annum equal to the sum of (x) the interest rate
then in effect plus (y) two percent (2%). If the Borrower shall default
in the performance of or breach any covenant of the Borrower in this
Agreement (other than the covenants in Section 7.6 and Section 7.7) and
such default continues unremedied for a period of fifteen (15) days
after the Borrower has or should reasonably have had notice thereof,
the Borrower shall pay interest on the Loan up to (but not including)
the date such default is cured or waived by the Lender at a rate per
annum equal to the sum of (x) the interest rate then in effect plus (y)
two percent (2%).
(c) Computation of Interest. Interest accruing on the Loan
shall be computed on the basis of the actual number of days elapsed in
a year of three hundred sixty (360) days.
(d) Interest Due Dates. Accrued interest on the Note shall be
payable in arrears on each Settlement Date and on the Maturity Date.
Section 2.3. The Note. The Loan made hereunder shall be
evidenced by and repayable in accordance with the Note. The unpaid principal
amount of the Note shall bear
12
interest as set forth in Section 2.2, and shall be payable as set forth in
Article III or earlier in accordance with Section 9.2.
Section 2.4. Use of Proceeds. Proceeds of the Loan shall be
used by the Borrower solely for purposes of purchasing Eligible Receivables from
TCSI pursuant to the Receivables Purchase Agreement.
Section 2.5. Required Principal Payments; Prepayments.
(a) Voluntary Prepayments. On any Settlement Date, the
Borrower may prepay all or any portion of the Loan without premium or
penalty.
(b) Mandatory Prepayments.
(i) The Borrower shall, without notice or demand by
the Lender, prepay the Loan from the Security Interest
Percentage of Collections as described in and pursuant to
Section 3.1(b)(vi) or from the Reserve Account as described
in and pursuant to Section 3.4.
(ii) If the Servicer presents the Lender with an
offer from a third party to purchase all or part of the
Receivables, the Lender shall have the right, but not the
obligation, to require the Borrower to prepay, without premium
or penalty, the Loans in an amount equal to such aggregate
offered purchase price. Such prepayment shall be made on the
closing of such sale; provided, however, that if the Servicer
notifies the Lender that the third party has withdrawn its
offer to purchase all or part of the Receivables, the Lender
shall also withdraw any notice of required prepayment
previously given.
Section 2.6. Payments.
(a) Making of Payments. All payments of principal and interest
due under the Loan and all other payments due pursuant to Section 2.7
shall be made to the Lender pursuant to Article III. All payments shall
be made to the Lender at its office in Minneapolis, Minnesota, not
later than 10:00 a.m., Minneapolis, Minnesota time, on the date due, in
immediately available funds, and funds received after that hour shall
be deemed to have been received by the Lender on the next Business Day;
provided, however, that in the event any such payment is required to be
returned to the Paying Agent, the Servicer or the Borrower for any
reason whatsoever, then the Borrower's obligation to such Lender with
respect to such payment shall be deemed to be automatically reinstated.
(b) Setoff. The Lender, shall have all rights of setoff and
bankers' lien provided by applicable law.
(c) Due Date Extension. If any payment of principal of or
interest on the Loan or any fees payable hereunder falls due on a day
which is not a Business Day,
13
then such due date shall be extended to the next following Business
Day, and (in the case of principal) additional interest shall accrue
and be payable for the period of such extension.
Section 2.7 Taxes. All payments to the Lender under or in
connection with this Agreement or the Note shall be made without any setoff or
other counterclaim, and shall be free and clear of and without deduction for or
on account of any present or future taxes now or hereafter imposed by any
governmental or other authority, except to the extent that any such deduction or
withholding is compelled by law. As used herein, the term "Taxes" shall include
all income, excise, and other taxes of whatever nature (other than taxes
generally assessed on the overall net income of the Lender by the government or
other authority of the country, state, or political subdivision in which the
Lender is incorporated or in which the office through which the Lender is acting
is located) as well as all levies, imposts, duties, charges, or fees of whatever
nature. If the Borrower or the Servicer is compelled by law to make any
deductions or withholdings on account of any Taxes (including any foreign
withholding) the Borrower will:
(a) pay to the relevant authorities the full amount required
to be so withheld or deducted;
(b) pay such additional amounts (including, without
limitation, any penalties, interest, or expenses) as may be necessary
in order that the net amount received by the Lender after such
deductions or withholdings (including any required deduction or
withholding on such additional amounts) shall equal the amount the
Lender would have received had no such deductions or withholdings been
made; and
(c) promptly forward to the Lender an official receipt or
other documentation satisfactory to the Lender evidencing such payment
to such authorities.
The amount that the Borrower shall be required to pay to the Lender pursuant to
the foregoing clause (b) shall be reduced, to the extent permitted by applicable
law, by the amount of any offsetting tax benefit which the Lender receives as
the result of the Borrower's or the Servicer's payment to the relevant
authorities as reasonably determined by the Lender; provided, however, that if
the Lender shall subsequently determine that it has lost the benefit of all or a
portion of such tax benefit, the Borrower shall promptly remit to the Lender the
amount certified by the Lender to be the amount necessary to restore the Lender
to the position it would have been in if no payment had been made pursuant to
this sentence. If any Taxes otherwise payable by the Borrower or the Servicer
pursuant to the foregoing are directly asserted against the Lender, the Lender
may pay such taxes and the Borrower promptly shall reimburse the Lender to the
full extent otherwise required under this Section 2.7. The obligations of the
Borrower under this Section 2.7 shall survive any termination of this Agreement.
If circumstances arise in respect of the Lender which would or would upon the
giving of notice result in any liability of the Borrower under this Section 2.7.
then, without in any way limiting, reducing or otherwise qualifying the
Borrower's obligations under this Section 2.7 the Lender shall promptly, upon
becoming aware of the same, notify
14
the Borrower thereof and shall, in consultation with the Borrower and to the
extent that it can do so without, in its reasonable judgment, disadvantaging
itself, take such reasonable steps as may be available to it to mitigate the
effects of such circumstances.
Section 2.8. Conclusiveness of Statements; Survival of
Provisions. Determinations and statements of the Lender pursuant to Section 2.7
shall be presumed conclusive absent demonstrable error. The Lender may use
reasonable averaging and attribution methods in determining compensation
pursuant to such Section 2.7 and the provisions of Section 2.7 shall survive
termination of this Agreement.
ARTICLE III
ORDER OF DISTRIBUTION OF COLLECTIONS;
ESCROW ACCOUNT
Section 3.1. Distribution of the Security Interest Percentage
of Collections During the Regular Amortization Period. On each Settlement Date
during the Regular Amortization Period, the Servicer shall instruct the Paying
Agent to distribute the Security Interest Percentage of Collections received
during the preceding Monthly Period, in the following order:
(a) On any Business Day during the Regular Amortization Period
(unless a Trigger Event has occurred and is continuing), the Servicer
shall apply the Security Interest Percentage of Collections to purchase
new Receivables in the Accounts.
(b) On each Settlement Date during the Regular Amortization
Period (unless a Trigger Event has occurred and is continuing), the
Servicer shall instruct the Paying Agent to distribute the Security
Interest Percentage of Collections received during the preceding
Monthly Period and remaining in the Collection Account after
application pursuant to subsection (a) above, in the following order:
(i) First, to pay, pro rata to the Backup Servicer
and the Paying Agent, the Backup Servicing Fee for the
preceding Monthly Period plus any accrued but unpaid Backup
Servicing Fee from any prior Monthly Period and the fees and
expenses owing the Paying Agent on such date;
(ii) Second, to pay to the Lender any cost or expense
reimbursement or indemnity obligation payments arising under
this Agreement;
(iii) Third, to pay to the Servicer the Security
Interest Percentage of the Servicing Fee for the preceding
Monthly Period plus any accrued but unpaid amounts under this
clause (iii) from any prior Monthly Period;
(iv) Fourth, to pay to the Lender any unpaid and due
accrued interest on the Loan;
15
(v) Fifth, to pay the Borrower's reasonable
administrative and operating expenses customary for limited
purpose entities similar to the Borrower.
(vi) Sixth, any remaining amount shall be applied as
a prepayment of the Loan pursuant to Section 2.5.
Section 3.2. Distribution of the Security Interest Percentage
of Collections During the Accelerated Amortization Period. On each Settlement
Date during the Accelerated Amortization Period or during the Regular
Amortization Period after the occurrence and during the continuance of a Trigger
Event, the Servicer shall instruct the Paying Agent to distribute the Security
Interest Percentage of Collections received during the preceding Monthly Period
in the following order:
(a) First, to pay, pro rata to the Backup Servicer and the
Paying Agent, the Backup Servicing Fee for the preceding Monthly Period
and any accrued but unpaid Backup Servicing Fee from any prior Monthly
Period and the fees and expenses owing to the Paying Agent on such
date.
(b) Second, to pay to the Lender any cost or expense
reimbursement or indemnity obligation payments arising under this
Agreement.
(c) Third, to pay to the Servicer the Security Interest
Percentage of the Servicing Fee for the preceding Monthly Period and
any accrued but unpaid amounts under this clause (iii) from any prior
Monthly Period.
(d) Fourth, to pay any unpaid and due accrued interest on the
Loan to the Lender.
(e) Fifth; to pay the Borrower's reasonable administrative and
operating expenses customary for limited purpose entities similar to
the Borrower.
(f) Sixth, to repay principal on the Loan until fully paid.
Section 3.3. Borrower's Interest Percentage of Collections. On
each Settlement Date, the Servicer will instruct the Paying Agent to distribute
to the Borrower an amount equal to the sum of (a) product of (i) the Borrower's
Interest Percentage and (ii) all Collections received during the preceding
Monthly Period minus (b) the Borrower's Interest Percentage of the accrued and
unpaid Servicing Fee, Backup Servicing Fee, and fees payable to the Payment
Agent. On each Settlement Date, the Servicer will instruct the Paying Agent to
distribute an amount equal to the Borrower's Interest Percentage of the accrued
Servicing Fee or, if TCSI is no longer the Servicer, the Backup Servicing Fee to
the Servicer or the Backup Servicer, as the case may be.
Section 3.4. Distribution of Reserve Account. If during the
Regular Amortization Period, the Borrowing Base Ratio is less than 143% as of
the last day of any
16
Monthly Period, the Servicer will instruct the Paying Agent to withdraw from the
Reserve Account and pay to the Lender an amount which, if applied as a
prepayment to the Loan as of such date, would increase the Borrowing Base Ratio
to 143%. Any such payment shall be applied as a prepayment of principal on the
Loan. On the first Settlement Date during the Accelerated Amortization Period,
the Servicer will instruct the Paying Agent to withdraw the entire amount, if
any, remaining on deposit in the Reserve Account and pay such amount to the
Lender. Such payment shall be applied as a payment of principal on the Loan.
ARTICLE IV
COLLATERAL FOR OBLIGATIONS
Section 4.1. Grant of Security Interest. (a) To secure the
prompt performance and payment when due of all of the Obligations, the Borrower
hereby assigns, pledges, conveys, and grants to the Lender a security interest
in all Collateral, whether now owned or hereafter acquired; provided, however,
that such security interest shall not exceed in the aggregate the Security
Interest Percentage.
(b) At any time, at its option, but only upon request by the
Borrower, the Lender may in its sole discretion permit the Borrower to remove
the Receivables in specified Accounts from the Collateral and substitute
therefor the Receivables in new credit card accounts listed in a supplement to
the Account Schedule ("Substituted Accounts"); provided, however, that (i) each
Substituted Account shall be an Eligible Account as of the date of such
substitution and (ii) the aggregate outstanding balance of all Substituted
Accounts being included in Collateral on any Business Day shall be not less than
the aggregate outstanding balance of all Accounts being replaced thereby.
Section 4.2. Covenants Regarding Eligible Receivables. The
Borrower, and the Servicer (where applicable to each) shall comply with each of
the following with respect to each Eligible Receivable:
(a) Compliance with the Credit and Collection Policy. The
Borrower and the Servicer will comply with the Credit and Collection
Policy with regard to the Receivables, except insofar as any failure to
comply could not be reasonably expected to impair the collectibility of
the Receivables, as a whole, or a substantial portion thereof, or
otherwise have a Material Adverse Effect.
(b) No Disposition or Pledge of Collateral or Proceeds. The
Borrower will not sell, transfer, lease, or grant a security interest
in any Collateral without first obtaining the prior written consent of
the Lender.
Section 4.3. Servicing.
(a) Designation of the Servicer. The servicing, administering,
and collection of the Receivables shall be conducted by the Person
designated as the
17
Servicer hereunder (the "Servicer") from time to time in accordance
with this Section 4.3. TCSI is hereby designated as, and hereby agrees
to perform the duties, obligations and covenants of, the Servicer
pursuant to the terms of this Agreement and the other Transaction
Documents. Notwithstanding the foregoing, upon the occurrence of any of
the following (a "Servicer Termination Event"):
(i) the Servicer's failure to deliver to the Lender
the Settlement Statement for any Monthly Period on the related
Settlement Date and such failure continues unremedied for a
period of three Business Days;
(ii) the Servicer's failure to make, transfer or
deposit, or deliver to the Lender any proceeds or payment
required under this Agreement or any other Transaction
Document and such failure remains unremedied for more than
five (5) Business Days;
(iii) the Servicer's failure to perform any provision
of this Agreement, which failure (A) would have a Material
Adverse Effect and (B) continues unremedied for a period of
ten Business Days after the earlier to occur of (x) discovery
by a senior officer of the Servicer or (y) the date on which
written notice of such failure, requiring the same to be
remedied, shall have been received by a senior officer of the
Servicer; or the Servicer delegates its duties under this
Agreement, except as permitted hereby;
(iv) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of the Servicer, or
of a substantial part of the property or assets of the
Servicer, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other federal or
state bankruptcy, insolvency, receivership or similar law, (B)
the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Servicer
or for a substantial part of the property or assets of the
Servicer or (C) the winding-up or liquidation of the Servicer;
and such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(v) the Servicer shall (A) voluntarily commence any
proceeding or file any petition seeking relief under Title 11
of the United States Code as now constituted or hereafter
amended, or any other federal or state bankruptcy, insolvency,
receivership or similar law, (B) consent to the institution
of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in clause
(iv) above, (C) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator or similar official
for the Servicer or for a substantial part of the property or
assets of the Servicer, (D) file an answer admitting the
material allegations of a petition filed against it in any
such proceeding, (E) make a general assignment for the benefit
of
18
creditors, (F) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (G)
take any action for the purpose of effecting any of the
foregoing; or
(vi) any representation or warranty made by the
Servicer in this Agreement or any certificate or Settlement
Statement delivered by the Servicer pursuant to this Agreement
shall prove to have been false or misleading when made in any
respect that has a Material Adverse Effect and, if susceptible
of being remedied, continues unremedied for a period of 30
days after the earlier to occur of (A) discovery by a senior
officer of the Servicer and (B) the date on which written
notice thereof, requiring the same to be remedied, shall have
been received by a senior officer of the Servicer.
the Lender may notify the Servicer in writing that all future servicing
of the Receivables shall be undertaken by a new Servicer designated by
the Lender (which new Servicer may, but need not, be the Lender (or its
designee)). Upon receipt of such written notice the Servicer shall:
terminate its activities as Servicer hereunder and reasonably
facilitate the transition of the performance of such activities to the
new Servicer, and the new Servicer shall assume each and all of the
Servicer's said obligations to service and administer the Receivables,
on the terms and subject to the conditions herein set forth and the
Servicer shall use its best efforts to assist the new Servicer in
assuming such obligations. If the Servicer disputes the occurrence of a
Servicer Termination Event, the Servicer may take appropriate action to
resolve such dispute; provided that the Servicer must terminate its
activities hereunder as Servicer and must allow the new Servicer to
perform such activities on the date specified by the Lender,
notwithstanding the commencement or continuation of any proceeding to
resolve the aforementioned dispute; and provided, further, that once
notified by the Lender that all future servicing of the Receivables
shall be undertaken by the new Servicer, the Servicer shall not be
entitled to resume its servicing obligations with respect to such
Receivables without the written consent of the Lender, notwithstanding
that the Servicer shall have remedied and cured the Servicer
Termination Event giving rise to such assumption of servicing by the
new Servicer.
If TCSI (or any subsequent Person acting as the Servicer) is terminated
as the Servicer and servicing is performed by a new Servicer, such new
Servicer shall have all the rights and assume all the duties and
obligations of the Servicer under this Agreement, including without
limitation this Section 4.3.
(b) Rights upon the Occurrence of a Servicer Termination
Event. Upon the occurrence and during the continuance of a Servicer
Termination Event and following the appointment of a new Servicer:
(i) the power and authority of TCSI, as initial
Servicer (or any subsequent Person acting as the Servicer), to
collect the Receivables in the ordinary course of business
shall be deemed to be immediately revoked and
19
terminated, and with or without such general notification, the
new Servicer may take or bring all steps, actions, suits, or
proceedings reasonably deemed by the new Servicer as necessary
or desirable to effect enforcement or collection of any
Receivables, may make allowance or adjustments related to any
Receivables, may remove from TCSI's (or from any subsequent
Servicer's) premises all documents, instruments, records,
files and other items relating to any Collateral, and may
administer, collect and dispose of all Collateral; provided,
however, that the new Servicer shall not be liable for any
failure to collect or for any failure to exercise diligence in
the collection or possession of all or any part of the
Collateral or sums due or paid thereon (except for the willful
misconduct or gross negligence of the new Servicer), nor shall
it be under any obligation whatsoever to anyone by virtue of
this Agreement, except to account for the funds that it shall
actually receive hereunder; and
(ii) the new Servicer shall have the authority to
issue a receipt to any person obligated to pay any amount on
account of any Receivable, which shall be a full and complete
release, discharge, and acquittance to such person to the
extent of any amount so paid to the new Servicer; and the new
Servicer may, and is hereby authorized and empowered on behalf
of the Borrower, TCSI (as initial Servicer) or any subsequent
Person acting as the Servicer (as applicable), and is hereby
granted an irrevocable power of attorney, which grant is
coupled with an interest, to endorse the name of the Borrower,
TCSI (as initial Servicer) or any subsequent Person acting as
the Servicer (as applicable) upon any check, draft,
instrument, receipt, instruction, or other document or item,
including all items evidencing payment upon any Receivable or
other indebtedness constituting Collateral; and the new
Servicer may, and is hereby granted an irrevocable power of
attorney, which is coupled with an interest, to endorse or
otherwise execute all instruments, instructions or other
documents, agreements, or items on behalf of the Borrower,
TCSI (as initial Servicer) or any subsequent Person acting as
the Servicer, as shall be reasonably deemed by the new
Servicer to be necessary or advisable, in the sole discretion
of the new Servicer, to collect upon any Collateral or protect
its security interest in any Collateral.
(c) Duties of the Servicer. The Servicer shall manage,
service, administer, and collect the Receivables in accordance with the
Credit and Collection Policy. The Servicer shall collect all payments
due under the Receivables, account for such payments through
appropriate reductions in subsequent Borrowing Base Certificates,
comply with the lockbox and collection account procedures established
pursuant to Section 4.4, and set up a program for collecting data and
records, storing such records, and making reports to the Lender and the
Borrower with respect to the Receivables and collections on the
Receivables as contemplated in Section 4.4 and Section 7.1.
20
The Servicer shall provide the Paying Agent with instructions for the
distribution of Collections pursuant to Article III.
(d) Servicing Fee. The Servicer shall be paid the Servicing
Fee in the manner and in the order described in Article III.
Section 4.4. Lockbox, Collection Account and Reserve Account.
(a) Lockbox. On or prior to the Closing Date, the Borrower or
TCSI will direct all Obligors to make all payments under Receivables
directly to the Lockbox Account. All of the invoices, account
statements, and other written or oral communications directing,
instructing, demanding, or requesting payment of Obligors shall
conspicuously direct that all payments be made to the Lockbox Account
and shall include the Lockbox Account address.
(b) Collection Account. The Borrower hereby agrees to
establish the Collection Account on or before the Closing Date. No
funds other than Collections shall be deposited or transferred into the
Collection Account. Until deposited in the Collection Account, all
proceeds or collections of Collateral shall be held in trust by the
Borrower or the Servicer for the Lender and the Borrower and shall not
be commingled with any funds or property of the Borrower or the
Servicer (except during such time as they are in the Lockbox Account).
Amounts deposited in the Collection Account shall be invested in
Eligible Investments at the direction of the Servicer, and all income
received on such investments shall be treated in the same way as
Collections. The Servicer shall not be responsible for any investment
losses in the Collection Account so long as the Servicer had directed
that the funds therein be invested in Eligible Investments. Amounts on
deposit in the Collection Account shall be subject to withdrawal and
disbursement by the Paying Agent pursuant to the terms of the Paying
Agent Agreement. All Collections (and interest thereon) shall
constitute proceeds of Collateral in which the Lender has a security
interest equal to the Security Interest Percentage and shall not
constitute payment of any Obligation until applied in accordance with
Article III. Finally collected funds from the Collection Account shall
be disbursed by the Paying Agent in accordance with Article III and
applied by the Lender subject to the provisions of Section 2.6.
(c) Reserve Account. The Borrower hereby agrees to establish
the Reserve Account on or before the Closing Date hereof. No funds
other than the initial deposit from the Loan proceeds pursuant to
Section 2.1 shall be deposited or transferred into the Reserve Account.
Amounts deposited in the Reserve Account shall be invested in Eligible
Investments at the direction of the Servicer with the consent of the
Lender, and all income received on such investments shall be treated in
the same way as Collections. The Servicer shall not be responsible for
any investment losses in the Reserve Account so long as the Servicer
had directed that the funds therein be invested in Eligible
Investments. Amounts on deposit in the Reserve Account shall be subject
to withdrawal and disbursement by the Paying Agent in accordance with
21
Article III and applied by the Lender in accordance with Section 2.6.
All funds on deposit in the Reserve Account shall constitute Collateral
in which the Lender has a security interest and shall not constitute
payment of any Obligation until applied in accordance with Article III.
Section 4.5. Financing Statement. A carbon, photographic, or
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interest granted
pursuant to Section 4.1. For this purpose, the following information is set
forth:
Name and Address of Debtor:
TCS Funding V, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
Federal Tax Identification No. 00-0000000
Name and Address of Secured Party:
Xxxxxx & Xxxxxxxxx Investments Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Section 4.6. Further Documents. The Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements, and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect, or enforce the security interest granted pursuant to
Section 4.1 or the rights of the Lender under this Agreement (but any failure to
request or assure that the Borrower executes, delivers, or endorses any such
item shall not affect or impair the validity, sufficiency, or enforceability of
this Agreement and the security interest granted pursuant to Section 4.1,
regardless of whether any such item was or was not executed, delivered, or
endorsed in a similar context or on a prior occasion).
Section 4.7. Limited Recourse. The Loan shall be without
recourse to the Borrower except to the extent of the security interest granted
pursuant to Section 4.1. The Lender acknowledges that it is relying solely on
the Security Interest Percentage of the Collateral for repayment of the Loan and
not on the creditworthiness of TCSI, except for TCSI's obligations as Servicer
under this Agreement and its obligation to repurchase
22
Receivables in the event of certain breaches of representations and warranties
under the Receivables Purchase Agreement.
ARTICLE V
CONDITIONS OF LENDING
Section 5.1. Conditions Precedent to the Loan. The obligations
of the Lender to make the Loan to the Borrower is subject to the condition
precedent that the Lender shall have received the following, each (unless
otherwise expressly stated) in form and substance satisfactory to the Lender:
(a) This Agreement and the Note, properly executed on behalf
of the Borrower;
(b) The Receivables Purchase Agreement, properly executed on
behalf of the Borrower and TCSI;
(c) The Lockbox Agreement, the Lockbox Paying Agent Agreement,
the Backup Servicing Agreement and the Paying Agent Agreement, properly
executed on behalf of the applicable parties;
(d) The Borrower will have adjusted equity (as defined in FASB
91) of at least $1,142,800;
(e) UCC-1 financing statements to be filed with the
Secretaries of State of South Dakota and Delaware naming (i) TCSI as
debtor/seller, the Borrower as secured party/purchaser and the Lender
as assignee and (ii) the Borrower as debtor and the Lender as secured
party;
(f) Current UCC searches of the Secretaries of State of South
Dakota and Delaware showing that no financing statements or other
notifications or filings have been filed and remain in effect against
the Borrower or TCSI with respect to any Collateral, other than those
for which the Lender has received an appropriate release, termination
or satisfaction or those permitted in accordance with Section 8.1;
(g) Certificates of the Secretary or Assistant Secretary of
each of the Borrower and TCSI containing:
(i) copy of the resolutions of the board of directors
evidencing approval of all Transaction Documents and the other
matters contemplated hereby;
(ii) the names of the officers authorized to sign the
Transaction Documents and the other documents or certificates
to be delivered pursuant to this Agreement, together with the
true signatures of such officers. The Lender may conclusively
rely upon such certificates until it receives a further
23
certificate of the Secretary or an Assistant Secretary of the
Borrower or TCSI (as the case may be) canceling or amending
the prior certificate and submitting the signatures of the
officers named in such further certificate; and
(iii) copies of the certificate of incorporation and
bylaws certified as being true and correct copies thereof.
(h) A certificate of good standing with respect to each of the
Borrower and TCSI dated not more than thirty (30) days prior to the
Closing Date, and evidence satisfactory to the Lender that each of the
Borrower and TCSI is qualified to conduct its business in each state
where it presently conducts such business if failure to obtain any such
qualification or licensing is reasonably likely to have a Material
Adverse Effect;
(i) A certificate as to the aggregate amount of Eligible
Receivables as of the close of business on April 30, 2001;
(j) The opinion of Xxxxxxx X. Angel as to certain corporate
matters with respect to TCSI, in form and substance satisfactory to the
Lender and addressed to the Lender;
(k) One or more opinions of Faegre & Xxxxxx LLP with respect
to "true sale," substantive consolidation, creation of a security
interest under this Agreement and the Receivables Purchase Agreement,
and corporate matters with respect to the Borrower and TCSI, each in
form and substance satisfactory to the Lender and addressed to the
Lender;
(l) The opinion of Davenport, Evans, Xxxxxxx & Xxxxx, L.L.P.
regarding perfection and priority of the Borrower's and the Lender's
respective security interests in the Receivables in form and substance
satisfactory to the Lender and addressed to the Lender;
(m) Payment of all fees and expenses then due and payable
pursuant to a fee letter between the Lender and the Borrower and the
other fees and expenses payable pursuant to Section 12.5; and
(n) A solvency certificate from an officer of the Borrower in
the form of Exhibit B.
24
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower and TCSI (where applicable) severally represent
and warrant to the Lender as follows:
Section 6.1. Corporate and Company Existence and Power; Name;
Chief Executive Office. The Borrower is a corporation duly formed, validly
existing, and in good standing under the laws of the State of Delaware, and is
duly licensed or qualified to transact business in all jurisdictions in which
the nature of its business requires it to be so licensed or qualified, except
where the failure to be so licensed or qualified is not reasonably likely to
have a Material Adverse Effect. TCSI is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of Delaware, and is
duly licensed or qualified to transact business in all jurisdictions in which
the nature of its business requires it to be so licensed or qualified, except
where the failure to be so licensed or qualified is not reasonably likely to
have a Material Adverse Effect. The Borrower and TCSI have all requisite power
and authority, corporate or otherwise, to conduct their respective businesses,
to own their properties, and to execute, deliver, and perform all of their
respective obligations under the Transaction Documents. Since its incorporation,
the Borrower has done business solely under its legal name and, has not changed
its name, identity or corporate structure, merged with or into or consolidated
with any other corporation, or been the subject of any proceeding under the
United States Bankruptcy Code. Since its incorporation, the chief executive
office and principal place of business of the Borrower has been located at the
address set forth on the signature page hereto. All of the Borrower's records
and all of TCSI's records relating to their respective businesses are kept at
the locations set forth on the signature page hereto.
Section 6.2. Authorization for Borrowings; No Conflict as to
Law or Agreements. The execution, delivery, and performance by the Borrower and
TCSI of the Transaction Documents, and the borrowing hereunder, have been duly
authorized by all necessary action, company, corporate or otherwise, and do not
and will not (i) require any consent or approval which has not been obtained
prior to the date hereof, (ii) require any authorization, consent or approval
by, or registration, declaration or filing (other than filing of financing
statements and recording of mortgages as contemplated hereunder) with, or notice
to, any governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing, or notice
which as has been obtained, accomplished, or given prior to the date hereof,
(iii) violate any provision of any law, rule, or regulation or of any order,
writ, injunction or decree presently in effect having applicability to the
Borrower or TCSI, or of any of the organizational documents of the Borrower or
TCSI, (iv) result in a breach of or constitute a default under any material
indenture or loan or credit agreement or any other material agreement, lease, or
instrument to which the Borrower or TCSI is a party or by which it or its
properties may be bound or affected, or (v) result in, or
25
require, the creation or imposition of, any mortgage, deed of trust, pledge,
lien, security interest, or other charge or encumbrance of any nature upon or
with respect to any of the properties now owned or hereafter acquired by the
Borrower or TCSI (other than as required hereunder in favor of the Lender).
Section 6.3. Legal Agreements. Each of the Transaction
Documents constitutes the legal, valid, and binding obligations and agreements
of the Borrower (and TCSI, where applicable), enforceable against the Borrower
(and TCSI, where applicable), in accordance with its terms, except to the extent
that enforcement thereof may be limited by any applicable bankruptcy,
insolvency, or similar laws now or hereafter in effect affecting creditors'
rights generally and by general principles of equity.
Section 6.4. Subsidiaries. The Borrower has no equity interest
of any kind whatsoever in any Person.
Section 6.5. Financial Condition; No Adverse Change.
(a) Borrower. Since the date of the Borrower's formation,
there has not occurred any event or circumstance that could have a
Material Adverse Effect. The Borrower is Solvent and shall remain
Solvent after receiving the Loan and after any transfers of Receivables
pursuant to the Receivables Purchase Agreement.
(b) TCSI. TCSI has heretofore furnished to the Lender audited
consolidated financial statements for its fiscal year ended May 31,
2000 and unaudited financial statements for its fiscal quarter ended
February 28, 2001, TCSI believes such financial statements fairly
present the financial condition of TCSI on the dates thereof and the
results of operations and cash flows for the periods then ended
(subject to audit adjustments) and were prepared in accordance with
GAAP. Since the date of the most recent financial statements, there has
not occurred any event or circumstance that could have a Material
Adverse Effect. On the Closing Date, TCSI shall be Solvent and will
remain Solvent after any transfers of Receivables pursuant to the
Receivables Purchase Agreement.
Section 6.6. Litigation.
(a) Borrower. There are no actions, suits, or proceedings
pending, or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or the properties of the Borrower before any
court or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign.
(b) TCSI. There are no actions, suits, or proceedings pending,
or, to the knowledge of TCSI, threatened against or affecting TCSI or
the properties of TCSI before any court or governmental department,
commission, board, bureau, agency, or instrumentality, domestic or
foreign, which, if determined adversely to TCSI, could reasonably be
expected to have a Material Adverse Effect.
26
Section 6.7. Taxes. The Borrower and TCSI have paid or caused
to be paid to the proper authorities when due all federal, state, and local
taxes required to be paid or withheld by it. The Borrower and TCSI,
respectively, have filed all federal, state, and local tax returns which to the
knowledge of the officers of the Borrower or TCSI, respectively, are required to
be filed after any permitted extensions, and the Borrower and TCSI,
respectively, have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
it to the extent such taxes have become due, except for any such tax,
assessment, charge, or claim whose amount, applicability, or validity is being
contested by the Borrower or TCSI (as the case may be) in good faith and by
proper proceedings and for which the Borrower or TCSI (as the case may be) shall
have set aside adequate reserves in accordance with GAAP.
Section 6.8. Titles and Liens. The Borrower has good and
absolute title to all properties and assets reflected in the latest balance
sheet delivered pursuant to Section 7.1 (other than any properties or assets
disposed of in accordance with Section 8.1 or repurchased by TCSI in accordance
with the terms of the Receivables Purchase Agreement after the date of such
balance sheet), free and clear of all mortgages, security interests, liens, and
encumbrances, except for the security interest granted pursuant to Section 4.1.
The Receivables have been sold to the Borrower under the Receivables Purchase
Agreement, which sale does not violate any applicable law, rule or regulation,
and are owned by the Borrower free and clear of any Adverse Claim except as
required by and in accordance with this Agreement and the Transaction Documents.
No Account or Receivable is or will be the subject of a purchase money security
interest granted in favor of any third party. At the time of the filing of the
UCC financing statement pursuant to Section 2.1 of the Receivables Purchase
Agreement, the Borrower has no knowledge of any rights, liens or interests
affecting the Receivables or the proceeds thereof other than as contemplated in
the Receivables Purchase Agreement and this Agreement.
Section 6.9. Plans. The Borrower does not maintain and has not
in the past maintained any Plan. The Borrower has not received any notice, nor
has it received any knowledge to the effect, that it is not in full compliance
with any of the requirements of ERISA. The Borrower does not have any liability
or know of any fact or circumstances which could result in any liability to the
PBGC, the Internal Revenue Service, the Department of Labor, or any participant
in connection with any Plan (other than accrued benefits which are or which may
become payable to participants or beneficiaries of any such Plan).
Section 6.10. Default. The Borrower is in compliance with all
provisions of all agreements (including, without limiting, the Transaction
Documents), instruments, decrees, and orders to which it is a party or by which
it or its property is bound or affected, the breach or default of which could
have a Material Adverse Effect.
Section 6.11. Submissions to Lender. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's
27
request for the Loan contemplated hereby is true and correct in all material
respects and, as to projections, valuations, or pro forma financial statements,
present a good faith opinion as of the date made as to such projections,
valuations, and pro forma condition and results.
Section 6.12. Nature of Receivables.
(a) Each Receivable included in the calculation of Eligible
Receivables for purposes of the certificate delivered pursuant to
Section 5.1 hereof shall be in fact an Eligible Receivable.
(b) Each Receivable is, or will be at the date of its
creation, an "account," "chattel paper," or a "general intangible" as
each such term is defined in Article 9 of the UCC arising out of the
Issuing Bank's performance, in accordance with the terms thereof, of
the related Account Agreement.
(c) The Account Schedule and any supplements thereto will
contain an accurate list of the Accounts, the Receivables of which are
the subject of this Agreement.
Section 6.13. Compliance with Applicable Laws. Each of the
Borrower and TCSI is in compliance with the requirements of all applicable laws,
rules, regulations, and orders of all governmental authorities (Federal, state,
local, or foreign, and including, without limitation, environmental laws), a
breach of which could reasonably be expected to have a Material Adverse Effect.
Section 6.14. Compliance with Credit and Collection Policy.
The Borrower and TCSI are in compliance with the Credit and Collection Policy in
all material respects with regard to the Receivables.
Section 6.15. Not an Investment Company. The Borrower is not
an "investment company" within the meaning of the Investment Company Act of 1940
(as such act may be amended, supplemented, restated, or otherwise modified or
replaced), or is exempt from all provisions of such act.
Section 6.16. Federal Reserve Regulations. No part of the
proceeds of the Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, (i) to purchase or carry margin stock
(as such term is defined in Regulation U of the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violations
of, or which is inconsistent with, the provisions of Regulations U or X as
promulgated by the Board of Governors of the Federal Reserve System.
Section 6.17. Solvency. The Receivables Purchase Agreement and
this Agreement were not executed by TCSI and the Borrower, the respective
interests of the
28
Borrower and the Lender were not granted, taken, attached, or perfected, and any
transfers contemplated by the Receivables Purchase Agreement and this Agreement
were not effected or consummated after the commission by TCSI or the Borrower of
an act of insolvency or in contemplation thereof or with a view to prevent the
application of such party's assets in the manner prescribed by applicable law or
with a view to the preference of one creditor over another or with the intent to
hinder, delay or defraud such party's creditors.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Obligation shall remain unpaid or outstanding,
the Borrower and the Servicer, where applicable, will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 7.1. Reporting Requirements. The Borrower or the
Servicer (as the case may be) will deliver, or cause to be delivered, to the
Lender each of the following, which shall be in form and detail reasonably
acceptable to the Lender:
(a) within one hundred twenty (120) days after the end of each
calendar year of the Borrower or the Servicer (if TCSI or any
Affiliate), as applicable, annual financial statements of the Borrower
and the Servicer audited by independent certified public accountants
selected by the Borrower or the Servicer (as applicable) and reasonably
acceptable to the Lender and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect),
including balance sheets as at the end of such fiscal year and the
related statements of income and, only with respect to the Servicer,
cash flows for the fiscal year then ended, all in reasonable detail and
prepared in accordance with GAAP, together with a certificate of the
chief financial officer of the Borrower or the Servicer (as
applicable), in substantially the form of Exhibit D, stating (i) that
such financial statements have been prepared in accordance with GAAP
and (ii) whether such officer has knowledge of the occurrence of any
Default, Event of Default, or Servicer Termination Event and, if so,
stating in reasonable detail the facts with respect thereto;
(b) within forty-five (45) days after the end of each fiscal
quarter of the Borrower or the Servicer (if TCSI or any Affiliate), as
applicable, unaudited quarterly financial statements of the Borrower
and the Servicer, including balance sheets and the related statements
of income and, only with respect to the Servicer, cash flow as at the
end of and for such quarter and for the year-to-date period then ended,
in reasonable detail and the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP (but
without footnotes and subject to year-end audit adjustments); and
accompanied by a certificate of the chief financial officer of the
Borrower or the Servicer (as applicable), substantially in the form of
Exhibit E, stating (i) that such financial statements have been
prepared in accordance with GAAP, without footnotes and subject to
year-end audit adjustments
29
and (ii) whether or not such officer has knowledge of the occurrence of
any Default, Event of Default, or Servicer Termination Event not
theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto;
(c) within thirty (30) days after the end of each fiscal
quarter, a report with respect to the Borrowing Base Ratio and the
delinquency rates of the Receivables prepared by independent certified
public accountants selected by the Borrower and reasonably acceptable
to the Lender, to the effect that such accountants have compared the
Borrowing Base Ratio and the delinquency rates reported in the
Settlement Statements delivered to the Lender during such quarter with
the computer reports (which may include personal computer generated
reports that summarize data from the computer reports generated by the
Borrower or the Servicer that are used to prepare the Settlement
Statements) which were the source of such amounts and percentages and
that on the basis of such comparison, such amounts and percentages are
in agreement except as shall be set forth in such report;
(d) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 6.6 or which (i) seek any monetary recovery
against the Borrower or (ii) if determined adversely to the Borrower,
could reasonably be expected to have a Material Adverse Effect;
(e) as promptly as practicable (but in any event not later
than five (5) business days) after an officer of the Borrower or the
Servicer obtains knowledge of the occurrence of a Default or Event of
Default, notice of such occurrence, together with a detailed statement
by a responsible officer of the Borrower or the Servicer (as the case
may be) setting forth the steps being taken by the Borrower or the
Servicer (as the case may be) to cure the effect of such Default or
Event of Default;
(f) promptly upon obtaining knowledge thereof, notice of the
violation by the Borrower or the Servicer of any law, rule, or
regulation, the non-compliance with which could reasonably be expected
to have a Material Adverse Effect; and
(g) on each Settlement Date, the Servicer shall provide to the
Lender a report (the "Settlement Statement"), in form and substance
satisfactory to the Lender, that summarizes, in a manner reasonably
satisfactory to the Lender, the following: (i) the outstanding balance
of the Receivables as of the end of the preceding Monthly Period; (ii)
the amount of Collections received with respect to the Receivables
during the preceding Monthly Period; (iii) the total amounts
distributed from the Collections received during the preceding Monthly
Period with respect to payments of principal or interest on the Loan,
payment of the monthly servicing fee, distributions to the Borrower to
purchase new Receivables, and other distributions to the Borrower; (iv)
the aggregate amount of Receivables charged off as uncollectible during
the preceding Monthly Period; and (v) the aggregate outstanding balance
of Receivables that are
30
current, and 30-59, 60-89 and 90+ days and more contractually
delinquent as of the end of the preceding Monthly Period.
(h) on each Settlement Date, the Servicer shall provide to the
Lender a properly completed and executed Borrowing Base Certificate
calculated as of the end of the immediately preceding Monthly Period.
(i) ERISA. The Borrower shall promptly give the Lender written
notice upon becoming aware that TCSI or any of its subsidiaries is not
in compliance in all material respects with ERISA or that any ERISA
lien exists on any of the Receivables.
Section 7.2. Books and Records; Inspection and Examination.
Each of the Borrower and the Servicer will maintain a system of accounting
established and administered in accordance with GAAP, consistently applied, and
will maintain and implement administrative and operating procedures and keep and
maintain all documents, books, records, and other information, reasonably
necessary or advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the identification of each new Receivable
and all Collections of and adjustments to each existing Receivable). The
Borrower and the Servicer will each give the Lender notice of any material
change in the administrative and operating procedures referred to in the
previous sentence. Upon request of and reasonable notice by the Lender, each of
the Borrower and the Servicer will permit any officer, employee, attorney or
accountant for the Lender to audit, review, make extracts from, or copy any and
all of its corporate and financial books and records at all reasonable times
during ordinary business hours, and to discuss its affairs with any of its
directors, officers, employees, or agents; provided that the Lender will use
reasonable efforts to minimize disruptions to the operations of the Borrower and
the Servicer. The Borrower and the Servicer (respectively) will permit the
Lender or its employees, accountants, attorneys, or agents, to examine and
inspect any Collateral and any and all information relating thereto at any time
during ordinary business hours; provided, that the Lender will provide the
Borrower or the Servicer (as the case may be) with reasonable notice of any
examination or inspection and will use reasonable efforts to conduct (or have
conducted) any such examination or inspection so as to minimize disruptions to
the operations of the Borrower or the Servicer (as the case may be).
Section 7.3. Compliance with Laws. Each of the Borrower and
the Servicer, respectively, will (a) comply with the requirements of applicable
laws and regulations, the noncompliance with which could reasonably be expected
to have a Material Adverse Effect and (b) use and keep its assets, and will
require that others use and keep its assets, only for lawful purposes, without
violation of any federal, state, or local law, statute, or ordinance, the
noncompliance with which could reasonably be expected to have a Material Adverse
Effect.
Section 7.4. Payment of Taxes and Other Claims. Each of the
Borrower and the Servicer, respectively, will pay or discharge, when due, (a)
all taxes, assessments, and governmental charges levied or imposed upon it or
upon its income or profits, upon any
31
properties belonging to it prior to the date on which penalties attach thereto,
(b) all federal, state, and local taxes required to be paid or withheld by it,
and (c) all lawful claims for labor, materials, and supplies which, if unpaid,
might by law become a lien or charge upon any of the Receivables; provided,
however, that neither the Borrower nor the Servicer shall be required to pay any
such tax, assessment, charge, or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings and for which such
Person has set aside adequate reserves in accordance with GAAP.
Section 7.5. Preservation of Existence. Each of the Borrower
and the Servicer will preserve and maintain its existence and all of its rights,
privileges, and franchises necessary or desirable in the normal conduct of its
business.
Section 7.6. Borrowing Base Ratio. The Borrowing Base Ratio,
as measured on the last business day of each calendar month during the Regular
Amortization Period, shall be equal to or greater than one hundred forty-three
percent (143%).
Section 7.7. Covenants Regarding the Receivables. Neither the
Servicer nor the Borrower will take any action to cause any Receivable to be
evidenced by any instrument (as defined in the UCC), except in connection with
the enforcement or collection of a Receivable. Except in such circumstances,
neither the Servicer nor the Borrower will take any action to cause any
Receivable to be anything other than an "account," a "general intangible," or
"chattel paper" (as defined in the UCC).
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Obligation shall remain unpaid or outstanding,
the Borrower and the Servicer (where applicable) will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 8.1. Sales, Liens, Etc. Except as otherwise provided
herein or in the Transaction Documents, neither the Borrower nor the Servicer
shall sell, assign (by operation of law or otherwise), or otherwise dispose of
or create or suffer to exist any Adverse Claim on any of the Collateral.
Section 8.2. Mergers, Acquisitions, Sales, Investments, Etc.
The Borrower shall not:
(a) (i) consolidate or merge with or into any other Person, or
(ii) sell, lease or transfer all or substantially all of its assets to
any other Person;
(b) sell, transfer, convey, or pledge all or any substantial
part of its assets other than pursuant to this Agreement; or
32
(c) make, incur, or suffer to exist any investment in, equity
contribution to, loan or advance to, or payment obligation in respect
of the deferred purchase price of property from, any other Person.
Section 8.3. No Extension or Amendment of Receivables. Except
as otherwise permitted by the Credit and Collection Policy, neither the Borrower
nor the Servicer shall, or permit an Issuing Bank to, extend, amend or otherwise
modify the terms of any Receivables if such extension, amendment or modification
is reasonably likely to have a Material Adverse Effect.
Section 8.4. Changes to Credit and Collection Policy. Each of
the Servicer and the Borrower shall comply with the Credit and Collection Policy
in regard to the Receivables, except insofar as any failure to so comply could
not be reasonably expected to impair the collectibility of the Receivables, on
the whole, or a substantial amount thereof, or otherwise have a Material Adverse
Effect and the Servicer shall service the Receivables in all respects in a
manner consistent with and similar to the revolving credit consumer credit card
accounts and receivables owned by the Servicer. Neither the Borrower nor the
Servicer shall make any change in the character of its business or in the Credit
and Collection Policy, which change would, in either case, be reasonably
expected to impair the collectibility of the Receivables, as a whole, or a
substantial amount thereof, to materially and adversely effect the Lender, or to
otherwise have a Material Adverse Effect.
Section 8.5. TCSI's Covenants. In consideration of the
Lender's making the Loan to the Borrower, TCSI agrees as follows
(a) TCSI will continue to fund new Receivables arising in the
Accounts during the Accelerated Amortization Period and during the
Regular Amortization Period if it does not receive the full purchase
price from the Borrower and it will not terminate, or fail to perform
its payment obligations under, its agreements with the Issuing Banks
with respect to the Accounts.
(b) Without the Lender's consent, TCSI will not amend, modify
or terminate the provisions added to the Loan and Security Agreement
dated as of April 30, 1998 between TCSI and Coast Business Credit, as
amended from time to time (the "Coast Loan Agreement") in the Tenth
Amendment to Loan and Security Agreement dated as of May 1, 2001
between Coast Business Credit and TCSI (the "Coast Amendment");
provided, however, that TCSI shall not be prohibited from amending,
modifying or terminating, without the Lender's consent, the Coast Loan
Agreement, so long as such amendment or modification does not affect
the provisions added thereto by the Coast Amendment.
(c) TCSI shall not make any change in its capital structure
that would (i) have a Material Adverse Effect or (ii) decrease its
Tangible Net Worth to less than $20,000,000.
33
(d) Except as expressly provided herein, TCSI shall not pay or
declare any dividends or distributions on the ownership interests in
TCSI (except for dividends or distributions payable solely in stock
form of ownership interests in TCSI) or make any payments on any TCSI
Subordinated Debt.
(i) TCSI may pay interest on the TCSI Subordinated
Debt if TCSI meets a quarterly debt service calculation of not
less than 1.30:1. For purposes of this calculation, "quarterly
debt service" means, consistent with GAAP, the following: (i)
EBITDA divided by (ii) the sum of (x) all payments of
principal and interest and (y) capital lease payments.
(ii) TCSI may make payments of principal on TCSI
Subordinated Debt from current earnings (i.e. the earnings for
the immediately preceding fiscal quarter); provided, however,
that no such principal payments shall be made unless (A) the
aggregate of all principal payments on TCSI Subordinated Debt
does not exceed the immediately preceding quarter's net
income, (B) TCSI's cumulative net income from the preceding
four consecutive quarters was at least $1, and (C) TCSI's
Tangible Net Worth will exceed $20,000,000 million after
giving effect to all payments of principal.
(iii) TCSI may pay dividends or distributions on the
ownership interests in TCSI from current earnings (i.e. the
earnings for the immediately preceding fiscal quarter);
provided, however, that no such dividends or distributions
shall be paid unless (A) the aggregate of all principal
payments on TCSI Subordinated Debt plus all dividends or
distributions does not exceed the immediately preceding
quarter's net income, (B) TCSI's cumulative net income from
the preceding four consecutive quarters was at least $1, and
(C) TCSI's Tangible Net Worth will exceed $20,000,000
after giving effect to all payments of principal and
dividends.
(iv) Payments of principal or interest on TCSI
Subordinated Debt and dividends or distributions on the
ownership interests in TCSI may not be paid until after TCSI
has submitted its financial statements required under Section
7.1 and an officer's certificate to the effect that there are
no Servicing Defaults or Defaults or Events of Default under
this Agreement.
TCSI may make payments of interest, principal and/or dividends in
accordance with the foregoing provisions one time per quarter after it
submits the financial statements required under Section 7.1 (a) or (b).
Notwithstanding the foregoing, TCSI may pay interest and principal on
the TCSI Subordinated Debt and dividends or distributions on its
ownership interests at any time with the proceeds of sales of
subordinated debt or equity; provided, however, that TCSI shall give
the Lender prior written notice of any such payment.
34
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 9.1. Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) default in the payment of any principal or interest on the
Note or any fees, costs, or expenses or deposit required to be paid or
made by the Borrower or the Servicer (so long as TCSI is the Servicer)
under this Agreement or any other Transaction Document and such default
continues for a period of five (5) Business Days; or
(b) the Obligations shall not have been paid in full on or
before the Maturity Date.
(c) the Borrower shall fail for any reason to have a valid
ownership interest or first priority security interest in the
Receivables or the Lender shall fail for any reason to have a valid,
first priority security interest in the Receivables; or
(d) default in the performance, or breach, of any covenant or
agreement of the Borrower or the Servicer in this Agreement (other than
the covenant in Section 7.6 or Section 7.7) or in any other Transaction
Document, which default has a Material Adverse Effect, and such default
continues unremedied for a period of ten (10) Business Days after the
Borrower or the Servicer (as the case may be) has or should reasonably
have had notice thereof; or
(e) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Borrower or TCSI, or
of a substantial part of the property or assets of the Borrower or
TCSI, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other federal or state bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Subsidiary or for a substantial part
of the property or assets of the Borrower or TCSI or (iii) the
winding-up or liquidation of the Borrower or TCSI; and such proceeding
or petition shall continue undismissed for 120 days or an order or
decree approving or ordering any of the foregoing shall be entered; or
(f) the Borrower or TCSI shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code as now constituted or hereafter amended, or any
other federal or state bankruptcy, insolvency, receivership or similar
law, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or the filing of any petition
described
35
in subsection (d) above, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator or similar official for
the Borrower or TCSI or for a substantial part of the property or
assets of the Borrower or TCSI, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take any action for the
purpose of effecting any of the foregoing; or
(g) any representation or warranty made by the Borrower or the
Servicer in any Transaction Document shall prove to have been false or
misleading in any material respect when made that has a Material
Adverse Effect and, if susceptible of being remedied, has not been
remedied within ten (10) Business Days after the Borrower or the
Servicer (as the case may be) has or should reasonably have had notice
thereof; or
(h) the Borrower shall become an "investment company" within
the meaning of the Investment Company Act;
(i) the Borrower amends its certificate of incorporation or
bylaws without the consent of the Lender; or
(j) a Servicer Termination Event shall have occurred and the
Lender shall have given notice of termination of TCSI as Servicer
pursuant to Section 4.3.
Section 9.2. Rights and Remedies.
(a) Upon the occurrence of an Event of Default, the Lender
may, by written notice to the Borrower, declare the Loan to be
forthwith due and payable in whole or in part, whereupon the principal
of the Loan so declared to be due and payable, together with accrued
interest thereon and any other unpaid obligations of the Borrower
accrued hereunder, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower.
(b) In addition to the rights and remedies set forth above,
upon the occurrence of an Event of Default, the Lender may:
(i) exercise and enforce the rights and remedies
available upon default to a secured party under the UCC
including, without limitation, the right to take possession of
the Security Interest Percentage of the Collateral, and each
and every evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or
notice thereof, which the Borrower hereby expressly waives)
and the right to sell, lease, or otherwise dispose of the
Security Interest Percentage of the Collateral; any notice of
intended disposition of any Collateral required by law shall
be deemed commercially
36
reasonable if such notice is mailed or delivered to the
Borrower in accordance with this Agreement at least ten (10)
days before the date of any such disposition; and
(ii) exercise any other rights and remedies available
to the Lender by law or agreement.
ARTICLE X
PARTICIPATIONS
Section 10.1. Participation. The Lender may grant
participations in all or a portion of the Note to any Person. The Lender shall
not be relieved of any of its respective obligations hereunder as a result of
any such granting of a participation. The Borrower and TCSI hereby acknowledge
and agree that any participant described in this Section 10.1 may rely upon, and
possess all rights under, any certificates, or other instruments or documents
delivered by the Borrower or TCSI under or in connection with any Transaction
Document.
ARTICLE XI
BANKRUPTCY REMOTE PROTECTIONS
The Borrower hereby represents and warrants as set forth in
this Article XI, and agrees that so long as any Obligation shall remain unpaid
or outstanding, the Borrower will comply with the following requirements, unless
the Lender shall otherwise consent in writing:
Section 11.1. Composition of the Borrower's Board. At least
one member of the Borrower's board of directors will be an individual who
satisfies the independent director eligibility requirements set forth in the
Borrower's certificate of incorporation. No such individual will be a direct,
indirect or beneficial stockholder, officer, director, employee, Affiliate,
associate, customer, or supplier of TCSI. No such director shall at any time
serve as a trustee in bankruptcy for TCSI.
Section 11.2. Compensation of Employees, Agents, and
Consultants; Limitation on Agency. Any employee, consultant, director, or agent
of the Borrower will be compensated from the Borrower's own funds for services
provided to the Borrower. The Borrower will engage no agents other than: (i) the
Servicer, the Backup Servicer and the Paying Agent as described in this
Agreement and (ii) TCSI to provide employees and organizational services. The
Servicer, the Backup Servicer, the Paying Agent and TCSI will be fully
compensated for their services to the Borrower by payment of negotiated fees.
Section 11.3. Servicing; Fees. The Borrower is contracting
with the Servicer in this Agreement and with the Backup Servicer in the Backup
Servicing Agreement to perform all operations required on a daily basis to
service the Receivables. The Borrower
37
will pay the Servicer and the Backup Servicer a monthly fee as specified in this
Agreement or the Backup Servicing Agreement, as applicable. If the Borrower
fails to make any such payment to the Backup Servicer, TCSI shall not be
obligated to make such payment. The Borrower does not expect to incur any
material indirect or overhead expenses for items shared between the Borrower and
TCSI which are not reflected in documented service or administration fees. To
the extent, if any, the Borrower and TCSI share items of expenses not reflected
in its respective service or management fees (including, without limiting,
legal, auditing, and other professional services), such expenses will be
allocated to the extent practical on the basis of actual use of the services
rendered, and otherwise on a basis reasonably related to actual use or value of
services rendered.
Section 11.4. Expenses. With the exception of start-up
expenses, the Borrower's operating expenses will not be paid by TCSI.
Section 11.5. Mailing Address. The Borrower will have its own
separate mailing address, as stated below in Section 12.4, and its own
stationery.
Section 11.6. Books and Records. The Borrower's books and
records will be maintained separately from those of TCSI.
Section 11.7. Financial Statements. Any financial statements
of TCSI which are consolidated to include the Borrower shall contain detailed
notes clearly stating that the Borrower is a separate legal entity with its own
separate creditors which will be entitled to be satisfied out of the Borrower's
assets prior to any value in the Borrower becoming available to the Borrower's
stockholders.
Section 11.8. Holding of Funds and Assets. The assets of the
Borrower will be maintained in a manner that facilitates their identification
and segregation from those of TCSI. Funds or other assets of the Borrower will
not be commingled with those of TCSI (except during such times as funds of the
Borrower are on deposit in the Lockbox Account). The Borrower shall not maintain
joint bank accounts or other depository accounts to which TCSI (other than in
its capacity as the Servicer in the exercise of its servicing responsibilities)
has independent access. No funds of the Borrower will at any time be pooled with
any funds of TCSI other than while such funds are in the Lockbox Account or the
Collection Account.
Section 11.9. Insurance. The Borrower shall not, directly or
indirectly, be named, or shall enter into any agreement to be named, as a direct
or contingent beneficiary or loss payee on any insurance policy covering the
property of TCSI.
Section 11.10. Separate Legal Entities. The Borrower
acknowledges that all the parties entering into this Agreement, the Transaction
Documents, and any other related documents do so in reliance on the Borrower's
identity as a legal entity separate from TCSI.
38
Section 11.11. Arm's Length Relationships. The Borrower will
maintain arm's length relationships with TCSI and its Affiliates. Neither the
Borrower nor TCSI or its Affiliates will be or will hold itself out to be
responsible for the debts of the other or the decisions or actions relating to
the daily business and affairs of the other.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Assistance. In order to facilitate the granting
of participations in all or a portion of the Note to any Person, each of the
Borrower and TCSI agrees to cooperate fully with the Lender in connection
therewith, and to provide all reasonable assistance requested by the Lender
relating thereto, including:
(a) the furnishing of such written materials and financial
information regarding the Borrower and TCSI as the Lender may
reasonably request;
(b) the execution of such documents as the Lender may
reasonably request with respect thereto; and
(c) the participation by officers of the Borrower and TCSI, in
one or more meetings or teleconference calls with potential
participants, upon the request of the Lender (given at any time or from
time to time).
Section 12.2. No Waiver; Cumulative Remedies. No failure or
delay on the part of the Lender in exercising any right, power, or remedy under
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power, or remedy preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy
hereunder. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
Section 12.3. Amendments, Requested Waivers Etc. No amendment,
modification, termination, or waiver of any provision of this Agreement or the
Note or consent to any departure by the Borrower or the Servicer therefrom shall
be effective unless the same shall be in writing and signed by the Lender. Any
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
Section 12.4. Addresses for Notices. Etc. Except as otherwise
expressly provided herein, all notices, requests, demands, and other
communications provided for under this Agreement shall be in writing (including
facsimile communication) and mailed, sent by overnight delivery, telecopied, or
delivered to the applicable parties at their respective addresses or numbers set
forth on the execution pages hereto, or, as to each party, at such other address
or number as shall be designated by such party in a written notice to the other
39
party complying as to delivery with the terms of this Section 12.4. All such
notices, requests, demands, and other communications, (a) when delivered by
courier or overnight delivery service, shall be effective upon actual delivery,
(b) when sent by facsimile, shall be effective when confirmed by telephone or
electronic means, and (c) when mailed by first class mail, postage prepaid,
shall be effective on the fourth Business Day from the date of mailing.
Section 12.5. Costs and Expenses. The Borrower will reimburse
the Lender for (a) any and all out-of-pocket costs and expenses, including
without limitation reasonable attorneys' fees and other charges, lien and UCC
searches, title and recording expenses, and other similar expenses, paid or
incurred by the Lender in connection with the preparation, filing, or recording
of the Transaction Documents and any other document or agreement related hereto
or thereto, and the transactions contemplated hereby and the negotiation of any
amendments, modifications, or extensions to or of any of the foregoing
documents, instruments, or agreements and the preparation of any and all
documents necessary or desirable to effect such amendments, modifications, or
extensions, (b) all fees of Xxxxx Fargo Bank Minnesota, National Association as
the Paying Agent and as the Backup Servicer, (c) all fees of Xxxxx Fargo Bank
South Dakota, N.A. as the lockbox bank under the Lockbox Agreement, and (d) any
and all other out-of-pocket costs and expenses (which shall be reasonably
documented) incurred by the Lender in connection with any of the transactions
contemplated hereby. The Borrower will also reimburse the Lender for any and all
costs and expenses incurred by the Lender in connection with the enforcement of
any of the rights or remedies of the Lender under any of the Transaction
Documents or under applicable law, whether or not suit is filed with respect
thereto.
Section 12.6. Indemnity. In addition to the payment of
expenses pursuant to Section 12.5, the Borrower agrees to indemnify, defend, and
hold harmless the Lender and the Backup Servicer, and all present and future
officers, directors, employees, and agents of the Lender and the Backup
Servicer, respectively (the "Indemnitees"), from and against any and all
actions, causes of action, liabilities, losses, damages, penalties, judgments,
suits, claims, costs, and expenses of any kind or nature whatsoever incurred in
connection therewith (whether or not such Indemnitee shall be designated a party
to the action for which indemnification hereunder is sought) including, without
limitation, the reasonable fees and disbursements of counsel (collectively, the
"Indemnified Liabilities"), which may be imposed on, incurred by, or asserted
against such Indemnity, in any manner relating to, arising out of, or in
connection with (i) the execution or delivery of this Agreement or any agreement
or instrument contemplated hereby, the performance by the parties hereto or
thereto of their respective obligations hereunder or thereunder or the
consummation of the Loan or (ii) the use of proceeds of the Loan; provided,
however, that such indemnity shall not, as to any Indemnitee, be available to
the extent that such actions, causes of action, liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses resulted from the
willful misconduct or negligence of such Indemnitee or for credit losses. If any
investigative, judicial, or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon request of such Indemnitee,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit, or
40
proceeding to the extent and in the manner directed by the Indemnitee, at the
Indemnitors' sole cost and expense. Each Indemnitee will use its best efforts to
cooperate in the defense of any such action, suit, or proceeding. If the
foregoing undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, the Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the indemnified liabilities contemplated hereby which is permissible
under applicable law. The obligations of the Borrower under this Section 12.6
shall survive termination of this Agreement and the discharge of the
Obligations.
Section 12.7. Execution in Counterparts; Facsimile Signature.
This Agreement may be executed in any number of counterparts and by the
different parties on separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument. This Agreement may
be executed by facsimile signature and each facsimile signature shall have the
same force and effect as an original signature.
Section 12.8. Governing Law; Jurisdiction; Waiver of Jury
Trial.
(a) Governing Law. The Agreement and the Note shall be
governed by, and construed in accordance with, the internal laws
(without regard to the conflict of laws provisions) of the State of
Minnesota, except to the extent the law of any other jurisdiction
applies as to the perfection or enforcement of the security interest
granted pursuant to Section 4.1 or as to any other aspect of the
Lender's interest in the Collateral.
(b) Jurisdiction. The Borrower hereby irrevocably submits to
the nonexclusive jurisdiction of any state or federal court sitting in
Minneapolis, Minnesota, in any action or proceeding arising out of or
relating to this Agreement or the Note, and the Borrower hereby
irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such Minnesota state or
federal court. The Borrower hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding and agrees that a final
judgment in any such action or proceeding may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Section 12.8 (b) shall affect the right of the
Lender to bring any action or proceeding against the Borrower or its
property in the courts of other jurisdictions.
(c) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE OR
ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.
Section 12.9. Integration. This Agreement, together with the
Note and the fee letter described in Section 5.1, comprise the final and
complete integration of all prior
41
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement among the parties hereto with respect to
such subject matter, superseding all prior oral or written understandings.
Section 12.10. Agreement Effectiveness. This Agreement shall
become effective upon delivery of fully executed counterparts hereof to the
Lender and the Lender's subsequent declaration that this Agreement has become
effective.
Section 12.11. Advice from Counsel. The parties hereto
understand that this Agreement is a legally binding agreement that may affect
such party's rights. Each party hereto represents to the other that it has
received legal advice from counsel of its choice regarding the meaning and legal
significance of this Agreement and that it is satisfied with its legal counsel
and the advice received from it.
Section 12.12. Judicial Interpretation. Should any provision
of this Agreement require judicial interpretation, it is agreed that a court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against any person by reason of the rule
of construction that a document is to be construed more strictly against the
person who itself through its agent prepared the same, it being agreed that all
parties hereto have participated in the preparation of this Agreement.
Section 12.13. Binding Effect; No Assignment by Borrower;
Third Party Beneficiary. This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lender, the Servicer, and their respective
successors and assigns; except that the Borrower may not assign any or all of
its rights or obligations hereunder or any of its interest herein without the
prior written consent of the Lender. The Backup Servicer shall be a third party
beneficiary of this Agreement with respect to its right to payment in accordance
with Article III of this Agreement.
Section 12.14. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 12.15. Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 12.16. True Sale; Nonconsolidation. The Lender hereby
covenants and agrees that it will not (i) make any argument or seek any
determination that the transfer of Receivables from TCSI to the Borrower
pursuant to the Receivables Purchase Agreement is anything other than a true
sale, or (ii) bring or support any action to substantively consolidate TCSI and
the Borrower in the event of a bankruptcy of TCSI.
(SIGNATURE PAGE FOLLOWS)
42
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
XXXXXX & XXXXXXXXX INVESTMENTS CORPORATION, as Lender
By
-------------------------------------------
Its
------------------------------------------
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
TCS FUNDING V, INC., as Borrower
By
-------------------------------------------
Its
------------------------------------------
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
THE CREDIT STORE, INC., as Servicer
By
-------------------------------------------
Its
------------------------------------------
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
(Signature Page 1 of 1 to the Credit and Security Agreement)
Exhibit A to
Credit and Security Agreement
FORM OF TERM NOTE
$________________ Minneapolis, Minnesota
_______________, 200_
FOR VALUE RECEIVED, the undersigned, TCS FUNDING V, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
XXXXXX & XXXXXXXXX INVESTMENTS CORPORATION, a Minnesota corporation (the
"Lender"), at its main office in Minneapolis, Minnesota, or at any other place
designated at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal sum of
________ Dollars ($________) or, if less, the aggregate unpaid principal amount
of the Loan Outstanding Amount under the Credit Agreement (defined below),
together with interest on the principal amount hereunder from the date such Loan
is funded until this Note is fully paid at the rates from time to time in effect
under the Credit and Security Agreement dated as of May 1, 2001, by and among
the Borrower, The Credit Store, Inc., a Delaware corporation, in its capacity as
Servicer, and the Lender (as the same may hereafter be amended, supplemented, or
restated from time to time, the "Credit Agreement").
The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note is subject to
certain permissive and mandatory prepayments in accordance with the Credit
Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Note as referenced in the Credit Agreement. This Note is secured
pursuant to the Credit Agreement, and may now or hereafter be secured by one or
more other security agreements or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor,
and protest are expressly waived.
TCS FUNDING V, INC.
By
--------------------------------
Its
------------------------------
Exhibit B to
Credit and Security Agreement
FORM OF BORROWING BASE CERTIFICATE
TO: Xxxxxx & Xxxxxxxxx Investments Corporation (the "Lender")
Suite 3000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Senior Vice President - Banking Group
DATE: __________________, 200 __
SUBJECT: TCS Funding V, Inc. (the "Borrower")
Borrowing Base Certificate
In accordance with the Credit and Security Agreement dated as
of May 1, 2001 (as amended or modified to date, the "Credit Agreement"), by and
among the Lender, the Borrower, and The Credit Store, Inc., a Delaware
corporation, in its capacity as Servicer set forth below is the calculation of
the Borrowing Base Ratio as of ________, ____, which date is the last day of the
preceding Monthly Period, (the "Reporting Date"). All terms used in this
certificate have the meanings given to them in the Credit Agreement. Unless
otherwise indicated, all amounts are as of the Reporting Date.
Borrowing Base Ratio Compliance.
1. The aggregate principal amount of Eligible $
Receivables that are not more than 60 days in --------------
arrears of any payment date.
2. Security Interest Percentage %
-------------
3. SIP Receivables (line 1 multiplied by line 2) $
-------------
4. The Loan Outstanding Amount. $
-------------
5. The Borrowing Base Ratio (the value of (a) line
3 divided by (b) line 4). -------------%
6. BORROWING BASE RATIO COMPLIANCE (is the Yes/No
value of line 5, expressed as a percentage, -------------
equal to or greater than 143%).
The Borrower represents and warrants to the Lender that (i)
the Lender has a perfected first priority security interest in the Receivables,
(ii) this Borrowing Base Certificate is a true and correct statement of the
matters set forth herein, and (iii) no Default or Event of Default has occurred
and is continuing. The Borrower acknowledges that the Loan made to the Borrower
and the Loan Outstanding Amount are based upon the Lender's reliance on the
information contained herein.
TCS FUNDING V, INC.
By
---------------------------------
Its
-------------------------------
Exhibit C to
Credit and Security Agreement
SOLVENCY CERTIFICATE
I, Xxxxxxx X. Xxxxxx, Xx., being the duly qualified and acting
Vice President of TCS Funding V, Inc., a Delaware corporation ("the Borrower"),
hereby certify that as of May 1, 2001 the Borrower is Solvent as such term is
defined in the Credit and Security Agreement dated as of May 1, 2001, by and
among The Credit Store, Inc., a Delaware corporation, the Borrower, and Xxxxxx &
Xxxxxxxxx Investments Corporation, a Minnesota corporation.
TCS FUNDING V, INC.
-----------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
Vice President
Exhibit D to
Credit and Security Agreement
Annual Certificate of Chief Financial Officer
TO: Xxxxxx & Xxxxxxxxx Investments Corporation (the "Lender")
Suite 3000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Senior Vice President - Banking Group
DATE: ______________, _____
SUBJECT: Audited Year-End Financial Statements of [TCS Funding V, Inc.]
[The Credit Store, Inc.]
I am the duly qualified and acting [Chief Financial Officer]
[Vice President] of the [Borrower or Servicer] and I am familiar with the
financial statements and financial affairs of the [Borrower or Servicer] and am
authorized to execute this Certificate on behalf of the [Borrower or Servicer].
Capitalized terms used herein but not otherwise defined shall have the same
meanings assigned to them in the Credit and Security Agreement dated as of May
1, 2001 (as amended or modified to date, the "Credit Agreement"), by and among
TCS Funding V, Inc. (the "Borrower"), The Credit Store, Inc. (the "Servicer"),
and the Lender.
Pursuant to Section 7.1(a), attached are the audited financial
statements of the [Borrower or Servicer] prepared by ___________________ as of
and for the fiscal year ended ________, ______. I certify that such
financial statements have been prepared in accordance with GAAP, fairly present
the financial condition of the [Borrower or Servicer] and the results of its
operations for the period then ended, and conform to the requirements of Section
7.1(a) of the Credit Agreement. I further certify that I have obtained no
knowledge, except as specifically stated below, of any Default, Event of
Default, or Servicer Termination Event.
[TCS FUNDING V, INC.]
or
[THE CREDIT STORE, INC.]
By
--------------------------------
Its:
-----------------------------
Exhibit E to
Credit and Security Agreement
Ouarterly Certificate of Chief Financial Officer
TO: Xxxxxx & Xxxxxxxxx Investments Corporation (the "Lender")
Suite 3000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Senior Vice President - Banking Group
DATE: __________________, ______
SUBJECT: Quarterly Financial Statements of [TCS Funding V, Inc.]
[The Credit Store, Inc.]
I am the duly qualified and acting [Chief Financial Officer]
[Vice President] of the [Borrower or Servicer] and I am familiar with the
financial statements and financial affairs of the [Borrower or Servicer] and am
authorized to execute this Certificate on behalf of the [Borrower or Servicer].
Capitalized terms used herein but not otherwise defined shall have the same
meanings assigned to them in the Credit and Security Agreement dated as of May
1, 2001 (as amended or modified to date, the "Credit Agreement"), by and among
TCS Funding V, Inc. (the "Borrower"), The Credit Store, Inc. (the "Servicer"),
and the Lender.
Pursuant to Section 7.1(b), attached are the required
unaudited financial statements of the Borrower as of _________, 200_ (the
"Covenant Computation Date"). I certify that such financial statements have been
prepared in accordance with GAAP, fairly present the financial condition of the
Borrower as of the Covenant Computation Date and the results of its operations
for the period then ended, subject to year-end adjustments, and conform to the
requirements of Section 7.1(b) of the Credit Agreement. I further certify that I
have obtained no knowledge, except as previously reported or specifically stated
below, of any Default, Event of Default, or Servicer Termination Event.
[TCS FUNDING V, INC.]
or
[THE CREDIT STORE, INC.]
By
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Its:
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