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EXHIBIT 10.43
EXECUTION COPY
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MASTER CREDIT AND SECURITY AGREEMENT
dated as of May 31, 2000
by and among
TCS FUNDING IV, INC.
as the Borrower,
THE CREDIT STORE, INC.,
as the Servicer,
and
XXXXXX & XXXXXXXXX INVESTMENTS CORPORATION,
as Lender
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................................................................1
Section 1.1. Definitions......................................................................................1
ARTICLE II TERM LOANS...........................................................................................12
Section 2.1. Term Loan.......................................................................................12
Section 2.3. Interest on the Loans...........................................................................14
Section 2.4. Notes...........................................................................................15
Section 2.5. Use of Proceeds.................................................................................15
Section 2.6. Prepayments.....................................................................................15
Section 2.7. Payments........................................................................................15
Section 2.8 Taxes...........................................................................................16
Section 2.9. Conclusiveness of Statements; Survival of Provisions............................................17
ARTICLE III ORDER OF DISTRIBUTION OF COLLECTIONS; RESERVE ......................................................17
Section 3.1. Order of Distribution of Collections During the Revolving Period................................17
Section 3.2. Order of Distribution of Collections During the Amortization Period.............................18
Section 3.3. Borrower's Interest Percentage of Collections...................................................19
Section 3.4. Distribution of Reserve Account.................................................................19
ARTICLE IV COLLATERAL FOR OBLIGATIONS...........................................................................19
Section 4.1. Grant of Security Interest......................................................................19
Section 4.2. Covenants Regarding Eligible Receivables........................................................20
Section 4.3. Servicing.......................................................................................20
Section 4.4. Lockbox; Collection Account.....................................................................23
Section 4.5. Financing Statement.............................................................................24
Section 4.6. Further Documents...............................................................................24
Section 4.7. Limited Recourse................................................................................25
ARTICLE V CONDITIONS OF LENDING.................................................................................25
Section 5.1. Conditions Precedent to the Initial Loans.......................................................25
Section 5.2. Conditions Precedent to Additional Loans........................................................27
ARTICLE VI REPRESENTATIONS AND WARRANTIES.......................................................................28
Section 6.1. Corporate and Company Existence and Power; Name; Chief Executive Office.........................28
Section 6.2. Authorization for Borrowings; No Conflict as to Law or Agreements...............................29
Section 6.3. Legal Agreements................................................................................29
Section 6.4. Subsidiaries....................................................................................29
Section 6.5. Financial Condition; No Adverse Change..........................................................29
Section 6.6. Litigation......................................................................................30
Section 6.7. Taxes...........................................................................................30
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Section 6.8. Titles and Liens................................................................................30
Section 6.9. Plans...........................................................................................31
Section 6.10. Default.........................................................................................31
Section 6.11. Submissions to Lender...........................................................................31
Section 6.12. Nature of Receivables...........................................................................31
Section 6.13. Compliance with Applicable Laws.................................................................32
Section 6.14. Compliance with Credit and Collection Policy....................................................32
Section 6.15. Not an Investment Company.......................................................................32
Section 6.16. Federal Reserve Regulations.....................................................................32
Section 6.17. Solvency........................................................................................32
ARTICLE VII AFFIRMATIVE COVENANTS...............................................................................33
Section 7.1. Reporting Requirements..........................................................................33
Section 7.2. Books and Records; Inspection and Examination...................................................35
Section 7.3. Compliance with Laws............................................................................35
Section 7.4. Payment of Taxes and Other Claims...............................................................35
Section 7.5. Preservation of Existence.......................................................................36
Section 7.6. Reserved........................................................................................36
Section 7.7. Borrowing Base Ratio............................................................................36
Section 7.8. Rating Event....................................................................................36
Section 7.9. Covenants Regarding the Receivables.............................................................36
ARTICLE VIII NEGATIVE COVENANTS.................................................................................36
Section 8.1. Sales, Liens, Etc...............................................................................36
Section 8.2. Mergers, Acquisitions, Sales, Investments, Etc..................................................37
Section 8.3. No Extension or Amendment of Receivables........................................................37
Section 8.4. Changes to Credit and Collection Policy.........................................................37
Section 8.5. Servicer's Covenants............................................................................37
ARTICLE IX EVENTS OF DEFAULT; RIGHTS AND REMEDIES...............................................................39
Section 9.1. Events of Default...............................................................................39
Section 9.2. Rights and Remedies.............................................................................40
ARTICLE X PARTICIPATIONS........................................................................................41
Section 10.1. Participation...................................................................................41
ARTICLE XI BANKRUPTCY REMOTE PROTECTIONS........................................................................41
Section 11.1. Composition of the Borrower's Board.............................................................41
Section 11.2. Compensation of Employees, Agents, and Consultants; Limitation on Agency........................42
Section 11.3. Servicing; Fees.................................................................................42
Section 11.4. Expenses........................................................................................42
Section 11.5. Mailing Address.................................................................................42
Section 11.6. Books and Records...............................................................................42
Section 11.7. Financial Statements............................................................................42
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Section 11.8. Holding of Funds and Assets....................................................................43
Section 11.9. Insurance......................................................................................43
Section 11.10. Separate Legal Entities........................................................................43
Section 11.11. Arm's Length Relationships.....................................................................43
ARTICLE XII MISCELLANEOUS.......................................................................................43
Section 12.1. Assistance.....................................................................................43
Section 12.2. No Waiver; Cumulative Remedies.................................................................44
Section 12.3. Amendments, Requested Waivers, Etc.............................................................44
Section 12.4. Addresses for Notices, Etc.....................................................................44
Section 12.5. Costs and Expenses.............................................................................44
Section 12.6. Indemnity......................................................................................45
Section 12.7. Execution in Counterparts......................................................................45
Section 12.8. Governing Law; Jurisdiction; Waiver of Jury Trial..............................................46
Section 12.9. Integration....................................................................................46
Section 12.10. Agreement Effectiveness........................................................................46
Section 12.11. Advice from Counsel............................................................................46
Section 12.12. Judicial Interpretation........................................................................47
Section 12.13. Binding Effect; No Assignment by Borrower......................................................47
Section 12.14. Severability of Provisions.....................................................................47
Section 12.15. Headings.......................................................................................47
Section 12.16. True Sale; Nonconsolidation....................................................................47
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
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MASTER CREDIT AND SECURITY AGREEMENT
This MASTER CREDIT AND SECURITY AGREEMENT (the "Agreement")
dated as of May 31, 2000 is by and among TCS FUNDING IV, 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 asked the Lender to extend one or
more term loans to the Borrower in order to finance its purchases of revolving
credit card receivables from TCSI;
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 a designated pool of such receivables and
certain other related assets, as set forth herein;
WHEREAS, the Lender is willing, on an uncommitted case by case
basis to consider financing such purchases by making individual loans from time
to time on the terms and subject to the conditions set forth herein.
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.
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"Account" means a credit card account, the account receivables
of which are owned by the Borrower and that either (i) was an Eligible Account
listed by account number in the Account Schedule delivered to the Lender on the
Closing Date or (ii) becomes an Additional Account after the Closing Date. The
term "Account" refers to an Additional Account only from and after the Addition
Date on which it is listed in the Account Schedule. An Account includes any
related "relationship account" resulting from the earlier account having been
reported as lost or 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 schedules of Accounts of the
Borrower delivered to the Lender on the Closing Date and on each Addition Date
thereafter, as amended or supplemented from time to time pursuant to the terms
of this Agreement.
"Addition Date" means a Settlement Date on which the Borrower
designates credit card accounts as Additional Accounts and purchases Receivables
in such accounts pursuant to Section 3.1.
"Additional Account" means each credit card account that is an
Eligible Account designated as an Additional Account pursuant to Section 3.1 and
that is listed on the Account Schedule delivered on an Addition Date and is free
of any Adverse Claim.
"Additional Loan" means each Loan made pursuant to Section
2.1(b).
"Advance Date" with respect to any Loan, means the date on
which such Loan is disbursed under 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.
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"Agreement" means this Credit and Security Agreement and all
exhibits, amendments and supplements hereto.
"Aggregate Loan Balance" means the aggregate of the Loan
Outstanding Amounts of all Loans.
"Amortization Period" means the period beginning on the first
day after the end of the Revolving Period and ending on the date on which the
Aggregate Loan Balance and all accrued interest on the Loans has been paid in
full.
"Applicable Margin" means 2.50% if the Rating Event has
occurred and 3.00% if the Rating Event has not occurred.
"Backup Servicer" means Norwest Bank Minnesota, National
Association and its successors and assigns.
"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 in accordance with this Agreement.
"Borrower" has the meaning specified in the introductory
paragraph of this Agreement.
"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, minus (e) the amount of Borrower Funded Receivables
included in the Borrowing Base with respect to Additional Loans.
"Borrower's Interest Percentage" means the Borrower's interest
in the Receivables, 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.
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"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 Aggregate
Loan Balance 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.
"Closing Date" means May 31, 2000.
"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
000-000-00 maintained at Norwest Bank Minnesota, National Association, that is
(a) identified as the "TCS Funding IV 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 in payment of any
amounts owed in respect of the Receivables and (b) all payments made by TCSI to
the Borrower pursuant to Sections 3.2(b) and 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.
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"Dollars" and the sign "$" mean lawful money of the United
States of America.
"Eligible Account" means an Account that has been tagged with
the FDR TCS Pool ID Number 2000006 and that satisfies each of the following
criteria as of the Closing Date or Addition Date, as applicable:
(a) the Receivables in such Account are payable in United
States dollars;
(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 or Addition Date, as applicable, occurs; and
(h) such Account has not been cancelled.
"EBITDA": 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 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
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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);
(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 Fair Credit Reporting 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.
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"Event of Default" has the meaning specified in Section 9.1.
"Expected Final Payment Date" means the later of (a) the
November 2004 Settlement Date, or (b) such later date to which the Lender may
agree.
"Facility Fee" means a fee of 3% of each Loan made by Lender
pursuant to this Agreement.
"Finance Charge Receivables" means, with respect to any day,
any Receivables in respect of periodic finance charges, overlimit 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(b).
"Indemnitees" has the meaning specified in Section 12.6.
"Indemnified Liabilities" has the meaning specified in Section
12.6.
"Initial Funding Date" means the date on which the first of
the Initial Loans is disbursed under this Agreement.
"Initial Loans" has the meaning specified in Section 2.1(a).
"Interest Rate Period" means the quarterly period from and
including a Settlement Date occurring in August, November, February or May to
but excluding the next succeeding Settlement Date; provided, however, that the
first Interest Rate Period shall commence on the Initial Funding Date.
"Investment Company Act" means the Investment Company Act of
1940, (as such act may be amended, supplemented, restated, or otherwise modified
or replaced).
"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" or "Loans" means one or more of the term loans made by
the Lender to the Borrower pursuant to this Agreement, including both the
Initial Loan(s) and the Additional Loans.
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The "Loan Outstanding Amount" of any Loan means, as of any
date of determination, the outstanding principal amount of such Loan.
"Lockbox Account" means the lockbox account at Norwest Bank
South Dakota, National Association referred to in the Lockbox Agreement.
"Lockbox Agreement" means that certain amended and restated
lockbox agreement of even date herewith among the Borrower, the Lender, TCSI
(individually and as the Servicer), Norwest Bank South Dakota, N.A., Norwest
Bank Minnesota, National Association ("Norwest"), and Coast Business Credit
("Coast"), pursuant to which Norwest will segregate amounts on deposit in the
Lockbox Account relating to Collections and deposit such amounts in the
Collection Account and which will contain intercreditor provisions between Coast
and the Lender.
"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);
(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 the Expected Final
Payment Date or (ii) the date on which all Obligations have been paid in full.
"Maximum Loan Amount" means $40,000,000 of originally issued
principal amount of Notes.
"Minimum Required Reserve Amount" means five percent (5%) of
the Security Interest Percentage of Eligible Receivables.
"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 during the three consecutive Monthly Periods most recently ended and
the denominator of which is the average of Receivables balance as of the close
of business on the last day of the each of the three consecutive preceding
Monthly Periods, such percent to be stated on an annualized basis.
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"Note" means any of the series of pari passu Notes evidencing
the Loans to be issued pursuant to Section 2.3, substantially in the form of
Exhibit A-1 hereto with respect to the Initial Loans and substantially in the
form of Exhibit A-2 with respect to the Additional Loans.
"Obligations" means (a) the Borrower's obligations in respect
of the due and punctual payment of principal of and interest on the Loans 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 Agreement" means a Paying Agent Agreement in
form and substance satisfactory to the Lender entered into pursuant to Section
4.4 by and among the Borrower, the Lender, and the Paying 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.
"Paying Agent" means Norwest Bank Minnesota, National
Association or its successors or assigns under the Paying Agent Agreement.
"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 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 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.
"Rating Event" means a nationally recognized credit rating
company acceptable to Lender has given a rating of BBB- or better to the Loans
issued or to be issued under this Agreement.
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"Receivables" mean all of the indebtedness of any Obligor
arising under the Accounts designated in Schedule 1 to this Agreement (which may
be in tape or other electronic format) , as such Schedule 1 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.
"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
000-000-00 maintained at Norwest Bank Minnesota, National Association that is
(a) identified as the "TCS Funding IV Reserve Account," (b) in the Borrower's
name, and pledged to the Lender pursuant to Section 4.1 of this Agreement.
"Revolving Period" means the period commencing on the Closing
Date and ending on the earlier to occur of (i) December 1, 2001 or (ii) the date
on which an Event of Default occurs.
"Security Interest Percentage" means, as of any date of
determination, the Lender's security interest in the Receivables, 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.
"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 and, at any
time during following termination of TCSI as Servicer pursuant to Section 4.3(a)
such amount as is specified in the Backup Servicing Agreement.
"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).
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"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 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.
"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.
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"TCSI" has the meaning specified in the introductory paragraph
of this Agreement.
"Transaction Documents" means this Agreement, the Lockbox
Agreement, the Paying Agent Agreement, the Receivables Purchase Agreement, the
Backup Servicing Agreement and the Notes, 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%; or
(b) the three month average payment rate of the Receivables is
less than 5.75%.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the State of Minnesota and the State of South Dakota.
ARTICLE II
TERM LOANS
Section 2.1. Term Loans.
(a) Initial Loans. The Lender hereby agrees, on the terms and
subject to the conditions set forth in this Agreement, to make one or
more Loans to the Borrower after the Closing Date in an aggregate
amount equal to $10,000,000 (such Loans shall be referred to herein as
the "Initial Loans"). The Initial Loans shall be advanced in the
following principal amounts and on the following dates:
--------------------------------- ----------------------------
Principal Amount Date of Funding
--------------------------------- ----------------------------
$5,000,000 June 29, 2000
--------------------------------- ----------------------------
$3,000,000 July 14, 2000
--------------------------------- ----------------------------
$2,000,000 July 31, 2000
--------------------------------- ----------------------------
On the Initial Funding Date, the Borrower shall deposit into the
Reserve Account proceeds of the first of the Initial Loans an amount
equal to the amount by which (x) five percent (5%) of the Eligible
Receivables exceeds (y) the balance on deposit in the Reserve Account
on such date.
(b) Additional Loans. From time to time after the Rating Event
has occurred, the Borrower may request additional Loans until Loans
have been issued up to the Maximum Loan Amount. The minimum principal
amount of any requested
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Additional Loan shall be $1,000,000 and the maximum amount of any
requested Additional Loan shall be $10,000,000. The obligation of the
Lender to make any Additional Loan is discretionary at the sole option
of the Lender and the Borrower expressly waives and disclaims any
obligation on the part of the Lender to make any Additional Loans.
(c) Fees and Costs. The Borrower shall pay the Lender $100,000
of the Facility Fee with respect to the Initial Loans on the Closing
Date. The remaining $200,000 of the Facility Fee with respect to the
Initial Loans and all unpaid costs and expenses of the Lender shall be
paid on the Initial Funding Date. The Lender shall be paid the Facility
Fee due for each Additional Loan plus costs and expenses of Lender
incurred in connection therewith on the related Advance Date.
Section 2.2. Procedure for Additional Loans.
(a) Procedure for Additional Loans. Any request by the
Borrower for a Loan hereunder shall be in writing (which may be a
telecopy), or by telephone promptly confirmed in writing (which may be
a telecopy) and shall be made in accordance with subsection (b) below.
Each request for a Loan hereunder shall be deemed a representation by
the Borrower that on the date of the requested Loan and after giving
effect to the requested Loan the applicable conditions specified in
Section 6.2 have been and will be satisfied.
(b) Notice of Borrowing. Any request for a Loan must be given
so as to be received by the Lender not less than fifteen (15) Business
Days prior to the date of the requested Loan. Each request for a Loan
shall specify (i) the date of the Loan, and (ii) the amount of the
Loan.
(c) Reserve Account Deposit. On the date any Loan is made, the
Borrower shall deposit from the proceeds of such Loan, an amount equal
to (i) the Minimum Required Reserve Amount on such date minus (ii) the
amount on deposit in the Reserve Account on such date.
Section 2.3. Interest on the Loans. The Borrower hereby agrees
to pay interest on the unpaid principal amount of each Loan for the period
commencing on the Initial Funding Date or the related Advance Date until the
unpaid principal amount of such Loan is paid in full, as follows:
(a) Interest Rate.
(i) Pre-Rating Loans. Subject to Section 2.2(b) below,
each Loan borrowed before the Ratings Event shall bear
interest on the unpaid principal amount thereof at (A) 13.00%
until May 31, 2001 and (B) commencing on June 1, 2001, at a
varying rate per annum equal to the sum of (x) the Prime Rate
for the applicable Interest Rate Period and (y) the Applicable
Margin.
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(ii) Post-Rating Loans. Subject to Section 2.2(b) below,
each Loan borrowed after the Ratings Event shall bear interest
on the unpaid principal amount thereof during the applicable
Interest Rate Period at a rate per annum equal to the Prime
Rate.
(b) Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any of the Loans 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 7.7 and Section 7.9) 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 Loans 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 Loans
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; Pro Rata Payment. Accrued interest on
the Notes shall be payable in arrears on each Settlement Date, any
prepayment date, and on the Maturity Date. All interest payments shall
be applied pro rata to the Notes.
Section 2.4. Notes. Each Loan shall be evidenced by a
separate Note payable to the order of the Lender in a principal amount equal to
the original principal amount of such Loan. The unpaid principal amount of the
Notes shall bear 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 2.5. Use of Proceeds. Proceeds of the Loans shall be
used by the Borrower solely for purposes of purchasing Eligible Receivables from
TCSI pursuant to the Receivables Purchase Agreement.
Section 2.6. Prepayments.
(a) Voluntary Prepayments. On any Settlement Date, the
Borrower may prepay all or any portion of the Loans without premium or
penalty.
(b) Mandatory Prepayments. 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
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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 2.7. Payments.
(a) Making of Payments. All payments of principal and interest
due under the Notes and all other payments due pursuant to Section 2.8
shall be made to the Lender pursuant to Article III and be applied pro
rata to the Loans. 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 Loans or any fees payable hereunder falls due on a day
which is not a Business Day, 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 2.8 Taxes. All payments to the Lender under or in
connection with this Agreement or the Notes 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
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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 2.8. The obligations of the
Borrower under this Section 2.8 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 2.8.
then, without in any way limiting, reducing or otherwise qualifying the
Borrower's obligations under this Section 2.8 the Lender shall promptly, upon
becoming aware of the same, notify 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 2.9. Conclusiveness of Statements; Survival of
Provisions. Determinations and statements of the Lender pursuant to Section 2.8
shall be presumed conclusive absent demonstrable error. The Lender may use
reasonable averaging and attribution methods in determining compensation
pursuant to such Section 2.8 and the provisions of Section 2.8 shall survive
termination of this Agreement.
ARTICLE III
ORDER OF DISTRIBUTION OF COLLECTIONS;
RESERVE ACCOUNT
Section 3.1. Order of Distribution of Collections During the
Revolving Period.
(a) On any Business Day during the Revolving Period (unless a
Trigger Event has occurred and is continuing), the Servicer shall apply
the Security Interest Percentage of Collections to purchase new
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Receivables in the Accounts. If the Security Interest Percentage of
Collections is insufficient to purchase new Receivables in the Accounts
that are "Accounts" as of the close of business on the preceding
Business Day, the Servicer shall use funds on deposit in the Reserve
Account for such purpose.
(b) On each Settlement Date during the Revolving 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 any cost or expense reimbursement or
indemnity obligation payments to the Lender arising under this
Agreement;
(ii) Second, to pay to the Backup Servicer the Backup
Servicing Fee for the preceding Monthly Period plus any
accrued but unpaid Backup Servicing Fee from any prior Monthly
Period and to pay to the Paying Agent, its fees and expenses
owing on such date;
(iii) Third, to pay any unpaid and due accrued interest on
the Loans to the Lender;
(iv) Fourth, to pay to the Servicer the Security Interest
Percentage of the Servicing Fee for the preceding Monthly
Period plus any accrued but unpaid Servicing Fee from any
prior Monthly Period;
(v) Fifth, at the Borrower's option, either (A) to the
Lender to repay principal on the Loans or (B) to the Borrower
to purchase new Receivables in new credit card accounts that
(i) are Eligible Accounts and (ii) that the Borrower
designates as "Additional Accounts" on such date, in each case
until the Borrowing Base is at least equal to one hundred
forty-three percent (143%);
(vi) Sixth, To fund the Reserve Account until the amount
on deposit therein equals the Minimum Required Reserve
Amount;
(vii) Seventh, to pay the Borrower's reasonable
administrative and operating expenses customary for limited
purpose entities similar to the Borrower;
(viii) Eighth, in the Borrower's sole discretion (A) to
the Borrower, to purchase new Receivables in new credit card
accounts that (i) are Eligible Accounts and (ii) that the
Borrower designates as "Additional Accounts" on such date, (B)
to fund the Reserve Account with additional funds or (C) to
the Lender to prepay the Loans;
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notwithstanding the provisions in clauses (v) and (viii) above, the
Borrower shall not designate Additional Accounts on any Settlement Date
unless the Borrower or the Servicer provides the Lender with (x) a copy
of a release of the security interest of Coast Business Credit in the
receivables related to such credit card accounts and a UCC-3
termination statement with respect to such receivables and (y) a
bringdown UCC search report disclosing no Adverse Claim of any third
party in the Additional Accounts designated on such date.
Section 3.2. Order of Distribution of Collections During the
Amortization Period. On each Settlement Date during the Amortization Period or
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 any cost or expense reimbursement or
indemnity obligation payments to the Lender arising under this
Agreement.
(b) Second, to pay to the Backup Servicer the Backup Servicing
Fee for the preceding Monthly Period and any accrued but unpaid Backup
Servicing Fee from any prior Monthly Period and to pay to the Paying
Agent, its fees and expenses owing on such date.
(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 Servicing Fee from any prior Monthly Period to
the Servicer.
(d) Fourth, to pay any unpaid and due interest on the Loans 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 Loans 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 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
Servicing Fee to the Borrower. 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 to the Servicer.
Section 3.4. Distribution of Reserve Account. On the earlier
of (a) the December 2001 Settlement Date and (b) the first Settlement Date
during the Amortization Period, the Servicer will instruct the Paying Agent to
withdraw the entire amount 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
Loans.
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ARTICLE IV
COLLATERAL FOR OBLIGATIONS
Section 4.1. Grant of Security Interest. 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.
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 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 and continuance 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 that 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 three (3)
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
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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 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;
(vi) any representation or warranty made by the Servicer
in this Agreement or any certificate or Settlement Statement
delivered 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; or
(vii) if TCSI is the Servicer, any event, transaction or
occurrence as a result of which any "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) other than the current
holders of the ownership interests in TCSI becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or
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indirectly, as a result of any single transaction, of more
than twenty-six percent (26%) of the total voting power of all
classes of stock or other ownership interests then outstanding
of TCSI normally entitled to vote in the election of
directors;
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 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
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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. 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. On or prior to the
Closing Date, the Lender, the Borrower and the Servicer will enter into the
Lockbox Agreement and the Paying Agent Agreement. Among other provisions, the
Paying Agent Agreement will establish, on or prior to the Closing Date, the
Collection Account and the Reserve Account.
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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 Borrower's 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. The Borrower hereby
agrees to establish the Collection Account and the Reserve Account on or before
the date hereof. 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
losses in the Collection Account. 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 in accordance
with Section 2.6.
Section 4.5. Financing Statement. A photocopy 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 IV
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
Suite 3000
000 Xxxxx Xxxxx Xxxxxx
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,
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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 Loans 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 Loans and not on the
creditworthiness of TCSI, except for TCSI's obligations as Servicer under this
Agreement and its obligation to repurchase 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 Initial Loans. The obligation
of the Lender to make the Initial Loans to the Borrower is subject to the
condition precedent that the Lender shall have received the following on or
before the Closing Date, each (unless otherwise expressly stated) in form and
substance satisfactory to the Lender:
(a) This Agreement, properly executed on behalf of the Borrower and the
Servicer;
(b) The Receivables Purchase Agreement, properly executed on behalf of
the Borrower and TCSI;
(c) The Lockbox Agreement, the Paying Agent Agreement and the Backup
Servicing Agreement, each properly executed on behalf of the applicable
parties;
(d) UCC-1 financing statements to be filed with the Secretaries of
State of South Dakota and Delaware naming (i) TCSI as debtor, the Borrower
as secured party and the Lender as assignee of the secured party and (ii)
the Borrower as debtor and the Lender as secured party;
(e) Current UCC searches of appropriate filing offices showing that no
financing statements 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 or received or will receive prior to the Initial Funding
Date an appropriate release, termination or satisfaction (including the
filing of a UCC-2 partial termination statement from Coast Business Credit,
a division of Southern Pacific Bank releasing
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its interest in the Receivables arising in those credit card accounts that
are Accounts as of the Closing Date) or those permitted in accordance with
Section 8.1;
(f) Certificates of the Secretary or Assistant Secretary of each of the
Borrower and TCSI containing:
(i) a 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 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 bylaws certified as being true and correct
copies thereof;
(g) Copies of the certificate of incorporation of the Borrower and
TCSI, certified by the Secretary of State of Delaware;
(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 May 24, 2000;
(j) One or more opinions of Faegre & Xxxxxx LLP as to corporate matters
with respect to the Borrower and TCSI, "true sale," substantive
consolidation, and creation of a security interest under this Agreement and
the Receivables Purchase Agreement, in each case in form and substance
satisfactory to the Lender and addressed to the Lender;
(k) 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;
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(l) 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
(m) A solvency certificate from an officer of the Borrower in the
form of Exhibit B.
Section 5.2. Conditions Precedent to Additional Loans. No Additional
Loan shall be made on any Advance Date unless the following conditions have been
fulfilled:
(a) Representations and Warranties. The representations and
warranties contained in Article VI shall be true and correct on and as of
such Advance Date, with the same force and effect as if made on such date
except to the extent such representations and warranties expressly relate
to an earlier date, in which case such representations and warranties will
be true and correct in all material respects as of such earlier date or, in
the case of financial statements, shall refer to the financial statements
last delivered to the Lender.
(b) No Default. No Default or Event of Default shall have
occurred on the Closing Date and on each Advance Date or will exist after
giving effect to the Loan made on such date.
(c) A certificate as to the aggregate amount of Eligible
Receivables as of a cut-off date shortly before the date of such Additional
Loan;
(d) Borrowing Base; Maximum Loan Amount. The Borrowing Base
Ratio, after giving effect to such Loan and the new Receivables to be
required with the proceeds of such Loan, as reflected in a Borrowing Base
Certificate would be not less than one hundred forty-three percent (143%).
After giving effect to such Loan, the aggregate amount of Loans issued
pursuant to this Agreement shall not exceed the Maximum Loan Amount;
(e) 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;
(f) The Lender shall have received a solvency certificate from an
officer of the Borrower in the form of Exhibit B; and
(g) The Lender shall have received then current UCC searches of
appropriate filing offices showing that no financing statements 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;
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(h) No event shall have occurred which shall have resulted in a
Material Adverse Effect; and
(i) The Rating Event shall have occurred and no Trigger Event
shall have occurred.
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 borrowings 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
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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 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
each of the Loans 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, 1999
and unaudited financial statements for its fiscal quarter ended February
29, 2000; 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
with respect to the Initial Loans and each Advance Date with respect to
each Additional Loan, 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.
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(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.
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 subsequently
disposed of in accordance with Section 8.1 or Section 8.3), free and clear of
all mortgages, security interests, liens, and encumbrances, except for the
security interest granted pursuant to Section 4.1 and, prior to the Initial
Funding Date, the security interest of Coast Business Credit, a division of
Southern Pacific Bank. 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,
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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 request for the Loans 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 or
Section 5.2 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 Account Agreement
giving rise to such Receivable.
(c) The Account Schedule and any supplements thereto will contain an
accurate list of the Accounts, the Receivables of which are Collateral.
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 or is
exempt from all provisions of such act.
Section 6.16. Federal Reserve Regulations. No part of the proceeds of
any 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 Federal Reserve Board) 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 T, U or X as promulgated by the Federal Reserve Board.
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Section 6.17. Solvency. The Receivables Purchase Agreement and the
Credit Agreement were not executed by TCSI and the Borrower, the respective
interests of the Borrower and the Lender were not granted, taken, attached, or
perfected, and any transfers contemplated by the Receivables Purchase Agreement
and the Credit 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 fiscal
year of the Borrower or the Servicer (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 (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,
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stating (i) that such financial statements have been prepared in accordance
with GAAP, without footnotes and subject to year-end audit adjustments 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 calendar 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 Loans, payment of the monthly Servicing Fee and Backup
Servicing Fee, deposits to the Reserve Account, distributions to the
Borrower to purchase new Receivables, and other distributions to the
Borrower; (iv) the aggregate amount of
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Receivables charged off as uncollectible during the preceding Monthly
Period; and (v) the aggregate outstanding balance of Receivables that are
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 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, the Borrower 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.
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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 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. Reserved.
Section 7.7. Borrowing Base Ratio. The Borrowing Base Ratio, as
measured on the last business day of each calendar month, shall be equal to or
greater than one hundred forty-three percent (143%).
Section 7.8. Rating Event. The Borrower will use good faith reasonable
efforts to achieve the Rating Event.
Section 7.9. 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:
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(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
(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. Servicer's Covenants. In consideration of the Lender's
making the Loans to the Borrower, TCSI agrees as follows
(a) TCSI will continue to fund new Receivables arising in the Accounts
during the Amortization Period and during the Revolving 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) TCSI will use good faith reasonable efforts to assist the Borrower
to achieve the Rating Event.
(c) Without the Lender's consent, TCSI will not amend, modify or
terminate the Seventh Amendment to Loan and Security Agreement of even date
herewith between Coast Business Credit and TCSI (collectively the "Coast
Amendment"); provided, however, that TCSI shall not be prohibited from
amending, modifying or terminating, without the Lender's consent, the Loan
and Security Agreement dated as of April 30, 1998 between TCSI and Coast
Business Credit, as
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amended as of the date hereof, so long as such amendment or modification
does not affect the release requirements of the Coast Amendment.
(d) 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.
(e) 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 make payments of interest on 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 minus cash
capital expenditures minus cash payment of federal and state taxes
divided by (ii) all payments of principal plus interest plus 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, no such principal
payments shall be made unless (A) the aggregate of all principal
payments on TCSI Subordinated Debt does not exceed the 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, 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 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 and dividends.
(iv) Payments 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.
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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 any of the
Notes 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;
(b) any of the Notes shall not have been paid in full on or before the
Expected Final Payment Date.
(c) the Borrower shall fail for any reason to have a valid, first
priority ownership interest or security interest in the Receivables, or the
Lender shall fail for any reason to have a valid, first priority security
interest in the Receivables;
(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 7.7 or Section 7.9) 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;
(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 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(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 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
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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;
(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 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;
(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 Loans to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans 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 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
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(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 any 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 hereby acknowledges and agrees that any participant
described in this Section 10.1 may rely upon, and possess all rights under, any
opinions, certificates, or other instruments or documents delivered 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; provided, however, that such individual may be a
director of a subsidiary of TCSI that is a limited purpose corporation similar
to the Borrower. 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 bank accounts for services
provided to the Borrower. The Borrower will engage no agents other than: (i) the
Servicer to service the Receivables and (ii) TCSI to provide employees and
organizational services; the Servicer 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 to perform all operations required on a daily basis
to service the Receivables. The Borrower will pay the Servicer a monthly fee as
specified in this Agreement. 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
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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 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.
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 any of the Notes to any Person, each of
the Borrower and TCSI agrees to
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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
Notes 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, 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 party complying as to delivery with
the terms of this Section 12.4. All such notices, requests, demands, and other
communications, (a) when delivered, 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, shall be effective when sent by
nationally recognized overnight mail courier or delivery service, addressed as
aforesaid.
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
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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 the lockbox bank under the Lockbox Agreement, and
(c) 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 all present and future officers, directors, employees,
and agents of the Lender (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 Indemnitee, 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 Loans or (ii) the use of proceeds of the Loans; 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 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. 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.
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Section 12.8. Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) Governing Law. The Agreement and the Notes 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
non-exclusive 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 Notes, 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 NOTES OR ANY INSTRUMENT
OR DOCUMENT DELIVERED THEREUNDER.
Section 12.9. Integration. This Agreement, together with the Notes and
the fee letter described in Section 5.1, comprise the final and complete
integration of all prior 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
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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. 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.
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 PAGES FOLLOW)
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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
-------------------------
Suite 3000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
TCS Funding IV, Inc., as the Borrower
By
---------------------------
Its
-------------------------
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
THE CREDIT STORE, INC., as the
Servicer
By
---------------------------
Its
-------------------------
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
(Signature Page 1 of 1 to the Credit and Security Agreement)
