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EXHIBIT 10.46
[EXECUTION COPY]
MASTER LOAN AND SERVICING AGREEMENT
THIS MASTER LOAN AND SERVICING AGREEMENT (this "LOAN AGREEMENT") is
made and entered into as of October 31, 2000, by and among CREDIT STORE
SERVICES, INC., a Delaware corporation ("BORROWER"), THE CREDIT STORE, INC., a
Delaware corporation, as servicer ("SERVICER" or "TCSI"), and THE VARDE FUND
IV-A, L.P., a Delaware limited partnership ("LENDER").
RECITALS
Borrower desires that Lender make one or more Loans to finance
Borrower's acquisition of Assets from various Asset Sellers.
Lender is willing to make the Loans, up to an aggregate original
principal amount of Twenty-five Million Dollars ($25,000,000), subject to the
terms and conditions herein set forth.
Borrower and Lender desire that Servicer service the Assets, and
Servicer is willing to perform such duties.
In consideration of the foregoing premises and the agreements
hereinafter set forth, Borrower, Servicer and Lender agree as follows:
ARTICLE I
THE LOANS
Section 1.1 Definitions. Capitalized terms used in this Loan Agreement are
defined in Article 8 hereof.
Section 1.2 The Loans. Subject to the terms and conditions set forth
herein, Lender agrees to make one or more Loans up to an aggregate original
principal amount of Twenty-five Million Dollars ($25,000,000) (each, a "LOAN"
and collectively, the "LOANS"), in order to finance Borrower's acquisition(s) of
Assets; provided, however, that unless otherwise agreed by Lender in its sole
discretion, in no event shall Lender make a Loan from and after the earlier of
(a) October 31, 2003 and (b) the termination of this Loan Agreement in
accordance with its terms. The Loans will not be made on a revolving basis.
Section 1.3 Procedures for Loan Advances.
(a) Proposals. Borrower shall request each Loan (or series of
Loans, in the case of a Forward Flow Agreement) by presenting a
Proposal to Lender.
(b) Commitments.
(i) Lender shall have up to five (5) calendar days (or such
lesser number of days as the parties may agree upon based on the
circumstances of the Proposal) from the receipt thereof, to accept
or reject the Proposal. If Lender accepts the Proposal, such
acceptance shall be in the form (and only in the form)
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of a Commitment. If Lender does not respond within five (5)
calendar days (or such lesser number of days as the parties may
agree upon based on the circumstances of the Proposal) after
Lender's receipt of the Proposal, Lender shall be deemed to have
rejected the Proposal. All Loans from Lender to Borrower shall be
made at Lender's sole and absolute discretion, and Lender may
decline to accept any Proposal that is the subject of a Commitment
for any reason or for no reason. Lender shall have no obligation
to make any Loan except pursuant to and in accordance with the
terms and conditions of this Loan Agreement and a written
Commitment made to Borrower with respect to a specific Portfolio
or, in the case of a Forward Flow Agreement, the Portfolios
subject thereto. Any Commitment delivered by Lender to Borrower
may be withdrawn by Lender for any reason at any time prior to
TCSI's submission of a written and binding bid to the respective
Asset Seller for the purchase of the related Portfolio or, in the
case of a Forward Flow Agreement, the related Portfolios. For the
purposes of this Section 1.3(b)(i), if an Asset Seller permits use
of an online bid, then such online bid shall be considered a
written bid.
(ii) In the case of a Forward Flow Agreement that is the
subject of a Commitment, so long as no Event of Default has
occurred and is continuing and subject to the conditions precedent
to Loans contained in Section 1.7, Lender agrees to make Loans to
finance all of Borrower's purchases of Portfolios from TCSI
related to such Forward Flow Agreement; provided, however, that
Lender may decline to make a Loan with respect to a Portfolio
related to such a Forward Flow Agreement if Lender provides TCSI
with timely notice sufficient to enable TCSI to decline to
purchase such Portfolio in accordance with the terms of such
Forward Flow Agreement. To facilitate the making of each Loan
under a Forward Flow Agreement, Borrower will submit to Lender
information on the related Portfolio in the same format as a
Proposal as early as possible prior to the closing date related to
such Portfolio but no additional Commitment shall be required by
Lender with respect to such information.
Section 1.4 The Notes. Each Loan shall be evidenced by a Note duly
executed by Borrower. Each Note shall bear interest from the applicable
Borrowing Date, represent a borrowing from the Borrowing Date and shall mature
on the respective Maturity Date. Payments on the Notes will be made in
accordance with Section 1.10 and Section 2.2. Borrower shall maintain, or cause
to be maintained a register in the form attached as Exhibit D. Upon surrender of
a Note by the holder thereof for registration of transfer, Borrower shall
execute one or more replacement Notes in an aggregate principal amount equal to
that of the surrendered Note, issued to, and registered in the name of, the
transferee holder(s); provided that, in any event, Borrower shall have no
liability to any party in connection with the form or substance of the register.
Section 1.5 Financed Amount. Lender will not make any Loan in an
original principal amount greater than [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
of the Total Cost of the related Portfolio.
Section 1.6 Interest.
(a) Fixed Interest. Fixed Interest will accrue on the unpaid
principal balance of each Note from the applicable Borrowing Date, at
the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], and is
payable in accordance with Section 2.2 commencing on the Distribution
Date occurring in the first calendar month following the applicable
Borrowing Date. If
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available Collections from the related Portfolio on the first four
Distribution Dates following the Borrowing Date with respect to a Loan
are insufficient to pay the accrued Fixed Interest, such accrued but
unpaid Fixed Interest shall be added to the principal amount of the
respective Note, effective as of the Distribution Date on which such
Fixed Interest is not paid; provided, however, that beginning on the
fifth Distribution Date following the Borrowing Date for such Loan,
Fixed Interest (including any accrued but unpaid Fixed Interest) shall
be due and payable regardless of the sufficiency of Collections. Any
payment of Fixed Interest made by Borrower from funds other than
Collections from the related Portfolio shall increase the Borrower's
Contribution with respect to such Portfolio. Fixed Interest will be
computed on the basis of the actual number of days principal remains
unpaid and a 360-day year.
(b) Minimum Cash Return Interest. Minimum Cash Return Interest
will also be paid on each Loan, to the extent of available Collections
from the related Portfolio, in accordance with Section 2.2(c)(viii).
(c) Default Interest. Upon the occurrence of an Event of Default,
Fixed Interest shall accrue at the lesser of (i) [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] per annum or (ii) the maximum
interest rate permitted by law (hereinafter referred to as the "DEFAULT
RATE").
Section 1.7 Conditions to Loan Advances; Loan Closings. This Loan
Agreement shall be effective upon the execution and delivery by Borrower, Lender
and Servicer; provided, however, that the obligation of Lender to advance any
Loan hereunder is subject in each case to the satisfaction or waiver of the
following conditions precedent on or before the applicable Borrowing Date:
(a) Conditions to Initial Loan Advance. The obligation of Lender
to advance the initial Loan hereunder is subject in each case to the
satisfaction or waiver of the following conditions precedent on or
before the applicable Borrowing Date:
(i) Loan Documents. All of the Loan Documents shall have been
fully executed on behalf of the applicable parties, including,
without limitation, a Note with respect to such Loan.
(ii) Certified Resolutions. Borrower and Servicer shall have
delivered to Lender certified copies of resolutions or other
evidence of corporate action authorizing the execution, delivery
and performance of the Loan Documents (including the borrowing of
Loans subsequent to the initial Loan) and the acquisition of
Portfolios (including Portfolios with respect to Loans subsequent
to the initial Loan).
(iii) Opinions. Lender shall have received opinions from
Borrower's counsel regarding the existence of Borrower and
Servicer, their corporate authority to enter into the Loan
Documents, the enforceability of the Loan Documents under
Minnesota law and the creation and perfection of Lender's security
interest in the Collateral.
(iv) Financing Statements. Lender shall have received UCC-1
financing statements to be filed with the Secretaries of State of
South Dakota and Delaware with respect to the Collateral, naming
(i) Borrower as debtor and Lender as secured party with respect to
Collateral, and (ii) TCSI as debtor,
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Borrower as secured party and Lender as assignee of the secured
party, with respect to the "Conveyed Property" (as defined in each
of the TCSI Account Purchase Agreement and the Converted Accounts
Agreement).
(v) Borrower and Servicer Organizational Documents. Lender
shall have received the following with respect to Borrower and
Servicer: (A) recent Good Standing Certificate issued by the
Secretary of State of the State of Delaware, (B) certificate of
incorporation, as amended, certified by the Secretary of State of
the State of Delaware, and (C) current by-laws, certified by an
authorized officer.
(vi) Credit and Collection Policy. Servicer shall deliver to
Lender a true, correct and complete copy of the Credit and
Collection Policy.
(b) Conditions to All Advances. The obligation of Lender to
advance each Loan hereunder is subject in each case to the satisfaction or
waiver of the following conditions precedent on or before the applicable
Borrowing Date:
(i) Proposal and Commitment. Borrower shall have delivered to
Lender a Proposal relating to the requested Loan, duly executed by
an authorized officer, and the Proposal shall have been accepted
and agreed to by Lender by the issuance of its Commitment.
(ii) Note. Borrower shall have executed and delivered to
Lender a Note with respect to such Loan.
(iii) Officer's Certificates. Borrower shall have caused an
authorized officer to deliver to Lender a certification to Lender
that as of such Borrowing Date, that no Event of Default exists
and that there exists no condition, event or act which, with the
giving of notice or passage of time, or both, would constitute an
Event of Default, and Servicer shall have caused an authorized
officer to deliver to Lender a certification to Lender that as of
such Borrowing Date, that no Servicer Termination Event exists and
that there exists no condition, event or act which, with the
giving of notice or passage of time, or both, would constitute a
Servicer Termination Event.
(iv) Asset Purchase Agreement Documentation. Lender shall
have received all information and copies of all documents relating
to the respective Asset Purchase Agreement as Lender shall
reasonably request.
(v) Portfolio Budget. Borrower shall have delivered to Lender
the Portfolio Budget for the applicable Portfolio.
(vi) No Default. As of such Borrowing Date, there shall exist
no Event of Default and no condition, event or act which, with the
giving of notice or passage of time, or both, would constitute an
Event of Default.
(vii) Representations and Warranties. All representations and
warranties of Borrower and Servicer contained herein shall be true
and correct in all material respects on such Borrowing Date, with
the same force and effect as though such representations and
warranties had been made at such time except to
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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 Lender.
(viii) Acquisition of Portfolio by Borrower. TCSI and the
Asset Seller shall have performed all of their respective
obligations under the respective Asset Purchase Agreement as of
the respective Borrowing Date. Contemporaneously with the closing
of the Loan, TCSI shall pay the purchase price of the Portfolio
and the Asset Seller shall transfer the Portfolio to TCSI pursuant
to the terms of such Asset Purchase Agreement, free and clear of
all liens, claims and encumbrances, and TCSI shall transfer the
Portfolio and TCSI's rights under the Asset Purchase Agreement to
Borrower pursuant to the terms of the TCSI Account Purchase
Agreement.
(ix) Delivery of Documents. Borrower shall have delivered to
Lender, or Lender's agent, the original copies of all Account
Documents relating to the Assets in such Portfolio then in its
possession that are Chattel Paper or Instruments, and will
immediately deliver (or cause the Asset Seller to deliver) upon
its receipt (or right to receive) any additional Account Documents
that are Chattel Paper or Instruments as may be reasonably
requested by Lender; provided, however, that all such Instruments
must be delivered to Lender or Lender's agent within the time
necessary for Lender to obtain a first priority perfected purchase
money security interest therein. To the extent that Servicer holds
any such Chattel Paper or Instruments, Servicer shall hold them in
a custodial capacity as bailee for Borrower.
(x) Compliance with Agreements. Borrower shall have otherwise
complied with all of the terms and conditions of the Loan
Documents.
(c) Closing. Unless otherwise agreed by Borrower and Lender, the
closing of each Loan will take place in Minneapolis, Minnesota, upon
satisfaction of the conditions precedent set forth in this Section 1.7.
Section 1.8 Repayment of Principal, Fixed Interest, Minimum Cash Return
Interest and Lender's Residual. Borrower covenants to repay principal amounts
advanced under the Notes and Fixed Interest thereon, and to pay Minimum Cash
Return Interest and the Lender's Residual to the extent of available
Collections, as more particularly set forth herein.
Section 1.9 Survival of Obligation to Pay the Lender's Residual.
Borrower's obligation to pay Minimum Cash Return Interest, if any, and the
Lender's Residual with respect to a Loan shall not be discharged upon payment in
full of the principal amount of the respective Note, and Borrower's obligation
to pay the Lender's Residual and Minimum Cash Return Interest, if any, with
respect to a Loan shall continue unless and until such time as the following
events have occurred: Borrower has disposed of substantially all of the Assets
in a Portfolio through one or more Unconverted Account Sales, Whole Loan Sales
or Securitizations (and the net proceeds thereof have been distributed in
accordance with Section 2.2 of this Loan Agreement) and (i) Borrower has prepaid
the Lender's Residual, if any, with respect to such Portfolio, in accordance
with terms of Section 1.10 of this Loan Agreement or (ii) Lender has purchased
the Borrower's remaining interest, if any, in the Portfolio in accordance with
the terms of Section 1.10 of this Loan Agreement.
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Section 1.10 Prepayment.
(a) Prepayment of Principal and Fixed Interest. Except as provided in
Section 2.2 with respect to the application of Collections or in connection with
a Compliance Prepayment, principal may not be prepaid in whole or in part. If
and to the extent Borrower makes a Compliance Prepayment, the amount of such
Compliance Prepayment will be added to Borrower's Contribution on account of the
respective Loan, effective as of the payment of such Compliance Prepayment.
(b) Prepayment Offers. The occurrence of any of (i), (ii) or (iii),
below, is referred to herein as a "PREPAYMENT OFFER":
(i) if, beginning on the earlier of (A) the date that is six (6)
full months after the Maturity Date or (B) the date on which principal,
Fixed Interest and Minimum Cash Return Interest, if any, are paid in
full, Borrower gives written notice to Lender that Borrower desires to
initiate the Prepayment Option with respect to the respective Loan;
(ii) if, beginning on the earlier of (A) the date that is six (6)
full months after the Maturity Date or (B) the date on which principal,
Fixed Interest and Minimum Cash Return Interest, if any, are paid in
full, Lender gives written notice to Borrower that Lender desires to
initiate the Prepayment Option with respect to the respective Loan; or
(iii) if Lender gives written notice to Borrower that Lender
desires to initiate the Prepayment Option with respect to the
respective Loan pursuant to Section 6.3.
The date on which Lender receives notice of the Prepayment Offer pursuant to
subparagraph (i) or initiates the Prepayment Offer pursuant to subparagraph (ii)
is referred to herein as the "PREPAYMENT NOTICE DATE."
(c) Prepayment Option Procedures.
(i) Within ten (10) Business Days after the Prepayment Notice
Date, Borrower shall deliver to Lender a schedule setting forth in
detail its written good faith estimate of the future net cash flows
from the respective Portfolio as of the Prepayment Notice Date (the
"PORTFOLIO PREPAYMENT Schedule"). The Portfolio Prepayment Schedule
shall also show the present value of the Lender's Residual with respect
to such Loan (the "RESIDUAL PREPAYMENT VALUE") and the present value of
the Borrower's Residual (the "BORROWER'S BUY-OUT VALUE"). The Residual
Prepayment Value and the Borrower's Buy-Out Value must be calculated
using the same cash flow and discount rate.
(ii) Within ten (10) Business Days after Lender's receipt of the
Portfolio Prepayment Schedule, Lender shall give notice to Borrower
that on a date that is not more than twenty (20) Business Days
following the date such notice is given to Borrower (the "PREPAYMENT
DATE"), Lender will, at Lender's sole discretion and option (such
option, the "PREPAYMENT OPTION"), either:
(A) require Borrower to pay Lender the Residual Prepayment
Value as payment in full of Borrower's obligation to pay the
Lender's Residual on account of the respective Assets; or
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(B) purchase or have Lender's designee purchase Borrower's
remaining interest in the Portfolio for an amount equal to the sum
of (1) any unpaid Borrower Advances, (2) the unpaid balance of the
Borrower's Contribution, (3) the unpaid balance of any amounts due
to Borrower pursuant to Section 2.2(c)(vii), (4) the unpaid
balance of any amounts due to Borrower pursuant to Section
2.2(c)(x), and (5) Borrower's Buy-Out Value.
(iii) All payments under this Section 1.10 shall be made in
immediately available funds. Following prepayment of Lender's Residual
in accordance with Section 1.10(c)(ii)(A), all rights and obligations
of Lender with respect to such Portfolio shall terminate. Upon
completion of the purchase by Lender pursuant to Section
1.10(c)(ii)(B), all rights and obligations of Borrower with respect to
the related Collateral and Loan (including all obligations with respect
to payment of principal, Fixed Interest, Minimum Cash Return Interest
and Lender's Residual in connection with the related Note and all
obligations to fund new charges and advances with respect to any Credit
Card Receivables) shall terminate.
(iv) All parties agree to execute, deliver, and file such
documents as may be reasonably necessary to evidence the transactions
contemplated by Section 1.10(c)(ii)(A), including, without limitation,
the execution, delivery and filing of any lien assignments or
termination statements or any other documents reflecting the release of
liens or encumbrances granted pursuant to the Security Agreement. All
parties agree to execute, deliver, and file such documents as may be
reasonably necessary to evidence the transactions contemplated by
Section 1.10(c)(ii)(B), including, without limitation (a) appropriate
instruments to transfer Borrower's remaining interest in the Portfolio
to Lender or Lender's designee, and (b) instruments reasonably deemed
necessary by the parties with respect to servicing transfer
arrangements, including agreements by Lender or Lender's designee with
respect to obligations to the issuing banks in connection with the
funding of new charges and advances with respect to Credit Card
Receivables.
ARTICLE II
COLLATERAL
Section 2.1 Perfection of Lender's Security Interest. Borrower shall
take all commercially reasonable steps necessary to perfect Lender's security
interest in the Collateral, including, without limitation, (i) appropriate
notations on the computer records with respect to the Portfolios, (ii) physical
delivery of Account Documents with respect to the Assets that are Chattel Paper
or Instruments to Lender or its designated agent, or (iii) filing or recording
of any assignment, financing statement, notice or other writing. Borrower agrees
to execute, acknowledge and deliver all such further and additional instruments
and documents, and take such other actions as may be reasonably necessary or as
Lender or its counsel may reasonably request from time to time in order to
preserve, perfect and maintain Lender's rights hereunder and under the Security
Agreement.
Section 2.2 Administration of Collateral and Collections.
(a) Payment and Receipt Processing. Obligors will be instructed to
submit payments directly to the post office address for the Lockbox.
Pursuant to the Lockbox Agreement, the Lockbox Bank will collect the
contents of the post office box each
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Business Day and will endorse all checks, money orders, and other
negotiable instruments of payment contained in such mail and deposit
such amounts in the Deposit Account; provided, however, that all
payments unable to be processed by the Lockbox Bank will be sent to
Servicer for research and identification and will then be deposited
directly into the Deposit Account within five (5) Business Days after
receipt by Servicer. Borrower shall direct that any and all other
Collections from parties other than Obligors (e.g. the net proceeds of
Unconverted Account Sales, Whole Loan Sales, Securitizations or putback
rights against Asset Sellers, etc.) shall be deposited into the
Disbursement Account. Each Business Day, the Lockbox Bank will transfer
available funds in the Deposit Account (net of NSF checks and refunds)
to the Disbursement Account. Collections remaining in the Disbursement
Account after application pursuant to subsection (b) below will be
transferred to the Collection Account pursuant to the provisions of the
Paying Agent Agreement.
(b) Funding of Purchases and Advances on Credit Card Receivables.
(i) On each Business Day, Servicer will provide Lender and
Payment Processing Audit Firm with the information contained in
the Daily Report. Upon confirmation by the Payment Processing
Audit Firm that the amounts are correct in the form of the Daily
Verification Report, Servicer shall instruct the Paying Agent to
disburse amounts from the Disbursement Account to the applicable
credit card issuing bank, all amounts due on such day with respect
to Credit Card Receivables in respect of the sum of (A) cash
advances and credit card purchases, (B) re-presentments and (C)
miscellaneous adjustments requiring funding, net of the sum of (x)
return merchandise credits, (y) chargebacks and (z) miscellaneous
credit advices ("FUNDING REQUIREMENTS") according to the Daily
Report and the Daily Verification Report.
(ii) If amounts available in the Disbursement Account are
insufficient to make the payment referred to above, the Servicer
shall advance such amount in accordance with the terms of its
agreement with the applicable credit card issuing bank (each such
advance, a "FUNDING ADVANCE"). To the extent that the Servicer
fails to make Funding Advances as and when required, Lender may
make such Funding Advances.
(iii) On each Business Day on which one or more unreimbursed
Funding Advances exists, Lender shall instruct the Bank to
disburse to the party which made the Funding Advance amounts then
on deposit in the Collection Account, in each case without respect
to Portfolio, in an amount equal to unreimbursed Funding Advances.
(iv) At the same time Servicer delivers the Remittance
Report, Servicer shall provide Lender and Borrower with a summary
of the applications of Collections and amounts on deposit in the
Collection Account pursuant to this subsection (b) during the
preceding calendar month. To the extent that Collections with
respect to any Portfolio in excess of the Funding Requirements for
such Portfolio were applied to meet the Funding Requirements of
one or more other Portfolios, Borrower shall deposit into the
Collection Account an amount equal to such excess (such deposit, a
"BORROWER ADVANCE").
(c) Distribution of Payment and Collections. All amounts in the
Collection Account received on account of each Portfolio as of the end
of the previous calendar
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month, together with all Borrower Advances in the Collection Account
made on account of each such Portfolio with respect to the prior
calendar month, and together with any interest earned on such amounts,
will be distributed by the Bank from the Collection Account pursuant to
Lender's instructions on each Distribution Date in the following order,
as more particularly specified in a Remittance Report as reasonably
approved by Lender:
(i) First, to the Lockbox Bank, the Paying Agent and the
Bank, the pro rata portion allocated to such Portfolio of any fees
due from Borrower or Lender for their services pursuant to the
terms of the Lockbox Agreement, the Paying Agent Agreement and the
Blocked Account Agreement (and, if amounts in the Collection
Account with respect to the related Portfolio are not sufficient
to pay such fees with respect to such Portfolio, the Borrower will
be required to advance the difference and be entitled to repayment
of such amounts on a priority basis under this subsection from
Collections with respect to the related Portfolio received on
subsequent days);
(ii) Second, to Borrower, any unpaid Borrower Advances made
with respect to such Portfolio made pursuant to subsection (b)
above and any unreimbursed payments made by Borrower with respect
to such Portfolio pursuant to subsection 2.2(c)(i) above on any
previous Distribution Dates;
(iii) Third, to Servicer, all accrued but unpaid Servicing
Fees with respect to such Portfolio (and, if amounts in the
Collection Account with respect to the related Portfolio are not
sufficient to pay such Servicing Fees, the Servicer will be
entitled to repayment of such Servicing Fees on a priority basis
under this subsection from Collections with respect to the related
Portfolio received on subsequent days);
(iv) Fourth, to Lender in an amount equal to accrued but
unpaid Fixed Interest with respect to such Loan and any collection
expenses owing to Lender pursuant to Section 5.11 for such Loan;
(v) Fifth, to the applicable Person, to pay the reasonable
administrative and operating expenses customary for limited
purpose entities similar to Borrower;
(vi) Sixth, to Lender, until such time as Lender has received
the balance of principal with respect to such Loan;
(vii) Seventh, to Borrower in an amount equal to accrued but
unpaid interest on Borrower's Contribution with respect to such
Loan at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***] per annum, compounded and accrued monthly on an
actual/360 basis;
(viii) Eighth, to Borrower, until such time as Borrower has
received the balance of Borrower's Contribution with respect to
such Loan;
(ix) Ninth, to Lender, until such time as Lender has received
an amount ("MINIMUM CASH RETURN INTEREST") equal to the positive
difference (if any) between an amount equal to 5% of the original
principal amount of such
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Loan and the amount of Fixed Interest received by Lender on
account of such Loan;
(x) Tenth, to Borrower, until such time as Borrower has
received an amount equal to the positive difference (if any)
between an amount equal to 5% of the Borrower's Contribution and
the amounts received by Borrower with respect to Section
2.2(c)(vii) on account of such Loan;
(xi) Eleventh, as more particularly set forth below:
(A) Prior to IRR to Lender of [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION***]. Until such time as Lender achieves an
IRR of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], any
remaining Collections with respect to such Portfolio will be
distributed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
to Lender and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***] to Borrower.
(B) Prior to IRR to Lender of [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION***]. After such time as Lender achieves an
IRR of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] and
until such time as Lender achieves an IRR of [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***], any remaining Collections
with respect to such Portfolio will be distributed 75% to Lender
and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] to
Borrower.
(C) After IRR to Lender of [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION***]. After such time as Lender achieves an
IRR of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], any
remaining Collections with respect to such Portfolio will be
distributed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
to Lender and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***] to Borrower.
Amounts required to be paid to Lender pursuant to Section 2.2(c)(xi)
above are referred to as the "LENDER'S RESIDUAL" and the amounts that
Borrower is entitled to retain pursuant to Section 2.2(c)(xi), above
are referred to as the "BORROWER'S RESIDUAL."
(d) Allocation of Certain Amounts to Shortfalls. To the extent
(and only to the extent) that there is a shortfall of Collections on a
Distribution Date with respect to amounts due under subsections
2.2(c)(iv) and 2.2(c)(vi) with respect to the related Loan, and on the
same Distribution Date Borrower is entitled to receive a portion of
Collections pursuant to Section 2.2(c)(vii), (viii), (x) or (xi) on
account of one or more different Portfolios, Borrower shall be required
to direct Lender in the Remittance Report to apply such excess
Collections to such shortfall. Such amounts shall be deemed to be paid
from Borrower's funds and shall be added to Borrower's Contribution.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce Lender to make Loans under this Loan Agreement, each of
Borrower and Servicer severally makes the following representations and
warranties as to itself, which shall survive the execution and delivery of the
Loan Documents and shall be deemed to be made as of each Borrowing Date and
shall continue in full force and effect until payment in full by Borrower of all
amounts payable hereunder or under the Loan Documents.
Section 3.1 Corporate Existence and Power. Each of Borrower and
Servicer is a duly organized and validly existing corporation in good standing
under the laws of the State of Delaware with all requisite power and authority
to own and operate its property and assets, to conduct the businesses in which
it is engaged or proposes to engage, and to execute, deliver, and
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perform its obligations under the Loan Documents to which it is a party.
Borrower does business only under the name of Credit Store Services, Inc.
Section 3.2 Authorization. The execution, delivery and performance of
the Loan Documents by Borrower and Servicer have been duly authorized by all
necessary corporate action. Each of Borrower and Servicer has duly authorized,
executed and delivered the Loan Documents to which it is a party, and each such
Loan Document constitutes its legal, valid and binding obligation, enforceable
against the Borrower or the Servicer, as applicable, in accordance with its
respective terms subject to bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting creditor's rights generally and by general principles
of equity.
Section 3.3 Compliance with Law and Other Agreements. Each of Borrower
and Servicer is not in violation of, or in default under, any terms of its
certificate of incorporation, by-laws or any law or governmental regulation
applicable to it or any agreement to which it is a party, which violation or
default would have a Material Adverse Effect. The execution, delivery, and
performance by Borrower or Servicer of the Loan Documents, the consummation of
the transactions contemplated herein or therein and the compliance with the
terms and provisions hereof or thereof will not contravene any material
provision of any law or regulation to which Borrower or Servicer is subject or
any order or decree of any court of governmental authority applicable to
Borrower or Servicer and will not result in any material breach of or constitute
a default under any indenture, mortgage, deed of trust, agreement or other
instrument to which Borrower or Servicer is a party or by which it or its
properties are bound, or result (except as contemplated by this Loan Agreement
and the Security Agreement) in the creation or imposition of any Lien on any of
the property or assets of Borrower or Servicer. Each of Borrower and Servicer
holds all of the permits, licenses, certificates, consents and other
authorizations of applicable governmental entities required by law to own and
service the Portfolios, the absence of which would have a Material Adverse
Effect.
Section 3.4 Litigation. There are no actions, suits, proceedings, or
investigations pending, threatened against or affecting Borrower, Servicer, any
of their subsidiaries or the Key Principals or any of their respective
properties, nor is there any outstanding judgment, order, writ, injunction,
decree or award affecting Borrower, Servicer, any of their subsidiaries or the
Key Principals before any court or before any federal, state, municipal or other
governmental department, commission, board, bureau or agency, which, either
separately or in the aggregate, is reasonably likely to have a Material Adverse
Effect, and Borrower or Servicer knows of no basis for any such suit,
proceeding, or investigation.
Section 3.5 Ownership; Liens. Beginning on the applicable Borrowing
Date, Borrower has a valid, first priority ownership interest or valid first
perfected security interest in the respective Assets, free and clear of all
Liens other than (i) the Lien in favor of Lender created pursuant to the
Security Agreement, (ii) any Lien in favor of Borrower created pursuant to the
Converted Accounts Agreement, (iii) the lien of taxes not yet due and payable,
and (iv) the lien, if any, of attorneys or others in possession of Collateral
for the purposes of collection.
Section 3.6 No Materially Adverse Contracts. Each of Borrower and
Servicer is not obligated under any contract or agreement or under any law,
regulation or decree which is reasonably likely to have a Material Adverse
Effect.
Section 3.7 Disclosure. The Loan Documents and the certificates,
exhibits and schedules attached thereto or furnished to Lender by Borrower in
connection with the closing of any Loan or Loans, do not contain any untrue
statement of a material fact or omit to state a
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material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading. To the best knowledge of Borrower, except as previously disclosed to
Lender in writing, there is no fact or condition existing as of the date hereof
which has, or in the future is reasonably like to have a Material Adverse
Effect.
Section 3.8 Government Approval. Except for the filing of financing
statements, or as may be provided in the Asset Purchase Agreements, Borrower is
not required to obtain any order, consent, approval or authorization of, or
presently required to make any declaration or filing with any governmental
authority in connection with, the execution and delivery of the Asset Purchase
Agreements and the Loan Documents.
Section 3.9 Collection History. The experience and past results of
Borrower and Servicer, including, without limitation, collections, conversions
and related measures as represented to Lender by Borrower or Servicer prior to
the date hereof, are true and correct in all material respects and Borrower or
Servicer has not failed to disclose to Lender any material fact that is
necessary to make such representations, in the light of the circumstances under
which they were made, not misleading.
Section 3.10 Limited Authority over Lockbox and Collection Account.
Borrower has no authority to withdraw funds from the Lockbox or the Collection
Account.
Section 3.11 Credit Collection Policy. The Credit and Collection Policy
delivered to Lender is true, correct and complete in all material respects,
except for such changes from and after the date of this Loan Agreement that
Servicer is not required to provide to Lender pursuant to Section 4.3(d).
ARTICLE IV
LOAN SERVICING
Section 4.1 Servicer. The servicing, administering, and collection of
the Assets shall be conducted by the Person designated as the Servicer hereunder
("SERVICER") from time to time in accordance with this Section 4.1. TCSI is
hereby designated as, and hereby agrees to perform the duties, obligations and
covenants of, Servicer pursuant to the terms of this Loan Agreement and the
other Loan Documents. Servicer shall be entitled to receive Servicing Fees from
Collections received on account of each particular Portfolio as provided in the
applicable Proposal and Section 2.2(c). In addition, Servicer shall be entitled
to a priority interest in all Collections to repay Funding Advances it was
obligated to make under Section 2.2(b) and a priority interest in Collections
from the related Portfolio with respect to fees advanced by Servicer pursuant to
Section 2.2(c).
Section 4.2 Replacement Servicer. If TCSI is terminated as Servicer
pursuant to Section 4.5 below, Borrower may enter into a new servicing agreement
with a replacement servicer for such Servicing Fees and on such other terms and
conditions as Lender, in its sole discretion, may determine.
Section 4.3 Duties of Servicer.
(a) Unconverted Accounts. Servicer shall manage, administer, and
collect the Unconverted Accounts in accordance with the respective
provisions of the Credit and
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Collection Policy, as in effect from time to time, with the goal of
achieving the projections in the applicable Portfolio Budget, including
(i) performing standard accounting services and general record keeping
services with respect to the Unconverted Accounts, (ii) responding to
any telephone and written inquiries of Obligors regarding the
Unconverted Accounts and (iii) contacting Obligors to effect collection
and doing so by lawful means. Servicer shall use all reasonable efforts
consistent with its current practices to perform the following tasks
with respect to all credit files relating to Unconverted Accounts
purchased by Borrower: (1) identify bankrupt or deceased Obligors, (2)
update or locate current telephone numbers and addresses, and (3) score
and stratify Unconverted Accounts for marketing and credit evaluation.
Servicer shall use reasonable efforts, consistent with its current
practices as described by Servicer to Lender, and subject to Credit
Collection Laws, to cause Borrower's Unconverted Accounts to become
Converted in conformance with the Credit Collection Policy; provided,
however, that upon any Unconverted Accounts Sale, Servicer shall cease
all efforts to Convert such Unconverted Accounts.
(b) Credit Card Receivables. Servicer shall manage, service,
administer, and collect the Credit Card Receivables in accordance with
the respective provisions of the Credit and Collection Policy, as in
effect from time to time, with the goal of achieving the projections in
the applicable Portfolio Budget.
(c) Standard of Care. In performing its duties and obligations
under this Loan Agreement, Servicer will comply with all applicable
Credit Collection Laws and will apply in performing such duties and
obligations, those standards, policies and procedures consistent with
the standards, policies and procedures Servicer applies with respect to
assets owned by Servicer that are similar to the Assets. In performing
its duties and obligations hereunder, Servicer shall maintain all state
and federal licenses, permits and franchises necessary for it to
perform its responsibilities hereunder, and shall not impair the rights
of Borrower or Lender in the Collateral.
(d) Credit and Collection Policy. Servicer will provide Lender and
Borrower with any changes to the Credit Collection Policy that Servicer
deems, in its reasonable discretion, to be material to Borrower and
Lender in light of their respective interests under this Loan
Agreement.
(e) Insurance. Servicer shall maintain an errors and omissions
insurance policy providing coverage in an amount of not less than
$1,000,000 and a fidelity bond in an amount of not less than $100,000,
in such form as is customary for loan servicers acting in respect of
consumer loans on behalf of institutional investors therein. Borrower
and Lender shall be named as additional insureds under such insurance
policy, and as beneficiaries under such bond, and shall be furnished
with not less than thirty (30) calendar days prior written notice
before any amendment or cancellation thereof.
(f) Defend Against Claims Through Servicer. Servicer shall defend
Borrower's and Lender's right, title and interest to and in the
Collateral against all claims of third parties claiming through or
under Servicer.
(g) No Transfers of Assets. Servicer shall not sell, pledge,
assign, or transfer to any other Person, or grant, create, incur,
assume, permit or suffer to exist any Lien on any Collateral owned by
Borrower other than as permitted in this Loan Agreement.
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(h) General. Servicer shall collect all payments due under the
Assets, account for such payments, comply with the Lockbox and
Collection Account procedures, set up a program for collecting data and
records, storing such records, and making reports to Lender and
Borrower with respect to the Collateral and collections on the Assets.
Servicer shall provide the Paying Agent with the Distribution Report
and the Remittance Report, subject to Lender's right to approve the
Remittance Report provided in Section 2.2.
(i) Term. Servicer shall commence servicing each Portfolio of
Assets on the date such Portfolio is acquired by Borrower and shall
continue servicing the Assets in such Portfolio until the earlier of
(i) collection, resolution, disposition or charge-off of all Assets in
such Portfolio to Borrower's and Lender's satisfaction, (ii) earlier
appointment of a new servicer under Section 4.5, (iii) Lender or
Lender's designee purchases Borrower's remaining interest in the
Portfolio pursuant to Section 1.10(c)(ii)(B)(provided that the
termination of such servicing responsibility shall be limited to the
Portfolio purchased by Lender or Lender's designee), or (iv) by written
agreement of Borrower, Servicer and Lender.
Section 4.4 Servicer's Indemnification. Servicer agrees to indemnify,
defend and hold Lender harmless from and against any and all losses, damages,
costs, claims, expenses (including reasonable attorneys fees) and liabilities to
third parties growing out of or resulting from (i) the failure of Servicer to
comply with all applicable Credit Collection Laws; (ii) the actions of any of
the agents, representatives or employees of Servicer taken in connection with
the collection activities with respect to the Assets; (iii) the misapplication
(whether negligent or intentional), misappropriation, conversion or theft of any
part of the Collateral by any officer, employee, agent or representative of
Servicer; (iv) a Servicer Termination Event, or (v) fraud or material
misrepresentation. No indemnification under this Section shall provide recourse
to Servicer for the collectibility of any Asset or repayment of any Loan.
Section 4.5 Termination of Servicer. Notwithstanding the foregoing,
upon the occurrence and continuance of any of the following (a "Servicer
Termination Event"):
(a) Servicer's failure to deliver the Distribution Report to the
required parties within five (5) Business Days of the date that the
Daily Report is required to be delivered pursuant to the Paying Agent
Agreement;
(b) Servicer's failure to deliver the Remittance Report to the
required parties prior to the twenty-fifth (25th) calendar day of the
month in which such Remittance Report is due;
(c) Servicer's failure to make, transfer or deposit, or deliver to
Lender any proceeds or payment required under this Loan Agreement or
any other Loan Document or make a Funding Advance and such failure
remains unremedied for more than five (5) Business Days;
(d) Any breach by Servicer of any covenant, term, agreement or
condition contained in any Loan Document to which it is a party, which
breach has a Material Adverse Effect, and the same shall continue
unremedied for a period of thirty (30) calendar days after the Servicer
has or reasonably should have had notice thereof (provided that such
thirty (30) calendar day period shall only be applicable if Servicer
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uses diligent efforts during such time to cure such breach) or such
other amount of time permitted for cure that is specifically provided
herein;
(e) Servicer delegates its duties under this Loan Agreement,
except to the extent that Servicer retains responsibility to Borrower
or Lender, as the case may be, for the performance of such duty or to
the extent otherwise permitted hereby;
(f) 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 Servicer, or of a substantial part of the
property or assets of 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, (ii) the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Servicer or for a substantial part
of the property or assets of Servicer or (iii) the winding-up or
liquidation of Servicer; and such proceeding or petition shall continue
undismissed for sixty (60) days or an order or decree approving or
ordering any of the foregoing shall be entered;
(g) Servicer 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
clause (d) above, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator or similar official for
Servicer or for a substantial part of the property or assets of
Servicer, (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;
(h) any representation or warranty made by Servicer in this Loan
Agreement, any certificate, any Distribution Report or any Remittance
Report delivered pursuant to this Loan Agreement shall prove to have
been false or misleading when made in any respect that has a Material
Adverse Effect, and the same shall continue unremedied for a period of
thirty (30) calendar days after the earlier to occur of (i) discovery
by a senior officer of Servicer and (ii) the date on which written
notice thereof, requiring the same to be remedied, shall have been
received by a senior officer of Servicer (provided that such thirty
(30) calendar day period shall only be applicable if Servicer uses
diligent efforts during such time to cure such breach);
(i) the occurrence and continuance of an Event of Default.
Lender may notify Servicer in writing that all future servicing of the Assets
shall be undertaken by a new Servicer designated by Lender (which new Servicer
may, but need not, be Lender (or its designee)). Upon receipt of such written
notice Servicer shall terminate its activities as Servicer hereunder and
facilitate as quickly as commercially practicable, the transition of the
performance of such activities to the new Servicer, and the new Servicer shall
assume each and all of Servicer's said obligations to service and administer the
Assets, on the terms and subject to the conditions herein set forth (including
the obligation to fund new purchases and advances with respect to the Credit
Card Receivables pursuant to Section 2.2(b)) and Servicer shall use its best
efforts to assist the new Servicer in assuming such obligations. Upon Lender's
request following the termination of Servicer hereunder, Servicer shall refer
inquiring Obligors to a telephone
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number provided by Lender or Lender's designee and shall forward all
correspondence received from Obligors to Lender or Lender's designee within
three (3) Business Days following Servicer's receipt of such correspondence. If
Servicer disputes the occurrence of a Servicer Termination Event, Servicer may
take appropriate action to resolve such dispute; provided that Servicer must
terminate its activities hereunder as Servicer and must allow the new Servicer
to perform such activities on the date specified by Lender, notwithstanding the
commencement or continuation of any proceeding to resolve the aforementioned
dispute; and provided, further, that once notified by Lender that all future
servicing of the Assets shall be undertaken by the new Servicer, Servicer shall
not be entitled to resume its servicing obligations with respect to such Assets
without the written consent of Lender, notwithstanding that Servicer shall have
remedied and cured Servicer Termination Event giving rise to such assumption of
servicing by the new Servicer.
If TCSI (or any subsequent Person acting as 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 Loan Agreement, including without limitation this Section 4.5.
Section 4.6 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, the power and authority of
TCSI, as initial Servicer (or any subsequent Person acting as the Servicer), to
collect the Assets in the ordinary course of business shall be deemed to be
immediately revoked and terminated, and with or without such general
notification, and, subject to the limitations and requirements of Section 4.3,
the new Servicer shall have the authority to do the following:
(a) issue a receipt to any person obligated to pay any amount on
account of any Asset, 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;
(b) endorse the name of the Borrower, TCSI (as initial Servicer)
or any subsequent Person acting as Servicer (as applicable) upon any
check, draft, instrument, receipt, instruction, or other document or
item, including all items evidencing payment upon any Asset or other
indebtedness constituting Collateral, for which the new Servicer is
hereby granted an irrevocable power of attorney, which grant is coupled
with an interest, or
(c) 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 Lender's security interest in any Collateral,
for which the new Servicer is hereby granted an irrevocable power of
attorney, which is coupled with an interest.
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ARTICLE V
COVENANTS OF BORROWER AND SERVICER
Borrower and Servicer (where applicable), covenants and agrees that
from the date hereof and until payment in full of each Note and of all other
amounts due under this Loan Agreement:
Section 5.1 Business and Existence. Each of Borrower and Servicer will
perform all things necessary to preserve and keep in full force and effect its
corporate existence and use its best efforts to comply in all material respects
with all laws applicable to it. Borrower will not engage in any line of business
other than purchasing Unconverted Accounts from TCSI pursuant to the TCSI
Account Purchase Agreement, acquiring Credit Card Receivables pursuant to the
Converted Accounts Agreement, and holding and disposing of the Assets, without
the prior written consent of Lender, which consent may be withheld for any
reason or no reason. The Borrower will not own assets other than the Assets
(except for cash and contract rights incidental to the operation of Borrower as
contemplated by this Loan Agreement).
Section 5.2 Payment of Obligations and Expenses. Borrower will pay and
discharge all of its indebtedness, obligations and expenses promptly in
accordance with normal terms and practices of its business, before the same
shall become delinquent, as well as all lawful claims for labor, materials and
supplies which otherwise, if unpaid, might become a lien or charge upon its
properties or assets or any part thereof. Borrower shall not be required to pay
any obligation so long as Borrower shall contest, in good faith and at its own
cost and expense, the amount or validity thereof, in an appropriate manner or by
appropriate proceedings which shall operate during the pendency thereof to
prevent the collection of or other realization upon the obligations so
contested, provided that no such contest shall subject Lender to the risk of any
liability. Borrower shall give Lender prompt written notice of any such contest.
Section 5.3 Payment of Taxes and Assessments. Borrower shall pay when
due all taxes, assessments and other governmental charges or levies which become
due and payable by Borrower to any political entity, subdivision or department
thereof under any law now or hereafter in force or effect. Borrower, however,
shall not be required to pay any tax, charge or assessment so long as Borrower
shall contest, in good faith and at its cost and expense, in its own name and
behalf, the amount or validity thereof, in an appropriate manner or by
appropriate proceedings which shall operate during the pendency thereof to
prevent the collection of or other realization upon the tax, assessment, levy or
charge, so contested, provided that no such contest shall subject Lender to the
risk of any liability. Borrower shall give Lender prompt written notice of any
such contest.
Section 5.4 Notice of Event of Default. As soon as practicable after an
officer of Borrower or Servicer has knowledge of an Event of Default or any
condition which, with the passage of time could become an Event of Default,
Borrower or Servicer, as the case may be, will furnish Lender with written
notice of the occurrence of any such event or the existence of any such
condition which constitutes or upon written notice or lapse of time could
constitute an Event of Default.
Section 5.5 Asset Information. Borrower and Servicer will provide
Lender sufficient information to allow Lender to make an informed decision with
respect to a Proposal. Such information shall include but not be limited to,
information provided to Borrower by Asset Sellers related to the Assets,
internally generated stratifications and analyses of the Assets, portfolio
write-ups prepared by Borrower, key assumptions used in projecting future cash
flows of the
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Assets and Credit Card Receivables created from the Assets, historical numbers
on the Assets, and proposed Asset Purchase Agreements.
Section 5.6 Asset Information Related to Forward Flow Agreements. For
all Portfolios purchased pursuant to a Forward Flow Agreement, Borrower or
Servicer will submit to Lender a stratification report (by dollars and number of
Assets with percentages for each) containing detailed Asset information for each
Portfolio within ten (10) Business Days after the relevant Borrowing Date. The
form and content of such stratification reports will be as determined by Lender
in its sole but reasonable discretion.
Section 5.7 Other Information. Borrower and Servicer will furnish such
other information regarding the operations, business affairs and financial
condition of Borrower or Servicer or their property or assets (including but not
limited to the Portfolios of Assets) as Lender may reasonably request for the
purpose of determining compliance with the Loan Documents, except that, subject
to Section 5.9, Servicer will not be required to deliver specific asset or
property information and may withhold the identity of other parties.
Section 5.8 Right of Inspection. Upon request of reasonable notice by
Lender, Borrower and Servicer shall permit any person designated by Lender, at
Lender's expense, to visit and inspect any of the properties, books and
financial reports of Borrower or Servicer and to discuss its affairs, finances
and accounts all at such reasonable times during ordinary business hours of
Borrower or Servicer and as often as Lender may reasonably request for the
purpose of determining compliance with the Loan Documents, or the status of the
Collateral; provided, however, that Lender will use reasonable efforts to
conduct (or have conducted) any such examination or inspection so as to minimize
disruptions to the operations of Borrower or Servicer.
Section 5.9 Portfolio Acquisition List. Furnish to Lender, no later
than twenty (20) calendar days after each month-end, a list of all Portfolios
acquired by Borrower or its Affiliates during the previous month. Such list
shall be certified by an officer of Borrower or Servicer as to its completeness
and include the following pieces of information: name of Asset Seller; size of
Portfolio; purchase price; and general collateral characteristics.
Notwithstanding the foregoing, Servicer will not be required to deliver specific
asset or property information and may withhold the identity of other parties
other than the Asset Seller.
Section 5.10 Compliance Certificate. Borrower or Servicer will each
deliver to Lender, within forty-five (45) calendar days after the end of each
calendar quarter, a certificate dated as of the end of the quarter in question
and signed by a responsible officer of such party stating (i) that as of the
date thereof no Event of Default has occurred and is continuing or exists, (ii)
that all respective representations and warranties of Borrower and Servicer set
forth in this Loan Agreement remain true and correct as of the date of such
compliance certificate, and (iii) that each has carried out its respective
obligations under this Loan Agreement in all material respects.
Section 5.11 Reimbursement of Collection Expenses. Borrower will
reimburse Lender, upon demand, for any and all costs, including reasonable
attorneys' fees, incurred in collecting any sums payable by Borrower under the
Loan Documents.
Section 5.12 Liens; Other Debt. Each of Borrower and Servicer will not
sell, transfer or assign the Collateral, except as permitted herein, or
contract, create, or incur any Liens upon or grant any security interest in any
of the Collateral, whether now owned or hereafter acquired,
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except (i) the Lien in favor of Lender created pursuant to the Security
Agreement, (ii) any Lien in favor of Borrower created pursuant to the Converted
Accounts Agreement, (iii) the lien of taxes not yet due and payable, and (iv)
the lien, if any, of attorneys or others in possession of Collateral for the
purposes of collection. The Borrower will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than the Loans.
Section 5.13 Consolidation, Merger, Sale of Collateral; Changes to
Organizational Documents. Borrower will not (a) wind up, liquidate, or dissolve
its affairs, (b) enter into any transaction of merger or consolidation or (c)
convey, sell, lease or otherwise dispose of the Collateral or any part thereof,
except in the normal course of collections on the Portfolios or in connection
with an Unconverted Accounts Sale, a Whole Loan Sale or a Securitization
pursuant to Article VII. Borrower will not amend its certificate of
incorporation or by-laws without the prior written consent of Lender, determined
in Lender's reasonable discretion.
Section 5.14 Other Agreements. Borrower and Servicer will not enter
into any agreement containing any provision that would be violated or breached
by the performance of Borrower's or Servicer's obligations under any Loan
Document.
Section 5.15 Use of Loan Proceeds. Borrower will use the proceeds of
the Loans only to pay for the Total Cost of the Portfolios and for no other
purpose.
Section 5.16 Notification of Legal Process. Borrower or Servicer will
promptly notify Lender of any attachment or other legal process levied against
any of the Collateral and any information received by Borrower or Servicer
relative to the Collateral that may materially or adversely affect the value
thereof or the rights and remedies of Lender with respect thereto.
Section 5.17 Transactions with Affiliates. Except for Permitted
Affiliated Transactions, Borrower will not, either directly or indirectly, enter
into any contracts, agreements or transactions, including but not limited to,
brokerage contracts, property management agreements, sales contracts for the
providing of any other goods or services, or the reimbursement or payment of any
fees or expenses with its shareholders, officers or directors or with any of
Borrower's Affiliates (including, without limitation, TCSI) or entities owned in
whole or in part by Borrower or its shareholders, officers or directors without
the prior written consent of Lender, which consent may be withheld for any
reason.
Section 5.18 Annual Financial Statements. (a) No later than one hundred
twenty (120) calendar days after Borrower's fiscal year end, Borrower will
provide to Lender, annual financial statements of Borrower prepared in
accordance with generally accepted accounting principles and reviewed by an
independent public accounting firm acceptable to Lender in its reasonable
discretion and certified as correct by a reliable officer of Borrower. (b) No
later than one hundred twenty (120) calendar days after Servicer's fiscal year
end, Servicer will provide to Lender, audited annual financial statements of
Servicer prepared in accordance with generally accepted accounting principles
and audited by an independent accounting firm acceptable to Lender in its
reasonable discretion and certified as correct by a reliable officer of
Servicer.
Section 5.19 Quarterly Financial Statements. No later than sixty (60)
calendar days after each fiscal quarter of Borrower and Servicer, Borrower and
Servicer will each provide to Lender, financial statements for such quarter of
Borrower and Servicer prepared in accordance with generally accepted accounting
principles and certified as correct by a reliable officer of Borrower and
Servicer, respectively.
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Section 5.20 Single Purpose Entity.
(a) 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.
(b) 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 Assets 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.
(c) Servicing; Fees. The Borrower is contracting with the Servicer
in this Loan Agreement to perform all operations required on a daily
basis to service the Assets. The Borrower will pay Servicing Fees to
the Servicer from Collections from the related Assets as specified in
this Loan 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 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.
(d) Expenses. With the exception of start-up expenses, the
Borrower's operating expenses will not be paid by TCSI.
(e) Mailing Address. The Borrower will have its own separate
mailing address and its own stationery.
(f) Books and Records. The Borrower's books and records will be
maintained separately from those of TCSI.
(g) 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.
(h) 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). The Borrower
shall not maintain joint bank accounts or other depository accounts to
which
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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 Deposit Account or the Disbursement
Account.
(i) Separate Legal Entities. The Borrower acknowledges that all
the parties entering into the Loan Documents, and any other related
documents do so in reliance on the Borrower's identity as a legal
entity separate from TCSI.
(j) 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.
(k) Loans to Other Parties. Except for Borrower Advances, the
Borrower will not make any loans or advances to any third party
(including any Affiliate).
Section 5.21 Charge-off Policy. Without the prior written consent of
Lender, which consent shall not be unreasonably withheld, Servicer will not
change its general policy regarding Charge-offs from the following: Servicer
will charge off Delinquent Credit Card Receivables if payment of not less than
the amount of the required minimum monthly payment has not been received from
the respective Obligor within 180 days after the applicable statement date.
Section 5.22 Unwind Policy. Without the prior written consent of
Lender, which consent shall not be unreasonably withheld, Servicer will not
change its general policy regarding Unwinds from the following: Servicer will
unwind Credit Card Receivables on which the related Obligors (a) fail to make a
payment of not less than the amount of the required minimum monthly payment
within ninety (90) days after the initial statement date and (b) have charges of
less than $10.00 within ninety (90) days after the initial statement date.
Servicer shall be entitled to make exceptions to its general policy for
individual Obligors under the same terms and conditions it makes exceptions for
other cardholders in portfolios of credit card receivables that it owns or
services so long as such exceptions (in the aggregate) are not likely to have a
Material Adverse Effect.
Section 5.23 Re-Aging Policy. Without the prior written consent of
Lender, which consent shall not be unreasonably withheld, Servicer will not
change its general policy regarding re-aging the Credit Card Receivables from
the following: a credit card account is re-aged if (i) either (a) two
consecutive payments of at least the minimum payment due are received or (b) one
payment of at least 6% of the total outstanding balance is received and (ii) the
credit card account has been open for at least six months and is no more than
210 days delinquent at the time of re-aging. Servicer shall be entitled to make
exceptions to its general policy for individual Obligors under the same terms
and conditions it makes exceptions for other cardholders in portfolios of credit
card receivables that it owns or services so long as such exceptions (in the
aggregate) are not likely to have a Material Adverse Effect.
Section 5.24 Minimum Monthly Payment Policy. Without the prior written
consent of Lender, which consent shall not be unreasonably withheld, Servicer
will not change its general policy regarding minimum monthly payments from the
following: the minimum monthly payment due with respect to the Credit Card
Receivables is (a) if the account is not past due, 3% of the total outstanding
balance on the related credit card account and (b) if the account is past due,
the current minimum payment as calculated under clause (a) above plus all past
due
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amounts. Servicer shall be entitled to make exceptions to its general policy for
individual Obligors under the same terms and conditions it makes exceptions for
other cardholders in portfolios of credit card receivables that it owns or
services so long as such exceptions (in the aggregate) are not likely to have a
Material Adverse Effect.
Section 5.25 Credit Line Increase Policy. Without the prior written
consent of Lender, which consent shall not be unreasonably withheld, Servicer
will not change its general policy on credit line increases from the following:
an Obligor can request a credit line increase twenty days after Servicer
receives the first payment. If granted, the increase is limited to 10% of the
credit line with a minimum of $50.00 and a maximum of $150.00. After six months
of consecutive payments (each not less than the minimum payment due), the
Obligor can request another credit line increase of 10% of the credit line with
a minimum of $50.00 and a maximum of $150.00. Additional credit line increases
can then be requested annually, thereafter. Servicer processes credit line
increases only in response to an Obligor request and does not initiate automatic
credit line increases. An account can be over its credit limit at the time the
request is made, but cannot be delinquent. The maximum credit line achievable is
$5,150.00. Servicer shall be entitled to make exceptions to its general policy
for individual Obligors under the same terms and conditions it makes exceptions
for other cardholders in portfolios of credit card receivables that it owns or
services so long as such exceptions (in the aggregate) are not likely to have a
Material Adverse Effect.
Section 5.26 Amendments to TCSI Account Purchase Agreement or Converted
Accounts Agreement. Borrower will not amend either the TCSI Account Purchase
Agreement or the Converted Accounts Agreement without the prior written consent
of Lender in its sole discretion.
Section 5.27 Transactions Involving Collateral. Except for Funding
Advances, Borrower Advances and comparable advances made in the ordinary course
of servicing, neither Borrower, nor any of Borrower's Affiliates (including,
without limitation, TCSI) will lend or invest money in, or borrow from, any
person or entity that purchases all or any portion of the Collateral, or any
interest therein, without the prior written consent of Lender, which consent
shall not be unreasonably withheld.
ARTICLE VI
DEFAULT
Section 6.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT" under this Loan
Agreement:
(a) Payment. Failure to make payments of Fixed Interest,
principal, Borrower Advances or other amounts payable to Lender under
any Note, this Loan Agreement or any other Loan Document within five
(5) Business Days after such payment is due;
(b) Representations and Warranties. Any representation or warranty
made by Borrower in any Loan Document shall prove to be false,
misleading, incomplete or untrue 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 has or
reasonably should have had notice thereof;
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(c) Covenants. Any breach by Borrower of any covenant, term,
agreement or condition contained in any Loan Document, which breach has
a Material Adverse Effect, and the same shall continue unremedied for a
period of thirty (30) calendar days after the Borrower has or
reasonably should have had notice thereof (provided that such thirty
(30) calendar day period shall only be applicable if Borrower uses
diligent efforts during such time to cure such breach) or such other
amount of time permitted for cure that is specifically provided herein;
(d) Bankruptcy or Insolvency. (i) The commencement of any
proceeding under any bankruptcy or insolvency laws by or against
Borrower and such proceeding shall not be dismissed within sixty (60)
calendar days after the date of filing; (ii) Borrower is unable, or
admits in writing its inability, to pay its recourse debts as they
become due; (iii) Borrower makes an assignment for the benefit of
creditors; (iv) Borrower files a petition or applies to any tribunal
for the appointment of a custodian, receiver or any trustee for all or
a substantial part of its assets; (v) Borrower, by any act or omission,
indicates its consent, approval of, or acquiescence in the appointment
of a receiver, custodian or trustee for all or a substantial part of
its property; (vi) Borrower is adjudicated a bankrupt; (vii) Borrower
becomes insolvent however otherwise evidenced; or (viii) Borrower
ceases doing business as a going concern;
(e) Default in or Breach of Other Agreements. The enforcement of
remedies under any other agreement to which Borrower or Servicer is a
party by another party thereto following the occurrence of any default
or event of default under or the breach by the Borrower or the Servicer
thereunder, which enforcement has a Material Adverse Effect;
(f) Judgments. A judgment or order for the payment of money is
entered against Borrower for more than $100,000 and such judgment is
not, within thirty (30) calendar days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal;
(g) Ownership; Liens. The Borrower shall fail for any reason to
have a valid, first priority ownership interest or valid first priority
perfected security interest in the Assets, or if Lender shall fail to
have a first priority perfected security interest in the Collateral;
(h) Key Employees. Any two (2) of the Key Principals shall cease
to be senior officers of the Borrower or TCSI and a successor for such
Person shall not have been hired within six (6) months of any such
Person's cessation of employment, or the Key Principals and their
successors shall fail to devote substantially all of their time to the
operation of TCSI and its Affiliates;
(i) Maximum Principal Balance. The quotient of the outstanding
principal balance of a Loan, divided by the original principal amount
of the Loan, exceeds the respective percentage specified in Schedule 2
of the respective Proposal as of the related Distribution Date
specified in Schedule 2 and such event is not cured within five (5)
Business Days after such Distribution Date.
(j) Minimum Credit Card Receivables. The quotient of the aggregate
dollar amount of Credit Card Receivables in a Portfolio that are less
than ninety (90) days delinquent, divided by the outstanding principal
balance of the Loan, is less than the
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respective percentage specified in Schedule 2 of the respective
Proposal as of the related Distribution Date specified in Schedule 2
and such event is not cured within five (5) Business Days after such
Distribution Date.
(k) Ownership of Borrower. TCSI ceases to own, directly or
indirectly, at least 51% of the capital stock of Borrower;
(l) Servicer Termination Event. The occurrence of a Servicer
Termination Event; or
(m) Loss or Damage. The occurrence of loss, theft, damage or
destruction of any material portion of the Collateral, or the making of
any seizure, unauthorized sale or other unauthorized transfer of any
Collateral.
Section 6.2 Effect of Event of Default. Upon the occurrence of any
Event of Default, Lender may at its option, by written notice to Borrower,
declare the entire unpaid principal balance of all Notes, and all other amounts
due hereunder, immediately due and payable, without presentment, demand, protest
or further notice of any kind, all of which are expressly waived by Borrower. An
Event of Default with respect to any Loan shall be deemed an Event of Default
with respect to all other Loans, it being Borrower's and Lender's intention that
the Loans be fully cross-defaulted. Notwithstanding any Event of Default or
acceleration of the Loans under this Section 6.2, Lender shall apply Collections
or other proceeds of the Assets to pay any accrued but unpaid Servicer Fees and
any Funding Advances made pursuant to this Loan Agreement as set forth Section
2.2 (or any funding advances made pursuant to TCSI's funding obligations with
the credit card issuing banks with respect to the Credit Card Receivables).
Section 6.3 Remedies with Respect to Residual Interest.
Notwithstanding anything to the contrary herein or in the Security Agreement or
any of the other Loan Documents, at any time Lender has received all of its
principal, Fixed Interest and Minimum Cash Return Interest, if any, with respect
to a specific Loan, but has not received all of its Lender's Residual with
respect to such Loan, upon the occurrence of an Event of Default hereunder with
respect to such Loan, Lender may, in its sole discretion and by written notice
to Borrower and without prejudice to any other rights or remedies available
under this Loan Agreement, pursuant to the procedures set forth in Section
1.10(c) and subject to all of the terms and conditions of Section 1.10(c),
require Borrower to pay Lender the Residual Prepayment Value as payment in full
of Borrower's obligation to pay the Lender's Residual on account of the
respective Assets or purchase or have Lender's designee purchase Borrower's
remaining interest in the Portfolio for an amount equal to the balance of the
Borrower's Contribution pursuant to Section 2.2(c)(vii) and Borrower's Buy-Out
Value.
ARTICLE VII
DISPOSITIONS OF ASSETS
Section 7.1 Unconverted Account Sales. From time to time, Borrower may
present Lender with a proposal to sell its rights and title in and to all or a
portion of the Unconverted Accounts in one or more Portfolios (each such sale an
"UNCONVERTED ACCOUNTS SALE"). Such proposal will contain information regarding
estimated transactional costs (including broker's fees, accounting fees, rating
agency fees and legal fees and expenses), together with the estimated present
fair market value of such Unconverted Accounts and/or a "break even" point with
respect to such proposed sale (either of which may be a range). Any Unconverted
Accounts Sale shall be
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subject to the Lender's approval in its sole but reasonable discretion and
determination taking into account Lender's desire to either (i) maximize the
present value of Lender's Residual, or (ii) enhance the likelihood of full
principal and Fixed Interest payment in connection with the Loan. If Lender
consents to an Unconverted Accounts Sale, Borrower shall be entitled to market
such Unconverted Accounts and to sell them to any Person at any price greater
than the minimum price specified by Lender in its approval without seeking
further approval from Lender. The proceeds of an Unconverted Accounts Sale, net
of transactional costs shall be disbursed as provided in Section 2.2. Lender
agrees to release its security interest in the Unconverted Accounts that are the
subject of an Unconverted Accounts Sale and to file appropriate UCC partial
releases of financing statements in connection therewith. If a Retained Interest
exists following the closing of an Unconverted Accounts Sale and the application
of the net proceeds thereof received on the closing date of such sale, Lender
shall continue to be entitled to receive the Lender's Residual with respect to
such Unconverted Accounts.
Section 7.2 Whole Loan Sales. From time to time, Borrower and Servicer
may present Lender with a proposal to sell Borrower's rights and title in and to
all or a portion of the Credit Card Receivables in one or more Portfolios along
with the Servicer's and the card issuing bank's respective interests in the
related credit card account (each such sale a "WHOLE LOAN SALE"). Such proposal
will contain information regarding estimated transactional costs (including
broker's fees, accounting fees, rating agency fees and legal fees and expenses)
together with the estimated present fair market value of such Credit Card
Receivables (taking into account the estimated Charge-offs, servicing costs,
finance charges and other factors) and/or a "break even" point with respect to
such proposed sale (either of which may be a range). Any Whole Loan Sale shall
be subject to the Lender's approval in its sole but reasonable discretion and
determination taking into account Lender's desire to either (i) maximize the
present value of Lender's Residual, or (ii) enhance the likelihood of full
principal and Fixed Interest payment in connection with the Loan. If Lender
consents to a Whole Loan Sale, Borrower shall be entitled to market such Credit
Card Receivables and to sell them to any Person at any price greater than the
minimum price specified by Lender in its approval without seeking further
approval from Lender. The proceeds of a Whole Loan Sale, net of transactional
costs shall be disbursed as provided in Section 2.2. Following the closing of
such sale and the application of the net proceeds thereof, Lender shall have no
Lender's Residual with respect to such Credit Card Receivables. Lender agrees to
release its security interest in the Credit Card Receivables that are the
subject of a Whole Loan Sale and to file appropriate UCC partial releases of
financing statements in connection therewith. If a Retained Interest exists
following the closing of a Whole Loan Sale and the application of the net
proceeds thereof received on the closing date of such sale, Lender shall
continue to be entitled to receive the Lender's Residual with respect to such
Credit Card Receivables.
Section 7.3 Securitizations. From time to time, Borrower may present
Lender with a proposal to sell, transfer or grant a security interest in all or
a portion of the Credit Card Receivables in one or more Portfolios in connection
with a securitization of such Credit Card Receivables (each such transaction a
"SECURITIZATION"). Such proposal will contain information regarding the
estimated present fair market value of such Credit Card Receivables (taking into
account factors including the estimated Charge-offs, servicing costs, finance
charges and other factors), estimated transactional costs (including broker's
fees, accounting fees, rating agency fees and legal fees and expenses), in
connection with the proposed Securitization, the estimated interest cost on the
note or notes issued pursuant to the proposed Securitization (either of which
may be a range), the estimated advance rate (which may be a range), and the
estimated final pay-out date with respect to the proposed Securitization. Any
Securitization shall be subject to the Lender's approval in its sole but
reasonable discretion and determination taking into account Lender's desire to
either (i) maximize the present value of Lender's Residual, or (ii) enhance the
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likelihood of full principal and Fixed Interest payment in connection with the
Loan. If Lender consents to a Securitization, Borrower shall be entitled to
complete any Securitization with or through any Person at any advance rate
greater than the minimum advance rate and any interest costs less than the
maximum interest cost specified by Lender in its approval without seeking
further approval from Lender. The advance rate proceeds of a Securitization, net
of transactional costs shall be disbursed as provided in Section 2.2. Lender
agrees to release its security interest in the Credit Card Receivables that are
the subject of a Securitization and to file appropriate UCC partial releases of
financing statements in connection therewith. If a Retained Interest exists
following the closing of a Securitization and the application of the net
proceeds thereof on the closing date of such Securitization, Lender shall
continue to be entitled to receive the Lender's Residual with respect to such
Credit Card Receivables.
Section 7.4 Retained Interests. In connection with any Unconverted
Accounts Sale, Whole Loan Sale or Securitization, Lender and Borrower agree that
the "RETAINED INTEREST" shall be the difference, if any, between the present
fair market value of the Assets being sold (or otherwise transferred) and the
advance rate, or the sale price, as the case may be, received by Borrower in
connection therewith. The Retained Interest shall be used to determine the
Lender's Residual and the Borrower's Residual with respect to the Assets being
sold (or otherwise transferred).
ARTICLE VIII
DEFINITIONS
For purposes of this Loan Agreement, the following terms shall have the
following meanings:
"ACCOUNT DOCUMENTS" shall mean customer agreements, notes,
security agreements, financing statements, and such other evidences of
indebtedness or documents and electronic tapes relating to the Assets
in the Portfolios, provided, however, that credit card account
agreements with respect to any Credit Card Receivables in the
Portfolios are not the property of Borrower and shall not be considered
part of the Account Documents.
"AFFILIATE" shall mean, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract or otherwise.
"ASSETS" shall mean (a) non-performing consumer debt obligations,
consisting principally of charged off consumer credit and accounts
receivable, that are identified in a Proposal and are made subject to
the Loan Documents, and including any amendments, modifications,
replacements or renewals of such consumer debt obligations and (b)
Credit Card Receivables with respect to Assets that have been
Converted.
"ASSET PURCHASE AGREEMENT" shall mean an agreement under which
TCSI has purchased Assets from an Asset Seller.
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"ASSET SALE FEE" shall mean the asset sale fee agreed upon by Borrower
and Servicer and approved by Lender at the time of Borrower's acquisition
of each Portfolio as detailed in Schedule 1 of the related Proposal.
"ASSET SELLER" shall mean the Person from whom Borrower acquires
Assets.
"BANK" shall mean Xxxxx Fargo Bank Minnesota, National Association, and
any successor under the Blocked Account Agreement.
"BLOCKED ACCOUNT AGREEMENT" shall mean that certain Blocked Account
Agreement dated as of even date herewith among Borrower, Lender and the
Bank, as such agreement may be amended, restated, replaced or other
otherwise modified from time to time
"BORROWER ADVANCE" shall have the meaning contained in Section 2.2.
"BORROWER'S BUY-OUT VALUE" shall have the meaning set forth in Section
1.10.
"BORROWER'S CONTRIBUTION" shall mean with respect to a particular Loan,
the sum of (a) Borrower's financial contribution toward payment of the
Total Cost with respect to the related Portfolio, (b) the amount of any
Compliance Prepayments paid on account of such Loan, and (c) any other
Fixed Interest and principal paid on account of such Loan from funds other
than Collections from the related Portfolio in accordance with Section
2.2(d).
"BORROWER'S RESIDUAL" shall have the meaning contained in Section
2.2(c).
"BORROWING DATE" with respect to any Loan shall mean the date of
funding of such Loan.
"BUSINESS DAY" shall mean any day other than a Saturday or Sunday, or a
date on which Lender, Borrower or commercial banks in the States of
Minnesota and South Dakota generally are closed for regular business.
"CHARGE-OFF" shall mean a Credit Card Receivable that is charged off
and that has a Z status placed on it through the First Data Resources
System or other third party processor.
"CHATTEL PAPER" shall mean any "chattel paper," as such term is defined
in the Code, now owned or hereafter acquired by Borrower.
"CLOSING FEES AND EXPENSES" shall mean the broker's fees, legal
expenses and the other fees and expenses agreed upon by Lender and Borrower
for each Loan to be paid on the applicable Borrowing Date and which shall
be included in the Total Cost of each Portfolio.
"CODE" means the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of Minnesota; provided, that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to,
Lender's Lien on any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the
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State of Minnesota, the term "Code" shall mean the Uniform Commercial Code
as from time to time enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to
such provisions.
"COLLATERAL" shall have the meaning set forth in the Security
Agreement.
"COLLECTION ACCOUNT" shall mean Account #0000000000 at the Bank
pursuant to the Blocked Account Agreement.
"COLLECTION FEE" shall mean the collection fee agreed upon by Borrower
and Servicer and approved by Lender at the time of Borrower's acquisition
of each Portfolio as detailed in Schedule 1 of the related Proposal.
"COLLECTIONS" with respect to any Portfolio shall mean all payments
made by Obligors on account of the Assets in such Portfolio, together with
any other collections, income, interest, principal, penalty, late fees,
extension fees, prepayment fees, or other fees on account of such Assets,
any proceeds from the sale or other disposition of such Assets, including
amounts received from any Asset Seller and the proceeds of any Unconverted
Accounts Sale, Whole Loan Sale or Securitization, net of fees and expenses
of the transaction (including broker's fees, accounting fees, rating agency
fees and legal fees and expenses).
"COMMITMENT" shall mean Lender's written acceptance of a Proposal
including any additional terms that Lender may require as a condition to
making the requested Loan, substantially in the form of Exhibit B hereto.
"COMPLIANCE PREPAYMENT" means a prepayment of principal made by
Borrower to the extent that a principal prepayment is required in order for
Borrower to be in compliance with Section 6.1(i) or Section 6.1(j).
"CONVERT" OR "CONVERSION" means the act of causing an Obligor to agree
to convert all or part of the outstanding balance of an Asset that is a
charged off consumer credit account receivable to a current outstanding
balance on a newly issued credit card, the receivables on which will be
sold or transferred to Borrower pursuant to the Converted Accounts
Agreement.
"CONVERTED ACCOUNTS AGREEMENT" shall mean that certain Converted
Accounts/Receivables Sale Agreement of even date herewith between Borrower
and TCSI, as such agreement may be amended, restated, or other otherwise
modified from time to time.
"CREDIT AND COLLECTION POLICY" shall mean those credit, collection,
customer relations and customer service policies and practices and other
written policies and procedures of the Servicer relating to the Unconverted
Accounts and Credit Card Receivables as in effect from time to time.
"CREDIT CARD RECEIVABLE" shall mean "Receivables" as defined in the
Converted Accounts Agreement. A Credit Card Receivable shall not include
any rights in and to the underlying credit card account.
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"CREDIT COLLECTION LAWS" shall mean state and federal laws governing
the business of collecting consumer debt, including without limitation, the
Fair Debt Collection Practices Act, the Federal Consumer Credit Protection
Act and Regulation Z issued thereunder, the Federal Equal Credit
Opportunity Act and Regulation B issued thereunder and the United States
Bankruptcy Code.
"DAILY REPORT" shall have the meaning contained in the Paying Agent
Agreement.
"DAILY VERIFICATION REPORT" shall have the meaning contained in the
Paying Agent Agreement.
"DEFAULT RATE" shall have the meaning contained in Section 1.6(c).
"DELINQUENT" shall mean a Credit Card Receivable on which no payment
has been received more than 30 days past the related statement date.
"DEPOSIT ACCOUNT" shall mean Account #0835014153 maintained at the
Lockbox Bank as more particularly described in the Lockbox Agreement.
"DISBURSEMENT ACCOUNT" shall mean Account #00000000 maintained at the
Paying Agent as more particularly described in the Lockbox Agreement and
the Paying Agent Agreement.
"DISTRIBUTION DATE" shall mean either (i) if the Remittance Report is
delivered to Lender on or before the fourteenth (14th) calendar day of the
month, a date that is on or before the sixteenth (16th) calendar day of
such month (or, if such date is not a Business Day, the next succeeding
Business Day), or (ii) if the Remittance Report is delivered to Lender
after the fourteenth (14th) calendar day of the month, a date that is not
later than two (2) Business Days after Lender's receipt of the Remittance
Report, but in no event later than the twenty-seventh (27th) calendar day
of the month. With respect to any Loan, the first Distribution Date will be
in the first month following the Borrowing Date.
"DISTRIBUTION REPORT" shall mean the Daily Report as it relates to the
Portfolios.
"EVENT OF DEFAULT" shall have the meaning set forth in Article VI.
"FIXED INTEREST" shall have the meaning contained in Section 1.6.
"FORWARD FLOW AGREEMENT" shall mean an Asset Purchase Agreement
pursuant to which TCSI purchases a series of Portfolios over a fixed period
of time at a fixed price.
"FUNDING ADVANCE" shall have the meaning contained in Section 2.2.
"FUNDING REQUIREMENTS" shall have the meaning contained in Section 2.2.
"GOVERNING STATE" shall mean the State of Minnesota.
"INSTRUMENT" shall mean any "instrument," as such term is defined in
the Code, now owned or hereafter acquired by Borrower, wherever located.
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"IRR" shall mean an annual internal rate of return calculated monthly
based on the cash flows received by Lender, provided that for purposes of
such calculation, the cash flow distributed on any Distribution Date shall
be credited as if the same were received on the last day of the calendar
month preceding such Distribution Date. The formula for determining IRR is
more particularly set forth in Exhibit E hereto.
"KEY PRINCIPALS" shall mean Xxxxx Xxxxxxx, Xxxxxxx X. Philippe and
Xxxxxxx X. Angel.
"LENDERS'S RESIDUAL" shall have the meaning contained in Section
2.2(c)(x).
"LIEN" shall mean a lien, security interest, pledge, hypothecation,
collateral assignment, charge, encumbrance, or other right or claim of any
Person other than an unfiled lien for tax accrued but not yet payable
"LOAN" shall have the meaning set forth in Section 1.2 of this Loan
Agreement.
"LOAN DOCUMENTS" shall mean this Loan Agreement and all Notes,
Proposals and Commitments, the Security Agreement, the Converted Accounts
Agreement, the TCSI Account Purchase Agreement, the Lockbox Agreement, the
Paying Agent Agreement, the Blocked Account Agreement and other documents,
instruments or certificates delivered pursuant hereto or in connection
therewith.
"LOCKBOX" shall mean the post office box maintained at the Lockbox Bank
pursuant to the Lockbox Agreement and described therein as the "Lockbox."
"LOCKBOX AGREEMENT" shall mean that certain Amended and Restated
Lockbox Agreement of even date herewith among Borrower, various
subsidiaries of TCSI, Lender, TCSI (individually and as the Servicer), the
Lockbox Bank, the Paying Agent, and lenders of the Borrower's Affiliates,
as such agreement may be amended, restated, other otherwise modified or
replaced from time to time.
"LOCKBOX BANK" shall mean Xxxxx Fargo Bank South Dakota, N.A., and any
successor and any successor under the Lockbox Agreement.
"MANAGEMENT FEE" shall mean the management fee agreed upon by Borrower
and Servicer and approved by Lender at the time of Borrower's acquisition
of each Portfolio as detailed in Schedule 1 of the related Proposal.
Management Fees will not be applicable to Unwinds and Charge-offs after the
date they become such.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any event or
circumstance, a material adverse effect on:
(a) the ability of the Borrower (or applicable party, as the context
requires) to perform its obligations under any Loan Document to which it is
a party;
(b) the validity or enforceability of any Loan Document;
(c) the status, existence, perfection, priority, or enforceability of
any lien or security interest granted to the Lender pursuant to the Loan
Documents; or
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(d) the validity, enforceability or collectibility of the Assets, taken
as a whole.
"MATURITY DATE" shall mean the maturity date for principal and accrued
but unpaid Fixed Interest on each Loan, which shall be the earlier of (i)
the date twenty-four (24) months following the applicable Borrowing Date or
(ii) the date of acceleration of the related Note pursuant to Section 6.2.
"MINIMUM CASH RETURN INTEREST" shall have the meaning contained in
Section 2.2.
"NOTE" shall mean a promissory note substantially in the form of
Exhibit C hereto evidencing a Loan.
"NOTICE" shall have the meaning contained in Section 9.14.
"OBLIGOR" shall mean each signer, co-signer, guarantor or other person
responsible for payment of an Asset.
"ORIGINATION FEE" shall mean the origination fee agreed upon by
Borrower and Servicer and approved by Lender at the time of Borrower's
acquisition of each Portfolio as detailed in Schedule 1 of the related
Proposal.
"OUTSTANDING CREDIT CARD RECEIVABLE BALANCE" shall mean, at any point
in time, the amount contractually owed by the cardholder on the related
Credit Card Receivable.
"PAYING AGENT" shall mean Xxxxx Fargo Bank Minnesota, National
Association, and any successor under the Paying Agent Agreement.
"PAYING AGENT AGREEMENT" shall mean that certain Amended and Restated
Paying Agent Agreement of even date herewith among Borrower, various
Affiliates of the Borrower, Lender, TCSI (individually and as the
Servicer), Xxxxx Fargo Bank South Dakota, N.A., the Paying Agent, and
lenders of the Borrower's Affiliates, as such agreement may be amended,
restated, other otherwise modified or replaced from time to time.
"PAYMENT PROCESS AUDITING FIRM" shall mean McGladrey & Xxxxxx or any
successor appointed as such by Borrower with Lender's consent, which shall
not be unreasonably withheld.
"PERMITTED AFFILIATED TRANSACTIONS" shall mean (i) this Loan Agreement,
(ii) a Securitization approved by Lender pursuant to Section 7.3, (iii)
agreements to pay directors compensation (as directors) in the ordinary
course of business, and (iv) the TCSI Account Purchase Agreement, (v) the
Converted Accounts Agreement, (vi) agreements to pay allocated overhead and
expenses to TCSI, (vii) agreements to pay expenses approved by Lender
related to Whole Loan Sales, Unconverted Accounts Sales and
Securitizations, and (viii) and agreements related to the foregoing.
"PERSON" shall mean any natural person, limited liability company,
corporation, partnership, joint venture, firm, association, trust,
unincorporated organization,
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governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.
"PORTFOLIO" shall mean each pool or grouping of Assets purchased from
time to time by Borrower from an Asset Seller and any Credit Card
Receivables related to Assets that have been Converted, which is financed
in part by a Loan from Lender.
"PORTFOLIO BUDGET" shall mean a strategic budget developed by Borrower
and Servicer and approved by Lender for each Portfolio of Assets,
representing Borrower's good faith estimate of the projected cash inflows
and outflows including, but not limited to, payments on account of Credit
Card Receivables, payments on account of Unconverted Accounts, net proceeds
from Unconverted Accounts Sales, Securitizations and Whole Loan Sales,
funding for purchases and advances on Credit Card Receivables, Servicing
Fees and other fees and expenses.
"PORTFOLIO PREPAYMENT SCHEDULE" shall have the meaning set forth in
Section 1.10.
"PREPAYMENT DATE" shall have the meaning set forth in Section 1.10.
"PREPAYMENT NOTICE DATE" shall have the meaning set forth in Section
1.10.
"PREPAYMENT OFFER" shall have the meaning set forth in Section 1.10.
"PREPAYMENT OPTION" shall have the meaning set forth in Section 1.10.
"PROCESSING FEE" shall mean the processing fee agreed upon by Borrower
and Servicer and approved by Lender at the time of Borrower's acquisition
of each Portfolio as detailed in Schedule 1 of the related Proposal.
Processing Fees will not be applicable to Unwinds and Charge-offs after the
date they become such.
"PROPOSAL" shall mean a written proposal from Borrower to Lender
requesting a Loan in connection with Borrower's purchase of a particular
Portfolio (or a series of Portfolios pursuant to a Forward Flow Agreement),
substantially in the form of Exhibit A hereto.
"QUALIFIED ASSIGNEE" shall mean (i) a financial institution that is not
a business competitor of TCSI with total assets of at least $250,000,000,
or (ii) an assignee that is not a business competitor of TCSI that gives
substantially all decision-making authority with respect to this Agreement
to The Varde Fund IV-A, L.P.
"REMITTANCE REPORT" shall mean a report submitted monthly by Servicer
to Borrower and Lender listing Collections received during such month and
disbursements out of the Collection Account during such month pursuant to
Sections 2.2(b), 2.2(c) and 2.2(d). All such amounts should be identified
by Portfolio.
"RESIDUAL PREPAYMENT VALUE" shall have the meaning contained in Section
1.10.
"RETAINED INTEREST" shall have the meaning contained in Section 7.4.
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"SECURITIZATION" shall have the meaning set forth in Section
7.3.
"SECURITY AGREEMENT" shall mean the Security Agreement in the
form attached hereto as Exhibit F, pursuant to which Borrower shall
assign to and grant Lender a security interest in the respective
Assets and related Collateral, as such agreement may be amended,
restated, other otherwise modified from time to time.
"SERVICER" shall mean TCSI or any successor Servicer appointed
by Lender pursuant to Section 4.5.
"SERVICER TERMINATION EVENT" shall have the meaning set forth in
Section 4.5.
"SERVICING FEES" shall mean the aggregate of the Origination
Fee, Processing Fee, Management Fee, Collection Fee and Asset Sale
Fee.
"TCSI" shall mean The Credit Store, Inc., a Delaware
corporation, and its successors and assigns.
"TCSI ACCOUNT PURCHASE AGREEMENT" shall mean the Account
Purchase Agreement dated as of even date herewith between TCSI, as
seller, and Borrower, as buyer, as such agreement may be amended,
restated, or other otherwise modified from time to time
"TOTAL COST" shall mean, for each Portfolio of Assets, the sum
of (i) Borrower's purchase price therefor, (ii) an agreed-upon amount
of Closing Fees and Expenses relating to the closing of the related
Loan as specified in the Proposal, and (iii) an agreed-upon amount of
scrubbing costs and expenses related to such Portfolio as specified in
the Proposal.
"UNCONVERTED ACCOUNT" shall mean an Asset that has not been
Converted into a Credit Card Receivable, an Unwind or a Charge-off.
"UNCONVERTED ACCOUNT SALE" shall have the meaning set forth in
Section 7.1.
"UNWIND" shall mean a credit card account that is initially
treated as a Credit Card Receivable but subsequently has a Z status
placed on it through the First Data Resources System or other third
party processor and is thereafter treated as if it never was a Credit
Card Receivable under the Servicer's Unwind Policy.
"WHOLE LOAN SALE" shall have the meaning set forth in Section
7.2.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Representations and Warranties. All
representations and warranties made herein shall be true and correct as of each
Borrowing Date and shall survive the Borrowing Date and the execution and
delivery of this Loan Agreement, the Security Agreement, and each Note, and
shall continue in full force and effect until payment in full by Borrower of all
amounts payable hereunder, under the Security Agreement or under the Notes.
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Section 9.2 Cure. Lender shall have the right to cure any default by
Borrower upon any lease, insurance policy, indenture, security agreement,
mortgage, deed of trust, agreement or other instrument to which Borrower is a
party or by which its properties are bound or may be subject if such default
shall in any manner affect Lender's rights hereunder, or in and to the
Collateral, or the ability of Borrower to perform its obligations hereunder or
under the Security Agreement or the Notes, and Borrower shall immediately
reimburse Lender for any amounts paid to cure such defaults.
Section 9.3 Relationship between Parties. The relationship between
Lender and Borrower shall be solely one of commercial lender and borrower, and
nothing contained in this Loan Agreement or in any Loan Document shall
constitute the parties as partners or co-venturers with one another or with any
other party, or agents for one another or for any other party with regard to any
activities contemplated by this Loan Agreement or otherwise, or render any party
liable for any debts or obligations of any other party.
Section 9.4 Confidentiality. Borrower, Servicer and Lender each agree
to use all commercially reasonably efforts (equivalent to the efforts such
parties apply to maintain the confidentiality of their own confidential
information) to maintain as confidential all information with respect to the
Assets, any Proposal, the terms of the Loan Documents or other confidential
information regarding the business of the others (to the extent such
confidential information was provided by or on behalf of one or more of the
other parties), except that any of Borrower, Servicer or Lender, as the
"Disclosing Party" may disclose such information (a) to Persons employed or
engaged by the Disclosing Party in evaluating, approving, structuring or
administering the Loans and Commitments, (b) to any bona fide or potential
assignee of Lender or participant in a Loan that has agreed in writing to comply
with the covenant contained in this Section (and any such bona fide or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) to any bona fide or
potential investor in Lender, but only to the extent of the terms of the Loan
Documents and general performance information with respect to Lender's interest
in the Loans, (d) as required or requested of any governmental authority or
reasonably believed by the Disclosing Party to be compelled by, or required
under, any regulation or law (including, without limitation, any securities
regulation or law), or any court decree, subpoena or legal or administrative
order or process; (e) as, on the advice of the Disclosing Party's counsel, is
required by law; (f) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any litigation to which the
Disclosing Party is a party; or (g) that ceases to be confidential through no
fault of the Disclosing Party. To the extent that either Borrower or Servicer
reasonably believes that it is required to issue a press release in connection
with this Loan Agreement, any such press release shall be subject to the prior
review and approval of Lender in its reasonable discretion. Lender shall not use
any proprietary business information or trade secrets provided by or on behalf
of Borrower or TCSI for the purpose of competing, directly or indirectly, with
Borrower or TCSI or for any other purpose other than in connection with this
Agreement. Notwithstanding the foregoing, TCSI may file this Loan Agreement with
the Securities Exchange Commission but will request confidentiality treatment
with respect to the financed amount described in Section 1.5, the rate used when
computing Fixed Interest and any percentages contained in 2.2(c)(xi) and,
following such filing, no filed portion of this Loan Agreement shall be deemed
to be confidential information.
Section 9.5 Amendment and Modification. Any amendments or modifications
to any provisions of this Loan Agreement, a Note or any other Loan Document must
be (i) in writing and (ii) signed by the parties thereto.
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Section 9.6 Waivers. Lender shall not be deemed to have waived any of
its rights or remedies hereunder, under any Note or any other Loan Document
unless such waiver is (i) in writing and (ii) signed by Lender, and then only to
the extent specifically recited. No failure to exercise and no delay or omission
in exercising any right, remedy or recourse on the right of Lender shall operate
or be deemed as a waiver of such right, remedy or recourse hereunder or
thereunder or preclude any other or further exercise thereof. A waiver or
release on any one occasion shall not be construed as continuing, as a bar to,
or as a waiver or release of any subsequent right, remedy or recourse on any
subsequent occasion. All rights and remedies of Lender, whether pursuant to this
Loan Agreement, the Notes, the Security Agreement, or any other Loan Document,
shall be cumulative and concurrent and may be exercised singularly, successively
or concurrently, at the sole discretion of Lender and may be exercised as often
as occasion therefor may exist.
Section 9.7 Transferability of Loan Agreement; Loan Participations.
This Loan Agreement shall be binding upon Borrower, Lender and Servicer and
their respective successors and assigns; provided, however, that (i) neither
Borrower nor Servicer may transfer or assign any or all of their respective
rights or obligations hereunder without the prior written consent of Lender;
(ii) Lender may, upon written notice to Borrower, transfer and assign any or all
of its rights or obligations hereunder or under any Loan or Note, including
without limitation the sale of participations in any Loan or Note to any
Affiliate of Lender or to a Qualified Assignee; and (iii) Lender may not
transfer and assign any or all of its rights or obligations hereunder or under
any Loan or Note, including without limitation the sale of participations in any
Loan or Note to any party other than an Affiliate of Lender or a Qualified
Assignee without the prior written consent of Borrower, which consent may not be
unreasonably withheld or delayed. This Loan Agreement shall be for the benefit
of Lender and those of its affiliated funds which act as lenders pursuant
hereto.
Section 9.8 Actions in Connection with Bankruptcy. Without the
necessity of an evidentiary hearing and without the necessity or requirement
that Lender establish or prove the value of the Collateral (or any other
collateral pledged to Lender pursuant to the Loan Documents), or the lack of
adequate protection of Lender's interest in the Collateral (or any other
collateral pledged to Lender pursuant to the Loan Documents), Lender shall be
entitled to the immediate termination of the automatic stay of 11 U.S.C. ss. 362
in order to permit Lender to exercise all of its rights and remedies in respect
of the Collateral (or any other collateral pledged to Lender pursuant to the
Loan Documents), the existence of this provision constituting sufficient "cause"
for purposes of 11 U.S.C. ss. 362(d)(1). Borrower agrees not to directly or
indirectly oppose or otherwise defend against the termination of the automatic
stay. Any reasonable attorney's fees and other expenses incurred by Lender in
connection with Borrower's bankruptcy or any of the other aforesaid events shall
be additional indebtedness of Borrower.
Section 9.9 GOVERNING LAW; JURISDICTION; VENUE. THIS LOAN AGREEMENT,
THE NOTES, AND ALL OTHER LOAN DOCUMENTS, AND WITHOUT LIMITATION ANY QUESTIONS
CONCERNING THE INTERPRETATION OR ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE GOVERNING STATE. Borrower and
Lender each hereby irrevocably submit to the jurisdiction of any state or
federal court sitting in the Governing State over any suit, action or proceeding
arising out of or relating to a Loan or the Loan Documents. Borrower and Lender
each irrevocably waive, to the fullest extent permitted by law, any objection
that Borrower or Lender may now or hereafter have to the laying of venue of any
such suit, action or proceeding brought in any such court and any claims that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
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Nothing in this Section shall limit the right of Lender to bring proceedings
against Borrower in the courts of any other jurisdiction. Borrower agrees that
any forum other than the Governing State is an inconvenient forum and that a
suit brought by Borrower against Lender in a court of any state other than the
Governing State should be forthwith dismissed or transferred to a court located
in the Governing State by that court.
Section 9.10 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG LENDER AND BORROWER OR SERVICER
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS LOAN AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
Section 9.11 Enforceability of Loan Agreement. Should any one or more
of the provisions of this Loan Agreement be determined to be illegal or
unenforceable, all other provisions shall remain effective and binding on the
parties hereto.
Section 9.12 Titles. Titles of the Sections of this Loan Agreement are
merely for convenience in reading and shall not be construed to alter, modify or
interpret the meaning of the provisions under said titles.
Section 9.13 Accounting Terms. All accounting terms used in this Loan
Agreement shall have the meanings ascribed to them by generally accepted
accounting principles.
Section 9.14 Notice. Unless otherwise required or provided by this Loan
Agreement, all demands, notices, approvals and other communications hereunder
(including Borrower's reporting obligations set forth in herein) (individually
and collectively, "NOTICES") shall be in writing and shall be served personally,
delivered by facsimile or sent by a national overnight delivery or courier
company, or by United States registered or certified mail, postage prepaid
return receipt requested, and addressed as set forth below. Any such Notices
shall be deemed delivered upon delivery or refusal to accept delivery as
indicated in writing by the person attempting to make personal service, on the
United States Postal Service return receipt, or by similar written advice from
the overnight delivery company; provided, however, that if any such Notice shall
be sent by telecopier to the telecopier number, if any, set forth above, such
Notice shall be deemed given at the time and on the date of machine transmittal
(except if sent after 5:00 p.m. recipient's time, then the notice shall be
deemed given at 9:00 a.m. on the next Business Day) if the sending party
receives a written send verification on its machine and sends a duplicate Notice
on the same day or the next Business Day by personal service, registered or
certified United States mail, or overnight delivery in the manner described
above. Each party hereto shall make an ordinary, good faith effort to ensure
that it will accept or receive Notices that are given in accordance with this
Section 9.14, and that any person to be given Notice actually receives such
Notice. Any party to whom Notices are to be sent pursuant to this Loan Agreement
may from time to time change its address and/or facsimile number for future
communication
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hereunder by giving Notice in the manner prescribed herein to all
other parties hereto, provided that the address and/or facsimile number change
shall not be effective until five (5) Business Days after the Notice of change
has been given.
If to Lender: With a Copy to:
Xxx Xxxxx Xxxx XX-X, X.X. Xxxxxxx, Xxxxxx and Deinard
c/o Varde Partners, L.P. Professional Association
0000 Xxxx 00xx Xxxxxx, Xxxxx 000 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxx Attention: Xxxxxx Xxx, Esq.
Telephone No.: 000.000.0000 Telephone No.: 000.000.0000
Facsimile No.: 952.893.9613 Facsimile No.: 612.335.1657
If to Borrower: With a Copy to:
Credit Store Services, Inc. Faegre & Xxxxxx LLP
Suite 106 2200 Xxxxx Fargo Center
0000 Xxxxx Xxxxxx Xxxxxx 00 Xxxxx Xxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000 Xxxxxxxxxxx, XX 00000-0000
Attention: Chief Financial Officer Attention: Xxxxxxx X. Xxxxxxxx
Telephone No.: 000.000.0000 Telephone No.: 000.000.0000
Facsimile No.: 605.338.3486 Facsimile No.: 000.000.0000
If to Servicer: With a Copy to:
The Credit Store, Inc. Faegre & Xxxxxx LLP
0000 Xxxxx Xxxxxx Xxxxxx 0000 Xxxxx Xxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000 00 Xxxxx Xxxxxxx Xxxxxx
Attention: Chief Financial Officer Xxxxxxxxxxx, XX 00000-0000
Telephone No.: 000.000.0000 Attention: Xxxxxxx X. Xxxxxxxx
Facsimile No.: 605.338.3486 Telephone No.: 000.000.0000
Facsimile No.: 000.000.0000
Section 9.15 Entire Agreement. This Loan Agreement (including all
Exhibits hereto), and the Security Agreement, Proposals, Notes, and all other
Loan Documents shall constitute the full and entire understanding and agreement
of the parties hereto and there are no further or other agreements or
undertakings, written or oral, in effect between the parties relating to the
subject matter hereof unless expressly referred to herein. All prior
negotiations, agreements, representations and warranties, statements and
undertakings concerning the subject matter hereof between the parties are
superseded by this Loan Agreement and the other Loan Documents.
Section 9.16 Borrower's Indemnification. Borrower agrees to indemnify,
defend and hold Lender harmless from and against any and all losses, damages,
costs, claims, expenses (including reasonable attorneys fees) and liabilities to
third parties growing out of or resulting from (i) the failure of Borrower to
comply with the Credit Collection Laws; (ii) the actions of any of the agents,
representatives or employees of Borrower taken in connection with the collection
activities with respect to the Assets; (iii) the misapplication (whether
negligent or intentional), misappropriation, conversion or theft of any part of
the Collateral by any officer, employee, agent or representative of Borrower;
(iv) the failure to pay and discharge any liens, encumbrances or security
interests in the Collateral (other than liens granted to Lender to secure
repayment of
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Loans) created or which could be created as a result of the actions
of Borrower; (v) fraud or material misrepresentation; (vi) the misapplication of
receipts or proceeds from the Collateral received by Borrower after notice of
default on any Loan which are not applied to the outstanding balance of the
related Note, to payment of debt service on any Loan, or to the payment of any
other amounts payable under this Loan Agreement or (vii) the breach by Borrower
of Sections 5.12, 5.13, 5.17 and 5.20 of this Loan Agreement.
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Section 9.17. Savings Provision. All agreements between Borrower and
Lender are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to
Lender for the use, forbearance, loaning or detention of the indebtedness
evidenced hereby exceed the maximum permissible amount under applicable law. If
from any circumstances whatsoever, fulfillment of any provisions hereof or of
any other Loan Document at any time given shall exceed the maximum permissible
amount under applicable law, then the obligation to be fulfilled shall
automatically be reduced to an amount which complies with applicable law, and if
from any circumstances Lender should ever receive as interest an amount which
would exceed the highest lawful rate of interest, such amount which would be in
excess of such lawful rate of interest shall be applied to the reduction of the
principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between Borrower
and Lender and shall also be binding upon and available to any subsequent holder
of a Note.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK.]
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The undersigned have executed this Loan Agreement as of the date first
above written.
LENDER: BORROWER:
THE VARDE FUND IV-A, L.P., a Delaware limited CREDIT STORE SERVICES, INC.,
partnership, by Varde Partners, L.P., a Delaware a Delaware
limited partnership, its General Partner, corporation
by Varde Partners, Inc., a Delaware corporation,
its General Partner
By: _____________________________ By: _________________________
Name: Xxxxxxx X. XxXxxxxx Name: _______________________
Its: Vice President Its: ________________________
SERVICER:
THE CREDIT STORE, INC.,
a Delaware corporation
By: _________________________
Name: _______________________
Its: ________________________
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MASTER LOAN AND SERVICING AGREEMENT
EXHIBIT A:
FORM OF PROPOSAL
Credit Store Services, Inc.
Xxxxx 000
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
The Varde Fund IV-A, L.P.
c/o Varde Partners, L.P.
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxx
Re Master Loan and Servicing Agreement dated as of October 31, 2000 among
Credit Store Services, Inc., a Delaware corporation ("BORROWER"), The
Credit Store, Inc., a Delaware corporation ("SERVICER"), and The
Varde Fund IV-A, L.P., a Delaware limited partnership ("LENDER") (the
"LOAN AGREEMENT")
Ladies and Gentlemen:
This letter shall serve as a Proposal pursuant to the Loan Agreement.
Capitalized terms have the respective meanings contained in the Loan Agreement.
We request that you finance Borrower's contemplated purchase of the following
Assets subject to, and in accordance with, the terms of the Loan Agreement and
the terms set forth below:
-------------------------------------- -------------------------------------------------------------------------------
Assets [Nonperforming [ ] being sold by [ ]
--------- --------------
-------------------------------------- -------------------------------------------------------------------------------
Purchase Price [ %] of $ or - $
------------------ ------------------------
-------------------------------------- -------------------------------------------------------------------------------
Closing Fees and Expenses $ to
---------------
--------------------------------------
$ to
---------------
--------------------------------------
--------------------------------------
--------------------------------------
Total Closing Fees and Expenses $
----------------------
-------------------------------------- -------------------------------------------------------------------------------
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Proposal
Page 2
-------------------------------------- -------------------------------------------------------------------------------
Total Cost $
-------------------
-------------------------------------- -------------------------------------------------------------------------------
Advance Rate 95.00%
-------------------------------------- -------------------------------------------------------------------------------
Loan Amount $
-------------------
-------------------------------------- -------------------------------------------------------------------------------
Borrowing Date
--------------------
-------------------------------------- -------------------------------------------------------------------------------
Servicing Fees See Schedule 1
-------------------------------------- -------------------------------------------------------------------------------
Maximum Principal Balance Pursuant to Section 6.1(i) of the Loan Agreement. See Schedule 2
attached hereto.
-------------------------------------- -------------------------------------------------------------------------------
Minimum Credit Card Pursuant to Section 6.1(j) of the Loan Agreement. See Schedule 2
Receivables attached hereto.
-------------------------------------- -------------------------------------------------------------------------------
Additional Conditions to Closing or
Terms -------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
In offering this Proposal, Borrower confirms that (i) no Event of Default has
occurred and is continuing or will occur as a result of the closing of the
proposed Loan or Borrower's purchase of the above-described Assets, (ii) the
Loan Agreement, Security Agreement, Note and other Loan Documents constitute
legal, valid and binding obligations of the Borrower enforceable in accordance
with their terms and (iii) the representations and warranties in the Loan
Agreement are true and correct as of the date hereof.
Dated: , 200
---------- ---
CREDIT STORE SERVICES, INC.,
a Delaware corporation
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
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43
Schedule 1 to Proposal
SERVICING FEES
-------------------------------------------------- -------------------------------------------------------------------
Asset Sale Fee [_____]% of net proceeds from Unconverted Account Sales, Whole
Loan Sales and Securitizations
-------------------------------------------------- -------------------------------------------------------------------
Collection Fee [_____]% of collections on Unconverted Accounts
-------------------------------------------------- -------------------------------------------------------------------
Management Fee [______]% annually, paid monthly, based on the beginning of the
month Outstanding Credit Card Receivable Balance
-------------------------------------------------- -------------------------------------------------------------------
Origination Fee $[____] one-time payment
for each credit card account
that results from the
Conversion of an Unconverted
Account.
-------------------------------------------------- -------------------------------------------------------------------
Processing Fee $[____] per active credit card account per month
-------------------------------------------------- -------------------------------------------------------------------
43
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SCHEDULE 2 TO PROPOSAL
The following Distribution Dates and percentages relate to Section 6.1(i)
(Maximum Principal Balance) of the Loan Agreement:
------------------------------------------------------------ ---------------------------------------------------------
DISTRIBUTION DATE PERCENTAGE
------------------------------------------------------------ ---------------------------------------------------------
7th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
13th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
19th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
The following Distribution Dates and percentages relate to Section 6.1(j)
(Minimum Credit Card Receivables) of the Loan Agreement:
------------------------------------------------------------ ---------------------------------------------------------
DISTRIBUTION DATE PERCENTAGE
------------------------------------------------------------ ---------------------------------------------------------
7th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
10th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
13th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
16th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
19th Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
22nd Distribution Date %
----------
------------------------------------------------------------ ---------------------------------------------------------
44
45
MASTER LOAN AND SERVICING AGREEMENT
EXHIBIT B:
FORM OF COMMITMENT
THE VARDE FUND IV-A, L.P.
c/o Varde Partners, L.P.
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxx
Telephone No.: 000.000.0000
Facsimile No.: 952.893.9613
Credit Store Services, Inc.
Xxxxx 000
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Chief Financial Officer
Re Master Loan and Servicing Agreement dated as of October 31, 2000 among
Credit Store Services, Inc., a Delaware corporation ("BORROWER"), The
Credit Store, Inc., a Delaware corporation ("SERVICER"), and The
Varde Fund IV-A, L.P., a Delaware limited partnership ("LENDER") (the
"LOAN AGREEMENT")
Ladies and Gentlemen:
This letter shall serve as our "Commitment" (as defined in the Loan Agreement)
with respect to your Proposal dated , 200 (the "PROPOSAL"). Lender
hereby agrees to make a "Loan" (as defined in the Loan Agreement) with respect
to the Proposal, subject to, and in accordance with, the terms and conditions
set forth in the Proposal and the Loan Agreement.
Dated: , 200
---------- ---
THE VARDE FUND IV-A, L.P., a Delaware limited
partnership, by Varde Partners, L.P., a Delaware
limited partnership, its General Partner, by Varde
Partners, Inc., a Delaware corporation, its General
Partner
By:
--------------------------------
Name:
------------------------------
Its:
--------------------------------
45
46
MASTER LOAN AND SERVICING AGREEMENT
EXHIBIT C:
FORM OF NOTE
PROMISSORY NOTE
$ [ ], 200__
---------------
For value received, CREDIT STORE SERVICES, INC., a Delaware
corporation, having a mailing address of 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000 (hereinafter referred to as "BORROWER") promises to pay to
the order of THE VARDE FUND IV-A, L.P., a Delaware limited partnership, having a
mailing address of c/o Varde Partners, Inc., 0000 Xxxx 00xx Xxxxxx, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx 00000 (hereinafter referred to as "LENDER"), the
principal sum of Dollars
($ ) in lawful money of the United States of America, together with
Fixed Interest on the advanced but unpaid principal balance, Minimum Cash Return
Interest, and the Lender's Residual, all in accordance with the terms set forth
herein and in the Master Loan and Servicing Agreement among Borrower, Lender and
The Credit Store, Inc., as servicer, dated as of October 31, 2000 (the "LOAN
AGREEMENT"). Reference is hereby made to the Loan Agreement, the terms and
conditions of which are incorporated herein by reference as fully and with the
same effect as if set forth herein at length. All capitalized terms not
otherwise defined herein have the respective meanings contained in the Loan
Agreement. Reference is also hereby made to the Security Agreement described in
the Loan Agreement for a more complete description of certain Collateral, a
statement of certain covenants and agreements, a statement of the rights and
remedies and securities afforded thereby and all other matters contained
therein. This Note is entitled to the benefit of the Loan Agreement and the
Security Agreement.
Borrower and all endorsers and guarantors jointly and severally waive
presentments, demand, protest, and notice (except such notice as is required
under the Loan Documents) of any kind.
This Note shall be governed by and construed according to the internal
laws of the State of Minnesota.
Time is of the essence of this Note and each of the provisions hereof.
46
47
IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of
the date and year first above written.
CREDIT STORE SERVICES, INC.,
a Delaware corporation
By:
----------------------------
Name:
---------------------------
Its:
---------------------------
47
48
MASTER LOAN AND SERVICING AGREEMENT
EXHIBIT D:
FORM OF NOTE REGISTER
NOTE REGISTER
Varde/Credit Store Services, Inc.
---------------------------------- -------------------------------- -----------------------------------------
Date of Note Face Amount of Note Name of Holder of Note
$ The Varde Fund IV-A, L.P.
---------------- ---------------
---------------------------------- -------------------------------- -----------------------------------------
48
49
MASTER LOAN AND SERVICING AGREEMENT
EXHIBIT E:
CALCULATION OF INTERNAL RATE OF RETURN
Internal Rate of Return ("IRR") is defined as the percentage rate which makes
the net present value ("NPV") of a series of cash flows equal to zero. To
calculate the monthly IRR, two steps are followed:
Step 1
To find the IRR for an investment lasting T months, the following expression
must be solved where C represents the cash flow dollars and IRR is the solution.
NPV = Co + C 1 + C 2 + . . . + C r = 0
---------- ---------- ----------
1 + IRR (1 + IRR)2 (1 + IRR)r
In Excel, this expression is solved using = IRR (values, guess) where guess is a
decimal or percentage value that represents your estimate of the internal rate
of return since IRR is solved though trial and error, and values is the address
of the cells in the worksheet which contain the monthly cash flows.
Step 2
Once the IRR is calculated in Step 1, the solution needs to be multiplied by
twelve (12) because we are solving for IRR using monthly cash flows whereas the
Excel software program assumes that the cash flow amounts are from an annual
period.
For example:
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
1 A B C D E F
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
2 C(o) C(1) C(2) C(3)
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
3 Monthly Cash Flow (1,000,000) 350,000 350,000 350,000
Dollars
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
4
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
5 Step 1 2.48% Formula:
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
6 Solve expression = IRR (B3: E3,0.2)
for IRR using = IRR
(values, guess)
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
7
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
8
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
9 Step 2
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
10 Multiply solution 29.76% Formula:
in Step 1 by 12
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
11 = E5*12
------- --------------------- --------------- -------------- --------------- ----------------- ----------------------
49
50
MASTER LOAN AND SERVICING AGREEMENT
EXHIBIT F:
FORM OF SECURITY AGREEMENT
50
