NCOP Lakes, Inc. EXHIBIT 10.4
000 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
August 19, 2002
CFSC Capital Corp. XXXIV
00000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxx Xxxxxxx
Re: Exclusivity Agreement related to Credit Agreement Between NCOP
LAKES, INC., a Nevada corporation (the "Borrower") and CFSC
CAPITAL CORP. XXXIV (the "Lender") dated as of August 19, 2002
Ladies and Gentlemen:
Reference is made to the credit agreement referred to above
(the "Credit Agreement"). All capitalized terms used in this Letter Agreement
and not otherwise defined herein shall have the meanings given to them in the
Credit Agreement.
The parties hereto have entered into this Letter Agreement to
induce the Lender to enter into the Credit Agreement with the Borrower. The
Borrower is a wholly owned subsidiary of NCO Portfolio Management, Inc., a
Delaware corporation (the "Parent').
As a condition to making any loans thereunder, the Borrower,
the Parent, NCO Financial Systems, Inc., a Delaware corporation (the "Servicer")
and NCO Group, Inc., a Pennsylvania corporation ("NCOG") (collectively, the
Borrower, the Parent, the Servicer and NCOG are herein called the "Grantors"),
on behalf of themselves and on behalf of all parties which are related (by blood
or marriage) to, controlling, or controlled by, or under common control with any
one or more of the Grantors (either through financial investment or management
responsibility), or any member or equity holder of any Grantor which holds fifty
percent (50%) or more of the membership or other equity interests in such
Grantor (collectively, the "Affiliated Parties"), hereby grant to the Lender,
pursuant to the terms and conditions of this Letter Agreement, the exclusive
right to finance (under the terms of the Credit Agreement) consumer debt
obligations (the "Consumer Obligations") to be acquired by any of the Grantors
or any Affiliated Party at any time from and after the date hereof to and
including the Funding Termination Date, other than the Excluded Consumer
Obligations (defined below). The Grantors acknowledge that the Borrower and the
Servicer are obligated to provide to the Lender on a quarterly basis a report
summarizing all Excluded Consumer Obligations and the Grantors agree to
cooperate with the Borrower and the Servicer in preparing such quarterly
reports.
As used herein, the term "Excluded Consumer Obligations" means
Consumer Obligations:
(a) in which a substantial majority of such Consumer
Obligations are obligations of obligors residing outside of the United
States;
(b) constituting obligations subject to a separate exclusivity
agreement between an Affiliated Party and the Lender;
(c) constituting obligations acquired, or to be acquired, by
an Affiliated Party pursuant to an existing agreement as of the date
hereof, or an agreement to result from negotiations under way as of the
date hereof, and generally described as+;
(d) which have been purchased pursuant to an agreement to
purchase such Consumer Obligations on a periodic basis for a specified
period of time, which agreement has been entered into prior to the date
of the Credit Agreement (each a "Prior Forward Flow Purchase
Agreement") and with respect to which the Grantors have agreed with the
Lender not to amend such Prior Forward Flow Purchase Agreement to
increase the amount of Consumer Obligations purchased thereunder
without the Lender's prior written consent; provided, any renewal of
any such Prior Forward Flow Purchase Agreement shall not constitute an
Excluded Consumer Obligation; or
(e) which have been purchased pursuant to a Purchase Agreement
or a Forward Flow Purchase Agreement for the purchase of Assets, to the
extent that the purchase price (or, in the case of a Forward Flow
Purchase Agreement, the commitment amount thereof) for the aggregate
Consumer Obligations to be purchased under all agreement(s) with such
seller or any affiliate of such seller does not exceed $4,000,000.
Subject to the ability of any Grantor or any Affiliated Party
(other than the Borrower which is prohibited from purchasing Excluded Consumer
Obligations) to purchase Excluded Consumer Obligations as provided in this
Letter Agreement, the Grantors agree, on behalf of themselves and on behalf of
each Affiliated Party, that in the event any Grantor or any Affiliated Party
desires to purchase any Consumer Obligations other than Excluded Consumer
Obligations, such Grantor or such Affiliated Party, as applicable, shall not
purchase such Consumer Obligations until the Lender shall have been given the
opportunity to exercise its exclusive right to finance the Borrower's purchase
of such Consumer Obligations pursuant to the terms of this Letter Agreement and
the Credit Agreement.
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+ Confidential portions omitted and filed separately with the Commission.
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In the event that any of the Grantors or any Affiliated Party
desires to purchase any Consumer Obligations other than Excluded Consumer
Obligations, the Grantors shall cause the Borrower to provide to the Lender with
respect to such Consumer Obligations a Borrowing Request and a related bid
package in accordance with the provisions of Section 2.1 of the Credit
Agreement. Thereafter, the Lender shall accept or reject such Borrowing Request
in accordance with the provisions of Section 2.1 of the Credit Agreement. If the
Lender accepts such Borrowing Request in accordance with the provisions of
Section 2.1, (i) the Borrower shall borrow thereunder in its own name and
acquire the Assets therein described in its own name or (ii) the Borrower shall
request that the Lender enter into a new set of loan documents with a newly
created entity owned by the owners of the Borrower (herein, a "New Borrower"),
on the same terms and conditions as the Loan Documents and, upon consummation of
the execution and delivery of such new loan documents in form and content
acceptable to the Lender (the "New Loan Documents"), satisfaction of all terms
and conditions for borrowing thereunder and entering into documentation
sufficient to provide for cross-collateralization and cross-default between the
New Loan Documents and the Loan Documents, the Lender shall permit the New
Borrower to satisfy the obligations of the Grantors hereunder with respect to
such Accepted Borrowing Request. The Grantors shall reimburse the Lender for all
costs and expenses, including fees and disbursements of counsel to the Lender,
incurred in connection with negotiation, preparation and delivery of the New
Loan Documents, which amounts shall be due and payable upon demand of the Lender
and shall not be paid from Asset Pool Proceeds. If the Lender rejects such
Borrowing Request, thereafter any Grantor or any Affiliated Party (other than
the Borrower) may purchase such Consumer Obligations with its own funds or may
obtain financing to purchase such Consumer Obligations from another party on
terms no more favorable to such other party than those offered to the Lender
pursuant to the Borrowing Request submitted to the Lender with respect to such
Consumer Obligations. A purchase completed in accordance with the requirements
of this paragraph shall be referred to as a "Complying Purchase".
In a circumstance where the Parent or a Purchase Affiliate
desires to purchase Consumer Obligations without first complying with the
requirements for a Complying Purchase, such Parent or Purchase Affiliate, as
applicable, shall:
(a) notify the Lender in writing prior to such purchase, which
notice shall include a description of the Consumer Obligations to be
purchased and the purchase price and estimated purchase expenses for
such Consumer Obligations;
(b) purchase such Consumer Obligations with its own funds and
not with borrowed money,
(c) purchase such Consumer Obligations free and clear of all
known mortgages, security interests, liens and encumbrances;
(d) purchase such Consumer Obligations pursuant to a purchase
agreement (the "Purchase Agreement") that is fully assignable to the
Borrower;
(e) immediately offer to assign all of the Parent's or
Purchase Affiliate's, as applicable, right, title and interest in and
to such Consumer Obligations, the Purchase Agreement and any UCC-1
financing statement or other security received in connection therewith
to the Borrower pursuant to an assignment agreement (the "Assignment
Agreement") under which the Parent or such Purchase Affiliate shall
represent and warrant that (1) the Parent or Purchase Affiliate, as
applicable, has not conducted any collection activities with respect to
the Consumer Obligations purchased under the Purchase Agreement, and
(2) any amount paid by the Borrower to the Parent or Purchase
Affiliate, as applicable, in connection with the execution and delivery
of the Assignment Agreement contains no administrative expense or other
fee in favor of the Parent or Purchase Affiliate, as applicable, and
such amount does not, when aggregated with all amounts still owing to
the seller under the Purchase Agreement, exceed the purchase price and
estimated expenses set forth in the notice in (a) above;
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(f) cause the Borrower to comply with the requirements for a
Complying Purchase above;
(g) upon the Borrower's receipt of an Accepted Borrowing
Request with respect thereto, properly execute and deliver the
Assignment Agreement and all other documents required to properly
assign all of the Parent's or Purchase Affiliate's, as applicable,
right, title and interest in and to such Consumer Obligations, the
Purchase Agreement and any UCC- 1 financing statement or other security
received in connection therewith to the Borrower;
(h) at all times prior to the Lender's rejection of a
Borrowing Request in accordance with Section 2.1 and Section 2.2 of the
Credit Agreement with respect thereto, treat such Consumer Obligations
as held in trust for the Borrower and not as the Parent's or Purchase
Affiliate's exclusive property, including, without limitation (1)
conducting no collection activities with respect thereto, and (2)
obtaining no financing with respect thereto;
provided, any financing obtained by the Parent or Purchase Affiliate
with respect to any Consumer Obligations purchased by the Parent or a
Purchase Affiliate in connection with the above subparagraphs (a)
through (h) subsequent to the Lender's rejection of a Borrowing Request
submitted in connection therewith may not be on terms more favorable
than those offered to the Lender pursuant to the Borrowing Request so
rejected.
Notwithstanding anything to the contrary contained herein,
this Letter Agreement may be terminated prior to the Funding Termination Date
if:
(i) twenty-four (24) calendar months have elapsed since the
first Loan was funded under the Credit Agreement;
(ii) the Borrower has requested that the Lender terminate its
agreement to consider making any future Loans under the Credit
Agreement;
(iii) the Borrower becomes obligated to pay a termination fee
(the "Termination Fee") equal to the product of (y) $125,000 and (z)
the number of calendar months (or portion thereof) remaining between
the effective date of any such termination and the Funding Termination
Date, which Termination Fee shall be secured by all Loan Collateral and
payable from (x) Asset Pool Proceeds which would otherwise be allocated
to the Borrower under Section 2.8(k) of the Credit Agreement, if
available, or (y) other funds of the Borrower or the Parent; and
(iv) the Borrower shall have executed and delivered to the
Lender its promissory note evidencing its obligation to pay the
Termination Fee, which shall provide for monthly payments of $125,000
each, commencing on the first day of the first month following the
effective date of any such termination and continuing thereafter until
paid in full and the Parent shall have delivered to the Lender its
irrevocable guaranty of payment of such promissory note, each in form
and content acceptable to the Lender.
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The Grantors, by signing below, hereby acknowledge and agree
that any failure by the Grantors or any Affiliated Party to comply with the
terms and conditions of this Letter Agreement shall constitute an Event of
Default under the Credit Agreement. The Lender shall be entitled to seek relief
pursuant to the Credit Agreement and shall be entitled to independently seek
relief for damages under this Letter Agreement, either in equity or at law,
against any Grantor, or all Grantors; provided however, that the Lender shall
not seek money damages against any Grantor if such Grantor (i) has not breached
a covenant or agreement under this Letter Agreement and (ii) is not an
Affiliated Party of the party which has breached such covenant or agreement.
This Letter Agreement shall be governed by, and construed in
accordance with, the laws of the State of Minnesota. This Letter Agreement may
be executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts taken
together, shall constitute but one and the same instrument. This Letter
Agreement shall be binding upon the Grantors and their respective heirs,
representatives, successors and assigns.
[Signature page follows]
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By signing this Letter Agreement below the signatories agree to be
bound by its terms and conditions as of the date first written above.
Very truly yours,
NCOP LAKES, INC. NCO FINANCIAL SYSTEMS, INC.
By By
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Its Its
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NCO PORTFOLIO MANAGEMENT, INC. NCO GROUP, INC.
By By
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Its Its
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Accepted and agreed to as of August ___, 2002.
CFSC CAPITAL CORP. XXXIV
By
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Its
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Signature Page to Exclusivity Agreement
