EXHIBIT 2.1
PURCHASE AGREEMENT
Dated as of July 30, 1998
Between
UNITED SECURITY SYSTEMS, INC.
AS SELLER
and
RESPONSE ACQUISITION CORP.
AS PURCHASER
PURCHASE AGREEMENT
Dated as of July 30, 1998
UNITED SECURITY SYSTEMS, INC., a New Jersey corporation (the "SELLER"), and
RESPONSE ACQUISITION CORP., a Delaware corporation (the "PURCHASER"), hereby
agree as follows:
PRELIMINARY STATEMENTS.
(a) Certain terms which are capitalized and used throughout this Agreement
(in addition to those defined above) are defined in Article I of this Agreement.
(b) The Seller has Receivables that it wishes to sell to the Purchaser,
and the Purchaser is prepared to purchase such Receivables on the terms set
forth herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADVERSE CLAIM" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement.
"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person.
"BUSINESS DAY" means any day on which banks are not authorized or
required to close in Cleveland, Ohio.
"CENTRAL STATION" means a central station monitoring company which the
Collection Agent may elect to utilize to provide monitoring services to Obligors
which is approved by the Purchaser. Initially, the Central Station shall be
Emergency Response Center, Inc. and the Collection Agent.
"CENTRAL STATION CONTRACT" means the agreement attached hereto as
Exhibit C between the Collection Agent and the Central Station.
"CENTRAL STATION FEES" means, for any month, the fees due under the
Central Station Contract for such month; PROVIDED, that in no event shall the
Central Station Fees charged by the Collection Agent be greater than those
charged by any other Central Station hereunder.
"COLLECTION AGENT" means, at any time, the Person then authorized
pursuant to Section 6.01 to service, administer and collect Transferred
Receivables.
"COLLECTION AGENT FEE" has the meaning specified in Section 6.03.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable, and all funds deemed to have been received by the Seller or any
other Person as a Collection pursuant to Section 2.04.
"CONTRACT" means an agreement between the Seller or its
predecessor-in-interest and an Obligor, substantially in the form of one of the
written contracts approved by the Purchaser, pursuant to or under which such
Obligor shall be obligated to pay for central-station monitoring and other
similar services consistent with such Contract and past practice or as otherwise
may be approved by the Purchaser from time to time.
"CREDIT AND COLLECTION POLICY" means written receivables credit and
collection policies and practices of the Seller reasonably satisfactory to the
Purchaser in effect on the date of this Agreement applicable to the Contracts
and the Receivables and delivered by the Seller to the Purchaser within 30 days
following the date hereof, as modified in compliance with this Agreement.
"CREDIT SCORE" means, with respect to an Obligor, the credit score of
such Obligor, as determined pursuant to the generic risk scoring system
developed by Fair Xxxxx & Company based upon information regarding such Obligor
provided by Equifax Inc.
"DEBT" means, with respect to any Person, (a) indebtedness of such
Person for borrowed money, (b) any obligation of such Person evidenced by a
bond, debenture, note or other similar instrument, (c) any obligations of such
Person to pay the deferred purchase price of property or services, (d) any
obligation of such Person as lessee under a lease which shall have been or
should be, in accordance with generally accepted accounting principles, recorded
as a capital lease, (e) any obligation of such Person under a direct or indirect
guaranty in respect of, and any obligation of such Person (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, any indebtedness or obligations of others of the
kinds referred to in clauses (a) through (d) above and (f) any liability of such
Person in respect of unfunded vested benefits under a plan covered by Title IV
of ERISA.
"DEFAULTED RECEIVABLE" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid for 150 or
more days from the original due date for such payment;
2
(b) as to which the Obligor thereof or any other Person obligated thereon
has taken any action, or suffered any event to occur, of the type described in
Section 7.01(g); or
(c) which, consistent with the Credit and Collection Policy, would be
written off as uncollectible.
"DEFERRED PURCHASE PRICE" means the portion of the Purchase Price of
Purchased Receivables purchased on any Purchase Date exceeding the amount of the
Purchase Price under Section 2.02 to be paid in cash, which portion, when added
to the cumulative amount of all previous Deferred Purchase Prices (after giving
effect to any payments made on account thereof), shall not exceed $10,000,000.
The obligations of the Purchaser in respect of the Deferred Purchase Price are
hereby subordinated to the payment by the Purchaser of all amounts due under the
Financing Agreement. The Deferred Purchase Price shall be evidenced by one or
more promissory notes in the form of Exhibit B.
"DELINQUENT RECEIVABLE" means a Receivable that is not a Defaulted
Receivable and:
(a) as to which any payment, or part thereof, remains unpaid for (i) 91 or
more days from the original due date for such payment with respect to
residential Contracts, (ii) 120 or more days from the original due date for such
payment with respect to commercial Contracts or (iii) 150 or more days from the
original due date for such payment with respect to Government Contracts or
(b) which, consistent with the Credit and Collection Policy, would be
classified as delinquent by the Seller.
"DILUTION" means, with respect to any Transferred Receivable, the
aggregate amount of any reductions or adjustments in the Outstanding Balance of
such Transferred Receivable as a result of any defective or rejected services
or any cash discount or other adjustment or setoff.
"ELIGIBLE RECEIVABLE" means a Receivable:
(a) the Obligor of which is a United States resident, is not an Affiliate
of any of the parties hereto;
(b) the Obligor of which is not the Obligor of any Defaulted Receivables;
(c) which, at the time of the transfer thereof to the Purchaser under this
Agreement, is not a Defaulted Receivable or a Delinquent Receivable;
(d) which, in according to the Contract related thereto, is required to be
paid by the Obligor thereof in equal monthly installments and which, upon any
termination by the Obligor thereof, must be paid in full;
3
(e) which is an "account" within the meaning of Section 9-105 of the UCC
of the applicable jurisdictions;
(f) which is denominated and payable only in United States dollars in the
United States;
(g) which arises under a Contract which, together with such Receivable, is
in full force and effect and constitutes the legal, valid and binding obligation
of the Obligor of such Receivable and is not subject to any dispute, offset,
counterclaim or defense whatsoever (except the potential discharge in bankruptcy
of such Obligor);
(h) which, together with the Contract related thereto, does not contravene
in any material respect any law, rule or regulation applicable thereto
(including, without limitation, any law, rule or regulation relating to usury,
consumer protection, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and privacy)
and with respect to which no party to the Contract related thereto is in
violation of any such law, rule or regulation in any material respect;
(i) the transfer, sale or assignment of which does not contravene any
applicable law, rule or regulation or any agreement to which the Seller is a
party or to which the related Contract is subject;
(j) the Obligor of which has a Credit Score of not less than 550;
(k) which arises under a Contract which (i) does not require the Obligor
thereunder to consent to the transfer, sale or assignment of the rights and
duties of the Seller under such Contract and (ii) does not contain a
confidentiality provision that purports to restrict the ability of the Purchaser
and its assigns to exercise their rights under this Agreement, including,
without limitation, their right to review the Contract; and
(l) which (i) satisfies all applicable requirements of the Credit and
Collection Policy and (ii) complies with such other criteria and requirements
(other than those relating to the collectibility of such Receivable) as the
Purchaser or its designee may from time to time specify to the Seller upon 30
days' notice.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"EVENT OF TERMINATION" has the meaning specified in Section 7.01.
"FACILITY TERMINATION DATE" means June 30, 2005.
"FINANCE AGREEMENT" means that certain Monitoring Receivables Finance
Agreement, dated as of the date hereof, among the Purchaser, as seller, XxXxxx,
Xxxxx Capital Holdings Corp., as purchaser, and the Seller, as collection agent,
as amended or restated from time to time.
4
"GOVERNMENTAL ENTITY" means the United States of America, any state,
any political subdivision of a state and any agency or instrumentality of the
United States of America or any state or political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GOVERNMENT RECEIVABLE" means a Receivable payable by a Governmental
Entity.
"INCIPIENT EVENT OF TERMINATION" means an event that but for notice or
lapse of time or both would constitute an Event of Termination.
"INDEMNIFIED AMOUNTS" has the meaning specified in Section 8.01.
"INITIAL PURCHASE" means the Purchase occurring on the date hereof.
"LOCKBOX" means one or more accounts, under the exclusive ownership
and control of the Purchaser (or its assigns or designees), maintained for the
purpose of receiving Collections. The Lockbox initially shall be Post Office
Box ____, ____________, __ _____.
"MONTHLY REVENUE" means, with respect to any Contract on any Purchase
Date, the monthly revenue payable with respect to such Contract.
"OBLIGOR" means a Person obligated to make payments pursuant to a
Contract.
"OUTSTANDING BALANCE" of any Receivable at any time means the then
outstanding principal balance thereof.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"PURCHASE" means a purchase by the Purchaser of Receivables from the
Seller pursuant to Article II.
"PURCHASE DATE" has the meaning specified in Section 2.02(a).
"PURCHASE PRICE" means, for any Purchase of Receivables, an amount
equal to the aggregate Monthly Revenue of each Contract the Receivables under
which are the subject of such Purchase multiplied by 37.15 for the Initial
Purchase and 37.64 for each Subsequent Purchase.
"PURCHASED RECEIVABLE" means any Receivable which, pursuant to the
procedure described in Section 2.02(c), has been identified as a Purchased
Receivable.
5
"PURCHASER ACCOUNT" means Account #0000000 at Mellon Bank, N.A. or
such other account under the exclusive control of the Purchaser (or its assigns)
as is specified from time to time by the Purchaser.
"PURCHASER LOAN" means a loan made by the Purchaser, at its option, to
the Seller, upon the Seller's request; PROVIDED, that no such loan may be made,
and all such loans shall become immediately due and payable, upon the occurrence
of any Event of Termination. The Purchaser Loans shall be evidenced by one or
more promissory notes in substantially the form of Exhibit A.
"RECEIVABLE" means the indebtedness of an Obligor under a Contract,
and includes any other obligations of such Obligor with respect thereto. Each
Purchase of a Contract hereunder shall be deemed to include any and all amounts
payable under such Contract, whether or not earned at the time of such Purchase.
"RECEIVABLES REPORT" means a report, in form and substance reasonably
satisfactory to the Purchaser, furnished by the Collection Agent to the
Purchaser pursuant to Section 6.02(b).
"RELATED SECURITY" means, with respect to any Transferred Receivable:
(a) all of the Seller's interest in any merchandise (including returned
merchandise) relating to any sale giving rise to such Receivable and in the
Central Station Contract related thereto to the extent that such Central Station
Contract relates to such Receivable;
(b) all security interests or liens and property subject thereto from time
to time purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together with all financing
statements signed by an Obligor describing any collateral securing such
Receivable;
(c) all guaranties, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable, whether pursuant to the Contract related to such Receivable or
otherwise; and
(d) the Contract and all other books, records and other information
(including, without limitation, computer programs, tapes, discs, punch cards,
data processing software and related property and rights) relating to such
Receivable and the related Obligor.
"SETTLEMENT DATE" means the first day of each month (or if such day is
not a Business Day, the immediately succeeding Business Day).
"TRANSFERRED CONTRACT" means a Contract the Receivables arising under
which are Transferred Receivables.
"TRANSFERRED RECEIVABLE" means a Purchased Receivable.
6
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
SECTION 1.02 OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York,
and not specifically defined herein, are used herein as defined in such Article
9.
ARTICLE II
AMOUNTS AND TERMS OF PURCHASES
SECTION 2.01 FACILITY. On the terms and conditions hereinafter set forth
and without recourse to the Seller (except to the extent specifically provided
herein),(i) the Seller shall, on the date hereof, sell to the Purchaser the
Receivables described on the Receivables Report attached hereto as Schedule I
and the Purchaser shall purchase such Receivables and (ii) the Seller may, from
time to time hereafter, at its option, sell to the Purchaser such Receivables as
may be set forth on a Receivables Report delivered by the Seller to the
Purchaser.
SECTION 2.02 MAKING PURCHASES.
(a) INITIAL PURCHASE. The Seller shall sell the Receivables described on
Schedule I on the date hereof in exchange for payment by the Purchaser of the
Purchase Price for such Purchase. The Purchaser shall promptly notify the
Seller whether it has determined to make such Purchase.
(b) SUBSEQUENT PURCHASES. Upon notice from the Seller on a Business Day
following the Initial Purchase (each such day, including the date of the initial
purchase under Section 2.02(a), a "PURCHASE DATE"), the Seller may sell to the
Purchaser and the Purchaser shall purchase from the Seller any Receivables
listed on a Receivables Report delivered by the Seller to the Purchaser. On the
date of each such Purchase, the Purchaser shall, upon satisfaction of the
applicable conditions set forth in Article III, pay the Purchase Price for such
Purchase in the manner provided in Section 2.02(c).
(c) PAYMENT OF PURCHASE PRICE. The Purchase Price for the Initial
Purchase shall be paid by a deposit in same day funds to the Seller's account
designated by the Seller in the amount of $22,880,000 and the Deferred Purchase
Price in the amount of $3,120,000, or an aggregate of $26,000,000. The Purchase
Price for each Purchase following the Initial Purchase shall be paid on the
Purchase Date therefor, at the discretion of the Seller, by means of (i) a
deposit in same day funds to the Seller's account designated by the Seller, (ii)
an increase in the Deferred Purchase Price (subject at all times to the
limitations contained in the definition thereof) or (iii) a credit against
interest and/or principal owed by the Seller with respect to any Purchaser Loan.
The allocation of the Purchase Price as among such methods of payment shall be
subject in each instance to the sole discretion of the Purchaser.
7
(d) OWNERSHIP OF RECEIVABLES AND RELATED SECURITY. On each Purchase
Date (including the date of the Initial Purchase), after giving effect to the
Purchase on such date, the Purchaser shall own all Transferred Receivables. The
Purchase of any Receivable shall include all Related Security with respect to
such Receivable.
SECTION 2.03 COLLECTIONS. All Collections on the Transferred
Receivables shall be directed to the Lockbox, except as otherwise directed by
the Purchaser. If the Seller believes that Collections which are not
Collections of Transferred Receivables have been deposited into an account of
the Purchaser, the Seller shall so advise the Purchaser and, on the Business Day
following such identification, the Purchaser shall remit, or shall cause to be
remitted, all Collections so deposited which are identified, to the Purchaser's
satisfaction, to be Collections of Receivables which are not Transferred
Receivables to the Seller.
SECTION 2.04 SETTLEMENT PROCEDURES.
(a) If on any day the Outstanding Balance of any Purchased Receivable is
reduced or adjusted as a result of any defective or rejected services, any cash
discount or other adjustment made by the Seller or any set-off or dispute in
respect of any claim by the Obligor thereof against the Seller (whether such
claim arises out of the same or a related transaction or an unrelated
transaction but EXCLUDING adjustments, reductions or cancellations in respect of
such Obligor's bankruptcy), the Seller shall be deemed to have received on such
day a Collection of such Purchased Receivable in the amount of such reduction or
adjustment. The Seller shall remit to the Purchaser Account on or prior to the
next Settlement Date all amounts deemed to have been received pursuant to this
subsection.
(b) Upon discovery by the Seller or the Purchaser of a breach of any of
the representations and warranties made by the Seller in Section 4.01 with
respect to any Transferred Receivable, such party shall give prompt written
notice thereof to the other party, as soon as practicable and in any event
within three Business Days following the date of such discovery. The Seller
shall (to the extent any such breach shall not have been remedied), upon not
less than two Business Days' notice from the Purchaser or its assign or
designee, repurchase all such Transferred Receivables under such Contract on the
next succeeding Settlement Date for a repurchase price equal to the Purchase
Price of such Transferred Receivable. Each repurchase of a Transferred
Receivable shall include the Related Security with respect to such Transferred
Receivable. The proceeds of any such repurchase shall be deemed to be a
Collection in respect of such Transferred Receivable. The Seller shall remit to
the Purchaser Account on or prior to the next Settlement Date the repurchase
price required to be paid pursuant to this subsection.
(c) Except as stated in subsection (a) or (b) of this Section 2.04 or as
otherwise required by law or the underlying Contract, all Collections of any
Transferred Receivable shall be applied to the Receivables of each Obligor in
the order of the age of such Receivables, starting with the oldest such
Receivable, unless such Obligor designates its payment for application to
specific Receivables.
8
SECTION 2.05 PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or
deposited by the Seller or the Collection Agent hereunder shall be paid or
deposited no later than 2:00 P.M. (Cleveland time) on the day when due in same
day funds to the Purchaser Account.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01 CONDITIONS PRECEDENT TO INITIAL PURCHASE. The Initial
Purchase of Receivables from the Seller hereunder is subject to the conditions
precedent that the Purchaser shall have received on or before the date of such
Purchase the following, each (unless otherwise indicated) dated such date, in
form and substance reasonably satisfactory to the Purchaser:
(a) Certified copies of the resolutions of the Board of Directors of the
Seller approving this Agreement and certified copies of all documents evidencing
other necessary corporate action and governmental approvals, if any, with
respect to this Agreement.
(b) A certificate of the Secretary or Assistant Secretary of the Seller
certifying the names and true signatures of the officers of the Seller
authorized to sign this Agreement and the other documents to be delivered by it
hereunder.
(c) Acknowledgment copies or time-stamped receipt copies of proper
financing statements, duly filed on or before the date of the initial Purchase,
naming the Seller as the seller/debtor and the Purchaser as the
purchaser/secured party, or other similar instruments or documents, as the
Purchaser may deem necessary or desirable under the UCC of all appropriate
jurisdictions or other applicable law to perfect the Purchaser's ownership of
and security interest in the Transferred Receivables and Related Security and
Collections with respect thereto or such other evidence as is reasonably
satisfactory to the Purchaser.
(d) Acknowledgment copies or time-stamped receipt copies of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the Transferred Receivables, Contracts or Related
Security previously granted by the Seller or such other evidence as is
reasonably satisfactory to the Purchaser.
(e) Completed requests for information, dated on or before the date of
such initial Purchase, listing the financing statements referred to in
subsection (c) above and all other effective financing statements filed in the
jurisdictions referred to in subsection (c) above that name the Seller as
debtor, together with copies of such other financing statements (none of which
shall cover any Transferred Receivables, Contracts or Related Security).
SECTION 3.02 CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase
(including the initial Purchase) hereunder shall be subject to the further
conditions precedent that:
9
(a) on or prior to the date of such Purchase, the Seller shall have
delivered to the Purchaser a written report identifying, among other things, the
Receivables (including the underlying Contracts) to be included in such Purchase
and the then outstanding Purchased Receivables and the aged balance thereof, in
each case correlated to Purchases;
(b) on or prior to the date of such Purchase, the Collection Agent shall
have delivered to the Purchaser, in form and substance reasonably satisfactory
to the Purchaser, a completed Receivables Report for the most recently ended
reporting period for which information is required pursuant to Section 6.02(b)
and containing such additional information as may reasonably be requested by the
Purchaser;
(c) the Seller shall have marked its master data processing records and,
at the request of the Purchaser, each Contract giving rise to Purchased
Receivables and all other relevant records evidencing the Receivables which are
the subject of such Purchase with a legend, acceptable to the Purchaser, stating
that such Receivables, the Related Security and Collections with respect
thereto, have been sold in accordance with this Agreement; and
(d) on the date of such Purchase the following statements shall be true
(and the Seller, by accepting the amount of such Purchase, shall be deemed to
have certified that):
a. the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of the date of such Purchase as
though made on and as of such date,
b. no event has occurred and is continuing, or would result from
such Purchase, that constitutes an Event of Termination or would constitute
an Incipient Event of Termination and
c. the Purchaser shall not have delivered to the Seller a notice
that the Purchaser shall not make any further Purchases hereunder; and
(e) the Purchaser shall have received such other approvals, opinions or
documents as the Purchaser may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as follows:
10
(a) The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New Jersey, and is duly qualified
to do business, and is in good standing, in every jurisdiction where the nature
of its business requires it to be so qualified except where the failure to be
so qualified would not have a material adverse effect on the collectibility of
the Transferred Receivables or on the Seller.
(b) The execution, delivery and performance by the Seller of this
Agreement and the other documents to be delivered by it hereunder, including the
Seller's sale of Receivables hereunder and the Seller's use of the proceeds of
Purchases, (i) are within the Seller's corporate powers, (ii) have been duly
authorized by all necessary corporate action on the part of the Seller, (iii) do
not contravene (A) the Seller's charter or by-laws, (B) any law, rule or
regulation applicable to the Seller, (C) any contractual restriction binding on
or affecting the Seller or its property or (D) any order, writ, judgment, award,
injunction or decree binding on or affecting the Seller or its property and (iv)
do not result in or require the creation of any lien, security interest or other
charge or encumbrance upon or with respect to any of its properties (except for
the transfer of the Seller's interest in the Transferred Receivables pursuant to
this Agreement). This Agreement has been duly executed and delivered by the
Seller.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Seller of this Agreement or any
other document to be delivered thereunder.
(d) This Agreement constitutes the legal, valid and binding obligation of
the Seller, enforceable against the Seller in accordance with its terms subject
to bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and to general principles of equity (whether considered in a
proceeding in equity or at law).
(e) Each sale made pursuant to this Agreement will constitute a valid
sale, transfer and assignment of Transferred Receivables to Purchaser,
enforceable against creditors of, and purchasers from, the Seller. The Seller
shall have no remaining property interest in any Transferred Receivable.
(f) There is no pending or, to the knowledge of the Seller, threatened
action or proceeding affecting the Seller before any court, governmental agency
or arbitrator which may materially adversely affect the financial condition or
operations of the Seller or the ability of the Seller to perform its obligations
under this Agreement, or which purports to affect the legality, validity or
enforceability of this Agreement.
(g) No proceeds of any Purchase will be used to acquire any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
(h) No transaction contemplated hereby requires compliance with any bulk
sales act or similar law.
11
(i) Each Receivable purported to be sold by the Seller hereunder is an
Eligible Receivable, and each Transferred Receivable, together with the Related
Security, is owned (prior to its sale hereunder) by the Seller free and clear of
any Adverse Claim (other than any Adverse Claim arising solely as the result of
any action taken by the Purchaser). When the Purchaser makes a Purchase of
Receivables, it shall acquire valid and perfected first priority ownership of
each Transferred Receivable and the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim (other than any Adverse
Claim arising solely as the result of any action taken by the Purchaser), and no
effective financing statement or other instrument similar in effect covering any
Transferred Receivable, any interest therein, the Related Security or
Collections with respect thereto is on file in any recording office except such
as may be filed in favor of the Purchaser in accordance with this Agreement or
in connection with any Adverse Claim arising solely as the result of any action
taken by the Purchaser.
(j) Each Receivable Report (if prepared by the Seller, or to the extent
that information contained therein is supplied by the Seller), exhibit,
financial statement or report furnished or to be furnished at any time by the
Seller to the Purchaser in connection with this Agreement is or will be accurate
in all material respects as of its date or as of the date so furnished, and no
such document contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading.
(k) The principal place of business and chief executive office of the
Seller and the office where the Seller keeps its records concerning the
Transferred Receivables are located at the address referred to in Section
5.01(b).
(l) The Seller is not known by and does not use any tradename or
doing-business-as name other than Triple A Protection and Rampart Security
Systems.
(m) With respect to any program used by the Seller in the servicing of the
Receivables, no sublicensing agreement is necessary in connection with the
designation of a new Collection Agent pursuant to Section 6.01(b) so that such
new Collection Agent shall have the benefit of such programs.
(n) The transfers of Transferred Receivables by the Seller to the
Purchaser pursuant to this Agreement, and all other transactions between the
Seller and the Purchaser, have been and will be made in good faith and without
intent to hinder, delay or defraud creditors of the Seller.
(o) (i) The fair value of the property of the Seller is greater than the
total amount of liabilities, including contingent liabilities, of the Seller,
(ii) the present fair salable value of the assets of the Seller is not less than
the amount that will be required to pay all probable liabilities of the Seller
on its debts as they become absolute and matured, (iii) the Seller does not
intend to, and does not believe that it will, incur debts or liabilities beyond
its ability to pay such debts and liabilities as they mature and (iv) the Seller
is not engaged in a business or a transaction, and is not about to
12
engage in a business or a transaction, for which its property would constitute
unreasonably small capital.
(p) (i) Each Transferred Contract (A) arose in connection with a bona
fide final sale and delivery of a security alarm system and/or related service
in the ordinary course of business; (B) is for a liquidated amount as stated in
such Contract; (C) is not subject to any defense, deduction, offset or
counterclaim; (D) constitutes the valid, legal and binding obligations of the
Originator or its predecessor-in-interest, enforceable in accordance with its
terms; (E) complies with all federal, state and local laws, rules and
regulations and (F) as of the date of its inclusion in a Receivable Report
hereunder, the Receivables thereunder are Eligible Receivables.
(ii) With respect to each Transferred Contract, (A) the Obligor
thereon has acknowledged that the security system dealer originally a party
thereto has completed all necessary work contracted for and has received a
notice of his rights of rescission under federal and state law with respect
thereto, (B) the Obligor has not exercised any such rescission rights
within five business days after the time such notice of rescission rights
was signed by such Obligor, (C) the Obligor thereon is obligated and liable
for payment of the amounts stated in such Contract, and has no known reason
to exercise any right of rejection, return, offset, defense, counterclaim,
discount or deduction.
(iii) Each Transferred Contract contains valid mandatory deferred
payment obligations for the mandatory monitoring of the security system
purchased, leased or owned by the Obligor, legally enforceable in
accordance with its terms, representing actual and bona fide agreements to
perform and accept residential monitoring services.
(iv) No payment under any Transferred Contract is, as of the relevant
Closing Date, delinquent, in default or subject to any dispute. All
statements made in any Financed Contract, including names and addresses,
locations and descriptions of property or services, down-payments and
unpaid balances, are in all respects true, complete and accurate. All
signatures and endorsements that appear on each Transferred Contract, or
any agreement or instrument relating thereto, are genuine and all
signatories and endorsers, if any, have full legal capacity to contract.
(v) All of the Seller's obligations to the Obligor on any Transferred
Contract, with the exception of future monitoring services and maintenance
or service obligations, have been completed and fulfilled in their
entirety. No Obligor on any Transferred Contract has been induced to enter
into such Contract by fraud or misrepresentation as to price, quality of
products or services.
13
ARTICLE V
COVENANTS
SECTION 5.01 COVENANTS OF THE SELLER. From the date hereof until the
first day following the Facility Termination Date on which all of the
Transferred Receivables are either collected in full or become Defaulted
Receivables:
(a) COMPLIANCE WITH LAWS, ETC. The Seller will comply in all material
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges except to the extent that the failure so to comply with any such law,
rule or regulation or the failure so to preserve and maintain such existence,
rights, franchises, qualifications, and privileges would not materially
adversely affect the collectibility of the Transferred Receivables or the
ability of the Seller to perform its obligations under this Agreement.
(b) OFFICES, RECORDS AND BOOKS OF ACCOUNT. The Seller will keep its
principal place of business and chief executive office and the office where it
keeps its records concerning the Transferred Receivables at the address of the
Seller set forth under its name on the signature page to this Agreement or, upon
30 days' prior written notice to the Purchaser, at any other locations in
jurisdictions where all actions required by Section 5.01(j) shall have been
taken and completed. The Seller also will maintain and implement administrative
and operating procedures (including, without limitation, an ability to recreate
records evidencing Transferred Receivables and related Contracts in the event of
the destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Transferred Receivables (including, without limitation,
records adequate to permit the daily identification of each new Transferred
Receivable and all Collections of and adjustments to each existing Transferred
Receivable). The Seller shall make a notation in its books and records,
including its computer files, to indicate which Receivables have been sold to
the Purchaser hereunder.
(c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND COLLECTION
POLICY. The Seller will, at its expense, timely and fully perform and comply
with all material provisions, covenants and other promises required to be
observed by it under the Transferred Contracts, and timely and fully comply in
all material respects with the Credit and Collection Policy in regard to each
Transferred Receivable and the related Contract.
(d) SALES, LIENS, ETC. Except for the sales of Receivables contemplated
herein, the Seller will not sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse Claim upon or
with respect to, any Transferred Receivable, Related Security, related Contract
or Collections, or upon or with respect to any account to which any Collections
of any Transferred Receivable are sent, or assign any right to receive income in
respect thereof.
14
(e) EXTENSION OR AMENDMENT OF TRANSFERRED RECEIVABLES. Except as
provided in Section 6.02(c), the Seller will not extend, amend or otherwise
modify the terms of any Transferred Receivable, or amend, modify or waive any
term or condition of any Contract related thereto.
(f) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The Seller will
not make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, materially adversely affect the
collectibility of the Transferred Receivables or the ability of the Seller to
perform its obligations under this Agreement.
(g) AUDITS. The Seller will, from time to time during regular business
hours as requested by the Purchaser or its assigns, permit the Purchaser, or its
agents, representatives or assigns, (i) to examine and make copies of and
abstracts from all books, records and documents (including, without limitation,
computer tapes and disks) in the possession or under the control of the Seller
relating to Transferred Receivables and the Related Security, including, without
limitation, the related Contracts and (ii) to visit the offices and properties
of the Seller for the purpose of examining such materials described in clause
(i) above and to discuss matters relating to Transferred Receivables and the
Related Security or the Seller's performance hereunder or under the Contracts
with any of the officers or employees of the Seller having knowledge of such
matters; PROVIDED, that except during the continuance of an Event of
Termination, the Purchaser shall not be entitled to exercise the rights set
forth in clause (ii) more than once during any 12-month period.
(h) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The Seller will not
terminate the Lockbox or make any change in its instructions to Obligors
regarding payments to be made to the Lockbox.
(i) DEPOSITS TO LOCKBOX. Except as otherwise specified by the
Purchaser, the Seller will deposit, or cause to be deposited, all Collections of
Transferred Receivables into the Lockbox, and the Seller will not deposit or
otherwise credit, or cause or permit to be so deposited or credited, to the
Lockbox or the Purchaser Account cash or cash proceeds other than Collections of
Transferred Receivables.
(j) FURTHER ASSURANCES.
(i). The Seller will from time to time, at its expense, promptly
execute and deliver all further instruments and documents, and take all
further actions, that may be reasonably necessary or desirable, or that the
Purchaser or its assignee may reasonably request, to perfect, protect or
more fully evidence the sale of Receivables under this Agreement or to
enable the Purchaser or its assignee to exercise and enforce its respective
rights and remedies under this Agreement. Without limiting the foregoing,
the Seller will, upon the request of the Purchaser or its assign,
(A) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments and documents, that may be
reasonably necessary or desirable to perfect, protect or evidence such
Transferred Receivables and (B) deliver to the Purchaser or its assign the
original of each Contract relating to the Transferred Receivables and (on
each Settlement Date) copies of all records relating to such
15
Contracts and the Transferred Receivables, whether in hard copy or in
magnetic tape or diskette format (which if in magnetic tape or diskette
format shall be compatible with the Purchaser's computer equipment).
(ii). The Seller authorizes the Purchaser or its assign to file
financing or continuation statements, and amendments thereto and
assignments thereof, relating to the Transferred Receivables and the
Related Security, the related Contracts and the Collections with respect
thereto without the signature of the Seller where permitted by law. A
photocopy or other reproduction of this Agreement shall be sufficient as a
financing statement where permitted by law.
(iii). The Seller shall provide for (i) the monitoring of the alarm
system of each Obligor under each Transferred Contract and (ii) the
servicing, repair, warranty service or replacement, and service calls
required by each Transferred Contract.
(k) REPORTING REQUIREMENTS. The Seller will provide to the Purchaser the
following:
(i). as soon as available and in any event within 45 days after the
end of the first three quarters of each fiscal year of the Seller, balance
sheets of the Seller as of the end of such quarter and statements of income
and retained earnings of the Seller for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, certified
by the chief financial officer of the Seller;
(ii). as soon as available and in any event within 105 days after the
end of each fiscal year of the Seller, financial statements for such year
audited by its independent public accountants;
(iii). as soon as possible and in any event within five days after the
occurrence of any Event of Termination or Incipient Event of Termination, a
statement of the chief financial officer of the Seller setting forth
details of such Event of Termination or Incipient Event of Termination and
the action that the Seller has taken and proposes to take with respect
thereto;
(iv). promptly after the filing or receipt thereof, copies of all
reports and notices that the Seller or any Affiliate files under ERISA with
the Internal Revenue Service, the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or that the Seller or any Affiliate receives
from any of the foregoing or from any multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Seller or any
Affiliate is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal liability
or an event or condition which could, in the aggregate, result in the
imposition of liability on the Seller and/or any such Affiliate;
(v). at least ten Business Days prior to any change in the Seller's
name, a notice setting forth the new name and the effective date thereof;
16
(vi). concurrently with the delivery of each Receivables Report by the
Collection Agent, a statement as to whether or not all of the Receivables
under all Contracts arising during the immediately preceding month have
been transferred by the Seller to the Purchaser and, if less than all of
such Receivables have been transferred, a summary of those Receivables not
transferred; and
(vii). such other information respecting the Transferred Receivables or
the condition or operations, financial or otherwise, of the Seller as the
Purchaser may from time to time reasonably request.
(1) SEPARATE CONDUCT OF BUSINESS. The Seller will: (i) maintain separate
corporate records and books of account from those of the Purchaser; (ii) conduct
its business from an office separate from that of the Purchaser; (iii) ensure
that all oral and written communications, including, without limitation,
letters, invoices, purchase orders, contracts, statements and applications, will
be made solely in its own name; (iv) have stationery and other business forms
and a mailing address and a telephone number separate from those of the
Purchaser; (v) not hold itself out as having agreed to pay, or as being liable
for, the obligations of the Purchaser; (vi) not engage in any transaction with
the Purchaser except as contemplated by this Agreement or as permitted by the
Finance Agreement; (vii) continuously maintain as official records the
resolutions, agreements and other instruments underlying the transactions
contemplated by this Agreement; and (viii) disclose on its annual financial
statements (A) the effects of the transactions contemplated by this Agreement in
accordance with generally accepted accounting principles and (B) that the assets
of the Purchaser are not available to pay the creditors of the Seller.
SECTION 5.02 COVENANT OF THE SELLER AND THE PURCHASER. The Seller and
the Purchaser have structured this Agreement with the intention that each
Purchase of Receivables hereunder be treated as a sale of such Receivables by
the Seller to the Purchaser for all purposes. The Seller and the Purchaser
shall record each Purchase as a sale or purchase, as the case may be, on its
books and records, and reflect each Purchase in its financial statements and tax
returns as a sale or purchase, as the case may be. If, contrary to the mutual
intent of the Seller and the Purchaser, any Purchase of Receivables hereunder is
not characterized as a sale, the Seller shall, effective as of the date hereof,
be deemed to have granted (and the Seller hereby does grant) to the Purchaser a
first priority security interest in and to any and all Receivables and the
proceeds thereof and all of the Seller's rights in any computer software, disks
and the like necessary or desirable for collection of the Contracts, all to
secure the repayment of all amounts advanced to the Seller hereunder with
accrued interest thereon, and this Agreement shall be deemed to be a security
agreement.
17
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01 DESIGNATION OF THE COLLECTION AGENT. The servicing,
administration and collection of the Transferred Receivables shall be conducted
by such Person (the "COLLECTION AGENT") so designated hereunder from time to
time. The Seller is hereby designated as, and hereby agrees to perform the
duties and obligations of, the Collection Agent pursuant to the terms hereof.
The Purchaser or its designee or assign at any time following the occurrence and
during the continuance of an Event of Termination may designate as Collection
Agent any other Person (including itself) to succeed the Seller or any successor
Collection Agent, if such Person shall consent and agree to the terms hereof.
Upon the Seller's receipt of such notice, the Seller agrees that it will
terminate its activities as Collection Agent hereunder in a manner which the
Purchaser (or its assign) believes will facilitate the transition of the
performance of such activities to the new Collection Agent, and the Seller shall
use its best efforts to assist the Purchaser (or its assign) to take over the
servicing, administration and collection of the Transferred Receivables,
including, without limitation, providing access to and copies of all computer
tapes or disks and other documents or instruments that evidence or relate to
Transferred Receivables maintained in its capacity as Collection Agent and
access to all employees and officers of the Seller responsible with respect
thereto. The Purchaser at any time after giving such notice may designate as
Collection Agent any Person (including itself) to succeed the Seller or any
successor Collection Agent, if such Person shall consent and agree to the terms
hereof. The Collection Agent may, with the prior consent of the Purchaser,
subcontract with any other Person for the servicing, administration or
collection of Transferred Receivables. Any such subcontract shall not affect
the Collection Agent's liability for performance of its duties and obligations
pursuant to the terms hereof.
SECTION 6.02 DUTIES OF THE COLLECTION AGENT.
(a) The Collection Agent shall take or cause to be taken all such actions
as may be necessary or advisable to collect each Transferred Receivable from
time to time, all in accordance with applicable Requirements of Law, with
reasonable care and diligence, and in accordance with the Credit and Collection
Policy. The Purchaser hereby appoints the Collection Agent, from time to time
designated pursuant to Section 6.01, as agent to enforce its ownership and other
rights in the Transferred Receivables, the Related Security and the Collections
with respect thereto. In performing its duties as Collection Agent, the
Collection Agent shall exercise the same care and apply the same policies as it
would exercise and apply if it owned the Transferred Receivables and shall act
in the best interests of the Purchaser and its assignees.
(b) Prior to the tenth Business Day of each month, the Collection Agent
shall prepare and forward to the Purchaser (i) a Seller Report relating to all
then outstanding Transferred Receivables and the Related Security and
Collections with respect thereto, in each case, as of the close of business on
the last day of the immediately preceding month and (ii) a listing by Obligor of
all Transferred Receivables correlating Transferred Receivables and Purchases,
together with an aging report of such Transferred Receivables.
18
(c) If no Event of Termination or Incipient Event of Termination shall
have occurred and be continuing, the Seller, while it is the Collection Agent,
may, in accordance with the Credit and Collection Policy, extend the maturity or
adjust the Outstanding Balance of any Transferred Receivable as the Seller deems
appropriate to maximize Collections thereof.
(d) The Seller shall deliver to the Collection Agent, and the Collection
Agent shall hold in trust for the Seller and the Purchaser in accordance with
their respective interests, all documents, instruments and records (including,
without limitation, computer tapes or disks) which evidence or relate to
Transferred Receivables other than those required to be transferred to and held
by another party pursuant to the Financing Agreement.
(e) The Collection Agent shall, as soon as practicable following receipt,
return to the Seller any cash collections or other cash proceeds received with
respect to Receivables not constituting Transferred Receivables, less, in the
event the Seller is not the Collection Agent, all reasonable and appropriate
out-of-pocket costs and expenses of the Collection Agent of servicing,
collecting and administering the Receivables to the extent not covered by the
Collection Agent Fee received by it.
(f) The Collection Agent also shall perform the other obligations of the
Collection Agent set forth in this Agreement with respect to the Transferred
Receivables.
(g) In addition to its other duties specified herein, the Collection Agent
shall, until its duties hereunder are terminated by the Purchaser, contract for
the performance of all monitoring services required under each Contract as if
such Contract had not been sold by the Purchaser hereunder.
SECTION 6.03 COLLECTION AGENT FEE. The Purchaser shall pay to the
Collection Agent, so long as it is acting as the Collection Agent hereunder, a
periodic collection fee (the "COLLECTION AGENT FEE") of $5.00 per month for each
Contract that is a Transferred Contract for such month (other than any Contract
related to a Transferred Receivable that is a Defaulted Receivable), payable on
each Settlement Date or such other day during each calendar month as the
Purchaser and the Collection Agent shall agree. The payment of the Collection
Agent Fee shall be made to the extent and in the manner provided in the
Financing Agreement.
SECTION 6.04 CERTAIN RIGHTS OF THE PURCHASER.
(a) The Purchaser may, at any time, give notice of ownership and/or direct
the Obligors of Transferred Receivables and any Person obligated on any Related
Security, or any of them, that payment of all amounts payable under any
Transferred Receivable shall be made directly to the Purchaser or its designee.
The Seller hereby transfers to the Purchaser (and its assigns) the exclusive
ownership and control of the Lockbox.
19
(b) The Seller shall, at any time upon the Purchaser's request and at the
Seller's expense, give notice of its ownership of the Transferred Receivables to
each Obligor thereof and direct that payments of all amounts payable under such
Transferred Receivables be made directly to the Purchaser or its designee.
(c) At the Purchaser's request and at the Seller's expense, the Seller and
the Collection Agent shall (i) assemble all documents, instruments and other
records (including, without limitation, computer tapes and disks) that evidence
or relate to the Transferred Receivables and the related Contracts and Related
Security, or that are otherwise necessary or desirable to collect the
Transferred Receivables, and shall make the same available to the Purchaser at a
place selected by the Purchaser or its designee and (ii) segregate all cash,
checks and other instruments received by it from time to time constituting
Collections of Transferred Receivables in a manner acceptable to the Purchaser
and, promptly upon receipt, remit all such cash, checks and instruments, duly
indorsed or with duly executed instruments of transfer, to the Lockbox. The
Purchaser shall also have the right to make copies of all such documents,
instruments and other records at any time.
(d) The Seller authorizes the Purchaser to take any and all steps in the
Seller's name and on behalf of the Seller that are reasonably necessary or
desirable, in the determination of the Purchaser, to collect amounts due under
the Transferred Receivables, including, without limitation, endorsing the
Seller's name on checks and other instruments representing Collections of
Transferred Receivables and enforcing the Transferred Receivables and the
Related Security and related Contracts.
SECTION 6.05 RIGHTS AND REMEDIES.
(a) If the Seller or the Collection Agent fails to perform any of its
obligations under this Agreement, the Purchaser may (but shall not be required
to), if such failure continues more than five Business Days following receipt of
written notice from the Purchaser, itself perform, or cause performance of,
such obligation, and, if the Seller (as Collection Agent or otherwise) fails to
so perform, the costs and expenses of the Purchaser incurred in connection
therewith shall be payable by the Seller as provided in Section 8.01 or Section
9.04 as applicable.
(b) The Seller shall perform all of its obligations under the Contracts
related to the Transferred Receivables to the same extent as if the Seller had
not sold Receivables hereunder and the exercise by the Purchaser of its rights
hereunder shall not relieve the Seller from such obligations or its obligations
with respect to the Transferred Receivables. The Purchaser shall not have any
obligation or liability with respect to any Transferred Receivables or related
Contracts, nor shall the Purchaser be obligated to perform any of the
obligations of the Seller thereunder.
(c) The Seller shall cooperate with the Collection Agent in collecting
amounts due from Obligors in respect of the Transferred Receivables.
(d) The Seller hereby grants to the Collection Agent an irrevocable power
of attorney, with full power of substitution, coupled with an interest, to take
in the name of the Seller all steps
20
necessary or advisable to endorse, negotiate or otherwise realize on any writing
or other right of any kind held or transmitted by the Seller or transmitted or
received by Purchaser (whether or not from the Seller) in connection with any
Transferred Receivable.
SECTION 6.06 TRANSFER OF RECORDS TO PURCHASER. Each Purchase of
Receivables hereunder shall include the transfer to the Purchaser of all of the
Seller's right and title to and interest in the records relating to such
Receivables and shall include an irrevocable non-exclusive license to the use of
the Seller's computer software system to access and create such records. Such
license shall be without royalty or payment of any kind, is coupled with an
interest, and shall be irrevocable until all of the Transferred Receivables are
either collected in full or become Defaulted Receivables. The Seller shall take
such action requested by the Purchaser, from time to time hereafter, that may be
necessary or appropriate to ensure that the Purchaser has an enforceable
ownership interest in the records relating to the Transferred Receivables and
rights (whether by ownership, license or sublicense) to the use of the Seller's
computer software system to access and create such records. In recognition of
the Seller's need to have access to the records transferred to the Purchaser
hereunder, the Purchaser hereby grants to the Seller an irrevocable license to
access such records in connection with any activity arising in the ordinary
course of the Seller's business or in performance of its duties as Collection
Agent, PROVIDED that (i) the Seller shall not disrupt or otherwise interfere
with the Purchaser's use of and access to such records during such license
period and (ii) the Seller consents to the assignment and delivery of the
records (including any information contained therein relating to the Seller or
its operations) to any assignees or transferees of the Purchaser provided they
agree to hold such records confidential.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01 EVENTS OF TERMINATION. If any of the following events
(each, an "EVENT OF TERMINATION") shall occur and be continuing:
(a) the Collection Agent (if the Seller or any of its Affiliates) shall
fail (i) to perform or observe any term, covenant or agreement under this
Agreement (other than as referred to in clause (ii) of this subsection (a) or
subsection (d) below) and such failure shall remain unremedied for the greater
of ten Business Days after actual knowledge thereof by a responsible officer of
the Collection Agent and five Business Days after written notice by the
Purchaser or its assign or (ii) to make when due any payment or deposit to be
made by it under this Agreement three Business Days after the same is due; or
(b) the Seller shall fail to make any payment required hereunder three
Business Days after the same is due; or
(c) any representation or warranty made or deemed made by the Seller in
this Agreement or any information or report delivered by the Seller pursuant to
this Agreement shall prove to have
21
been incorrect or untrue in any material respect when made or deemed made or
delivered and, if, in the reasonable determination of the Purchaser or its
assign, such failure can be corrected within 15 days, either the Seller is not
making its best efforts to remedy the same or such failure shall continue
unremedied for 20 days after the earlier of actual knowledge by a responsible
officer of the Purchaser and written notice thereof by the Purchaser or its
assign; or
(d) the Seller shall fail to perform or observe any of the following
provisions of this Agreement: the first sentence of Section 5.01(b); Section
5.01(d); Section 5.01(h); Section 5.01(k)(iii)-(v); Section 5.01(l); or Section
6.02(b); or
(e) the Seller shall fail to pay any principal of or premium or interest
on any of its Debt which is outstanding in a principal amount of at least
$250,000 when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed, purchased
or defeased, or an offer to repay, redeem, purchase or defease such Debt shall
be required to be made, in each case prior to the stated maturity thereof; or
(f) any Purchase of Receivables, the Related Security and the Collections
with respect thereto hereunder shall for any reason cease to constitute valid
and perfected ownership of such Receivables, Related Security and Collections
free and clear of any Adverse Claim; or
(g) the Seller shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Seller seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or the Seller shall take any corporate action to
authorize any of the actions set forth above in this subsection (g); or
(h) an Event of Default shall have occurred under the Finance Agreement;
or
(i) there shall have occurred any material adverse change in the financial
condition or operations of the Seller since the date hereof; or there shall have
occurred any event which may
22
materially adversely affect the collectibility of the Transferred Receivables or
the ability of the Seller to collect Transferred Receivables or otherwise
perform its obligations under this Agreement;
then, and in any such event, the Purchaser may, by notice to the Seller, take
either or both of the following actions: (x) declare the Facility Termination
Date to have occurred (in which case the Facility Termination Date shall be
deemed to have occurred) and (y) without limiting any right under this Agreement
to replace the Collection Agent, designate another Person to succeed the Seller
as Collection Agent; PROVIDED, that, automatically upon the occurrence of any
event (without any requirement for the passage of time or the giving of notice)
described in paragraph (g) of this Section 7.01, the Facility Termination Date
shall occur, the Seller (if it is then serving as the Collection Agent) shall
cease to be the Collection Agent, and the Purchaser (or its assigns or
designees) shall become the Collection Agent. Upon any such declaration or
designation or upon such automatic termination, the Purchaser shall have, in
addition to the rights and remedies under this Agreement, all other rights and
remedies with respect to the Receivables provided after default under the UCC
and under other applicable law, which rights and remedies shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01 INDEMNITIES BY THE SELLER. Without limiting any other
rights which the Purchaser may have hereunder or under applicable law, the
Seller hereby agrees to indemnify the Purchaser and its assigns and transferees
(each, an "INDEMNIFIED PARTY") from and against any and all damages, claims,
losses, liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "INDEMNIFIED AMOUNTS"), awarded against or incurred by any
Indemnified Party arising out of or as a result of:
(a) the inclusion, or purported inclusion, in any Purchase of any
Receivable that is not an Eligible Receivable on the date of such Purchase, or
the characterization in any Receivables Report or other statement made by the
Seller of any Transferred Receivable as an Eligible Receivable which is not an
Eligible Receivable as of the date of such Receivables Report or statement;
(b) any failure by the Purchaser to obtain full payment with respect to
any Government Receivable 180 days after the same becomes payable or any failure
by the Purchaser to obtain a perfected ownership interest in any Government
Receivable;
(c) any representation or warranty made or deemed made by the Seller under
this Agreement, which shall have been incorrect in any material respect when
made;
(d) the failure by the Seller to comply with any applicable law, rule or
regulation with respect to any Transferred Receivable or the related Contract;
or the failure of any Transferred Receivable or the related Contract to conform
to any such applicable law, rule or regulation;
23
(e) the failure to vest in the Purchaser absolute ownership of the
Receivables that are, or that purport to be, the subject of a Purchase under
this Agreement and the Related Security and Collections in respect thereof, free
and clear of any Adverse Claim;
(f) the failure of the Seller to have filed, or any delay in filing,
financing statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable law with respect to any
Receivable that is, or that purports to be, the subject of a Purchase under this
Agreement and the Related Security and Collections in respect thereof, whether
at the time of any Purchase or at any subsequent time;
(g) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable that
is, or that purports to be, the subject of a Purchase under this Agreement
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other claim
resulting from the sale of the merchandise or services related to such
Receivable or the furnishing or failure to furnish such merchandise or services
or relating to collection activities with respect to such Receivable (if such
collection activities were performed by the Seller acting as Collection Agent)
except to the extent that such dispute, claim, offset or defense results solely
from actions or failures to act of the Purchaser or its assigns;
(h) any failure of the Seller, as Collection Agent or otherwise, to
perform its duties or obligations in accordance with the provisions hereof or to
perform its duties or obligations under any Contract related to a Transferred
Receivable;
(i) any products liability or other claim arising out of or in connection
with services which are the subject of any Contract;
(j) the commingling of Collections of Transferred Receivables by the
Seller or a designee of the Seller, as Collection Agent or otherwise, at any
time with other funds of the Seller or an Affiliate of the Seller;
(k) any investigation, litigation or proceeding related to this Agreement
or the use of proceeds of Purchases or the ownership of Receivables, the Related
Security or Collections with respect thereto or in respect of any Receivable,
Related Security or Contract, except to the extent any such investigation,
litigation or proceeding relates to a possible matter involving an Indemnified
Party for which neither the Seller nor any of its Affiliates is at fault;
(l) any failure of the Seller to comply with its covenants contained in
Section 5.01;
(m) any Collection Agent Fees or other costs and expenses payable to any
replacement Collection Agent, to the extent in excess of the Collection Agent
Fees payable to the Seller hereunder;
24
(n) any claim brought by any Person other than an Indemnified Party
arising from any activity by the Seller or any Affiliate of the Seller in
servicing, administering or collecting any Transferred Receivable; or
(o) any Dilution with respect to any Transferred Receivable.
It is expressly agreed and understood by the parties hereto (i) that the
foregoing indemnification is not intended to, and shall not, constitute a
guarantee of the collectibility or payment of the Transferred Receivables and
(ii) that nothing in this Section 8.01 shall require the Seller to indemnify any
Person (A) for Receivables which are not collected, not paid or uncollectible on
account of the insolvency, bankruptcy, or financial inability to pay of the
applicable Obligor, (B) for damages, losses, claims or liabilities or related
costs or expenses resulting from such Person's gross negligence or willful
misconduct or (C) for any income taxes or franchise taxes incurred by such
Person arising out of or as a result of this Agreement or in respect of any
Transferred Receivable or any Contract.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller therefrom shall be
effective unless in a writing signed by the Purchaser and, in the case of any
amendment, also signed by the Seller, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No failure on the part of the Purchaser to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right.
SECTION 9.02 NOTICES, ETC. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be faxed or delivered, to each party
hereto, at its address set forth under its name on the signature pages hereof or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. Notices and communications by facsimile shall be
effective when sent (and shall be followed by hard copy sent by regular mail),
and notices and communications sent by other means shall be effective when
received.
SECTION 9.03 BINDING EFFECT; ASSIGNABILITY.
(a) This Agreement shall be binding upon and inure to the benefit of the
Seller, the Purchaser and their respective successors and assigns; PROVIDED,
HOWEVER, that the Seller may not assign its rights or obligations hereunder or
any interest herein without the prior written consent of
25
the Purchaser. In connection with any sale or assignment by the Purchaser of
all or a portion of the Transferred Receivables, the buyer or assignee, as the
case may be, shall, to the extent of its purchase or assignment, have all rights
of the Purchaser under this Agreement (as if such buyer or assignee, as the case
may be, were the Purchaser hereunder) except to the extent specifically provided
in the agreement between the Purchaser and such buyer or assignee, as the case
may be.
(b) This Agreement shall create and constitute the continuing obligations
of the parties hereto in accordance with its terms, and shall remain in full
force and effect until such time, after the Facility Termination Date, when all
of the Transferred Receivables are either collected in full or become Defaulted
Receivables; PROVIDED, HOWEVER, that rights and remedies with respect to any
breach of any representation and warranty made by the Seller pursuant to Article
IV and the provisions of Article VIII and Sections 9.04, 9.05 and 9.06 shall be
continuing and shall survive any termination of this Agreement.
SECTION 9.04 COSTS, EXPENSES AND TAXES. In addition to the rights of
indemnification granted to the Purchaser pursuant to Article VIII, the Seller
agrees to pay on demand all reasonable costs and expenses, if any (including
reasonable counsel fees and expenses), in connection with the enforcement of
this Agreement and the other documents to be delivered hereunder EXCLUDING,
HOWEVER, any costs of enforcement or collection of Transferred Receivables.
SECTION 9.05 NO PROCEEDINGS. The Seller hereby agrees that it will
not institute against the Purchaser any proceeding of the type referred to in
Section 7.01(g) so long as there shall not have elapsed one year plus one day
since the later of (a) the Facility Termination Date and (b) the date on which
all of the Transferred Receivables are either collected in full or become
Defaulted Receivables.
SECTION 9.06 CONFIDENTIALITY. Unless otherwise required by applicable
law or the rules of any exchange on which the shares of Response USA, Inc. are
listed, each party hereto agrees to maintain the confidentiality of this
Agreement in communications with third parties and otherwise; PROVIDED that this
Agreement may be disclosed to (a) third parties to the extent such disclosure is
made pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the other party hereto and (b) such party's legal
counsel and auditors and the Purchaser's assignees, if they agree in each case
to hold it confidential.
SECTION 9.07 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to the conflict of laws principles thereof), except to the extent that
the perfection of the Purchaser's ownership of or security interest in the
receivables or remedies hereunder, in respect thereof, are governed by the laws
of a jurisdiction other than the State of New York.
SECTION 9.08 THIRD PARTY BENEFICIARY. Each party hereto hereby
acknowledges that the Purchaser may assign all or any portion of its rights
under this Agreement and that such assignees may (except as otherwise agreed to
by such assignees) further assign their rights under this
26
Agreement, and the Seller hereby consents to any such assignments. All such
assignees, including parties to the Finance Agreement in the case of assignment
to such parties, shall be third party beneficiaries of, and shall be entitled to
enforce the Purchaser's rights and remedies under, this Agreement to the same
extent as if they were parties thereto, except to the extent specifically
limited under the terms of their assignment.
SECTION 9.09 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: UNITED SECURITY SYSTEMS, INC.
By: /S/ Xxxxxx X. May
--------------------------------------
Title:
-----------------------------------
Address: 00-X Xxxxxxxx Xxxx
Xxxxxxxxxxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
PURCHASER: RESPONSE ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Title:
-----------------------------------
Address: 00-X Xxxxxxxx Xxxx
Xxxxxxxxxxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
