Exhibit 4.1
FACTORING AGREEMENT
This Agreement, dated October 28, 2005 (the "Effective Date"), is between
Citadel Security Software Inc. with offices at Two Lincoln Center, 0000 XXX
Xxxxxxx, Xxx. 0000, Xxxxxx, XX 00000 (hereinafter called "Seller"), and Allied
Capital Partners, L.P., with offices at 0000 Xxxx Xxxx Xx., Xxxxx 000, Xxxxxx,
Xxxxx 00000 (hereinafter called "Allied").
The Seller desires to sell its Accounts to Allied on the following terms,
conditions and provisions and, therefore, it is agreed as follows:
1. Definitions. As used in this Agreement and all other documents or
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instruments executed and delivered in connection with this Agreement:
1.1 The capitalized words used herein (singular, plural or in any
tense) shall have the same definitions as those set forth in the
Uniform Commercial Code as adopted by the State of Texas,
effective July 1, 2001.
1.2 "Without Recourse" shall mean the Seller of Accounts is not
obligated to pay or repurchase an Account sold to Allied unless
Seller breaches its warranties or representations concerning such
Account. "With Recourse" or "Recourse" means Seller shall pay or
repurchase Accounts acquired by Allied that are not paid
according to the terms of the invoice.
1.3 "Face Amount" shall mean the total amount of each Account,
including taxes, delivery charges, etc.
1.4 An Account shall be deemed to be "Disputed" if (i) the Account
Debtor disputes any of the terms of an Account, including the
amount owing, timely delivery of the goods, conformity of the
goods or services to the order, or any other aspect of the sale
giving rise to the Account for any reason whatsoever, even if the
dispute has no merit, is in bad faith or is unreasonable, (ii)
the Account contains mistakes, is not correct or was sent in
error, or (iii) all of the following three conditions exist: (a)
the Account is not paid within 90 days of its invoice date, (b)
the Account Debtor will not communicate the reason for
non-payment to Allied, and (c) the Seller fails to produce,
within such time period, good and sufficient evidence that
nonpayment is due to the Account Debtor's financial inability to
pay, the pendency of a bankruptcy proceeding by or against the
Account Debtor or some reason other than a dispute of the type
referred to above.
1.5 "New Commitment" shall mean any written commitment Seller may
receive during the Term of this Agreement from a third party to
provide factoring to Seller, which commitment Seller intends to
accept.
1.6 "Discount" shall mean the sum of the following, subject to
adjustment as set forth below: (i) 1.50% of the Face Amount of
each Account up to a limit of $625,000 sold to Allied under this
Agreement for the Initial Payment Period and (ii)0.050% for each
1 day period (or portion thereof) that the Account remains unpaid
after the Initial Payment Period (as hereinafter defined), until
the earlier of (a) the date it is paid in full or repurchased by
the Seller in accordance with this Agreement, or (b) if the
Account is not one that the Seller is or becomes obligated to pay
or repurchase, 150 days from the date of the invoice of the
Account. In the event the Wall Street Journal Prime shall have
increased or decreased on the first business day of each calendar
quarter during the Term from its percentage as of the first
business day of the previous calendar quarter, or as of the
Effective Date if this term is applied on the first business day
of the calendar quarter immediately following the Effective Date,
the Discount shall increase or decrease proportionally.
1.7 "Initial Payment Period" shall mean the period of 30 days from
the date Allied has purchased an Account under this Agreement.
1.8 "Purchase Price" shall mean the Face Amount of the Account less
the Discount.
1.9 "Wall Street Journal Prime" shall mean the "prime rate" quoted by
The Wall Street Journal as the national average base rate on
loans posted by at least 75% of the nation's largest banks.
Other words used herein, which are capitalized, shall have the definitions
prescribed herein. Variations of words defined herein shall have the same
meaning as the defined terms.
2. Offer to Sell. Seller may, at its option, offer to sell, assign and
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transfer to Allied its existing and hereinafter arising, acquired or
created Accounts. Any such offer shall be made on an assignment form
prescribed by Allied (the "Schedule") sent to Allied at its above
stated office and accompanied by a copy of (i) each invoice, (ii) the
xxxx of lading, shipping documents or other proof of delivery, (iii)
the contract or purchase order (or purchase order number which
corresponds with the invoice), and (iv) such other documentation as
may be requested by Allied for each Account listed on the Schedule.
3. Acceptance of Offer. Allied may accept Seller's offer to sell
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Accounts at its above stated office by either (i) paying the Purchase
Price (less the Reserve, defined below) with respect to all Accounts
appearing on the Schedule submitted to Allied, or
_____ INITIAL
Exhibit 4.1
(ii) by marking out the Accounts which appear on the Schedule and
which Allied is unwilling to purchase, paying the Purchase Price (less
the Reserve) for the remaining Accounts, and sending a copy of the
Schedule to Seller which shows which Accounts were rejected. Allied
shall not be obligated to purchase any Account that Seller offers to
sell to Allied.
4. Reserve. Allied may, at its sole option and discretion, defer
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making payment to Seller of a portion of the Purchase Price payable
for all Accounts purchased under this Agreement which have not been
paid by the Account Debtor or paid or repurchased by Seller's payment
of the Repurchase Price to Allied, up to an aggregate amount equal to
18.50% of the Face Amount of all such Accounts provided, however, if
the Face Amount of any Account sold to Allied exceeds $625,000, Allied
may, in lieu of the 18.50% deferral, defer making payments to seller
of that portion of the Purchase Price payable on such Account which
exceeds $500,000 (the "Reserve"). The Reserve shall not bear interest.
The remaining portion of the Purchase Price payable for each Account
purchased hereunder and which constitutes part of the Reserve is
payable by Allied to Seller, on request of Seller (limited to one
request per week), after the earlier of (i) the date the Account is
paid to Allied, or (ii) 150 days from the date of the invoice of the
Account, unless the Reserve is increased as herein provided or the
Account is or becomes one that the Seller is obligated to repurchase
or pay. Notwithstanding the preceding limitation on the Reserve, in
the event Seller breaches any representation, warranty, term,
condition or provision of this Agreement, or if in Allied's reasonable
judgment it is necessary to increase the Reserve to protect Allied
from losses due to a Dispute of any Account, returns or other
contingencies, or Seller's unsatisfied obligations and liabilities,
Allied is entitled to increase the amount of the Reserve without
Seller's consent. If any Account owned by Allied is not paid within 75
days of the date of the invoice related thereto, Allied may presume
that the Account may be Disputed and may increase the Reserve by an
amount equal to that portion of the Purchase Price previously paid by
Allied plus the Discount. In the event Allied notifies Seller that it
has increased the Reserve, Seller shall immediately refund to Allied a
portion of the Purchase Price previously paid by Allied for the
purchase of Seller's Accounts which is equal to the increased amount
of the Reserve. After the Term of this Agreement defined below has
expired and Seller has paid its liabilities to Allied and fulfilled
its obligations arising hereunder, Allied shall pay the balance of the
Purchase Price payable for all Accounts purchased hereunder which
constitutes Reserve (if any) to Seller. The purpose of the Reserve is
to provide Allied with additional collateral to secure payment of
Seller's liabilities and performance of Seller's obligations arising
under this Agreement. Allied shall be entitled to offset or recoup
from the Reserve the amount of any liabilities owing by Seller to
Allied, whether presently existing or hereinafter arising, and whether
or not arising under this Agreement, including, but not limited to,
Seller's obligation to repurchase Accounts or to pay Accounts pursuant
to the provisions of this Agreement. Seller acknowledges that the
Reserve is not a cash deposit, but represents the balance of Allied's
liability to Seller for payment of the Purchase Price, subject to its
right of offset or recoupment and its security interest in the
Reserve. Allied shall provide Seller with a monthly statement of
accounting of transactions affecting the Reserve.
5. Seller's Repurchase Obligation. In addition to all other rights of
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Allied hereunder, Allied may require that Seller repurchase, by
payment of the Repurchase Price together with any other unpaid fees
then owing to Allied, any Account that has been purchased by Allied:
(i) for which Seller has breached its warranty or representation
concerning such Account as set forth herein; or (ii) which was
purchased by Allied With Recourse. If any Account purchased by Allied
is one that Seller is or becomes obligated to pay or repurchase under
this Agreement and is not paid within the Initial Payment Period,
Allied, at Allied's sole discretion, may elect to: (i) retain
ownership of the Account until the earlier of either the date the
Account is paid by the Account Debtor or 90 days after the invoice
date of the Account, or (ii) at any time require Seller to repurchase
the Account at the Repurchase Price. The purchase price for any
Account, which Seller is required to repurchase from Allied under this
Agreement is the Face Amount of the Account (the "Repurchase Price").
If Seller ever becomes obligated to repurchase an Account from Allied,
it shall not become the owner of such Account until it has paid the
Repurchase Price to Allied.
6. Minimum Sales. If Seller fails to offer to sell and assign to
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Allied a monthly minimum of $0 in Accounts which are acceptable to
Allied, Seller will pay to Allied the difference between the Discount
on all Accounts purchased by Allied from Seller during the month and
$0.
7. Recourse. Except as provided below, all Accounts sold and purchased
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hereunder are sold With Recourse on Seller. Allied and Seller may
agree in writing that the Accounts of a specific Account Debtor or
specific Accounts shall be purchased Without Recourse on Seller.
However, notwithstanding anything contained herein or in any such
agreement to the contrary, Allied shall never be considered to have
agreed to purchase an Account from the Seller which has a Face Amount
in excess of $250,000, unless Allied and Seller have signed a written
agreement stating that such specific and identifiable Account has been
purchased by Allied Without Resources on Seller.
8. Account Warranties. Seller warrants, represents, covenants and
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agrees that the presently existing and hereafter arising, acquired or
created Accounts of Seller sold to Allied or in which Allied obtains a
security interest: (i) are not and will not be Disputed; (ii) will be
paid when due (unless the Account was purchased Without Recourse);
(iii) are owned solely by Seller, which has the power to transfer the
Accounts, and that its title to the Accounts is free of all adverse
claims, liens, security interests and restrictions on transfer,
encumbrance or pledge, except as created by this Agreement; (iv) set
forth the correct and complete terms of sale, which have not been and
will not be altered or amended; (v) are valid and owing, and all goods
and services giving rise to the Accounts have been provided or
delivered in accordance with Seller's agreement with the Account
Debtor; (vi) will not be paid by a preference payment or fraudulent
transfer (as defined by the Bankruptcy Code or the relevant law of any
state); (vii) are not and shall not become subject to a defense or
claim in recoupment or setoff that can be asserted against Allied;
(viii) are not owing by Account Debtors that were subject to
insolvency or bankruptcy proceedings concerning which Seller had any
notice as of the date the Account is sold, or in which Seller owns an
interest of any kind; (ix) shall be reflected on Seller's books and
records in accordance with generally accepted accounting principles
and disclosures required by the Securities and Exchange Commission;
and (x) shall be evidenced by an invoice, and each invoice shall have
printed on the face thereof a statement, approved by Allied, notifying
the Account Debtor that the invoice has been sold and assigned to
_____ INITIAL
Exhibit 4.1
Allied and is payable only to Allied (or jointly to Allied and Seller)
at the address designated in such notice and that, if the Account is
paid, the Account will be paid by the Account Debtor in accordance
with such instructions. The warranties and representations set forth
herein shall apply as of the date each Account is sold hereunder and
shall continue with respect to each Account until each such Account is
paid. If Seller breaches any warranty, covenant or agreement set forth
above, Seller shall repurchase the applicable Account for the
Repurchase Price, or pay the Account; such payment or repurchase shall
cure Seller's default for breach of warranty with respect to such
Account.
9. Other Warranties and Covenants of Seller. Seller further warrants,
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represents, covenants and agrees that as of the Effective Date and at
all times during the Term of this Agreement: (i) Seller is and shall
be able to pay its debts as they become due; (ii) Seller's (a)
principal executive office is located in the State of Texas, (b)
Seller's Jurisdiction of Organization or state of incorporation or
charter is the State of Delaware and (c) exact legal name is as set
forth in the first paragraph of this Agreement, and Seller does not
operate under any trade name or assumed name (iii) Allied is and shall
remain Seller's sole factor, and Seller will not sell its Accounts to
any other person, firm or corporation during the Term; (iv) after
written notice by Allied to Seller and automatically, without notice,
after Seller's default under this Agreement, Seller shall not, without
the prior written consent of Allied in each instance, (a) grant any
extension of time for payment of any Accounts or any other Collateral
which includes a monetary obligation, (b) compromise or settle any
Accounts or any such other Collateral for less than the full amount
thereof, (c) release in whole or in part any Account Debtor or other
person liable for payment of Accounts or any other such Collateral, or
(d) grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Accounts or any such
other Collateral; (v) before sending any invoice to an Account Debtor
with respect to an Account that has been sold to Allied, Seller shall
xxxx the same with a notice of assignment as may be required by
Allied; (vi) Seller maintains and shall continue to maintain complete
and accurate business records of the type normally maintained by
businesses similar to Seller, and all financial records, statements,
books and other documents shall be made available for Allied's
inspection and shall be true and accurate in all respects; (vii) the
Accounts and Collateral are and shall at all times remain free and
clear of liens, claims and encumbrances other than the security
interests granted to Allied hereunder; (viii) Seller insures and shall
continue to insure its business and its assets in a manner customary
for businesses of the type of Seller's business, and Seller will
insure its inventory and goods in transit for their full value; (ix)
Seller will not sell, encumber or move the Collateral except in the
ordinary course of its business, without the prior written consent of
Allied; (x) Seller is and shall remain in compliance with all federal,
state and local tax laws, rules and regulations and shall furnish
Allied with evidence thereof on demand; (xi) Seller will preserve its
present legal formation and existence and not, in one transaction or
series of related transactions, merge into or consolidate with any
other entity, change the form of its legal existence, or sell all or
substantially all of its assets; and (xii) Seller will not change the
state where it is located, will not change the state where it is
incorporated or organized and will not change its organizational
documents, and will not change its name without providing Allied with
at least 30 days prior written notice. Seller also agrees that, if an
Account purchased by Allied authorizes the Account Debtor to discount
the Face Amount of the Account for prompt payment, the Seller shall
pay to Allied an amount equal to the discount taken by the Account
Debtor (even if not properly taken) and Allied is authorized to offset
such discount against the Reserve.
10. Notice to Allied. Seller shall immediately notify Allied of (i) a
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Dispute of any Account sold or encumbered under this Agreement, (ii)
any other breach of warranty or default in Seller's covenants and
agreements set forth herein, (iii) Seller's discovery of evidence of
Insolvency of an Account Debtor, and (iv) the filing and service of a
lawsuit or adversary proceeding related to an Account purchased by
Allied or the payment related thereto (including, but not limited to,
preference or fraudulent transfer litigation), (v) any claim of a lien
in the Collateral of Allied (including federal tax liens), (vi) any
change in ownership of Seller, and (vii) Seller's failure to pay any
tax it may owe at any time for any reason, when due.
11. Security Interest in Collateral. To secure Seller's payment to
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Allied of all amounts owing to Allied hereunder or damages arising due
to Seller's breach of the terms, warranties, representations, or
conditions of this Agreement or any other agreement by and between
Allied and Seller, whether now or hereafter owing to Allied, Seller
grants to Allied a Security Interest in all of its presently existing
and hereinafter arising, acquired or created: Accounts together with
all purchase orders and all rights, titles, and interests of Seller in
the product and/or service represented by such Account and all amounts
owing to Seller hereunder, including the Purchase Price and Reserve,
and all Proceeds thereof. Seller agrees as follows with respect to the
aforementioned Collateral: (i) Allied shall have the right at any time
and in its sole discretion to enforce Seller's rights against the
Account Debtors and obligors; (ii) Seller will not pledge, hypothecate
or encumber the Collateral during the Term of this Agreement and while
it is indebted or otherwise obligated to Allied; (iii) Allied may
exercise all rights and remedies of an unpaid seller with respect to
Accounts, Supporting Obligations, and Chattel Paper constituting
Collateral hereunder, including the right of replevin, reclamation and
stoppage in transit; (iv) Seller has the risk of loss of the
Collateral; and (v) Allied shall have no duty to collect the
Collateral or preserve or enforce any rights relating to the
Collateral.
12. Inspection of Records. Any agent of Allied may audit, check, make
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abstracts from or copies of the books, records, receipts,
correspondence, memoranda, and other papers or data relating to the
Collateral, Accounts purchased under this Agreement, the obligations
of Seller to Allied and any other transactions between Seller and
Allied, or generally audit all of Seller's books and records at
Seller's place of business upon Allied's demand therefore. Seller
shall at all times maintain a complete set of books and records
containing up-to-date posting of all of its cash and accrual
transactions of any nature.
13. Property of Allied/Proceeds and Returned Goods Held in Trust.
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After Allied has purchased an Account from Seller, (i) the
_____ INITIAL
Exhibit 4.1
Account and all proceeds thereof shall become the sole and absolute
property of Allied, (ii) Allied may at any time in its sole discretion
notify all Account Debtors of Accounts purchased by Allied that such
Accounts have been sold and assigned to Allied and are payable only to
Allied at the address provided by Allied, (iii) Seller shall
immediately make proper entries on its books and records disclosing
the absolute sale of such Accounts to Allied, (iv) Seller shall not
hinder, delay or interfere with payment of Accounts and shall
cooperate with and assist Allied in connection with Allied's handling,
collection or other dealings with the Accounts and Account Debtors,
including, without limitation, assisting Allied in obtaining written
confirmation, statements or agreements from Account Debtors which
specify or confirm any information requested by Allied with respect to
the Accounts, and (v) Seller shall hold any check, commercial paper,
notes, cash or other forms of payment of any Account sold to Allied
which may come into Seller's possession or under its control (even if
such payment is payable to Seller) in trust for the benefit of
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Allied and shall immediately turn over and deliver to Allied all such
payments, in kind, and in the exact form received. Seller shall
endorse any instrument or other form of payment which is payable to
Seller, but which is paid on an Account sold to Allied hereunder. In
the event of the return or non-acceptance, in whole or in part, of
property, the sale of which resulted in Accounts which were sold and
assigned to Allied, the Seller shall hold such property in trust
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for Allied, give to Allied immediate notice of such return or
non-acceptance, immediately turn over such property to the custody and
control of Allied, and legibly xxxx such merchandise as the property
of Allied; thereafter, upon demand, Seller shall repurchase such
property from and pay to Allied the invoice price thereof, and upon
such payment the Seller shall be entitled to the redelivery of such
property. If Seller fails to make such purchase and payment
immediately upon demand, it shall be in default hereunder and Allied
shall be entitled (in addition to its other remedies) to sell such
property at public or private sale and to charge Seller's account with
the difference between the invoice price of such property and the
amount realized upon the sale, plus all charges, fees and commissions
upon such sale. Allied may become a bidder and purchaser at any such
sale.
14. Breach of Trust Fee. Seller's strict adherence to the provisions
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of Paragraph 13 is essential in order for Allied to purchase Seller's
Accounts at the Discount and on the other terms set forth in this
Agreement. Seller agrees that the provisions of such paragraph are of
the essence of this Agreement and agrees to implement policies and
procedures to ensure its consistent and prompt performance of its
obligations hereunder. In the event Seller breaches its obligations
under such paragraph for reasons other than excusable neglect (which
shall be determined solely by Allied in its sole judgment and
discretion), (i) Allied may immediately terminate this Agreement and
charge the Termination Fee, as defined in Xxxxxxxxx 00 xxxxx, (xx)
Seller shall pay to Allied a fee equal to 15% of the amount of any
payment or other property which was received by Seller as property of
Allied in addition to all other amounts owing to Allied, and (iii)
Seller, at Allied's option, shall immediately repurchase all Accounts
acquired by Allied which are then owing by the Account Debtors by
payment of the Repurchase Price to Allied, even if such Accounts were
purchased Without Recourse.
15. Power of Attorney. Seller makes, constitutes and appoints Allied
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as Seller's true and lawful attorney-in-fact with power of
substitution and with power and authority to: (i) endorse the name of
Seller or of any of its officers or agents upon any notes, checks,
drafts, money orders, or other instruments of payment; (ii) sign and
endorse the name of Seller or any of its agents upon any invoice,
freight or express xxxx, xxxx of lading, storage or warehouse receipt,
drafts against Account Debtors, assignments, verifications, demands
under letters of credit and notices in connection with Accounts
acquired by Allied or which are Collateral under this Agreement, and
any instrument or document relating thereto or to Seller's rights
therein; (iii) execute any agreement compromising and settling any
Dispute or collection of any Account owned by Allied or owned by
Seller, if Seller is in default hereunder, on terms and conditions
acceptable to Allied in its sole discretion; (iv) bring suit in the
name of Seller or Allied to collect any Account; (v) amend the terms
of any Account owned by Allied or owned by Seller, if Seller is in
default hereunder; (vi) execute any financing statements (including
amendments) to perfect Allied's Security Interest granted by this
Agreement; (vii) execute and file in the name of Seller or Allied, or
both, mechanics' liens and all related notices and claims under any
payment bond, in connection with goods or services sold by Seller for
the improvement of realty; (viii) notify any Account Debtor obligated
with respect to any Account purchased by Allied that the underlying
Account has been assigned to Allied by Seller and that payment thereof
is to be made to the order of and directly and solely to Allied; (ix)
communicate directly with Account Debtors to verify the amount and
validity of any Account and to collect payment; (x) if Allied (in its
sole and absolute discretion) declares Seller to be in default
hereunder, give written notice to such office and officials of the
United States Post Office to effect such change or changes of address
that all mail addressed to Seller may be delivered directly to Allied.
Seller's attorney-in-fact is hereby granted full power to do all
necessary things to accomplish the above as fully and effectively as
could Seller; and (xi) exercise reclamation rights of Seller and to
file a claim in a bankruptcy proceeding of an Account Debtor (which
Seller requests Allied to do). Seller ratifies all that the
attorney-in-fact shall lawfully do or cause to be done by virtue
hereof. The power of attorney shall be irrevocable for the Term of
this Agreement and all transactions hereunder.
16. Default. Except as specifically provided herein, the following
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events shall constitute a default under this Agreement: (i) Seller
fails to pay any amounts owing hereunder or fails to fulfill its other
obligations under this Agreement or fails to make payments or fulfill
obligations under any other agreements that it may have with Allied,
(ii) Seller's warranties or representations set forth herein prove to
be untrue or false in any respect, howsoever minor, (iii) Seller or
any guarantor of the payment and performance of obligations hereunder
becomes subject to any debtor-relief proceedings, (iv) any such
guarantor fails to perform or observe any of such guarantor's
obligations to Allied or to notify Allied of its intention to rescind,
modify, terminate, or revoke any guaranty, or any such guaranty ceases
to be in full force and effect for any reason whatsoever, or (v)
Allied, for any reason, in good faith, deems itself insecure with
respect to the prospect of repayment or performance of the
_____ INITIAL
Exhibit 4.1
obligations of Seller. All warranties and representations of Seller
under this Agreement are continuing warranties and representations.
17. Term. Unless sooner terminated by either of the parties hereto,
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the initial Term of this Agreement shall commence on the Effective
Date and continue for twelve months thereafter, and this Agreement
shall automatically renew for additional twelve-month renewal Terms at
the end of the initial Term and each renewal Term unless either party
hereto gives written notice to the other at least 30 days prior to the
end of the original Term or any renewal Term that the Term is not
renewed. (Such initial Term and renewal Term is the "Term.") Allied
may terminate this Agreement at any time (i) if the Seller is in
default under this Agreement, by giving written notice to Seller, or
(ii) by giving 30 days advance written notice to Seller. Provided
Seller is not in default hereunder, Seller may terminate this
Agreement at any time by giving 30 days prior written notice to
Allied, accompanied by the Termination Fee. A fee of 4% of $3,000,000
shall be paid by Seller to Allied if this Agreement is terminated by
Seller (except as hereinafter provided) or if this Agreement is
terminated by Allied due to Seller's breach of any warranty, term,
condition or provision of this Agreement (the "Termination Fee");
provided, however, the Termination Fee is waived if Seller is not in
default and obtains a bank loan, secured by its Accounts, or obtains
proceed from equity financing and pays all of its obligations to
Allied from the proceeds. The Termination Fee is not a penalty, but is
a reasonable estimate of the damages Allied is likely to suffer as a
result of termination, and constitutes agreed liquidated damages. All
obligations hereunder shall continue in full force and effect with
respect to all transactions entered into and obligations, whether
absolute or contingent, existing or incurred before the end of the
Term.
18. Right of First Offer. Seller hereby agrees that in the event Seller
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receives a New Commitment, Seller will (i) advise Allied in writing of
the identity of the offeror of the New Commitment and the complete
terms of the New Commitment, and (ii) accept Allied's commitment if
Allied elects, in its sole discretion, to offer to modify this
Agreement to contain the same terms as the New Commitment.
19. Miscellaneous. The parties agree to the following additional
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terms:
19.1 This Agreement shall be binding upon and inure to the benefit
of both parties and their legal representatives, successors and
assigns.
19.2 This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Texas. Venue for the
institution of any legal proceeding shall be in Dallas County, Texas.
Each sale of an Account to Allied under this Agreement is an "Account
Purchase Transaction" as defined by section 306.001(1) of the Texas
Finance Code and is subject to such subtitle of the Texas Finance
Code.
19.3 If any term of this Agreement is held to be illegal, invalid,
or unenforceable, such determination shall not affect the validity of
the remaining terms. Time is of the essence of this Agreement.
19.4 Seller authorizes Allied to file a Financing Statement
describing the above described Collateral (and all amendments thereto
and renewals thereof) any place Allied may deem necessary or
appropriate, with or without the signature of Seller thereon. Allied
may enforce and foreclose its Security Interest in the Collateral in
accordance with its rights under the Texas Uniform Commercial Code.
19.5 All notices under this Agreement shall be in writing and
delivered personally, faxed or mailed by certified mail, return
receipt requested, or postage prepaid. The parties shall use the
addresses or fax number set forth below for all notices, unless the
party giving the notice has received written notice from the recipient
of a change of address or fax number at least 10 days prior to the
notice given under this Agreement.
ALLIED CAPITAL PARTNERS, L.P.
XX XXX 000000
XXXXXX, XX 00000-0000
HAND DELIVERY OR OVERNIGHT DELIVERY ONLY:
0000 XXXXXXXX XXXX, XXX. 000
XXXXXX, XX 00000
FACSIMILE: 000-000-0000
SELLER:
CITADEL SECURITY SOFTWARE INC.
TWO LINCOLN CENTRE
0000 XXX XXXXXXX, XXX. 0000
XXXXXX, XX 00000
FACSIMILE: 000-000-0000
19.6 Seller waives all notices of default, opportunity to cure,
presentment, demand, protest, and notice of dishonor.
_____ INITIAL
Exhibit 4.1
19.7 This Agreement constitutes the entire understanding between
the parties. It may not be changed or terminated except in an
instrument signed by both parties.
19.8 Allied shall not be deemed to have waived any of its rights
and remedies unless the waiver is in writing and signed by Allied. A
waiver by Allied of a right or remedy under this Agreement on one
occasion shall not constitute a waiver of the right or remedy on any
subsequent occasion.
19.9 Each statement of Seller's account which Allied sends to
Seller shall be deemed acceptable and binding upon Seller unless
Allied receives written notice from Seller stating in detail and with
particularity any exception thereto within 30 days after the date
thereof.
19.10 Seller shall reimburse Allied for the following costs
incurred by Allied in the course of performing its functions under
this Agreement: credit research, certified mail postage, UCC searches
and UCC filing fees, and wire transfer fees. The cost of credit
reports and all other costs shall be reimbursed at Allied's actual
cost. Seller also agrees to reimburse Allied the actual amount of
costs and expenses, including reasonable attorney's fees, incurred by
Allied in protecting, preserving or enforcing any lien, security
interest, title, collateral or other right granted by Seller to Allied
or arising under applicable law, whether or not suit is brought,
including but not limited to the defense of fraudulent transfer and
preference claims, enforcement of this Agreement or recovery of any
damages incurred by Allied as a result of the Seller's default. Seller
shall also reimburse Allied for its actual costs in assuring Seller's
compliance with this Agreement, such as the cost of the federal tax
lien search, UCC searches and Secretary of State Confirmations and
certificates.
19.11 Seller agrees to execute any further documents and to take
any further actions reasonably requested by Allied to evidence or
perfect the Security Interest granted herein or the assignments of
Accounts pursuant hereto, or to give effect to any of the rights
granted to Allied under this Agreement. If Allied (in its sole and
absolute discretion) declares Seller to be in default hereunder,
Allied may, at any time: (i) notify any Account Debtor to make payment
of any Account directly to Allied, regardless of whether such Accounts
have been purchased by Allied or Allied has a Security Interest
therein, and (ii) initiate electronic debit or credit entries through
the ACH system to Seller's bank accounts or other deposit account
maintained by Seller, wherever located, to collect all amounts owing
to Allied by Seller.
19.12 Seller has signed this agreement and submits the Agreement
to Allied for acceptance at Allied's offices in Dallas, Dallas County,
Texas. Seller and Allied shall make all payments and perform all other
obligations arising hereunder at Dallas County, Texas, and this
Agreement is made and entered into at Dallas County, Texas. Dallas
County, Texas, shall be the venue for any litigation arising under
this Agreement. In the event it becomes necessary for Allied to obtain
a temporary restraining order or other injunctive relief in order to
enforce the provisions of this Agreement, Seller hereby agrees to such
an order, and the parties agree that the Court may require a bond
which does not exceed the sum of $1,000.00 as a condition therefor,
and such bond shall be reasonable and adequate in all respects and
under all circumstances.
19.13 All amounts payable to Allied by Seller under this Agreement
are payable on demand by Allied, except amounts payable under
Paragraph 13 of this Agreement, for which no demand is required;
Allied is authorized, at its sole option, to collect any payments
owing by Seller to Allied under this Agreement by debit, offset or
recoupment from or against the Reserve. In the event Seller is in
default under any of the terms of this Agreement, Allied may, at its
option, require Seller to repurchase all unpaid Accounts that were
purchased by Allied, even if such Accounts were purchased Without
Recourse. Interest shall accrue on all past due sums owing to Allied
by Seller at 18% per annum if Seller is a corporation or 10% per annum
if Seller is not a corporation.
Seller:
CITADEL SECURITY SOFTWARE INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxx Xxxxxxx
Title: CEO
Date: October 31, 2005
Accepted at Dallas, Dallas County, Texas by Allied on the ______ day of ______,
2005.
ALLIED CAPITAL PARTNERS, L.P.
BY: Xxxxxx Capital Corporation
Its: General Partner
By:
----------------------------------------
Name: Xxxx Xxxxxx
Title: President
_____ INITIAL
