Exhibit 10.2
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FINANCING AND SECURITY AGREEMENT
This Financing and Security Agreement dated for purposes of reference June 14th,
2001 is by and between the undersigned, MANAGEMENT SOLUTIONS & SYSTEMS, INC.
D/B/A MANAGEMENT SOLUTIONS SYSTEMS, INC. which is located at 000 XXXXXXXXX XXXX,
XXXXX 000, XXXXXXXX, XX 00000 (hereinafter referred to as `CLIENT') and ACTION
CAPITAL CORPORATION (hereinafter, `ACTION'). CLIENT and ACTION agree as follows:
I. PURPOSE OF AGREEMENT
CLIENT desires to obtain short-term financing by selling and assigning to ACTION
acceptable accounts receivable. The purpose of this financing is commercial in
nature, and not for household, family, and/or personal use. In the event CLIENT
and ACTION are currently operating under an earlier agreement, this agreement is
and shall be a modification and continuation of such earlier agreement and in
the event of any inconsistencies or contradictions within the agreements, CLIENT
and ACTION agree that the terms of THIS AGREEMENT SHALL CONTROL.
II. DEFINITIONS
2.1 `ACCOUNT' means both present and future accounts, contract rights and other
forms of obligations for the payment of money arising out of the sale by
CLIENT of goods or the performance by CLIENT of services.
2.2 `ACCEPTABLE ACCOUNT' means an account offered by CLIENT to ACTION for sale
which account ACTION has reviewed and have, in its sole discretion,
approved for purchase in whole or in part, and which account conforms to
the warranties and terms set forth herein and in the Agreement for the Sale
and Assignment of Invoices form accompanying each offer to sell.
2.3 `CUSTOMER' means CLIENT's customer or the account debtor.
2.4 `INVOICE' means the document evidencing any ACCOUNT referenced in and made
subject to any Agreement for the Sale and Assignment thereof entered into
between the CLIENT and ACTION.
III. WARRANTIES AND COVENANTS BY CLIENT
3.1 CLIENT's business is solvent, and is presently paying its debts as they
become due. CLIENT has never filed for bankruptcy under federal or state
law nor had an involuntary bankruptcy petition filed against it. CLIENT has
made and shall continue to make timely payment of all required taxes. To
the best of CLIENT's knowledge and based on CLIENT's reasonable business
practices, each CUSTOMER is solvent.
3.2 Each ACCOUNT offered for sale to ACTION hereunder is and shall be, as of
the time of such offer, a bona fide and existing obligation of CLIENT's
CUSTOMER for the payment of money arising out of the sale by CLIENT of
goods or the performance by CLIENT of services, which is owed to CLIENT,
free from any liens, claims, disputes, off-sets or equities of third
parties, that CLIENT is the lawful owner of and has good and undisputed
title to the ACCOUNTs offered for sale to ACTION hereunder, and that no
ACCOUNT offered or to be offered for sale to ACTION hereunder represents
consigned or guaranteed sales.
3.3 CLIENT has not transferred, pledged or granted a security interest in
CLIENT's ACCOUNTs to any other party and CLIENT will not transfer, pledge
or grant a security interest to any other party in said ACCOUNTs for the
term of this Agreement and for as long as CLIENT is indebted to ACTION
hereunder. Additionally, CLIENT will not sell or assign ACCOUNTs except to
ACTION for the period of this Agreement, and/or for as long as any
indebtedness whatsoever remains owing by CLIENT to ACTION.
3.4 FINANCIAL INFORMATION: CLIENT will furnish ACTION financial statements as
reasonably required by ACTION from time to time and will furnish ACTION,
upon request, satisfactory proof of payment and/or compliance with all
Federal, State and/or local tax requirements. ACTION will keep any
information it receives with respect to the financial or other records of
CLIENT or CLIENT's CUSTOMERS strictly confidential. This covenant of
confidentially survives this Agreement. All financial records, statements,
books or other documents shown to ACTION by CLIENT at any time, either
before or after the signing of this Agreement, are true and accurate.
3.5 ACTION or any person designated by ACTION shall have the right at any time
to inspect, audit, check and make copies or extracts from CLIENT's books,
records, journals, orders, receipts, and other correspondence and other
data relating to CLIENT's business and any other transaction between ACTION
and CLIENT without hindrance or delay.
3.6 CLIENT will not, under any circumstances or in any manner whatsoever,
interfere with any of ACTION's rights under this Agreement.
3.7 CLIENT will promptly notify ACTION in writing of any change in the location
of CLIENT's place(s) of business, name, identity, legal entity, corporate
structure, officers, principals, partners, and/or owners of CLIENT.
3.8 CLIENT has full power and authority to execute, deliver and perform this
Agreement.
IV. FURTHER PROMISES
4.1 SECURITY INTEREST/COLLATERAL: CLIENT gives to ACTION, as collateral for the
repayment of any and all obligations and liabilities whatsoever of CLIENT
to ACTION, a security interest, under the Uniform Commercial Code, in the
following described property (hereinafter collectively called
`Collateral'): All presently existing or hereafter arising, now owned or
hereafter acquired accounts, accounts receivable, contract rights, chattel
paper, documents, instruments, general intangibles, reserves, reserve
accounts, rebates, and all books and records (including without limitation,
customer lists, computer programs, print outs, and other computer material
and records) pertaining to the foregoing and all proceeds of the foregoing
property.
4.2 NOTIFICATION: ACTION will, at its discretion, notify any CUSTOMER TO MAKE
PAYMENTS DIRECTLY TO ACTION for any ACCOUNT that is sold and assigned to
ACTION pursuant to this Agreement.
4.3 ASSIGNMENT: CLIENT shall from time to time at CLIENT's option, sell,
transfer and assign ACCEPTABLE ACCOUNTs to ACTION, to be identified on a
form known as ACTION's Agreement for Sale and Assignment of Invoices
together with an original INVOICE and all supporting documents appropriate
to CLIENT's business.
4.4 PURCHASE PRICE: Each ACCEPTABLE ACCOUNT purchased by ACTION hereunder shall
be purchased for a price equal to the net amount of such ACCEPTABLE
ACCOUNT, less ACTION's fees and costs. As used herein, the "net amount" of
an ACCEPTABLE ACCOUNT means the face amount thereof less express mail and
bank wire transfer charges, and all returns, discounts and credits or
allowances of any nature, calculated on the basis of the shortest selling
terms provided.
4.5 INTEREST AND FEES: ACTION agrees to provide financing to CLIENT for the
fees as indicated below:
(a) WITH RESPECT TO THE DAILY AVERAGE BALANCE OF UNPAID ACCEPTABLE
ACCOUNTS PURCHASED HEREUNDER BY ACTION, CLIENT SHALL PAY INTEREST AT A
PER ANNUM RATE EQUAL TO THE "PRIME RATE OF WACHOVIA BANK, N.A. (AS OF
THE DATE HEREOF, THE PRIME RATE OF WACHOVIA BANK, N.A. IS 7.00% AND
MAY IN THE FUTURE INCREASE OR DECREASE) PLUS ONE PERCENT (1.00%), PLUS
A MONTHLY FEE EQUAL TO NINETY-FIVE ONE HUNDREDTHS OF ONE PERCENT
(0.95%) PER MONTH WITH RESPECT TO SUCH DAILY AVERAGE BALANCE. ANY
FUTURE CHANGES IN SUCH PRIME RATE SHALL BE EFFECTED ON THE FIRST DAY
OF EACH MONTH HEREAFTER BASED ON THE PRIME RATE IN EFECT ON THE LAST
DAY OF THE PRECEDING MONTH. ALL COMPUTATIONS OF INTEREST DUE HEREUNDER
SHALL BE CALCULATED ON THE BASIS OF A 360-DAY YEAR, FOR ACTUAL DAYS
ELAPSED. ALL INTEREST AND FEES HEREUNDER SHALL BE BILLED MONTHLY IN
ARREARS WITH PAYMENT DUE ON THE BILLING DATE.
(b) all other costs incurred by ACTION.
4.5 DATE OF ADVANCE: ACTION will buy ACCEPTABLE ACCOUNTs at the NET AMOUNT less
any specified reserve which will be advanced to CLIENT at the time the
ACCOUNT is accepted.
4.6 RESERVE: ACTION will reserve and withhold an amount in a reserve account
equal to NOT LESS THAN FIFTEEN PERCENT (15%) of the face amount of unpaid
ACCOUNTs purchased hereunder. The reserve account may be held by ACTION and
applied against charge-backs or any obligations of CLIENT to ACTION, known
or anticipated, and the reserve account shall not be due and payable to
CLIENT until any and all obligations of CLIENT to ACTION are fully paid
and/or satisfied. Notwithstanding the foregoing, as each ACCOUNT is paid in
full, the reserve associated with the paid ACCOUNT will be made available
to CLIENT provided, however, there does not then exist an event or
condition of default and further provided, however, that in no event at any
time shall the aggregate balance in the reserve account be less than
FIFTEEN PERCENT (15%) of CLIENT's unpaid ACCEPTABLE ACCOUNTs purchased by
ACTION.
4.7 RECOURSE: ACTION shall have full recourse against CLIENT when an ACCOUNT is
not paid by CUSTOMER when due, including without limitation, the right to
charge-back or sell back any such ACCOUNT, if not paid within 90 days of
the date of purchase. Notwithstanding the foregoing, as to any such ACCOUNT
that is charged-back or sold back to or repurchased by CLIENT, such
charge-back, sell back or repurchase shall not constitute a re-assignment
to CLIENT of any payment rights with respect to any such ACCOUNT and ACTION
shall at all times thereafter retain the exclusive and prior right to
collect and/or receive payment for any such ACCOUNT, unless and until all
obligations of CLIENT to ACTION have been fully and finally satisfied.
4.8 DISPUTED ACCOUNTS: CLIENT will immediately notify ACTION and accept back
(repurchase) from ACTION any ACCOUNT subject to a dispute between CUSTOMER
and CLIENT of any kind whatsoever.
4.9 HOLD IN TRUST: CLIENT will hold in trust and safekeeping, as the property
of ACTION, and immediately turn over to ACTION the identical check or other
form of payment received by CLIENT, whenever any payment on an ACCOUNT
purchased by ACTION comes into CLIENT's possession; ANY FAILURE BY CLIENT
IN THIS REGARD CONSTITUTES A DEFAULT UNDER THIS AGREEMENT (PURSUANT TO
SECTION V HEREINBELOW) AND MAY RESULT IN CIVIL AND/OR CRIMINAL ACTIONS
AGAINST CLIENT AND/OR THE PERSON (S) RESPONSIBLE FOR SUCH FAILURE.
4.10 RESPONSIBILITY FOR TAXES: All taxes and governmental charges with respect
to goods or services represented by ACCOUNTs purchased by ACTION shall be
the obligation and responsibility of CLIENT. CLIENT has no obligation for
ACTION's income or property taxes or any other taxes with respect to
ACTION's business.
4.12 NOTICE OF LEVY: CLIENT will promptly notify ACTION of any material
attachment, tax assessment or other legal process levied against CLIENT or
any of CLIENT's CUSTOMERS.
4.13 BOOK ENTRY: CLIENT will, immediately upon sale of ACCOUNTs to ACTION, make
proper entries on its books and records disclosing the absolute sale of
said ACCOUNTs to ACTION subject to the terms and conditions of this
Agreement.
4.14 LEGAL FEES: Except as is prohibited by law, CLIENT shall pay to ACTION all
reasonable costs and expenses, including without limitation attorney's fees
and expenses, and costs incurred by ACTION in the prosecution or
enforcement of any of ACTION's rights, claims or courses of action which
arise out of, relate to or pertain to this Agreement.
4.15 POWER OF ATTORNEY: CLIENT hereby names, appoints, and constitutes ACTION
and its designees as CLIENT's true and lawful attorney-in-fact, and does
hereby request, authorize, empower and direct ACTION or its designee, for
and in the name and instead of CLIENT, either in CLIENT's name or ACTION's
name to:
(a) compromise, adjust or settle any claim of a customer with respect to
an ACCOUNT that is sold and assigned to ACTION pursuant to this
Agreement;
(b) demand, xxx for, collect and give release for any and all monies due
or to become due on ACCOUNTs that are sold and assigned to ACTION
pursuant to this Agreement;
(c) make any and all corrections or completions on any of the invoices or
other documents constituting the ACCOUNTS that are sold and assigned
to ACTION pursuant to this Agreement;
(d) endorse CLIENT's name an any checks, drafts, instruments or other
evidences of payment with respect to any ACCOUNT or to otherwise
collect the same;
(e) receive, open and dispose of all mail addressed to CLIENT with respect
to any ACCOUNT; and
(f) do all other acts and things necessary to carry out the purpose and
intent of this agreement.
All acts of ACTION as attorney-in-fact are hereby ratified and approved and
ACTION shall not be liable for any errors of commission or omission nor for
any error of or mistake of law or fact excepting acts constituting gross
negligence or willful misconduct. This power of attorney in coupled with an
interest and is irrevocable for so long as CLIENT is indebted to ACTION.
The authority granted ACTION shall remain in full force and effect until
all assigned accounts are paid in full and any indebtedness of CLIENT to
ACTION is discharged.
V. DEFAULT
5.1 EVENTS OF DEFAULT: Any one or more of the following shall be a default
hereunder:
(a) CLIENT's breach of any promise, covenant or warranty under this
Agreement or any other agreements between CLIENT and ACTION or
obligation of CLIENT to ACTION, including without limitation, payment
of any indebtedness to ACTION when due;
(b) the appointment of any receiver or trustee of all or a substantial
portion of the assets of CLIENT; insolvency or inability to pay debts
as they mature; a general assignment for the benefit of creditors; the
voluntary or involuntary filing of a petition for relief under any
bankruptcy or similar law;
(c) issuance of any levies of attachment, executions, tax assessments or
similar process against the Collateral;
(d) CLIENT's tender to ACTION of information that is false or incorrect in
any material respect.
5.2 REMEDIES AFTER DEFAULT: In the event of any default, ACTION may do any one
or more of the following:
(a) declare any indebtedness including outstanding ACCOUNTS purchased by
ACTION, immediately due and payable;
(b) notify any CUSTOMER of CLIENT to make payments directly to ACTION with
respect to any and all ACCOUNTS of CLIENT;
(c) require CLIENT to send copies of records and files pertaining to
ACCOUNTs to ACTION and enter the premises of CLIENT and make copies of
the COLLATERAL and the records pertaining to the ACCOUNTs and any
other COLLATERAL;
(e) hold CLIENT liable for any deficiency.
VI. MISCELLANEOUS
6.1 MAXIMUM ACCOUNT: The outstanding amount of CLIENT's account with ACTION
(that is, at any time, the unpaid and owing principal amount of advances
made by ACTION to CLIENT) shall not exceed $500,000.00.
6.2 TERMINATION: This Agreement shall continue in full force and effect until
terminated by written notice by either party.
6.3 POST-TERMINATION: After termination CLIENT shall be liable to ACTION for
the full and prompt payment of the full amount of ACCOUNTs which have been
sold and assigned to ACTION and are then outstanding and unpaid, disputed
or undisputed, as well as any other indebtedness whatsoever. ACTION shall
continue to have a security interest in the LATERAL of CLIENT until any
existing indebtedness of CLIENT to ACTION is paid in full.
6.4 APPLICABLE LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia and shall be binding upon
the successors, assigns and representatives of the parties hereto.
6.5 ENTIRE AGREEMENT-AMENDMENT: This document contains the entire Agreement
between the parties as of the date specified below. This Agreement may be
modified only by a written instrument executed by the parties hereto.
Executed and accepted this 14 day of June, 2001.
Attested By: CLIENT:
MANAGEMENTY SOLUTIONS & SYSTEMS, INC. D/B/A
MANAGEMENT SOLUTIONS SYSTEMS, INC.
/s/ Xxxxx X. Xxxxxx BY: /s/ Xxxxxxxx Xxxx
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Corporate Secretary PRESIDENT
(Affix Corporate Seal)
ACTION:
ACTION CAPITAL CORPORATION
BY: /s/ illegible
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Executive Vice President
