CAPCO
FINANCIAL
CONTRACT OF SALE
SECURITY AGREEMENT
(LOC Form 5)
This Contract of Sale and Security Agreement dated for purposes of reference
July 18, 2005; is between the undersigned, CCI TELECOM, INC., hereinafter called
"CLIENT", and CAPCO FINANCIAL COMPANY- A DIVISION OF GREATER BAY BANK N.A.
hereinafter called "CAPCO ", agree as follows:
PURPOSE OF AGREEMENT:
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1. CLIENT desires to obtain short-term financing by selling, to CAPCO ALL
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Accounts receivable. CAPCO agrees to Purchase CLIENT's Accounts from time
to time at a discount below face value, utilizing an advance formula for
the purchase of ALL Accounts based upon advances against
Acceptable/Eligible Accounts. It is clearly understood by both parties that
ALL Accounts of CLIENT are to be sold to CAPCO.
DEFINITIONS:
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2. "Account" means any right of payment for goods sold, or leased, and
delivered, or services rendered, any specific transaction, or any right of
payment.
3. "Advance Formula" means the maximum amount available to CLIENT from CAPCO
for the purchase of All Accounts will not exceed 85% of Acceptable/Eligible
Accounts.
4. "Acceptable/Eligible Account" means an Account conforming to the Warranties
and terms set forth herein that has not been outstanding for more than 90
DAYS from the date of invoice, has been underwritten and approved by CAPCO,
and has not been reduced from the original amount billed by, credit memo,
offset, adjustment of any kind, or partial payment subsequent to invoice
date.
5. "Customer" means CLIENT'S Customer or the Account debtor.
6. "CLIENT" means the seller of All Accounts.
7. "Collateral" means the intangible or tangible property given as security to
CAPCO by CLIENT for any obligations and liabilities of CLIENT to CAPCO
under the Agreement.
8. "Warrant" means to guarantee, as a material element of this Agreement.
9. "Credit Problem" means Customer is unable to pay his debts because of
problems or insolvency.
10. "Customer Dispute" means any claim by Customer against CLIENT, of any kind
whatsoever, valid or invalid, that reduces the amount collectible from
Customer by CAPCO.
CLIENT COVENANTS:
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11. CLIENT agrees to sell to CAPCO ALL ACCOUNTS RECEIVABLE, (Accounts)
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mechanic's lien(s), and rights to payment under any stop notice(s), or
bonded stop notice(s) securing payment of those Accounts created by CLIENT
in the course of its business, existing as of the date of this agreement or
thereafter created during the term of this agreement, subject to approval
and verification by CAPCO. CAPCO is not obligated to advance funds for the
purchase of All Accounts from CLIENT. When CLIENT notifies CAPCO of it's
Accounts, CLIENT shall provide a copy of the original Assigned Account
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(Invoice) a copy of the xxxx of lading contract, purchase order, purchase
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order number, and/or any other requisite supporting documentation
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corresponding to said Accounts and appropriate to the business of CLIENT,
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as requested by CAPCO.
12. CLIENT shall prepare and give to CAPCO proper written assignments of
Accounts, mechanic's lien(s) on forms provided by CAPCO. The execution of
said assignments shall transfer to CAPCO all of CLIENT's right, title and
ownership to ALL Accounts. CLIENT or CAPCO by this agreement will properly
xxxx Accounts, as assigned and sold to CAPCO, and CAPCO is authorized to
notify Customer of said sale and assignment.
13. CLIENT represents and Warrants to CAPCO that:
a. CLIENT is sole and absolute owner of any and all Accounts and
mechanic's liens and rights to payment under any stop notices, or bonded
stop notices, sold and assigned hereunder, and CLIENT has full legal right
to make said sale, assignment, and/or transfer.
b. All Accounts sold to CAPCO are an accurate statement of a bonafide
sale, delivery and acceptance of merchandise, or performance of service by
CLIENT to / for Account-debtor. Accounts are not contingent upon
Form Date 6/97 Page 1 Initial RB
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the fulfillment by CLIENT and each Account-debtor's business is believed to
be solvent. The terms for payment of said Accounts are 30 days or as
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expressly set forth on the face of said sold and assigned Accounts, and the
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payment of said Accounts are not contingent upon the fulfillment by CLIENT
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of any further performance of any nature whatsoever. CLIENT shall accept no
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returns and shall grant no allowances or credits to any sold and Assigned
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Account of any Account-debtor without the prior written approval of CAPCO.
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c. There are no known setoffs, Customer Disputes, adverse claims,
defenses, and/or liens whatsoever against the payment of Accounts, and
Account's mechanic's liens have not been previously assigned or encumbered
by CLIENT in any manner whatsoever. CLIENT will, immediately upon sale of
Accounts to CAPCO make proper entries on its books and records disclosing
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the absolute sale of Accounts to CAPCO and CLIENT will post no payment
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unless it is reflected in a payment report from CAPCO.
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d. CLIENT will promptly notify CAPCO in writing of any proposed change in
CLIENT'S place of business, name, legal entity, corporate structure,
record-keeping location, and/or as to any additional place of business, or
expiration of any special license(s), or transfer of assets, or technology,
to a third party, or proposed change in ownership in excess of twenty five
percent, (25%), of outstanding shares;
e. CLIENT does not own, control, manage, participate in management, or
have any involvement and/or association whatsoever with the business of any
Account-debtor related to any Accounts sold and assigned hereunder;
f. There are no financing statements now on file in any public office
governing, any Account, Inventory or work in process of CLIENT in which
CLIENT is named in or has signed as the debtor, except the financing
statement or statements filed or to be filed in respect to this Agreement,
or those statements now on file that have been disclosed in writing by
CLIENT to CAPCO. CLIENT will not execute any financing statements pledging
Accounts receivables, inventory or work in process, in favor of any other
person or entity, excepting CAPCO, for the term of this Agreement;
g. CLIENT'S taxes are not delinquent nor has CLIENT been subject to a tax
levy by any governmental entity nor are there now on file in any public
office tax liens affecting CLIENT other than those delinquencies, levies
and/or liens which have been disclosed by CLIENT to CAPCO;
h. All records, statements, books, or other documents shown to CAPCO by
CLIENT at any time, either before, or after the signing of the Agreement
are true and accurate;
i. CLIENT has served or caused to be served any and all preliminary
10-day notices required by law to perfect or enforce any mechanic's lien
for All Accounts to insure perfection of ownership for CAPCO and the
information contained on those preliminary 10-day notices is true, correct,
and properly recorded, to Seller's knowledge and belief;
j. Waivers and releases for all labor, services, equipment, or material
of CLIENT and others will be submitted on CAPCO's form concurrent with
Accounts.
14. CLIENT and CAPCO agree that CAPCO will have FULL RECOURSE against CLIENT
and CLIENT shall be liable to repay to CAPCO any amount paid by CAPCO to
CLIENT in consideration for the sale, transfer, and assignment of Accounts.
15. All Accounts shall be the sole property of CAPCO, but if for any reason a
payment owing on said Accounts shall be paid to CLIENT; CLIENT shall
promptly notify CAPCO of such payment, shall hold any check, draft or money
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so received in trust and for the benefit of CAPCO, and shall pay over such
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check or draft in-kind, or money, to CAPCO promptly and without delay. All
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of CLIENT'S invoices shall bear the address of a LOCK BOX ACCEPTABLE TO
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CAPCO; as the "REMIT TO" address, and CLIENT agrees that ALL remittances
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for payment on ALL Accounts shall be made to the LOCK BOX or other
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repository authorized in writing by CAPCO.
16. CLIENT will furnish CAPCO periodic statements, accounts receivable agings,
journals, bank records, and other information as requested by CAPCO from
time to time.
17. CLIENT will not pledge the credit of CAPCO to any other person, or business
for any purpose whatsoever.
18. CLIENT is properly licensed and authorized to operate the business of CCI
Telecom, Inc., under the trade name none, and CLIENT'S trade name has been
properly filed and published as required by the laws of the State of
Nevada.
19. CLIENT'S business is solvent.
20. CLIENT will not sell Accounts, or pledge Accounts to any party, except to
CAPCO for the period of this Agreement unless specific Accounts are
subordinated and released by CAPCO in writing.
21. CLIENT will not transfer, pledge, or give a security interest of the Assets
sold or Collateral granted to CAPCO to any other party.
Form Date 6/97 Page 2 Initial RB
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22. CLIENT will not change, or modify the terms of the original sold and
assigned Account with Customer unless CAPCO first consents to such change
in writing. CAPCO agrees to provide a prompt response to CLIENT request for
modification or change with respect to an Assigned Account. For example,
CLIENT may not extend credit to a Customer BEYOND 30 DAYS OR THE TIME SET
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FORTH ON THE FACE OF THE SOLD AND ASSIGNED ACCOUNT WITHOUT PRIOR WRITTEN
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CONSENT FROM CAPCO.
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23. NOTICE OF DISPUTE: CLIENT must immediately notify CAPCO of Customer
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Disputes greater than $400.00 in total for any one Customer.
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24. POWER OF ATTORNEY: In order to carry out this Agreement and avoid
unnecessary notification of Customers. CLIENT irrevocably appoints CAPCO,
or any person designated by CAPCO, as its special attorney in fact, or
agent, with power to:
a. strike out CLIENT'S address on all Accounts mailed to Customers and
put on CAPCO's address.
b. receive, direct and forward, open, and dispose of all mail addressed
to CLIENT, or to CLIENT'S fictitious trade name via CAPCO'S address.
c. endorse the name of CLIENT, OR CLIENT'S fictitious trade name on any
checks or other evidences of payment that may come into the possession of
CAPCO on Accounts purchased by CAPCO and on any other documents relating to
any of the Accounts or to assigned Collateral.
d. in CLIENT'S name, or otherwise, demand, xxx for, collect, and give
release for any and all monies due, or to become due on Accounts sold and
assigned hereunder.
e. do any and all things necessary and proper to carry out the purpose
intended by this Agreement.
f. execute any documents necessary to perfect or to continue any Security
Interest and without further authorization from CLIENT file a carbon,
photograph, facsimile, or other reproduction of any financing statement for
use as a financing statement
The authority granted CAPCO shall remain in full force and effect until all
Accounts are paid in full and any indebtedness of CLIENT TO CAPCO is
discharged.
CAPCO COVENANTS:
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25. CAPCO reserves the sum of ($5,000,000.00) FIVE MILLION AND 00/100 for the
purchase of ALL of CLIENT's Accounts. These funds are available daily at
CLIENT'S option, subject to restriction as governed by the Advance Formula.
Daily availability will be communicated to CLIENT via CAPCO'S Availability
/ Advance Request.
26. This Agreement shall have an initial term ending with the first full (12)
TWELVE calendar months and unless terminated by either party giving not
less than thirty (30) days prior written notice.
27. STATEMENT OF Acceptable/Eligible Accounts: CAPCO shall identify in writing
all Acceptable/Eligible Accounts and provide to CLIENT, upon request, a
written statement thereof (Weekly Aging Report).
ACCOUNTING & FEES:
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28. Funds advanced by CAPCO to CLIENT are subject to DAILY FEE OF GREATER BAY
BANK N.A. PRIME RATE + 6.000% /360 (EQUIVALENT TO A MONTHLY DISCOUNT FEE OF
GREATER BAY BANK N.A. PRIME RATE + 6.000% /12) PERCENT calculated on the
daily balance (as reported on the CLIENT Liability Detail Report) owing to
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CAPCO. This period will usually be 1 calendar day except for weekends and
or weeks where holidays or other non-operating days prevent the fee from
being taken on a daily basis.
29. CAPCO will provide to the CLIENT daily, via fax, an advance and
availability request. This report must be acknowledged and returned, via
fax, to CAPCO no later than 11:30AM if a deposit or wire transfer is to be
made the same date as the request form was issued to the CLIENT by CAPCO.
30. PAYMENT PROCESSING: All payments received by CAPCO will be applied to
CLIENT's Outstanding Balance daily following a 2 (TWO) business day hold to
allow for the application of collected funds.
31. DISPUTED ACCOUNT: CLIENT will immediately notify CAPCO of any Account
subject to a Customer Dispute (See Paragraph 10 for definition) of any kind
whatsoever and said Account shall be removed as an Acceptable/Eligible
Account.
32. INVOICING ERRORS: Mistaken, incorrect and/or erroneous invoicing, submitted
by CLIENT to CAPCO may at CAPCO's discretion be deemed a Customer Disputed
sold and Assigned Account and shall be removed as an Acceptable/Eligible
Account.
COLLATERAL:
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33. As Collateral for the payment of any indebtedness now owing, or in the
future owing, by CLIENT to CAPCO, CLIENT hereby grants to CAPCO a security
interest in the following property:
Form Date 6/97 Page 3 Initial RB
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a. SEE EXHIBIT A ATTACHED.
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34. CLIENT will maintain such insurance covering CLIENT's business and/or the
property of CLIENT's Customers as is customary for businesses similar to
the business of CLIENT.
35. CLIENT shall complete any and all documents required to provide CAPCO a
perfected security interest/lien in the Collateral pledged to CAPCO.
DEFAULT:
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36. Any one or more of the following shall constitute an event of default:
a. If CLIENT shall fail to pay any amount of indebtedness to CAPCO when
owing;
b. If CLIENT shall be in breach of any term, provision, Warranty, or
representation under this Agreement, or any other agreement related hereto;
c. If bankruptcy or insolvency proceedings shall be instituted by or
against CLIENT.
d. If the Collateral shall be attached, levied upon, seized in any legal
proceeding, and not released within 5 working days thereof;
e. If CLIENT shall cease doing business and there shall exist any
indebtedness or commitments by CLIENT to CAPCO;
f. Any Accounts, documents, statements, or other writings submitted by
CLIENT to CAPCO prove false or inaccurate in any material respect;
g. If CLIENT has contributed to, or aggravated Account debtor's problem,
insolvency, and/or said Account debtor's ability and/or willingness to pay
any Accounts;
h. If any unpaid judgment or tax lien exists against CLIENT;
i. If CAPCO with reasonable cause and in good faith determines that it's
purchased asset or collateral is impaired for any reason whatsoever;
j. Terminating prior to end of initial term;
k. Any change in CLIENT'S place of business, name, legal entity,
corporate structure, record-keeping location, and/or as to any additional
place of business, or expiration of any special license(s), or transfer of
assets, or technology, to a third party, or proposed change in ownership in
excess of twenty five percent, (25%), of outstanding shares.
REMEDIES AFTER DEFAULT:
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37. In the event of any default CAPCO may do any one or more of the following:
a. Declare any indebtedness secured hereby immediately due and payable;
b. increase the DAILY FEE by FIVE PERCENT / 360 (EQUIVALENT TO AN
INCREASE IN THE MONTHLY DISCOUNT FEE OF 5.000% / 12).
c. Notify any and all Customers and take possession of the Accounts and
Collateral and collect any receivables or funds paid to CLIENT all without
judicial process;
d. Require CLIENT to assemble the Collateral and the records pertaining
to receivables or other assets pledged as collateral, and make them
available to CAPCO, at a place designated by CAPCO;
e. Enter the premises of CLIENT and take possession of the Collateral and
of the records pertaining to the receivables and any other Collateral;
x. Xxxxx extensions, compromise claims and settle receivables for less
than face value, all without prior notice to CLIENT;
g. Use, in connection with any assembly or disposition of the Collateral,
any trademark, trade name, trade style, copyright, patent right or
technical process used or utilized by CLIENT;
h. Return any surplus realized to CLIENT after deduction of reasonable
expenses, attorney's fees, attorney's fees on appeal, collection costs,
independent third party auditors, incurred by CAPCO in resolving said
default;
i. Hold CLIENT liable for any deficiency.
j. Establish a reserve from the collection of Accounts to meet reasonable
legal expenses associated with a future defense resulting from an action
brought against CAPCO by CLIENT, CLIENT's customer, or other third party,
as a result of an action of default.
k. Injunction against CLIENT taking any action with regard to the
Accounts or Collateral.
l. CAPCO is authorized by CLIENT to receive, direct and forward, open,
and dispose of all mail addressed to CLIENT at any address used by CLIENT
to receive mail.
Form Date 6/97 Page 4 Initial RB
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GENERAL:
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38. After termination CLIENT remains fully responsible to CAPCO for any
indebtedness existing, or which may yet arise in connection with Accounts
that remain unpaid.
39. If during the term hereof CLIENT fails to make any payment required, CAPCO
may at its discretion pay the same and charge CLIENT therefore.
40. CLIENT will not, under any circumstances, or in any manner whatsoever,
interfere with any of CAPCO's rights under this Agreement.
41. TAX COMPLIANCE: CLIENT will furnish CAPCO upon request satisfactory proof
of payment and/or compliance with all Federal, State and/or Local tax
requirements.
42. NOTICE OF LEVY: CLIENT will promptly notify CAPCO of any attachment or any
other legal process levied against CLIENT.
43. LEGAL FEES: The losing party will pay any and all legal expenses and
reasonable attorney's fees, paralegal fees, staff overtime expense, travel
costs, costs on appeal, or other reasonable collection costs, that the
prevailing party may incur as a result of either CLIENT or CAPCO enforcing
this Agreement one against the other.
44. HOLD HARMLESS: CLIENT shall hold CAPCO harmless against any liability,
damages, loss, attorneys' fees and costs of any type due to any action by a
Customer arising from CAPCO'S collecting or attempting to collect any
Accounts so long as these collections are performed in a commercially
reasonable manner and in compliance with all applicable laws, rules and
regulations. CLIENT maintains the primary responsibility for collections
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efforts, until the occurrence of an event of default.
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45. BINDING ON FUTURE PARTIES: This Agreement inures to the benefit of and is
binding upon the heirs, executors, administrators, successors and assigns
of the parties thereto.
46. CUMULATIVE RIGHTS: All rights, remedies and powers granted to CAPCO in this
Agreement, or in any note, or other agreement given by CLIENT to CAPCO, are
cumulative and may be exercised singularly or concurrently with such other
rights as CAPCO may have. These rights may be exercised from time to time
as to all or any part of the pledged Collateral as CAPCO in its discretion
may determine.
47. WRITTEN WAIVER: CAPCO may not waive its rights and remedies unless the
waiver is in writing and signed by CAPCO. A waiver by CAPCO of a right, or
remedy under this Agreement on one occasion is not a waiver of the right,
or remedy on any subsequent occasion.
48. WASHINGTON LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of WASHINGTON. CLIENT hereby consents
to the exclusive jurisdiction of the State of Washington in any dispute
arising hereunder or related hereto. Venue for any actions shall be in KING
Co. WASHINGTON.
49. INVALID PROVISIONS: If any provision of this Agreement shall be declared
illegal or contrary to law, it is agreed that such provision shall be
disregarded and this Agreement shall continue in force as though such
provision had not been incorporated herein.
50. ENTIRE AGREEMENT: This instrument contains the entire Agreement between the
parties. Any addendum or modification hereto will be signed by both parties
and attached hereto.
51. EFFECTIVE: This Agreement becomes effective when it is accepted and
executed by the authorized officers of CAPCO.
52. Execution of this document may contain multiple signature pages; each shall
be considered, when combined, as one signed and executed document.
Form Date 6/97 Page 5 Initial RB
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Executed the 18th day of July, 2005 at San Antonio, Texas.
CCI TELECOM, INC.
By: /s/ Xxx X. Ber
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Title: VP & CFO
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By:
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Title:
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CAPCO FINANCIAL COMPANY- A DIVISION OF GREATER BAY BANK N.A.
Accepted this 28th day of July 2005 at Bellevue, Washington
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By: /s/ [Illegible]
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Title: AVP
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Form Date 6/97 Page 6 Initial RB
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CONTRACT OF SALE
SECURITY AGREEMENT
CCI TELECOM, INC.
EXHIBIT "A"
All personal property, now owned or hereafter acquired, including without
limitation accounts, contract rights, chattel paper, documents, instruments,
deposit accounts, investment property, letters of credit, commercial tort
claims, general intangibles, inventory, raw materials, work in progress,
finished goods, equipment, accessions, substitutions and accessions, and
proceeds (cash and non-cash) including, without limitation, insurance proceeds,
thereof.
Form Date 6/97 Page 7 Initial RB
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