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EXHIBIT 10.1
NationsBank
NationsBanc Commercial Corporation
Factoring Agreement
entered into between
ECCS, INC.
and
NationsBanc Commercial Corporation
NationsBanc Commercial Corporation
X.X. Xxx 0000
Xxxxxxx, Xxxxxxx 00000
Gentlemen:
We are pleased to confirm the following agreement by which you are to
act as sole factor for sales made by us:
SECTION 1. DEFINITIONS
1.1 "Affiliate" shall mean, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or under common Control with the Person specified.
1.2 "Approved Subordinated Debt" shall mean Indebtedness subordinated
to our Obligations under the Agreement and the other Transaction Documents on
terms approved in writing by you.
1.3 "Banking Day" shall mean a day for dealings by and between banks,
excluding Saturday, Sunday and any day which shall be a legal holiday in the
City of Atlanta, Georgia, or the State of New Jersey and any other day on which
banking institutions are authorized to close in the City of Atlanta, Georgia or
the State of New Jersey.
1.4 "Borrowing Base Certificate" shall have the meaning set forth in
Section 6.3.
1.5 "Capital Lease Obligations" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP and
the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
1.6 "Certificate re Trademarks" shall mean the document entitled
Certificate re Trademarks executed by us on or about the date hereof.
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1.7 "Change in Management" shall be deemed to have occurred on the date
on which the persons who were members of our Board of Directors as of
__________, 199_ (the "Original Directors") cease to constitute a majority of
our Board of Directors; provided, however, that any new director whose
nomination or selection has been approved by the affirmative vote of at least
three of the Original Directors then in office shall also be deemed an Original
Director.
1.8 "Collateral" shall mean (A) all Receivables; (B) all Inventory; (C)
all Equipment; (D) all General Intangibles; (E) all books, records, ledgercards,
files, correspondence, computer programs, tapes, disks and related data
processing software (owned by us or in which we have an interest) which at any
time evidence or contain information relating to (A), (B), (C) and (D) above or
are otherwise necessary or helpful in the collection thereof or realization
thereupon; (F) documents of title, policies and certificates of insurance,
securities, chattel paper, other documents or instruments evidencing or
pertaining to (A), (B), (C), (D) and (E); (G) all guaranties, liens on real or
personal property, leases, and other agreements and property which in any way
secure or relate to (A), (B), (C), (D), (E) and (F) above, or are acquired for
the purpose of securing and enforcing any item thereof; (H) (i) all cash held as
cash collateral to the extent not otherwise constituting Collateral, all other
cash or property at any time on deposit with or held by you for our account
(whether for safekeeping, custody, pledge, transmission or otherwise), (ii) all
of our present or future deposit accounts (whether time or demand or interest or
non-interest bearing) with you or any of your affiliates or any other person or
entity to which any such cash representing proceeds of the Collateral may at any
time and from time to time be credited, (iii) all investments and reinvestments
(however evidenced) of amounts from time to time credited to such accounts, and
(iv) all interest, dividends, distributions and other proceeds payable on or
with respect to (x) such investments and reinvestments and (y) such accounts;
and (I) all proceeds of (A), (B), (C), (D), (E), (F), (G) and (H) above
(including, but not limited to, all claims to items referred to in (A), (B),
(C), (D), (E), (F), (G) and (H) above) and all of our claims against third
parties (x) for (i) loss of, damage to, or destruction of, and (ii) payments due
or to become due under leases, rentals and hires of, any or all of (A), (B),
(C), (D), (E), (F), (G) and (H) above and (y) proceeds payable under, or
unearned premiums with respect to policies of insurance in whatever form.
1.9 "Consolidated Current Liabilities" shall mean, at the date of
determination, all of our liabilities and those of our consolidated Subsidiaries
that would, in accordance with GAAP, be classified on a consolidated balance
sheet of us and our Subsidiaries as current liabilities.
1.10 "Consolidated Funded Indebtedness" shall mean, as of the date of
determination, all of our Indebtedness and that of our consolidated
Subsidiaries, determined on a consolidated basis in accordance with GAAP, that
by its terms matures more than one year after the date of calculation, and any
such Indebtedness maturing within one year from such date that is renewable or
extendible at the option of the obligor to a date more than one year from such
date.
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1.11 "Consolidated Net Worth" shall mean, as of the date of
determination, all items which in conformity with GAAP would be included under
shareholders' equity on a consolidated balance sheet of us and our Subsidiaries
at such date.
1.12 "Consolidated Tangible Net Worth" shall mean, as of the date of
determination, Consolidated Net Worth after deducting therefrom (a) any surplus
resulting from the write-up of assets subsequent to _____________, 1997, (b)
goodwill, including any amounts (however designated on the balance sheet)
representing the cost or acquisitions of our Subsidiaries in excess of
underlying tangible assets, (c) patents, trademarks, copyrights and other
intangible assets, (d) leasehold improvements not recoverable at the expiration
of a lease and (e) deferred charges (including, but not limited to, unamortized
debt discount and expense, organizational expenses, experimental and development
expenses, and capitalized software expenses but excluding prepaid expenses).
1.13 "Consolidated Total Liabilities" shall mean, as of the date of
determination, all of our liabilities and those of our consolidated
Subsidiaries, determined on a consolidated basis in conformity with GAAP,
including Consolidated Current Liabilities and Consolidated Funded Indebtedness.
1.14 "Contract Year" shall mean the twelve month period ending on the
anniversary of the Effective Date in each year.
1.15 "Control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
1.16 "Credit Risk" shall mean the risk of loss resulting solely and
exclusively from the financial inability of a Customer to pay a Receivable at
maturity.
1.17 "Customer Dispute" shall mean any cause for nonpayment of any
Receivable, including, without limitation, any alleged defense, offset, defense
or counterclaim whether bona fide or not.
1.18 "Customers" shall mean the account debtors obligated on the
Receivables.
1.19 "Default" shall mean the occurrence of any of the following
events:
(a) nonpayment when due of any amount payable on any of the
Obligations or failure to perform any agreement or meet any obligation of ours
contained herein or in any agreement out of which any of the Obligations arose,
which failure to perform shall not be cured to your satisfaction within 10 days
following such breach or failure to perform;
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(b) default by us in repayment when due of any indebtedness aggregating
more than $50,000 now or hereafter owed for monies borrowed from any one other
than you;
(c) failure to pay any taxes when due unless such taxes are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been provided on our books;
(d) an attachment or levy is made upon any of our assets having an
aggregate value in excess of $100,000, or a judgment is rendered against us or
any of our property involving a liability of more than $100,000, which
attachment, levy or judgment shall not have been vacated, discharged, stayed or
bonded pending appeal within sixty (60) days from the entry thereof;
(e) any material adverse change in our condition or affairs (financial
or otherwise) after the date hereof;
(f) any lien created hereunder or under any related agreement for any
reason ceases to be or is not a valid and perfected lien having a first priority
interest;
(g) any material statement, representation, or warranty of ours made
orally or in writing herein or in any other writing or statement at any time
furnished or made by us to you is untrue in any material respect as of the date
furnished or made and the same is not cured to your satisfaction within 10 days
following such occurrence;
(h) we shall admit in writing our inability, or be generally unable to
pay our debts as they become due or the suspension of the operation of our
present business;
(i) any Obligor becomes insolvent or unable to pay debts as they
mature, makes an assignment for the benefit of creditors, or a proceeding is
instituted by or against any Obligor alleging that such Obligor is insolvent or
unable to pay debts as they mature, or a petition under any provision of Title
11 of the United States Code (entitled "Bankruptcy"), as amended is brought by
or against any Obligor;
(j) termination or withdrawal of any guaranty for the Obligations;
(k) there is a Change in Management;
(l) appointment of a receiver for any collateral pledged for the
Obligations or for any of our property and such appointment shall continue
undismissed for 30 days; or
(m) you in good xxxxx xxxx the prospect of our payment or performance
of the Obligations to have been impaired.
1.20 "Effective Date" shall have the meaning set forth in Section 11
hereof.
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1.21 "Electronic Transmission Letter" shall mean the Electronic
Transmission Letter executed by the parties hereto on or about the date hereof.
1.22 "Eligible Receivables" means and includes each Receivable which
conforms to the following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) no return, rejection or
repossession of the merchandise has occurred; (c) merchandise or services shall
not have been rejected or disputed by the Customer and there shall not have been
asserted any offset, defense, counterclaim, or Customer Dispute; (d) continues
to be in full conformity with the representations and warranties made by us to
you with respect thereto; (e) you are, and continue to be, satisfied with the
credit standing of the Customer in relation to the amount of credit extended;
(f) is documented by an invoice in a form approved by you and shall not be
unpaid more than ninety (90) days from invoice date; (g) less than 25% of the
unpaid amount of invoices due from such Customer remain unpaid more than sixty
(60) days from due date and no more than 50% of our total Eligible Receivables
are due from such Customer; (h) is not evidenced by chattel paper or an
instrument of any kind with respect to or in payment of the Receivable unless
such instrument is duly endorsed to and in your possession or represents a check
in payment of a Receivable; (i) if the Customer is located outside of the United
States, Puerto Rico or Canada, the goods which gave rise to such Receivable were
shipped after receipt by us from or on behalf of the Customer of an irrevocable
letter of credit, assigned and delivered to you and confirmed by a financial
institution acceptable to you and is in form and substance acceptable to you,
payable in the full amount of the Receivable in United States dollars at a place
of payment located within the United States or otherwise enhanced on terms
acceptable to you; (j) such Receivable is not subject to any lien, other than
Permitted Liens; (k) does not arise out of transactions with any employee,
officer, agent, director, stockholder or our affiliate; (l) does not arise out
of a xxxx and hold sale prior to shipment unless requested by a Customer and
with respect to which a DD250 has been delivered to you (it being understood
that we may sell to other Customers on xxxx and hold terms with your prior
written consent, which consent shall not be unreasonably withheld), and, if the
Receivable arises out of a sale to any person or entity to which we are
indebted, other than Receivables owing from Unisys Corp. which are the subject
of a no offset letter between you and Unisys Corp. dated April 29, 1997 the
amount of such indebtedness, and any anticipated indebtedness, is deducted in
determining the face amount of such Receivable; (m) is net of any returns,
discounts, claims, credits and allowances; (n) if the Receivable arises out of
contracts between us and the United States, any state, or any department,
agency, contractor or instrumentality of any of them, we have so notified you,
in writing, prior to the creation of such Receivable, the applicable DD250 form
has been delivered to you and, if you so requested, there has been compliance
with any governmental notice or approval requirements, including without
limitation, compliance with the Federal Assignment of Claims Act; (o) is a good
and valid account representing an undisputed bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to an unconditional sale and delivery upon the stated terms
of goods sold by us, or work, labor and/or services rendered by us; and (p) is
otherwise satisfactory to you as determined in your discretion.
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1.23 "Equipment" shall mean and include all of our now owned or
hereafter acquired equipment, machinery and goods (excluding inventory), whether
or not constituting fixtures, including, without limitation: plant and office
equipment, tools, dies, parts, data processing equipment, furniture and trade
fixtures, trucks, trailers, loaders and other vehicles and all replacements and
substitutions therefore and all accessions thereto.
1.24 "Formula Amount" shall mean the lesser of (a)$7,000,000.00 or (b)
up to 85% of Eligible Receivables; less charges and reserves provided for in
accordance with Section 2.3.
1.25 "Funds Transfer Letter" shall mean the Funds Transfer Letter
executed by the parties hereto on or about the date hereof.
1.26 "GAAP" shall mean generally accepted accounting principles in the
United States of America.
1.27 "General Intangibles" shall mean and include all of our now owned
or hereafter acquired general intangibles as said term is defined in the Uniform
Commercial Code in effect in the State of New York including, without
limitation, trademarks, tradenames, tradestyles, trade secrets, equipment
formulation, manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights, registrations,
contract rights, choses in action, causes of action, corporate or other business
records, inventions, designs, goodwill, claims under guarantees, licenses,
franchises, tax refunds, tax refund claims, computer programs, computer data
bases, computer program flow diagrams, source codes, object codes and all other
intangible property of every kind and nature.
1.28 "Guarantee" of or by any Person (the "guarantor") shall mean any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
1.29 "Indebtedness" of any Person shall mean, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
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Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
1.30 "Interest Increase Event" shall mean the occurrence of any one or
more of the following: (i) we report operating losses in two consecutive
quarters; (ii) at the end of any fiscal year, we report a decline in our net
worth (as that term is defined by GAAP); or (iii) you, in your sole discretion,
permit the sum of advances plus other amounts charged or chargeable to our
account to exceed the Formula Amount.
1.31 "Inventory" shall mean and include all of our now owned or
hereafter acquired inventory, including all goods and merchandise now or
hereafter acquired, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materails, work in process, finished
goods and materials of any kind, nature or description which are used or
consumed in our business or used in selling or furnishing such goods and
merchandise, and all documents of title or other documents representing them.
1.32 "Lien" shall mean, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
1.33 "Moody's" shall mean Xxxxx'x Investors Service, Inc.
1.34 "Net Amount" of Receivables shall mean the gross amount of
Receivables, less maximum discounts, less returns, less credits or allowances of
any nature at any time issued, owing, granted or outstanding.
1.35 "New Borrower" shall mean each entity which becomes a borrower
hereunder in accordance with the terms of Section 14 hereof from time to time.
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1.36 "Obligations" shall mean all of our obligations to you hereunder,
including without limitation advances of the purchase price of Receivables, all
obligations of ours to you under any note, contract of surety, guaranty, or
accommodation, or with respect to letters of credit or acceptances, sums owing
to you for goods and/or services purchased from any other firm factored or
financed by you, and all other obligations of ours to you, however and whenever
created, arising or evidenced, whether direct or indirect, through assignment
from third parties in the ordinary course of your business, absolute, contingent
or otherwise, now or hereafter existing or due or to become due.
1.37 "Obligor" shall mean: us and each other party primarily or
secondarily, directly or indirectly liable on any of the Obligations.
1.38 "Payment Date" shall mean the date of deposit of Customer payment
by you plus two (2) Banking Days for collection and clearance of checks. Payment
Date may be delayed to the next Banking Day following the day of application of
remittances to Receivables.
1.39 "Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof:
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of not
less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in clause
(c) above.
1.40 "Permitted Liens" shall mean (i) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business securing
sums not overdue; (ii) liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on our books in conformity with
GAAP, (iii) liens in your favor, (iv) liens for taxes (a) not yet due or (b)
being diligently contested in good faith, provided that
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adequate reserves with respect thereto are maintained on our books in conformity
with GAAP and (v) liens in favor of AT&T Capital Corp. so long as such liens are
subject to an intercreditor agreement between you and AT&T Capital Corp. in form
and substance acceptable to you.
1.41 "Person" shall mean any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership or
other entity.
1.42 "Prime Rate" shall mean the rate of interest announced by
NationsBank, N.A., its successors and assigns from time to time as its Prime
Rate which may not be the lowest rate charged to its borrowers.
1.43 "Receivables" shall mean all accounts, instruments, contract
rights, chattel paper, documents, and general intangibles arising from our
Sales, and the proceeds thereof, and all security and guaranties therefor,
whether now existing or hereafter created.
1.44 "Restricted Payment" shall mean any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of our capital stock or that of any of our Subsidiaries, any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of our capital stock
or any option, warrant or other right to acquire any such shares of our capital
stock, except that any wholly-owned Subsidiary may declare and pay dividends to
us, or, in the case of any Subsidiary that is wholly-owned by any other
Subsidiary, to such Subsidiary.
1.45 "Reverse Event" shall mean the occurrence of any one or more of
the following, as measured on the last day of our fiscal year: (i) profits are
reported for two successive quarters and such profits are equal or greater than
the prior quarters' losses or (ii) our Consolidated Tangible Net Worth exceeds
$5,363,000.00 at the end of a fiscal year following a fiscal year in which such
Consolidated Tangible Net Worth suffered a decline, provided that in order for a
Reverse Event to occur, the sum of advances plus other amounts charged or
chargeable to our account may not exceed the Formula Amount.
1.46 "S&P" shall mean Standard & Poor's.
1.47 "Sales" shall mean the sale of goods and/or the rendition of
services by us in the ordinary course of our business to Customers in the United
States of America, Canada and Puerto Rico.
1.48 "Subsidiary" shall mean, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity, whether domestic or foreign, the accounts of which
would be consolidated with those of the parent in the parent's consolidated
financial statements if such financial statements were prepared in accordance
with GAAP as of such date, as well as any other corporation, limited liability
company, partnership, association or other entity, whether domestic or foreign,
(a) of which securities or other ownership interests representing more than 50%
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of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries or the parent or by the
parent and one or more subsidiaries of the parent.
1.49 "Systems Integrator" shall mean a company that sells to its
customers a system consisting of hardware and software components, installed and
operating to its customer's specifications.
1.50 "Transaction Documents" shall mean this Factoring Agreement, the
Electronic Transmission Letter, the Funds Transfer Letter, and the Certificate
re Trademarks.
1.51 "us", "we" and "our" shall mean and include ECCS, Inc. and any New
Borrower which is a party hereto pursuant to Section 14 hereof.
SECTION 2. PURCHASE PRICE; COMMISSION; ADVANCES; RESERVE
2.1 We hereby assign and sell to you as absolute owner, our entire
interest in all of our present and future Receivables; provided however, that
each such sale is with full and complete recourse to us in the event any
Receivable is not paid in full in accordance with its terms. We understand that
you are assuming no Credit Risk under this Agreement, or otherwise, and we are
responsible for the nonpayment of any Receivable for any reason, whether as a
result of the financial inability of the Customer to pay, any Customer Dispute,
any act of God, war, civil strife, currency restrictions, foreign political
impediments, or otherwise. We will place one or more notations in our books and
records, in form and substance satisfactory to you, that our Receivables have
been purchased by and assigned to you.
2.2 We will provide you with listings of Receivables in form
satisfactory to you, together with Customers' invoices, shipping documents, and
such other documents and proof of delivery/rendition as you may at any time
require. Billing on invoices by whomever done shall be conclusive evidence of
assignment and sale hereunder of such Receivables whether or not we execute any
other instrument with regard thereto. All invoices to Customers shall state
plainly on the face thereof that payment thereof must be sent solely to X.X. Xxx
000000, Xxxxxxx, XX 00000-0000, or to such other address as you may designate in
writing (the "Lockbox"). The Lockbox shall be under your exclusive control. All
remittances obtained by us against Receivables will be received in trust for
you, and we will turn over to you the identical remittances as speedily as
possible; provided, however, that nothing herein authorizes us to collect
Receivables.
2.3 The purchase price of Receivables is to be the Net Amount thereof
less your commissions earned thereon, which, less any charges and reserves, will
be due and payable on the Payment Date. We shall pay you a commission in an
amount equal to one-quarter of one percent (.25%) of the first $20,000,000 of
the gross amount of such Receivables (less discounts granted to Customers on the
face of the underlying invoices) assigned to you hereunder during each
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Contract Year; two-tenths of one percent (.20%) of the next $10,000,000 of the
gross amount of such Receivables (less discounts granted to Customers on the
face of the underlying invoices) assigned to you hereunder during such Contract
Year and one-tenth of one percent (.10%) of the gross amount of such Receivables
(less discounts granted to Customers on the face of the underlying invoices)
assigned to you hereunder in excess of $30,000,000 during such Contract Year,
provided, however, that the minimum commissions to be paid by us during each
Contract Year during which this Agreement is in effect or the part of the last
Contract Year during which this Agreement is in effect if it is terminated
before the end of a Contract Year shall be $75,000. Any deficiency between such
minimum commission and the commissions actually assigned hereunder shall be
computed on a monthly basis and charged to our account each month or in the
month following the effective date of termination of this Agreement if it is
terminated before the end of a Contract Year. You may retain from sums payable
to us a reserve, which reserve may be revised from time to time at your
discretion, in order to provide for Customer Disputes, possible credit losses,
and the Obligations. A discount, credit, or allowance after issuance or granting
may not be claimed by us, but may be claimed solely by the Customer; no third
party beneficiary rights are created hereby.
2.4 Prior to Payment Date, upon our request and at your sole
discretion, you may advance to us up to the Formula Amount. Any additional
amounts advanced to us shall also be subject to this Agreement. We agree to use
all such advances and the proceeds thereof, only for working capital purposes in
the ordinary course of business.
2.5 We shall pay to you on demand or you may charge to our account at
any time any advances or charges which constitute Obligations hereunder.
2.6 You will render a statement of account monthly, and such statement
shall be binding upon us except as to specific matters for which you are
notified in writing to the contrary within sixty (60) days after the date of
such statement.
SECTION 3. INTEREST, FEES
3.1 Interest shall be charged for the number of days that advances of
the purchase price are made prior to Payment Date and for the number of days
that advances or other charges to our account remain outstanding at the Prime
Rate; provided, however, if an Interest Increase Event has occurred, interest
shall be charged at the rate of one percent (1%) per annum plus the Prime Rate
until such time as a Reverse Event has occurred, provided further, however, that
the interest rate shall in no event be less than six percent (6%) per annum and
shall in no event be higher than the highest interest rate permitted by Georgia
law. Interest shall be computed on the basis of a year of three hundred sixty
(360) days, for actual days elapsed. Changes in the rate shall be effected
monthly to reflect changes in the Prime Rate, as follows: The rate shall be
adjusted on the first day of each month based on the Prime Rate in effect at the
close of business on the last Banking Day of the immediately preceding month.
After termination of the Agreement or upon a Default hereunder, we shall pay
interest on our obligations hereunder at the rate of three percent (3%) per
annum plus the Prime Rate, with changes to such rate of
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interest to take effect as hereinbefore provided. For the purpose of interest
calculation, commissions earned during each month shall be deemed charged to our
account on the fifteenth (15th) day of each month.
3.2 Upon execution of this Agreement, we shall pay to you a closing fee
in the amount of $25,000, which fee is payable on and shall be fully earned as
of the date hereof and shall constitute an Obligation hereunder.
3.3 You shall charge to our account all bank charges, including without
limitation, charges for wire transfers and lock box fees.
SECTION 4. POWER OF ATTORNEY
We hereby appoint you as our attorney-in-fact to receive, open, and
dispose of all mail addressed to us pertaining to Receivables; to endorse our
name upon any notes, acceptances, checks, drafts, money orders, and other
evidences of payment of Receivables that may come into your possession and to
deposit or otherwise collect the same; and to do all other acts and things
necessary to carry out the terms of this Agreement. This power, being coupled
with an interest, is irrevocable while any Receivable shall remain unpaid. You,
as attorney-in-fact, shall not be liable for any errors of judgment or mistake
of fact, other than resulting from your gross negligence or willful misconduct.
SECTION 5. SECURITY INTEREST
We hereby grant you a security interest in the Collateral. We further
sell and assign to you all our title and/or interest in the goods (unless
released by you) represented by Receivables as well as goods returned by or
repossessed from Customers, all of our rights as an unpaid vendor or lienor, all
or our rights of stoppage in transit, replevin and reclamation relating thereto,
and all of our rights thereto; we will cooperate with you in exercising any
rights with respect to the goods. In addition, we hereby grant you a security
interest in the reserve established pursuant to Section 2.3 hereof, to secure
all of the Obligations.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Representations Concerning the Collateral. We represent and warrant
(each of which such representations and warranties shall be deemed repeated upon
the making of each request for an advance and made as of the time of each and
every advance hereunder):
(a) all the Collateral (i) is owned by us free and clear of
all claims, liens, security interests and encumbrances (including without
limitation any claims of infringement) except (A) those in your favor and as
otherwise consented to in writing by you and (B) Permitted Liens and (ii) is not
subject to any agreement prohibiting the granting of a security interest or
requiring notice of or consent to the granting of a security interest; and
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(b) all Receivables (i) represent complete bona fide
transactions which require no further act under any circumstances on our part to
make such Receivables payable by Customers (it being understood that from time
to time we are required to make further performance if we, as a Systems
Integrator, fail to satisfy our obligations to a Customer), (ii) to the best of
our knowledge, are not subject to any present, future or contingent Customer
Disputes; (iii) do not represent xxxx and hold sales unless requested by a
Customer and with respect to which a DD250 has been delivered to you (it being
understood that we may sell to other Customers on xxxx and hold terms with your
prior written consent, which consent shall not be unreasonably withheld),
consignment sales, guaranteed sales, sale or return or other similar
understandings or obligations of any of our affiliates or subsidiaries; (iv)
included in any Borrowing Base Certificate as an Eligible Receivable meets all
criteria specified in the definition of Eligible Receivables, except as may
otherwise be specifically disclosed in such Borrowing Base Certificate or as
otherwise theretofore disclosed in writing to you; and (v) we have no knowledge
of any fact or circumstance not disclosed to you in the pertinent Borrowing Base
Certificate or otherwise in writing, which would impair the validity or
collectibility of any Receivable and that all documents in connection with each
Receivable are genuine.
6.2 Covenants Concerning the Collateral. During the term hereof, we
covenant that we shall:
(a) in the event any amounts due and owing from any Customer
to us on any Eligible Receivable shall become subject to any Customer Dispute,
or to any other adjustment otherwise permitted to be made in accordance with the
terms and provisions hereof in the ordinary course of business and prior to the
occurrence of an Default hereunder, we agree that we shall, at the time of the
submission of the next Borrowing Base Certificate required to be delivered to
you immediately following the date on which we learn thereof, provide you with
notice thereof. We further agree that we shall also notify you promptly of all
returns and credits in respect of any Receivables included within a Borrowing
Base Certificate, which notice shall specify the Receivables affected.;
(b) place notations upon our books of account and any
financial statement prepared by us to disclose your security interest in the
Collateral;
(c) defend the Collateral against the claims and demands of
all parties;
(d) keep and maintain the Equipment in good operating
condition, except for ordinary wear and tear, and shall make all necessary
repairs and replacements thereof so that the value and operating efficiency
shall at all times be maintained and preserved. We shall not permit any such
items to become a fixture to real estate or accessions to other personal
property;
(e) not extend the payment terms of any Receivable without
prompt notice thereof to you;
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(f) perform all other steps reasonable and necessary to create
and maintain in your favor a valid perfected first security interest in all
Collateral; and
(g) we shall promptly provide you with duplicate originals of
all credits which we issue to our Customers and immediately notify you of any
merchandise returns or Customer Disputes. We shall settle all Customer Disputes
at no cost or expense to you. Should you so elect, upon the occurrence and
continuance of any Default, you may at any time in your discretion (i) withdraw
our authority to issue credits to our Customers without your prior written
consent; (ii) litigate Customer Disputes or settle them directly with Customers
on terms acceptable to you; or (iii) direct us to set aside and identify as your
property any returned or repossessed merchandise or other goods which by sale
resulted in Receivables theretofore assigned to you. All such goods (and the
proceeds thereof) shall be (A) held by us in trust for you as your property, (B)
subject to your security interest hereunder and (C) disposed of only in
accordance with your express written instructions.
6.3 Collection and Maintenance of Collateral and Records. You may at
any time verify our Receivables utilizing an audit control company or any other
agent. You or your designee may notify Customers, at any time at your sole
discretion, of your security interest in Receivables, collect them directly and
charge the collection costs and expenses to our account, but, unless and until
you do so or give us other instructions, we shall instruct all of our Customers
to make payments on account of Receivables to an account under your dominion and
control at such bank as you may designate, as provided by the terms of Section
2.2. To the extent we receive any payments on account of Receivables, we shall
hold such payments for your benefit in trust as your trustee and immediately
deliver them to you in their original form with all necessary endorsements or,
as directed by you, deposit such payments as directed by you. You will credit
(conditional upon final collection) all such payments to our account on the
Payment Date. Promptly after the creation of any Receivables, we shall provide
you with schedules describing all Receivables created or acquired by us and
shall execute and deliver confirmatory written assignments of such Receivables
to you, but our failure to execute and deliver such schedules or written
confirmatory assignments of such Receivables shall not affect or limit your
security interest or other rights in and to the Receivables. We shall furnish,
at your request, copies of contracts, invoices or the equivalent, and any
original shipping and delivery receipts for all merchandise sold or services
rendered and such other documents and information as you may require. All of our
invoices shall bear the terms stated on the applicable customer order, and no
change from the original terms of such customer order shall be made without your
prior written consent. We shall provide you on a monthly (within ten (10) days
after the end of each month), or more frequent basis, as requested by you, a
summary report of our current inventory, certified as true and accurate by our
President or Chief Financial Officer, as well as an aged trial balance of our
existing accounts payable. We shall provide you, as requested by you, such other
schedules, documents and/or information regarding the Collateral as you may
require. Without limiting the foregoing, we shall provide to you a
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borrowing base certificate each time we request an advance hereunder ("Borrowing
Base Certificate"), which must be in form and substance acceptable to you and
which Borrowing Base Certificate shall certify to you, and shall contain
sufficient information and calculations as you may deem necessary or desirable,
in order to verify the applicable Formula Amount and whether or not Receivables
included therein are Eligible Receivables. Without limiting the foregoing, a
Borrowing Base Certificate must be executed and delivered by us to you at the
time of or prior to each request for advances pursuant to Section 2.4. Each such
Borrowing Base Certificate shall be delivered to you at your office, on each
relevant Banking Day.
6.4 Additional Representations, Warranties and Covenants. We represent
and warrant (each of which such representations and warranties shall be deemed
repeated upon the making of a request for an advance and made as of the time of
each advance made hereunder), and covenant that:
(a) (i) we are a corporation duly organized and validly
existing under the laws of the State of New Jersey and, and except where the
failure to do so could not reasonably be expected to result in a material
adverse effect on us, are duly qualified and in good standing in every other
state or jurisdiction where such qualification is required;
(ii) we have no Subsidiaries other than those listed on
Schedule 6.4(a) hereto and such Subsidiaries are dormant as of the date hereof.
(b) the execution, delivery and performance of this Agreement
and any related agreements (i) have been duly authorized, (ii) are not in
contravention of our certificate of incorporation, by-laws or of any material
indenture, agreement or undertaking to which we are a party or by which we are
bound and (iii) are within our corporate powers;
(c) this Agreement and any Transaction Documents are our
legal, valid and binding obligations, enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law;
(d) we keep and will continue to keep all of our books and
records concerning the Collateral at our executive offices located at the
address set forth at the end of this Agreement and will not move such books and
records without giving you at least thirty (30) days prior written notice;
(e) the operation of our business is and will continue to be
in compliance in all material respects with all applicable federal, state and
local laws, including but not limited to all applicable environmental laws and
regulations.
(f) based upon the Employee Retirement Income Security Act of
1974 ("ERISA"), and the regulations and published interpretations thereunder:
(i) we have not engaged in any Prohibited Transactions as defined in paragraph
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406 of ERISA and paragraph 4975 of the Internal Revenue Code, as amended; (ii)
We have met all applicable minimum funding requirements under paragraph 302 of
ERISA in respect of its plans; (iii) we have no knowledge of any event or
occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) we have no fiduciary responsibility for investments with respect
to any plan existing for the benefit of persons other than our employees; and
(v) we have not withdrawn, completely or partially, from any multiemployer
pension plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980;
(g) we are solvent, able to pay our debts as they mature, have
capital sufficient to carry on our business and all businesses in which we are
about to engage and the fair saleable value of our assets (calculated on a going
concern basis) is in excess of the amount of our liabilities;
(h) there is no pending or threatened litigation, actions or
proceedings which involve the possibility of materially and adversely affecting
our business, assets, operations, condition or prospects, financial or
otherwise, or the Collateral or our ability to perform this Agreement;
(i) all balance sheets and income statements which have been
delivered to you fairly, accurately and properly state our financial condition
on a basis consistent with that of previous financial statements and there has
been no material adverse change in our financial condition as reflected in such
statements since the date thereof and such statements do not fail to disclose
any fact or facts which might materially and adversely affect our financial
condition;
(j) (x) we possess all of the licenses, patents, copyrights,
trademarks, tradenames and permits necessary to conduct our business, and (y)
there has been no assertion or claim of violation or infringement with respect
thereof;
(k) we will pay or discharge when due all taxes, assessments
and governmental charges or levies imposed upon us except taxes, assessments and
governmental charges or levies that are being contested in good faith by
appropriate proceedings and for which we have set aside on our books adequate
reserves in accordance with GAAP;
(l) we will promptly inform you in writing of: (i) the
commencement of all proceedings and investigations by or before and/or the
receipt of any notices from, any governmental or nongovernmental body and all
actions and proceedings in any court or before any arbitrator against or in any
way concerning any of our properties, assets or business, which might singly or
in the aggregate, have a material adverse effect on us; (ii) any amendment of
our certificate of incorporation or by-laws; (iii) any change in our business,
assets, liabilities, condition (financial or otherwise), results of operations
or business prospects which has had or might have a material adverse effect on
us; (iv) any Default; (v) any default or any event which with the passage of
time or giving of notice or both would constitute a default under any agreement
for the payment of money to which we are a party
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or by which we or any of our properties may be bound which would have a material
adverse effect on our business, operations, property or condition (financial or
otherwise) or the Collateral; (vi) any change in the location of our executive
offices; (vii) any change in our corporate name; (viii) any material delay in
our performance of any of our obligations to any Customer and of any assertion
of any material claims, offsets, counterclaims or Customer Disputes by any
Customer and of any allowances, credits and/or other monies granted by us to any
Customer; (ix) all material adverse information relating to the financial
condition of any Customer; and (x) any material return of goods;
(m) We will not create, incur, assume or permit to exist any
Indebtedness (exclusive of trade debt), except
(i) Indebtedness created hereunder or under the other
Transaction Documents, and other Indebtedness to you:
(ii) Indebtedness existing on the date hereof and set
forth in Schedule 6.4(m), and any extensions, renewals, refinancing or
replacements of any such Indebtedness;
(iii) Indebtedness of us to any New Borrower and of
any New Borrower to us or any other New Borrower;
(iv) Indebtedness of us or any New Borrower incurred
to finance the acquisition, construction or improvement of any fixed or capital
assets, including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of such assets and extensions, renewals and
replacements of any such Indebtedness, provided that (A) such Indebtedness is
incurred prior to or within 90 days after such acquisition or the completion of
such construction or improvement and (B) the aggregate principal amount of
Indebtedness incurred as permitted by this clause (iv) shall not exceed
$250,000.00 in the aggregate for any of our fiscal years.
(v) liabilities under operating leases of equipment
not in excess of $250,000.00 in the aggregate for any of our fiscal years;
(vi) Approved Subordinated Debt;
(vii) Indebtedness of a corporation which is acquired
and becomes a New Borrower after the date hereof, provided that such
Indebtedness existed at the time such corporation became a New Borrower and was
not created in anticipation of the acquisition; and
(viii) additional Indebtedness not exceeding
$250,000.00 in aggregate principal amount at any one time outstanding.
(n) all financial projections of our performance prepared by
us or at our direction and delivered to you have been prepared by us on the
basis of sound financial planning practice and we have no reason to believe they
are incorrect or misleading in any material respect;
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(o) none of the proceeds of the advances hereunder will be
used directly or indirectly to "purchase" or "carry" "margin stock" or to repay
indebtedness incurred to "purchase" or "carry" "margin stock" within the
respective meanings of each of the quoted terms under Regulation G of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect;
(p) we will bear the full risk of loss from any loss of any
nature whatsoever with respect to the Collateral. At our own cost and expense in
amounts and with carriers acceptable to you, we shall (i) keep all our insurable
properties and properties in which we have an interest insured against the
hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to ours including,
without limitation, business interruption insurance; (ii) maintain a bond in
such amounts as is customary in the case of companies engaged in businesses
similar to ours insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to our assets or funds either
directly or through authority to draw upon such funds or to direct generally the
disposition of such assets; (iii) maintain public and product liability
insurance against claims for personal injury, death or property damage suffered
by others; (iv) maintain all such workmen's compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which we are
engaged in business; (v) furnish you with (x) copies of all policies and
evidence of the maintenance of such policies at least thirty (30) days before
any expiration date, and (y) appropriate loss payable endorsements in form and
substance satisfactory to you, naming you as loss payee and providing that as to
you the insurance coverage shall not be impaired or invalidated by any act or
neglect of ours and the insurer will provide you with at least thirty (30) days
notice prior to cancellation. We shall instruct the insurance carriers that in
the event of any loss thereunder, the carriers shall make payment for such loss
to you and not to us and you jointly. If any insurance losses are paid by check,
draft or other instrument payable to us and you jointly, you may endorse our
name thereon and do such other things as you may deem advisable to reduce the
same to cash. You are hereby authorized to adjust and compromise claims. All
loss recoveries received by you upon any such insurance may be applied to the
Obligations, in such order as you in your sole discretion shall determine. Any
surplus shall be paid by you to us or applied as may be otherwise required by
law. Any deficiency thereon shall be paid by us to you, on demand.
(q) we will not (i) liquidate or dissolve, or merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with us, or (ii) sell, transfer, lease or otherwise dispose of (x)
assets in an amount such that after giving effect thereto the aggregate of all
such sales, transfers, leases, or other dispositions by us in any of our fiscal
years (A) shall have equaled or exceeded 10% of Consolidated Tangible Net Worth
(as of the most recent quarterly financial statements furnished hereunder), or
(B) involve assets that generated 10% or more of the consolidated revenues of us
and our Subsidiaries (during such fiscal period); or (y) any stock of any of our
Subsidiaries; provided that (a) any Subsidiary
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of ours may be merged or consolidated with or into us or with or into any one or
more of our wholly owned Subsidiaries and (b) any wholly-owned Subsidiary may
sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to us or any other of our wholly-owned
Subsidiaries;
(r) we will not (i) change our accounting policies in any way
that could have a material effect on the presentation of financial reports, (ii)
alter in any material respect the nature of our business from that conducted on
the date hereof, or (iii) change our fiscal year from the fiscal year in effect
on the date hereof; provided that such accounting policies may change to accord
with a change in GAAP;
(s) we will not purchase, hold or acquire any capital stock,
evidences of indebtedness or other securities of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person or purchase or
otherwise acquire any assets of any other Person constituting a business unit,
except:
(i) extensions of trade credit to customers in the
ordinary course of business;
(ii) loans to our officers in an aggregate principal
amount outstanding at any time not to exceed $350,000.00;
(iii) loans and advances to our employees or
employees of our Subsidiaries for travel, entertainment and relocation expenses
in the ordinary course of business;
(iv) loans and advances by us to our wholly-owned
Subsidiaries, provided that the aggregate principal amount outstanding at any
time shall not exceed $100,000.00;
(v) Permitted Investments;
(vi) investments existing on the date hereof in the
capital stock of any New Borrower;
(vii) acquisitions of the assets, business or capital
stock (or other equity interests) of other Persons, provided that our President
or Chief Financial Officer certifies to you that the fair market value of the
acquired stock, assets, or business is equal to or greater than the investment
therein, and provided further, if such acquisition is done in connection with a
secondary offering of our capital stock, no such certification will be required;
(viii) the loans and investments listed on Schedule
6.4(s); and
(ix) loans and investments incurred after the date
hereof in an aggregate amount not to exceed $100,000.00 at any one time
outstanding.
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(t) we will not pay, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, other than (i) cash dividends,
from our indirect Subsidiaries to one of our Subsidiaries or from one of our
Subsidiaries to us or (ii) dividends payable in respect of our Series B and C
preferred stock, provided that such dividends paid pursuant hereto shall not
exceed 35% of our net after tax profits in any fiscal quarter, or (iii) in the
event that we complete a public offering after the Effective Date, the gross
proceeds of which are in excess of $5,000,000.00, accrued dividends payable in
respect of our Series B and C preferred stock, so long as such dividends do not
exceed the net proceeds of the public offering received by us;
(u) we will not sell, lease or otherwise transfer any property
or assets to, or purchase, lease or otherwise acquire any property or assets
from, or otherwise engage in any other transactions with, any of our Affiliates,
except (a) as may otherwise be expressly permitted in this Agreement or (b) in
the ordinary course of business at prices and on terms and conditions not less
favorable to us or such Subsidiary than could be obtained on an arm's-length
basis from unrelated third parties; and
(v) we will not make any optional payment or prepayment on or
redemption, defeasance or purchase of any Indebtedness (other than Indebtedness
under this Agreement) including, without limitation, the Approved Subordinated
Debt, or amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms relating to the payment or prepayment
of principal of or interest on, any such Indebtedness, other than any amendment,
modification or change which would extend the maturity or reduce the amount of
any payment of principal thereof or which would reduce the rate or extend the
date for payment of interest thereon.
(w) we will not activate any of the Subsidiaries listed on
Schedule 6.4(a) hereto unless such Subsidiary becomes a New Borrower in
accordance with Section 14 hereof.
SECTION 7. CUSTOMER DISPUTES, CHARGEBACKS AND RETURNS
We will notify you promptly (but not less frequently than weekly) and
will settle all Customer Disputes. Upon a Default, you have the right at all
times to do so directly and to compromise, adjust, or litigate all such Customer
Disputes. If a Customer Dispute exists or is asserted with regard to any
Receivable, or if we breach any representation, warranty or covenant with
respect to any Receivable, you may charge back to our account the Net Amount of
such Receivable. A chargeback shall not be deemed a reassignment of the
Receivable, and title thereto and to the goods represented thereby shall remain
in you until you execute a reassignment. All returned, replevied, and reclaimed
goods coming into our possession shall be held in trust by us for you.
SECTION 8. BOOKS AND RECORDS; FINANCIAL STATEMENTS
8.1 Inspections. You and your representatives shall at all reasonable
times have the right to (a) visit and inspect our properties and the
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Collateral, (b) inspect, audit and make extracts from our relevant books and
records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with our principal officers, and
independent accountants, our business, assets, liabilities, financial condition,
results of operations and business prospects, provided however, that absent a
Default such inspections shall be limited to one per calendar quarter. We will
deliver to you any instrument necessary for you to obtain records from any
service bureau maintaining records for us.
8.1 Financial Information We shall provide you (a) as soon as
available, but in any event within ninety (90) days after the end of each of our
fiscal years, our balance sheet as at the end of such fiscal year and the
related statements of income, retained earnings and statement of cash flow for
such fiscal year, setting forth in comparative form the figures as at the end of
and for the previous fiscal year, which shall have been reported on by
independent certified public accountants who shall be satisfactory to you and
shall be accompanied by an unqualified audit report issued by such independent
certified public accountants; (b) as soon as available, drafts of our balance
sheet as at the end of each of our fiscal years and the related statements of
income, retained earnings and statement of cash flow for such fiscal year, which
have been internally prepared by us; (c) as soon as available, but in any event
within sixty (60) days after the close of each quarter, the balance sheet as at
the end of such quarter and the related statements of income, retained earnings
and changes in statement of cash flow for such quarter, which have been
internally prepared by us. All financial statements required under (a), (b) and
(c) above shall be prepared in accordance with GAAP, subject to year end
adjustments in the case of quarterly statements. Together with the financial
statements furnished pursuant to (a) above, we shall deliver a certificate of
our certified public accountants addressed to you stating that (i) they have
caused this Agreement and the Transaction Documents to be reviewed and (ii) in
making the examination necessary for the issuance of such financial statements,
nothing has come to their attention to lead them to believe that any Default
exists and, in particular, they have no knowledge of any Default or, if such is
not the case, specifying such Default and its nature, when it occurred and
whether it is continuing. At the times the financial statements are furnished
pursuant to (a), (b) and (c) above, a certificate of our President or Chief
Financial Officer shall be delivered to you stating that, based on an
examination sufficient to enable him to make an informed statement, no Default
exists, or, if such is not the case, specifying such Default and its nature,
when it occurred, whether it is continuing and the steps being taken by us with
respect to such event. If any internally prepared financial information,
including that required under this paragraph, is unsatisfactory in any manner to
you, you may request that our independent certified public accountants review
same.
In addition to the foregoing financial statements, we shall
furnish to you commencing with fiscal year 1998, a month by month projected
operating budget and cash flow for such fiscal year (including an income
statement for each month and a balance sheet as at the end of the last month in
each fiscal quarter) by January 31st of such fiscal year and a draft of such
projections by December 15th of the prior fiscal year, such projections to be
accompanied by a certificate signed by our President or Chief Financial
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Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
SECTION 9. INDEMNITY
We shall indemnify you for all losses, costs and expenses incurred by
you in connection with Receivables which are unpaid at maturity. Further, we
shall indemnify you for any liability for duties, forwarder's fees, storage,
shipping charges, sales or excise taxes or other expenses in connection with the
Receivables and for any losses occasioned by claims of Customers under
Receivables. Notwithstanding anything to the contrary contained herein or in any
other Transaction Document, such indemnity shall not be available to you to the
extent such losses, costs, expenses or liabilities or related expenses result
from your gross negligence or willful misconduct. This indemnity shall survive
the termination of this Agreement.
SECTION 10. APPLICABLE LAW
This Agreement shall be governed by, construed and enforced according
to the laws of the State of New York.
SECTION 11. EFFECTIVE DATE; TERMINATION; BINDING EFFECT
If accepted by you, this Agreement shall be effective on the day of ,
19 (the "Effective Date"), and shall continue in full force and effect until:
(a) three (3) years from the Effective Date (the "Initial Term") and from year
to year thereafter until terminated by us at any time by our giving to you not
less than sixty (60) days prior written notice; or (b) terminated by you at any
time by giving to us not less than sixty (60) days prior written notice. This
Agreement may be terminated at any time by you without notice to us should any
Default occur. Upon termination, we will pay all of our Obligations to you, and
in any event we will remain liable to you for any deficiency remaining after
determination of our liability hereunder and liquidation of any collateral.
Also, upon termination you may withhold any payment to us unless supplied with
an indemnity satisfactory to you. This Agreement shall bind us, our successors
and assigns and shall inure to the benefit of you, your successors and assigns;
we agree that you may delegate your duties hereunder.
SECTION 12. EXPENSES; ATTORNEYS' FEES; NO WAIVER; SEVERABILITY; NOTICES;
HEADINGS
We shall pay all reasonable expenses incurred by you in connection with
the negotiation and execution of this Agreement and any legal documentation now
or hereafter required by you or requested by us in connection with this
Agreement or any amendment or supplement thereto, including expenses incurred in
connection with the filing of financing statements, continuation statements,
record searches and reasonable attorneys' fees. We shall also pay you such wire
transfer and similar fees as you charge from time to time and, in connection
with your examinations of our books and records, such examination fees as you
charge from time to time, which shall not exceed $750.00 per day
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per person plus reasonable out-of-pocket expenses. Upon liquidation of any
collateral, settlement or prosecution of Customer Disputes, or enforcement of
any obligation of ours hereunder, you may charge to our account all costs and
expenses incurred including reasonable attorneys' fees, if collection is by or
through an attorney and such costs, expenses and fees shall constitute
obligations hereunder. No delay or failure on your part in exercising any right,
privilege, or option hereunder shall operate as a waiver of such or of any other
right, privilege, or option, and no waiver, amendment, or modification of any
provision of this Agreement shall be valid, unless in writing signed by you and
then only to the extent therein stated. Should any provision of this Agreement
be prohibited by or invalid under applicable law, the validity of the remaining
provisions shall not be affected thereby. All notices hereunder shall be deemed
to have been given when deposited in the mails (sent by registered or certified
mail) addressed to either party hereto at its address provided herein or at any
other address of which it shall have notified in writing the party giving such
notice. The headings used herein are intended to be for convenience of reference
only and shall not define or limit the scope, extent or intent or otherwise
affect the meaning of any portion hereof.
SECTION 13. ENTIRE AGREEMENT; WAIVER OF JURY TRIAL
This Agreement and the Transaction Documents embody our entire
agreement as to the subject matter and supersede all prior agreements as to the
subject matter. EACH OF US HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO TRANSACTIONS UNDER THIS AGREEMENT.
SECTION 14. JOINDER OF SUBSIDIARIES
(a) We may, from time to time, after the Effective Date form or acquire
Subsidiaries or reactivate dormant Subsidiaries, and those Subsidiaries shall
become a New Borrower hereunder, provided that such Subsidiary has satisfied or
obtained a waiver from you of the following conditions precedent:
(i) execution and delivery to you of a Joinder and Assumption
Agreement in substantially the form attached hereto as Schedule 14(a), pursuant
to which it shall join as a New Borrower each of the documents to which we are a
party;
(ii) delivery to you of its Articles of Incorporation, if it
is a corporation, its certificate of limited partnership if it is a limited
partnership, its articles of organization if it is a limited liability company
or any other relevant organizational documents if it is an entity other than a
corporation, a limited partnership or a limited liability company; together with
resolutions or similar authorization documentation authorizing the execution,
delivery and performance of the Joinder and Assumption Agreement and the
granting by such New Borrower of the security interests and liens upon the
Collateral;
(iii) delivery to you of an opinion of counsel to the effect
that such the Joinder and Assumption Agreement has been duly authorized,
executed
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and delivered by us and such new Subsidiary and constitutes a valid and binding
obligation enforceable in accordance with its terms, except as limited by
applicable fraudulent conveyance statutes, bankruptcy laws, insolvency laws and
other laws and equitable principles affecting creditors rights generally; and
(iv) at such time as we use the proceeds available to us
hereunder to finance the purchase of such Subsidiary or the ongoing financial
needs of such Subsidiary, you shall have completed Collateral examinations and
received any appraisals required by you, the results of which shall be
reasonably satisfactory in form and substance to you and shall be made available
to us upon our request, of the Receivables, Inventory, Equipment and General
Intangibles of the new Subsidiary, and all books and records in connection
therewith.
ECCS, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx
Vice President Finance and Administration
(Title)
Xxx Xxxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
ACCEPTANCE
The foregoing Factoring Agreement is accepted in Atlanta, Georgia as of
the 9th day of July, 1997.
NationsBanc Commercial Corporation
By:
-------------------------
(Title)
