EXHIBIT 10.4
FACTORING AGREEMENT
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THIS FACTORING AGREEMENT made as of the 26th day of November 1997 by and
between ACCESS CAPITAL, INC., a New York corporation ("Access Capital") and
TELENETICS CORPORATION, a California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has requested Access Capital to purchase from it, from
time to time, all of the right, title and interest of the Company in and to
certain accounts receivable due to the Company from its customers; and
WHEREAS, Access Capital is willing to consider purchasing certain of such
accounts receivable from the Company from time to time, upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, Access Capital and the Company have entered into a Letter of
Intent dated November 20, 1997 (the "Letter of Intent"), a copy of which is
attached hereto as Schedule A and the terms of which are incorporated herein,
whereby it is contemplated that Access Capital will provide capital to the
Company on the general terms set forth therein. Prior to the execution and
delivery of the definitive agreements contemplated by the Letter of Intent, the
Company has requested Access Capital to provide interim financial
accommodations, and Access Capital is willing to accommodate the short term
funding requirements of the Company on the terms, and subject to the conditions
contained herein;
NOW, THEREFORE, to induce Access Capital to purchase such accounts
receivable, and for other good valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is agreed as follows:
1. Tender of Accounts Receivable; Invoices.
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(a) The Company will tender to Access Capital all of the accounts
receivable from its customers with respect to goods sold and delivered to, or
services performed for, such customers by the Company (individually, an "Account
Receivable," and, collectively, "Accounts Receivable") by delivering to Access
Capital all of the invoices to be rendered to such customers promptly after the
creation thereof. Access Capital will forward all such invoices delivered to the
Company's customers (without regard to whether such invoices are offered for
purchase by Access Capital), in accordance with Access Capital's standard
procedures, together with a notice by the Company to its customers, in the form
prescribed by Access Capital, of the assignment of payment of such invoices to
Access Capital.
(b) Access Capital will conduct such examination and verification of
the invoices delivered to it, and such credit investigation of the account
debtors, as it considers necessary or desirable, and will notify the Company as
to which of the individual Accounts Receivable tendered by the Company, if any,
Access Capital elects to purchase from the Company. Access Capital shall have
the absolute right, in its sole discretion, to reject any or all of the Accounts
Receivable tendered
to it by the Company, irrespective of whether or not Access Capital has
previously purchased Accounts Receivable from the Company or has purchased
Accounts Receivable of any particular account debtor (individually, an "Account
Debtor," and, collectively, "Account Debtors").
2. Purchase and Sale of Accounts Receivable.
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(a) Those Accounts Receivable which Access Capital elects to purchase
from the Company shall be listed in an Invoice Delivery Schedule, substantially
in the form of Exhibit A (such form, together with any schedules and attachments
thereto is hereinafter referred to as an "Invoice Schedule"), executed by the
Company and accepted by Access Capital from time to time throughout the term of
this Agreement. Upon acceptance by Access Capital of an Invoice Schedule, the
Company shall be deemed to have sold, assigned, transferred, conveyed and
delivered to Access Capital, and Access Capital shall be deemed to have
purchased and received from the Company, all right, title and interest of the
Company in and to the Accounts Receivable listed in such Invoice Schedule.
Notwithstanding the foregoing, if either the Company or Access Capital fails to
include in any Invoice Schedule a particular Account Receivable tendered by the
Company to Access Capital, but Access Capital nonetheless makes an Initial
Payment (as hereinafter defined) to the Company for such Account Receivable,
then Access Capital shall be presumed conclusively to have purchased, and the
Company shall be presumed conclusively to have sold, such Account Receivable
pursuant to this Agreement, and such Account Receivable shall be governed by the
terms and conditions (including, without limitation, the Company's
representations and warranties to Access Capital) of this Agreement. The
Accounts Receivable which Access Capital has purchased, either by its acceptance
of an Invoice Schedule or by making an Initial Payment with respect thereto, are
sometimes referred to herein as "Purchased Receivables."
(b) Upon acceptance of an Invoice Schedule, Access Capital shall
deliver to the Company the amount of the Initial Payment specified in the Fee
Schedule, a copy of which is attached as Exhibit B hereto and made a part hereof
(the "Fee Schedule") with respect to the Accounts Receivable listed therein.
(c) By its execution of each Invoice Schedule with respect to
Accounts Receivable or acceptance of an Initial Payment with respect to an
Account Receivable, the Company shall be deemed to represent, warrant and
covenant to Access Capital with respect to each such Purchased Receivable that:
(i) The Company is the sole owner of such Purchased
Receivable and such Purchased Receivable has not previously been assigned
or encumbered in any manner; the Company has the full power and authority
to sell such Purchased Receivable and its sale to Access Capital has been
duly authorized by all necessary corporate action;
(ii) The goods or services listed or referred to in the
invoice related to such Purchased Receivable have been shipped or rendered
to the Account Debtor, and the prices and terms of shipment set forth
therein conform in all material respects to the terms of any related
purchase order or agreement with the Account Debtor;
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(iii) The invoice representing such Purchased Receivable
correctly sets forth the full purchase price of the goods or services
covered thereby, and such amount, less only the applicable trade discounts
and allowances stated therein, if any, is due and owing from the Account
Debtor, subject to no set-offs, deductions, disputes, contingencies or
counterclaims against the Company or the invoice, and payment thereof is
not contingent upon fulfillment of any obligation other than delivery of
the goods or services referred to in such invoice; and
(iv) Upon acceptance of the Invoice Schedule related
thereto and payment of the Initial Payment with respect thereto, Access
Capital shall be vested with all right, title and interest in and to such
Purchased Receivable, including all proceeds thereof, rights of stoppage in
transit and rights of return, contract rights and rights under policies of
insurance.
(d) If the amount of any Purchased Receivable is not paid by the
Account Debtor by reason of the financial inability of the Account Debtor to pay
when due, following acceptance by the Account Debtor of the goods sold or
services rendered, without dispute, the Company shall not be liable to reimburse
Access Capital the amount of the Initial Payment with respect thereto.
(e) If any Purchased Receivable is not paid by the Account Debtor
within 120 days after the date that such Purchased Receivable was invoiced and
such non-payment is not by reason of the insolvency of the Account Debtor or the
financial inability of the Account Debtor to pay the Purchased Receivable, or if
any Account Debtor asserts at any time any deduction, dispute, contingency, set-
off, or counterclaim with respect to any Purchased Receivable, the Company shall
reimburse Access Capital on demand for the amount of the Initial Payment with
respect to any Purchased Receivable. The Company shall be obligated to pay (and
Access Capital shall have the right to retain) the fee set forth on Exhibit B
with respect to such Purchased Receivable even if the Company is required to
reimburse Access Capital for such Purchased Receivable. For the purposes hereof,
(i) any failure of an Account Debtor to pay all or part of an invoice shall be
deemed to have been for a reason other than the insolvency or financial
inability of such Account Debtor unless the Company provides evidence to the
contrary acceptable to Access Capital, and (ii) even if the Company provides
such evidence under clause (i) above, any failure of an Account Debtor to pay
all or part of an invoice shall be deemed to have been for a reason other than
the insolvency or financial inability of such Account Debtor if such Account
Debtor has asserted any defense, dispute, contingency, deduction, or set-off,
regardless of the financial condition of such Account Debtor.
3. Conditions Precedent. Access Capital shall not be obligated to
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purchase any Accounts Receivable from the Company until each of the following
conditions shall have been satisfied:
(a) The Company shall have entered into a Security Agreement
substantially in the form attached hereto as Exhibit C (the "Security
Agreement") to secure the performance of the representations, warranties and
covenants of the Company in this Agreement (but not the payment of the Accounts
Receivable purchased thereby which are unpaid solely by reason of the financial
inability of the Account Debtor to pay at maturity, following acceptance by such
Account Debtor of the goods sold or services rendered without dispute) and the
payment and performance by the Company of its other obligations under this
Agreement;
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(b) The Company shall have executed and delivered to Access Capital
Uniform Commercial Code financing statements for filing with the appropriate
filing officer or officers in each jurisdiction where, in the opinion of Access
Capital, such filing is necessary or desirable to perfect the security interests
granted pursuant to the Security Agreement;
(c) Xxxxxxx Armani shall have executed and delivered to Access
Capital Anti-Fraud and Performance Agreements substantially in the form attached
hereto as Exhibit D-1 (the "Anti-Fraud and Performance Agreement") with respect
to the performance of the representations, warranties and covenants of the
Company in this Agreement (but not the payment of the Accounts Receivable
purchased thereby) and the payment and performance by the Company of its other
obligations under this Agreement;
(d) SMC Communications Group Inc. and Xxxxx Xxxxxxxx doing business
as SMC Group shall have executed and delivered to Access Capital a Subordination
Agreement substantially in the form attached hereto as Exhibit E (the
"Subordination Agreement") with respect to certain obligations of the Company.
(e) The Company shall have executed and delivered to Access Capital
an Internal Revenue Service Form 8821 authorizing Access Capital to inspect
and/or receive all information regarding all of the Company's taxes for all
periods; and
(f) The Company shall have executed and/or delivered to Access
Capital all other documents, agreements, instruments, certificates and opinion
letters as shall be required by Access Capital in connection with the
transactions contemplated by this Agreement.
4. Collection of Accounts Receivable.
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(a) Commencing on the date of this Agreement, Access Capital shall
administer the collection of all Accounts Receivable originated by the Company.
Following identification of payments and application to the related invoices,
payments received with respect to Accounts Receivable, net of Access Capital's
administration fee as set forth in the Fee Schedule and any amounts due with
respect to Purchased Receivables, shall be remitted to the Company by Access
Capital at weekly intervals (or such other intervals to which the Company and
Access Capital may agree from time to time).
(b) Access Capital shall have the right of endorsement on all
payments received in connection with each Account Receivable and the Company
hereby appoints Access Capital the attorney-in-fact and agent of the Company for
this purpose, which appointment is coupled with an interest and is irrevocable
during the term of this Agreement.
(c) Access Capital shall have no liability to the Company for any
mistake in the application of any payment received by it with respect to any
Account Receivable, so long as it acts in good faith and without gross
negligence.
5. Administration of Purchased Receivables. For administrative
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convenience, the Purchased Receivables delivered by the Company to Access
Capital during each week (or such other
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period as Access Capital may reasonably determine) may be aggregated and
administered as a single Account Receivable, or as several discreet Accounts
Receivable, in the discretion of Access Capital (each, an "Aggregate
Receivable"). As Access Capital collects the Purchased Receivables comprising an
Aggregate Receivable, it will pay to the Company an amount equal to the excess,
if any, of (i) the aggregate amount collected by Access Capital with respect to
such Aggregate Receivable, less (ii) the sum of (A) the aggregate Initial
Payments made by Access Capital with respect to such Aggregate Receivable, (B)
the fees earned by Access Capital with respect to such Aggregate Receivable, (C)
the aggregate amount theretofore paid by Access Capital (in excess of the
amounts specified in clauses (ii)(A) and (ii)(B)) with respect to such Aggregate
Receivable, if any, and (D) any amounts due pursuant to Sections 8 and 10 below
which have not theretofore been paid.
6. Cross-Collateralization. If a Default (as defined in Section 11 below)
-----------------------
shall have occurred and be continuing, Access Capital shall have the right,
which may be exercised in its sole and absolute discretion at any time and from
time to time during the continuance of such Default, to apply all amounts
collected with respect to Accounts Receivable as follows, before any payment
from such collections shall be made to the Company: (i) against the unreimbursed
balance of the Initial Payments made by Access Capital to the Company with
respect to Purchased Receivables; (ii) to the payment of all fees accrued with
respect to Accounts Receivable purchased by Access Capital from the Company,
whether or not such fees have become due and payable pursuant to the terms of
this Agreement; and (iii) to the payment of any and all other liabilities and
obligations of the Company to Access Capital pursuant to this Agreement, the
Security Agreement and any other agreement entered into between Access Capital
and the Company (the "Transaction Documents"). For purposes of this Section 6,
"Company" means and includes each person named as the Company in the preamble to
this Agreement and any parent, subsidiary, controlling person or other
affiliate.
7. Collection of Accounts Receivable.
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(a) The Company will instruct all Account Debtors obligated with
respect to its Accounts Receivable to mail or deliver payments on such Accounts
Receivable directly to Access Capital at its address set forth at the end of
this Agreement or to such other address that Access Capital may specify in a
written notice to the Company. Such instructions shall not be rescinded or
modified without Access Capital's prior written consent. If, despite such
instructions, the Company shall receive any payments with respect to any
Accounts Receivable purchased by Access Capital, it shall receive such payments
in trust for the benefit of Access Capital, shall segregate such payments from
its other funds, and shall deliver or cause to be delivered to Access Capital,
in the same form as so received with all necessary endorsements, all such
payments received as soon as practicable, but in no event later than two
business days after the receipt thereof by the Company.
(b) Access Capital shall have the full power and authority to collect
each Account Receivable, through legal action or otherwise, and may, in its sole
discretion, settle, compromise, or assign (in whole or in part) the claim for
any of the Accounts Receivable, or otherwise exercise any other right now
existing or hereafter arising with respect to any of the Accounts Receivable, if
such action will facilitate collection. The amount of any reduction resulting
from any such settlement, compromise, assignment or other collection action
shall reduce the balance otherwise due to the Company hereunder. The Company
acknowledges and agrees that Access Capital shall have the sole and exclusive
right to commence legal action to collect any Account Receivable.
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8. Payment of Expenses and Taxes; Indemnification. The Company will (a)
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pay or reimburse Access Capital for all of Access Capital's out-of-pocket costs
and expenses incurred in connection with the preparation and execution of, and
any amendment, supplement or modification to, the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the fees and disbursements of counsel to Access Capital
(whether or not such counsel is affiliated with Access Capital), (b) pay or
reimburse Access Capital for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under the Transaction
Documents, and the verification of the Accounts Receivable and the credit
worthiness of the account debtors, including, without limitation, fees and
disbursements of counsel to Access Capital (whether or not such counsel is
affiliated with Access Capital) and any collateral evaluation (e.g. field
examinations, collateral analysis or other business analysis) performed by
Access Capital or for its benefit as Access Capital deems necessary; (c) pay,
indemnify, and hold Access Capital harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from, any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement of modification of, or any waiver or consent under or in respect of,
the Transaction Documents; (d) pay, indemnify, and hold Access Capital harmless
from and against any and all claims, liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, whether threatened, pending or determined (including
attorneys' fees and court costs now or hereafter arising from the enforcement of
this clause), (1) with respect to the execution, delivery, enforcement and
performance of the Transaction Documents, including, without limitation, the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any collateral, or (2) arising directly or indirectly
from the activities of the Company or any subsidiary, its predecessors in
interest, or third parties with whom it has a contractual relationship, or
arising directly or indirectly from the violation of any environmental
protection, health, or safety law, whether such claims are asserted by any
governmental agency or any other person, or (3) arising by virtue of or in
connection with any representation or warranty by the Company being untrue as of
the date made or any agreement or covenant by the Company not being performed as
and when required hereunder (all of the foregoing, collectively, the
"indemnified liabilities"); provided, that the Company shall have no obligation
hereunder to Access Capital with respect to indemnified liabilities arising from
(i) the gross negligence or willful misconduct of Access Capital, (ii) salaries
and other amounts payable by Access Capital to its employees in the ordinary
course of business (other than for legal fees specifically billed with respect
to a particular matter to which the foregoing relates) or (iii) expenses
incurred by Access Capital (other than those specifically enumerated above) in
the ordinary course of business in connection with the performance of its
obligations hereunder. The agreements in this Section 8 shall survive the
termination of this Agreement.
9. Term; Fees.
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(a) This Agreement shall be effective for a period commencing on the
date hereof and continuing until the close of business on January 31, 1998 (the
"Initial Term").
(b) The representations, warranties and covenants of the Company and
the remedies of Access Capital for a breach of such representations, warranties
and/or covenants, shall
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survive the termination of this Agreement, and such termination shall not affect
the rights of Access Capital to enforce its remedies under the Transaction
Documents against the Company or against any collateral after a default by the
Company.
(c) The Company shall pay to Access Capital simultaneous with the
execution of this Factoring Agreement, a commitment fee of $10,000.
(d) In the event that the Company terminates this agreement on or
before January 31, 1998 without entering into the agreement pursuant to the
Letter of Intent dated November 20, 1997 then the Company shall pay a
Termination fee of $35,000.
11. Defaults; Remedies. If any of the following events (each herein
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referred to as a "Default") shall occur:
(a) Any representation, warranty or covenant made by the Company in
any of the Transaction Documents shall prove to have been incorrect, incomplete
or misleading on or as of the date made or deemed made; or
(b) The Company shall fail to perform or observe any term covenant or
agreement contained in any Transaction Document and such failure shall continue
for a period of five (5) days after written notice thereof from Access Capital
shall have been received by the Company; or
(c) Access Capital shall reasonably believe that the Company is
failing to tender all of its Accounts Receivable to Access Capital for purchase
pursuant to Section 1 of this Agreement;
(d) The Company shall instruct any Account Debtor to mail or deliver
payment on Accounts Receivable to the Company or to any person other than Access
Capital; or
(e) There shall be any change in the controlling ownership of the
Company; or
(f) The Company (i) shall generally not pay, or shall be unable to
pay, or shall admit in writing its inability to pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of creditors, or
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or a substantial part of its assets; or (iii) shall commence
any proceeding under any bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding commenced against it in which an order
for relief is entered or an adjudication or appointment is made, or (v) shall
take any corporate action indicating its consent to, approval of, or
acquiescence in any such petition, application, proceeding, or order for relief
or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (vi) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged.
then, and in any such event, Access Capital, without notice to the Company, may
exercise all of the rights provided in Section 6 and, by notice to the Company,
may: (i) declare the Facility Fee, Access
7
Capital's accrued fees with respect to the Purchased Receivables (calculated as
provided in the Fee Schedule as if all Purchased Receivables had been paid in
full on the date of such declaration) and all other amounts payable under the
Transaction Documents to be forthwith due and payable, whereupon the Facility
Fee and all such other amounts shall become and be forthwith due and payable,
without demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Company; or (ii) declare that its obligation to purchase
and/or administer Accounts Receivable pursuant to this Agreement is terminated,
whereupon such obligation or obligations shall forthwith terminate; or (iii)
both. Access Capital may terminate its obligation to purchase additional
Accounts Receivable pursuant to this Agreement without terminating this
Agreement or its right to administer Accounts Receivable pursuant to the terms
hereof. In addition, the Company shall pay Access Capital a liquidation fee
("Liquidation Fee") in the amount of five percent (5%) of the face amount of
each receivable outstanding at any time during a "liquidation period" (as
defined below). For the purposes hereof, "liquidation period" means a period:
(i) beginning on the earliest date of (x) an event referred to in Section 11(f);
or (y) the cessation of business of the Company; and (ii) ending on the date on
which Access Capital has actually received fees, costs, expenses and other
amounts due and owing to it under the Transaction Documents. The Liquidation Fee
shall be paid on the earlier to occur of: (i) the date on which Access Capital
collects the applicable Account Receivable; and (ii) the 90th day from the
invoice of such Account Receivable by deduction from any amount otherwise due
from Access Capital to the Company directly, at the option of Access Capital.
The Company and Access Capital acknowledge that the actual damages that would be
incurred by Access Capital after the occurrence of a Default would be difficult
to quantify and that the Company and Access Capital have agreed that the fees
and obligations set forth in this paragraph and in this Agreement would
constitute fair and appropriate liquidated damages in the event of any such
termination.
12. Notices. All notices and other communications hereunder and under any
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other Transaction Document (unless otherwise specified in such Transaction
Document) shall be deemed given when delivered or deposited in the mails, first
class postage prepaid (provided, however, that notices given by telegram, telex
or telefax shall be deemed given when dispatched by telegram, telex or telefax,
as the case may be) and if to a party hereto addressed as set forth beneath its
name at the foot hereof unless a party shall give notice in writing of a
different address or telefax number in the manner provided herein.
13. Amendments. Etc. No amendment, modification, termination, or waiver of
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any provision of any Transaction Document to which the Company is a party, nor
consent to any departure by the Company from any Transaction Document to which
it is a party, shall in any event be effective unless the same shall be in
writing and signed by Access Capital, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
14. No Waiver. No course of dealing between Access Capital and the
---------
Company, nor any failure or delay on the part of Access Capital in exercising
any right, power, or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power, or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power, or remedy hereunder. The rights and remedies provided in the
Transaction Documents are cumulative, and are not exclusive of any other rights,
powers, privileges, or remedies, now or hereafter existing, at law or in equity
or otherwise.
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15. Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the Company and Access Capital and their respective successors
and assigns, except that the Company may not assign or transfer any of its
rights under any Transaction Document to which it is a party without the prior
written consent of Access Capital.
16. Integration. This Agreement and the other Transaction Documents
-----------
contain the entire agreement between the parties relating to the subject matter
hereof and supersede all oral statements and prior writings with respect
thereto.
17. Severability of Provisions. Any provision of any Transaction Document
--------------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such
Transaction Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
18. Additional Reports. In the event that at any time after the expiration
------------------
of the term of this Agreement (as the same may be extended or modified, or
terminated following the occurrence of a default), the Company or any successor
or assignee of the Company, shall request additional information from Access
Capital including, without limitation, account reports, collections advice for
previously concluded transactions or information for the Company's accounting
records, such information shall be supplied by Access Capital to the Company if
available, and the Company shall pay Access Capital based on the time spent by
Access Capital personnel in the preparation of such information for the Company,
and for the disbursements incurred by Access Capital in connection therewith, at
the hourly rates established by Access Capital for the consulting services of
its personnel.
19. Headings. Section headings in the Transaction Documents are included
--------
in such Transaction Documents for the convenience of reference only and shall
not constitute a part of the applicable Transaction Documents for any other
purpose.
20. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE
-----------------------
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN,
THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL JUDGMENT
IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER ALL
APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT.
21. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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22. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND ALL
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RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT.
23. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
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COUNTERPARTS, ALL OF WHICH SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT, AND ANY
PARTY HERETO MAY EXECUTE THIS AGREEMENT BY SIGNING ONE OR MORE COUNTERPARTS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
ACCESS CAPITAL, INC.
By: /s/ XXXX XXXXXXX
-------------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
Address for Notices:
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Client Services Department
Telephone Number: (000) 000-0000
Telefax Number: (000) 000-0000
TELENETICS CORPORATION
By: /s/ XXXXXXX ARMANI
-------------------------------------
Xxxxxxx Armani
President & Chief Executive Officer
Address for Notices:
00000 Xxxxx Xxxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone Number: (000) 000-0000
Telefax Number: (000) 000-0000
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EXHIBIT A
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INVOICE DELIVERY SCHEDULE
-------------------------
Bulk #: ________________
ACI Invoice #: _________
Aggregate Amount of Invoices: $ ________________
Initial Payment: $ ___________________________
Date:_________ 199___
Pursuant to the terms and conditions of the Factoring Agreement in effect
by and between the Company (as named below) and Access Capital, Inc. ("Access
Capital"), the Company hereby sells to Access Capital, and Access Capital hereby
purchases from the Company, the accounts receivable of the Company set forth on
Schedule A attached hereto and made a part hereof. Reference is made to the
Factoring Agreement between the parties, the terms and conditions of which are
incorporated herein by this reference.
Name of Company: Accepted:
TELENETICS CORPORATION ACCESS CAPITAL, INC.
By: /s/ XXXXXXX ARMANI By: /s/ XXXX XXXXXXX
-------------------------------------- -----------------------------
Xxxxxxx Armani Name: Xxxx Xxxxxxx
President & Chief Executive Officer Title: Vice President
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EXHIBIT B
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TELENETICS CORPORATION
FEE SCHEDULE
The fee earned by Access Capital, Inc. for purchasing Accounts
Receivable with an initial payment of 75% shall be 15% (fifteen percent) per
annum. Collected funds shall be available to the account of the Company five (5)
business clearance days after receipt of payment.
Access Capital, Inc. will earn a 2.5% (two and one half percent) administrative
fee for all Accounts Receivable purchased by the Company during the term of the
Account Agreements.
Agreed to and Accepted:
TELENETICS CORPORATION
By: /s/ XXXXXXX ARMANI
-------------------------------
Xxxxxxx Armani
President & Chief Executive Officer
EXHIBIT C
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SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT made as of the 26th day of November 1997 by and
between TELENETICS CORPORATION a California corporation, (the "Company") and
ACCESS CAPITAL, INC., a New York corporation ("Access Capital").
W I T N E S S E T H:
WHEREAS, the Company intends to enter into a Factoring Agreement with
Access Capital dated the date hereof (the "Factoring Agreement") pursuant to
which Access Capital will purchase certain accounts receivable represented by
invoices rendered to customers of the Company ("Accounts Receivable") on the
basis of, and in reliance upon the representations, warranties and covenants of
the Company contained in the Factoring Agreement; and
WHEREAS, it is a condition precedent to the obligation of Access Capital to
purchase Accounts Receivable pursuant to the Factoring Agreement that the
Company shall have entered into this Security Agreement for the purpose of
securing the performance of the representations, warranties and covenants of the
Company in the Factoring Agreement (but not the payment of the Accounts
Receivable purchased thereby which are unpaid solely by reason of the financial
inability of the account debtor to pay at maturity, following acceptance by such
account debtor of the goods sold or services rendered without dispute) and the
payment and performance by the Company of its other obligations under the
Factoring Agreement;
NOW, THEREFORE, to induce Access Capital to enter into the Factoring
Agreement and purchase Accounts Receivable pursuant thereto, and in
consideration thereof and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. Security Interest. The Company hereby grants Access Capital a security
-----------------
interest (the "Security Interest") in all of the following property now owned or
at any time hereafter acquired by it, or in which it now has or at any time in
the future may acquire any right, title or interest (the "Collateral"):
(a) all Accounts Receivable purchased by Access Capital pursuant to
the Factoring Agreement, all rights of the Company pursuant to the Factoring
Agreement, and all contract rights and other general intangibles related to the
Accounts Receivable purchased by Access Capital pursuant to the Factoring
Agreement and associated therewith and the proceeds and products thereof
(including without limitation proceeds of insurance) and all additions,
accessions and substitutions thereto or therefor; and
(b) all accounts not purchased by Access Capital, all other personal
property and fixtures of the Company, including, without limitation, inventory,
equipment, goods, documents, instruments, contract rights, general intangibles
and chattel paper in which the Company now has or hereafter may acquire any
right, title or interest and the proceeds and products thereof (including
without limitation, proceeds of insurance) and all additions, accessions and
substitutions thereto or therefor.
Terms used in clauses (a) and (b) of this Section which are defined in the
Uniform Commercial Code as enacted and in effect in the State of New York (the
"Code") are used as so defined in the Code.
2. Obligations. This Agreement and the Security Interest shall secure the
-----------
following obligations (the "Obligations"):
(a) Any and all obligations of the Company under the Factoring
Agreement or under any other agreement or instrument executed and delivered
pursuant thereto, including without limitation all reimbursement and
indemnification obligations of the Company; and
(b) Any and all other liabilities and obligations of every kind and
nature whatsoever of the Company to Access Capital under the Factoring Agreement
or otherwise, whether such liabilities and obligations be direct or indirect,
absolute or contingent, secured or unsecured, now existing or hereafter arising
or acquired, due or to become due.
3. Financing Statements and Other Action. The Company will do all lawful
-------------------------------------
acts which Access Capital deems necessary or desirable to protect the Security
Interest or otherwise to carry out the provisions of this Agreement, including,
but not limited to, the execution of Uniform Commercial Code financing,
continuation, amendment and termination statements and similar instruments in
form satisfactory to Access Capital and the procurement of waivers and
disclaimers of interest in the Collateral by the owners of any real estate on
which the Collateral is located and will promptly pay on demand any filing fees
or other costs in connection with the filing or recordation of such statements
and instruments.
4. Places of Business. The Company warrants that its principal place of
-------------------
business, chief executive office and the place where the records concerning its
accounts and contract rights are located at the address for notices set forth in
the Factoring Agreement. None of the Accounts Receivable is evidenced by a
promissory note or other instrument. The Company will keep its principal place
of business and chief executive office and the office where it keeps its records
concerning its accounts and contract rights at the location therefor specified
in the previous sentence or, upon 30 days' prior written notice to Access
Capital, at any other locations in a jurisdiction where all actions required by
this Section 4 shall have been taken with respect to the Collateral. The Company
will hold and preserve its records concerning its accounts and contract rights
and will permit representatives of Access Capital at any time during normal
business hours to inspect and make abstracts from such records.
5. Encumbrances. The Company warrants that it has title to the Collateral
------------
purportedly owned by it and that there are no sums owed or claims, liens,
security interests or other encumbrance (collectively, "Liens") against the
Collateral other than as set forth on Schedule 1 hereto. The Company will notify
Access Capital of any Liens against the Collateral, will defend the Collateral
against any Liens adverse to Access Capital, except for liens having priority
listed on Schedule 1 hereto, and will not create, incur, assume, or suffer to
exist now or at any time throughout the
2
duration of the term of this Security Agreement, any Liens against the
Collateral, whether now owned or hereafter acquired, except liens in favor of
Access Capital and liens listed on Schedule 1.
6. Maintenance of Collateral. The Company shall preserve the Collateral
--------------------------
for the benefit of Access Capital. Without limiting the generality of the
foregoing, the Company shall:
(a) make all such repairs, replacements, additions and improvements to
its equipment as in its judgment are necessary to permit such business to
be properly and advantageously conducted at all times;
(b) maintain and preserve its inventory except as sold in the ordinary
course of business;
(c) preserve all beneficial contract rights to the extent commercially
reasonable;
(d) in conjunction with, and at the direction of, Access Capital, take
commercially reasonable steps to collect all accounts; and
(e) pay all taxes, assessments or other charges on the Collateral when
due, unless the amount or validity of such taxes, assessments or charges
are being contested in good faith by appropriate proceedings and reserves
have been provided on its books with respect thereto in conformity with
generally accepted accounting principles.
Nothing contained herein shall be construed to prohibit the Company from
buying and selling equipment and inventory in the ordinary course of business.
7. Additional Provisions Concerning the Collateral.
------------------------------------------------
(a) The Company authorizes Access Capital to file, without the
signature of the Company, where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral.
Access Capital may file a photographic or other reproduction of this Agreement
in lieu of a financing or continuation statement in any filing office where it
is permissible to do so.
(b) The Company irrevocably appoints Access Capital as its attorney-
in-fact (which power of attorney is coupled with an interest) and proxy, with
full authority in the place and stead of the Company and in its name or
otherwise, from time to time in Access Capital's discretion, including: (i) to
obtain and adjust insurance required to be paid to Access Capital pursuant to
Section 8 hereof; (ii) to ask, demand, collect, xxx for, recover, compound,
receive, and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral; (iii) to receive, endorse, and
collect any checks, drafts or other instruments, documents, and chattel paper in
connection with clause (i) or clause (ii) above; (iv) to sign the Company's name
on any invoice or xxxx of lading relating to any account, on drafts against
customers, on schedules and assignments of accounts, on notices of assignment,
financing statements and other public records, on verification of accounts and
on notices to customers (including notices directing customers to make payment
directly to Access Capital); (v) if a Default (as defined in the Factoring
Agreement) has occurred and is
3
continuing, to notify the postal authorities to change the address for delivery
of its mail to an address designated by Access Capital, to receive, open and
process all mail addressed to the Company, to send requests for verification of
accounts to customers; and (vi) to file any claims or take any action or
institute any proceedings which Access Capital may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Access Capital with respect to any of the Collateral. The Company ratifies
and approves all acts of said attorney; and so long as the attorney acts in good
faith and without gross negligence it shall have no liability to the Company for
any act or omission as such attorney.
(c) If the Company fails to perform any agreement contained herein,
Access Capital may itself perform, or cause performance of, such agreement or
obligation, and the costs and expenses of Access Capital incurred in connection
therewith shall be payable by the Company and shall be fully secured hereby.
(d) The powers conferred on Access Capital hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon Access
Capital to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Access Capital shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.
(e) Anything herein to the contrary notwithstanding, (i) the Company
shall remain liable under any contracts and agreements relating to the
Collateral, to the extent set forth therein, to perform all of its obligations
thereunder, to the same extent as if this Agreement had not been executed; (ii)
the exercise by Access Capital of any of its rights hereunder shall not release
the Company from any of its obligations under the contracts and agreements
relating to the Collateral; and (iii) Access Capital shall not have any
obligation or liability by reason of this Agreement under any contracts and
agreements relating to the Collateral, nor shall Access Capital be obligated to
perform any of the obligations or duties of the Company thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
8. Insurance. The Company shall maintain insurance covering the
---------
Collateral with financially sound and reputable insurers satisfactory to Access
Capital against such risks as are customarily insured by a business in the same
or a similar industry and similarly situated for an amount not less than the
full replacement value of such Collateral. All such insurance policies covering
property on and after the date such property becomes subject to the Security
Interest shall be written so as to be payable in the event of loss to the
Company and Access Capital as their interests shall appear and shall provide for
at least thirty (30) days prior written notice to Access Capital prior to the
cancellation or modification of each such policy. At the request of Access
Capital, all insurance policies covering property subject to the Security
Interest shall be furnished to and held by Access Capital. If, while any
Obligations are outstanding, any proceeds with respect to any casualty loss are
paid to Access Capital under such policies on account of such casualty loss, and
no Default (as defined in the Factoring Agreement) has occurred and is
continuing, Access Capital will pay over such proceeds in whole or in part to
the Company, for the purpose of repairing or replacing the Collateral destroyed
or damaged, with any such repaired or replaced Collateral to be secured by this
Agreement. If a Default has occurred and is continuing, Access Capital may apply
the proceeds in its
4
discretion to any of the Obligations. Access Capital is hereby appointed during
the term of this Agreement as irrevocable attorney-in-fact to collect the
proceeds of such insurance, to settle any claims with the insurers in the event
of loss or damage, to endorse settlement drafts and upon the occurrence and
during the continuance of a Default to cancel, assign or surrender any insurance
policies.
9. Remedies. If any Default (as defined in the Factoring Agreement) shall
---------
have occurred and be continuing:
(a) Access Capital may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the Code
(whether or not the Code applies to the affected Collateral), and also may (i)
require the Company to, and the Company hereby agrees that it will at its
expense and upon request of Access Capital forthwith, assemble all or part of
the Collateral as directed by Access Capital and make it available to Access
Capital at a place to be designated by Access Capital which is reasonably
convenient to both parties and (ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of Access Capital's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as Access Capital may
deem commercially reasonable. The Company agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to the Company of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Access Capital shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Access Capital may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and any such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(b) Any cash held by Access Capital as Collateral and all cash
proceeds received by Access Capital in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral may, in the
discretion of Access Capital, be held by Access Capital as Collateral for,
and/or then or any time thereafter be applied in whole or in part by Access
Capital against, all or any part of the Obligations in such order as Access
Capital shall elect. Any surplus of such cash or cash proceeds held by Access
Capital and remaining after payment in full of all the Obligations shall be paid
over to the Company or to whomsoever may be lawfully entitled to receive such
surplus.
(c) Access Capital may exercise any and all rights and remedies of the
Company under or in connection with the Collateral, including, without
limitation, any and all rights of the Company to demand or otherwise require
payment of any amount under, or performance of any provision of, any account,
contract or agreement.
(d) All payments received by the Company under or in connection with
the Collateral shall be received in trust for the benefit of Access Capital,
shall be segregated from other funds of the Company and shall be forthwith paid
over to Access Capital in the same form as so received (with any necessary
endorsement).
10. Payment of Taxes. Charges. Etc. Access Capital, at its option, after
-------------------------------
notice to the Company, may discharge any taxes, charges, assessments, security
interests, liens or other
5
encumbrances upon the Collateral or otherwise protect the value thereof. All
such expenditures incurred by Access Capital shall become payable by the Company
to Access Capital upon demand, shall bear interest at an annual rate equal at
all times to the lesser of 15 percent per annum or the highest legal interest
rate from the date incurred to the date of payment, and shall be secured by the
Collateral.
11. Duties with Respect to Collateral. Access Capital shall have no duty
---------------------------------
to the Company with respect to the Collateral other than the duty to use
reasonable care in the safe custody of any of the Collateral in its possession.
Without limiting the generality of the foregoing, Access Capital, although it
may do so at its option, shall be under no obligation to the Company to take any
steps necessary to preserve rights in the Collateral against other parties.
12. Waivers. To the extent permitted by law, the Company hereby waives
-------
demand for payment, notice of dishonor or protest and all other notices of any
kind in connection with the Obligations except notices required herein, by law
or by any other agreement between the Company and Access Capital. Access Capital
may release, supersede, exchange or modify any collateral or security which it
may from time to time hold and may release, surrender or modify the liability of
any third party without giving notice hereunder to the Company. Such
modifications, changes, renewals, releases or other actions shall in no way
affect the Company's obligations hereunder.
13. Termination. This Agreement and the Security Interest shall terminate
-----------
upon the expiration, cancellation or other termination of the Factoring
Agreement, provided that all Obligations have been paid or discharged in full.
Upon termination of the Security Interest, Access Capital will deliver to the
Company appropriate termination statements with respect to Collateral so
released from the Security Interest for filing with each filing officer with
which financing statements have been filed by Access Capital to perfect the
Security Interest in such Collateral.
14. Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the Company and Access Capital and their respective successors
and assigns.
15. Severability of Provisions. Any provision of this Agreement which is
--------------------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
16. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE
-----------------------
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN,
THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL JUDGMENT
IN ANY SUCH SUIT ACTION OR PROCEEDING
6
BROUGHT IN SUCH A COURT, AFTER ALL APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND
BINDING UPON IT.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
18. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND ALL
-----------------
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
TELENETICS CORPORATION
By: /s/ XXXXXXX ARMANI
-------------------------------------
Xxxxxxx Armani
President & Chief Executive Officer
ACCESS CAPITAL, INC.
By: /s/ XXXX XXXXXXX
-------------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
7
Schedule 1
to
Security Agreement
------------------
PERMITTED LIENS
---------------
8
EXHIBIT D-1
-----------
ANTI-FRAUD and PERFORMANCE AGREEMENT
------------------------------------
THIS ANTI-FRAUD and PERFORMANCE AGREEMENT, made as of the 26th day of
November 1997, by and between XXXXXXX ARMANI ("Xxxxxxx Armani") and ACCESS
CAPITAL, INC., a New York corporation ("Access Capital").
W I T N E S S E T H:
WHEREAS, TELENETICS CORPORATION (the "Company") and Access Capital intend
to enter into a Factoring Agreement dated the date hereof (the "Factoring
Agreement") pursuant to which Access Capital will purchase certain accounts
receivable billed to customers of the Company ("Accounts Receivable") on the
basis of, and in reliance upon, the representations, warranties and covenants of
the Company contained in the Factoring Agreement; and
WHEREAS, Xxxxxxx Armani is an officer and shareholder of the Company; and
WHEREAS, it is a condition precedent to the obligation of the Access
Capital to enter into the Factoring Agreement and to purchase Accounts
Receivable pursuant thereto that Xxxxxxx Armani shall have entered into this
Anti-Fraud and Performance Agreement, guaranteeing the performance by the
Company of the representations, warranties and covenants of the Company in the
Factoring Agreement (but not the payment of the Accounts Receivable purchased
thereby which are unpaid solely by reason of the financial inability of the
account debtor to pay at maturity, following acceptance by such account debtor
of the goods sold or services rendered without dispute) and the payment and
performance by the Company of its other obligations under the Factoring
Agreement;
NOW, THEREFORE, in order to induce Access Capital to enter into the
Factoring Agreement and the Security Agreement and to purchase Accounts
Receivable pursuant thereto, and in consideration thereof and for other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
Xxxxxxx Armani, it is agreed as follows:
1. Liabilities of Xxxxxxx Armani. Xxxxxxx Armani hereby absolutely and
-----------------------------
unconditionally guarantees the accuracy and completeness of the Company's
representations and warranties and the prompt and complete performance by the
Company of the Company's covenants and obligations in the Factoring Agreement,
the prompt and complete payment and performance of all other fees, expenses and
obligations of any nature that shall become due or owing to Access Capital by
the Company under the Factoring Agreement or pursuant to any modification or
amendment thereof, and the payment of any costs or expenses incurred by Access
Capital in enforcing the same (the "Obligations"). Except as provided in Section
7, this Anti-Fraud and Performance Agreement is a continuing guaranty of the
Obligations for the duration of the term of the Factoring Agreement and any
renewals or extensions thereof. Payments to be made by Xxxxxxx Armani hereunder
may be required by Access Capital on any number of occasions. Payment by Xxxxxxx
Armani shall be made to Access Capital at Access Capital's office on demand as
Obligations become due.
2. Presumption of Default. In the event that Access Capital shall have
----------------------
purchased an Account Receivable from the Company which shall not have been paid
in full when due at a time when the customer to which such Account Receivable
was billed has not (i) ceased generally to pay its debts as they become due, or
(ii) made an assignment for the benefit of creditors, or petitioned or applied
to any tribunal for the appointment of a custodian, receiver, or trustee for it
or a substantial part of its assets, or (iii) commenced any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, or (iv) had a petition or
application filed or any such proceeding commenced against it, then the failure
of the customer to pay such Account Receivable shall be presumed to be the
result of the Company's breach of a representation, warranty, covenant or
obligation in the Factoring Agreement with respect to the Account Receivable to
which it relates.
3. Costs of Enforcement. Xxxxxxx Armani shall pay to Access Capital
--------------------
forthwith upon demand, all reasonable costs and expenses (including court costs
and legal expenses) incurred or expended by Access Capital in enforcing its
rights under this Anti-Fraud and Performance Agreement.
4. Waiver of Right of Subrogation. Notwithstanding any payment or
------------------------------
payments made by Xxxxxxx Armani hereunder, Xxxxxxx Armani will not exercise any
rights of Access Capital against the Company by way of subrogation,
reimbursement or indemnity, and shall have no right of recourse to any assets or
property of the Company held for the payment and performance of its Obligations,
whether or not the Obligations of the Company shall be satisfied. If there is
more than one obligor, each obligor agrees not to seek contribution from any
other obligor until all the Obligations shall have been paid in full. If any
amount shall nevertheless be paid to Xxxxxxx Armani, such amount shall be held
in trust for the benefit of Access Capital and shall forthwith be paid to Access
Capital to be credited and applied to the Obligations, whether matured or not
matured. The provisions of this Section 4 shall survive termination of this
Anti-Fraud and Performance Agreement.
5. Waiver. Xxxxxxx Armani hereby assents, to the extent permitted by law,
------
to all the terms and conditions of the Obligations and waives: (a) notice of
acceptance of this Anti-Fraud and Performance Agreement and all notice of the
creation, extension or accrual of any Obligations; (b) presentment, demand for
payment, notice of dishonor and protest; (c) notice of any other nature
whatsoever; (d) any requirement of diligence or promptness on the part of Access
Capital in the enforcement of any of its rights under the provisions of the
Factoring Agreement or any Account Agreement; (e) any requirement that Access
Capital take any action whatsoever against the Company or any other party or
file any claim in the event of the bankruptcy of the Company; or (f) failure of
Access Capital to protect, preserve or resort to any collateral. The waivers set
forth in this section shall be effective notwithstanding the fact that the
Company ceases to exist by reason of its liquidation, merger, consolidation or
otherwise.
6. Consent. Xxxxxxx Armani hereby consents that from time to time, and
-------
without further notice to or consent of Xxxxxxx Armani, Access Capital may take
any or all of the following actions without affecting the liability of Xxxxxxx
Armani: (a) extend, renew, modify, compromise, settle or release the
Obligations; (b) release or compromise any liability of any party or parties
with respect to the Obligations; (c) release its security interest in the
collateral or exchange, surrender or otherwise deal with the collateral as
Access Capital may determine; or (d) exercise or refrain from exercising any
right or remedy of Access Capital.
2
7. Obligations of Xxxxxxx Armani Unconditional; Termination. The
--------------------------------------------------------
obligations of Xxxxxxx Armani under this Anti-Fraud and Performance Agreement
shall be absolute and unconditional, irrespective of the validity, regularity or
enforceability of any Obligation or any instrument or agreement evidencing the
same or relating thereto or any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Xxxxxxx Armani. The
obligations of Xxxxxxx Armani hereunder shall be absolute and unconditional
under any and all circumstances and shall not be discharged except by complete
payment or performance of the Obligations and the liabilities of Xxxxxxx Armani
hereunder.
8. Notices. All notices and other communications hereunder shall be
-------
deemed given when delivered or deposited in the mails, first class postage
prepaid (provided, however, that notices given by telegram, telex or telefax
shall be deemed given when dispatched) and if to a party hereto addressed as set
forth beneath its name at the foot hereof unless a party shall give notice of a
different address or telefax number in the manner provided herein.
9. Survival of Agreement. This Anti-Fraud and Performance Agreement shall
---------------------
inure to the benefit of and be binding upon Xxxxxxx Armani and Access Capital
and their respective heirs, successors and assigns, including any subsequent
holder or holders of any Obligations, and the term "Access Capital" shall
include any such holder or holders whenever the context permits.
10. Independent Obligation. Access Capital may proceed against Xxxxxxx
----------------------
Armani under this Anti-Fraud and Performance Agreement without first proceeding
against the Company, against any other surety or any other person or any
security held by Access Capital and without pursuing any other remedy.
11. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE
-----------------------
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN,
THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL JUDGMENT
IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER ALL
APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT.
12. GOVERNING LAW. THIS ANTI-FRAUD AND PERFORMANCE AGREEMENT SHALL BE
-------------
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
13. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND ALL
-----------------
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT.
3
IN WITNESS WHEREOF, Xxxxxxx Armani has executed this Agreement as a sealed
instrument as of the date first above written.
/s/ XXXXXXX ARMANI
--------------------------
Xxxxxxx Armani
Address for Notices:
00000 Xxxxx Xxxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone Number: (000) 000-0000
Telefax Number: (000) 000-0000
The foregoing Anti-Fraud and Performance Agreement is hereby confirmed and
accepted as of the date hereof:
ACCESS CAPITAL, INC.
By: /s/ XXXX XXXXXXX
------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
Address for Notices:
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Client Services Department
Telephone Number: (000) 000-0000
Telefax Number: (000) 000-0000
4
EXHIBIT E
---------
SUBORDINATION AGREEMENT
-----------------------
THIS AGREEMENT made as of the 26th day of November 1997 by and between SMC
COMMUNICATIONS GROUP INC. and XXXXX XXXXXXXX doing business as SMC GROUP (the
"Creditor") and ACCESS CAPITAL, INC., a New York corporation ("Access Capital").
W I T N E S S E T H:
WHEREAS, the Creditor has made certain loans and advances to TELENETICS
CORPORATION (the "Company") as detailed on Schedule 1 attached hereto and
incorporated herein by reference (collectively the "Loans"); and
WHEREAS, the Company and Access Capital intend to enter in a Factoring
Agreement dated the date hereof (the "Factoring Agreement"), pursuant to which
Access Capital will purchase certain accounts receivable billed to customers of
the Company (such accounts receivable, together with the proceeds thereof, are
hereinafter referred to as "Accounts Receivable"); and
WHEREAS, it is a condition precedent to the obligation of Access Capital to
enter into the Factoring Agreement and to purchase Accounts Receivable pursuant
thereto that the Creditor shall have entered into this Subordination Agreement
for the purpose of establishing, as between the Creditor and Access Capital, the
respective priorities of the Loans and the obligations of the Company to Access
Capital under the Factoring Agreement;
NOW, THEREFORE, to induce Access Capital to enter into the Factoring
Agreement and purchase Accounts Receivable pursuant thereto, and in
consideration thereof and for other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Definitions. For the purposes of this Agreement:
-----------
(a) the term "Senior Obligations" shall mean : (i) all fees, expenses
and other amounts due or hereafter becoming due to Access Capital under the
Factoring Agreement and any other agreements and instruments executed in
connection therewith; and (ii) any and all other amounts owed to Access Capital
by the Company, whether now existing or hereafter arising;
(b) the term "Junior Obligations" shall mean: (i) the Loans, together
with any and all interest accrued with respect thereto; (ii) all dividends and
other distributions with respect to the capital stock of any class of the
Company; and (iii) any and all amounts due or to become due, or accrued or to
accrue, from the Company to the Creditor pursuant to any present or future
agreement; and
(c) the term "Subordinated Party" shall mean the Creditor, any
affiliate of the Creditor and any transferee from the Creditor of any Junior
Obligation.
2. Subordination of Junior Obligations.
------------------------------------
(a) SUBORDINATION. All indebtedness and obligations constituting
Junior Obligations shall be subordinate and junior in right of payment to the
Senior Obligations to the extent and in the manner hereinafter provided in this
Section 2.
(b) BANKRUPTCY, LIQUIDATION, ETC. In the event of any of the
following (collectively referred to as "Acts of Bankruptcy"): (i) any
insolvency or bankruptcy proceedings, or any receivership, liquidation,
reorganization or other similar proceedings in connection therewith relative to
the Company or any subsidiary or to the property of the Company or any
subsidiary that has been instituted but has not been discharged, (ii) any
proceedings for voluntary liquidation, dissolution or other winding up of the
Company or any subsidiary, whether or not involving insolvency or bankruptcy
proceedings, or (iii) any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
substantially all of the property, assets or business of the Company or any
subsidiary or the proceeds thereof to any creditor or creditors other than in
the ordinary course of business (including without limitation any marshalling of
assets), then, in the event of the occurrence of any of the foregoing Acts of
Bankruptcy the Senior Obligations shall be paid in full before the holder of any
Junior Obligation shall be entitled to receive any payment or distribution,
direct or indirect, whether in cash, securities, property or otherwise, on
account of Junior Obligations and to that end (but subject to the power of a
court of competent jurisdiction to make other equitable arrangements reflecting
the rights conferred in this Agreement upon the Senior Obligations with respect
to the indebtedness represented thereby by a lawful plan of reorganization under
applicable bankruptcy law), Access Capital shall be entitled to receive and to
apply in payment of the Senior Obligations any payment or distribution, direct
or indirect, whether in cash, securities, property or otherwise, which may be
payable or deliverable in any such proceedings in respect of the Junior
Obligations.
(c) NO PAYMENT IN RESPECT OF JUNIOR OBLIGATIONS. Unless and until the
Senior Obligations shall have been paid and satisfied in full, no payment or
distribution, direct or indirect, whether in cash, securities, property or
otherwise, on account of any principal or interest or other amount of any Junior
Obligation shall be made to any Subordinated Party.
(d) RECEIPT OF PAYMENTS IN TRUST. Any payments or other distributions
in cash, securities, property or otherwise received by any of the Subordinated
Parties in contravention of the provisions of this Section 2 shall be deemed to
be received in trust for the benefit of Access Capital and shall be remitted
forthwith to Access Capital in the exact form received with any necessary
endorsements for application to the payment of the Senior Obligations to the
extent necessary to pay the same in full.
(e) JUNIOR OBLIGATIONS NOT IMPAIRED. The provisions of this Section 2
are for the purpose of defining the relative rights of Access Capital, on the
one hand, and the Subordinated Parties, on the other hand, against the Company
and its property. Nothing contained in this Section is intended to or shall
impair, as among the Company and the Subordinated Parties, the obligations
2
of the Company to the Subordinated Parties under the terms of the relevant
agreements. In addition, nothing contained in this Section 2 shall prevent any
Subordinated Party from exercising all rights and remedies otherwise permitted
by applicable law or under any Junior Obligation upon a default thereunder,
subject to (i) the rights of Access Capital under this Section to receive cash,
property or securities of the Company or any subsidiary received upon the
exercise of any such remedy or otherwise deliverable to such Subordinated Party,
and (ii) the limitations on the exercise of certain rights of the Subordinated
Parties set forth in subsection (f) below.
(f) LIMITATION ON EXERCISE OF CERTAIN RIGHTS. Each Subordinated Party
agrees that unless and until the Senior Obligations shall have been paid and
satisfied in full, it will not (i) make any request or demand for, accelerate or
bring any action with respect to, the payment of any Junior Obligation, (ii)
bring any action to or otherwise enforce any judgment or lien against the
Company or any subsidiary or its assets, (iii) seize any property of the Company
or any subsidiary, or (iv) institute, or join in any petition for, any
insolvency, bankruptcy, receivership or similar proceeding against the Company
or any subsidiary, except that in such instance that Access Capital institutes
such an action or proceeding against the Company or any subsidiary, then the
Subordinated Parties may immediately join in such action or proceeding.
(g) SUBROGATION. Subject to the payment in full of all Senior
Obligations, the Subordinated Parties shall be subrogated to the rights of
Access Capital to receive payments or distributions of assets of the Company or
any subsidiary made on the Senior Obligations. No payments or distributions,
direct or indirect, whether in cash, securities, property or otherwise, to
Access Capital shall, as between the Company and its creditors other than Access
Capital, be deemed to be a payment by the Company to any Subordinated Party or
on account of any Junior Obligation. The provisions of this subsection are
intended solely to define the relative rights of the Subordinated Parties, on
the one hand, and Access Capital, on the other hand, vis-a-vis the Company.
Notwithstanding the right of subrogation of the Subordinated Parties to the
rights of Access Capital, each of the Subordinated Parties agrees that Access
Capital may, prior to payment in full of all amounts due on the Senior
Obligations, make all determinations and take or omit to take all actions and
exercise or refrain from exercising all remedies that Access Capital may have at
any time with respect to the Senior Obligations without consultation with, or
participation or joinder by, or any consideration of the interests of, any
Subordinated Party and without any liability to any Subordinated Party.
(h) ADDITIONAL RIGHTS OF ACCESS CAPITAL. Without the consent of or
notice to any Subordinated Party, Access Capital at any time and from time to
time in its sole and absolute discretion may (i) amend or supplement the
Factoring Agreement and any other document or instrument executed by the Company
or any subsidiary in connection therewith; (ii) demand and receive a security
interest in or other lien upon any property or assets of the Company or any
subsidiary to secure the Senior Obligations and sell, exchange, release or
otherwise deal with any property pledged or mortgaged to secure, or howsoever
securing, Senior Obligations; (iii) exercise or refrain from exercising any
other of its rights in respect of the Senior Obligations against the Company,
any subsidiary or others (including any Subordinated Party) and (iv) apply any
sums by whomsoever or however realized to the Senior Obligations.
3
(i) REINSTATEMENT. The provisions of this Section 2 shall continue to
be effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Obligations is rescinded or must otherwise be returned by
Access Capital to the Company or any subsidiary upon the insolvency, bankruptcy
or reorganization of the Company or such subsidiary or otherwise, all as though
such payment had not been made.
3. Relationship to Other Agreements. Notwithstanding any provisions to
--------------------------------
the contrary of any other agreement or document to which any Subordinated Party
is a party, whether with the Company or otherwise (collectively, the
"Subordinated Documents"), the parties hereto intend, and each of the
Subordinated Parties hereby expressly acknowledges and agrees, that with respect
to the subject matter of this Agreement, the terms of this Agreement shall
govern and control in the event of a conflict between the Subordinated Documents
and this Agreement.
4. Restriction on Transfer. Each Subordinated Party covenants and agrees
-----------------------
that until the Senior Obligations have been paid and discharged in full it will
not, without the prior written consent of Access Capital, transfer, sell,
endorse, assign, or grant a participation in all or any part of any Subordinated
Obligation and, as a condition to any such consent by Access Capital, any
transferee must agree to assume the obligations of this Agreement in a written
instrument satisfactory to Access Capital signed by such transferee.
5. Amendments. Any provision hereof may be modified or amended only by a
----------
written instrument expressly referring hereto signed by each Subordinated Party
and by Access Capital.
6. Notices. All notices and other communications hereunder shall be
-------
deemed given when delivered or deposited in the mails, first class postage
prepaid (provided, however, that notices given by telegram, telex or telefax
shall be deemed given when dispatched) and if to a party hereto addressed as set
forth beneath its name at the foot hereof unless a party shall give notice of a
different address or telefax number in the manner provided herein.
7. No Third Party Beneficiary. The subordinations and agreements of the
--------------------------
Subordinated Parties and Access Capital set forth herein are solely for the
benefit of said parties and neither the Company nor any other person not a party
to this agreement shall be a third party beneficiary hereof, including without
limitation a trustee-in-bankruptcy of the Company or any subsidiary, or entitled
to any rights hereunder or arising out of this Agreement.
8. References to Access Capital. All references herein to "Access
----------------------------
Capital" shall be deemed to include any future holder or holders of the Senior
Obligations without further amendment to this Agreement.
9. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which, taken together, shall constitute one and the same
instrument, and any of the parties hereto may execute this agreement by signing
any such counterpart.
10. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the successors, assigns, heirs and legal representatives of the
parties hereto.
4
11. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE
-----------------------
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN,
THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL JUDGMENT
IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER ALL
APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
5
13. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND ALL RIGHT
-----------------
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.
IN WITNESS WHEREOF, this instrument has been signed as of the day and year
first above written.
ACCESS CAPITAL, INC.
By: /s/ XXXX XXXXXXX
___________________________
Name: Xxxx Xxxxxxx
Title: Vice President
Address for Notices:
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Client Services Department
Telephone Number: (000) 000-0000
Telefax Number: (000) 000-0000
CREDITOR
/s/ XXXXX XXXXXXXX
______________________________
Xxxxx Xxxxxxxx
Address for Notices:
SMC Group
00000 Xxxxx Xxxxxxx
Xxxx Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Telephone Number: (000) 000 0000
Telefax Number: (000) 000 0000
The undersigned hereby accepts and acknowledges receipt of a copy of the
foregoing Agreement.
TELENETICS CORPORATION
By: /s/ XXXXXXX ARMANI
__________________________
Xxxxxxx Armani
President & Chief Executive Officer
6
SCHEDULE 1
----------
Loans from the Creditor
to the Company
Unpaid Principal Amount Date
----------------------- ----
$200,000 February 7, 1992 and
amended on September 6,
1996.
7
