Exhibit 10.4
ACCOUNTS RECEIVABLE FINANCING AGREEMENT
This ACCOUNTS RECEIVABLE FINANCING AGREEMENT (the "Agreement") is
entered into this 27th day of May, 2003 by and between SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 0000 Xxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production office located
at One Newton Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, doing business under the name "Silicon Valley East" (FAX
000-000-0000) ("Bank") and NAVISITE, INC., a Delaware corporation, CLEARBLUE
TECHNOLOGIES MANAGEMENT, INC., a Delaware corporation, AVASTA, INC., a
California corporation, CONXION CORPORATION, a California corporation, INTREPID
ACQUISITION CORP., a Delaware corporation, each with its principal place of
business at 000 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (FAX
______________) (each are herein collectively, the "Borrower") and provides the
terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The
parties agree as follows:
1. DEFINITIONS. In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ACCOUNT BALANCE" is the aggregate outstanding Advances made hereunder.
"ACCOUNT DEBTOR" is as defined in the Code and shall include, without
limitation, any person liable on any Financed Receivable, such as, a guarantor
of the Financed Receivable and any issuer of a letter of credit or banker's
acceptance.
"ADJUSTMENTS" are all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor for any Financed Receivable.
"ADVANCE" is defined in Section 2.2.
"ADVANCE RATE" is eighty percent (80% ), net of Deferred Revenue and
offsets related to each specific Account Debtor, or such other percentage as
Bank establishes under Section 2.2.
"APPLICABLE RATE" is a per annum rate equal to the "Prime Rate" plus
four percent (4.0%).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"CLOSING DATE" is the date of the execution of this Agreement.
"CODE" is the Uniform Commercial Code as adopted by The Commonwealth of
Massachusetts (presently, Mass. Gen. Laws, Ch. 106), as may be amended and in
effect from time to time.
"COLLATERAL" is attached as EXHIBIT A, as each term listed thereon is
defined in the Code.
"COLLATERAL HANDLING FEE" is defined in Section 3.4.
"COLLECTIONS" are all funds received by Bank from or on behalf of an
Account Debtor for Financed Receivables.
"COMPLIANCE CERTIFICATE" is attached as EXHIBIT "B".
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"DEFERRED REVENUE" is all amounts received in advance of performance
under contracts and not yet recognized as revenue.
"EARLY TERMINATION FEE" is defined in Section 4.3.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization in accordance with GAAP and excludes acquisition-related costs and
one-time extraordinary charges.
"EVENT OF DEFAULT" is defined in Section 9.
"FACILITY AMOUNT" is Twelve Million Five Hundred Thousand Dollars
($12,500 ,000.00).
"FACILITY FEE" is defined in Section 3.3.
"FACILITY PERIOD" is the period beginning on this date and continuing
until May 27, 2004, unless the period is terminated sooner (i) by Bank at any
time with notice to Borrower after the occurrence of an Event of Default, (ii)
by Borrower pursuant to Section 4.3, or (iii) upon an Event of Default.
"FINANCE CHARGES" is defined in Section 3.2.
"FINANCED RECEIVABLES" are all those accounts, receivables, chattel
paper, instruments, contract rights, documents, general intangibles, letters of
credit, drafts, bankers acceptances, and rights to payment, and all proceeds,
including their proceeds (collectively "receivables"), which Bank finances and
makes an Advance. A Financed Receivable stops being a Financed Receivable (but
remains Collateral) when the Advance made for the Financed Receivable has been
finally paid.
"FINANCED RECEIVABLE BALANCE" is the total outstanding amount, at any
time, of all Financed Receivables.
"GAAP" is generally accepted accounting principles as adopted by the
Financial Accounting Standards Board.
"GOOD FAITH DEPOSIT" is described in Section 3.8.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INELIGIBLE RECEIVABLE" is any accounts receivable:
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(a) that is unpaid ninety (90) calendar days after the
invoice date; or
(b) that is owed by an Account Debtor that has filed, or
has had filed against it, any bankruptcy case,
assignment for the benefit of creditors,
receivership, or Insolvency Proceeding or who has
become insolvent (as defined in the United States
Bankruptcy Code) or who is generally not paying its
debts as they become due; or
(c) for which there has been any breach of warranty or
representation in Section 6 or any breach of any
covenant in this Agreement; or
(d) for which the Account Debtor asserts any discount,
allowance, return, dispute, counterclaim, offset,
defense, right of recoupment, right of return,
warranty claim, or short payment, to the extent of
such assertion.
"INSOLVENCY PROCEEDING" are proceedings by or against any person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"INVOICE TRANSMITTAL" shows accounts receivable which Bank may finance
and, for each receivable, includes the Account Debtor's, name, address, invoice
amount, invoice date and invoice number and is signed by Borrower's authorized
representative.
"LOCKBOX" is described in Section 6.3(J).
"MINIMUM FINANCE CHARGE" is a minimum monthly Finance Charge of
$10,000.00 payable to the Bank.
"OBLIGATIONS" are all advances, liabilities, obligations, covenants and
duties owing, arising, due or payable by Borrower to Bank now or later under
this Agreement or any other document, instrument or agreement, account
(including those acquired by assignment) primary or secondary, such as all
Advances, Finance Charges, Facility Fee, Early Termination Fee, Collateral
Handling Fee, interest, fees, expenses, professional fees and attorneys' fees,
or other amounts now or hereafter owing by Borrower to Bank.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or the
Loan Documents;
(b) Indebtedness existing on the Closing Date and shown on the
Perfection Certificate;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) investments in short term United States government treasury
bills, certificates of deposit, repurchase agreements,
commercial paper and mutual funds or money market funds that
invest substantially all of their assets in instruments
described above in this definition;
(b) travel and other advances to directors and employees of
Borrower made in the ordinary course of business; and
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(c) investments in marketable securities listed on SCHEDULE B
hereto.
"PERMITTED LIENS" are liens, claims, and encumbrances that:
(a) arise or exist pursuant to this Agreement;
(b) exist on the date hereof and are listed on SCHEDULE A hereto
and any renewals or extensions thereof, provided such liens
secure the purchase money for specific equipment and such
liens are limited solely to such specific equipment and the
proceeds thereof;
(c) In addition to the items listed on SCHEDULE A, capital leases
or purchase money liens in the aggregate of $1,500,000.00
outstanding at any time (i) on equipment acquired or held by
Borrower incurred for financing the acquisition of the
equipment, or (ii) existing on equipment when acquired, if the
lien is confined to the property and improvements and the
proceeds of the equipment;
(d) are for taxes not yet due or which are being contested in good
faith and by appropriate proceedings diligently conducted;
(e) are carriers', warehousemen's, mechanics', material men's,
repairmen's, or other similar liens, claims, or encumbrances
arising in the ordinary course of business which are not
overdue for a period of more than ninety (90) days or which
are being contested in good faith by appropriate proceedings
diligently conducted;
(f) are pledges or deposits in the ordinary course of business in
connection with workers' compensation, unemployment insurance,
and other Social Security legislation;
(g) are deposits to secure the performance of bids, contracts and
leases, statutory obligations, surety bonds, performance
bonds, and other obligations similarly incurred in the
ordinary course of business;
(h) secure judgments for the payment of money not constituting an
Event of Default or secure appeal or other surety bonds
related to such judgments; and
(i) secure Permitted Indebtedness.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "Prime Rate," even if it
is not Bank's lowest rate, except that at no time under this Agreement shall the
Prime Rate be less than four and one-quarter percent (4.25%).
"RECONCILIATION DAY" is the last calendar day of each month.
"RECONCILIATION PERIOD" is each calendar month.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank,
pursuant to a subordination agreement entered into between the Bank, the
Borrower and the subordinated creditor), on terms acceptable to Bank.
"SUBSIDIARY" is for any Person, joint venture, or any other business
entity of which more than 50% of the voting stock or other equity interests is
owned or controlled, directly or indirectly, by the Person.
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2. FINANCING OF ACCOUNTS RECEIVABLE.
2.1. REQUEST FOR ADVANCES. During the Facility Period,
Borrower may offer accounts receivable to Bank and request that the Bank finance
such accounts receivables, if there is not an Event of Default. Borrower will
deliver an Invoice Transmittal for each accounts receivable it offers. Bank may
rely on information on or with the Invoice Transmittal.
2.2. ACCEPTANCE OF ACCOUNTS RECEIVABLE. Bank is not obligated
to finance any accounts receivable. Bank may approve any Account Debtor's
credit before agreeing to finance any accounts receivable. When Bank agrees to
finance a receivable, it will extend credit to Borrower in an amount up to the
result of the Advance Rate multiplied by the face amount of the receivable (the
"Advance"). Bank may, in its reasonable discretion, change the percentage of the
Advance Rate for a particular receivable on a case by case basis. When Bank
makes an Advance, the receivable becomes a "Financed Receivable." All
representations and warranties in Section 6 must be true as of the date of the
Invoice Transmittal and of the Advance and no Event of Default exists or would
occur as a result of the Advance. The aggregate face amount of all Financed
Receivables outstanding at any time may not exceed the Facility Amount. Although
Bank's obligation to make an Advance is discretionary in each instance, Bank
acknowledges that (subject to verifications and other terms and conditions
provided herein with respect to Account Debtors generally), it is the usual
practice of Bank to finance accounts receivable due and owing from those Account
Debtors that are Fortune 1000 type companies.
3. COLLECTIONS, FINANCE CHARGES, REMITTANCES AND FEES. The
Obligations shall be subject to the following fees and Finance Charges. Fees and
Finance Charges may, in Bank's discretion, be charged as an Advance, and shall
thereafter accrue fees and Finance Charges as described below. Bank may, in its
discretion, charge fees and Finance Charges to Borrower's deposit account
maintained with Bank.
3.1. COLLECTIONS. Collections will be credited to the Financed
Receivables Balance, but if there is an Event of Default, Bank may apply
Collections to the Obligations in any order it chooses. If Bank receives a
payment for both a Financed Receivable and a non Financed Receivable, the funds
will first be applied to the Financed Receivable and, if there is not an Event
of Default, the excess will be remitted to the Borrower, subject to Section 3.7.
3.2. FINANCE CHARGES. In computing Finance Charges on the
Financed Receivables Balance, all Collections received by Bank shall be deemed
applied by Bank on account of the Obligations three (3) Business Days after
receipt of the Collections. On each Reconciliation Day, Borrower will pay a
finance charge (the "Finance Charge"), which is equal to the greater of (i) the
Applicable Rate divided by 360 multiplied by the number of days in the
Reconciliation Period multiplied by the outstanding average daily Financed
Receivable Balance for that Reconciliation Period, or (ii) the Minimum Finance
Charge.
3.3. FACILITY FEE. A fully earned, non-refundable facility
fee of Eighty Thousand Dollars ($80,000.00 ) is due upon execution of this
Agreement.
3.4. COLLATERAL HANDLING FEE. On each Reconciliation Day,
Borrower will pay to Bank a collateral handling fee, equal to 0.25% per month of
the average daily Financed Receivable Balance outstanding during the applicable
Reconciliation Period. After an Event of Default, the Collateral Handling Fee
will increase an additional 0.25% effective immediately before the Event of
Default.
3.5. ACCOUNTING. After each Reconciliation Period, Bank will
provide an accounting of the transactions for that Reconciliation Period,
including the amount of all Financed Receivables, all Collections, Adjustments,
Finance Charges, Collateral Handling Fee and the Facility Fee. If Borrower does
not object to the accounting in writing within thirty (30) days it is considered
correct. All Finance Charges and other interest and fees are calculated on the
basis of a 360 day year and actual days elapsed.
3.6. DEDUCTIONS. Bank may deduct fees, Finance Charges and
other amounts due pursuant to this Agreement from any Advances made or
Collections received by Bank.
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3.7. ACCOUNT COLLECTION SERVICES. All Borrower's receivables
are to be paid to the same address/or party and Borrower and Bank must agree
on such address. If Bank collects all receivables and there is not an Event of
Default or an event that with notice or lapse of time will be an Event of
Default, within three (3) days of receipt of those collections, Bank will give
Borrower the receivables collections it receives for receivables other than
Financed Receivables and/or amount in excess of the amount for which Bank has
made an Advance to Borrower, less any amount due to Bank, such as the Finance
Charge, the Facility Fee, other fees and expenses, or otherwise. This Section
does not impose any affirmative duty on Bank to do any act other than to turn
over amounts. All receivables and collections are Collateral and if an Event of
Default occurs, Bank need not remit collections of Collateral and may apply them
to the Obligations.
3.8. GOOD FAITH DEPOSIT. Borrower has paid to Bank a Good
Faith Deposit of $20,000.00 to initiate Bank's due diligence review process.
Any portion of the deposit not utilized to pay expenses will be applied to the
Facility Fee.
4. REPAYMENT OF OBLIGATIONS.
4.1. REPAYMENT ON MATURITY. Borrower will repay each Advance
on the earliest of: (a) payment of the Financed Receivable in respect which the
Advance was made, (b) the Financed Receivable becomes an Ineligible Receivable,
(c) when any Adjustment is made to the Financed Receivable (but only to the
extent of the Adjustment if the Financed Receivable is not otherwise an
Ineligible Receivable), or (d) the last day of the Facility Period (including
any early termination). Each payment will also include all accrued Finance
Charges on the Advance and all other amounts due hereunder.
4.2. REPAYMENT ON EVENT OF DEFAULT. When there is an Event of
Default, Borrower will, if Bank demands (or, in an Event of Default under
Section 9(B), immediately without notice or demand from Bank) repay all of the
Advances. The demand may, at Bank's option, include the Advance for each
Financed Receivable then outstanding and all accrued Finance Charges, the Early
Termination Fee, Collateral Handling Fee, attorneys and professional fees, court
costs and expenses, and any other Obligations.
4.3. EARLY TERMINATION OF AGREEMENT. This Agreement may be
terminated prior to the last day of the Facility Period as follows: (i) by
Borrower, effective three Business Days after written notice of termination is
given to Bank; or (ii) by Bank at any time with notice to Borrower after the
occurrence of an Event of Default, effective immediately. If this Agreement is
terminated (A) by Bank in accordance with clause (ii) in the foregoing sentence
or (B) by Borrower for any reason, Borrower shall pay to Bank a termination fee
in an amount equal to Eighty Thousand Dollars ($80,000.00) (the "Early
Termination Fee"). The Early Termination Fee shall be due and payable on the
effective date of such termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations. Notwithstanding
the foregoing, Bank agrees to waive the Early Termination Fee if: (i) Bank
agrees to refinance and redocument this Agreement under another division of the
Bank (in its sole and exclusive discretion) prior to the last day of the
Facility Period, or (ii) Borrower terminates this Agreement within thirty (30)
days of the Closing Date, as a result of the Bank's failure to finance invoices
requested by Borrower, or (iii) Borrower terminates this Agreement as a result
of Bank's failure to consent to a transaction pursuant to Section 6.4(D).
5. POWER OF ATTORNEY. Borrower irrevocably appoints Bank and its
successors and assigns it attorney-in-fact and authorizes Bank:
(I) during an Event of Default, to:
(A) sell, assign, transfer, pledge,
compromise, or discharge all or any part of the
Financed Receivables;
(B) demand, collect, xxx, and give releases
to any Account Debtor for monies due and compromise,
prosecute, or defend any action, claim, case or
proceeding about the Financed
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Receivables, including filing a claim or voting a
claim in any bankruptcy case in Bank's or Borrower's
name, as Bank chooses; and
(C) prepare, file and sign Borrower's name
on any notice, claim, assignment, demand, draft, or
notice of or satisfaction of lien or mechanics'
lien or similar document in connection with
exercising the Bank's rights as contemplated by this
Agreement;
(II) regardless of whether there has been an Event of Default,
to:
(A) notify all Account Debtors to pay Bank
directly;
(B) receive, open, and dispose of mail
addressed to Borrower;
(C) endorse Borrower's name on check or
other instruments (to the extent necessary to pay
amounts owed pursuant to this Agreement); and
(D) execute on Borrower's behalf any
instruments, documents, financing statements to
perfect Bank's interests in the Financed Receivables
and Collateral and do all acts and things necessary
to protect, preserve, and otherwise enforce the
Bank's rights and remedies under this Agreement, as
directed by the Bank.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants for each Financed Receivable at the time of submission:
(A) Borrower is the owner with legal right
to sell, transfer and assign it;
(B) The correct amount is on the Invoice
Transmittal and is not disputed;
(C) Payment is not contingent on any
obligation or contract and it has fulfilled all its
obligations as of the Invoice Transmittal date;
(D) It is based on an actual sale and
delivery of goods and/or services rendered, due to
Borrower, it is not past due or in default, has not
been previously sold, assigned, transferred, or
pledged and is free of any liens, security interests
and encumbrances;
(E) There are no defenses, offsets,
counterclaims or agreements for which the Account
Debtor may claim any deduction or discount;
(F) Borrower has not filed or had filed
against it Insolvency Proceedings and does not
anticipate any filing;
(G) Bank has the right to endorse and/ or
require Borrower to endorse all payments received on
Financed Receivables and all proceeds of Collateral;
and
(H) No representation, warranty or other
statement of Borrower in any certificate or written
statement given to Bank contains any untrue statement
of a material fact.
6.2. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants as follows:
(A) Borrower is duly existing and in good
standing in its state of formation and qualified and
licensed to do business in, and in good standing in,
any state in which the conduct of its business or its
ownership of property requires that it be qualified.
The execution, delivery and performance of
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this Agreement has been duly authorized, and does not
conflict with Borrower's organizational documents or
constitute an Event of Default under any material
agreement by which Borrower is bound. Borrower is not
in default under any agreement to which or by which
it is bound.
(B) Borrower has good title to the
Collateral.
(C) Except as listed on SCHEDULE C attached
hereto, there are no actions or proceedings pending
or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary of Borrower, in excess of
$150,000 in the aggregate.
(D) All consolidated financial statements
for Borrower and any Subsidiary of Borrower delivered
to Bank fairly present in all material respects
Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There
has not been any material deterioration in Borrower's
consolidated financial condition since the date of
the most recent financial statements submitted to
Bank.
(E) Borrower is able to pay its debts
(including trade debts) as they mature.
(F) No representation, warranty or other
statement of Borrower in this Agreement or any
certificate or written statement given to Bank
contains any untrue statement of a material fact.
(G) To the best of Borrower's knowledge,
Borrower is not an "investment company" or a company
"controlled" by an "investment company" under the
Investment Company Act. Borrower is not engaged as
one of its important activities in extending credit
for margin stock (under Regulations X, T and U of the
Federal Reserve Board of Governors). Borrower has
complied with the Federal Fair Labor Standards Act.
To its knowledge, Borrower has not violated any laws,
ordinances or rules. None of Borrower's properties or
assets has been used by Borrower, to the best of
Borrower's knowledge, by previous persons, in
disposing, producing, storing, treating, or
transporting any hazardous substance other than
legally. Borrower has timely filed all required tax
returns and paid, or made adequate provision to pay,
all taxes. To its knowledge, Borrower has obtained
all consents, approvals and authorizations of, made
all declarations or filings with, and given all
notices to, all government authorities that are
necessary to continue its business as currently
conducted.
6.3. AFFIRMATIVE COVENANTS. Borrower will do all of the following:
(A) Maintain its corporate existence and
good standing in its jurisdictions of incorporation
and maintain its qualification in each jurisdiction
necessary to Borrower's business or operations.
(B) Pay all its taxes including gross
payroll, withholding and sales taxes when due (other
than taxes and assessments which Borrower is
contesting in good faith, with adequate reserves
maintained in accordance with GAAP) and will deliver
satisfactory evidence of payment if requested.
(C) Provide a written report within sixty
(60) days after the invoice date respecting any
Financed Receivable (or as and when otherwise
directed by the Bank), if payment of any Financed
Receivable does not occur by its due date and include
the reasons for the delay.
(D) Borrower shall deliver to Bank: (i) as
soon as available, but no later than thirty (30)
days after the last day of each month, a company
prepared consolidated balance sheet and income
statement, prepared under GAAP, consistently applied,
covering Borrower's consolidated operations during
the period, in a form and substance acceptable to
Bank, certified by Borrower; and (ii) budgets, sales
projections, operating plans or other financial
information Bank reasonably requests in a form of
presentation previously delivered by Borrower to
Bank.
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(E) Borrower shall keep its business and the
Collateral insured for risks and in amounts, as
provided on the certificate of insurance delivered to
the Bank. All property policies shall have a lender's
loss payable endorsement showing Bank as an
additional loss payee and all liability policies
shall show the Bank as an additional insured and all
policies shall provide that the insurer must give
Bank at least twenty (20) days notice before
canceling its policy. At Bank's request, Borrower
shall deliver certified copies of policies and
evidence of all premium payments. Proceeds payable
under any policy shall, at Bank's option, be payable
to Bank on account of the Obligations.
Notwithstanding the foregoing, so long as no Event of
Default has occurred and is continuing, Borrower
shall have the option of applying the proceeds of
any casualty policy up to $200,000.00, in the
aggregate, toward the replacement or repair of
destroyed or damaged property; provided that (i) any
such replaced or repaired property (a) shall be of
equal or like value as the replaced or repaired
Collateral and (b) shall be deemed Collateral in
which Bank has been granted a first priority security
interest and (ii) after the occurrence and during the
continuation of an Event of Default all proceeds
payable under such casualty policy shall, at the
option of the Bank, be payable to Bank on account of
the Obligations. If Borrower fails to obtain
insurance as required under this Section or to pay
any amount or furnish any required proof of payment
to third persons and the Bank, Bank may make all or
part of such payment or obtain such insurance
policies required in this Section, and take any
action under the policies Bank deems prudent.
(F) Execute any further instruments and take
further action as Bank reasonably requests to perfect
or continue Bank's security interest in the
Collateral or to effect the purposes of this
Agreement.
(G) Provide Bank with a Compliance
Certificate along with monthly and annual financial
statements, or as requested by Bank.
(H) Provide Bank with, as soon as available,
but no later than twenty (20) days following each
Reconciliation Period an aged listing of accounts
receivables and accounts payable, along with a
Deferred Revenue report. All of the foregoing shall
be in form and substance satisfactory to the Bank.
(I) Immediately notify, transfer and deliver
to Bank all collections Borrower receives for
Financed Receivables (and, as and when required
hereunder, for all receivables).
(J) Borrower shall direct each Account
Debtor (and each depository institution where
proceeds of accounts receivable are on deposit) to
make payments with respect to all receivables to a
lockbox account established with the Bank ("Lockbox")
or to wire transfer payments to a cash collateral
account that Bank controls, as and when directed by
the Bank from time to time, at its option and at the
sole and exclusive discretion of the Bank. Until such
Lockbox can be established, the Borrower shall remit
all receivable cash payments and remittances to the
Bank at least weekly (at the close of business on
each Friday) along with a detailed cash receipts
journal. It will be considered an immediate Event of
Default if the Lockbox is not set-up and operational
within 45 days from the date of this Agreement.
(K) Borrower will allow Bank to audit
Borrower's Collateral, including, but not limited to,
Borrower's Accounts and accounts receivable, at
Borrower's expense, no later than ninety (90) days
after the execution of this Agreement and annually
thereafter, upon reasonable notice and during Bank's
normal business hours. Provided, however, if an Event
of Default has occurred and is continuing, Bank may
audit Borrower's Collateral, including, but not
limited to, Borrower's Accounts and accounts
receivable at Bank's sole and exclusive discretion
and without notification and authorization from
Borrower.
(L) Borrower shall maintain, to be tested by
Bank on a quarterly basis: (i) an EBITDA no less
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than ($1,000,000.00) for the quarter ending July 31,
2003, and (ii) an EBITDA of at least $1.00 for the
quarter ending October 31, 2003 and for each quarter
thereafter.
(M) Maintain (together with Borrower's
Subsidiaries) all of Borrower's and Borrower's
Subsidiaries' primary operating, depository,
investment and securities accounts with Bank (or
Bank's affiliate with respect to securities
accounts), which accounts shall represent at least
80% of the dollar value of the Borrower's and such
Subsidiaries accounts at all financial institutions.
6.4. NEGATIVE COVENANTS. Borrower will not do any of the
following without Bank's prior written consent which shall not be unreasonably
withheld or delayed:
(A) Assign, lease, transfer, sell or grant,
or permit any lien or security interest in the
Collateral, except for transfers (i) of inventory or
fixed assets in the ordinary course of business and
(ii) of worn-out or obsolete equipment, and (iii)
Permitted Liens.
(B) Create, incur, assume, or be liable for
any Indebtedness, except for Permitted Indebtedness
and except as provided in 6.4(C) and (D) below.
(C) Directly or indirectly enter into or
permit to exist any material transaction with any
affiliate or Subsidiary of Borrower or make any
distributions to any affiliate or Subsidiary, except
for the repayment and re-borrowing of up to $3,000
,000.00 with Atlantic Investors, LLC pursuant to a
Loan and Security Agreement dated January 29, 2003
and pursuant to the terms of a certain Subordination
Agreement between the Bank, the Borrower and Atlantic
Investors, LLC, and transactions that are in the
ordinary course of Borrower's business, upon fair and
reasonable terms that are no less favorable to
Borrower than would be obtained in an arm's length
transaction with a nonaffiliated person, and except
for those transactions listed and summarized on
EXHIBIT 6.4(c).
(D) Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any
other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of
the capital stock or property of another Person.
Notwithstanding the foregoing, Borrower, or any of
its Subsidiaries may merge or consolidate with any
other Person, provided that (i) such other Person is
in the same, or a similar, line of business; (ii) no
Event of Default has occurred and is continuing or
would exist after giving effect to the transactions;
and (iii) the Borrower is the surviving legal entity.
In the event that the Bank's consent is required for
any merger or consolidation hereunder, the Bank will
respond promptly to any request for such consent, but
no later than within seven (7) business days of
being provided with a formal term sheet. After seven
(7) days the transaction will be deemed approved
unless a written denial of consent is provided to
Borrower.
(E) Become an "investment company" or a
company controlled by an " investment company," under
the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to
purchase or carry margin stock, or use the proceeds
of any Advance for that purpose; fail to meet the
minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other
law or regulation, or permit any of its subsidiaries
to do so.
(F) Relocate its principal executive office
or add any new offices or business locations or keep
any Collateral in any additional locations, or (ii)
change its state of formation, or (iii) change its
organizational structure except for mergers,
acquisitions and consolidations with affiliates,
provided that the Borrower is the surviving legal
entity or (iv) change its legal name, or (v) change
any organizational number (if any) assigned by its
state of formation.
(G) Keep any Collateral in the possession of
any third party bailee (such as at a warehouse),
except for back-up tapes stored with any third party
bailee in the ordinary course of business. In the
event that Borrower, after the date hereof, intends
to store or otherwise deliver any Collateral
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to such a bailee, then Borrower shall receive the
prior written consent of Bank and such bailee must
acknowledge in writing that the bailee is holding
such Collateral for the benefit of Bank.
(H) Create, incur, or allow any lien on any
of its property, other than Permitted Liens, assign
or convey any right to receive income, including the
sale of any Accounts, or permit any Collateral not to
be subject to the first priority security interest
granted herein.
(I) Except as provided in Section 6.4 (C)
and (D) above, directly or indirectly acquire or own
any Person, or make any investment in any Person,
other than Permitted Investments, or permit any of
its Subsidiaries to do so; or pay any dividends or
make any distribution or payment or redeem, retire or
purchase any capital stock.
(J) Make or permit any payment on any
Subordinated Debt, except under the terms of the
Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt, without
Bank's prior written consent.
7. ADJUSTMENTS. If any Account Debtor asserts a discount,
allowance, return, offset, defense, warranty claim, or the like on a Financed
Receivable (an "Adjustment") or if Borrower breaches any of the
representations, warranties or covenants set forth in Section 6, Borrower will
promptly advise Bank.
8. SECURITY INTEREST. Borrower grants Bank a continuing security
interest in all presently existing and later acquired Collateral to secure all
Obligations and performance of each of Borrower's duties under this Agreement.
Any security interest shall be a first priority security interest in the
Collateral. The Collateral may also be subject to Permitted Liens. Bank may
place a "hold" on any deposit account pledged as Collateral. Except as
disclosed to Bank on SCHEDULE 8, Borrower is not a party to, nor is bound by,
any material license or other material agreement with respect to which the
Borrower is the licensee that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such license or agreement
or any other property. Without prior consent from Bank, Borrower shall not enter
into, or become bound by, any such license or agreement which is reasonably
likely to have a material impact on Borrower's business or financial condition.
Borrower shall take such reasonable steps as Bank reasonably requests to obtain
the consent of, or waiver by, any person whose consent or waiver is necessary
for all such licenses or contract rights to be deemed "Collateral" and for Bank
to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such license or agreement, whether now
existing or entered into in the future.
Borrower agrees that any disposition of the Collateral in
violation of this Agreement, by either the Borrower or any other Person, shall
be deemed to violate the rights of the Bank under the Massachusetts Uniform
Commercial Code. If the Agreement is terminated, Bank's lien and security
interest in the Collateral shall continue until Borrower fully satisfies its
Obligations. Upon repayment of all Obligations and the termination of Bank's
commitment to finance receivables hereunder, Bank shall promptly deliver to
Borrower all appropriate termination statements and releases to evidence the
termination of the Agreement and the security interest granted herein. If
Borrower shall at any time during the term of this Agreement, acquire a
commercial tort claim, Borrower shall promptly notify Bank in a writing signed
by Borrower of the brief details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Bank.
9. EVENTS OF DEFAULT. Any one or more of the following is an
Event of Default.
(A) Borrower fails to pay any amount owed
to Bank when due under this Agreement;
(B) Borrower files, or has filed against it,
any Insolvency Proceedings or any assignment for the
benefit of creditors, or appointment of a receiver or
custodian for any of its assets, and, to the extent
such filing is in connection with proceedings by or
against any person under the United States Bankruptcy
Code or any other bankruptcy law, is not removed or
dismissed within ten (10 business days;
-11-
(C) Borrower becomes insolvent or is
generally not paying its debts as they become due;
(D) Any involuntary lien, garnishment,
attachment (other than Permitted Liens) attaches to
the Financed Receivables or any Collateral or the
service of process upon Bank seeking to attach, by
mesne or trustee process any funds of Borrower on
deposit with Bank;
(E) Borrower breaches any material covenant,
agreement, warranty, or representation set forth in
this Agreement and such breach is not cured within
ten(10) days of the occurrence thereof;
(F) A judgment or judgments for the payment
of money in an amount, individually or in the
aggregate, of at least Two Hundred Thousand Dollars
($200,000) shall be rendered against Borrower and
shall remain unsatisfied and unstayed for a period of
twenty-five (25) days;
(G) Borrower is in default under any
document, instrument or agreement evidencing any
debt, obligation or liability in favor of Bank its
affiliates, or vendors in excess of $250,000 in the
aggregate, regardless of whether the debt, obligation
or liability is direct or indirect, primary or
secondary, or fixed or contingent;
(H) An event of default occurs under any
guaranty of the Obligations or any material provision
of any such guaranty is not valid or enforceable or
such guaranty is repudiated or terminated;
(I) A material default or Event of Default
occurs under any agreement between Borrower and any
creditor of Borrower that signed a subordination
agreement with Bank;
(J) Any creditor of Borrower that has signed
a subordination agreement with Bank breaches any
terms of the subordination agreement; or
(K) Any of the following occurs: (i) a
material impairment in the perfection or priority of
Bank's security interest in the Collateral or in the
value of such Collateral; or (ii) a material adverse
change in the business, operations, or condition
(financial or otherwise) of the Borrower occurs; or
(iii) a material impairment of the ability of
Borrower to repay any portion of the Obligations; or
(iv) Bank determines, based upon information provided
by Borrower and in its reasonable judgment, that
there is a substantial likelihood that Borrower shall
fail to comply with one or more of the financial
covenants in Section 6.3 during the next succeeding
financial reporting period.
10. REMEDIES.
10.1. REMEDIES UPON DEFAULT. When an Event of Default
occurs, (1) Bank may stop financing receivables or extending credit to Borrower;
(2) at Bank's option and on demand, all or a portion of the Obligations (or, for
an Event of Default described in Section 9(B), automatically and without demand)
are due and payable in full; (3) the Bank may apply to the Obligations any (i)
balances and deposits of Borrower it holds, or (ii) any amount held by Bank
owing to or for the credit or the account of Borrower; (4) Bank may exercise all
rights and remedies under this Agreement and applicable law, including those of
a secured party under the Code, power of attorney rights in Section 5 for the
Collateral, and the right to ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, collect, dispose of, sell, lease,
use, and realize upon all Financed Receivables and Collateral in any commercial
manner; and (5) Bank may make any payments and do any acts it considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower shall assemble the Collateral if Bank requests and make it available as
Bank designates. Bank may enter premises where the Collateral is located, take
and maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Borrower grants Bank a license
to enter and occupy any of its premises, without charge, to exercise any of
Bank's rights or remedies. Borrower agrees that any notice of
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sale required to be given to Borrower is deemed given if at least ten (10) days
before the sale may be held.
10.2. DEMAND WAIVER. Borrower waives demand, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guaranties held by Bank
on which Borrower is liable.
10.3. DEFAULT RATE. After the occurrence of an Event of
Default, all Obligations shall accrue interest at the Applicable Rate plus three
percent (3.0%) per annum.
11. FEES, COSTS AND EXPENSES. The Borrower will pay on demand all
fees, costs and expenses (including attorneys' and professionals fees with costs
and expenses) that Bank incurs from: (a) preparing, negotiating, and enforcing
this Agreement or related agreement, including any amendments, waivers or
consents, (b) any litigation or dispute except as provided in Section 14.2,
below, relating to the Financed Receivables, the Collateral, this Agreement or
any other agreement, (c) enforcing any rights against Borrower or any guarantor,
or any Account Debtor, (d) protecting or enforcing its interest in the Financed
Receivables or other Collateral, (e) collecting the Financed Receivables and the
Obligations, and (f) any bankruptcy case or insolvency proceeding involving
Borrower, any Financed Receivable, the Collateral, any Account Debtor.
12. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. This Agreement
shall be construed, governed, and enforced pursuant to the laws (without regard
to conflict of law principles) of The Commonwealth of Massachusetts. Borrower
and Bank each submits to the exclusive jurisdiction of the State and Federal
courts in Suffolk County, Massachusetts.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER
INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
13. NOTICES. Notices or demands by either party about this
Agreement must be in writing and personally delivered or sent by an overnight
delivery service, by certified mail postage prepaid return receipt requested, or
by FAX to the addresses listed at the beginning of this Agreement. A party may
change notice address by written notice to the other party.
14. GENERAL PROVISIONS.
14.1. SUCCESSORS AND ASSIGNS. This Agreement binds and is
for the benefit of successors and permitted assigns of each party. Borrower may
not assign this Agreement or any rights under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank may,
without the consent of or notice to Borrower, sell, transfer, or grant
participation in any part of Bank's obligations, rights or benefits under this
Agreement, provided such successor or assignee is a financial institution.
14.2. INDEMNIFICATION. Borrower will indemnify, defend and
hold harmless Bank and its officers, employees, and agents against: (a)
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) losses
or expenses incurred, or paid by Bank from or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
14.3. RIGHT OF SET-OFF. Borrower and any guarantor hereby
grant to Bank, a lien, security interest and right of setoff as security for all
Obligations to Bank, whether now existing or hereafter arising upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and any guarantor even though unmatured
and
-13-
regardless of the adequacy of any other collateral securing the Obligations. ANY
AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
14.4. TIME OF ESSENCE. Time is of the essence for
performance of all obligations in this Agreement.
14.5. APPLICATION OF FUNDS. Borrower agrees that any
disposition of the Collateral in violation of this Agreement, by either the
Borrower or any other Person, shall be deemed to violate the rights of the Bank
under the Code.
14.6. SEVERABILITY OF PROVISION. Each provision of this
Agreement is severable from every other provision in determining the
enforceability of any provision.
14.7. AMENDMENTS IN WRITING, INTEGRATION. All amendments to
this Agreement must be in writing. This Agreement is the entire agreement about
this subject matter and supersedes prior negotiations or agreements.
14.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts and
when executed and delivered are one Agreement.
14.9. REMEDIES CUMULATIVE. Bank's rights and remedies under
this Agreement, or any other documents, instruments and agreement by and between
Borrower and Bank are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver
hereunder shall be effective unless signed by Bank and then is only effective
for the specific instance and purpose for which it was given.
14.10. SURVIVAL. All covenants, representations and
warranties made in this Agreement continue in force while any Financed
Receivable amount remains outstanding. Borrower's indemnification obligations
survive until all statutes of limitations for actions that may be brought
against Bank have run.
14.11. CONFIDENTIALITY. Bank will use the same degree of
care handling Borrower's confidential information that it uses for its own
confidential information and in no less than all reasonable efforts, but may
disclose information; (i) to its subsidiaries or affiliates in connection with
their business with Borrower, (ii) to prospective transferees or purchasers of
any interest in the Agreement, (iii) as required by law, regulation, subpoena,
or other order, (iv) as required in connection with an examination or audit
and (v) as it considers appropriate exercising the remedies under this
Agreement. Confidential information does not include information that is either:
(a) in the public domain or in Bank's possession when disclosed, or becomes part
of the public domain after disclosure to Bank through no act or omission by
Bank or its employees representatives or agents; or (b) disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.
14.12. BORROWER LIABILITY. Any Borrower may request Advances
hereunder. Each Borrower hereby appoints the others as such Borrower's agent for
all purposes hereunder, except with respect to requesting Advances hereunder.
Each Borrower hereunder shall be obligated to repay all Advances made hereunder,
regardless of which Borrower actually receives said Advance, as if each Borrower
hereunder directly received all Advances.
14.13. SUBROGATION AND SIMILAR RIGHTS. Notwithstanding any
other provision of this Agreement or other related document, each Borrower
irrevocably subordinates all rights that it may have at law or in equity
(including, without limitation, any law subrogating such Borrower to the rights
of Bank under the Loan Documents) to seek contribution, indemnification or any
other form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by such Borrower with respect to the Obligations in connection with
the Loan Documents or otherwise and all rights that it might have to benefit
from, or to participate in, any security for the Obligations as a result of any
payment made by
-14-
the Borrowers with respect to the Obligations in connection with the Loan
Documents or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall not
be enforced while this Agreement is in force. If any payment is made to a
Borrower in contravention of this Section, such Borrower shall hold such payment
in trust for Bank and such payment shall be promptly delivered to Bank for
application to the Obligations, whether matured or unmatured.
14.14. ACCOUNTING AND OTHER TERMS. Accounting terms not
defined in this Agreement shall be construed following GAAP. Calculations and
determinations must be made following GAAP. The term "financial statements"
includes the notes and schedules. The terms "including" and "includes" always
mean "including (or includes) without limitation," in this or any document
executed in connection herewith. All terms contained in this Agreement, unless
otherwise indicated or defined herein, shall have the meanings provided by the
Code, to the extent such terms are defined there in.
14.15. OTHER AGREEMENTS. This Agreement may not adversely
affect Banks rights under any other document or agreement. If there is a
conflict between this Agreement and any agreement between Borrower and Bank,
Bank may determine in its sole discretion which provision applies. Borrower
acknowledges that any security agreements, liens and /or security interests
securing payment of Borrower's Obligations also secure Borrower's Obligations
under this Agreement and are not adversely affected by this Agreement.
-15-
EXECUTED under seal as of the date first written above.
"BORROWER"
NAVISITE, INC.
By /s/ Xxx Xxxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
CLEARBLUE TECHNOLOGIES MANAGEMENT, INC.
By /s/ Xxx Xxxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
AVASTA, INC.
By /s/ Xxx Xxxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
CONXION CORPORATION
By /s/ Xxx Xxxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
INTREPID ACQUISITION CORP.
By /s/ Xxx Xxxxxxx
-------------------------------------
Title Chief Financial Officer
----------------------------------
"BANK"
SILICON VALLEY BANK
By /s/ Xxxxx Xxxxx
-------------------------------------
Title Vice President
----------------------------------
-16-
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All goods, equipment, inventory, contract rights or rights to
payment of money, leases, license agreements, franchise agreements, general
intangibles (including payment intangibles), accounts (including health-care
receivables), documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts, fixtures,
letters of credit rights (whether or not the letter of credit is evidenced by a
writing), commercial tort claims, securities, and all other investment property
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and
Any copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, now owned or later acquired; any
patents, trademarks, service marks and applications therefor; trade styles,
trade names, any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions, attachments, accessories, accessions and improvements to and
replacements, products, proceeds and insurance proceeds of any or all of the
foregoing.
-17-
EXHIBIT "B"
(LOGO)
SILICON VALLEY BANK
SPECIALTY FINANCE DIVISION
Compliance Certificate
I, as authorized officer of NAVISITE, INC. ("Borrower") certify under the
Accounts Receivable Financing Agreement (the "Agreement") between Borrower and
Silicon Valley Bank ("Bank") as follows.
BORROWER REPRESENTS AND WARRANTS FOR EACH FINANCED RECEIVABLE:
It is the owner with legal right to sell, transfer and assign it;
The correct amount is on the Invoice Transmittal and is not disputed;
Payment is not contingent on any obligation or contract and it has
fulfilled all its obligations as of the Invoice Transmittal date;
It is based on an actual sale and delivery of goods and/or services
rendered, due to Borrower, it is not past due or in default, has not been
previously sold, assigned, transferred, or pledged and is free of any liens,
security interests and encumbrances;
There are no defenses, offsets, counterclaims or agreements for which
the Account Debtor may claim any deduction or discount;
It reasonably believes no Account Debtor is insolvent or subject to
any Insolvency Proceedings;
It has not filed or had filed against it proceedings and does not
anticipate any filing;
Bank has the right to endorse and/ or require Borrower to endorse all
payments received on Financed Receivables and all proceeds of Collateral.
No representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statement contained in the certificates or statement not misleading.
ADDITIONALLY, BORROWER REPRESENTS AND WARRANTS AS FOLLOWS:
Borrower is duly existing and in good standing in its state of
formation and qualified and licensed to do business in, and in good standing in,
any state in which the conduct of its business or its ownership of property
requires that it be qualified. The execution, delivery and performance of this
Agreement has been duly authorized, and do not conflict with Borrower's
formations documents, nor constitute an Event of Default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which or by which it is bound.
Borrower has good title to the Collateral. All inventory is in all
material respects of good and marketable quality, free from material defects.
Borrower is not an "investment company" or a company "controlled" by
an "investment company" under the
-18-
Investment Company Act. Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations X, T and U of
the Federal Reserve Board of Governors). Borrower has complied with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules. None of Borrower's properties or assets has been used by Borrower, to the
best of Borrower's knowledge, by previous persons, in disposing, producing,
storing, treating, or transporting any hazardous substance other than legally.
Borrower has timely filed all required tax returns and paid, or made adequate
provision to pay, all taxes. Borrower has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted.
All representations and warranties in the Agreement are true and
correct in all material respects on this date.
Sincerely,
_______________________________________
SIGNATURE
_______________________________________
TITLE
_______________________________________
DATE
-19-
