LINE OF CREDIT AGREEMENT
THIS
ACCOUNTS RECEIVABLE PURCHASE AGREEMENT (the “Agreement”) is made as of the
21st day of
February, by and between Mosaic Financial Services, LLC, a Delaware limited
liability the Company, (the “Provider”) having a business address at 000
Xxxxxxxxx Xxx, Xxx Xxxx, Xxx Xxxx and eRXSYS, Inc., a Nevada Corporation, (the
“Company”) having its principal place of business and executive offices at 00000
Xxx Xxxx Xxxxxx, Xxxxx X0, Xxxxxx, Xxxxxxxxxx 00000-0000.
W
I T N E S S E T H:
WHEREAS, the
Provider is in the trade or business of advancing funds for businesses for a
fee;
WHEREAS, the
Company desires to avail itself of the services of the Provider under the terms
and conditions of this Agreement; and
WHEREAS, the
Provider wishes to advance funds to the Company under the terms and conditions
of this Agreement.
NOW
THEREFORE, in
consideration of the mutual promises contained in this Agreement, the
sufficiency and receipt of which are hereby acknowledged, the parties agree as
follows:
1.
Definitions. When
used herein, the following terms shall have the following meanings.
1.1.
“Account
Balance” shall
mean, on any given day, the amount of all outstanding and unpaid Advances under
the Line of Credit.
1.2.
“Account
Debtor shall
have the meaning set forth in Section 9-102(a)(3) of the New York UCC and shall
include any person liable on any Receivable, including without limitation, any
guarantor of the Receivable and any issuer of a letter of credit or
banker’s
acceptance.
1.3.
“Adjustments” shall
mean all discounts, allowances, returns, disputes, counter claims, offsets,
defenses, rights of recoupment, rights of return, warranty claims, or short
payments, asserted by or on behalf of any Account Debtor with respect to any
Pledged Receivable.
1.4.
“Advance” shall
have the meaning set forth in Section 2.2 hereof.
1.5.
“Collateral” shall
have the meaning set forth in Section 8 hereof.
1.6.
“Collections” shall
mean all good funds received by the Provider from or on behalf of an Account
Debtor with respect to Pledged Receivables.
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1.7
“Compliance
Certificate” shall
mean a certificate, in a form provided by the Provider to the Company, which
contains the certification of the chief financial officer of the Company that,
among other things, the representations and warranties set forth in this
Agreement are true and correct as of the date such certificate is
delivered.
1.8. “Credit
Problem” shall
mean a customer or Account Debtor of the Company that is unable to pay its debts
because a receiver or trustee for all or a substantial portion of its assets has
been appointed, it has filed a general assignment for the benefit of creditors,
or had filed against it an involuntary or voluntary bankruptcy proceeding.
1.9. “Customer
Dispute” shall
mean a claim or disagreement by a customer or Account Debtor of the Company
against the Company at any time, of any kind whatsoever, whether valid or
invalid that reduces or could reduce the amount collectible from such customer
or Account Debtor by the Provider.
|
1.10. |
“Event
of Default”
shall have the meaning set forth in Section 9
hereof. |
|
1.11. |
“Finance
Charges”
shall have the meaning set forth in Section 3.2
hereof. |
1.12. “Obligations” shall
mean all advances, financial accommodations, liabilities, obligations, covenants
and duties owing, arising, due or payable by the Company to the Provider of any
kind or nature, present or future, arising under or in connection with this
Agreement or under any other document, instrument or agreement, whether or not
evidenced by any note, guarantee or other instrument whether arising on account
or by overdraft, whether direct or indirect (including those acquired by
assignment) absolute or contingent, primary or secondary, due or to become due,
now owing or hereafter arising, and however acquired; including, without
limitation, all Advances, Account Balances, Finance Charges, fees, expenses,
professional fees and attorney’s fees and any other sums chargeable to the
Company hereunder or otherwise.
1.13. “Pledged
Receivables” shall
mean 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 thereof (all of the
foregoing being referred to as “receivables”), arising out of the invoices and
other agreements to which the Company has a right to collect from an Account
Debtor for the first time on a date when there is an unpaid Advance
outstanding.
1.14. “Refund” shall
have the meaning set forth in Section 3.5 hereof.
1.15. “Reconciliation
Date” shall
mean the last calendar day of each calendar month.
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2.
Draw
upon Line of Credit; transfer of Receivables.
2.1
Activation. A line
of credit (the “Line of Credit”) in the maximum amount of up to FIVE HUNDRED
THOUSAND DOLLARS ($500,000) is hereby activated in favor the Company effective
on the date of this Agreement. Provided that no Event of Default has occurred,
or any event that with notice, lapse of time or otherwise would constitute an
Event of Default, the maximum aggregate amount of the Line of Credit available
to the Company shall be increased for the period beginning July 1, 2005 through
the end of the Term to SEVEN HUNDRED THOUSAND DOLLARS ($700,000).
2.2.
Requests
for Draws upon Line of Credit. During
the Term hereof, provided that there does not then exist any Event of Default or
any event that with notice, lapse of time or otherwise would constitute an Event
of Default, the Company may request a draw upon the line of credit (hereinafter,
an “Advance”), up to the amount by which the aggregate value of the Pledged
Receivables exceeds the aggregate amount outstanding under the Line of Credit,
including the amount of the Advance then requested, calculated as of the date of
such request. The foregoing notwithstanding, the Company may request an initial
Advance of $350,000.00 provided it has at least $200,000.00 of Pledged
Receivables at the time of such Advance (the “Initial Advance”). It shall be a
condition to each Advance that (a) all of the representations and warranties set
forth in Section 6 of this Agreement be true and correct on and as of the date
of the Advance as though made at and as of each such date, and (b) no Event of
Default or any event or condition that with notice, lapse of time or otherwise
would constitute an Event of Default shall have occurred and be continuing, or
would result from such Advance.
2.3.
Pledge
of Receivables. Each
receivable of the Company which is or becomes outstanding during the time there
is an unpaid Obligation due to the Provider shall be deemed a Pledged
Receivable. Effective upon the Provider’s payment of an Advance, and in
consideration therefore and in consideration of the covenants of this Agreement,
the Company hereby absolutely sells, transfers and assigns to the Provider, all
of the Company’s right, title and interest in and to each Pledged Receivable and
all funds due or which may become due on or with respect to such Pledged
Receivable. The Provider shall be the absolute owner of each Pledged Receivable
until such time as all outstanding Obligations have been repaid to the Provider.
The Provider shall have, with respect to any goods related to the Pledged
Receivable, all the rights and remedies of a secured party under the New York
Uniform Commercial Code and other applicable law, including the rights of
replevin, claim and delivery, reclamation and stoppage in transit.
2.4 Invoices. The
Company will deliver to Provider a copy of each invoice created during the Term
with respect to a Pledged Receivable simultaneously with the Company’s delivery
of such invoice to the Company’s Account Debtor. The Company also will provide
to Provider a copy of each invoice for each outstanding receivable that becomes
a Pledged Receivable, at the time such receivable becomes a Pledged Receivable.
In addition, if requested by Provider, the Company will provide proof,
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satisfactory
to the Provider, of delivery of good or services to which each invoice and
Pledged Receivable relates.
2.5. Disbursements
of Advances. Once the Provider has received Pledged Receivables in an aggregate
amount that exceeds the Initial Advance (i.e., The sum of: (i) the amount of
Pledged Receivables delivered to the Provider on execution of this Agreement,
plus, (ii) the amount of Pledged Receivables generated by the Company
thereafter, must equal at least $350,000), the Provider shall commence to make
regular advances (the “Regular Advances”) to the Company by wire transfer on
Monday and Thursday (or the next business day in the case of national banking
holidays) each week during the Term. The amount of each Regular Advance, if any,
shall be equal to the amount of any new Pledged Receivables received by the
Provider that were not used to secure a prior Advance (either, an Initial
Advance or a Regular Advance).
3.
Collections,
Charges and Remittances.
3.1.
Collections. Upon
receipt by the Provider of Collections, the Provider shall promptly credit such
Collections to the Company’s Account Balance on a daily basis; provided, that if
there is an Event of Default under this Agreement, or any event that with
notice, lapse of time or otherwise would constitute an Event of Default, the
Provider shall apply all Collections to the Company’s Obligations hereunder in
such order and manner as the Provider may determine. If an item of Collection is
not honored or the Provider does not receive good funds for any reason, the
amount shall be included in the Account Balance as if the Collections had not
been received and Finance Charges under Section 3.2 shall continue to accrue
thereon.
3.2.
Charges. On
each Reconciliation Date the Company shall pay to the Provider a Finance Charge
in the amount of ONE AND ONE QUARTER PERCENT (1.25%) (the “Finance Charge,”
collectively, the “Finance Charges”) of the maximum amount of the Line of Credit
(i.e. initially, $500,000), as such amount may be increased pursuant to Section
2.1 hereof. The Provider may deduct the accrued Finance Charges from the
Advances. In addition, the Company agrees to reimburse the Provider for the cost
of wire transfers at the rate of THIRTY DOLLARS ($30.00) for each transfer, and
TWENTY DOLLARS ($20.00) for the delivery of documents by overnight courier.
3.3.
Accounting. The
accrued Finance Charge for the preceding month shall be due and payable by the
Company on or before the SEVENTH (7th)
calendar day following the close of each month. In the event that an amount
aside from the Finance Charge is due the Provider, the Company shall issue its
draft to the Provider for the full amount due. In the event this Agreement shall
expire or terminate, all outstanding and unpaid Obligations shall immediately be
due and payable in full, in the manner, and subject to the provisions of Section
4.2 hereof.
4.
Recourse
and Repurchase Obligations.
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4.1.
Recourse. The
Provider’s acquisition of Pledged Receivables from the Company shall be with
full recourse against the Company. In the event the Obligations exceed the
amount of Pledged Receivables and Collateral, the Company shall be liable for
any deficiency.
4.2.
Company’s
Payment of the Amounts Due the Provider. When
any amount owing to the Provider becomes due, the Provider shall inform the
Company of the manner of payment which may be any one or more of the following
in the Provider’s sole discretion: (a) in cash immediately upon demand therefor;
(b) by delivery of additional receivables which shall thereupon become Pledged
Receivables; (c) by deduction from or offset against the amount that otherwise
would be forwarded to the Company in respect of any further Advances that may be
made by the Provider; or (d) by any combination of the foregoing as the Provider
may in its sole discretion choose from time to time.
4.3 Re-payment
of Disputed Pledged Receivable. The
Company shall immediately notify the Provider of any Pledged Receivable that is
subject to, or affected by, a Customer Dispute of any kind, whether or not the
same is valid or with merit. If such Customer Dispute is not resolved to
Provider’s satisfaction within 30 days of the commencement of such dispute, in
addition to any other remedy it may have under this Agreement, the Company shall
immediately pay to the Provider, or the Provider may offset against any future
Advances or other amounts owed by Provider to the Company, the amount of any
Pledged Receivable that is subject to such Customer Dispute. Pledged Receivables
that remain unpaid after ninety (90) days from any Customer without a Credit
Problem shall be deemed to be the subject of a Customer Dispute. The Provider
may, at its sole discretion, require the Company to repurchase a Pledged
Receivable deemed the subject of a Customer Dispute. The repurchase of a Pledged
Receivable shall not constitute a reassignment of such Pledged Receivable, and
the security interest therein shall remain in the Provider until expressly
released. If after the Company repurchases a Pledged Receivable, whether subject
to a Customer Dispute or unpaid after ninety days, and payments for the Pledged
Receivables are received by the Company, the Company shall immediately deliver
the payments to the Provider.
5.
Power
of Attorney. The
Company does hereby irrevocably appoint the Provider and its successors and
assigns as the Company’s true and lawful attorney in fact, and hereby authorizes
the Provider, regardless of whether there has been an Event of Default, (a) to
sell, assign. transfer, pledge, compromise, or discharge the whole or any part
of the Pledged Receivables; (b) to demand, collect, receive, xxx, and give
releases to any Account Debtor for the funds due or which may become due upon or
with respect to the Pledged Receivables and to compromise, prosecute, or defend
any action, claim, case or proceeding relating to the Pledged Receivables,
including the filing of a claim or the voting of such claims in any bankruptcy
case, all in the Provider’s name or the Company’s name, as the Provider may
choose; (c) to prepare, file and sign the Company’s name on any notice, claim,
assignment, demand, draft, or notice of or satisfaction of lien or mechanic’s
lien or similar document with respect to Pledged Receivables; (d) to notify all
Account Debtors with respect to the Pledged Receivables to pay the Provider
directly; (e) to receive, open, and dispose of all mail addressed to the
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Company
for the purpose of collecting the Pledged Receivables: (f) to endorse the
Company’s name on any checks or other forms of payment on the Pledged
Receivables; (g) to execute on behalf of the Company any and all instruments,
documents, financing statements and the like to perfect the Provider’s interests
in the Pledged Receivables and Collateral; and (h) to do all acts and things
necessary or expedient, in furtherance of any such purposes. If the Provider
receives a check or item which is payment for both a Pledged Receivable and
another receivable, the funds shall first be applied to the Pledged Receivable
and, so long as there does not exist an Event of Default or an event that with
notice, lapse of time or otherwise would constitute an Event of Default, the
excess shall be remitted to the Company. Upon the occurrence and continuation of
an Event of Default all of the power of attorney rights granted by the Company
to the Provider hereunder shall be applicable with respect to all Pledged
Receivables and all Collateral.
6.
Representations,
Warranties and Covenants.
6.1.
Receivables
Warranties, Representations and Covenants. To
induce the Provider to service Pledged Receivables and to renders its services
to the Company, and with full knowledge that the truth and accuracy of the
following are being relied upon by the Provider in determining whether to accept
receivables as Pledged Receivables. The Company represents, warrants, covenants
and agrees, with respect to each Pledged Receivable, that:
(A)
The
Company is the absolute owner of each Pledged Receivable and has full legal
right to sell, transfer and assign such Pledged Receivables;
(B)
The
correct amount of each Pledged Receivable is as set forth in the invoice which
corresponds thereto and is not in dispute;
(C)
The
payment of each Pledged Receivable is not contingent upon the fulfillment of any
obligation or contract, past or future and any and all obligations required of
the Company have been fulfilled as of the date of the rendering of the services
giving rise to the Pledged Receivable;
(D)
Each
Pledged Receivable is based on an actual sale and delivery of goods and/or
services actually rendered, is presently due and owing to the Company, is not
past due or in default, has not been previously sold, assigned, transferred, or
pledged, and is free of any and all liens, security interests and encumbrances
other than liens, security interests or encumbrances in favor of the Provider or
an affiliate of the Provider;
(E)
There are
no defenses, offsets, or counterclaims against any of the Pledged Receivables,
and no agreement has been made under which the Account Debtor may claim any
deduction or discount, except as otherwise identified by the
Company;
(F)
Each
Pledged Receivable shall be the property of the Provider and shall be collected
by the Provider, but if for any reason it should be paid to the Company, the
Company shall promptly notify the Provider of such payment, shall hold any
checks,
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drafts,
or funds so received in trust for the benefit of the Provider, and shall
promptly transfer and deliver the same to the Provider;
(G)
Provider
shall have the right of endorsement, and also the right to require endorsement
by the Company, on all payments received in connection with each Pledged
Receivable and any proceeds of Collateral;
(H)
Company,
and to the Company’s best knowledge, each Account Debtor of a Pledged
Receivable, are and shall remain solvent as that term is defined in the United
States Bankruptcy Code and the New York Uniform Commercial Code, and no such
Account Debtor has filed or had filed against it a voluntary or involuntary
petition for relief under the United States Bankruptcy Code;
(I)
Each
Account Debtor of a Pledged Receivable will not object to the payment for, or
the quality or the quantity of the subject matter of, the Pledged Receivable and
is liable for the amount set forth on each invoice;
(J)
After
acceptance by the Provider of an Account Debtor, each such Account Debtor shall
promptly be notified by the Company, in the form prescribed by Provider, that
the Pledged Receivable has been transferred to and is payable to the Provider,
and the Company shall not take or permit any action to countermand such
notification; and
(K)
The
Company does not own or control, in any way, the business of any Account Debtor,
and the Company shall not change or modify the terms of any Pledged Receivable
(including, without limitation, extending the payment term thereof) without the
prior written consent of the Provider.
(L) All
receivables forwarded to and accepted by the Provider after the date hereof, and
thereby becoming Pledged Receivables, shall comply with each and every one of
the foregoing representations, warranties, covenants and agreements referred to
above in this Section 6.1.
6.2.
Additional
Warranties, Representations and Covenants. In
addition to the foregoing warranties, representations and covenants, to induce
the Provider to buy receivables and to render its services to the Company, the
Company hereby represents, warrants, covenants and agrees that:
(A)
Company
will not assign, transfer, sell, or grant, or permit any lien or security
interest in any Pledged Receivables or Collateral to or in favor of any other
party, without the Provider’s prior written consent;
(B)
The
Company’s name, form of organization, jurisdiction of incorporation, chief
executive office, and the place where the records concerning all Pledged
Receivables and Collateral are kept is set forth at the beginning of this
Agreement. Collateral is located only at the location set forth in the beginning
of this Agreement, or,
7
if
located at any additional location, as set forth on a schedule attached to this
Agreement, and the Company will give the Provider at least thirty (30) days
prior written notice if such name, organization, jurisdiction of incorporation,
chief executive office or other locations of Collateral or records concerning
Pledged Receivables or Collateral is changed or added and shall execute any
documents necessary to perfect the Provider’s interest in the Pledged
Receivables and the Collateral;
(C)
Company
shall (i) pay all of its normal gross payroll for employees, and all federal and
state taxes, as and when due, including without limitation all payroll,
withholding, income and state sales taxes; (ii) deliver at any time and from
time to time at the Provider’s request, evidence satisfactory to the Provider
that all such amounts have been paid to the proper taxing authorities; and (iii)
if requested by the Provider, pay its payroll and related taxes through a bank
or an independent payroll service acceptable to the Provider;
(D)
Company
has not, as of the time the Company delivers to the Provider a Pledged
Receivable, or as of the time the Company accepts any Advance from the Provider,
filed a voluntary petition for relief under the United States Bankruptcy Code or
had filed against it an involuntary petition for relief;
(E)
If the
Company owns, holds or has any interest in, any copyrights (whether registered,
or unregistered), patents or trademarks, and licenses of any of the foregoing,
such interest has been disclosed to the Provider and is specifically listed and
identified on a schedule to this Agreement, and the Company shall immediately
notify the Provider if the Company hereafter obtains any interest in any
additional copyrights, patents, trademarks or licenses that are significant in
value or are material to the conduct of its business;
(F)
Company
shall provide the Provider with a Compliance Certificate (i) on a quarterly
basis to be received by the Provider no later than the FIFTH (5th) calendar day
following each calendar quarter, and; (ii) on a more frequent or other basis if
and as requested by the Provider;
(G) The
Company shall provide the Provider with an aged accounts receivable listing upon
request; and
(H) On
request by the Provider, the Company will promptly furnish any information the
Provider may reasonably request to determine the financial condition of the
Company including, but not limited to, all of the Company’s Obligations, and the
condition of any of the Company’s receivables which may include but are not
limited to Pledged Receivables.
7.
Adjustments.
In the
event of a breach of any of the representations, warranties, or covenants set
forth in Section 6.1, or in the event any Adjustment or dispute is asserted by
any Account Debtor, the Company shall promptly advise the Provider and shall,
subject to the Provider’s approval, resolve such disputes and advise the
Provider of any
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adjustments.
Unless the disputed Pledged Receivable is repurchased by the Company and the
full Repurchase Amount is paid, the Provider shall remain the absolute owner of
any Pledged Receivable which is subject to Adjustment or repurchase under
Section 4.2 hereof, and any rejected, returned, or recovered personal property,
with the right to take possession thereof at any time. If such possession is not
taken by the Provider, the Company is to resell it for the Provider’s account at
the Company’s expense with the proceeds made payable to the Provider. While the
Company retains possession of said returned goods, the Company shall segregate
said goods and xxxx them property of the Provider.
8.
Security
Interest. To
secure the prompt payment and performance to the Provider of all of the
Obligations, the Company hereby grants to the Provider a continuing lien upon
and security interest in all of the Company’s now existing or hereafter arising
rights and interest in the following, whether now owned or existing or hereafter
created, acquired, or arising, and wherever located (collectively, the
“Collateral”):
(A)
All
accounts, receivables, contract rights, chattel paper, instruments, documents,
letters of credit, bankers acceptances, drafts, checks, cash, securities, and
general intangibles (including, without limitation, all claims, causes of
action, deposit accounts, guaranties, rights in and claims under insurance
policies (including rights to premium refunds), rights to tax refunds,
copyrights, patents, trademarks, rights In and under license agreements, and all
other intellectual property;
(B)
All
inventory, including the Company’s rights to any returned or rejected goods,
with respect to which the Provider shall have all the rights of any unpaid the
Company, including the rights of replevin, claim and delivery, reclamation, and
stoppage in transit;
(C)
All
funds, refunds and other amounts due the Company, including, without limitation,
amounts due the Company under this Agreement (including the Company’s right of
offset end recoupment);
(D)
All
equipment, machinery, furniture, furnishings, fixtures, tools, supplies and
motor vehicles;
(E)
All farm
products, crops, timber, minerals and the like (including oil and
gas);
(F)
All
accessions to, substitutions for, and replacements of, all of the
foregoing;
(G)
All books and records pertaining to all of the foregoing;
and
(H) All
proceeds of the foregoing, whether due to voluntary or involuntary disposition,
including insurance proceeds. The Company is not authorized to sell, assign,
9
transfer
or otherwise convey any Collateral without the Provider’s prior written consent,
except for the sale of finished inventory in the Company’s usual course of
business. The Company agrees to sign, and hereby authorizes the Provider, its
agents and assigns, to sign and execute on the Company’s behalf, any and all
necessary forms, instruments and documents, including UCC financing statements,
to evidence, perfect, or protect the interests of the Provider in the
Collateral. The Company agrees to deliver to the Provider the originals of all
instruments, chattel paper and documents evidencing or related to Pledged
Receivables and Collateral.
9. Default. The
occurrence of any one or more of the following shall constitute an Event of
Default hereunder,
(A)
Company
fails to pay any amount owed to the Provider as and when due;
(B)
There
shall be commenced by or against the Company any voluntary or involuntary case
under the United States Bankruptcy Code, or any assignment for the benefit of
creditors, or appointment of a receiver or custodian for any of its
assets;
(C)
Company
shall become insolvent in that its debts are greater than the fair value of its
assets, or the Company is generally not paying its debts as they become due or
is left with unreasonably small capital;
(D)
Any
involuntary lien, garnishment, attachment or the like is issued against or
attaches to the Pledged Receivables or any Collateral;
(E)
Company
shall breach any covenant, agreement, warranty, or representation set forth
herein, and the same is not cured to the Provider’s satisfaction within ten (10)
days after the Provider has given the Company oral or written notice thereof;
provided, that if such breach is incapable of being cured it shall constitute an
immediate default hereunder;
(F)
An event
of default shall occur under any guaranty executed by any guarantor of the
Obligations of the Company to the Provider under this Agreement, or any material
provision of any such guaranty shall for any reason cease to be valid or
enforceable or any such guaranty shall be repudiated or terminated, including by
operation of law;
(G)
A default
or event of default shall occur under any agreement between the Company and any
creditor of the Company that has entered into a subordination agreement with the
Provider: or
(H)
Any
creditor that has entered into a subordination agreement with the Provider shall
breach any of the terms of or not comply with such subordination
agreement.
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10.
Remedies
Upon Default. Upon
the occurrence of an Event of Default, (a) without implying any obligation to
buy receivables, the Provider may cease buying receivables or extending any
financial accommodations to the Company; (b) all or a portion of the Obligations
shall be, at the option of and upon demand by the Provider, or with respect to
an Event of Default described in Section 9(B), automatically and without notice
or demand, due and payable in full; and (c) the Provider shall have and may
exercise all the rights and remedies under this Agreement and under applicable
law, including the rights and remedies of a secured party under the New York
Uniform Commercial Code, all the power of attorney rights described in Section 5
with respect to all Collateral, and the right to collect, dispose of, sell,
lease, use, and realize upon all Pledged Receivables and all Collateral in any
commercially reasonable manner. The Company and the Provider agree that any
notice of sale required to be given to the Company shall be deemed to be
reasonable if given FIVE (5) days prior to the date on or after which the sale
may be hold.
11.
Accrual
of Interest. If any
amount owed by the Company hereunder is not paid when due, such amounts shall
bear interest at a per annum rate equal to the per annum rate of the Finance
Charges, until the earlier of (i) payment in full in good funds or (ii) entry of
a final judgment thereof, at which time the principal amount of any money
judgment remaining unsatisfied shall accrue interest at the highest rate allowed
by applicable law.
12.
Fees,
Costs and Expenses; Indemnification. The
Company will pay to the Provider immediately upon demand all fees, costs and
expenses (including fees of attorneys and professionals and their costs and
expenses) that the Provider incurs or may from time to time impose in connection
with any of the following: (a) preparing, negotiating, administering, and
enforcing this Agreement or any other agreement executed in connection herewith,
including any amendments, waivers or consents in connection with any of the
foregoing, (b) any litigation or dispute (whether instituted by the Provider,
the Company or any other person) in any way relating to the Pledged Receivables,
the Collateral, this Agreement or any other agreement executed in connection
herewith or therewith, (c) enforcing any rights against the Company or any
guarantor, or any Account Debtor, (d) protecting or enforcing its interest in
the Pledged Receivables or the Collateral, (e) collecting the Pledged
Receivables and the Obligations, and (f) the representation of the Provider in
connection with any bankruptcy case or insolvency proceeding involving the
Company, any Pledged Receivable, the Collateral, any Account Debtor, or any
guarantor. The Company shall indemnify and hold the Provider harmless from and
against any and all claims, actions, damages, costs, expenses, and liabilities
of any nature whatsoever arising in connection with any of the
foregoing.
13.
Severability,
Waiver, and Choice of Law. In the
event that any provision of this Agreement is deemed invalid by reason of law,
this Agreement will be construed as not containing such provision and the
remainder of the Agreement shall remain in full force and effect, the Provider
retains all of its rights, even if it makes an Advance after an Event of
Default. If the Provider waives an Event of Default, it may enforce a later
Event of Default. Any consent or waiver under, or amendment of, this Agreement
must be in
11
writing.
Nothing contained herein, or any action taken or not taken by the Provider at
any time, shall be construed at any time to be indicative of any obligation or
willingness on the part of the Provider to amend this Agreement or to grant to
the Company any waivers or consents. This Agreement has been transmitted by the
Company to the Provider at the Provider’s office in the State of New York and
has been executed and accepted by the Provider in the State of New York. This
Agreement shall be governed by and interpreted in accordance with the internal
laws of the State of New York, except to
the extent that the NY UCC provides for the application of the laws of the State
of Nevada with
respect to the perfection, priority, and enforceability of the security
interests granted in herein.
14.
Account
Collection Services. Certain
Account Debtors may require or prefer that all of the Company’s receivables be
paid to the same address and/or party, or the Company and the Provider may agree
that all receivables with respect to certain Account Debtors be paid to one
party. In such event the Provider and the Company may agree that the Provider
shall collect all receivables whether owned by the Company or the Provider and
(provided that there does not then exist an Event of Default or event that with
notice, lapse or time or otherwise would constitute an Event of Default, and
subject to the Provider’s rights in the Collateral) the Provider agrees to remit
to the Company the amount of the receivables collections it receives with
respect to receivables other than Pledged Receivables. It is understood and
agreed by the Company that this Section does not impose any affirmative duty on
the Provider to do any act other than to turn over such amounts. All such
receivables and collections are Collateral and in the event of the Company’s
default hereunder, the Provider shall have no duty to remit collections of
Collateral and may apply such collections to the obligations hereunder and the
Provider shall have the rights of a secured party under the New York Uniform
Commercial Code.
15. Notices. All
notices shall be given to the Provider at X.X. Xxx 00, Xxxxxxxx Xxxx, XX 00000
and to the Company at the address set forth on the first page of this Agreement
and shall be deemed to have been delivered and received: (a) if mailed, three
(3) calendar days after deposited in the United States mail, first class,
postage pre-paid, (b) one (1) calendar day after deposit with an overnight mail
or messenger service; or (c) on the same date of confirmed transmission if sent
by hand delivery, telecopier, telefax or telex.
16.
Jury
Trial. THE
COMPANY AND THE PROVIDER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY; (b)RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES
A MATERIAL INDUCEMENT FOR IT TO ENTER IN TO THIS AGREEMENT; AND (c) REPRESENT
AND WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE
NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND
VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.
17.
Term
and Termination. The term
of this Agreement shall be for one (1) year from the date hereof (the “Term”),
and from year to year thereafter (each a “Renewal
12
Term”)
unless either party provides written notice to the other at least ONE HUNDRED
EIGHTY (180) calendar days prior to the end of the then effective Term or
Renewal Term. Notwithstanding the foregoing, any termination of this Agreement
shall not affect the Provider’s security interest in the Collateral and the
Provider’s ownership of the Pledged Receivables, and this Agreement shall
continue to be effective, and the Provider’s rights
and remedies hereunder shall survive such termination, until all transactions
entered into and Obligations incurred hereunder or in connection herewith have
been completed and satisfied in full including, without limitation, the payment
in full by the Company to Provider of all Obligations outstanding on the date of
any such termination, pursuant to the terms of Section 3.3.
18.
Titles
and Section Headings. The
titles and section headings used herein are for convenience only and shall not
be used in interpreting this Agreement.
19.
Other
Agreements. The terms
and provisions of this Agreement shall not adversely affect the rights of the
Provider or any of its affiliates under any other document, instrument or
agreement. The terms of such other documents, instruments and agreements shall
remain in full force and effect notwithstanding the execution of this Agreement.
In the event of a conflict between any provision of this Agreement and any
provision of any other document, instrument or agreement between the Company on
the one hand, and the Provider or any affiliate, the Provider shall determine in
its sole discretion which provision shall apply. the Company acknowledges
specifically that any security agreements, liens and/or security interests
currently securing payment of any obligations of the Company owing to the
Provider or any affiliate also secure the Company’s obligations under this
Agreement, and are valid and subsisting and are not adversely affected by
execution of this Agreement. The Company further acknowledges that (a) any
collateral under other outstanding security agreements or other documents
between the Company and the Provider or any affiliate secures the obligations of
the Company under this Agreement and (b) a default by the Company under this
Agreement constitutes a default under other outstanding agreements between the
Company and the Provider or any affiliate.
20. Information
Rights.
(A) From time
to time as requested by the Provider, at the sole expense of the Company, the
Provider, or its designee shall have access, during reasonable business hours if
prior to an Event of Default and at any time if on or after an Event of Default,
to the premises where Collateral is located for the purposes of inspecting (and
removing, if after the occurrence of a Default) any of the Collateral, including
the Company’s books and records, and the Company shall permit the Provider or
its designee to make copies of such books and records or extracts therefrom as
the Provider may request.
(B) The
Provider or its designee shall be entitled to receive not less than seven (7)
days’ prior written notice of every meeting of the Board of Directors of the
Company and to attend and be present throughout, and take notes at, all such
meetings thereof and of any committees thereof. The Provider shall be entitled
to receive copies of all
13
agendas,
notes, minutes, financials and materials presented at, referenced in, derived
from or relating to, any such meeting, and all documents, instruments and
materials attached thereto or referenced therein. The Provider also shall
receive a copy of every pre-meeting package of information delivered to the
Directors of the Company. The Provider, or its designee, shall be entitled to be
reimbursed for its, his or her reasonable out of pocket expenses relating to
attendance at meetings of the Board of Directors or any committees thereof.
(C) The
Company shall send to Provider a copy of each action by written consent of the
Board of Directors of the Company (with all attachments) at the time such
consent action is sent to the Directors for execution.
(D) The
Company shall permit the Provider to discuss the Company’s affairs, finances and
accounts with the Company’s officers, at such times as may be requested by the
Provider.
(E) The
Company shall provide the Provider with monthly and quarterly financial
statements certified by an officer of the Company within thirty days following
the end of the respective month and quarter, annual financial statements
prepared by a certified public accountant within sixty days following the end of
the respective year, records, and such other information as may be reasonably
requested by the Provider from time to time, and each quarter shall furnish an
updated customer list with customer names, contact names, addresses, and phone
numbers, as well as a complete and current payables-aging report.
21. Conversion
Right.
(A) Conversion
Right. The
Provider shall have a continuing right (the “Conversion Right”) during the Term
to convert all or a portion of the then outstanding amount of the Obligations
hereunder into a number of shares of the common stock (the “Common Stock”) of
the Company determined at a conversion price (the “Conversion Price”) equal to
EIGHTY PERCENT (80%) of the average of the daily VWAP for the SEVEN (7)
consecutive Trading Days immediately preceding the date the Conversion Right is
exercised. Notwithstanding the foregoing, the Conversion Price shall not be less
than TWENTY-FIVE CENTS ($0.25) nor more than SEVENTY-FIVE CENTS ($.75). For
purposes hereof:
“VWAP”
shall mean the volume weighted average price of the Company’s common stock as
quoted by Bloomberg, LP.
“Trading
Day” shall mean any day during which the New York Stock Exchange shall be open
for business.
14
(B) Registration
Rights.
(i) The
Provider shall be entitled to piggyback registration rights upon exercise of
this Conversion Right. Further, it is the intention of the parties that this
Section 21 shall, to the extent permitted by law, be deemed a right to purchase
the Common Stock that triggers the applicable holding period for the underlying
Common Stock for purposes of Rule 144.
(C)
Notice of Exercise. The
Provider may exercise this Conversion Right by giving the Company written notice
specifying the amount of the Obligations Provider elects to convert into Common
Stock.
IN
WITNESS WHEREOF, the Company and the Provider have executed this Agreement on
the day and year above written.
Mosaic
Financial Services, LLC
By:
/s/ Xxxxxx X. Xxxxx
Name:
Xxxxxx X. Xxxxx
Title:
Managing Member
ERXSYS,
Inc.
By:
/s/ Xxxxxx XxxXxxxxxx
Name:
Xxxxxx XxxXxxxxxx
Title:
CEO
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SCHEDULE
6.2(B)
(location
of Collateral other than at the principal office of the Company)
Pharmacy
Locations:
1. 0000 X.
Xxxxxx Xxx., Xxxx X, Xxxxx Xxx, Xxxxxxxxxx, 00000
2. 0000
Xxxxxxx, Xxx., Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx, 00000
3. 00000
000xx Xxxxxx XX, Xxxxxxxx, Xxxxxxxxxx. 00000
4. 0000 X.X.
Xxxxxx Xxxx, Xxxxxxxx, Xxxxxx. 00000
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SCHEDULE
6.2(E)
(Identification
of copyrights, patents,
trademarks,
licenses and other intellectual property)
17
