FACTORING AGREEMENT
Exhibit
10.3
THIS
FACTORING AGREEMENT (“Agreement”) is made and entered into as of this
4TH
day of
November 2005, by and between ATSI COMMUNICATIONS, INC., a Nevada
corporation,
with
principal offices and mailing address at
0000
Xxxxxxxx, Xxxxx 000X, Xxx Xxxxxxx, Xxxxx 00000
(hereinafter called the "Seller"), and CSI BUSINESS FINANCE, INC., a Texas
corporation, with offices at 000 Xxxxx Xxxx Xxx Xxxx, Xxxxx 000, Xxxxxxx,
Xxxxxx
Xxxxxx, Xxxxx 00000 (hereinafter called "CSI");
W I T N E&#
160;S S E T H:
WHEREAS,
CSI is engaged in, among other things, the business of purchasing accounts
receivable and other rights to payment from persons or firms selling goods
or
rendering services to others, and Seller desires from time to time to sell
accounts receivable and other rights to CSI pursuant to the terms of this
Agreement;
NOW
THEREFORE, for and in consideration of the mutual promises herein contained,
and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, CSI and Seller hereby agree as follows:
ARTICLE
I
GENERAL
TERMS
Section
1.01 Terms
Defined Above.
As used
in this Agreement, the terms "Seller" and "CSI" shall have the meanings
indicated above.
Section
1.02 Certain
Definitions.
As used
in this Agreement, the following terms shall have the following meanings,
unless
the context otherwise requires:
“Account
Debtor” shall mean the party or parties obligated to pay an
Account.
"Accounts"
shall
mean the accounts receivable and other forms of rights to payment described
on
Schedule
A
attached
hereto and/or as set forth on a supplemental Schedule A to be attached in
the
future and signed by Seller and accepted for purchase by CSI.
“Accounts
Eligible for Purchase" shall mean accounts receivable for goods actually
sold or
leased by Seller or services actually performed by Seller that have not been
pledged to any party other than CSI (except for Liens permitted under Section
5.02 hereof), after deducting (a) the amount on all such accounts unpaid
for
ninety (90) days or more after the date of original invoice, (b) the amount
of
all discounts, allowances, rebates, credits and adjustments to such accounts,
(c) all contra-accounts, setoffs, defenses or counterclaims asserted by or
available to the Persons obligated on such accounts, (d) all such accounts
owing
by officers or employees of the Seller or by Subsidiaries or any other Person
in
which the Seller may have an equity interest, (e) all such accounts owed
by
Account Debtors which are insolvent, in any bankruptcy proceeding, or otherwise
which CSI, in its sole discretion, deems not acceptable, (f) all such accounts
for which twenty percent (20%) of the outstanding aggregate balance owed
by any
Account Debtor, is unpaid for ninety (90) days or more after the date of
the
original invoices unless the account debtor is an United States Government
agency or an investment grade Account Debtor, (g) the amount owed
by any
Account Debtor on such accounts which exceeds twenty-five percent (25%) of
the
total of all Accounts Eligible for Purchase of the Seller, and (h) accounts
where the Account Debtor is a foreign entity. The term “Accounts Eligible for
Purchase” shall include Accounts that have already been purchased by CSI
hereunder unless and until such Accounts are actually collected or would
otherwise be excluded pursuant to clauses (a) through (h) above.
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Standards
of eligibility may be set and may be revised, and reserves may be established,
from time to time solely by CSI in its exclusive judgment.
"Affiliate"
shall mean any Person controlling, controlled by or under common control
with
any other Person. For purposes of this definition, "control" (including
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or otherwise. Without limiting the generality of the foregoing, for purposes
of
this Agreement, Seller, Guarantors, and each of their respective Subsidiaries
shall be deemed to be Affiliates of one another.
“Agreed
Due Date” shall mean 30 days after the date the invoice leading to the Account
was originally issued by Seller, unless otherwise agreed in writing between
CSI
and Seller.
"Agreement"
shall mean this Factoring Agreement, as the same may from time to time be
amended or supplemented.
"Business
Day" shall mean Banking Day as such term is defined in section 4.104 of the
UCC.
“Clearance
Days” means the actual number of days after a payment is made for the payment
to
clear CSI’s bank, but not less than three (3) business days.
"Closing"
shall mean the date and time for closing the transaction contemplated hereby,
described in Section 7.01 hereof.
"Commitment"
shall mean the obligation of CSI to consider the purchase of Seller’s accounts
receivable under Section 2.01 hereof, up to the amount of the Maximum Committed
Funds.
"Default"
shall mean the occurrence of any of the events specified in Article VI hereof,
whether or not any requirement for notice or lapse of time or other condition
precedent has been satisfied.
“Deferred
Purchase Price” means any portion of the Purchase Price of an Account that is
deferred at the request of Seller and at Seller’s sole discretion pursuant to
Section 2.05. Any amount of the Purchase Price that is deferred shall
be
available upon request of Seller except to the extent that as a result of
such
request, the Accounts Eligible for Purchase would be rendered less than the
Funds Employed following payment of the Deferred Purchase
Price.
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"DTPA"
shall mean the Texas Deceptive Trade Practices-Consumer Protection Act,
Subchapter E of Chapter 17 of the Texas Business and Commerce Code.
"ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Event
of
Default" shall mean the occurrence of any of the events specified in Article
VI
hereof, provided that any requirement for notice or lapse of time or any other
condition precedent has been satisfied.
"Financial
Statements" shall mean the consolidated and consolidating financial statement
or
statements of the Seller and its Subsidiaries delivered to CSI pursuant to
Section 3.06 hereof.
"Funding
Date" shall mean the date upon which CSI initially purchases any Accounts
pursuant to this Agreement.
"Lien"
shall mean any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and including but not limited
to
the security interest or lien arising from a mortgage, security agreement,
deed
of trust, assignment, collateral mortgage, chattel mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment, bailment
for
security purposes or certificate of title lien. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purposes of this Agreement, the Seller or any
Subsidiary shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
"Maximum
Committed Funds" shall mean the maximum amount of funds CSI has agreed to employ
in the purchase of Accounts pursuant hereto, which amount shall not exceed
One
Hundred Fifty Thousand and No/100 Dollars ($150,000.00).
“Net
Funds Employed” shall mean the sum of (i) the aggregate funds paid by CSI for
Accounts that remain outstanding or for which the amount of such Accounts has
not been paid to CSI plus (ii) all fees and other amounts owed by Seller to
CSI
pursuant to this Agreement.
“New
Accounts Eligible for Purchase” shall mean Accounts Eligible for Purchase other
than those that have already been purchased by CSI pursuant hereto.
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"Obligations"
shall mean any and all amounts owing or to be owing by the Seller pursuant
to
this Agreement or the other Security Instruments to CSI, and other obligations
of the Seller to CSI from time to time existing, whether in connection with
this
or other transactions; provided, however, under no circumstances shall the
funds
paid to Seller in consideration of the sale of Accounts to CSI be deemed
Obligations.
"Person"
shall mean any individual, corporation, partnership, joint venture, association,
joint stock company, trust, trustee, unincorporated organization, government
or
any agency or political subdivision thereof, or any other form of
entity.
"Plan"
shall mean any Plan subject to Title IV of ERISA and maintained by the Seller
or
any Subsidiary, or any such plan to which the Seller or any Subsidiary is
required to contribute on behalf of its employees.
“Property”
shall mean any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.
"Purchase
Price" shall have the meaning specified in Section 2.05 hereof.
"RICO"
shall mean the Racketeer Influence and Corrupt Organization Act of 1970, as
amended.
"Reserve
Account" shall have the meaning specified in Section 2.05 hereof.
"Security
Instruments" shall mean this Agreement, the agreements or instruments described
or referred to in Sections 7.08, 7.09 and 7.11 hereof, and any and all other
agreements or instruments now or hereafter executed and delivered by the Seller,
any Subsidiary or any other Person (other than solely by CSI) in connection
with, or as security for the payment or performance of, the
Obligations.
"Subsidiary"
shall mean any corporation of which more than fifty percent (50%) of the issued
and outstanding securities having ordinary voting power for the election of
directors is owned or controlled, directly or indirectly, by the Seller and/or
one or more of its subsidiaries and/or one or more shareholders of the Seller;
provided, that any such corporation of which more than fifty percent (50%)
of
such securities is owned by the shareholders of the Seller, and none of which
securities are owned by the Seller or any subsidiary of the Seller, shall not
be
deemed a Subsidiary hereunder.
"Termination
Date" shall mean one year from the date of this Agreement.
“Validity
Guarantors” shall mean Xxxxxx X. Xxxxx and Xxxxxxx Xxxxxxx, collectively.
Section
1.03 Accounting
Principles.
Where
the character or amount of any asset or liability or item of income or expense
is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, this
shall be done in accordance with generally accepted accounting principles,
consistently applied, except where such principles are inconsistent with the
requirements of this Agreement.
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ARTICLE
II
PURCHASE
AND SALE OF ACCOUNTS
Section
2.01 Purchase
and Sale of Accounts Receivable and other Rights.
At each
occasion in which Seller desires to sell Accounts to CSI and on such other
occasions as shall be requested by CSI, Seller shall complete a document in
the
form of Schedule
A
attached
hereto. Such Schedule
A
shall
set forth all New Accounts Eligible for Purchase for which Seller is submitting
to CSI for purchase, and shall also include an up to date listing of all
Accounts Eligible for Purchase. This schedule shall be certified by the
president or the chief financial officer of Seller as being true and correct,
to
the best of their knowledge, as of the date thereof. Seller covenants and agrees
that at no time shall the Net Funds Employed exceed seventy-five percent (75.0
%) of all Accounts Eligible for Purchase (as may be adjusted from time to time
by CSI in its sole discretion). CSI may elect at any time to return back to
Seller and charge back any outstanding Account that is no longer an Account
Eligible for Purchase. Upon CSI’s election to return and charge-back an Account
that is no longer an Account Eligible for Purchase, Seller shall pay to CSI
the
face amount of the invoice less any payments theretofore received on such
invoice by CSI. In order to fund such return and charge-back, CSI may, at its
option, take any one or more of the following actions: (a) charge the
Reserve Account for such amount, (b) subtract such amount from the Purchase
Price for the next Account sold by Seller to CSI, or (c) otherwise invoice
Seller for such amount, with such invoice being payable upon receipt. Upon
payment to CSI of such amount, CSI shall assign, transfer, convey and deliver
such Account to Seller without recourse. Acceptance of one or more Accounts
listed on a Schedule
A
by CSI
shall be evidenced by notation on the internal records of CSI and the funding
(whether through payment to Seller or credit against obligations of Seller
to
CSI as provided herein) of the Purchase Price of the purchased Account to
Seller. All purchased Accounts shall be subject in all respects to the terms
of
this Agreement. The parties agree that the transactions contemplated by
Agreement are each an “Account Purchase Transaction” as that term is used in
section 306.001 of the Texas Finance Code.
Section
2.02 Transfer
of Related Interests.
In
addition to the Accounts, Seller hereby sells, assigns, transfers, conveys
and
delivers to CSI all other rights, title and interests (but not obligations)
now
or hereafter existing in connection with the Accounts, including, but not
limited to, liens, security interests and guarantees securing payment of the
Accounts, Seller's interest in returned goods arising with respect to the
Accounts, and all other rights and remedies of Seller related to the Accounts
such as rights of stoppage in transit, replevin, reclamation and lawsuits to
collect the Accounts. If any Account is ever represented by a promissory note
or
other written evidence of obligation, Seller shall endorse and deliver the
same
to CSI and take any other action requested by CSI to effectuate such
transfer.
Section
2.03 Further
Assurances.
Seller
agrees to execute and deliver to CSI such notices of assignment and other
documents as CSI may request from time to time to further document the sale
and
assignment of Accounts hereunder.
Section
2.04 Terms
- Seller's Customers.
Except
as may otherwise be agreed to in writing from time to time, all Accounts shall
be due on or before the Agreed Due Date. All invoices to be purchased pursuant
hereto will be forwarded to the Account Debtor upon delivery of the goods or
the
services that are the subject of the Account. Seller shall not vary the terms
of
sale, terms of payment, or location of payment set forth in the invoice relating
to any Account without CSI's prior written consent, it being understood that
any
such Account is the property of CSI.
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Section
2.05 Purchase
Price; Fees; Deferral of Receipt of Purchase Price; Reserve
Account.
The
Purchase Price (herein so called) for Accounts shall be the gross amount of
the
invoice, including any miscellaneous charges such as sales taxes, less any
early
payment or special discounts offered to Seller's customers as previously
disclosed to CSI (the “Adjusted Gross Amount of the Invoice”), less the fees
that accrue to CSI hereunder as provided herein. At the option of Seller and
upon notice to CSI, Seller shall be permitted to defer receipt of a portion
of
the Purchase Price following the sale of any of its Accounts hereunder, and
CSI
shall thereafter pay to Seller the Deferred Purchase Price upon reasonable
notice from Seller so long as the payment of such Deferred Purchase Price at
the
time of request does not otherwise place Seller in default of its obligations
under this Agreement. As its fee for the purchase of Accounts, Seller shall
pay
to CSI on a monthly basis the
average dollar amount of funds employed by CSI in connection with the purchase
of Accounts from the Seller for the month, times one and five tenths percent
(1.50%). In
addition, there shall be subtracted from each payment for an Account an amount
equal to twenty-five percent (25.0%) of the Adjusted Gross Amount of the
Invoice, which amount shall stand as a reserve securing the payment of the
fees
and other amounts which Seller shall be obligated to pay hereunder or pursuant
to any other Security Instrument (such reserve being referred to herein as
the
“Reserve Account”). The balance in the Reserve Account shall at all times be
maintained in a minimum amount equal to no less than twenty-five percent (25.0%)
of the aggregate gross amount of all Accounts outstanding at a particular time;
provided, however, (i) the applicable percentage deduction from the Purchase
Price described above may be increased as necessary to maintain such minimum
balance, and (ii) the amount required to be maintained in the Reserve Account
as
a percentage of the gross amount of all Accounts outstanding may be increased
or
decreased upon notice by CSI to Seller in CSI’s sole discretion. Upon request of
Seller, CSI shall release to Seller amounts, if any, in the Reserve Account
in
excess of the balance required pursuant to this Section 2.05. While the reserve
provided for herein is referred to as the Reserve Account, Seller acknowledges
that the Reserve Account shall actually be a series of journal entries on the
books and records of CSI, and that no actual segregated bank account will exist
with the funds represented by the Reserve Account. The Reserve Account shall
accrue no interest. Notwithstanding the foregoing, to the extent Seller defers
receipt of a portion of the purchase price as permitted above, CSI may reduce
the amount retained in the Reserve Account for such Account upon purchase of
such Account during the deferral period.
Section
2.06 Termination
of Commitment.
Notwithstanding anything to the contrary contained herein or in any of the
other
Security Instruments, CSI may, (a) at any time, and from time to time, in its
sole discretion, refuse to purchase any particular account receivable hereunder,
or (b) upon giving the Seller at least sixty (60) days' prior notice, at any
time terminate its Commitment to purchase accounts hereunder. The rights of
CSI
under this Section 2.06 are in addition to the rights of CSI to terminate the
Commitment pursuant to Section 6.02 hereof.
Section
2.07 Early
Termination Fee.
In view
of the impracticability and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation of CSI’s
lost profits as a result of early termination of this Agreement, Seller shall
pay CSI upon the effective date of such termination, a fee of Ten Thousand
and
No/100 Dollars ($10,000.00) (the “Termination Fee”), if, prior to the
Termination Date, Seller (i) defaults under this Agreement and CSI terminates
its Commitment hereunder and requires the repurchase of Accounts hereunder
as
permitted pursuant to Section 6.02, (ii) fails to continue to offer accounts
receivable to CSI for purchase in the ordinary course of business pursuant
to
this Agreement prior to the Termination Date, or (iii) terminates this
Agreement; provided, however, Seller agrees that under no circumstances shall
it
terminate this agreement absent the providing of thirty (30) days written notice
to CSI of such termination.
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Section
2.08 Application
and Documentation Fees.
Seller
shall pay to CSI an application fee in the amount of One Thousand and No/100
Dollars ($1,000.00), and a documentation fee of Two Thousand Five Hundred and
No/100 Dollars ($2,500.00). Such fees shall be due and payable on the date
specified in Section 7.01 hereof.
Section
2.09 Minimum
Committed Funds.
So long
as CSI’s commitment pursuant to this Agreement is continuing, Seller shall at
all times have a sufficient quantity of outstanding Accounts that have been
sold
to CSI hereunder such that the minimum Net Funds Employed committed by CSI
pursuant to this Agreement shall be One Hundred Fifty Thousand and No/100
($150,000.00). Seller shall not elect to defer any portion of the Purchase
Price
at such times as the Net Funds Employed under this Agreement are less than
the
minimum Net Funds Employed requirements described in the previous sentence.
This
Section 2.09 shall not be read so as to require CSI to purchase or continue
to
own any Accounts that would not constitute Accounts Eligible for
Purchase.
Section
2.10 Clearance
Days.
For all
purposes under this Agreement, Clearance Days will be added to the date on
which
any payment is received by CSI.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
In
order
to induce CSI to enter into this Agreement, the Seller represents and warrants
to CSI that:
Section
3.01 Corporate
Existence.
The
Seller and each Subsidiary is a corporation duly organized, legally existing
and
in good standing under the laws of the jurisdiction in which it is incorporated
and is duly qualified as a foreign corporation in all jurisdictions wherein
it
maintains a place of business.
Section
3.02 Corporate
Power and Authorization.
The
Seller is duly authorized and empowered to enter into this Agreement and
continue to sell Accounts pursuant to the terms hereof; and the Seller and
each
Subsidiary is duly authorized and empowered to execute, deliver and perform
the
Security Instruments, including this Agreement, to which it is a party; and
all
corporate action on the Seller's or any Subsidiary's part requisite due
execution, delivery and performance of the Security Instruments, including
this
Agreement, to which the Seller or any Subsidiary is a party has been duly and
effectively taken. The Board of Directors of the Seller acting pursuant to
a
duly called and constituted meeting, after proper notice, or pursuant to valid
and unanimous consent, has determined (i) that entry into and performance of
this Agreement and each of the other documents to which the Seller is a party,
directly or indirectly benefits the Seller and (ii) that adequate and fair
consideration and reasonably equivalent value has been received by the Seller
to
execute and perform this Agreement and each of the other documents to which
it
is a party.
Section
3.03 Binding
Obligations.
This
Agreement does, and the other Security Instruments to which the Seller and
any
Subsidiaries are parties upon their execution and delivery will, constitute
valid and binding obligations of the Seller or the Subsidiary, as the case
may
be, enforceable in accordance with their terms.
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Section
3.04 No
Legal Bar or Resultant Lien.
The
Security Instruments, including this Agreement, to which the Seller or any
Subsidiary is a party, do not and will not violate any provisions of the
articles or certificates of incorporation or bylaws of the Seller or any such
Subsidiary, or any contract, agreement, law, regulation, order, injunction,
judgment, decree or writ to which the Seller or such Subsidiary is subject,
or
result in the creation or imposition of any Lien upon any Properties of the
Seller or such Subsidiary, other than those contemplated by this
Agreement.
Section
3.05 No
Consent.
The
execution, delivery and performance of the Security Instruments, including
this
Agreement, to which the Seller or any Subsidiary is a party do not require
the
consent or approval of any other Person, including without limitation any
regulatory authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state
thereof.
Section
3.06 Financial
Condition.
The
audited consolidated and consolidating financial statements of the Seller and
its Subsidiaries dated July 31, 2005, which have been delivered to CSI, are
complete and correct in all material respects, and have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and fully and accurately reflect the financial condition and results of the
operations of the Seller and its Subsidiaries as at the date or dates and for
the period or periods stated (subject only to normal year-end audit adjustments
with respect to any unaudited interim statements). No material adverse change,
either in any case or in the aggregate, has since occurred in the condition,
financial or otherwise, of the Seller or any Subsidiary, except as disclosed
to
CSI in writing.
Section
3.07 Investments
and Guaranties.
Neither
the Seller nor any Subsidiary has made investments in, advances to or guaranties
of the obligations of any Person, except as reflected in the Financial
Statements or disclosed to CSI in writing.
Section
3.08 Issuance
of Stock.
Unless
otherwise previously disclosed by Seller, there are no outstanding
subscriptions, warrants, options, calls, commitments, convertible securities
or
other agreements to which Seller is a party or by which it is bound, calling
for
the issuance of any capital stock or securities convertible into capital stock
of Seller. From and after the date of this Agreement, Seller shall provide
Factor with written notice thirty (30) days prior to the issuance of any
additional subscriptions, warrants, option, calls, commitment, convertible
securities or other agreement to which Seller is a party or by which it is
bound, calling for the issuance of any capital stock or securities convertible
into capital stock of Seller.
Section
3.09 Liabilities.
Except
for liabilities incurred in the normal course of business, neither the Seller
nor any Subsidiary has any material (individually or in the aggregate)
liabilities, direct or contingent, except as disclosed or referred to in the
Financial Statements or as disclosed to CSI in writing. Except as described
in
the Financial Statements, or as otherwise disclosed to CSI in writing, there
is
no litigation, legal or administrative proceeding, investigation or other action
of any nature pending or, to the knowledge of the Seller, threatened against
or
affecting the Seller or any Subsidiary which involves the possibility of any
judgment or liability not fully covered by insurance, and which may materially
and adversely affect the business or the Properties of the Seller or any
Subsidiary or their ability to carry on business as now conducted.
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Section
3.10 Taxes;
Governmental Charges.
The
Seller and each Subsidiary has filed all tax returns and reports required to
be
filed and has paid all taxes, assessments, fees and other governmental charges
levied upon it.
Section
3.11 Titles,
etc.
The
Seller and each Subsidiary has good title to its respective material
(individually or in the aggregate) Properties, free and clear of all Liens
except those referred to in the Financial Statements.
Section
3.12 Defaults.
Neither
the Seller nor any Subsidiary is in default (in any respect which materially
and
adversely affects its respective business, Properties, operations or condition,
financial or otherwise) under any indenture, mortgage, deed of trust, agreement
or other instrument to which the Seller or any Subsidiary is a party or by
which
the Seller or any Subsidiary is bound, except as disclosed to CSI in writing.
No
Default hereunder
has occurred and is continuing.
Section
3.13 Compliance
with the Law.
Neither
the Seller nor any Subsidiary:
(a)
is
in
violation of any law, ordinance, or governmental rule or regulation to which
the
Seller or any Subsidiary or any of their respective Properties are subject
including but not limited to those laws, ordinances and governmental rules
and
regulations regarding employee wages and overtime;
(b)
has
failed to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of any of their respective Properties
or the conduct of their respective businesses; which violation or failure might
adversely affect the business, prospects, profits, Properties or condition
(financial or otherwise) of the Seller or any Subsidiary.
Section
3.14 ERISA.
The
Seller and its Subsidiaries are in compliance in all material respects with
the
applicable provisions of ERISA, and no "reportable event," as such term is
defined in Section 4043 of ERISA, has occurred with respect to any Plan of
the
Seller or any Subsidiary.
Section
3.15 Subsidiaries.
The
Seller has two known Subsidiaries, being Telefamilia Communications, Inc.,
and
Digerati Networks, Inc. each a Texas corporation.
Section
3.16 RICO.
The
Seller is not in violation of any laws, statutes or regulations, including,
without limitation, RICO, which contain provisions which could potentially
override CSI's security interest in the Collateral (as that term is defined
in
the Security Instruments).
ARTICLE
IV
AFFIRMATIVE
COVENANTS
A
deviation from the provisions of this Article IV shall not constitute a Default
under this Agreement if such deviation is consented to in writing (in the manner
hereinafter provided in Section 9.02) by CSI. Without the prior written consent
of CSI, the Seller will at all times comply with the covenants contained in
this
Article IV, from the date hereof and for so long as any Obligations or the
Commitment is outstanding.
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Section
4.01 Financial
Statements and Reports.
The
Seller and the Subsidiaries will promptly furnish to CSI from time to time
upon
request such information regarding the business and affairs and financial
condition of the Seller and its Subsidiaries as CSI may reasonably request,
and
will furnish to CSI:
(a)
Annual
Financial Statements.
As soon
as available and in any event within ninety (90) days after the close of each
fiscal year of the Seller, the reviewed consolidated and consolidating balance
sheets of the Seller and its Subsidiaries as at the end of such year and the
reviewed consolidated and consolidating operating statements of the Seller
and
its Subsidiaries as at the end of such year (showing income, expenses and
surplus), setting forth in each case in comparative form figures for the
previous fiscal year, all prepared in accordance with generally accepted
accounting principles and reviewed by an independent certified public accountant
acceptable to CSI;
(b)
Monthly
Financial Statements.
As soon
as available and in any event within twenty (20) days after the end of each
calendar month, the consolidated and consolidating balance sheets of the Seller
and its Subsidiaries as at the end of such month and the consolidated and
consolidating operating statements of the Seller and its Subsidiaries for such
month (showing income, expenses and surplus for such month and for the period
from the beginning of the fiscal year to the end of such month), all prepared
in
accordance with generally accepted accounting principles, certified by the
principal financial officer of the Seller;
(c)
Accounts
Agings.
As soon
as available and in any event within ten (10) days after the end of each
calendar month and with each Schedule
A,
an
aging of all accounts payable and accounts receivable, showing each such account
which is thirty (30), sixty (60), ninety (90) and over ninety (90) days past
due
(such listing to include Accounts that have been purchased by CSI as well as
accounts that continue to be owned by Seller);
(d) Inventory
Perpetual.
On or
before the first Business Day of each week, a perpetual inventory schedule
as of
the end of the preceding week; and
(e) New
Accounts Eligible for Purchase.
On or
before the first Business Day of each week, a report of Accounts Eligible for
Purchase in the form described in Section 2.01 above, together with cash receipt
journals, sales journals and backup for all miscellaneous credits and debits
which support such report (as well as copies of checks and invoices for new
xxxxxxxx if requested by CSI). Such report shall also reflect (i) the amount
of
sales and receipts of Seller during the preceding week, (ii) all new accounts
receivable generated by such sales, including the name, invoice amount, contact
person and telephone number of the customer generating such accounts receivable,
and (iii) such other information as CSI may reasonably request.
All
such
balance sheets and other financial statements referred to in this Section 4.01
above shall be in such detail as CSI may reasonably request and shall conform
to
generally accepted accounting principles applied on a basis consistent with
those of the Financial Statements, except only for such changes in accounting
principles or practice with which independent certified public accountants
concur.
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Section
4.02 Compliance
with Laws; Payment of Taxes and Other Claims.
The
Seller will and will cause each Subsidiary to observe and comply with (a) all
laws, statutes, codes, acts, ordinances, rules, regulations, directions and
requirements of all federal, state, county, municipal and other governments,
departments, commissions, boards, courts, authorities, officials and officers
applicable to it and where the failure to observe or comply would have a
material adverse effect on the condition, financial or otherwise, of Seller;
and
(b) pay and discharge promptly all taxes, assessments and governmental charges
or levies imposed upon the Seller or any Subsidiary or upon the income or any
Property of the Seller or any Subsidiary as well as all claims of any kind
(including claims for labor, materials, supplies and rent) which, if unpaid,
might become a lien upon any or all of the Property of the Seller or any
Subsidiary; provided, however, that, subject to the written approval of CSI,
neither the Seller nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted and if the Seller or its Subsidiary shall have set up
reserves therefor adequate under generally accepted accounting
principles.
Section
4.03 Maintenance.
The
Seller will and will cause each Subsidiary to (i) maintain its corporate
existence, rights and franchises; (ii) observe and comply with all valid laws,
statutes, codes, acts, ordinances, judgments, injunctions, rules, regulations,
certificates, franchises, permits and licenses (including without limitation
applicable statutes, regulations, orders and restrictions relating to
environmental standards or controls or to energy regulations) of all federal,
state, county, municipal and other governmental authorities; (iii) maintain
its
Properties (and any Properties leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable condition
(ordinary wear and tear excepted) at all times and make all repairs,
replacements, additions, betterments and improvements to its Properties as
are
needful and proper so that the business carried on in connection therewith
may
be conducted properly and efficiently at all times; and (iv) maintain and keep
books of records and accounts, all in accordance with generally accepted
accounting principles, consistently applied, of all dealings and transactions
in
relation to its business and activity.
Section
4.04 Further
Assurances.
The
Seller will and will cause each Subsidiary to cure promptly any defects in
the
execution and delivery of the Security Instruments, including this Agreement.
The Seller at its expense will promptly execute and deliver to CSI upon request
all such other and further documents, agreements and instruments to effectuate
the agreements of the Seller or any of its Subsidiaries in the Security
Instruments, including in this Agreement, or to further evidence and more fully
describe the collateral intended as security for obligations created hereby,
or
to correct any omissions in the Security Instruments, or more fully to state
the
security obligations set out herein or in any of the Security Instruments,
or to
perfect, protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices, or obtain any
consents, all as may be necessary or appropriate in connection
therewith.
Section
4.05 Performance
of Obligations.
The
Seller will pay its Obligations according to the reading, tenor and effect
of
this Agreement and the other Security Instruments; and the Seller will do and
perform every act and discharge all of the obligations provided to be performed
and discharged by the Seller under the Security Instruments, including this
Agreement, at the time or times and in the manner specified, and cause each
of
its Subsidiaries to take such action with respect to their obligations to be
performed and discharged under the Security Instruments to which they
respectively are parties.
Section
4.06 Reimbursement
of Expenses.
The
Seller will pay all legal fees incurred by CSI in connection with the
preparation of this Agreement and the Security Instruments, up to Two Thousand
Five Hundred and No/100 Dollars ($2,500.00). The Seller shall also pay all
legal
fees incurred by CSI in connection with amendment, interpretation,
administration and enforcement of this Agreement and any and all other Security
Instruments contemplated hereby. The Seller will, upon request, promptly
reimburse CSI for all amounts expended, advanced or incurred by CSI to satisfy
any obligation of the Seller under this Agreement or any other Security
Instrument, or to protect the Properties or business of the Seller or any
Subsidiary or to enforce the rights of CSI under this Agreement or any other
Security Instrument, which amounts will include all court costs, attorneys'
fees, fees of auditors and accountants, and investigation expenses reasonably
incurred by CSI in connection with any such matters, together with interest
eighteen percent (18%) per annum.
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Section
4.07 Insurance.
The
Seller and each Subsidiary now maintains and will continue to maintain with
financially sound and reputable insurers, insurance with respect to its
respective Properties and businesses against such liabilities, casualties,
risks
and contingencies and in such types and amounts as is customary in the case
of
corporations engaged in the same or similar businesses and similarly situated
but in any event, all fixed assets of the Seller shall be insured for their
fair
replacement value. All such policies shall name CSI as loss payee. Upon request
of CSI, the Seller will furnish or cause to be furnished to CSI from time to
time a summary of the insurance coverage of the Seller and its Subsidiaries
in
form and substance satisfactory to CSI and if requested will furnish CSI copies
of the applicable policies.
Section
4.08 Right
of Inspection.
The
Seller will permit and will cause each Subsidiary to permit any officer,
employee or agent of CSI to visit and inspect any of the Properties of the
Seller or any Subsidiary, to conduct at least three (3) field reviews each
year,
to examine the Seller's or any Subsidiary's books of record and accounts, to
take copies and extracts therefrom, and to discuss the affairs, finances and
accounts of the Seller or any Subsidiary with the Seller's or Subsidiary's
current and former officers, employees, accountants and auditors, all at such
times and as often as CSI may desire. The Seller shall reimburse CSI for all
of
CSI's out-of-pocket expenses in connection with the field reviews.
Section
4.09 Notice
of Certain Events.
The
Seller shall promptly notify CSI if the Seller learns of the occurrence of
(i)
any event which constitutes a Default, together with a detailed statement by
a
responsible officer of the Seller of the steps being taken to cure the effect
of
such Default; or (ii) the receipt of any notice from, or the taking of any
other
action by, the holder of any promissory note, debenture or other evidence of
indebtedness of the Seller or any Subsidiary or of any security (as defined
in
the Securities Act of 1933, as amended) of the Seller or any Subsidiary with
respect to a claimed default, together with a detailed statement by a
responsible officer of the Seller specifying the notice given or other action
taken by such holder and the nature of the claimed default and what action
the
Seller or its Subsidiary is taking or proposes to take with respect thereto;
or
(iii) any legal, judicial or regulatory proceedings affecting the Seller or
any
Subsidiary or any of the Properties of the Seller or any Subsidiary in which
the
amount involved is material and is not covered by insurance or which, if
adversely determined, would have a material and adverse effect on the business
or the financial condition of the Seller or any Subsidiary; or (iv) any dispute
between the Seller or any Subsidiary and any governmental or regulatory body
or
any other Person which, if adversely determined, might materially interfere
with
the normal business operations of the Seller or any Subsidiary; or (v) any
material adverse changes, either in any case or in the aggregate, in the assets,
liabilities, financial condition, business, operations, affairs or circumstances
of the Seller or any Subsidiary, from those reflected in the Financial
Statements or by the facts warranted or represented in any Security Instrument,
including this Agreement.
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Section
4.10 ERISA
Information and Compliance.
The
Seller will promptly furnish to CSI (i) if requested by CSI, promptly after
the
filing thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual and other report with respect to
each Plan or any trust created thereunder, and (ii) immediately upon becoming
aware of the occurrence of any "reportable event," as such term is defined
in
Section 4043 of ERISA, or of any "prohibited transaction," as such term is
defined in Section 4975 of the Internal Revenue Code of 1986, as amended, in
connection with any Plan or any trust created thereunder, a written notice
signed by the President or the principal financial officer of the Seller
specifying the nature thereof, what action the Seller or any of its Subsidiaries
is taking or proposes to take with respect thereto, and, when known, any action
taken by the Internal Revenue Service with respect thereto. The Seller will
fund, or will cause its Subsidiaries to fund, all current service pension
liabilities as they are incurred under the provisions of all Plans from time
to
time in effect for the benefit of employees of the Seller or any of its
Subsidiaries, and comply with all applicable provisions of ERISA.
Section
4.11 Environmental
Requirements.
Seller
shall comply with all federal laws, state statutes, municipal ordinances and
all
other governmental standards, rules and regulations applicable to Seller or
to
its Property in respect to occupational health and safety, hazardous waste
and
substances and environmental matters. Seller shall promptly notify CSI of its
receipt of any notice of a violation or an alleged violation of any such federal
laws, state statutes, municipal ordinances or other governmental standards,
rules or regulations. Seller shall indemnify and hold CSI harmless from all
loss, cost, damages, claim and expense incurred by CSI on account of the
Seller's failure to perform the obligations of this Section.
ARTICLE
V
NEGATIVE
COVENANTS
A
deviation from the provisions of this Article V shall not constitute a Default
under this Agreement if such deviation is consented to in writing (in the manner
hereinafter provided in Section 9.02) by CSI. Without the prior written consent
of CSI, the Seller will at all times comply with the covenants contained in
this
Article V, from the date hereof and for so long as any part of the Obligations
or the Commitment is outstanding.
Section
5.01 Debts,
Guaranties and Other Obligations.
Neither
the Seller nor any Subsidiary will incur, create, assume or in any manner become
or be liable in respect of any indebtedness (including obligations for the
payment of rentals); and neither the Seller nor any Subsidiary will guarantee
or
otherwise in any way become or be responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person
or
agreement for the furnishing of funds to any other Person through the purchase
or lease of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
indebtedness of any other Person, or otherwise, except that the foregoing
restrictions shall not apply to:
(a) Obligations
of Seller and its Subsidiaries pursuant to this Agreement and the other Security
Instruments;
(b) liabilities,
direct or contingent, of the Seller and its Subsidiaries existing on the date
of
this Agreement which are reflected in the Financial Statements or have been
disclosed to CSI in writing, but not any renewals and extensions
thereof;
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(c) liabilities
in relation to leases and lease agreements to the extent permitted by Section
5.07 hereof;
(d) endorsements
of negotiable or similar instruments for collection or deposit in the ordinary
course of business;
(e) trade
payables or similar obligations from time to time incurred in the ordinary
course of business other than for borrowed money;
(f) taxes,
assessments or other government charges which are not yet due or are being
contested pursuant to Section 4.02 hereof.
Section
5.02 Liens.
Neither
the Seller nor any Subsidiary will create, incur, assume or permit to exist
any
Lien on any of its Properties (now owned or hereafter acquired),
except:
(a) Liens
securing the payment of any Obligations to CSI;
(b) Liens
for
taxes, assessments, or other governmental charges not yet due or which are
being
contested in good faith by appropriate action promptly initiated and diligently
conducted, if such reserve as shall be required by generally accepted accounting
principles shall have been made therefor;
(c) Liens
of
landlords, vendors, carriers, warehousemen, mechanics, laborers and materialmen
arising by law in the ordinary course of business for sums not yet due or,
subject to the written approval of CSI, being contested in good faith by
appropriate action promptly initiated and diligently conducted, if such reserve
as shall be required by generally accepted accounting principles shall have
been
made therefor;
(d) Liens
existing on Property owned by the Seller or any Subsidiary on the date of this
Agreement which have been disclosed to CSI in writing but not any renewals
and
extensions thereof;
(e) pledges
or deposits made in the ordinary course of business in connection with workmen's
compensation, unemployment insurance, social security and other like laws;
and
(f) inchoate
liens arising under ERISA to secure the contingent liability of the Seller
or
any Subsidiary permitted by Section 4.10 hereof.
Section
5.03 Investments,
Loans and Advances.
Neither
the Seller nor any Subsidiary will make or permit to remain outstanding any
loans or advances to or investments in any Person, except that the foregoing
restriction shall not apply to:
(a) loans,
advances or investments the material details of which have been set forth in
the
Financial Statements or have been otherwise disclosed to CSI in writing prior
to
the execution of this Agreement;
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(b) investments
in direct obligations of the United States of America or any agency
thereof;
(c) investments
in certificates of deposit issued by commercial banks in the United States
having a combined capital and surplus in excess of One Hundred Million Dollars
($100,000,000.00); and
(d) investments
in commercial paper with the best rating by Standard & Poor's, Xxxxx'x
Investors Service, Inc., or any other rating agency satisfactory to CSI issued
by companies in the United States with a combined capital and surplus in excess
of One Hundred Million Dollars ($100,000,000.00).
Section
5.04 Dividends,
Distributions and Redemptions.
The
Seller will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return any
capital to its stockholders, or make any distribution of its assets to its
stockholders as such; provided, however, if the stockholders of the Seller
are
subject to income taxes as a result of earnings of the Seller being taxed to
such stockholders, the Seller may pay dividends to the stockholders to the
extent of such income tax liability (but only to the extent not offset by
applicable losses).
Section
5.05 Sale
of Properties.
Neither
the Seller nor any Subsidiary will sell, transfer or otherwise dispose of all
or
any substantial portion or integral part of its Properties except in the
ordinary course of business, or enter into any arrangement, directly or
indirectly, with any Person whereby the Seller or any Subsidiary shall sell
or
transfer any Property, whether now owned or hereafter acquired, and whereby
the
Seller or any Subsidiary shall then or thereafter rent or lease as lessee such
Property or any part thereof or other Property which the Seller or any
Subsidiary intends to use for substantially the same purpose or purposes as
the
Property sold or transferred.
Section
5.06 Nature
of Business.
Neither
the Seller nor any Subsidiary will permit any material change to be made in
its
senior management employees or in the character of its business as carried
on at
the date hereof.
Section
5.07 Limitation
on Leases.
Neither
the Seller nor any Subsidiary will create, incur, assume or suffer to exist
any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal), under leases or lease agreements, without the prior written
consent of CSI, except (i) leases and lease agreements for equipment used in
the
office operations of the Seller in an aggregate amount for the Seller and all
Subsidiaries (determined on a consolidated basis) not to exceed $50,000 in
any
fiscal year of the Seller, and (ii) leases and lease agreements for real
property at 0000 Xxxxxxxx, Xxxxx 000X, Xxx Xxxxxxx, Xxxxx 00000.
Section
5.08 Mergers,
Consolidations, etc.
Neither
the Seller nor any Subsidiary will amend its certificate or articles of
incorporation or otherwise change its corporate name or structure, or
consolidate with or merge into or acquire any Person, or permit any other Person
to consolidate with or merge into or acquire the Seller or any Subsidiary or
acquire the stock of any corporation or form any Subsidiary.
Section
5.09 ERISA
Compliance.
The
Seller will not at any time permit any Plan maintained by it or any Subsidiary
to:
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(a) engage
in
any "prohibited transaction" as such term is defined in Section 4975 of the
Internal Revenue Code of 1986, as amended;
(b) incur
any
"accumulated funding deficiency" as such term is defined in Section 302 of
ERISA; or
(c) terminate
any such Plan in a manner which could result in the imposition of a Lien on
the
Property of the Seller or any Subsidiary pursuant to Section 4068 of
ERISA.
Section
5.10 Issuance
of Stock.
During
the term of this Agreement, Seller will not issue any additional shares of
stock
without the written consent of CSI.
Section
5.11 Changes
in Accounting Methods.
The
Seller will not make any change in its accounting method as in effect on the
date of this Agreement or change its fiscal year ending date from December
31,
unless such changes have the prior written approval of CSI.
Section
5.12 Transactions
With Affiliates.
The
Seller will not, directly or indirectly, enter into any transaction (including,
but not limited to, the sale or exchange of property or the rendering of any
service) with any Affiliate, other than in the ordinary course of its business
and upon substantially the same or better terms as it could obtain in an arm's
length transaction with a Person who is not an Affiliate.
Section
5.13 RICO.
The
Seller will not violate any laws, statutes or regulations, whether federal
or
state, for which forfeiture of its properties is a potential penalty, including,
without limitation, RICO.
ARTICLE
VI
EVENTS
OF DEFAULT
Section
6.01 Events.
Any of
the following events shall be considered an "Event of Default" as that term
is
used herein:
(a)
Default
in obligations hereunder.
Default
is made in any obligation of Seller to CSI hereunder; or
(b)
Representations
and Warranties.
Any
representation or warranty made by the Seller, any Subsidiary any Guarantor
or
any Validity Guarantor in any Security Instrument, including this Agreement,
proves to have been incorrect in any material respect as of the date thereof;
or
any representation, statement (including financial statements), certificate
or
data furnished or made by the Seller, any Subsidiary or any Guarantor (or any
officer, accountant or attorney of the Seller or any Subsidiary or any
Guarantor) under any Security Instrument, including this Agreement, proves
to
have been untrue in any material respect, as of the date as of which the facts
therein set forth were stated or certified; or
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(c)
Affirmative
Covenants.
Default
is made in the due observance or performance of any of the covenants or
agreements contained in Article IV of this Agreement; or
(d)
Negative
Covenants.
Default
is made in the due observance or performance by the Seller or any Subsidiary
of
any of the covenants or agreements contained in Article V of this Agreement;
or
(e)
Conditions
Precedent.
The
Seller fails to satisfy, or cause to be satisfied, any of the conditions
precedent contained in Article VII hereof which are not to be completed as
of
the date of this Agreement; or
(f)
Other
Security Instrument Obligations.
Default
is made in the due observance or performance by the Seller, any Subsidiary
or
any Guarantor of any of the covenants or agreements contained in any Security
Instrument other than this Agreement, and such default continues unremedied
beyond the expiration of any applicable grace period which may be expressly
allowed under such Security Instrument; or
(g)
Involuntary
Bankruptcy Proceedings.
A
receiver, conservator, custodian, liquidator, creditors' committee, board of
inspectors, or trustee of the Seller, any Subsidiary or any Guarantor, or of
any
of their Property, is created, engaged, retained, procured, authorized, or
appointed in the United States or under any law of any foreign country by the
order or decree of any court or agency or supervisory authority having
jurisdiction; or the Seller, any Subsidiary or any Guarantor becomes a debtor
under the Bankruptcy Code of the United States or under the law of any foreign
country, or is the subject of an order for relief, or becomes a bankrupt or
insolvent; or any of the Seller's, any Subsidiary's or any Guarantor's Property
is sequestered, seized, or attached in the United States or under any law of
any
foreign country by court order or decree; or a complaint, petition, or similar
pleading is filed against the Seller, any Subsidiary or any Guarantor under
any
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution,
or
liquidation law of any jurisdiction, in the United States or in any foreign
country, whether such law is now in existence or hereafter in effect;
or
(h)
Voluntary
Petitions.
The
Seller, any Subsidiary or any Guarantor files a petition in bankruptcy or
reorganization or seeks relief under any provision of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution, or liquidation
law of any jurisdiction, in the United States or in any foreign country, whether
such law is now in existence or hereafter in effect, or the Seller, any
Subsidiary or any Guarantor is the subject of an order for relief or winding-up
petition entered by any bankruptcy court, or the Seller or any Subsidiary or
any
Guarantor consents to the filing of any petition against it under any such
law
in the United States or in any foreign country; or
(i)
Assignments,
Conveyances, or Transfers for Benefit of Creditors.
The
Seller, any Subsidiary or any Guarantor makes an assignment, conveyance, or
transfer for the benefit of its creditors, or for the purpose of enforcing
a
lien against its Property, or admits in writing its inability to pay its debts
generally as they become due, or is generally not paying its debts as such
debts
become due, or consents to the appointment of a custodian, receiver, trustee,
assignee, or liquidator of all, substantially all, less than substantially
all,
or any part of its Property for the purpose of enforcing a lien against its
Property; or
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(j)
Discontinuance
of Business.
The
Seller or any Subsidiary discontinues its usual business; or
(k)
Default
on Other Debt or Security.
The
Seller, any Subsidiary or any Guarantor fails to make any payment due on any
indebtedness or security (as "security" is defined in the Securities Act of
1933, as amended) or any event shall occur or any condition shall exist in
respect of any such indebtedness or security of the Seller, any Subsidiary
or
any Guarantor, or under any agreement securing or relating to such indebtedness
or security, the effect of which is (i) to cause or to permit any holder of
such
indebtedness or other security or a trustee to cause (whether or not such holder
or trustee elects to cause) such indebtedness or security, or a portion thereof,
to become due prior to its stated maturity or prior to its regularly scheduled
dates of payment, or (ii) to permit a trustee or the holder of any security
(other than common stock of the Seller or any Subsidiary) to elect (whether
or
not such holder or trustee does elect) a majority of the directors on the board
of directors of the Seller or such Subsidiary; or
(l)
Undischarged
Judgments.
If
judgment for the payment of money in excess of Ten Thousand and No/100 Dollars
($10,000.00) is rendered by any court or other governmental body against the
Seller, any Subsidiary or any Guarantor and the Seller, Subsidiary or Guarantor
does not immediately discharge the same or provide for its immediate discharge
in accordance with its terms, or procure a stay of execution thereof within
ten
(10) days from the date of entry thereof, and within said period of ten (10)
days from the date of entry thereof or such longer period during which execution
of such judgment shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal while providing such reserves
therefor as may be required under generally accepted accounting principles;
or
(m)
Insolvency.
If the
Seller shall be or become insolvent; or
(n)
Fraudulent
Transfers.
The
Seller shall have concealed, removed, or permitted to be concealed or removed,
any part of its Property, with intent to hinder, delay or defraud its creditors
or any of them, or made or suffered a transfer of any of its Property which
may
be fraudulent under any bankruptcy, fraudulent transfer or similar law; or
shall
have made any transfer of its Property to or for the benefit of a creditor
at a
time when other creditors similarly situated have not been paid; or shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien upon
any
of its Property through legal proceedings or distraint or other process which
is
not vacated within 60 days from the date thereof; or
(o)
Forfeiture.
The
filing of formal charges under a federal or state law for which forfeiture
of
Seller's Property is a potential penalty.
Section
6.02 Remedies.
Upon
demand or the happening of any Event of Default specified in Section 6.01,
(i)
CSI may immediately charge back to Seller all Accounts purchased by CSI that
remain uncollected by CSI as of the date thereof and immediately require the
repurchase of such Accounts in the manner provided in Section 2.01 above; and
(ii) all obligations, if any, of CSI hereunder, including the Commitment, shall
immediately cease and terminate unless and until CSI shall reinstate same in
writing.
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Section
6.03 Prohibition
of Transfer, Assignment and Assumption.
This
Agreement pertains to the agreement by CSI to purchase certain Accounts of
the
Seller pursuant to the terms provided herein and cannot be transferred to,
assigned to or assumed by any other person or entity either voluntarily or
by
operation of law. In the event Seller or any Subsidiary becomes a debtor under
the Bankruptcy Code of the United States or under the law of any foreign
country, any trustee or debtor in possession may not assume or assign this
agreement nor delegate the performance of any provision hereunder.
Section
6.04 Right
of Set-off.
Upon
the occurrence of any Event of Default, or if the Seller becomes insolvent,
however evidenced, CSI and any agent bank of CSI is hereby authorized at any
time and from time to time, without notice to the Seller (any such notice being
expressly waived by the Seller), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held
and
other indebtedness at any time owing by CSI or any agent bank of CSI to or
for
the credit or the account of the Seller against any and all of the Obligations
of the Seller, irrespective of whether or not CSI shall have made any demand
under this Agreement. CSI agrees promptly to notify the Seller after any such
set-off and application, provided that the failure to give such notice shall
not
affect the validity of such set-off and application. The rights of CSI under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off), which CSI may have.
ARTICLE
VII
CONDITIONS
The
obligation of CSI to consider the purchase of Accounts of Seller pursuant to
the
terms hereof is subject to the accuracy of each and every representation and
warranty of the Seller and its Subsidiaries made or referred to in each Security
Instrument, including this Agreement, or in any certificate delivered to CSI
pursuant to or in connection with any Security Instrument, including this
Agreement, to the performance by the Seller of its obligations to be performed
hereunder on or before the date of the purchase of Accounts hereunder, and
to
the satisfaction of the following further conditions which must be satisfied
as
of the date of this Agreement or the date of purchase of further Accounts
hereunder.
Section
7.01 Closing.
The
delivery of all instruments and certificates referred to in this Article VII
not
theretofore delivered shall occur on or before November 4, 2005.
Section
7.02 Schedules.
The
Seller shall have duly and validly issued, executed and delivered one or more
schedules evidencing the Accounts to be considered for purchase by CSI
hereunder.
Section
7.03 Charter;
By-laws.
CSI
shall have received a copy, certified as true by the Secretary or Assistant
Secretary of the Seller or the Subsidiary, respectively, of the articles or
certificate of incorporation and the by-laws of the Seller and any Subsidiary
which is to execute this Agreement or any Security Instrument pursuant to this
Agreement.
Section
7.04 Secretary's
Certificates.
CSI
shall have received, on or before the date of Closing, certificates of the
Secretary of the Seller and any Subsidiary which is to execute any Security
Instrument pursuant to this Agreement setting forth (i) resolutions of its
board
of directors in form and substance satisfactory to CSI with respect to the
authorization of this Agreement and any other Security Instruments provided
herein and the officers authorized to sign such instruments, and (ii) specimen
signatures of the officers so authorized.
-19-
Section
7.05 Counsel
of CSI.
At the
time of the Closing, all legal matters incident to the transactions herein
contemplated shall be satisfactory to counsel of CSI.
Section
7.06 No
Default.
At the
time of each purchase of Accounts hereunder, no Default shall have occurred,
and
there shall not have occurred any condition, event or act which constitutes,
or
with notice or lapse of time (or both) would constitute a default or event
of
default under any note, agreement or trust indenture to which the Seller or
any
Subsidiary is a party.
Section
7.07 No
Material Adverse Changes.
Prior
to each purchase of Accounts by CSI hereunder, there shall have occurred, in
the
opinion of CSI, no material adverse changes, either in any case or in the
aggregate, in the assets, liabilities, financial condition, business,
operations, affairs or circumstances of the Seller or any Subsidiary, from
those
reflected in the Financial Statements or by the facts warranted or represented
in any Security Instrument, including this Agreement.
Section
7.08 Other
Security Instruments and Information.
The
Seller shall have duly and validly executed and delivered, or caused to be
executed and delivered, to CSI the following instruments, each in form and
substance satisfactory to CSI, in sufficient executed counterparts for recording
purposes, as security for obligations of Seller to CSI hereunder and other
Obligations and shall have delivered the following documents containing
information necessary to the preparation and perfection of the liens created
by
such instruments:
(a)
Security Agreements covering all of the Seller's accounts receivable, general
intangibles, inventory, equipment, chattel paper, instruments and documents;
and
(b)
Financing Statements relating to the items described in Subsection
(a).
Section
7.09 Guaranties.
The
Validity Guarantors shall have duly and validly executed and delivered, or
caused to be executed and delivered, to CSI in form and substance satisfactory
to CSI, the Validity Guaranty Agreement(s). The Guarantors shall have duly
and
validly executed and delivered, or caused to be executed and delivered, to
CSI
in form and substance satisfactory to CSI, the Guaranty
Agreement(s).
Section
7.10 Recordings.
The
Security Instruments described in Section 7.08 hereof, including financing
statements, security agreements and other notices related thereto, shall have
been duly delivered to the appropriate offices for filing, recording or
registration, and CSI shall have received confirmations of receipt thereof
from
the appropriate filing, recording or registration offices.
Section
7.11 Landlord's
Waiver.
The
owner of Seller's offices at 0000 Xxxxxxxx, Xxxxx 000X, Xxx Xxxxxxx, Xxxxx
00000, shall have executed and delivered, in form and substance satisfactory
to
CSI, in sufficient executed counterparts for recording purposes, waivers of
any
Liens to which it may be entitled, in favor of CSI.
Section
7.12 Additional
Matters.
CSI
shall have received all exhibits, annexes and schedules herein referenced and
such additional reports, certificates, documents, statements, legal opinions,
agreements and instruments, in form and substance reasonably satisfactory to
CSI, as CSI shall have reasonably requested from the Seller, Guarantors and
their counsel.
-20-
Section
7.13 Further
Purchases of Accounts.
All
purchases of Accounts hereunder shall further be subject to the following
specific conditions:
(a)
There
shall have been no default under this Agreement or under any of the other
Security Instruments;
(b)
The
Financial Statements and all other financial information required by CSI shall
have been furnished and shall be, as of the date of the requested advance,
true
and correct; and
(c)
The
financial condition of the Seller, as shown by the most recent Financial
Statement described in Section 4.01(b) hereof, shall be acceptable to CSI,
in
its sole discretion.
ARTICLE
VIII
ACCOUNT
CONTROL
Section
8.01 Collection
by CSI.
In the
Event of Default, Seller specifically authorizes CSI, to the extent permitted
by
applicable law, to notify each Account Debtor to pay directly to CSI all
accounts that are Accounts or Collateral (as defined in the Security
Agreement(s) referenced in Section 7.08 of this Agreement), regardless of
whether Seller has defaulted hereunder. CSI is authorized, but not obligated,
to
collect, xxx for and give releases for all monies or other items of value due
on
all Accounts. CSI is hereby specifically authorized to endorse all checks,
drafts or other forms of trade acceptances that are made payable to Seller,
whether tendered in payment of Accounts or otherwise, and to apply such payments
against the applicable Accounts or, if such payment does not relate to a
particular Account, against any other obligation of Seller to CSI. Seller
authorizes CSI to accept, indorse and deposit on behalf of Seller any checks
tendered by an Account Debtor “in full payment” of its obligation to Seller.
Seller shall not assert against CSI any claim arising therefrom, irrespective
of
whether such action by CSI effects an accord and satisfaction of Seller's
claims, under §3-311 of the Uniform Commercial Code, or otherwise. Seller
hereby waives notice of nonpayment of any Accounts as well as all other notices,
demands or presentations for payment hereunder, and Seller expressly agrees
that
CSI may extend or renew from time to time the payment of any account without
notice to or consent by Seller. In the event it becomes necessary for CSI to
employ an attorney and incur other expenses to collect any account or to enforce
any of the terms of this Agreement by reason of a breach or default by Seller,
Seller agrees to pay to CSI an amount equal to all reasonable attorneys' fees,
expenses and costs incurred by CSI. In the event any merchandise represented
by
any Account shall be returned to or repossessed by the Seller, such merchandise
shall be held by the Seller in
trust
for CSI,
separate and apart from the Seller's own property, and subject to CSI’s
directions and control. With respect to any returned or repossessed merchandise,
Seller shall, at its sole cost and expense, (a) provide proper storage therefor,
(b) maintain adequate insurance coverage thereon, (c) prepare the same for
sale,
(d) defend title thereto, (e) take any other action necessary for the protection
thereof, (f) pay all freight and related shipping costs, and (g) be responsible
for any other costs or expenses incurred in connection with the foregoing,
including, without limitation, attorneys' fees.
In order
to satisfy any of the Obligations, CSI is hereby authorized by Seller to
initiate electronic debit or credit entries through the ACH system to any
deposit account maintained by Seller wherever located.
-21-
Section
8.02 Verification
and Collection of Accounts. Seller
hereby authorizes CSI to contact each Account Debtor at any time for purposes
of
verification or collection of Accounts. Seller shall cooperate with CSI to
the
maximum extent possible to provide information necessary for CSI to accomplish
verification or collection of any Receivable. Unless otherwise agreed by CSI
in
writing, Seller shall provide the original invoice and any necessary copies
required by the Account Debtor and one copy to CSI ready for mailing with the
required postage to the Account Debtor. All invoices shall direct that payment
be made to a post office box or other address owned and controlled by CSI,
to be
provided by CSI. If requested by CSI, Seller agrees to furnish evidence of
shipment of the related merchandise and/or performance of services rendered,
and
a written assignment and xxxx of sale of such Receivable, all in a form
satisfactory to CSI, including the original purchase order from the Account
Debtor. If requested by CSI, all invoices for Accounts shall plainly state
on
their faces in language acceptable to CSI that the amounts payable thereunder
have been sold to and are payable directly to CSI. If payment is made to Seller
under any circumstances, such payment shall be held in trust by Seller for
CSI
and shall not be negotiated or commingled in any way with any of Seller's funds.
Seller shall either (i) hand-deliver to CSI any payment it receives from an
Account Debtor within one business day of such receipt, or (ii) mail to CSI
any
payment it receives from an Account Debtor on the same day of such receipt,
all
in the original form as received by Seller. In the event the form of any payment
on an Account received by Seller is made payable to Seller, Seller shall endorse
such instrument to the order of CSI. In the event that Seller does not deliver
or mail the payments to CSI within the time frames established by this Section
8.02, CSI shall be permitted to redirect Seller’s mail to CSI. Seller agrees to
furnish CSI, upon request, any and all papers, documents or records of whatever
nature related directly or indirectly, to any Accounts.
Section
8.03 Terms
- Seller's Customers.
Except
as may otherwise be agreed to in writing from time to time, all Accounts shall
be due on or before the Agreed Due Date. All invoices to be purchased pursuant
hereto will be forwarded to the Account Debtor upon delivery of the goods or
the
services that are the subject of the Account. Seller shall not vary the terms
of
sale, terms of payment, or location of payment set forth in the invoice relating
to any Account without CSI's prior written consent, it being understood that
any
Account is the property of CSI.
Section
8.04 Power
of Attorney.
For so
long as this Agreement has not been terminated, CSI is hereby irrevocably
authorized as Seller’s Attorney-in-Fact, with full authority in the place of
Seller and in the name of Seller or otherwise, in CSI’s discretion, to take any
action and to execute any instrument which CSI may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without
limitation:
(a) To
endorse in the name of Seller, and to take all actions necessary to collect
for
deposit to CSI’s account, all checks, drafts and other forms of trade
acceptances, negotiable instruments and other forms of payment (hereinafter
collectively referred to as the “Payments”) which are tendered in payment of
Accounts or in payment of insurance claims relating to the Accounts, or which
are received by CSI. The authorization includes, without limitation, the power
to open, cash, endorse, deposit and otherwise collect all such Payments in
the
event they are not made payable to CSI;
(b) To
contact Account Debtors at any time in order to verify and/or collect
Accounts;
-22-
(c) To
contact the Internal Revenue Service and other State and local taxing
authorities in order to ascertain Seller’s tax liability;
(d) To
obtain
and adjust insurance required to be paid to CSI;
(e) To
ask,
demand, collect, xxx for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Accounts;
(f) To
file,
at Seller’s expense, any claims or take any action or institute any proceedings
which CSI may deem necessary or desirable for the collection of any of the
Accounts or any of the collateral securing payment of the Accounts or otherwise
to enforce the rights of CSI with respect to the Accounts.
This
Power of Attorney is irrevocable and coupled with an interest. Seller hereby
acknowledges that Seller is not entitled to any notice, demand or presentation
with respect to payment of any Account and agrees that CSI may extend or renew
from time to time the payment of any Account without notice to or consent by
Seller.
ARTICLE
IX
MISCELLANEOUS
Section
9.01 Notices.
All
communications under or in connection with this Agreement shall be in writing
and shall be mailed by registered or certified mail, return receipt requested,
postage prepaid, or personally delivered to an officer of the receiving party.
All such communications shall be mailed or delivered as follows:
(a)
If to
the Seller, to the address set forth in the introductory paragraph of this
Agreement, or to such other address or to such individual's or department's
attention as it may have furnished CSI in writing;
(b)
If to
CSI, to the address set forth in the introductory paragraph of this Agreement,
or to such other address or to such individual's or department's attention
as it
may have furnished to the Seller in writing.
Any
notice so addressed and mailed by registered or certified mail, return receipt
requested, shall be deemed to be given when so mailed, and any notice so
delivered in person shall be deemed to be given when receipted for by, or
actually received by, an authorized officer of the Seller or CSI, as the case
may be.
Section
9.02 Deviation
from Covenants.
The
procedure to be followed by the Seller to obtain the consent of CSI to any
deviation from the covenants contained in this Agreement or any other Security
Instrument shall be as follows:
(a)
The
Seller shall send a written notice to CSI setting forth (i) the covenant(s)
relevant to the matter, (ii) the requested deviation from the covenant(s)
involved, and (iii) the reason for the requested deviation from the covenant(s);
and
-23-
(b)
CSI
will within a reasonable time send a written notice to the Seller, signed by
an
authorized officer of CSI, permitting or refusing the request; but in no event
will any deviation from the covenants of this Agreement or any other Security
Instrument be effective without the written consent of CSI.
Section
9.03 Invalidity.
In the
event that any one or more of the provisions contained in this Agreement or
in
any other Security Instrument shall, for any reason, be held invalid, illegal
or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other Security
Instrument.
Section
9.04 Survival
of Agreements.
All
representations and warranties of the Seller herein, and all covenants and
agreements herein not fully performed before the effective date of this
Agreement, shall survive such date.
Section
9.05 Successors
and Assigns.
All
covenants and agreements contained by or on behalf of the Seller or any
Subsidiary or any Guarantor in this Agreement and any other Security Instrument
shall bind its successors and assigns or the heirs and personal representatives
of any individual Guarantor and shall inure to the benefit of CSI and its
successors and assigns; except that neither the Seller nor any Guarantor nor
any
Person acting on behalf of any of them may assign any of their rights hereunder
without the prior written consent of CSI.
Section
9.06 Waivers.
No
course of dealing on the part of CSI, its officers, employees, consultants
or
agents, nor any failure or delay by CSI with respect to exercising any right,
power or privilege of CSI under this Agreement or any other Security Instrument
shall operate as a waiver thereof, except as otherwise provided in Section
9.02
hereof.
Section
9.07 Cumulative
Rights.
Rights
and remedies of CSI under this Agreement and each other Security Instrument
shall be cumulative, and the exercise or partial exercise of any such right
or
remedy shall not preclude the exercise of any other right or
remedy.
Section
9.08 Construction.
This
Agreement is a contract made under and shall be construed in accordance with
and
governed by the laws of the State of Texas.
Section
9.09 Multiple
Originals.
This
Agreement may be executed in two (2) or more copies; each fully executed copy
shall be deemed an original, but all of which together shall constitute one
and
the same instrument.
Section
9.10 Exhibits
and Schedules.
All
exhibits and schedules to this Agreement are incorporated herein by this
reference for all purposes. The exhibits and schedules may be attached hereto,
or bound together with or separately from this Agreement, and such binding
shall
be effective to identify such exhibits and schedules as if attached to this
Agreement.
Section
9.11 Performance
and Venue.
The
obligations of the parties hereto contained herein are performable in Houston,
Xxxxxx County, Texas, and venue for any action in connection therewith shall
be
in Xxxxxx County, Texas.
Section
9.12 Negotiation
of Documents.
This
Agreement and all other Security Instruments have been negotiated by the parties
at arm's length, each represented by its own counsel, and the fact that the
documents have been prepared by CSI's counsel, after such negotiation, shall
not
be cause to construe any of such documents against CSI.
-24-
Section
9.13 Notices
Received by CSI.
Any
instrument in writing, telex, telegram, telecopy or cable received by CSI in
connection with any sale of Accounts or other transaction hereunder, which
purports to be dispatched or signed by or on behalf of the Seller, shall
conclusively be deemed to have been signed by such party, and CSI may rely
thereon and shall have no obligation, duty or responsibility to determine the
validity or genuineness thereof or authority of the Person or Persons executing
or dispatching the same.
Section
9.14 Determination
of Purchase Price.
The
Purchase Price of the Accounts has been determined pursuant to negotiations
between CSI and Seller and represents the fair market value thereof, after
due
consideration has been given to the nature of the Account, the probability
of
prompt collection thereof, the creditworthiness of the Account Debtor, the
payment history of the Account Debtor and other economical factors relative
to
the Accounts. Further, in arriving at the Purchase Price, consideration has
been
given to services rendered and services that will be rendered in the future
by
CSI in connection with credit investigations of Account Debtor, supervising
the
ledgering of accounts purchased, supervising the collection of accounts
purchased, and the assumption of certain credit risks. The parties hereto
acknowledge that the purchase of the Accounts by CSI constitutes an outright
conveyance by the Seller to CSI.
Section
9.15 Provision
Regarding Usury.
Nothing
contained herein, nor any course of dealing in the future, shall be construed
to
be anything other than an outright purchase and sale of such Accounts. All
right, title and interest of the Seller has been conveyed to CSI and such
transaction is not subject to a security interest in the Accounts and the
Purchase Price paid to Seller by CSI constitutes consideration for the
acquisition of the Accounts and under no circumstances shall be construed as
a
loan and no consideration herein set forth is for the use, forbearance or
detention of money. Except with respect to Section 4.06 above, nothing contained
herein shall be construed as to require the payment of interest; however, should
a court of competent jurisdiction rule that any consideration paid hereunder
(including amounts paid pursuant to Paragraph 4.06) are in fact or in law to
be
treated as interest, in no event shall Seller be obligated to pay that interest
at a rate in excess of the maximum amount permitted by law, and all agreements,
conditions, or stipulations contained herein, if any, which may in any event
or
contingency whatsoever operate to bind, obligate, or compel Seller to pay a
rate
of interest exceeding the maximum rate of interest permitted by law shall be
without binding force or effect at law or in equity to the extent only of the
excess of interest over such maximum rate of interest permitted by law. Also
in
such event, CSI may “spread” all charges characterized as interest over the
entire term of all transactions with Seller and will refund to Seller the excess
of any payments made over the highest lawful rate. It is the intention of the
parties hereto that in the construction and interpretation of this Agreement,
the foregoing sentence shall be given precedence over any other agreement,
condition, or stipulation herein contained which is in conflict with
same.
Section
9.16 No
Third-Party Beneficiaries.
This
Agreement is for the sole and exclusive benefit of the Seller and CSI. This
Agreement does not create, and is not intended to create, any rights in favor
of
or enforceable by any other Person. This Agreement may be amended or modified
by
the agreement of the Seller and CSI, without any requirement or necessity for
notice to, or the consent of or approval of any other Person.
-25-
Section
9.17 Termination;
Release of Liability.
Seller
and CSI recognize that future purchases of Accounts are to be made only with
mutual consent of Seller and CSI, through joint execution by Seller and CSI
of a
supplemental Schedule
A.
Accordingly, this Agreement shall continue in full force and effect unless
and
until each of the following occur: (i) written notice of the termination of
this
Agreement as it relates to future Accounts by any party hereto, (ii) the payment
in full of all Obligations of Seller to CSI pursuant hereto and (iii) the
collection of all outstanding Accounts sold by Seller to CSI that, in the sole
discretion of CSI, can be collected; provided,
however,
that in
lieu of the condition in item (iii), Seller may purchase the Account(s) (or
any
of them) in accordance with the terms of this Agreement pursuant to which an
outstanding Account may or must be repurchased from CSI by Seller. Subject
to
the Payment of the Termination Fee by Seller, either party may immediately
terminate this Agreement as to future transactions, without cause within its
sole discretion, and nothing contained in this Agreement shall constitute an
agreement or commitment to purchase any accounts until a supplemental Schedule
describing such accounts has been executed by Seller and such accounts have
been
approved by CSI. In the event Seller shall have breached any provision of this
Agreement or any other agreement with CSI, or if either party shall have given
notice to the other of the termination of this Agreement as to future
Accounts,
any
and
all monies, balances or credits otherwise due by CSI to the Seller may be
retained and applied by CSI from time to time to reduce the Obligations. The
balance of such funds, if any, shall
not
be released to Seller unless all of Seller's Obligations hereunder have been
paid in full. At the discretion of CSI, upon written notice of the termination
of this Agreement as it relates to future Accounts by any party hereto, CSI
may
return and charge back to Seller any and all outstanding Accounts in the manner
described in Section 2.01 above. At the discretion of Seller, upon written
notice of termination of this Agreement as it relates to future Accounts by
any
party hereto, Seller may demand the sale by CSI to Seller of all or any of
the
Accounts. In addition and notwithstanding any provision of this Agreement to
the
contrary, CSI shall not be obligated to release any amounts otherwise owing
by
CSI to Seller unless and until Seller has executed and delivered to CSI a
general release in the form attached hereto as Exhibit
“A”.
In
recognition of CSI's
right to have its attorneys' fees and other expenses incurred in connection
with
this Agreement secured by the Collateral, notwithstanding payment in full of
all
Obligations by Seller, CSI shall not be required to record any terminations
or
satisfactions of any of CSI's liens on the Collateral unless and until Seller
has executed and delivered to CSI a general release in the form of Exhibit
“A”
hereto.
Seller
understands that this provision constitutes a waiver of its rights under §9-513
of the UCC.
Termination
of this Agreement shall not affect the rights and obligations of the parties
accruing with respect to prior transactions.
Section
9.18 DTPA
Waiver.
Seller acknowledges and agrees, on its own behalf and on behalf of any permitted
assigns and successors hereafter, that the DTPA is not applicable to this
transaction. Accordingly, Seller's rights and remedies with respect to the
transaction contemplated under this Agreement, and with respect to all acts
or
practices of CSI, past, present or future, in connection with such transaction,
shall be governed by legal principles other than the DTPA. In furtherance
thereof, Seller agrees as follows:
Seller
waives its rights under the Deceptive Trade Practices-Consumer Protection Act,
Section 17.41 et seq., Business & Commerce Code, a law that gives consumers
special rights and protections. After consultation with an attorney of Seller’s
own selection, Seller voluntarily consents to this waiver.
Section
9.19 Waiver
of Trial by Jury.
Each
party to this Agreement hereby expressly waives any right to trial by jury
of
any claim, demand, action or cause of action (i) arising under this Agreement
or
any other instrument, document or agreement executed or delivered in connection
herewith, or (ii) in any way connected with or related or incidental to the
dealings of the parties hereto or any of them with respect to this Agreement
or
any other instrument, document or agreement executed or delivered in connection
herewith, or the transactions related hereto or thereto. In each case whether
now existing or hereafter arising, and whether sounding in contract or tort
or
otherwise, each party hereby agrees and consents that any such claim, demand,
action or cause of actions shall be decided by court trial without a jury,
and
that any party to this Agreement may file an original counterpart or a copy
of
this section with any court as written evidence of the consent of the parties
hereto to the waiver of their right to trial by jury.
-26-
Section
9.20 No
Obligation to Purchase Further Accounts.
Seller
specifically acknowledges and agrees that, anything herein to the contrary
notwithstanding, CSI has the right to approve or reject any or all future
accounts receivable proposed for sale under this Agreement IN ITS SOLE
DISCRETION, and no course of conduct or prior course of dealing shall establish
any commitment, obligation or agreement to purchase future accounts
receivable.
Section
9.21 Use
of
Facsimiles.
The
parties acknowledge and agree that it is anticipated that execution of this
Agreement, as well as schedules or other documents executed in connection
herewith, may be evidenced by facsimile signatures, and such documents
containing facsimile signatures shall be of the same force and effect as if
original signatures had been obtained.
Section
9.22 Final
Expression.
THIS
WRITTEN AGREEMENT AND THE SECURITY INSTRUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
-27-
IN
WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed as of the date first above written.
| SELLER: | ||||
| |
ATSI
COMMUNICATOINS, INC.
|
|||
| By: | /S/ Xxxxxx X. Xxxxx | |||
|
Name:
Title:
|
Xxxxxx X. Xxxxx
CEO
|
|||
| CSI: | ||||
| |
CSI
BUSINESS FINANCE, INC.
|
|||
| By: | /S/ Xxxxxxx Xxxxxxxx | |||
|
Name:
Title:
|
Xxxxxxx Xxxxxxxx
CEO
|
|||
-28-
EXHIBIT
“A”
GENERAL
RELEASE
FOR
GOOD
AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby
acknowledged, the undersigned and each of them (collectively "Releasor") hereby
forever releases, discharges and acquits CSI Business Finance, Inc.
("Releasee"), its parent, partners, officers, directors, shareholders, agents
and employees, of and from any and all claims of every type, kind, nature,
description or character, and irrespective of how, why, or by reason of what
facts, whether heretofore existing, now existing or hereafter arising, or which
could, might, or may be claimed to exist, of whatever kind or name, whether
known or unknown, suspected or unsuspected, liquidated or unliquidated, each
as
though fully set forth herein at length, to the extent that they arise out
of or
are in way connected to or are related to that certain Factoring Agreement
between Releasee and Releasor dated November 4, 2005 (collectively, the
“Claims”).
Releasor
agrees that the matters released herein are not limited to matters which are
known or disclosed.
Releasor
acknowledges that factual matters now unknown to it may have given or
may
hereafter give rise to Claims which are presently unknown, unanticipated and
unsuspected, and it acknowledges that this Release has been negotiated and
agreed upon in light of that realization and that it nevertheless hereby intends
to release, discharge and acquit the Releasee from any such unknown
Claims.
Acceptance
of this Release shall not be deemed or construed as an admission of liability
by
any party released.
Releasor
acknowledges that either (a) it has had advice of counsel of its own choosing
in
negotiations for and the preparation of this release, or (b) it has knowingly
determined that such advise is not needed.
| DATED: November 4, 2005 | ||||
|
|
||||
| Individual Releasor: |
[Name of individual], individually |
|||
| Entity Releasor: |
ATSI
COMMUNICATIONS, INC.
|
|||
|
By:
Name:
|
/s/ Xxxxxx
X. Xxxxx
Xxxxxx X. Xxxxx |
|||
|
Title:
|
CEO
|
|||
