Exhibit 10.2
LOAN
AND SECURITY AGREEMENT
THIS LOAN AND SECURITY
AGREEMENT, dated as of the Acceptance Date (as defined in
Exhibit B attached hereto
and incorporated into this Agreement by reference ,
paragraph 1) is entered into between CAPITAL TEMPFUNDS , a
division of CAPITAL BUSINESS CREDIT LLC, a Delaware limited
liability company, with its principal place of business at 1700
Broadway, 19 th Floor, New York, New York 10019,
(hereinafter referred to as “TEMPFUNDS”), and Borrower
(as defined in Exhibit B, paragraph 2). Borrower and TEMPFUNDS
agree as follows:
PURPOSE OF
AGREEMENT
1.
Borrower desires to obtain commercial financing
from TEMPFUNDS. The purpose of this financing is not for
household, family, and/or personal use.
DEFINITIONS
2.
“Account(s)” means all accounts receivable due
to Borrower, and other forms of obligations now or hereafter owing
to Borrower, whether arising from the sale or lease of goods or the
rendition of services by Borrower (including, without limitation,
any obligation that might be characterized as an account, contract
right, general intangible or chattel paper under the Code), all of
Borrower’s rights in, to and under all purchase orders now or
hereafter received by Borrower for goods and services, all monies
due or to become due to Borrower under all contracts for the sale
or lease of goods or the rendition of services by Borrower (whether
or not yet earned) (including, without limitation, the right to
receive the proceeds of said purchase orders and contracts), and
all collateral security and guarantees of any kind given by any
obligor with respect to any of the foregoing.
3.
“Acceptable Accounts” means and includes those
Accounts (i) which have been validly assigned to TEMPFUNDS,
(ii) strictly comply with all of Borrower’s warranties
and representations to TEMPFUNDS, (iii) contain payment terms
of not greater than the Term Days (as defined on Exhibit B,
paragraph 3) from invoice date, (iv) are not past due more
than the number of Maximum Days (as defined on Exhibit B,
paragraph 4), (v) are invoiced not later than ten
(10) days from the last date of service or delivery
(vi) are invoiced on not greater than a monthly cycle, and
(vii) other than those Accounts where TEMPFUNDS has notified
Borrower that, in TEMPFUNDS sole discretion, which shall be
exercised in a commercially reasonable manner, the Account or
Customer is not acceptable to TEMPFUNDS.
Without limiting
TEMPFUNDS rights to deem any Account not acceptable, as a general
guideline Acceptable Accounts shall not include the
following: (a) Accounts with respect to which the
Customer has common officers, employees, directors or agents with
Borrower, or is a subsidiary of, related to or affiliated with
Borrower; (b) Accounts with respect to which services or goods
are on guaranteed sale or other terms by reason of which the
payment by the Customer may be conditional; (c) Accounts with
respect to which the Customer is not a resident of the United
States; (d) Accounts with respect to which the Customer is the
United States or any department, agency or instrumentality of the
United States; provided , however , that an Account
shall not be deemed ineligible by reason of this clause if the
aggregate amount of such Accounts does not exceed five percent (5%)
of the total of Borrower’s Accounts, or in the event the
aggregate amount of such Accounts does exceed five percent (5%) of
the total of Borrower’s Accounts, and that Borrower has
completed all steps necessary, in the opinion of TEMPFUNDS, to
comply with the Federal Assignment of Claims Act of 1940 (31 U.S.C.
Section 3727); (e) Accounts with respect to which the
Customer is any state of the United States or any city, town,
municipality, county or division thereof; provided ,
however , that an Account shall not be deemed ineligible by
reason of this clause (e) if the aggregate amount of such
Accounts does not exceed five percent (5%) of the total of
Borrower’s Accounts outstanding, or in the event the
aggregate amount of such Accounts does exceed five percent (5%) of
the total of Borrower’s Accounts, the Account can be assigned
to TEMPFUNDS in a manner reasonably acceptable to TEMPFUNDS, and
the Account can be collected by Borrower in the ordinary course, in
the same manner as its other trade accounts receivable; (f)
Accounts not previously
approved by TEMPFUNDS where the expected dollar value for such
Customer is greater than ten (10%) percent of Borrower’s
existing Accounts or the Maximum Concentration Amount (as
defined on Exhibit B, paragraph 5) , whichever is less;
(g) all of the Accounts owed by an Customer where the Cross
Aging Percentage (as defined on Exhibit B, paragraph 6) or
more of all of the Accounts owed by that Customer are unpaid more
than the Past Due Days (as defined on Exhibit B, paragraph 7)
from the invoice date; (h) Accounts for which the services
have not yet been rendered to the Customer or the goods sold have
not yet been delivered to the Customer (commonly referred to as
“pre-billed accounts”), (i) Accounts subject to a Customer Dispute, as
defined below; and (j) Accounts, if any, specifically
described on Exhibit B, paragraph 8.
4.
“ Agreement
” means this Loan and Security Agreement and all amendments
and supplements thereto.
5.
“ Customer
” means Borrower’s customer or the account
debtor.
6.
“ Customer
Dispute ” means (i) a claim by any Customer against
Borrower of any kind whatsoever, or (ii) financial inability
of a Customer to pay its obligations as they become due, including,
without limitation, a Customer who is subject to any insolvency,
including without limitation, the appointment of a receiver or
trustee, the filing by or against such Customer of a bankruptcy
proceeding or the making of an assignment for the benefit of
creditors or (iii) any mistaken, incorrect and/or erroneous
Account submitted by Borrower to TEMPFUNDS.
A
“Customer Dispute” may arise from any kind of
disagreement between Customer and Borrower whatsoever, whether such
disagreement is valid or invalid, and may also arise at any time,
both before and/or after the signing of this Agreement or the
financing of the Account with TEMPFUNDS.
7.
“ Ineligible
Account ” means an Account that is not an Acceptable
Account as defined in Section 3.
Crdentia
Corp
Loan and Security
Agreement
July 2008
1
8.
The term “
warrant” or “ warranty ” as used in
this Agreement means to guarantee, as a material element of this
Agreement. Each separate warranty herein is also an
independent condition to TEMPFUNDS duties under this
Agreement.
WARRANTIES AND COVENANTS
BY BORROWER
As an inducement
for TEMPFUNDS to enter into this Agreement with full knowledge that
the truth and accuracy of the warranties in this Agreement are
being relied upon by TEMPFUNDS in entering into this Agreement and
in making the loans described herein, Borrower warrants and/or
covenants that:
9.
Borrower’s name as of the date hereof, as it appears in the
official filing the state of its organization is as set forth in
Exhibit B, paragraph 2. Borrower’s only state of
organization or incorporation is in the Organizational State, as
defined in Exhibit B, paragraph 9. Pursuant to the
Borrower’s bylaws, only one officer is required to execute
this Agreement, and the party signing this Agreement on behalf of
the Borrower is an authorized officer.
10.
Borrower is duly organized and in good standing under the laws of
its Organizational State, and is properly licensed and authorized
to operate as a for profit business in all states in which such
business is conducted.
11.
Borrower’s trade
name(s) listed in Exhibit B, paragraph 10 are the only
names under which the Borrower conducts business and all have been
properly filed and published as required by applicable
law.
12.
Borrower’s Federal Tax
ID number is listed in Exhibit B, paragraph 11.
Borrower’s Organizational Number is listed in Exhibit B,
paragraph 12.
13.
Borrower is in compliance with
all laws, rules and regulations applicable to its
business. Furthermore, Borrower, in all material
respects, has in the past, is currently in compliance, and
at all times will comply with any and all federal, state and local
statutes, laws and regulations concerning the preservation of the
environment and the use and disposal of hazardous and toxic
materials and substances (collectively the “Environmental
Laws”).
14.
Borrower’s business is
solvent, the value of its assets exceed the value of its
liabilities excluding debt subordinated to TEMPFUNDS
(“Subordinated Debt”) pursuant to a subordination
agreement acceptable to TEMPFUNDS in its sole discretion (a
“Subordination Agreement”), and it is able to meet its
obligations as they become due.
15.
Each Customer’s business
is solvent to Borrower’s knowledge.
16.
Borrower is, and at all times
during the term of this Agreement will be, the lawful owner of and
have good and undisputed title to all Accounts, free and clear of
any encumbrances of any kind whatsoever.
17.
Each Account is an accurate
and undisputed statement of indebtedness owing by a Customer to
Borrower for a certain sum which is due and payable upon receipt or
within such time as is agreed to, in writing, by TEMPFUNDS and
Borrower, and is not subject to any defenses, setoffs or
counterclaims of any kind whatsoever, and is not subject to any
discounts, deductions, allowances or other contra items unless so
indicated on the invoice and accepted by a duly authorized officer
of TEMPFUNDS in writing, and is an accurate statement of a bona
fide sale, delivery and acceptance of merchandise or prescribed
goods, or performance of service by Borrower to a
Customer.
18.
All financial records,
statements, books or other documents shown or provided to TEMPFUNDS
by Borrower at any time, either before or after the signing of this
Agreement, are materially true and accurate, as determined by
TEMPFUNDS in its commercially reasonable discretion.
19.
Borrower will not under any
circumstances or in any manner whatsoever, interfere with any of
TEMPFUNDS rights under this Agreement.
20.
For
as long as any indebtedness whatsoever remains owing by Borrower to
TEMPFUNDS, Borrower will not factor, assign, hypothecate, transfer,
pledge a security interest in, or sell Accounts, except for the
security interest granted to ComVest Capital, LLC
(“ComVest”) in connection with its subordinated debt
(the “ComVest Sub Debt”). Furthermore, until the
Obligations are indefeasibly paid in full, Borrower will not file
any financing statement or amendment or termination statement with
respect to any financing statement filed in favor of TEMPFUNDS,
except with the prior written consent of TEMPFUNDS.
21.
Borrower, has not transferred,
pledged or granted a security interest in any of Borrower’s
Accounts or other Collateral, as defined below, to any other party
other than ComVest in connection with the ComVest Sub Debt and
Borrower will not transfer, pledge or grant a security interest to
any other party in said Accounts or other Collateral for the term
of this Agreement and for as long as Borrower is indebted to
TEMPFUNDS hereunder; provided, however, Borrower shall have a
period of thirty (30) days to cure any Default that arises in
connection with the granting of a security interest in the
Borrower’s machinery, equipment, furniture and
fixtures. In addition, Borrower has, and will have throughout
the term of this Agreement, good title to the
Collateral.
22.
Borrower will not change or
modify the terms of any Acceptable Account with any Customer unless
TEMPFUNDS first consents in writing to such change after receiving
prior written notice of such proposed change or modification from
Borrower.
23.
Except for (a) other
security interests listed on Exhibit B, paragraph 13 as
“Other Security Interests” and (b) additional
equipment leases which in the aggregate will not at any time exceed
$200,000.00, there are no existing liens, security interests or
encumbrances on any of Borrower’s personal property,
including, without limitation, the Collateral, and Borrower shall
not consent to the placement of any lien, security interest or
encumbrance upon any of Borrower’s personal property of any
type and wherever located not otherwise pledged or assigned to
TEMPFUNDS without TEMPFUNDS prior written consent, and Borrower
shall provide written notice to
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TEMPFUNDS within five
(5) days of Borrower obtaining any knowledge, from any source,
of the filing, recording or perfection by any means, of any
non-consensual lien, claim or encumbrance against the
aforementioned property of Borrower.
24.
Borrower will maintain such
insurance covering Borrower’s business and/or the property of
the Borrower as reasonably required by TEMPFUNDS and as indicated
under Other Insurance, as provided in Exhibit B, paragraph 14,
and will maintain workers’ compensation insurance in
accordance with applicable law and will name TEMPFUNDS as
certificate holder on all such workers’ compensation
policies.
25.
Borrower will notify TEMPFUNDS
in writing at least thirty (30) days prior to any change in
Borrower’s place(s) of business or change in location of
any Collateral, or if Borrower has or intends to acquire or add any
additional place(s) of business, or any change in
Borrower’s chief executive office, the office or offices
where Borrower’s books and records concerning Accounts are
kept, or in the event Borrower intends to change its Organizational
State.
26.
Borrower will notify TEMPFUNDS
in writing at least thirty days prior to any change of
Borrower’s name, identity, legal entity, corporate structure,
use of additional trade name(s), and/or any proposed change in any
of the officers, principals, partners, and/or owners of
Borrower.
27.
Borrower will deliver to
TEMPFUNDS within the Periodic Period, as defined in Exhibit B,
paragraph 15, if applicable and within the Annual Period, as
defined in Exhibit B, paragraph 16, a balance sheet together
with related statements of income, retained earnings, and cash flow
in form and substance reasonably acceptable to TEMPFUNDS as more
fully described in Exhibit B, paragraph 17 under Financial
Statements. Borrower will also provide TEMPFUNDS with copies of all
of its income and payroll tax returns, federal, state and local,
upon filing with the appropriate authorities. Borrower
shall execute and deliver to TEMPFUNDS within five (5) days
after the end of each month during the term of this Agreement,
reflecting the status as of the end of each month, certified by any
one of the officers of Borrower as being true and correct,
(i) a current detailed aging, by total and by customer, of
Borrower’s Accounts, (ii) a current detailed aging, by
total and by vendor, of Borrower’s accounts payable and
(iii) a Compliance Certificate in the form of
Exhibit “C” from one of the officers of
Borrower certifying that no Default currently exists under this
Agreement, all of which shall be set forth in a form and shall
contain such information as is reasonably acceptable to
TEMPFUNDS.
28.
Borrower’s assignment of any Accounts to TEMPFUNDS pursuant
to this Agreement will not at any time violate any federal, state
and/or local law, rule or regulation, court or other
governmental order or decree or terms of any contract relating to
such Accounts.
29.
(a) Borrower possesses all necessary trademarks, trade names,
copyrights, patents, patent rights and licenses to conduct its
business as now operated, without any known conflict with any
trademarks, trade names, copyrights, patents and license rights of
any other person or entity.
(b)
The Borrower is in compliance with all federal and state laws and
regulations with respect to the issuance of securities, including
but not limited to, disclosure and reporting obligations and all
other matters relative thereto.
(c)
The Borrower will not engage in any uncovered short sales of its
common stock.
(d)
In connection with the Unbilled Accounts (defined below), the
Borrower may pay employees and/or independent contractors who
perform services that may be billed to its Customers immediately
upon completion of the services, and prior to billing the Customer
for such services. The prospective amount to be billed to Customers
for such services shall be defined as the “Unbilled
Accounts” and consist of services that have been fully
provided and accepted by the Customer, and other than the fact that
the invoice cannot be physically presented to the Customer until
the end of the applicable billing period, complies with all the
representations and warranties of this Agreement, including but not
limited to the those in Section 17, and for which the
employees and/or independent contractors who provided such services
have received their payroll for such services rendered.
(e)
There is only one (1) holder remaining of
the 2006 Convertible Debentures issued by the Borrower (the
“Debenture”), that holder is Alpha Capital AG, and the
amount outstanding on such Debenture is $525,000.00.
FURTHER
PROMISES
30.
SECURITY
INTEREST/COLLATERAL: As a further inducement for TEMPFUNDS to
enter into this Agreement, and as collateral for all obligations of
Borrower to TEMPFUNDS, now existing and hereafter arising,
whether direct or indirect, absolute or contingent, due or to
become due (collectively the “Obligations”),
Borrower grants, assigns,
conveys and transfers to TEMPFUNDS, a security interest under the
New York Uniform Commercial Code (the “Code”), in the
following described property (hereinafter collectively called
“ Collateral ”): All presently existing or
hereafter arising, now owned or hereafter acquired, including all
additions, replacements, accessions, substitutions, increases,
profits, income, distributions, and proceeds thereof,
(i) Accounts, accounts receivable, contract rights, chattel
paper (including electronic chattel paper), documents, instruments
(including promissory notes), reserves, reserve accounts,
commercial tort claims, rebates, refunds, and general intangibles
(including tax refunds, payment intangibles, software,
lists, trademarks, tradenames, tradestyles, tradedresses, licenses,
licensing agreements, copyrights and patent rights ) and all books and records relating to
the Accounts and all proceeds of the foregoing property, including
insurance proceeds, and any renewals, and extensions of the
foregoing property and all proceeds thereof; (ii) all of
Borrower’s rights to receive payments from any source and for
any reason (whether characterized as accounts, accounts receivable,
chattel paper, choses-in action, contract rights, general
intangibles, instruments, securities, notes or otherwise)
including, without limitation, Borrower’s right to receive
payments for goods and other products sold or leased or for
services rendered, whether or not earned by performance or
recognized or billed by Borrower; (iii) all of
Borrower’s contract rights including, without limitation,
Borrower’s rights under distribution contracts, franchise
agreements, license agreements, sales contracts, unfilled customer
orders, and lease agreements; (iv) all of Borrower’s
cash, drafts, certificates of deposit and deposit accounts;
(v) all of Borrower’s assets, property and rights now or
hereafter in the possession of TEMPFUNDS or its agents;
(vi) all of Borrower’s supporting
obligations,
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investment property and
letter of credit rights, as defined in the Code; (vii)
all inventory, wherever located, now owned or hereafter acquired,
including without limitation, raw materials, work in process,
finished goods, materials and supplies, computer software,
programs, stored data, repossessions, deposits and credit balances
relating thereto; and (viii) all leasehold improvements,
furniture, fixtures, machinery and equipment, and computer hardware
along with all increases, substitutions, replacements, additions,
accessions of Borrower relating thereto, wherever situated, now
owned by Borrower or hereafter acquired, (ix) such other assets of the same
class or classes as the foregoing hereafter owned or acquired by
Borrower; but excluding (x) any items of personal
property described in Exhibit B, paragraph 18 under Excluded
Collateral.
31.
PERFECTION OF SECURITY
INTEREST: Borrower shall execute and deliver to TEMPFUNDS,
concurrent with Borrower’s execution of this Agreement, and
at any time or times hereafter at the request of TEMPFUNDS, all
financing statements, continuation financing statements, security
agreements, assignments, endorsements, affidavits, reports,
notices, schedules of accounts, letters of authority and all other
documents that TEMPFUNDS may request, in form and substance
satisfactory to TEMPFUNDS, to perfect or maintain perfection of
TEMPFUNDS liens in the Collateral and in order to fully consummate
or give effect to all of the transactions contemplated under this
Agreement. Borrower does hereby authorize TEMPFUNDS to file
financing statements, including, without limitation, original
financing statements, amendments and continuation statements
against the Borrower and authorizes TEMPFUNDS to file financing
statements that describe the Collateral as all assets of the
Borrower, or words of similar effect. [
If Borrower shall
at any time acquire a commercial tort claim, as defined in the
Code, Borrower shall immediately notify TEMPFUNDS in a writing
signed by Borrower of the brief details thereof and grant to
TEMPFUNDS in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance satisfactory to
TEMPFUNDS. In the event that any Collateral, including
proceeds, is evidenced by or consists of promissory notes, Borrower
shall, upon request of TEMPFUNDS, immediately endorse and assign
such promissory notes over to TEMPFUNDS and deliver actual physical
possession of the promissory notes to TEMPFUNDS.
Borrower will cooperate with
TEMPFUNDS in obtaining control with respect to Collateral
consisting of deposit accounts, investment property, letter of
credit rights and electronic chattel paper.
32.
NOTIFICATION: TEMPFUNDS may at
any time after a Default has occurred and at its sole discretion
notify any Customer of Borrower or any third party payer to make
payments directly to TEMPFUNDS. TEMPFUNDS may require Borrower to
place any legend or other statement on invoices indicating the
assignment of the invoice to TEMPFUNDS.
33.
ASSIGNMENT: Borrower
shall from time to time present Accounts to TEMPFUNDS for approval
and approved Accounts shall be identified by separate and
subsequent written assignments on a form to be provided to Borrower
by TEMPFUNDS known as “Schedule of
Accounts”.
34.
ADVANCES: TEMPFUNDS may
advance funds to Borrower in an amount up to the Advance Rate and
the Maximum Credit Facility, both as defined in Exhibit B,
paragraphs 20 and 21 respectively. TEMPFUNDS reserves the right to
retain certain reserves against advances, including, without
limitation, the Dilution Reserve, as defined in Exhibit B,
paragraph 22. Borrower agrees to repay to TEMPFUNDS the amount of
each such advance, with interest and fees as set forth below and on
Exhibit A. As consideration for each such advance, TEMPFUNDS
shall be paid in accordance with the rate schedule attached hereto
as Exhibit A and incorporated into this Agreement by reference
(the “Rate Schedule”). Borrower promises to repay each
advance, and each such advance shall be due and payable, if not
sooner paid by Borrower or through collection of the assigned
Account, on or before the Maximum Days (the “Advance
Period”). Unless otherwise extended, all advances and any
unpaid interest and fees shall be paid by Borrower to TEMPFUNDS as
aforesaid or, at TEMPFUNDS option, may be charged to
Borrower’s Loan Account (as defined in Exhibit B,
paragraph 23) or may be withheld and paid to TEMPFUNDS from any
subsequent advance made to Borrower. In addition to the amounts set
forth on the Rate Schedule, TEMPFUNDS may charge interest at the
rate of eighteen percent (18%) per annum (the “Default
Rate”) on any advances which remain unpaid on and after the
occurrence of an event of Default (irrespective of the date that
TEMPFUNDS notifies the Borrower of such Default) and/or after
judgment. TEMPFUNDS shall be entitled to charge the Default
Rate whether or not it demands payment of the Obligations or
exercises any of its rights and remedies hereunder or under any
other agreement between the Borrower and
TEMPFUNDS. All interest shall be computed for
the actual number of days elapsed on the basis of a year consisting
of 360 days. Borrower
acknowledges that TEMPFUNDS accrues interest on all advances on a
daily basis, however, such interest is due on a monthly basis,
unless otherwise payable as provided hereunder. In the event
that , at any time and for any reason, the amount of
advances made pursuant to this Agreement exceed the Advance Rate
and/or the Maximum Credit Facility (an “Over Advance”),
then Borrower, upon TEMPFUNDS election and demand, shall
immediately pay to TEMPFUNDS, in cash, the amount of such
excess. In the event of the existence of an Over Advance,
Borrower shall pay to TEMPFUNDS, at TEMPFUNDS discretion, an Over
Advance Fee of .0493 % of the amount of the Over Advance for each
day that the Over Advance is outstanding. Nothing provided
herein shall constitute consent by TEMPFUNDS to such Over
Advance.
Borrower irrevocably waives the right to direct
the application of any and all payments and collections at any time
or times hereafter received by TEMPFUNDS from or on behalf of
Borrower, and Borrower does hereby irrevocably agree that TEMPFUNDS
shall have the continuing exclusive right to apply and reapply any
and all such payments and collections received at any time or times
hereafter by TEMPFUNDS or its agent against the Obligations, in
such manner as TEMPFUNDS may deem advisable. The advances
shall constitute one general Obligation of Borrower, and shall be
secured by TEMPFUNDS lien upon all of the Collateral.
IT
IS THE INTENTION OF THE PARTIES HERETO NOT TO MAKE ANY AGREEMENT IN
VIOLATION OF THE LAWS OF THE STATE OF NEW YORK OR THE UNITED STATES
RELATING TO USURY. IN NO EVENT, THEREFORE, SHALL ANY INTEREST
DUE HEREUNDER BE AT A RATE IN EXCESS OF THE HIGHEST LAWFUL RATE,
i.e., IN NO EVENT SHALL TEMPFUNDS CHARGE OR SHALL BORROWER BE
REQUIRED TO PAY ANY INTEREST THAT, TOGETHER WITH ANY OTHER CHARGES
HEREUNDER THAT MAY BE DEEMED TO BE IN THE NATURE OF INTEREST,
HOWEVER COMPUTED, EXCEEDS THE MAXIMUM LAWFUL RATE OF INTEREST
ALLOWABLE UNDER THE LAWS OF THE STATE OF NEW YORK AND/OR OF THE
UNITED STATES. SHOULD ANY PROVISION OF THIS AGREEMENT OR ANY
OTHER AGREEMENT BETWEEN BORROWER AND TEMPFUNDS BE CONSTRUED TO
REQUIRE THE PAYMENT OF INTEREST THAT EXCEEDS SUCH MAXIMUM
LAWFUL
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RATE, ANY SUCH EXCESS SHALL BE AND IS EXPRESSLY
HEREBY WAIVED BY TEMPFUNDS. SHOULD ANY EXCESS INTEREST IN
FACT BE PAID, SUCH EXCESS SHALL BE DEEMED TO BE A PAYMENT OF THE
PRINCIPAL AMOUNT OF OUTSTANDING INDEBTEDNESS OWING BY BORROWER TO
TEMPFUNDS AND SHALL BE APPLIED TO SUCH PRINCIPAL.
In order to
satisfy any of the Obligations, Borrower authorizes TEMPFUNDS, or
its agents, affiliates, or depository bank(s) to initiate
electronic debit or credit entries through the ACH system to or
from any deposit account maintained by Borrower (“ACH
Transfers”).
Borrower shall be liable
for, and TEMPFUNDS may charge Borrower’s account with all
reasonable Costs and Expenses as described in Exhibit B,
paragraph 19 under Costs and Expenses. Such costs and expenses
shall be considered advanced under this Agreement.
35.
REQUIRED FORMS: Along
with the Schedule of Accounts, Borrower shall provide TEMPFUNDS,
upon request, with duplicate copies of invoices, proofs of delivery
or service, contracts or purchase orders, and/or purchase order
numbers, as appropriate to the business of Borrower, all in form
acceptable to TEMPFUNDS together with all those items set forth in
the Procedures Manual.
36.
NOTICE OF DISPUTE:
Borrower will immediately notify TEMPFUNDS of any Customer Dispute
involving in excess of $10,000.00 for any one Customer, and of any
litigation or proceeding, pending or threatened, by or against
Borrower.
37.
INELIGIBLE ACCOUNTS AND RIGHT
OF OFFSET: Upon notice of any Customer Dispute or in the
event that any Account becomes an Ineligible Account, TEMPFUNDS
may, in addition to any other remedies under this Agreement,
declare the Account to be ineligible for funding hereunder and
Borrower will immediately pay to TEMPFUNDS all amounts advanced to
Borrower against such Account. TEMPFUNDS may, at its sole
discretion, charge such amounts to the Loan Account or offset
against any advances or remittances it would otherwise make to
Borrower for any amounts owed to TEMPFUNDS hereunder.
Notwithstanding the foregoing, such Accounts shall remain as
Collateral for TEMPFUNDS as provided herein.
38.
TEMPFUNDS STATEMENTS: From
time to time, TEMPFUNDS shall provide Borrower with Borrower
ledgers and other reports. Such reports shall be deemed final and
conclusive between Borrower and TEMPFUNDS as to the contents of
said reports except for any errors of which Borrower shall have
notified TEMPFUNDS in writing within thirty (30) days after the
date of receipt by Borrower of such reports and TEMPFUNDS, in its
good faith and discretion determines that such exceptions are
accurate and makes an appropriate adjustment.
39.
SOLE RIGHT TO PAYMENT:
Other than to the ComVest Sub Debt, which is subject to a
subordination agreement in favor of TEMPFUNDs, the right to payment
from the Customers of the Borrower as to all Accounts is solely
collaterally assigned to TEMPFUNDS. Any interference, including but
not limited to Borrower failing to comply with Section 40
below or Borrower’s unauthorized receipt and retention of
Collateral proceeds will constitute a Default hereunder and may
result in, inter alia, termination of future advances to the
Borrower.
40.
COLLECTIONS: Borrower will
notify all of its Customers to forward all payments to the lock box
address indicated in Exhibit B, paragraph 24 (the “Lock
Box”). In the event that any payments from Customers
come into Borrower’s possession, Borrower will hold the same
in trust and safekeeping, and immediately deposit into the Lock Box
the identical check or other form of payment received by Borrower,
properly endorsed, including electronic or wire transfers. Should
Borrower come into possession of a check or other form of payment,
which constitutes payment of either Acceptable Accounts and/or
Ineligible Accounts, Borrower shall immediately remit such
payment(s) to the Lock Box.
In
the event that the Borrower fails to comply with the provisions of
this Section 40, in addition to all other remedies of
TEMPFUNDS hereunder, Borrower shall pay a Misdirection Fee equal to
2.5% of the amount of the funds which Borrower deposits in any bank
account other than bank accounts as directed by TEMPFUNDS under
this Agreement or in the Lock Box, or are otherwise not remitted to
TEMPFUNDS as required herein (the “Misdirected Funds”).
Nothing provided herein shall in any manner authorize the Borrower
to misdirect funds as prohibited by the Agreement. Notwithstanding
the foregoing, in the event that collections of Customers are
remitted to the account or lock box controlled by ComVest (the
“ComVest Collections”), and so long as ComVest remits
such payments to TEMPFUNDS as provided in the payoff letter between
ComVest and TEMPFUNDS, no Misdirection Fee shall be assessed in
connection with such ComVest Collections.
Any wire transfer
of funds, check, or other item of payment received by TEMPFUNDS
shall be credited to Borrower when applied by TEMPFUNDS and will be
applied to conditionally reduce Borrower’s Obligations, but
shall not be considered a payment on account unless and until such
check or other method or item of payment is honored when presented
for payment. The receipt of any check or other or method item
of payment deposited into the Lock Box shall be deemed to have been
paid to TEMPFUNDS at the expiration of the Collection Day Period
(as defined in Exhibit B, paragraph 25) after the date
TEMPFUNDS actually receives possession of such check or other
method or item of payment into the Wire Account referred to in
Exhibit B, paragraph 26. Absent legal process to the contrary and
provided that the outstanding indebtedness due TEMPFUNDS does not
exceed the availability hereunder and so long as there is not a
Default hereunder, then; (i) amounts collected and applied to
Accounts in excess of outstanding obligations due TEMPFUNDS will be
credited, without interest, to Borrower, (ii) payment of
Accounts not assigned to TEMPFUNDS or against Ineligible Accounts
will be credited, without interest, to Borrower, and (iii) the
amounts credited to Borrower under (i) and (ii) will be
available to Borrower.
41.
ACCESS TO BOOKS AND RECORDS,
ACCOUNT AND FINANCIAL INFORMATION: Upon request, Borrower will
furnish TEMPFUNDS with accounting records, financial information or
other information pertaining to the operation of Borrower’s
business and will allow TEMPFUNDS to review financial records kept
by Borrower with respect to its business. The foregoing right
of access shall include, without limitation, the right of TEMPFUNDS
to conduct field examinations with access to Borrower’s
business facilities and the right, after a Default, to contact
Customers and/or any third party payors for any reason, including
the confirmation of any or all invoices or statements. Borrower
agrees to hold TEMPFUNDS harmless from and against any costs,
claims, expenses or liabilities incurred by TEMPFUNDS arising out
of or relating to any actions or omissions of TEMPFUNDS permitted
by this Section 41 or taken or refrained from
5
being taken in reliance
on any information received from Borrower hereunder. Borrower shall
promptly reimburse TEMPFUNDS for the expenses of each field
examination as provided in Exhibit B, paragraph 27 under Field
Examination Expenses.
In addition, the
Borrower will provide to TEMPFUNDS: (a) promptly upon receipt
thereof, copies of any reports submitted by independent certified
public accountants in connection with examination of the financial
statements of the Borrower or any subsidiary or any Guarantor made
by such accountants;
(b) promptly
after the furnishing thereof, copies of any statement or report
furnished to any other party pursuant to the terms of any
indenture, loan or debenture and not otherwise required to be
furnished to TEMPFUNDS;
(c)
promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports which the Borrower or
any subsidiary sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration
statements which the Borrower or any subsidiary files with the SEC
or any governmental authority which may be substituted therefore,
or with any national security exchange.
(d) promptly
after receiving, any communication from the SEC or any governmental
authority which may be substituted therefore, or with any national
security exchange relating to the Borrower’s
securities.
42.
TAX COMPLIANCE: Borrower
agrees to provide to TEMPFUNDS, as and when requested, evidence of
timely payment of all Federal, State and/or local taxes due in
connection with Borrower’s business enterprises whether
related to this Agreement or not, including, payment of all
employee withholding taxes.
43.
NOTICE OF LEVY: Borrower
will promptly notify TEMPFUNDS of any attachment, tax assessment,
tax lien, judgment lien, or other legal process levied against
Borrower or any of its assets or if Borrower becomes aware, of any
of Customers assets.
44.
NO PLEDGE: Borrower will
not pledge the credit of TEMPFUNDS to any person or business for
any purpose whatsoever.
45.
LICENSE AGREEMENTS: Borrower will keep each License
Agreement, if any, in full force and effect for so long as Borrower
has any inventory the manufacture, sale or distribution of which is
in any manner governed by or subject to such License Agreement, and
provide TEMPFUNDS, upon request, with copies of each such License
Agreement and all amendments, extensions or modifications thereto.
“License Agreement” as used herein shall mean any
licenses held by the Borrower for the sale of products.
46.
BOOK ENTRY: Borrower
will, immediately upon assignment of Accounts to TEMPFUNDS, make
proper entries on its books and records disclosing the assignment
of said Accounts to TEMPFUNDS.
47.
LEGAL FEES: If,
at any time or times regardless of whether or not a Default then
exists, TEMPFUNDS incurs legal or accounting expenses or any other
costs or out-of-pocket expenses in connection with the loan
transaction described herein, including, without limitation:
(i) the negotiation and preparation of this Agreement or any
amendment of or modification of this Agreement or any of the other
loan documents in connection with this transaction (the “Loan
Documents”); (ii) the administration of this Agreement
or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (iii) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by
TEMPFUNDS, Borrower or any other person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or
Borrower’s affairs, and including all actions in bankruptcy,
appeal and probate; (iv) any attempt to enforce any rights of
TEMPFUNDS against Borrower or any other person which may be
obligated to TEMPFUNDS by virtue of this Agreement or any of the
other Loan Documents, including any account debtor, Customer or
guarantor of Borrower’s obligations owing to TEMPFUNDS;
(v) any consultations regarding this Agreement or any other
Loan Documents or preparation therefore, or the financing extended
hereunder or (vi) any attempt to inspect, verify, protect,
preserve, perfect or continue the perfection of TEMPFUNDS liens
upon, restore, collect, sell, liquidate or otherwise dispose of or
realize upon the Collateral; then all such reasonable legal and
accounting expenses and other reasonable costs and out-of-pocket
expenses of TEMPFUNDS shall be charged to Borrower. Legal
fees shall include all fees of TEMPFUNDS in house counsel.
All such legal fees shall be based upon the usual and customary
rates for services actually rendered and not upon any fixed
percentage of the outstanding balance hereunder. All amounts
chargeable to Borrower under this Section
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