[GRAPHIC OMITED]
SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, Xx. 00000
(000) 000-0000 - Fax (000) 000-0000
ACCOUNTS RECEIVABLE PURCHASE AGREEMENT
This Accounts Receivable Purchase Agreement (the "Agreement") is made as of
the Effective Date by and among Silicon Valley Bank ("Buyer") having a place of
business at the address specified above and RAPIDTRON, INC., a DELAWARE
corporation and RapidTron, Inc., a Nevada corporation (jointly, severally and
collectively, "Seller") having its principal place of business and chief
executive office at 0000 Xxxxxx Xxxxxx, Xxxxxxxx X, Xxxxx Xxxx, XX 00000 and
with a FAX number of __________________.
1. DEFINITIONS. When used herein, the following terms shall have the following
meanings.
"Account Balance" shall mean, on any given day, the gross amount of all
Purchased Receivables unpaid on that day.
"Account Debtor" shall have the meaning set forth in the California Uniform
Commercial Code and shall include any person liable on any Purchased Receivable,
including without limitation, any guarantor of the Purchased Receivable and any
issuer of a letter of credit or banker's acceptance.
"Adjustments" shall mean all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor with respect to any Purchased Receivable.
"Advance" shall have the meaning set forth in Section 2.2 hereof.
"Business Day" is any day that is not a Saturday, Sunday or a day on which
the Buyer is closed.
"Collateral" shall have the meaning set forth in Section 8 hereof.
"Collections" shall mean all good funds received by Buyer from or on behalf
of an Account Debtor with respect to Purchased Receivables.
"Compliance Certificate" shall mean a certificate, in a form provided by
Buyer to Seller, which contains the certification of the chief financial officer
of Seller that, among other things, the representations and warranties set forth
in this Agreement are true and correct as of the date such certificate is
delivered.
"Due Diligence Fee" shall have the meaning set for in Section 3.7 hereof.
"Effective Date" is the date Buyer executes this Agreement.
"Event of Default" shall have the meaning set forth in Section 9 hereof.
"Facility Fee" shall have the meaning set forth in Section 3.6 hereof.
"Finance Charges" shall have the meaning set forth in Section 3.2 hereof.
"Invoice Transmittal" shall mean a writing signed by an authorized
representative of Seller which accurately identifies the receivables which
Buyer, at its election, may purchase, and includes for each such receivable the
correct amount owed by the Account Debtor, the name and address of the Account
Debtor, the invoice number, the invoice date and the account code.
"Obligations" shall mean all advances, financial accommodations,
liabilities, obligations, covenants and duties owing, arising, due or payable by
Seller to Buyer of any kind or nature, present or future, arising under or in
connection with this Agreement or under any other document, instrument or
agreement, whether or not evidenced by any note, guarantee or other instrument,
whether arising on account or by overdraft, whether direct or indirect
(including those acquired by assignment) absolute or contingent, primary or
secondary, due or to become due, now owing or hereafter arising, and however
acquired; including, without limitation, all Advances, Finance Charges,
interest, Repurchase Amounts, fees, expenses, professional fees and attorneys'
fees and any other sums chargeable to Seller hereunder or otherwise.
"Purchased Receivables" shall mean all those accounts, receivables, chattel
paper, instruments, contract rights, documents, general intangibles, letters of
credit, drafts, bankers acceptances, and rights to payment, and all proceeds
thereof (all of the foregoing being referred to as "receivables"), arising out
of the invoices and other agreements identified on or delivered with any Invoice
Transmittal delivered by Seller to Buyer which Buyer elects to purchase and for
which Buyer makes an Advance.
"Refund" shall have the meaning set forth in Section 3.5 hereof.
"Reserve" shall have the meaning set forth in Section 2.4 hereof.
"Repurchase Amount" shall have the meaning set forth in Section 4.2 hereof.
"Reconciliation Date" shall mean the last calendar day of each
Reconciliation Period.
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"Reconciliation Period" shall mean each calendar month of every year.
2. PURCHASE AND SALE OF RECEIVABLES.
2.1. OFFER TO SELL RECEIVABLES. During the term hereof, and provided that
there does not then exist any Event of Default or any event that with notice,
lapse of time or otherwise would constitute an Event of Default, Seller may
request that Buyer purchase receivables and Buyer may, in its sole discretion,
elect to purchase receivables. Seller shall deliver to Buyer an Invoice
Transmittal with respect to any receivable for which a request for purchase is
made. An authorized representative of Seller shall sign each Invoice
Transmittal delivered to Buyer. Buyer shall be entitled to rely on all the
information provided by Seller to Buyer on or with the Invoice Transmittal and
to rely on the signature on any Invoice Transmittal as an authorized signature
of Seller.
2.2. ACCEPTANCE OF RECEIVABLES. Buyer shall have no obligation to
purchase any receivable listed on an Invoice Transmittal. Buyer may exercise
its sole discretion in approving the credit of each Account Debtor before buying
any receivable. Upon acceptance by Buyer of all or any of the receivables
described on any Invoice Transmittal, Buyer shall pay to Seller 70(%) percent
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(or 80(%) percent on receivables with terms of 30 days or less) of the face
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amount of each receivable Buyer desires to purchase, net of deferred revenue and
offsets related to each specific Account Debtor. Such payment shall be the
"Advance" with respect to such receivable. Buyer may, from time to time, in its
sole discretion, change the percentage of the Advance. Upon Buyer's acceptance
of the receivable and payment to Seller of the Advance, the receivable shall
become a "Purchased Receivable." It shall be a condition to each Advance that
(i) all of the representations and warranties set forth in Section 6 of this
Agreement be true and correct on and as of the date of the related Invoice
Transmittal and on and as of the date of such Advance as though made at and as
of each such date, and (ii) no Event of Default or any event or condition that
with notice, lapse of time or otherwise would constitute an Event of Default
shall have occurred and be continuing, or would result from such Advance.
Notwithstanding the foregoing, in no event shall the aggregate amount of all (i)
Purchased Receivables outstanding at any time exceed TWO MILLION FIVE HUNDRED
THOUSAND DOLLARS ($2,500,000) and (ii) Advances outstanding at any time exceed
ONE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($1,750,000).
2.3. EFFECTIVENESS OF SALE TO BUYER. Effective upon Buyer's payment of
an Advance, and for and in consideration therefor and in consideration of the
covenants of this Agreement, Seller hereby absolutely sells, transfers and
assigns to Buyer, all of Seller's right, title and interest in and to each
Purchased Receivable and all monies due or which may become due on or with
respect to such Purchased Receivable. Buyer shall be the absolute owner of each
Purchased Receivable. Buyer shall have, with respect to any goods related to
the Purchased Receivable, all the rights and remedies of an unpaid seller under
the California Uniform Commercial Code and other applicable law, including the
rights of replevin, claim and delivery, reclamation and stoppage in transit.
2.4. ESTABLISHMENT OF A RESERVE. Upon the purchase by Buyer of each
Purchased Receivable, Buyer shall establish a reserve. The reserve shall be the
amount by which the face amount of the Purchased Receivable exceeds the Advance
on that Purchased Receivable (the "Reserve"); provided, the Reserve with respect
to all Purchased Receivables outstanding at any one time shall be an amount not
less than 30(%) percent (or 20(%) percent on Purchased Receivables with terms of
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30 days or less) of the Account Balance at that time and may be set at a higher
percentage at Buyer's sole discretion. The reserve shall be a book balance
maintained on the records of Buyer and shall not be a segregated fund.
3. COLLECTIONS, CHARGES AND REMITTANCES.
3.1. COLLECTIONS. In computing Finance Charges on the Obligations, all
checks and other items of payment received by Buyer (including proceeds of
Purchased Receivables and payment of Obligations in full) shall be deemed
applied by Buyer on account of the Obligations three (3) Business Days after
receipt by Buyer of immediately available funds. If Seller is in default under
this Agreement, Buyer shall apply all Collections to Seller's Obligations
hereunder in such order and manner as Buyer may determine. If an item of
collection is not honored or Buyer does not receive good funds for any reason,
the amount shall be included in the Account Balance as if the Collections had
not been received and Finance Charges under Section 3.2 shall accrue thereon.
3.2. FINANCE CHARGES. On each Reconciliation Date Seller shall pay to
Buyer a finance charge in an amount equal to 1.50(%) percent per month of the
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average daily Account Balance outstanding during the applicable Reconciliation
Period (the "Finance Charges"). Buyer shall deduct the accrued Finance Charges
from the Reserve as set forth in Section 3.5 below.
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3.3. INTENTIONALLY LEFT BLANK.
3.4. ACCOUNTING. Buyer shall prepare and send to Seller after the close
of business for each Reconciliation Period, an accounting of the transactions
for that Reconciliation Period, including the amount of all Purchased
Receivables, all Collections, Adjustments and Finance Charges. The accounting
shall be deemed correct and conclusive unless Seller makes written objection to
Buyer within thirty (30) days after the Buyer mails the accounting to Seller.
3.5. REFUND TO SELLER. Provided that there does not then exist an Event
of Default or any event or condition that with notice, lapse of time or
otherwise would constitute an Event of Default, Buyer shall refund to Seller by
check after the Reconciliation Date, the amount, if any, which Buyer owes to
Seller at the end of the Reconciliation Period according to the accounting
prepared by Buyer for that Reconciliation Period (the "Refund"). The Refund
shall be an amount equal to:
(A) (1) The Reserve as of the beginning of that Reconciliation Period,
PLUS
(2) the Reserve created for each Purchased Receivable purchased during
that Reconciliation Period, MINUS
(B) The total for that Reconciliation Period of:
(1) the (intentionally left blank);
(2) Finance Charges;
(3) Adjustments;
(4) Repurchase Amounts, to the extent Buyer has agreed to accept
payment thereof by deduction from the Refund;
(5) the Reserve for the Account Balance as of the first day of the
following Reconciliation Period in the minimum percentage set forth
in Section 2.4 hereof; and
(6) all amounts due, including professional fees and expenses, as set
forth in Section 12 for which oral or written demand has been made by Buyer to
Seller during that Reconciliation Period to the extent Buyer has agreed to
accept payment thereof by deduction from the Refund.
In the event the formula set forth in this Section 3.5 results in an amount due
to Buyer from Seller, Seller shall make such payment in the same manner as set
forth in Section 4.3 hereof for repurchases. If the formula set forth in this
Section 3.5 results in an amount due to Seller from Buyer, Buyer shall make such
payment by check, subject to Buyer's rights under Section 4.3 and Buyer's rights
of offset and recoupment.
3.6. FACILITY FEE. A fully earned, non-refundable facility fee of $20,000
shall be due upon execution of this Agreement and on an annual basis thereafter.
3.7. DUE DILIGENCE FEE. A fully earned, non-refundable due diligence fee
of $7,500 is due immediately (the "Due Diligence Fee") (previously received).
4. RECOURSE AND REPURCHASE OBLIGATIONS.
4.1. RECOURSE. Buyer's acquisition of Purchased Receivables from Seller
shall be with full recourse against Seller. In the event the Obligations exceed
the amount of Purchased Receivables and Collateral, Seller shall be liable for
any deficiency.
4.2. SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay to Buyer on
demand, the full-face amount, or any unpaid portion, of any Purchased
Receivable:
(A) which remains unpaid ninety (90) calendar days after the invoice date;
or
(B) which is owed by any Account Debtor who has filed, or has had filed
against it, any bankruptcy case, assignment for the benefit of creditors,
receivership, or insolvency proceeding or who has become insolvent (as
defined in the United States Bankruptcy Code) or who is generally not
paying its debts as such debts become due; or
(C) with respect to which there has been any breach of warranty or
representation set forth in Section 6 hereof or any breach of any covenant
contained in this Agreement; or
(D) with respect to which the Account Debtor asserts any discount,
allowance, return, dispute, counterclaim, offset, defense, right of
recoupment, right of return, warranty claim, or short payment;
together with all reasonable attorneys' and professional fees and expenses and
all court costs incurred by Buyer in collecting such Purchased Receivable and/or
enforcing its rights under, or collecting amounts owed by Seller in connection
with, this Agreement (collectively, the "Repurchase Amount").
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4.3. SELLER'S PAYMENT OF THE REPURCHASE AMOUNT OR OTHER AMOUNTS DUE BUYER.
When any Repurchase Amount or other amount owing to Buyer becomes due, Buyer
shall inform Seller of the manner of payment which may be any one or more of the
following in Buyer's sole discretion: (a) in cash immediately upon demand
therefor; (b) by delivery of substitute invoices and an Invoice Transmittal
acceptable to Buyer which shall thereupon become Purchased Receivables; (c) by
adjustment to the Reserve pursuant to Section 3.5 hereof; (d) by deduction from
or offset against the Refund that would otherwise be due and payable to Seller;
(e) by deduction from or offset against the amount that otherwise would be
forwarded to Seller in respect of any further Advances that may be made by
Buyer; or (f) by any combination of the foregoing as Buyer may from time to time
choose.
4.4. SELLER'S AGREEMENT TO REPURCHASE ALL PURCHASED RECEIVABLES. Upon and
after the occurrence of an Event of Default, Seller shall, upon Buyer's demand
(or, in the case of an Event of Default under Section 9(B), immediately without
notice or demand from Buyer) repurchase all the Purchased Receivables then
outstanding, or such portion thereof as Buyer may demand. Such demand may, at
Buyer's option, include and Seller shall pay to Buyer immediately upon demand,
cash in an amount equal to the Advance with respect to each Purchased Receivable
then outstanding together with all accrued Finance Charges, Adjustments,
attorney's and professional fees, court costs and expenses as provided for
herein, and any other Obligations. Upon receipt of payment in full of the
Obligations, Buyer shall immediately instruct Account Debtors to pay Seller
directly, and return to Seller any Refund due to Seller. For the purpose of
calculating any Refund due under this Section only, the Reconciliation Date
shall be deemed to be the date Buyer receives payment in good funds of all the
Obligations as provided in this Section 4.4.
5. POWER OF ATTORNEY. Seller does hereby irrevocably appoint Buyer and its
successors and assigns as Seller's true and lawful attorney in fact, and hereby
authorizes Buyer, regardless of whether there has been an Event of Default, (a)
to sell, assign, transfer, pledge, compromise, or discharge the whole or any
part of the Purchased Receivables; (b) to demand, collect, receive, xxx, and
give releases to any Account Debtor for the monies due or which may become due
upon or with respect to the Purchased Receivables and to compromise, prosecute,
or defend any action, claim, case or proceeding relating to the Purchased
Receivables, including the filing of a claim or the voting of such claims in any
bankruptcy case, all in Buyer's name or Seller's name, as Buyer may choose; (c)
to prepare, file and sign Seller's name on any notice, claim, assignment,
demand, draft, or notice of or satisfaction of lien or mechanics' lien or
similar document with respect to Purchased Receivables; (d) to notify all
Account Debtors with respect to the Purchased Receivables to pay Buyer directly;
(e) to receive, open, and dispose of all mail addressed to Seller for the
purpose of collecting the Purchased Receivables; (f) to endorse Seller's name on
any checks or other forms of payment on the Purchased Receivables; (g) to
execute on behalf of Seller any and all instruments, documents, financing
statements and the like to perfect Buyer's interests in the Purchased
Receivables and Collateral; and (h) to do all acts and things necessary or
expedient, in furtherance of any such purposes. If Buyer receives a check or
item which is payment for both a Purchased Receivable and another receivable,
the funds shall first be applied to the Purchased Receivable and, so long as
there does not exist an Event of Default or an event that with notice, lapse of
time or otherwise would constitute an Event of Default, the excess shall be
remitted to Seller. Upon the occurrence and continuation of an Event of
Default, all of the power of attorney rights granted by Seller to Buyer
hereunder shall be applicable with respect to all Purchased Receivables and all
Collateral.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1. RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To
induce Buyer to buy receivables and to renders its services to Seller, and with
full knowledge that the truth and accuracy of the following are being relied
upon by the Buyer in determining whether to accept receivables as Purchased
Receivables, Seller represents, warrants, covenants and agrees, with respect to
each Invoice Transmittal delivered to Buyer and each receivable described
therein, that:
(A) Seller is the absolute owner of each receivable set forth in the
Invoice Transmittal and has full legal right to sell, transfer and assign
such receivables;
(B) The correct amount of each receivable is as set forth in the Invoice
Transmittal and is not in dispute;
(C) The payment of each receivable is not contingent upon the fulfillment
of any obligation or contract, past or future and any and all obligations
required of the Seller have been fulfilled as of the date of the Invoice
Transmittal;
(D) Each receivable set forth on the Invoice Transmittal is based on an
actual sale and delivery of goods and/or services actually rendered, is
presently due and owing to Seller, is not past due or in default, has not
been previously sold, assigned, transferred, or pledged, and is free of any
and all liens, security interests and encumbrances other than liens,
security interests or encumbrances in favor of Buyer or any other division
or affiliate of Silicon Valley Bank;
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(E) There are no defenses, offsets, or counterclaims against any of the
receivables, and no agreement has been made under which the Account Debtor
may claim any deduction or discount, except as otherwise stated in the
Invoice Transmittal;
(F) Each Purchased Receivable shall be the property of the Buyer and shall
be collected by Buyer, but if for any reason it should be paid to Seller,
Seller shall promptly notify Buyer of such payment, shall hold any checks,
drafts, or monies so received in trust for the benefit of Buyer, and shall
promptly transfer and deliver the same to the Buyer;
(G) Buyer shall have the right of endorsement, and also the right to
require endorsement by Seller, on all payments received in connection with
each Purchased Receivable and any proceeds of Collateral;
(H) Seller, and to Seller's best knowledge, each Account Debtor set forth
in the Invoice Transmittal, are and shall remain solvent as that term is
defined in the United States Bankruptcy Code and the California Uniform
Commercial Code, and no such Account Debtor has filed or had filed against
it a voluntary or involuntary petition for relief under the United States
Bankruptcy Code;
(I) Each Account Debtor named on the Invoice Transmittal will not object to
the payment for, or the quality or the quantity of the subject matter of,
the receivable and is liable for the amount set forth on the Invoice
Transmittal;
(J) Seller will remit all payments for accounts to Buyer by the close of
business on each Friday along with a detailed cash receipts journal and
shall immediately notify and direct all of the Seller's Account Debtor's to
make all payments for Seller's accounts to a lockbox account established
with Buyer ("Lockbox") or to wire transfer payments to a cash collateral
account that Buyer controls. It will be considered an immediate Event of
Default if the Lockbox is not set-up and operational within 45 days from
the date of this Agreement; and
(K) All receivables forwarded to and accepted by Buyer after the date
hereof, and thereby becoming Purchased Receivables, shall comply with each
and every one of the foregoing representations, warranties, covenants and
agreements referred to above in this Section 6.1.
6.2. ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. In addition to
the foregoing warranties, representations and covenants, to induce Buyer to buy
receivables and to render its services to Seller, Seller hereby represents,
warrants, covenants and agrees that:
(A) Seller will not assign, transfer, sell, or grant, or permit any lien or
security interest in any Purchased Receivables or Collateral to or in favor
of any other party, without Buyer's prior written consent;
(B) The Seller's name, form of organization, chief executive office, and
the place where the records concerning all Purchased Receivables and
Collateral are kept is set forth at the beginning of this Agreement,
Collateral is located only at the location set forth in the beginning of
this Agreement, or, if located at any additional location, as set forth on
a schedule attached to this Agreement, and Seller will give Buyer at least
thirty (30) days prior written notice if such name, organization, chief
executive office or other locations of Collateral or records concerning
Purchased Receivables or Collateral is changed or added and shall execute
any documents necessary to perfect Buyer's interest in the Purchased
Receivables and the Collateral;
(C) Seller shall (i) pay all of its normal gross payroll for employees, and
all federal and state taxes, as and when due, including without limitation
all payroll and withholding taxes and state sales taxes; (ii) deliver at
any time and from time to time at Buyer's request, evidence satisfactory to
Buyer that all such amounts have been paid to the proper taxing
authorities; and (iii) if requested by Buyer, pay its payroll and related
taxes through a bank or an independent payroll service acceptable to Buyer.
(D) Seller has not, as of the xxxx Xxxxxx delivers to Buyer an Invoice
Transmittal, or as of the xxxx Xxxxxx accepts any Advance from Buyer, filed
a voluntary petition for relief under the United States Bankruptcy Code or
had filed against it an involuntary petition for relief;
(E) If Seller owns, holds or has any interest in, any copyrights (whether
registered, or unregistered), patents or trademarks, and licenses of any of
the foregoing, such interest has been disclosed to Buyer and is
specifically listed and identified on a schedule to this Agreement, and
Seller shall immediately notify Buyer if Seller hereafter obtains any
interest in any additional copyrights, patents, trademarks or licenses that
are significant in value or are material to the conduct of its business;
(F) Seller shall provide Buyer with a Compliance Certificate on a monthly
basis to be received by Buyer no later than 30 days following each
Reconciliation Period or on a more frequent or other basis if and as
requested by Buyer,
(G) Seller shall provide Buyer with, (i) as soon as available, but no later
than 20 days following each Reconciliation Period, a deferred revenue
report and an aged listing of accounts receivable and accounts payable;
(ii) as soon as available, but no later than 30 days following each
Reconciliation Period, a company prepared balance sheet and income
statement, prepared under GAAP, consistently applied, covering Seller's
operations during the period; (iii) as soon as available, but no later than
120 days after the last day of Seller's fiscal year, audited consolidated
financial statements prepared under GAAP,
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consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm reasonably
acceptable to Buyer; (iv) a prompt report of any legal actions pending or
threatened against Seller that could result in damages or costs to Seller;
(v) budgets, sales projections, operating plans or other financial
information Buyer reasonably requests;
(H) On request by Buyer, Seller will promptly furnish any information Buyer
may reasonably request to determine financial condition of Seller,
including, but not limited to all of Seller's Obligations, and the
condition of any of Seller's receivables which may include but are not
limited to Purchased Receivables;
(I) Seller will maintain its primary banking relationship with Buyer, which
relationship shall include Seller maintaining account balances in any
accounts at or through Buyer representing at least 75% of all account
balances of Seller at any financial institution; and
(J) Seller shall not, without Buyer's prior written consent (which shall be
a matter of its good faith business judgment), do any of the following: (i)
merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any
other transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except for the sale of finished inventory in the
ordinary course of Seller's business, and except for the sale of obsolete
or unneeded equipment in the ordinary course of business; (v) store any
inventory or other Collateral with any xxxx-xxxxxxxx or other third party;
(vi) make any loans of any money or other assets; (vii) incur any debts,
outside the ordinary course of business, which would result in a material
adverse change (described in Section 9(J)); (viii) guarantee or otherwise
become liable with respect to the obligations of another party or entity;
(ix) pay or declare any dividends on Seller's stock (except for dividends
payable solely in stock of Seller); (x) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Seller's stock; (xi) make
any change in Seller's capital structure which would result in a material
adverse change (described in Section 9(J)); or (xii) engage, directly or
indirectly, in any business other than the businesses currently engaged in
by Seller or reasonably related thereto; (xiii) dissolve or elect to
dissolve; or (xiv) have a material change in its management.
7. ADJUSTMENTS. In the event of a breach of any of the representations,
warranties, or covenants set forth in Section 6.1, or in the event any
Adjustment or dispute is asserted by any Account Debtor, Seller shall promptly
advise Buyer and shall, subject to the Buyer's approval, resolve such disputes
and advise Buyer of any adjustments. Unless the disputed Purchased Receivable
is repurchased by Seller and the full Repurchase Amount is paid, Buyer shall
remain the absolute owner of any Purchased Receivable which is subject to
Adjustment or repurchase under Section 4.2 hereof, and any rejected, returned,
or recovered personal property, with the right to take possession thereof at any
time. If such possession is not taken by Buyer, Seller is to resell it for
Buyer's account at Seller's expense with the proceeds made payable to Buyer.
While Seller retains possession of said returned goods, Seller shall segregate
said goods and xxxx them "property of Silicon Valley Bank."
8. SECURITY INTEREST. To secure the prompt payment and performance to Buyer of
all of the Obligations, Seller hereby grants to Buyer a continuing lien upon and
security interest in all of Seller's now existing or hereafter arising rights
and interest in the following, whether now owned or existing or hereafter
created, acquired, or arising, and wherever located (collectively, the
"Collateral"):
(A) All accounts, receivables, contract rights, chattel paper, instruments,
documents, letters of credit, bankers acceptances, drafts, checks, cash,
investment property, securities, and general intangibles (including,
without limitation, all claims, causes of action, deposit accounts,
guaranties, rights in and claims under insurance policies (including rights
to premium refunds), rights to tax refunds, copyrights, patents,
trademarks, rights in and under license agreements, and all other
intellectual property);
(B) All inventory, including Seller's rights to any returned or rejected
goods, with respect to which Buyer shall have all the rights of any unpaid
seller, including the rights of replevin, claim and delivery, reclamation,
and stoppage in transit;
(C) All monies, refunds and other amounts due Seller, including, without
limitation, amounts due Seller under this Agreement (including Seller's
right of offset and recoupment);
(D) All equipment, machinery, furniture, furnishings, fixtures, tools,
supplies and motor vehicles;
(E) All farm products, crops, timber, minerals and the like (including oil
and gas);
(F) All accessions to, substitutions for, and replacements of, all of the
foregoing;
(G) All books and records pertaining to all of the foregoing; and
(H) All proceeds of the foregoing, whether due to voluntary or involuntary
disposition, including insurance proceeds.
Seller is not authorized to sell, assign, transfer or otherwise convey any
Collateral without Buyer's prior written consent, except for the sale of
finished inventory in the Seller's usual course of business. Seller agrees to
sign any instruments and documents requested by Buyer to evidence, perfect, or
protect the interests of Buyer in the Collateral. Seller authorizes Buyer to
file financing statements without notice to Seller, with all appropriate
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jurisdictions, as Buyer deems appropriate, in order to perfect or protect
Buyer's interest in the Collateral. Seller agrees to deliver to Buyer the
originals of all instruments, chattel paper and documents evidencing or related
to Purchased Receivables and Collateral.
9. DEFAULT. The occurrence of any one or more of the following shall
constitute an Event of Default hereunder.
(A) Seller fails to pay any amount owed to Buyer as and when due;
(B) There shall be commenced by or against Seller any voluntary or
involuntary case under the United States Bankruptcy Code, or any assignment
for the benefit of creditors, or appointment of a receiver or custodian for
any of its assets;
(C) Seller shall become insolvent in that its debts are greater than the
fair value of its assets, or Seller is generally not paying its debts as
they become due or is left with unreasonably small capital;
(D) Any involuntary lien, garnishment, attachment or the like is issued
against or attaches to the Purchased Receivables or any Collateral;
(E) Seller shall breach any covenant, agreement, warranty, or
representation shall constitute an immediate default hereunder;
(F) Seller is not in compliance with, or otherwise is in default under, any
term of any document, instrument or agreement evidencing a debt, obligation
or liability of any kind or character of Seller, now or hereafter existing,
in favor of Buyer or any division or affiliate of Silicon Valley Bank,
regardless of whether such debt, obligation or liability is direct or
indirect, primary or secondary, joint, several or joint and several, or
fixed or contingent, together with any and all renewals and extensions of
such debts, obligations and liabilities, or any part thereof;
(G) An event of default shall occur under any guaranty executed by any
guarantor of the Obligations of Seller to Buyer under this Agreement, or
any material provision of any such guaranty shall for any reason cease to
be valid or enforceable or any such guaranty shall be repudiated or
terminated, including by operation of law;
(H) A default or event of default shall occur under any agreement between
Seller and any creditor of Seller that has entered into a subordination
agreement with Buyer;
(I) Any creditor that has entered into a subordination agreement with Buyer
shall breach any of the terms of or not comply with such subordination
agreement; or
(J) (i) There is a material adverse change in the business, operations, or
condition (financial or otherwise) of the Seller, or (ii) there is a
material impairment of the prospect of repayment of any portion of the
Obligations or (iii) there is a material impairment of the value or
priority of Buyer's security interests in the Collateral.
10. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, (1)
without implying any obligation to buy receivables, Buyer may cease buying
receivables or extending any financial accommodations to Seller; (2) all or a
portion of the Obligations shall be, at the option of and upon demand by Buyer,
or with respect to an Event of Default described in Section 9(B), automatically
and without notice or demand, due and payable in full; and (3) Buyer shall have
and may exercise all the rights and remedies under this Agreement and under
applicable law, including the rights and remedies of a secured party under the
California Uniform Commercial Code, all the power of attorney rights described
in Section 5 with respect to all Collateral, and the right to collect, dispose
of, sell, lease, use, and realize upon all Purchased Receivables and all
Collateral in any commercially reasonable manner. Seller and Buyer agree that
any notice of sale required to be given to Seller shall be deemed to be
reasonable if given five (5) days prior to the date on or after which the sale
may be held. In the event that the Obligations are accelerated hereunder,
Seller shall repurchase all of the Purchased Receivables as set forth in Section
4.4.
11. ACCRUAL OF INTEREST. If any amount owed by Seller hereunder is not paid
when due, including, without limitation, amounts due under Section 3.5,
Repurchase Amounts, amounts due under Section 12, and any other Obligations,
such amounts shall bear interest at a per annum rate equal to the per annum rate
of the Finance Charges until the earlier of (i) payment in good funds or (ii)
entry of a final judgment thereof, at which time the principal amount of any
money judgment remaining unsatisfied shall accrue interest at the highest rate
allowed by applicable law.
12. FEES, COSTS AND EXPENSES; INDEMNIFICATION. The Seller will pay to Buyer
immediately upon demand all fees, costs and expenses (including fees of
attorneys and professionals and their costs and expenses) that Buyer incurs or
may from time to time impose in connection with any of the following: (a)
preparing, negotiating, administering, and enforcing this Agreement or any other
agreement executed in connection herewith, including any amendments, waivers or
consents in connection with any of the foregoing, (b) any litigation or dispute
(whether instituted by Buyer, Seller or any other person) in any way relating to
the Purchased Receivables, the Collateral, this Agreement or any other agreement
executed in connection herewith or therewith, (c) enforcing any
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rights against Seller or any guarantor, or any Account Debtor, (d) protecting or
enforcing its interest in the Purchased Receivables or the Collateral, (e)
collecting the Purchased Receivables and the Obligations, and (f) the
representation of Buyer in connection with any bankruptcy case or insolvency
proceeding involving Seller, any Purchased Receivable, the Collateral, any
Account Debtor, or any guarantor. Seller shall indemnify and hold Buyer
harmless from and against any and all claims, actions, damages, costs, expenses,
and liabilities of any nature whatsoever arising in connection with any of the
foregoing.
13. SEVERABILITY, WAIVER, AND CHOICE OF LAW. In the event that any
provision of this Agreement is deemed invalid by reason of law, this Agreement
will be construed as not containing such provision and the remainder of the
Agreement shall remain in full force and effect. Buyer retains all of its
rights, even if it makes an Advance after an Event of Default. If Buyer waives
an Event of Default, it may enforce a later Event of Default. Any consent or
waiver under, or amendment of, this Agreement must be in writing. Nothing
contained herein, or any action taken or not taken by Buyer at any time, shall
be construed at any time to be indicative of any obligation or willingness on
the part of Buyer to amend this Agreement or to grant to Seller any waivers or
consents. This Agreement has been transmitted by Seller to Buyer at Buyer's
office in the State of California and has been executed and accepted by Buyer in
the State of California. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of California.
14. LOCKBOX ACCOUNT COLLECTION SERVICES. Seller shall enter into a three
party agreement (the "Lockbox Agreement") with Buyer and a lockbox provider (the
"Lockbox Provider"). The Lockbox Agreement and Lockbox Provider shall be
acceptable to Buyer. Seller shall use the lockbox address as the payment
address on all invoices issued by Seller and shall direct all its Account
Debtors to remit their payments to the lockbox address. The Lockbox Agreement
shall provide that the Lockbox Provider shall remit all collections received in
the lockbox to Buyer. Upon Buyer's receipt of such collections, and provided
that there does not then exist an Event of Default or event that with notice,
lapse or time or otherwise would constitute an Event of Default, and subject to
Buyer's rights in the Collateral, Buyer agrees to remit promptly to Seller the
amount of the receivables collections it receives with respect to receivables
other than Purchased Receivables. It is understood and agreed by Seller that
this Section does not impose any affirmative duty on Buyer to do any act other
than to turn over such amounts. All such receivables and collections are
Collateral and in the event of Seller's default hereunder, Buyer shall have no
duty to remit collections of Collateral and may apply such collections to the
obligations hereunder and Buyer shall have the rights of a secured party under
the California Uniform Commercial Code.
15. NOTICES. Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Seller or to Buyer, as the case may be, at its
addresses set above.
Subrogation and Similar Rights. Notwithstanding any other provision of this
Agreement or any other document related to this Agreement, until payment to
Buyer in full and performance of all Obligations, each Seller irrevocably waives
all rights that it may have at law or in equity (including, without limitation,
any law subrogating the Seller to the rights of Buyer under this Agreement) to
seek contribution, indemnification, or any other form of reimbursement from any
other Seller, or any other entity now or hereafter primarily or secondarily
liable for any of the Obligations, for any payment made by the Seller with
respect to the Obligations in connection with this Agreement or otherwise and
all rights that it might have to benefit from, or to participate in, any
security for the Obligations as a result of any payment made by the Seller with
respect to the Obligations in connection with this Agreement or otherwise. Any
agreement providing for indemnification, reimbursement or any other arrangement
prohibited under this Section 16 shall be null and void. If any payment is made
to a Seller in contravention of this Section 16, such Seller shall hold such
payment in trust for Buyer and such payment shall be promptly delivered to Buyer
for application to the Obligations, whether matured or unmatured.
Waivers of Notice. Each Seller waives notice of acceptance hereof; notice of
the existence, creation or acquisition of any of the Obligations; notice of an
Event of Default; notice of the amount of the Obligations outstanding at any
time; notice of intent to accelerate; notice of acceleration; notice of any
adverse change in the financial condition of any other Seller or of any other
fact that might increase the Seller's risk; presentment for payment; demand;
protest and notice thereof as to any instrument; default; and all other notices
and demands to which the Seller would otherwise be entitled. Each Seller waives
any defense arising from any defense of any other Seller, or by reason of the
cessation from any cause whatsoever of the liability of any other Seller.
Buyer's failure at any time to require strict performance by any Seller of any
provision of this Agreement shall not waive, alter or diminish any right of
Buyer thereafter to demand strict compliance and performance therewith. Nothing
contained herein shall prevent
Page 8
Buyer from foreclosing on the lien of any deed of trust, mortgage or other
security instrument, or exercising any rights available thereunder, and the
exercise of any such rights shall not constitute a legal or equitable discharge
of any Seller. Each Seller also waives any defense arising from any act or
omission of Buyer that changes the scope of the Seller's risks hereunder. Each
Seller hereby waives any right to assert against Buyer any defense (legal or
equitable), setoff, counterclaim, or claims that such Seller individually may
now or hereafter have against another Seller or any other entity liable to
Seller with respect to the Obligations in any manner or whatsoever until the
Obligations are paid in full to Buyer.
Subrogation Defenses. Each Seller waives the benefits, if any, of any statutory
or common law rule that may permit a borrower to assert any defenses of a surety
or guarantor, or that may give a borrower the right to require a senior creditor
to marshal assets, and Seller agrees that it shall not assert any such defenses
or rights.
Right to Settle, Release. The liability of Seller hereunder shall not be
diminished by (i) any agreement, understanding or representation that any of the
Obligations is or was to be guaranteed by another entity or secured by other
property, or (ii) any release or unenforceability, whether partial or total, or
rights, if any, which Seller may now or hereafter have against any other entity,
including another Seller, or property with respect to any of the Obligations.
Without notice to any Seller and without affecting the liability of any Seller
hereunder, Buyer may (i) compromise, settle, renew, extend the time for payment,
change the manner or terms of payment, discharge the performance of, decline to
enforce, or release all or any of the Obligations with respect to a Seller, (ii)
grant other indulgences to a Seller in respect of the Obligations, (iii) modify
in any manner any documents, relating to the Obligations with respect to a
Seller, (iv) release, surrender or exchange any deposits or other property
securing the Obligations, whether pledged by a Seller or any other entity, or
(v) compromise, settle renew, or extend the time for payment, discharge the
performance of, decline to enforce, or release all or any obligations of any
guarantor, endorser or other entity who is now or may hereafter be liable with
respect to any of the Obligations.
16. JURY TRIAL. SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING
WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT;
AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED
FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND
KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.
17. TERM AND TERMINATION. The term of this Agreement shall be for one (1)
year from the date hereof, and from year to year thereafter unless terminated in
writing by Buyer or Seller. Seller and Buyer shall each have the right to
terminate this Agreement at any time. Notwithstanding the foregoing, any
termination of this Agreement shall not affect Buyer's security interest in the
Collateral and Buyer's ownership of the Purchased Receivables, and this
Agreement shall continue to be effective, and Buyer's rights and remedies
hereunder shall survive such termination, until all transactions entered into
and Obligations incurred hereunder or in connection herewith have been completed
and satisfied in full.
18. TITLES AND SECTION HEADINGS. The titles and section headings used
herein are for convenience only and shall not be used in interpreting this
Agreement.
19. OTHER AGREEMENTS. The terms and provisions of this Agreement shall not
adversely affect the rights of Buyer or any other division or affiliate of
Silicon Valley Bank under any other document, instrument or agreement. The
terms of such other documents, instruments and agreements shall remain in full
force and effect notwithstanding the execution of this Agreement. In the event
of a conflict between any provision of this Agreement and any provision of any
other document, instrument or agreement between Seller on the one hand, and
Buyer or any other division or affiliate of Silicon Valley Bank on the other
hand, Buyer shall determine in its sole discretion which provision shall apply.
Seller acknowledges specifically that any security agreements, liens and/or
security interests currently securing payment of any obligations of Seller owing
to Buyer or any other division or affiliate of Silicon Valley Bank also secure
Seller's obligations under this Agreement, and are valid and subsisting and are
not adversely affected by execution of this Agreement. Seller further
acknowledges that (a) any collateral under other outstanding security agreements
or other documents between Seller and Buyer or any other division or affiliate
of Silicon Valley Bank secures the obligations of Seller under this Agreement
and (b) a default by Seller under this Agreement constitutes a default under
other outstanding agreements between Seller and Buyer or any other division or
affiliate of Silicon Valley Bank.
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IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement on the
day and year above written.
SELLER: RAPIDTRON, INC., A DELAWARE CORPORATION
By /s/ Xxxx X. Xxxxx
Title President/CEO
RAPIDTRON, INC., A NEVADA CORPORATION
By /s/ Xxxx X. Xxxxx
Title President/CEO
BUYER: SILICON VALLEY BANK
By________________________________________
Title ______________________________________
Effective Date: ______________________________
Page 10
EXHIBIT "A"
TO FINANCING STATEMENT AND SECURITY AGREEMENT
This FINANCING STATEMENT and SECURITY AGREEMENT covers the following types or
items of property (in addition to, and without limiting the types of property
set forth on page 1 hereof):
A) All accounts, receivables, contract rights, chattel paper, instruments,
documents, letters of credit, bankers acceptances, drafts, checks, cash,
investment property, securities, deposit accounts, and general intangibles
(including, without limitation, all claims, causes of action, guaranties,
rights in and claims under insurance policies (including rights to premium
refunds), rights to tax refunds, copyrights, patents, trademarks, rights in
and under license agreements, and all other intellectual property);
B) All inventory, including Seller's rights to any returned or rejected goods,
with respect to which Buyer shall have all the rights of any unpaid seller,
including the rights of replevin, claim and delivery, reclamation, and
stoppage in transit;
C) All monies, refunds and other amounts due Seller, including, without
limitation, amounts due Seller under this Agreement (including Seller's
right of offset and recoupment);
D) All equipment, machinery, furniture, furnishings, fixtures, tools, supplies
and motor vehicles;
E) All farm products, crops, timber, minerals and the like (including oil and
gas);
F) All accessions to, substitutions for, and replacements of, all of the
foregoing;
G) All books and records pertaining to all of the foregoing; and
H) All proceeds of the foregoing, whether due to voluntary or involuntary
disposition, including insurance proceeds.
INITIALS JAC
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