EXHIBIT 99.12
ACCOUNTS RECEIVABLE FINANCING AGREEMENT
This ACCOUNTS RECEIVABLE FINANCING AGREEMENT is entered into this ___
day of _________, 2002 by and among (i) SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 0000 Xxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production office located
at One Xxxxxx Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, doing business under the name "Silicon Valley East" (FAX
000-000-0000) ("Bank") and (ii) EXCHANGE APPLICATIONS, INC. d/b/a Xchange, Inc.,
Xxx Xxxxxxx Xxxxx, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 and EXSTATIC
SOFTWARE, INC., formerly known as Xxxx Xxxxxxx, Inc., 0000 Xxxxxxxxx Xxx
Xxxxxxx, Xxxxxxxxxx 00000 (FAX 000-000-0000) (individually and collectively,
"Borrower") and provides the terms on which Bank shall lend to Borrower and
Borrower shall repay Bank. The parties agree as follows:
1. DEFINITIONS. In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ACCOUNT BALANCE" is the aggregate outstanding Advances made hereunder.
"ACCOUNT DEBTOR" is as defined in the Code and shall include, without
limitation, any person liable on any Financed Receivable, such as, a guarantor
of the Financed Receivable and any issuer of a letter of credit or banker's
acceptance.
"ADJUSTMENTS" are all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor for any Financed Receivable.
"ADVANCE" is defined in Section 2.2.
"ADVANCE RATE" is eighty percent (80.0%), net of any offsets related to
each specific Account Debtor, or such other percentage as Bank establishes under
Section 2.2.
"APPLICABLE RATE" is a per annum rate equal to the "Prime Rate" plus
two and one half percent (2.50%).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"CODE" is the Uniform Commercial Code as adopted by The Commonwealth of
Massachusetts (presently, Mass. Gen. Laws, Ch. 106), as may be amended and in
effect from time to time.
"COLLATERAL" is attached as EXHIBIT "A".
"COLLATERAL HANDLING FEE" is defined in Section 4.4.
"COLLECTIONS" are all funds received by Bank from or on behalf of an
Account Debtor for Financed Receivables.
"COMPLIANCE CERTIFICATE" is attached as EXHIBIT "B".
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another Person such as an
obligation directly or indirectly guaranteed, endorsed, co-made, discounted or
sold with recourse by that Person, or for which that Person is directly or
indirectly liable; (ii) any obligations for undrawn letters of credit for the
account of that Person; and (iii) all obligations from any interest rate,
currency or commodity swap agreement, interest rate cap or collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices; but
"Contingent Obligation" does not include endorsements in the ordinary course of
business. The amount of a Contingent Obligation is the stated or determined
amount of the primary obligation for which the Contingent Obligation is made or,
if not determinable, the maximum reasonably anticipated liability for it
determined by the Person in good faith; but the amount may not exceed the
maximum of the obligations under the guarantee or other support arrangement.
"DEFERRED REVENUE" is all amounts received in advance of performance
under contracts and not yet recognized as revenue.
"EARLY TERMINATION FEE" is defined in Section 5.3.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization in accordance with GAAP. For the purposes of calculating EBITDA
hereunder, Borrower's non-cash restructuring charges for such period shall not
be included as an expense.
"EVENT OF DEFAULT" is defined in Section 10.
"FACILITY AMOUNT" is Four Million Dollars ($4,000,000.00).
"FACILITY FEE" is defined in Section 4.3.
"FACILITY PERIOD" is the period beginning on this date and continuing
until one year from the date of this Agreement, unless the period is terminated
sooner by Bank with notice to Borrower or by Borrower pursuant to Section 5.3.
"FINANCE CHARGES" is defined in Section 4.2.
"FINANCED RECEIVABLES" are all those accounts, receivables, chattel
paper, instruments, contract rights, documents, general intangibles, letters of
credit, drafts, bankers acceptances, and rights to payment, and all proceeds,
including their proceeds (collectively "receivables"), which Bank finances and
make an Advance. A Financed Receivable stops being a Financed Receivable (but
remains Collateral) when the Advance made for the Financed Receivable has been
finally paid.
"FINANCED RECEIVABLE BALANCE" is the total outstanding amount, at any
time, of all Financed Receivables.
"GAAP" is generally accepted accounting principles as adopted by the
Financial Accounting Standards Board.
"GOOD FAITH DEPOSIT" is described in Section 4.8.
"GUARANTIED LOAN" is described in Section 3.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
-2-
"INELIGIBLE RECEIVABLE" is any accounts receivable:
(a) that is unpaid (90) calendar days after the invoice
date; or
(b) that is owed by an Account Debtor that has filed, or
has had filed against it, any bankruptcy case,
assignment for the benefit of creditors,
receivership, or Insolvency Proceeding or who has
become insolvent (as defined in the United States
Bankruptcy Code) or who is generally not paying its
debts as they become due; or
(c) for which there has been any breach of warranty or
representation in Section 7 or any breach of any
covenant in this Agreement; or
(d) for which the Account Debtor asserts any discount,
allowance, return, dispute, counterclaim, offset,
defense, right of recoupment, right of return,
warranty claim, or short payment, unless cured by an
Adjustment.
"INSOLVENCY PROCEEDING" are proceedings by or against any person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"INVOICE TRANSMITTAL" shows accounts receivable which Bank may finance
and, for each receivable, includes the Account Debtor's, name, address, invoice
amount, invoice date and invoice number and is signed by Borrower's authorized
representative.
"LOCKBOX" is described in Section 7.3(J).
"MINIMUM FINANCE CHARGE" is a minimum monthly Finance Charge of
$4,000.00 payable to the Bank.
"OBLIGATIONS" are all advances, liabilities, obligations, covenants and
duties owing, arising, due or payable by Borrower to Bank now or later under
this Agreement or any other document, instrument or agreement, account
(including those acquired by assignment) primary or secondary, such as all
Advances, the Guarantied Loan, Finance Charges, Facility Fee, Early Termination
Fee, Collateral Handling Fee, interest, fees, expenses, professional fees and
attorneys' fees, or other amounts now or hereafter owing by Borrower to Bank.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "Prime Rate," even if it
is not Bank's lowest rate.
"RECONCILIATION DAY" is the last calendar day of each month.
"RECONCILIATION PERIOD" is each calendar month.
"SCHEDULE" is the schedule of exceptions attached hereto.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank,
pursuant to a subordination agreement entered into between the Bank, the
Borrower and the subordinated creditor), on terms acceptable to Bank.
"SUBSIDIARY" is for any Person, joint venture, or any other business
entity of which more than 50% of the voting stock or other equity interests is
owned or controlled, directly or indirectly, by the Person or one or more
Affiliates of the Person.
-3-
2. FINANCING OF ACCOUNTS RECEIVABLE.
2.1. REQUEST FOR ADVANCES. During the Facility Period, Borrower may
offer accounts receivable to Bank and request that the Bank finance such
accounts receivables, if there is not an Event of Default. Borrower will deliver
an Invoice Transmittal for each accounts receivable it offers. Bank may rely on
information on or with the Invoice Transmittal.
2.2. ACCEPTANCE OF ACCOUNTS RECEIVABLE. Subject to the terms of this
Agreement, Bank may, in its sole discretion, finance accounts receivable. Bank
may approve any Account Debtor's credit before agreeing to finance any accounts
receivable. When Bank agrees to finance a receivable, it will extend credit to
Borrower in an amount up to the result of the Advance Rate multiplied by the
face amount of the receivable (the "Advance"). Bank may, in its discretion,
change the percentage of the Advance Rate. When Bank makes an Advance, the
receivable becomes a "Financed Receivable." All representations and warranties
in Section 7 must be true as of the date of the Invoice Transmittal and of the
Advance and no Event of Default exists or would occur as a result of the
Advance. The aggregate amount of all Financed Receivables outstanding at any
time may not exceed the Facility Amount. Although Bank's obligation to make an
Advance is discretionary in each instance, Bank acknowledges that (subject to
verifications and other terms and conditions provided herein with respect to
Account Debtors generally), it is the usual practice of Bank to finance accounts
receivable due and owing from those Account Debtors that are Fortune 1000 type
companies.
3. GUARANTIED LOAN. The Bank has made a loan to the Borrower pursuant to a
certain Amended and Restated Loan and Security Agreement of even date herewith
(the "Guarantied Loan").
4. COLLECTIONS, FINANCE CHARGES, REMITTANCES AND FEES. The Obligations
shall be subject to the following fees and Finance Charges. Fees and Finance
Charges may, in Bank's discretion, be charged as an Advance, and shall
thereafter accrue fees and Finance Charges as described below. Bank may, in its
discretion, charge fees and Finance Charges to Borrower's deposit account
maintained with Bank.
4.1. COLLECTIONS. Collections will be credited to the Financed
Receivables Balance, but if there is an Event of Default, Bank may apply
Collections to the Obligations in any order it chooses. If Bank receives a
payment for both a Financed Receivable and a non Financed Receivable, the funds
will first be applied to the Financed Receivable and, if there is not an Event
of Default, the excess will be remitted to the Borrower, subject to Section 4.7.
4.2. FINANCE CHARGES. In computing Finance Charges on the Obligations,
all Collections received by Bank shall be deemed applied by Bank on account of
the Obligations three (3) Business Days after receipt of the Collections.
Borrower will pay a finance charge (the "Finance Charge"), which is equal to the
greater of (i) the Applicable Rate multiplied by the number of days in the
Reconciliation Period multiplied by the outstanding average daily Financed
Receivable Balance for that Reconciliation Period, or (ii) the Minimum Finance
Charge.
4.3. FACILITY FEE. A fully earned, non-refundable facility fee of Forty
Thousand Dollars ($40,000.00) is due upon execution of this Agreement.
4.4. COLLATERAL HANDLING FEE. On each Reconciliation Day, Borrower will
pay to Bank a collateral handling fee, equal to 0.25% per month of the average
daily Financed Receivable Balance outstanding during the applicable
Reconciliation Period. During the continuance of an Event of Default, the
Collateral Handling Fee will increase an additional 0.375% effective immediately
before the Event of Default.
4.5. ACCOUNTING. After each Reconciliation Period, Bank will provide an
accounting of the transactions for that Reconciliation Period, including the
amount of all Financed Receivables, all Collections, Adjustments, Finance
Charges, Collateral Handling Fee and the Facility Fee. If Borrower does not
object to the accounting in writing within thirty (30) days it is presumed
correct. All Finance Charges and other interest and fees are calculated on the
basis of a 360 day year and actual days elapsed.
-4-
4.6. DEDUCTIONS. Bank may deduct fees, Finance Charges and other
amounts due pursuant to this Agreement from any Advances made or Collections
received by Bank.
4.7. ACCOUNT COLLECTION SERVICES. All Borrower's receivables are to be
paid to the same address/or party and Borrower and Bank must agree on such
address. If Bank collects all receivables and there is not an Event of Default
or an event that with notice or lapse of time will be an Event of Default, not
later than three (3) days of receipt of those collections, Bank will give
Borrower the receivables collections it receives for receivables other than
Financed Receivables and/or amount in excess of the amount for which Bank has
made an Advance to Borrower, less any amount due to Bank, such as the Finance
Charge, the Facility Fee, other fees and expenses, or otherwise. This Section
does not impose any affirmative duty on Bank to do any act other than to turn
over amounts. All receivables and collections are Collateral and if an Event of
Default occurs, Bank need not remit collections of Collateral and may apply them
to the Obligations.
4.8. GOOD FAITH DEPOSIT. Borrower has paid to Bank a Good Faith Deposit
of $10,000.00 to initiate Bank's due diligence review process. Any portion of
the deposit not utilized to pay expenses will be applied to the Facility Fee.
5. REPAYMENT OF OBLIGATIONS.
5.1. REPAYMENT ON MATURITY. Borrower will repay each Advance on the
earliest of: (a) payment of the Financed Receivable in respect which the Advance
was made, (b) the Financed Receivable becomes an Ineligible Receivable, (c) when
any Adjustment is made to the Financed Receivable (but only to the extent of the
Adjustment if the Financed Receivable is not otherwise an Ineligible
Receivable), or (d) the last day of the Facility Period (including any early
termination). Each payment will also include all accrued Finance Charges on the
Advance and all other amounts due hereunder.
5.2. REPAYMENT ON EVENT OF DEFAULT. When there is an Event of Default,
Borrower will, if Bank demands (or, in an Event of Default under Section 10(B),
immediately without notice or demand from Bank) repay all of the Advances. The
demand may, at Bank's option, include the Advance for each Financed Receivable
then outstanding and all accrued Finance Charges, the Early Termination Fee,
Collateral Handling Fee, attorneys and professional fees, court costs and
expenses, and any other Obligations.
5.3. EARLY TERMINATION OF AGREEMENT. This Agreement may be terminated
prior to the last day of the Facility Period as follows: (i) by Borrower,
effective three Business Days after written notice of termination is given to
Bank; or (ii) by Bank at any time after the occurrence and during the
continuance of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Bank (after the occurrence and during the
continuance of an Event of Default) or Borrower, Borrower shall pay to Bank a
termination fee in an amount equal to $50,000.00 (the "Early Termination Fee").
The termination fee shall be due and payable on the effective date of
termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations. Notwithstanding the foregoing, Bank
agrees to waive the Early Termination Fee if Bank agrees to refinance the
Obligations (in its sole and exclusive discretion) prior to the last day of the
Facility Period.
6. POWER OF ATTORNEY. Borrower irrevocably appoints Bank and its
successors and assigns its attorney-in-fact and authorizes Bank, regardless of
whether there has been an Event of Default, to:
(A) sell, assign, transfer, pledge, compromise, or discharge
all or any part of the Financed Receivables:
(B) demand, collect, xxx, and give releases to any Account
Debtor for monies due and compromise, prosecute, or defend any action,
claim, case or proceeding about the Financed Receivables, including
filing a claim or voting a claim in any bankruptcy case in Bank's or
Borrower's name, as Bank chooses:
-5-
(C) prepare, file and sign Borrower's name on any notice,
claim, assignment, demand, draft, or notice of or satisfaction of lien
or mechanics' lien or similar document;
(D) notify all Account Debtors to pay Bank directly;
(E) receive, open, and dispose of mail addressed to Borrower;
(F) endorse Borrower's name on check or other instruments (to
the extent necessary to pay amounts owed pursuant to this Agreement);
and
(G) execute on Borrower's behalf any instruments, documents,
financing statements to perfect Bank's interests in the Financed
Receivables and Collateral and do all acts and things necessary or
expedient, as determined solely and exclusively by the Bank, to
protect, preserve, and otherwise enforce the Bank's rights and remedies
under this Agreement, as directed by the Bank.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
for each Financed Receivable:
(A) Borrower is the owner with legal right to sell, transfer
and assign it;
(B) The correct amount is on the Invoice Transmittal and is
not disputed;
(C) Payment is not contingent on any obligation or contract
and it has fulfilled all its obligations as of the Invoice Transmittal
date, provided, however, certain obligations may be outstanding
pursuant to maintenance contracts with the Account Debtor which have
been disclosed to Bank; provided, however, not more than 40% of the
aggregate amount the Financed Receivables outstanding shall be subject
to maintenance contracts;
(D) It is based on an actual sale and delivery of goods and/or
services rendered, due to Borrower, it is not more than ninety (90)
days past the invoice date or in default, has not been previously sold,
assigned, transferred, or pledged and is free of any liens, security
interests and encumbrances;
(E) There are no defenses, offsets, counterclaims or
agreements for which the Account Debtor may claim any deduction or
discount;
(F) Borrower reasonably believes no Account Debtor is
insolvent or subject to any Insolvency Proceedings;
(G) Borrower has not filed or had filed against it Insolvency
Proceedings and does not anticipate any filing;
(H) Bank has the right to endorse and/ or require Borrower to
endorse all payments received on Financed Receivables and all proceeds
of Collateral; and
(I) No representation, warranty or other statement of Borrower
with respect to such Financed Receivables in any certificate or written
statement given to Bank contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statement
contained in the certificates or statement not materially misleading.
7.2. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants as follows:
(A) Borrower is duly existing and in good standing in its
state of formation and qualified and
-6-
licensed to do business in, and in good standing in, each jurisdiction
for which the failure to so qualify would have a material adverse
effect on Borrower's business or operations. The execution, delivery
and performance of this Agreement has been duly authorized, and does
not conflict with Borrower's organizational documents or constitute an
Event of Default under any material agreement by which Borrower is
bound. Borrower is not in default under any material agreement to which
or by which it is bound.
(B) Borrower has good title to the Collateral. All inventory
is in all material respects of good and marketable quality, free from
material defects.
(C) Except as set forth on the Schedule hereto, there are no
material actions or proceedings pending or, to Borrower's knowledge,
threatened by or against Borrower or any Subsidiary of Borrower.
(D) All consolidated financial statements for Borrower and any
Subsidiary of Borrower delivered to Bank fairly present in all material
respects Borrower's consolidated financial condition and Borrower's
consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the
date of the most recent financial statements submitted to Bank.
(E) Borrower is generally able to pay its debts (including
trade debts) as they mature.
(F) No representation, warranty or other statement of Borrower
in any certificate or written statement given to Bank contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained in the certificates or
statements not materially misleading.
(G) Borrower is not an "investment company" or a company
"controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations X, T and U of the
Federal Reserve Board of Governors). Borrower has complied with the
Federal Fair Labor Standards Act. Borrower has not violated any laws,
ordinances or rules, for which the failure to comply with would have a
material adverse effect on Borrower's business or operations. None of
Borrower's properties or assets has been used by Borrower, to the best
of Borrower's knowledge, by previous persons, in disposing, producing,
storing, treating, or transporting any hazardous substance other than
legally. Borrower has timely filed all required tax returns and paid,
or made adequate provision to pay, all taxes. Borrower has obtained all
consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all government authorities for
which the failure to so obtain would have a material adverse effect on
Borrower's business or operations.
7.3. AFFIRMATIVE COVENANTS. Borrower will do all of the following:
(A) Maintain its corporate existence and good standing in its
jurisdiction of incorporation and maintain its qualification in each
jurisdiction for which the failure to so qualify would have a material
adverse effect on Borrower's business or operations.
(B) Pay all its taxes including gross payroll, withholding and
sales taxes when due and will deliver satisfactory evidence of payment
if requested, except for those taxes being contested in good faith for
which Borrower maintains adequate reserves in accordance with GAAP.
(C) Provide a written report within sixty (60) days after the
invoice date respecting any Financed Receivable (or as and when
otherwise directed by the Bank), if payment of any Financed Receivable
does not occur by its due date and include, if known, the reasons for
the delay.
-7-
(D) Borrower shall deliver to Bank: (i) as soon as available,
but no later than thirty(30) days after the last day of each month, a
company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during the period, in a
form acceptable to Bank and certified Borrower; (ii) as soon as
available, but no later than one hundred twenty (120) days after the
end of Borrower's fiscal year or with respect to Borrower's 2001
statements, by May 15, 2002, audited consolidated financial statements
prepared under GAAP, consistently applied, together with an unqualified
opinion on the financial statements from an independent certified
public accounting firm acceptable to Bank (provided, however, Bank
acknowledges that Borrower's fiscal year 2001 statement will have a
qualification); (iii) within five (5) days of filing, copies of all
statements, reports and notices made available to Borrower's security
holders or to any holders of Subordinated Debt and all reports on Form
10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
and (iv) budgets, sales projections, operating plans or other financial
information Bank requests.
(E) Borrower shall, at all times insure its tangible personal
property Collateral in the amount of not less than Ten Million Dollars
($10,000,000.00) and carry such other business insurance, with insurers
reasonably acceptable to Bank, in such form and amounts as Bank may
reasonably require, and Borrower shall provide evidence of such
insurance to Bank, so that Bank is satisfied that such insurance is, at
all times, in full force and effect. All such insurance policies shall
name Bank as an additional loss payee, and shall contain a lenders loss
payee endorsement in form reasonably acceptable to Bank. Upon receipt
of the proceeds of any such insurance, Bank shall apply such proceeds
in reduction of the Obligations as Bank shall determine in its sole
discretion, except that, provided no Event of Default has occurred and
is continuing, Bank shall release to Borrower insurance proceeds with
respect to equipment totaling less than $100,000, which shall be
utilized by Borrower for the replacement of the equipment with respect
to which the insurance proceeds were paid. Bank may require reasonable
assurance that the insurance proceeds so released will be so used. If
Borrower fails to provide or pay for any insurance, Bank may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall
promptly deliver to Bank copies of all reports made to insurance
companies.
(F) Execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security
interest in the Collateral or to effect the purposes of this Agreement.
(G) Provide Bank with a Compliance Certificate no later than
thirty (30) days following each quarter end or as requested by Bank.
(H) Provide Bank with, as soon as available, but no later than
thirty (30) days following each fiscal quarter, a company prepared
balance sheet and income statement, prepared under GAAP, consistently
applied, covering Borrower's operations during the period together with
an aged listing of accounts receivables and accounts payable. All of
the foregoing shall be in form and substance reasonably satisfactory to
the Bank.
(I) Provide Bank with, as soon as available, but no later than
thirty (30) days following each month, a schedule of Deferred Revenue.
(J) Immediately notify, transfer and deliver to Bank all
collections Borrower receives for Financed Receivables (and, as and
when required hereunder, for all receivables).
(K) Borrower shall direct each Account Debtor (and each
depository institution where proceeds of accounts receivable are on
deposit) to make payments with respect to all receivables to a lockbox
account established with the Bank ("Lockbox") or to wire transfer
payments to a cash collateral account that Bank controls, as and when
directed by the Bank from time to time, at its option and at the sole
and exclusive discretion of the Bank.
-8-
(L) Borrower will allow Bank to audit Borrower's Collateral,
including, but not limited to, Borrower's Accounts and accounts
receivable, at Borrower's expense, no later than ninety (90) days after
the execution of this Agreement and annually thereafter, upon
reasonable notice. Provided, however, if an Event of Default has
occurred and is continuing, Bank may audit Borrower's Collateral,
including, but not limited to, Borrower's Accounts and accounts
receivable at Bank's sole and exclusive discretion and without
notification and authorization from Borrower.
(M) Borrower shall have EBITDA of not less than $1.00 for the
quarter ending June 30, 2002 and each quarter thereafter.
(N) Maintain its primary operating and depository accounts
with Bank.
7.4. NEGATIVE COVENANTS. Except as disclosed on the Schedule, Borrower
will not do any of the following without Bank's prior written consent:
(A) Assign, transfer, sell or grant, or permit any lien or
security interest in the Collateral, except for transfers (i) of
inventory in the ordinary course of business and (ii) of worn-out or
obsolete equipment.
(B) Create, incur, assume, or be liable for any indebtedness
for borrowed money other than indebtedness to Bank or Subordinated
Debt.
(C) Directly or indirectly enter into or permit to exist any
material transaction with any affiliate or Subsidiary of Borrower or
make any distributions to any affiliate or Subsidiary, except for
transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a
nonaffiliated person. Notwithstanding the foregoing, Borrower may make
transfers to Exchange Applications Securities Corporation.
(D) Merge or consolidate, or permit any of its Subsidiaries to
merge or consolidate, with any other Person, or acquire, or permit any
of its Subsidiaries to acquire, all or substantially all of the capital
stock or property of another Person. Notwithstanding the foregoing, a
Subsidiary may merge or consolidate into another Subsidiary or into
Borrower.
(E) Become an "investment company" or a company controlled by
an "investment company," under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to
purchase or carry margin stock, or use the proceeds of any Advance for
that purpose; fail to meet the minimum funding requirements of ERISA,
permit a Reportable Event or Prohibited Transaction, as defined in
ERISA, to occur; fail to comply with the Federal Fair Labor Standards
Act or violate any other law or regulation for which the failure to so
comply would have a material adverse effect on Borrower's business or
operations, or permit any of its Subsidiaries to do so.
(F) Without at least thirty (30) days prior written notice,
relocate its principal executive office or add any new offices or
business locations or keep any Collateral in any additional locations,
or (ii) change its state of formation, or (iii) change its
organizational structure, or (iv) change its legal name, or (v) change
any organizational number (if any) assigned by its state of formation.
(G) Keep any Collateral in the possession of any third party
bailee (such as at a warehouse). In the event that Borrower, after the
date hereof, intends to store or otherwise deliver any Collateral to
such a bailee, then Borrower shall receive the prior written consent of
Bank and such bailee must acknowledge in writing that the bailee is
holding such Collateral for the benefit of Bank.
-9-
(H) Borrower agrees that any disposition of the Collateral in
violation of this Agreement, by either the Borrower or any other
Person, shall be deemed to violate the rights of the Bank under the
Code.
8. ADJUSTMENTS. If any Account Debtor asserts a discount, allowance,
return, offset, defense, warranty claim, or the like on a Financed
Receivable (an "Adjustment") or if Borrower breaches any of the
representations, warranties or covenants set forth in Section 7,
Borrower will promptly advise Bank. Borrower will resell any rejected,
returned, or recovered personal property for Bank, at Borrower's
expense, and pay proceeds to Bank. While Borrower has returned goods
that are Borrower property, Borrower will segregate and xxxx them
"Subject to a Security Interest on behalf of Silicon Valley Bank." Bank
has a security interest in the Financed Receivables and until receipt
of payment, has the right to take possession of any rejected, returned,
or recovered personal property.
9. SECURITY INTEREST. Borrower grants Bank a continuing security interest
in all presently existing and later acquired Collateral to secure all
Obligations and performance of each of Borrower's duties under this Agreement.
Any security interest shall be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral.
10. EVENTS OF DEFAULT. Any one or more of the following is an Event of
Default.
(A) Borrower fails to pay any amount owed to Bank when due;
(B) Borrower files or has filed against it any Insolvency
Proceedings or any assignment for the benefit of creditors, or
appointment of a receiver or custodian for any of its assets;
(C) Borrower becomes insolvent or is generally not paying its
debts as they become due;
(D) Any involuntary lien, garnishment, attachment attaches to
the Financed Receivables or any involuntary lien, garnishment,
attachment in excess of $100,000 attaches to any other Collateral or
the service of process upon Bank seeking to attach, by mesne or trustee
process any funds of Borrower in excess of $100,000 on deposit with
Bank;
(E) Borrower breaches any covenant, agreement, warranty, or
representation set forth in this Agreement or any other agreement
between Borrower and Bank is an immediate Event of Default;
(F) Borrower is in default under any document, instrument or
agreement evidencing any debt, obligation or liability in favor of Bank
its affiliates or vendors regardless of whether the debt, obligation or
liability is direct or indirect, primary or secondary, or fixed or
contingent;
(G) An event of default occurs under the Guarantied Loan.
(H) An event of default occurs under any guaranty of the
Obligations or any material provision of any guaranty of the
Obligations is not valid or enforceable or a guaranty is repudiated or
terminated;
(I) A material default or Event of Default occurs under any
agreement between Borrower and any creditor of Borrower that signed a
subordination agreement with Bank;
(J) Any creditor that has signed a subordination agreement
with Bank breaches any terms of the subordination agreement; or
(K) Any of the following occurs:(i) a material impairment in
the perfection or priority of Bank's security interest in the
Collateral or in the value of such Collateral taken as a whole; or (ii)
-10-
a material adverse change in the business, operations, or condition
(financial or otherwise) of the Borrower occurs; or (iii) a material
impairment of the prospect of repayment of any portion of the
Obligations; or (iv) Bank determines, based upon information available
to it and in its reasonable judgment, that there is a reasonable
likelihood that Borrower shall fail to comply with one or more of the
financial covenants in Section 7.3 during the next succeeding financial
reporting period.
11. REMEDIES.
11.1. REMEDIES UPON DEFAULT. When an Event of Default exists, (1) Bank
may stop financing receivables or extending credit to Borrower; (2) at Bank's
option and on demand, all or a portion of the Obligations (or, for to an Event
of Default described in Section 10(B), automatically and without demand) are due
and payable in full; (3) the Bank may apply to the Obligations any (i) balances
and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or
for the credit or the account of Borrower; (4) Bank may exercise all rights and
remedies under this Agreement and applicable law, including those of a secured
party under the Code, power of attorney rights in Section 6 for the Collateral,
and the right to ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, collect, dispose of, sell, lease, use, and
realize upon all Financed Receivables and Collateral in any commercial manner;
and (5) Bank may make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower shall
assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies. Borrower agrees that any notice of sale required to be given to
Borrower is deemed given if at least ten (10) days before the sale may be held.
11.2. DEMAND WAIVER. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guaranties held by Bank on which
Borrower is liable.
11.3. DEFAULT RATE. After the occurrence and during the continuance of
an Event of Default, all Obligations shall accrue interest at the Applicable
Rate plus five percent (5.0%) per annum.
12. FEES, COSTS AND EXPENSES. The Borrower will pay on demand all
reasonable out-of-pocket fees, costs and expenses (including attorneys' and
professionals fees with costs and expenses) that Bank incurs from: (a)
preparing, negotiating, administering, and enforcing this Agreement or related
agreement, including any amendments, waivers or consents, (b) any litigation or
dispute relating to the Financed Receivables, the Collateral, this Agreement or
any other agreement, (c) enforcing any rights against Borrower or any guarantor,
or any Account Debtor, (d) protecting or enforcing its interest in the Financed
Receivables or other Collateral, (e) collecting the Financed Receivables and the
Obligations, and (f) any bankruptcy case or insolvency proceeding involving
Borrower, any Financed Receivable, the Collateral, any Account Debtor.
13. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. This Agreement shall be
construed, governed, and enforced pursuant to the laws (without regard to
conflict of law principles) of The Commonwealth of Massachusetts. Borrower and
Bank each submits to the exclusive jurisdiction of the State and Federal courts
in Suffolk County, Massachusetts.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
14. NOTICES. Notices or demands by either party about this Agreement must
be in writing and personally delivered or sent by an overnight delivery service,
by certified mail postage prepaid return receipt requested, or by
-11-
FAX to the addresses listed at the beginning of this Agreement. A party may
change notice address by written notice to the other party.
15. GENERAL PROVISIONS.
15.1. SUCCESSORS AND ASSIGNS. This Agreement binds and is for the
benefit of successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank may, without
the consent of or notice to Borrower, sell, transfer, or grant participation in
any part of Bank's obligations, rights or benefits under this Agreement.
15.2. INDEMNIFICATION. Borrower will indemnify, defend and hold
harmless Bank and its officers, employees, and agents against: (a) obligations,
demands, claims, and liabilities asserted by any other party in connection with
the transactions contemplated by this Agreement; and (b) losses or expenses
incurred, or paid by Bank from or consequential to transactions between Bank and
Borrower (including reasonable attorneys fees and expenses), except for any of
the foregoing arising as a result of Bank's gross negligence or willful
misconduct.
15.3. RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to
Bank, a lien, security interest and right of setoff as security for all
Obligations to Bank, whether now existing or hereafter arising upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and any guarantor even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.
15.4. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT.
Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms
and conditions of a certain Intellectual Property Security Agreement dated as of
April 25, 2001 between Borrower and Bank, and acknowledges, confirms and agrees
that said Intellectual Property Security Agreement remains in full force and
effect and contains an accurate and complete listing of all Intellectual
Property Collateral as defined in said Intellectual Property Security Agreement.
15.5. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and disclosures contained in
a certain Perfection Certificate dated as of April 25, 2001 between Bank and
Borrower, and acknowledges, confirms and agrees that the disclosures and
information Borrower provided to Bank in the Perfection Certificate has not
changed, as of the date hereof.
15.6. TIME OF ESSENCE. Time is of the essence for performance of all
obligations in this Agreement.
15.7. APPLICATION OF FUNDS. Borrower agrees that any disposition of the
Collateral in violation of this Agreement, by either the Borrower or any other
Person, shall be deemed to violate the rights of the Bank under the Code.
15.8. SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
15.9. AMENDMENTS IN WRITING, INTEGRATION. All amendments to this
Agreement must be in writing. This Agreement is the entire agreement about this
subject matter and supersedes prior negotiations or agreements.
15.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts and when executed
and delivered are one Agreement.
-12-
15.11. REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, or any other documents, instruments and agreement by and between
Borrower and Bank are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver
hereunder shall be effective unless signed by Bank and then is only effective
for the specific instance and purpose for which it was given.
15.12. SURVIVAL. All covenants, representations and warranties made in
this Agreement continue in force while any Financed Receivable amount remains
outstanding. Borrower's indemnification obligations survive until all statutes
of limitations for actions that may be brought against Bank have run.
15.13. CONFIDENTIALITY. Bank will use the same degree of care handling
Borrower's confidential information that it uses for its own confidential
information, but may disclose information; (i) to its subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the Agreement, (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with an
examination or audit and (v) as it considers appropriate exercising the remedies
under this Agreement. Confidential information does not include information that
is either: (a) in the public domain or in Bank's possession when disclosed, or
becomes part of the public domain after disclosure to Bank; or (b) disclosed to
Bank by a third party, if Bank does not know that the third party is prohibited
from disclosing the information.
-13-
EXECUTED under seal as of the date first written above.
EXCHANGE APPLICATIONS, INC. SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: By:
----------------------- -----------------------
Name: Name:
Title: Title:
EXSTATIC SOFTWARE, INC.
By:
-----------------------
Name:
Title:
-14-
The undersigned ratifies, confirms and reaffirms, all and singular, the
terms and conditions of a certain Unconditional Guaranty dated April 24, 2001
(the "Guaranty") and a certain Security Agreement dated April 24, 2001 (the
"Security Agreement") and acknowledges, confirms and agrees that the Guaranty
and the Security Agreement remain in full force and effect and shall in no way
be limited by the execution of this Agreement, or any other documents,
instruments and/or agreements executed and/or delivered in connection herewith.
EXCHANGE APPLICATIONS SECURITIES CORPORATION
By:
-----------------------
Name:
Title:
-15-
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in
and to the following:
All goods, equipment, inventory, contract rights or rights to payment
of money, leases, license agreements, franchise agreements, general intangibles
(including payment intangibles), accounts (including health-care receivables),
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities, and all other investment property supporting
obligations, and financial assets, whether now owned or hereafter acquired,
wherever located; and
Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; trade styles, trade names, any trade
secret rights, including any rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; or any claims for damages by way of any past,
present and future infringement of any of the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
-00-
XXXXXXX "X"
[SILICON VALLEY BANK LOGO]
SILICON VALLEY BANK
SPECIALTY FINANCE DIVISION
16. Compliance Certificate
I, as authorized officer of __________________ ("Borrower") certify under the
Accounts Receivable Financing Agreement (the "Agreement") between Borrower and
Silicon Valley Bank ("Bank") as follows.
BORROWER REPRESENTS AND WARRANTS FOR EACH FINANCED RECEIVABLE:
It is the owner with legal right to sell, transfer and assign it;
The correct amount is on the Invoice Transmittal and is not disputed;
Payment is not contingent on any obligation or contract and, except as
disclosed to Bank, it has fulfilled all its obligations as of the Invoice
Transmittal date;
It is based on an actual sale and delivery of goods
and/or services rendered, due to Borrower, it is not more than ninety (90) days
past the invoice date or in default, has not been previously sold, assigned,
transferred, or pledged and is free of any liens, security interests and
encumbrances;
There are no defenses, offsets, counterclaims or agreements for which
the Account Debtor may claim any deduction or discount;
It reasonably believes no Account Debtor is insolvent or subject to any
Insolvency Proceedings;
It has not filed or had filed against it proceedings and does not
anticipate any filing;
Bank has the right to endorse and/or require Borrower to endorse all
payments received on Financed Receivables and all proceeds of Collateral.
No representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank with respect to any Financed
Receivables contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statement contained in the certificates or
statement not materially misleading.
ADDITIONALLY, BORROWER REPRESENTS AND WARRANTS AS FOLLOWS:
Borrower is duly existing and in good standing in its state of
formation and qualified and licensed to do business in, and in good standing in,
each jurisdiction for which the failure to so qualify would have a material
adverse effect on Borrower's business or operations. The execution, delivery and
performance of this Agreement has been duly authorized, and does not conflict
with Borrower's organizational documents or constitute an Event of Default under
any material agreement by which Borrower is bound. Borrower is not in default
under any material agreement to which or by which it is bound.
Borrower has good title to the Collateral. All inventory is in all
material respects of good and marketable quality, free from material defects.
-17-
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has
complied with the Federal Fair Labor Standards Act. Borrower has not violated
any laws, ordinances or rules, for which the failure to comply with would have a
material adverse effect on Borrower's business or operations. None of Borrower's
properties or assets has been used by Borrower, to the best of Borrower's
knowledge, by previous persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower has timely
filed all required tax returns and paid, or made adequate provision to pay, all
taxes. Borrower has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities for which the failure to so obtain would have a material adverse
effect on Borrower's business or operations.
All representations and warranties in the Agreement are true and
correct in all material respects on this date.
Sincerely,
SIGNATURE
TITLE
DATE
-18-
