Silicon Valley
Financial Services A
Division of 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 on this ____ day of
______________, 1998, by and between Silicon Valley
Financial Services (a division of Silicon Valley
Bank) ("Buyer") having a place of business at the
address specified above and ACE*COMM CORPORATION, a
Maryland corporation ("Seller"), having its
principal place of business and chief executive
office at 000 Xxxxxx Xxxxxxx Xxxx, Xxxxxxxxxxxx,
Xxxxxxxx 00000.
1. Definitions. When used herein, the following
terms shall
have the following meanings.
1.1. "Account Balance" shall mean, on any given day,
the
gross amount of all Purchased Receivables unpaid on
that day.
1.2. "Account Debtor" shall have the meaning set
forth in the Massachusetts 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.
1.3. "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.
1.4. "Administrative Fee" shall have the meaning as
set
forth in Section 3.3 hereof.
1.5. "Advance" shall have the meaning set forth
in Section 2.2 hereof.
1.6. "Cash Balances Covenant" shall mean, at any
given time, that the Seller has on deposit with the
Bank (including the Restricted Account, but not
including any escrowed or payroll funds), an amount
equal to 1.5 times the amount of the aggregate
Advances hereunder (as defined herein).
1.7. "Collateral" shall have the meaning set forth in
Section 8 hereof.
1.8. "Collections" shall mean all good funds received
by
Buyer from or on behalf of an Account Debtor with
respect to Purchased Receivables.
1.9. "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.
1.10. "Event of Default" shall have the meaning
set
forth in Section 9 hereof.
1.11. "Finance Charges" shall have the
meaning set forth
in Section 3.2 hereof.
1.12. "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.
1.13. "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,
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, Administrative Fees, interest, Repurchase
Amounts, fees, expenses, professional fees and
attorneys' fees and any other sums chargeable to
Seller hereunder or otherwise.
1.14. "Prime Rate" shall mean the rate
announced from
time to time by Silicon Valley Bank as its Prime
Rate.
1.15. "Purchased Receivables" shall mean all
those
accounts, receivables, and rights to payment, and all
proceeds thereof (all of the foregoing being referred
to as "Receivables"), arising out of the invoices
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. Purchased Receivables shall include
Restricted Receivables.
1.16. "Reconciliation Date" shall mean the
last calendar
day of each Reconciliation Period.
1.17. "Reconciliation Period" shall mean
each calendar
month of every year.
1.18. "Refund" shall have the meaning set
forth in
Section 3.5 hereof.
1.19. "Release Event" shall have the meaning
set forth
in Section 3.1 hereof.
1.20. "Reserve" shall have the meaning set
forth in
Section 2.4 hereof.
1.21. "Repurchase Amount" shall have the
meaning set
forth in Section 4.2 hereof.
1.22. "Restricted Account" shall mean an
account
maintained in the Seller's name at Silicon Valley
Bank with respect to which the Borrower may not
withdraw proceeds until a Release Event.
1.23. "Restricted Receivables" shall have
the meaning
set forth in Section 2.1 hereof.
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 provided further that
the Seller is in compliance with all of the terms and
conditions herein, including, without limitation,
Section 2.2 below. 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.
Notwithstanding the terms herein, in the event that
the Seller is in compliance with the Cash Balances
Covenant at the time the Seller requests that Buyer
purchase a receivable, and no Event of Default exists
hereunder, and the purchase of said receivable will
not result in an Event of Default, or a breach of the
Cash Balances Covenant, then the Buyer shall
purchase said receivable, and the Advance (as defined
herein) resulting for said receivable shall be
credited by the Buyer to the Restricted Account (the
"Restricted Receivables").
2.2. Acceptance of Receivables. Except as
specifically provided in Section 2.1 above, Buyer
shall have no obligation to purchase any receivable
listed on an Invoice Transmittal, and 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 Eighty (80%) percent of the face amount of
each receivable Buyer desires to purchase or such
lesser percentage, if any, as the parties may agree
in writing, and if no such agreement is reached,
Seller may withdraw in writing its offer to sell a
particular receivable. Such payment shall be the
"Advance" with respect to such receivable. Upon
Buyer's acceptance of the receivable and payment to
Seller of the Advance, the receivable shall become a
"Purchased Receivable." Except with respect to
Restricted Receivables, 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 in all material
respects 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,
and (iii) the account debtor has been approved by the
Buyer in writing. Notwithstanding the foregoing, in
no event shall the aggregate amount of all Purchased
Receivables (including Restricted Receivables)
outstanding at any time exceed Four Million Dollars
($4,000,000.00).
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, subject to Buyer's
obligations hereunder, 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 Massachusetts
Uniform Commercial Code and other applicable law.
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 twenty percent (20.0%) of the
Account Balance at that time, and may be set at such
higher percentage as the parties may agree, to the
extent that the parties agree to a lower Advance
percentage as provided in Section 2.2. 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. Upon receipt by Buyer of
Collections,
Buyer shall promptly credit such Collections to
Seller's Account Balance on a daily basis. Upon the
receipt by Buyer of Collections with respect to
Restricted Receivables, the Advance previously
deposited by Buyer to Seller's Restricted Account
shall be released to Seller (the "Release Event").
Notwithstanding the foregoing, 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 the Bank's Prime Rate, plus four percent
(4.0%) per annum, of the 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.
3.3. Administrative Fee. On each Reconciliation
Date Seller
shall pay to Buyer an Administrative Fee equal to
0.625% of the face amount of each Purchased
Receivable first purchased during that Reconciliation
Period (the "Administrative Fee"). Buyer shall
deduct the Administrative Fee from the Reserve as set
forth in Section 3.5 below.
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,
Finance Charges, and the Administrative Fee. 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, Buyer shall promptly
refund to Seller, 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:
(1) (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
(2) The total for that Reconciliation
Period of:
(1) the Administrative Fee;
(2) Finance Charges;
(1)
(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.
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:
(1) which remains unpaid ninety (90)
calendar days after the invoice date (unless
otherwise agreed in writing by Buyer); or
(2) 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
(3) with respect to which there has been
any breach of warranty or representation (in any
material respect) set forth in Section 6 hereof
or any breach of any covenant contained in this
Agreement;
(4) 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; or
(5) which is a Restricted Receivable, in
the event the Seller fails to meet the Cash
Balances Covenant at any time.
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"). The proper repurchase of a Purchased
Receivable pursuant to this Section 4.2 shall cure
any Event of Default resulting, if any, with respect
to such Purchased Receivable.
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, Administrative Fees,
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 render 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:
(1) 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;
(2) The correct amount of each receivable
is as set forth in the Invoice Transmittal and
is not in dispute;
(3) 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;
(4) 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;
(5) 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;
(6) 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;
(1)
(7) 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;
(8) 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 Massachusetts
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;
(9) 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; and
(10) At Buyer's request, each Account
Debtor shall promptly be notified, after
acceptance by Buyer, that the Purchased
Receivable has been transferred to and is
payable to Buyer, and Seller shall not take or
permit any action to countermand such
notification.
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:
(1) 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;
(2) 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;
(3) 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.
(4) 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;
(5) Seller shall provide Buyer with a
Compliance Certificate (i) on a quarterly basis
to be received by Buyer no later than the fifth
calendar day following each calendar quarter,
and; (ii) on a more frequent or other basis if
and as requested by Buyer.
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, subject to the terms and
conditions hereunder. While Seller retains
possession of said returned goods, Seller shall
segregate said goods and xxxx them "property of
Silicon Valley Financial Services."
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"):
(1) All accounts, receivables, contract
rights, chattel paper, instruments, documents,
letters of credit, bankers acceptances, drafts,
checks, cash, securities, and general
intangibles (including, without limitation, all
claims, causes of action, deposit accounts,
guaranties, rights in and claims under insurance
policies (including rights to premium refunds),
rights to tax refunds, copyrights, patents,
trademarks, rights in and under license
agreements, and all other intellectual
property);
(2) 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;
(3) 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);
(4) Investment Property;
(5) All equipment, machinery, furniture,
furnishings, fixtures, tools, supplies and motor
vehicles (the "Equipment");
(6) All farm products, crops, timber,
minerals and the like (including oil and gas);
(7) All accessions to, substitutions for, and
replacements of, all of the foregoing;
(8) All books and records pertaining to
all of the foregoing; and
(9) 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 in the Seller's usual course
of business.
Notwithstanding the foregoing, the Buyer will
subordinate its security interest in any Equipment,
now or hereafter owned by Seller, and a certain Note
Receivable from ANSTEC INCORPORATED dated February 1,
1998 in the principal amount of $1,584,747.08. Seller
agrees to sign UCC financing statements, in a form
acceptable to Buyer, and any other instruments and
documents requested by Buyer to evidence, perfect, or
protect the interests of Buyer 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:
(1) Seller fails to pay any amount owed to
Buyer as and when due;
(2) 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 (however, it shall not be an Event
of Default hereunder until the earlier of (x)
the entry of an order for relief against the
Seller, or (y) the expiration of sixty (60) days
without dismissal of such complaint,
application, or petition if such complaint,
application, or petition filed against the
Seller was not filed by or at the direction of
the Seller or any related entity, and is being
diligently contested);
(3) 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;
(4) Any involuntary lien, garnishment,
attachment or the like is issued against or
attaches to the Purchased Receivables or any
Collateral which is in excess of $25,000, and is
not discharged within thirty (30) days;
(5) Seller shall breach, in any material
respect, any other covenant, agreement,
warranty, or representation set forth herein,
and the same is not cured to Buyer's
satisfaction within ten (10) days after Buyer
has given Seller oral or written notice thereof;
provided, that if
such breach is incapable of being cured it shall
constitute an immediate default hereunder;
(6) A default or event of default shall
occur under any agreement between Seller and any
creditor of Seller for indebtedness in excess of
$100,000, in the aggregate, which indebtedness
is accelerated by such creditor, or
(7) 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.
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 Massachusetts 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,
including the proceeds of the Restricted Account, in
any commercial 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 ten
(10) 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 (however
not including the Buyer's overhead costs), 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, (d) enforcing any rights against Seller or
any guarantor, or any Account Debtor, (e) protecting
or enforcing its interest in the Purchased
Receivables or the Collateral, (f) collecting the
Purchased Receivables and the Obligations, and (g)
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 a default. If Buyer waives
a default, it may enforce a later 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 Wellesley, Massachusetts and has been executed and
accepted by Buyer in Massachusetts. This Agreement
shall be governed by and interpreted in accordance
with the internal laws of the Commonwealth of
Massachusetts.
14. Account Collection Services. Certain Account
Debtors may require or prefer that all of Seller's
receivables be paid to the same address and/or party,
or Seller and Buyer may agree that all receivables
with respect to certain Account Debtors be paid to
one party. In such event Buyer and Seller may agree
that Buyer shall collect all receivables whether
owned by Seller or Buyer 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 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 Massachusetts Uniform
Commercial Code.
15. Notices. All notices shall be given to Buyer
and Seller at the addresses set forth on the first
page of this Agreement, and shall be delivered and
received: (a) one (1) business day after deposit with
an overnight mail or messenger service, with
delivered confirmed by such service; or (b) on the
same date of confirmed transmission or delivery if
sent by telecopy or by hand delivery.
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. Upon termination
and payment in full of the Obligations, Buyer shall
execute such releases and termination statements as
Seller may reasonably request.
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. 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.
IN WITNESS WHEREOF, Seller and Buyer have executed
this
Agreement as an instrument under seal under the laws
of the Commonwealth of Massachusetts as of on the day
and year above written.
SELLER:
ACE*COMM CORPORATION
By __________________________________________________
(duly authorized)
Name:________________________________________________
Title:_______________________________________________
__
BUYER:
SILICON VALLEY FINANCIAL SERVICES
A division of Silicon Valley Bank
By__________________________________________________
Title
________________________________________________
