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EX 10.21
Receivables Sale Agreement, dated September 28, 1999, between the Company and
RFC Capital Corporation
RECEIVABLES SALE AGREEMENT
Dated as of
September 28, 1999
by and between
ARI NETWORK SERVICES, INC.,
as Seller and Subservicer, and
RFC CAPITAL CORPORATION,
as Purchaser
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RECEIVABLES SALE AGREEMENT (the "Agreement"), dated as of September 28,
1999, by and between ARI NETWORK SERVICES, INC., a Wisconsin corporation, as
Seller and Subservicer, and RFC CAPITAL CORPORATION, a Delaware corporation, as
Purchaser.
WITNESSETH:
WHEREAS, the Seller desires to sell certain of its receivables and the
Purchaser is a corporation formed for the purpose of purchasing such receivables
from time to time;
WHEREAS, the Purchaser shall retain the complete right and ultimate
authority to perform certain servicing, administrative and collection functions
in respect of the receivables purchased by the Purchaser under this Agreement;
WHEREAS, the Purchaser desires that the Subservicer be appointed to perform
certain servicing, administrative and collection functions in respect of the
Purchased Receivables; and
WHEREAS, the Seller has been requested and is willing to act as the
Subservicer.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I - DEFINITIONS
Section 1.1. Certain Defined Terms. The capitalized terms used in this
Agreement shall have the respective meanings set forth on Exhibit A to this
Agreement.
Section 1.2. Other Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with generally accepted
accounting principles. All terms defined in Article 9 of the UCC, and not
specifically defined in this Agreement, are used in this Agreement as defined in
such Article 9 of the UCC.
ARTICLE II - PURCHASE AND SALE; ESTABLISHMENT OF ACCOUNTS
Section 2.1. Offer to Sell. Seller shall offer to sell, transfer, assign
and set over to Purchaser those Eligible Receivables selected for sale by
Seller, in its sole discretion, and to be set forth on a list of such Eligible
Receivables which list shall be delivered by the Seller to the Purchaser no
later than three (3) Business Days prior to each Purchase Date; provided,
notwithstanding the foregoing, Seller agrees to offer for Purchase to the
Purchaser Eligible Receivables in an amount not less than ten percent (10.0%) of
the Purchase Commitment during any ninety (90) day period during the term of
this Agreement.
Section 2.2. Purchase of Receivables. (a) Until the occurrence of a
Termination Date, upon receipt of the list of Eligible Receivables and offer to
sell pursuant to Section 2.1, the Purchaser, in its sole discretion, will
confirm which of the Eligible Receivables offered by Seller that the Purchaser
will Purchase. The Purchase of such Receivables shall occur upon payment of the
applicable Purchase Price, as provided at Section 2.3 of this Agreement. Upon
Purchase of the Receivables, Seller will have sold, transferred, assigned, set
over and conveyed to Purchaser, without recourse except as expressly provided
herein, all of Seller's right, title and interest in and to the Purchased
Receivables, and title to such Purchased Receivables shall have passed to
Purchaser at such time. If, in the event the Purchaser determines, in its sole
discretion, not to Purchase an Eligible Receivable under this Section 2.2, the
Purchaser shall provide the Seller with notice of the same within five Business
Days of Purchaser's receipt of the Seller's list of Eligible Receivables
pursuant to Section 2.1 and if, as a result thereof Seller elects to provide
written notice to the Purchaser of its intention to terminate this Agreement,
resulting in
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the occurrence of a Termination Date, provided there has not occurred any Event
of Seller Default, then the Seller shall not be obligated to pay to the
Purchaser a Termination Fee.
(b) The Seller shall not take any action inconsistent with such ownership
and, from and after the date of such transfer, shall not claim any ownership in
any Purchased Receivable. The Seller shall indicate in its Records that
ownership interest in any Purchased Receivable is held by the Purchaser. In
addition, the Seller shall respond to any inquiries with respect to ownership of
a Purchased Receivable by stating that it is no longer the owner of such
Purchased Receivable and that ownership of such Purchased Receivable is held by
the Purchaser. Documents relating to the Purchased Receivables shall be held in
trust by the Seller and the Subservicer, for the benefit of the Purchaser as the
owner of the Purchased Receivables, and possession of any Required Information
relating to the Purchased Receivables so retained is for the sole purpose of
facilitating the servicing of the Purchased Receivables and carrying out the
terms of this Agreement. Such retention and possession is at the will of the
Purchaser and in a custodial capacity for the benefit of the Purchaser only,
except to the extent necessary for the Seller's enforcement of its rights under
this Agreement.
Section 2.3. Purchase Price and Payment. The Purchase Price for Receivables
which have been billed to the Payor thereof and purchased on any Purchase Date
shall be an amount equal to the aggregate Net Values of such Purchased
Receivables and shall be paid by the Purchaser to the Seller by wire transfer.
The Purchase Price to be paid by the Purchaser to the Seller for Receivables
generated but yet to be billed by the Seller, or its Billing and Collection
Agent, as the case may be (each such Receivable an "Unbilled Receivable"), shall
be made in two installments the first of which to occur on the respective
Purchase Date such Receivable is sold by the Seller to the Purchaser in a manner
consistent with Sections 2.1 and 2.2 for an amount not to exceed the Gross
Liquidation Rate of the aggregate Net Value of such Unbilled Receivables (the
"Initial Payment"), and the second payment to be made on the Purchase Date
corresponding to such Unbilled Receivables being billed by the Seller, or its
Billing and Collection Agent, as the case may be, to the respective Payor in an
amount equal to the difference between the Initial Payment with respect to such
Unbilled Receivables and the aggregate Net Value of such Receivables. The
Purchase Price to be paid on such Purchase Date shall be reduced by (a) the
Program Fees as of such Purchase Date, (b) the amount, if any, by which the
Seller Credit Reserve Account (net of withdrawals required hereunder) is less
than the Specified Credit Reserve Balance as of such Purchase Date, (c) any
outstanding Rejected Receivable Amount, and (d) other amounts due the Purchaser
in accordance with this Agreement. At any time the aggregate Net Value of all
Purchased Receivables shall not exceed the Purchase Commitment.
Section 2.4. Establishment of Accounts; Conveyance of Interests Therein;
Investments. (a) A Lockbox Account will be established or assigned, as the case
may be, for the benefit of the Purchaser into which all Collections from Payors
with respect to Receivables shall be deposited. The Lockbox Account will be
maintained at the expense of the Seller. The Seller agrees to deposit all
Collections it receives with respect to Receivables in said Lockbox Account and
will instruct all Payors to make all payments on Receivables to said Lockbox
Account. All funds in said Lockbox Account will be remitted to the Collection
Account as instructed by the Purchaser.
(b) The Purchaser has established and shall maintain the "Collection
Account" (the "Collection Account"), the "Purchase Account" (the "Purchase
Account") and the "Seller Credit Reserve Account" (the "Seller Credit Reserve
Account").
(c) Other than as set forth at Section 5.1, the Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser all right, title and
interest of the Seller in and to all amounts deposited, from time to time, in
the Lockbox Account, the Collection Account and the Seller Credit Reserve
Account. Any Collections relating to Receivables held by the Seller or the
Subservicer pending deposit to the Lockbox Account as provided in this
Agreement, shall be held in trust for the benefit of the Purchaser until such
amounts are deposited into the Lockbox Account. All Collections in respect of
Purchased Receivables received by the Seller and not deposited directly by the
Payor in the Lockbox Account shall be remitted to the Lockbox Account within two
Business Days of receipt, and if such Collections are not remitted by Seller on
a timely basis, in addition to its other
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remedies hereunder, the Purchaser shall be entitled to receive a late charge
(which shall be in addition to the Program Fee) equal to 24% per annum of such
Collections or the maximum rate legally permitted if less than such rate,
calculated as of the first Business Day of such delinquency.
Section 2.5. Grant of Security Interest. It is the intention of the parties
to this Agreement that each payment of the Purchase Price by the Purchaser to
the Seller for Purchased Receivables to be made under this Agreement shall
constitute payment of consideration for a purchase of such Purchased Receivables
and not a loan. In the event, however, that a court of competent jurisdiction
were to hold that the transaction evidenced by this Agreement constitutes a loan
and not a purchase and sale, it is the intention of the parties that this
Agreement shall constitute a security agreement under the UCC and any other
applicable law, and that the Seller shall be deemed to have granted to the
Purchaser a first priority perfected security interest in all of the Seller's
right, title and interest in, to and under the Purchased Receivables; all
payments of principal of or interest on such Purchased Receivables; all amounts
on deposit from time to time in the Lockbox Account, the Collection Account and
the Seller Credit Reserve Account; all other rights relating to and payments
made under this Agreement, and all proceeds of any of the foregoing.
Section 2.6. Further Action Evidencing Purchases. The Seller agrees that,
from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or appropriate, or that the Purchaser may reasonably request, in order
to perfect, protect or more fully evidence the transfer of ownership of the
Purchased Receivables or to enable the Purchaser to exercise or enforce any of
its rights hereunder.
ARTICLE III - CONDITIONS OF PURCHASES
Section 3.1. Conditions Precedent to All Purchases. Each Purchase from the
Seller by the Purchaser shall be subject to the conditions precedent that as of
each Purchase Date:
(a) No Event of Seller Default has occurred and the Seller is in
compliance with each of its covenants and representations set forth in Sections
4.1 and 4.2 of this Agreement;
(b) The Seller shall have delivered to the Purchaser a complete copy of
each of the then current Billing and Collection Agreements, to the extent
applicable with respect to any Receivable, and any amendment or modification of
such agreements;
(c) Unless otherwise approved by Purchaser in writing, the Seller shall
have (i) (A) successfully converted to parallel operations under Seller's
existing accounts receivable operating system and a Year 2000 Compliant
operating system, or (B) successfully completed the conversion of its accounts
receivable operating system to Solomon, and (ii) upon completion of such
conversion to Solomon, to occur no later than November 30, 1999, delivered to
the Purchaser satisfactory evidence that Solomon is compliant with Section
4.1(l) of this Agreement;
(d) Seller shall have delivered to the Purchaser documentation
evidencing the following as the same pertains to WITECH: (i) conversion of
$1,000,000 note to equity, (ii) execution of $1,000,000 revolving note payable
December, 2001, (iii) execution of a $1,000,000 thirty-six month term loan, and
(iv) full release of any right, title and interest WITECH may have in, to and
under any Receivable of the Seller and the subordination of any right, title and
interest WITECH may have in, to and under the Customer Base of the Seller in
favor of a senior interest therein granted by Seller to Purchaser under this
Agreement;
(e) The Termination Date shall not have occurred; and
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(f) The Seller shall have taken such other action, including but not
limited to the delivery of an opinion of counsel prior to the initial Purchase
Date in the form of Exhibit D hereto, or delivered such other approvals,
opinions or documents to the Purchaser, as the Purchaser may reasonably request.
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
Section 4.1. Representations, Warranties and Covenants as to the Seller.
The Seller represents and warrants to the Purchaser, as of the date of this
Agreement and on each subsequent Purchase Date, as follows:
(a) The Seller is a corporation duly organized, validly existing and in
good standing (or the relative equivalent thereof) under the laws of the State
of Wisconsin and is duly qualified to do business and is in good standing (or
the relative equivalent thereof) in each jurisdiction in which it is doing
business and has the power and authority to own and convey all of its properties
and assets and to execute and deliver this Agreement and the Related Documents
and to perform the transactions contemplated thereby; and each is the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms;
(b) The execution, delivery and performance by the Seller of this
Agreement and the Related Documents and the transactions contemplated thereby
(i) have been duly authorized by all necessary corporate or other action on the
part of the Seller, (ii) do not contravene or cause the Seller to be in default
under (A) any contractual restriction contained in any loan or other agreement
or instrument binding on or affecting the Seller or its property; or (B) any
law, rule, regulation, order, writ, judgment, award, injunction, or decree
applicable to, binding on or affecting the Seller or its property and (iii) does
not result in or require the creation of any Adverse Claim upon or with respect
to any of the property of the Seller (other than in favor of the Purchaser as
contemplated hereunder);
(c) There is no court order, judgment, writ, pending or threatened
action, suit or proceeding, of a material nature against or affecting the
Seller, its officers or directors, or the property of the Seller, in any court
or tribunal, or before any arbitrator of any kind or before or by any
Governmental Authority (i) asserting the invalidity of this Agreement or any of
the Related Documents, (ii) seeking to prevent the sale and assignment of any
Receivable or the consummation of any of the transactions contemplated thereby,
(iii) seeking any determination or ruling that might materially and adversely
affect the Seller, this Agreement, the Related Documents, the Receivables or
Contracts, or (iv) asserting a claim for payment of money in excess of $100,000
which is not otherwise dismissed or settled within 60 days of Seller's actual or
constructive notice thereof, not covered by insurance or for which a performance
bond has not been obtained within 30 days of Seller's actual or constructive
notice thereof;
(d) The primary business of the Seller is the provision or sale of
electronic commerce products and/or services. All license numbers issued to the
Seller by any Governmental Authority are set forth on Schedule I and the Seller
has complied in all material respects with all applicable laws, rules,
regulations, orders and related Contracts and all restrictions contained in any
agreement or instrument binding on or affecting the Seller, and has and
maintains all permits, licenses, certifications, authorizations, registrations,
approvals and consents of Governmental Authorities or any other party necessary
for the business of the Seller and each of its Subsidiaries;
(e) The Seller (i) has filed on a timely basis all tax returns
(federal, state, and local) required to be filed and has paid or made adequate
provisions for the payment of all taxes, assessments, and other governmental
charges due from the Seller; (ii) the financial statements of the Seller, copies
of which have been furnished to the Purchaser, fairly present the financial
condition of the Seller, all in accordance with generally accepted accounting
principles consistently applied; (iii) since April 30, 1999, there has been no
material adverse change in any such condition, business or operations; and (iv)
the Seller has delivered to the Purchaser (a) (A) within 45 days after the end
of each subsequent three-month period, the financial statements, including
balance sheet and income statement prepared in accordance with generally
accepted accounting principles, certified by an officer of the Seller and
accompanied by a management narrative summarizing circumstances and issues
underlying such
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financial statements and facing the Seller going forward or (B) a copy of any
Form 10-Q within two Business Days of the filing thereof by the Seller, and (b)
(A) within 90 days after the end of the fiscal year of the Seller the financial
statements, including balance sheet and income statement prepared by an
accounting firm acceptable to Purchaser, or (B) a copy of any Form 10-K within
two Business Days of the filing thereof by the Seller;
(f) All information furnished by or on behalf of the Seller to the
Purchaser in connection with this Agreement is true and complete in all material
respects and does not omit to state a material fact and the sales of Purchased
Receivables under this Agreement are made by the Seller in good faith and
without intent to hinder, delay or defraud present or future creditors of the
Seller;
(g) The Lockbox Account is the only lockbox account to which Payors
have been or will be instructed to direct Receivable proceeds and each Payor of
an Eligible Receivable has been directed upon its receipt of the notice attached
hereto as Exhibit B, which such notice was mailed or provided to such Payors
within two Business Days of the Closing Date, or with respect to any given new
Payor prior to the submission of any Receivable related thereto by the Seller
for purchase by the Purchaser, to remit all payments with respect to such
Receivable for deposit in the Lockbox Account;
(h) The principal place of business and chief executive office of the
Seller are located at the address of the Seller set forth under its signature
below and there are not now, and during the past four months there have not
been, any other locations where the Seller is located (as that term is used in
the UCC) or keeps Records except as set forth in the designated space beneath
its signature line in this Agreement;
(i) The legal name of the Seller is as set forth at the beginning of
this Agreement and the Seller has not changed its legal name in the last six
years, and during such period, the Seller did not use, nor does the Seller now
use any tradenames, fictitious names, assumed names or "doing business as" names
other than those appearing on the signature page of this Agreement;
(j) The Seller has not done anything to impede or interfere with the
collection by the Purchaser of the Purchased Receivables and has not amended,
waived or otherwise permitted or agreed to any deviation from the terms or
conditions of any Purchased Receivable, Billing and Collection Agreement,
Contract or any related agreement so as to (i) create an Adverse Claim with
respect to any Receivable or (ii) materially affect the ability of Subservicer
or the Purchaser to act in its capacity as such; and has not allowed any invoice
due and owing by the Seller relating to any agreement, Contract, or Billing and
Collection Agreement with respect to a Receivable, to become any more than
thirty days past due; and
(k) For federal income tax reporting and accounting purposes, the
Seller will treat the sale of each Purchased Receivable pursuant to this
Agreement as a sale of, or absolute assignment of its full right, title and
ownership interest in such Purchased Receivable to the Purchaser.
(l) All computer software, equipment and/or related systems that
either relate to the Purchased Receivables, include imbedded date sensitive
software or are utilized by Seller in connection with the operation of its
business, and which are intended for use after December 31, 1999, are or will be
on or before December 31, 1999, "Year 2000 Compliant." For purposes hereof,
"Year 2000 Compliant" shall mean that the applicable computer software will (a)
function properly and without material interruption before, during, and
immediately after January 1, 2000; (b) accurately process date and time data
(including calculating, comparing, and sequencing) between the twentieth and
twenty-first centuries and between the years 1999 and 2000; (c) will respond to
or reject a two-digit year input in a way that resolves ambiguity as to century
in a defined and predetermined manner; and (d) will store and provide output of
date information in ways that are unambiguous as to century.
Section 4.2. Representations and Warranties of the Seller as to Purchased
Receivables. With respect to each Purchased Receivable sold pursuant to this
Agreement the Seller represents and warrants, as of the date hereof and as of
each subsequent Purchase Date, as follows:
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(a) Such Purchased Receivable (i) includes all the Required
Information; (ii) is the liability of an Eligible Payor, provided, that, unless
the Purchaser otherwise agrees in writing, the liability of each respective
Payor to the Seller does not comprise more than five percent (5.0%) of the Net
Value of all Purchased Receivables (which, to the extent a Receivable is
purchased by the Purchaser, the Purchaser shall be deemed to have provided its
written consent to the Seller); (iii) was created by the provision or sale of
electronic commerce products and/or services by the Seller in the ordinary
course of its business; (iv) has a Purchase Date no later than 90 days from its
Billing Date or such other period of time as the Purchaser may agree in writing
(which, to the extent a Receivable is purchased by the Purchaser, the Purchaser
shall be deemed to have provided its written consent to the Seller); (v) is not
a Purchased Receivable which with respect to which, as of any Determination
Date, payment by the Payor of such Receivable has been received and is not
duplicative of any other Receivable; and (vi) is owned by the Seller free and
clear of any Adverse Claim, and the Seller has the right to sell, assign and
transfer the same and interests therein as contemplated under this Agreement and
no consent other than those secured and delivered to the Purchaser on or prior
to the Closing Date shall be required to effect the sale of any such Purchased
Receivable;
(b) The Billed Amount of such Purchased Receivable is payable in United
States Dollars and the Eligible Receivable Amount with respect thereto, unless
the Purchaser and Seller agree otherwise in writing (which, to the extent a
Receivable is purchased by the Purchaser, the Purchaser shall be deemed to have
provided its written consent to the Seller), is not in excess of $100,000 with
respect to any one individual Payor of any Payor Class, and is net of any
adjustments or other modifications contemplated by any other agreement, Billing
and Collection Agreement, or Contract or otherwise and, unless otherwise agreed
in writing by Purchaser, neither the Purchased Receivable nor the related
agreement or Contract has been or will be compromised, adjusted, extended,
satisfied, subordinated, rescinded, set-off or modified by the Seller, the
Payor, a Billing and Collection Agent or any other third party, and is not nor
will be subject to compromise, adjustment, termination or modification, whether
arising out of transactions concerning the related agreement, Contract, Billing
and Collection Agreement, or otherwise; and
(c) There are no procedures or investigations pending or threatened
before any Governmental Authority (i) asserting the invalidity of such Purchased
Receivable, Billing and Collection Agreement, or Contract, (ii) asserting the
bankruptcy or insolvency of the related Payor, (iii) seeking the payment of such
Purchased Receivable or payment and performance of the related Contract, or (iv)
seeking any determination or ruling that might materially and adversely affect
the validity or enforceability of such Purchased Receivable or the related
Contract.
Section 4.3. Negative Covenants of the Seller. Unless otherwise set forth
herein, the Seller shall not, without the written consent of the Purchaser,
which such consent will not be unreasonably withheld:
(a) Sell, assign or otherwise dispose of, or create or suffer to exist
any Adverse Claim or lien upon any Receivable and related Contracts, its
Customer Base, the Lockbox Account, the Collection Account, or any other account
in which any Collections of any Receivable are deposited, or assign any right to
receive income in respect of any Receivable;
(b) Submit or permit to be submitted to Payors any invoice for services
or equipment rendered by or on behalf of Seller which contains a "pay to"
address other than the Lockbox Account;
(c) Make any change to (i) the location of its chief executive office
or the location of the office where Records are kept or (ii) its corporate name
or use any tradenames, fictitious names, assumed names or "doing business as"
names without providing the Purchaser of not less than thirty days prior written
notice thereof;
(d) Allow the ratio of the aggregate Net Value of Purchased Receivables
to Cash Collections to be greater than 2:1; or
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(e) Amend, waive or otherwise permit or agree to any deviation from the
terms or conditions of any Purchased Receivable.
Section 4.4. Repurchase Obligations. Upon discovery by any party to this
Agreement of a breach of any representation or warranty in Sections 4.1 or 4.2
of this Article IV which materially and adversely affects the value of a
Purchased Receivable or the interests of the Purchaser therein (herein a
"Rejected Receivable"), the party discovering such breach shall give prompt
written notice to the other parties to this Agreement. Thereafter, on the next
Purchase Date, the Net Value of the Rejected Receivables shall be deducted from
the amount otherwise payable to the Seller pursuant to Section 2.3 and deposited
in the Collection Account in satisfaction of the Rejected Receivable Amount and,
provided the full Net Value of such Rejected Receivables is deposited in the
Collection Account, such Rejected Receivables shall then be considered to have
been repurchased by the Seller. In the event that the full Net Value of such
Rejected Receivables is not deposited in the Collection Account pursuant to the
foregoing sentence, the Purchaser shall deduct any such deficiency from the
Excess Collection Amount or make demand upon the Seller to pay any such
deficiency to the Purchaser for deposit to the Collection Account. Upon full
payment of the amounts set forth above to the Collection Account, the Seller
will be deemed to have repurchased such Rejected Receivable.
ARTICLE V - ACCOUNTS ADMINISTRATION
Section 5.1. Collection Account. The Purchaser acknowledges that certain
amounts deposited in the Collection Account may relate to Receivables other than
Purchased Receivables and that such amounts continue to be owned by the Seller.
All such amounts shall be administered in accordance with Section 5.3.
Section 5.2. Determinations of the Purchaser. On each Determination Date,
the Purchaser will determine, in good faith, the following:
(a) the Net Value of all Purchased Receivables which have become Rejected
Receivables since the prior Purchase Date and which have not been repurchased or
offset in the manner set forth in Section 4.4 (the "Rejected Receivable
Amount");
(b) the amount of Collections up to the Purchase Price of all Purchased
Receivables received since the prior Determination Date (the "Paid Receivables
Amount");
(c) the Net Value of all Purchased Receivables which have become Defaulted
Receivables since the prior Purchase Date (the "Defaulted Receivable Amount" or
"Credit Deficiency");
(d) the aggregate amount deposited in the Collection Account in excess of
the Purchase Price of each Purchased Receivable, plus one hundred percent
(100.0%) of the Collections pertaining to Receivables not purchased under this
Agreement, since the prior Determination Date (the "Excess Collection Amount");
(e) the Net Value of all Purchased Receivables less the Rejected Receivable
Amount and the Defaulted Receivable Amount as of the current Determination Date;
and
(f) the amount of any accrued and unpaid Program Fee.
The Purchaser's determinations of the foregoing amounts shall be conclusive
in the absence of manifest error. The Purchaser shall notify the Seller of such
determinations.
Section 5.3. Distributions from Accounts. (a) On each Determination Date,
following the determinations set forth in Section 5.2, the Purchaser will make
the following withdrawals and deposits:
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(i) withdraw the Paid Receivables Amount and the Rejected Receivable Amount
plus any outstanding Rejected Receivable Amount applicable to any prior period,
to the extent such Rejected Receivable Amount is not paid to the Purchaser as a
reduction in Purchase Price to be paid to the Seller, from the Collection
Account and deposit such amount in the Purchase Account;
(ii) withdraw the Defaulted Receivable Amount from the Seller Credit
Reserve Account and deposit such amount in the Purchase Account;
(iii) withdraw the Excess Collection Amount from the Collection Account and
deposit such amount in the Seller Credit Reserve Account to the extent that the
Seller Credit Reserve Account is less than the Specified Credit Reserve Balance;
and
(iv) withdraw the balance of the Excess Collection Amount from the
Collection Account and, subject to any offset required under Section 5.3(b) of
this Agreement, remit such amount by wire transfer to an account designated by
the Seller, which, absent the occurrence of an Event of Seller Default and
provided that the Purchaser has received information in sufficient form and
format to allow the Purchaser to properly apply and/or post Collections against
Purchased Receivables, will occur no later than the next immediate Purchase Date
following such determination.
(b) The full amount of the Purchase Price before any offsets shall be
withdrawn from the Purchase Account and paid and administered as follows: (i)
the Program Fee due and owing as of each respective Purchase Date shall be paid
to the Purchaser, (ii) the amount, if any, by which the Seller Credit Reserve
Account is less than the Specified Credit Reserve Balance as of such respective
Purchase Date shall be deposited in the Seller Credit Reserve Account, (iii) the
amount, if any, due and owing the Purchaser pursuant to Section 9.4 of this
Agreement shall be paid to the Purchaser, and (iv) any remaining amount shall be
paid to the Seller in accordance with Section 2.3 of this Agreement.
(c) Until the Termination Date, with commercially reasonable best efforts
on each Purchase Date or in any event within two Business Days of each Purchase
Date, the Purchaser shall withdraw all amounts deposited hereunder (net of
withdrawals required hereunder) from the Seller Credit Reserve Account which are
in excess of the Specified Credit Reserve Balance and shall pay to the Purchaser
all amounts due and owing the Purchaser in accordance with Sections 2.3, 4.4,
5.3, 8.1, 9.4 and any applicable Termination Fee, and pay the balance, if any,
by wire transfer to an account designated by the Seller.
Section 5.4. Allocation of Monies following Termination Date. (a) Upon the
occurrence of a Termination Date hereunder, the Purchaser shall administer and
monitor the Lockbox Account and any and all Collections pertaining to Purchased
Receivables and apply the amount of such Collections to the outstanding Net
Value of Purchased Receivables. The application of such amounts to the
outstanding Net Value of Purchased Receivables shall not include any Excess
Collection Amount. Following the Termination Date and the Purchaser's receipt of
the Termination Fee, if applicable, from the Seller, the Purchaser shall, to the
extent funds deposited hereunder (net of withdrawals required hereunder) are
sufficient, withdraw an amount equal to the Program Fee from the Seller Credit
Reserve Account on each Purchase Date and deposit it in the Purchase Account. To
the extent that such funds do not equal the Program Fee, the Seller shall
deposit in the Purchase Account the balance of the Program Fee within five
Business Days following demand therefor. To the extent any Purchased Receivable
becomes a Defaulted Receivable, the Purchaser may withdraw an amount equal to
such Defaulted Receivable Amount from the Seller Credit Reserve Account and
deposit such amount in the Collection Account, provided, however, that such
recourse is expressly limited to the monies which comprise the Seller Credit
Reserve Account at the time of the Termination Date which shall not at any time
exceed the Specified Credit Reserve Balance. Following such Termination Date,
any Excess Collection Amount may not be used for deposit to the Seller Credit
Reserve Account and shall be otherwise administered in accordance with this
Agreement.
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(b) In any event, following the Termination Date and the Purchaser's
receipt of the Termination Fee, if any, the Seller may, at its option,
repurchase all previously Purchased Receivables which have not been fully paid
by the respective Payors thereof by depositing with the Purchaser the then
aggregate Net Value of such Purchased Receivables. Following such payment and
any other amount due and owing the Purchaser under this Agreement, this
Agreement shall be deemed terminated.
(c) On the first Determination Date on which the aggregate Net Value of all
Purchased Receivables (other than Defaulted Receivables) (i) is less than 10% of
the aggregate Net Value of Purchased Receivables (other than Defaulted
Receivables) on the Termination Date and (ii) is less than the aggregate amount
remaining in the Seller Credit Reserve Account, the Purchaser shall withdraw an
amount equal to such aggregate Net Value from such accounts and deposit it in
the Purchase Account. Thereupon the Purchaser shall disburse all remaining
amounts held in the Seller Credit Reserve Account to the Seller and all
interests of the Purchaser in all Purchased Receivables owned by the Purchaser
shall be reconveyed by the Purchaser to the Seller. Following such disbursement
and reconveyance, this Agreement shall be deemed terminated and the Purchaser
shall, at the request of the Seller, execute and deliver documentation
reasonably necessary to evidence such termination including but not limited to
the delivery of any necessary UCC Termination Statements.
ARTICLE VI - APPOINTMENT OF THE SUBSERVICER
Section 6.1. Appointment of the Subservicer. Subject to Section 6.5, as
consideration for the Seller's receipt of that portion of the Excess Collection
Amount relating to Purchased Receivables, the Purchaser hereby appoints the
Seller and the Seller hereby accepts such appointment to act as Subservicer
under this Agreement. The Subservicer may, with the prior consent of the
Purchaser, which consent shall not be unreasonably withheld, subcontract with a
subservicer for billing, collection, servicing or administration of the
Receivables. Any termination or resignation of the Subservicer under this
Agreement shall not affect any claims that the Purchaser may have against the
Subservicer for events or actions taken or not taken by the Subservicer arising
prior to any such termination or resignation.
Section 6.2. Duties and Obligations of the Subservicer. (a) The Subservicer
shall service the Purchased Receivables and enforce the Purchaser's respective
rights and interests in and under each Purchased Receivable and each related
Contract; and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect each Purchased
Receivable all in accordance with (i) customary and prudent servicing procedures
for receivables of a similar type, and (ii) all applicable laws, rules and
regulations; and shall serve in such capacity until the termination of its
responsibilities pursuant to Section 6.4 or 7.1. The Subservicer shall at any
time permit the Purchaser or any of its representatives to visit the offices of
the Subservicer and examine and make copies of all Servicing Records;
(b) The Subservicer shall notify the Purchaser of any action, suit,
proceeding, dispute, offset, deduction, defense or counterclaim that is or may
be asserted by any Person with respect to any Purchased Receivable.
(c) The Purchaser shall not have any obligation or liability with respect
to any Purchased Receivables which may arise out of a related Contract, nor
shall it be obligated to perform any of the obligations of the Subservicer
hereunder.
Section 6.3. Subservicing Expenses. The Subservicer shall be required to
pay for all expenses incurred by the Subservicer in connection with its
activities hereunder (including any payments to accountants, counsel or any
other Person) and shall not be entitled to any payment or reimbursement
therefor.
Section 6.4. Subservicer Not to Resign. The Subservicer shall not resign
from the duties and responsibilities hereunder except upon determination that
(a) the performance of its duties hereunder has become impermissible under
applicable law and (b) there is no reasonable action which the Subservicer could
take to
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make the performance of its duties hereunder permissible under applicable law
evidenced as to clause (a) above by an opinion of counsel to such effect
delivered to the Purchaser.
Section 6.5. Authorization of the Purchaser. The Seller hereby acknowledges
that the Purchaser (including any of its successors or assigns), shall retain
the authority to take any and all reasonable steps in its name and on its behalf
necessary or desirable in the determination of the Purchaser to collect all
amounts due under any and all Purchased Receivables, process all Collections,
commence proceedings with respect to enforcing payment of such Purchased
Receivables and the related Contracts, and adjusting, settling or compromising
the account or payment thereof. The Seller shall furnish the Purchaser (and any
successors thereto) with any powers of attorney and other documents necessary or
appropriate to enable the Purchaser to carry out its servicing and
administrative duties under this Agreement, and shall cooperate with the
Purchaser to the fullest extent in order to facilitate the collectibility of the
Purchased Receivables.
ARTICLE VII - EVENTS OF SELLER DEFAULT
Section 7.1. Events of Seller Default. If any of the following events
(each, an "Event of Seller Default") shall occur and be continuing:
(a) The Seller (either as Seller or Subservicer) shall materially fail to
perform or observe any term, covenant or agreement contained in this Agreement
which remains uncured for a period of 10 days;
(b) The Seller or any Affiliate defaults: (i) whether as primary or
secondary obligor, in the payment of any principal or interest on any obligation
for borrowed money beyond any applicable grace period or, if such obligation is
payable on demand, fails to pay such obligation upon demand; or (ii) in the
observance of any covenant, term or condition contained in any agreement, if the
effect of such default is to cause, or to permit any other party to such
obligation to cause, all or part of such obligation to become due before its
stated maturity provided that such obligation shall be an amount in excess of
$25,000;
(c) An Insolvency Event shall have occurred;
(d) There is a material breach of any of the representations and warranties
of the Seller as stated in Sections 4.1 or 4.2 that has remained uncured for a
period of 30 days, or, as such breach may pertain to a Purchased Receivable, has
not been cured pursuant to Section 4.4;
(e) Any Governmental Authority shall file notice of a lien in excess of
$25,000 with regard to any of the assets of the Seller or with regard to the
Seller which remains undischarged for a period of 30 days or there shall have
been an uncured default or breach with respect to any agreement, payment
arrangement or otherwise by and between the Seller or its Affiliates and the
Internal Revenue Service and/or any other taxing authority;
(f) As of the first day of any month, the aggregate Net Value of Purchased
Receivables which became Defaulted Receivables or Rejected Receivables during
the prior four month period shall exceed 10.0% of the Net Value of all Purchased
Receivables then owned by the Purchaser at the end of each of such three months;
(g) This Agreement shall for any reason cease to evidence the transfer to
the Purchaser (or its assignees or transferees) of the legal and equitable title
to, and ownership of, the Purchased Receivables;
(h) The amount deposited hereunder (net of withdrawals required hereunder)
in the Seller Credit Reserve Account has remained at less than the Specified
Credit Reserve Balance for fourteen consecutive days; or
(i) A Termination Event shall have occurred;
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then and in any such event, the Purchaser may, by notice to the Seller declare
that an Event of Seller Default shall have occurred and, the Termination
Date shall forthwith occur, without demand, protest or further notice of any
kind, and the Purchaser shall make no further Purchases from the Seller. The
Purchaser, in addition to all other rights and remedies under this Agreement,
all other rights and remedies provided under the UCC and other applicable law,
which rights shall be cumulative.
ARTICLE VIII - INDEMNIFICATION AND SECURITY INTEREST
Section 8.1. Indemnities by the Seller. (a) Without limiting any other
rights that the Purchaser or any director, officer, employee or agent of the
Purchaser (each an "Indemnified Party") may have under this Agreement or under
applicable law, the Seller hereby agrees to indemnify each Indemnified Party
from and against any and all claims, losses, liabilities, obligations, damages,
penalties, actions, judgments, suits, and related costs and expenses of any
nature whatsoever, including reasonable attorneys' fees and disbursements (all
of the foregoing being collectively referred to as "Indemnified Amounts") which
may be imposed on, incurred by or asserted against an Indemnified Party in any
way arising out of or relating to this Agreement or the ownership of the
Purchased Receivables or in respect of any Receivable or any Contract,
excluding, however, Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of any Indemnified Party or
recourse with respect to Purchased Receivables.
(b) Any Indemnified Amounts subject to the indemnification provisions of
this Section shall be paid to the Indemnified Party within five Business Days
following demand therefor, together with interest at the lesser of 12% per annum
or the highest rate permitted by law from the date of demand for such
Indemnified Amount.
Section 8.2 Security Interest. The Seller hereby grants to the Purchaser a
first priority perfected security interest in the Seller's Customer Base,
including but not limited to, all past, present and future customer contracts,
lists, agreements, or arrangements relating thereto; all of the Seller's right,
title and interest in, to and under all of the Seller's Receivables not sold to
the Purchaser hereunder, including all rights to payments under any related
Contracts, contract rights, instruments, documents, chattel paper, general
intangibles, or other agreements with all Payors and all the Collections,
Records and proceeds thereof; any other obligations or rights of Seller to
receive any payments in money or kind with respect to that set forth in this
Section 8.2; all cash or non-cash proceeds of the foregoing; all of the right,
title and interest of the Seller in and with respect to the services which gave
rise to or which secure any of the foregoing as security for the timely payment
and performance of any and all obligations the Seller or the Subservicer may owe
the Purchaser under Sections 2.3, 4.4, 5.3, 8.1, 9.4 and any applicable
Termination Fee, but excluding recourse for unpaid Purchased Receivables. This
Section 8.2 shall constitute a security agreement under the UCC and any other
applicable law and the Purchaser shall have the rights and remedies of a secured
party thereunder. Such security interest shall be further evidenced by Seller's
execution of appropriate UCC-1 financing statements prepared by and acceptable
to the Purchaser, and such other further assurances that may be reasonably
requested by the Purchaser from time to time.
ARTICLE IX - MISCELLANEOUS
Section 9.1. Notices, Etc. All notices, shall be in writing and mailed or
telecommunicated, or delivered as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall
be designated by such party in a written notice to the other parties hereto. All
such notices and communications shall not be effective until received by the
party to whom such notice or communication is addressed.
Section 9.2. Remedies. No failure or delay on the part of the Purchaser to
exercise any right hereunder shall operate as a waiver or partial waiver
thereof. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
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Section 9.3. Binding Effect; Assignability. This Agreement shall be binding
upon and inure to the benefit of the Seller, the Subservicer, the Purchaser and
their respective successors and permitted assigns. Neither the Seller nor the
Subservicer may assign any of their rights and obligations hereunder or any
interest herein without the prior written consent of the Purchaser, such consent
not to be unreasonable withheld by the Purchaser. The Purchaser may, at any
time, without the consent of the Seller or the Subservicer, assign any of its
rights and obligations hereunder or interest herein to any Person. Without
limiting the generality of the foregoing, the Seller acknowledges that the
Purchaser has assigned its rights hereunder for the benefit of third parties.
The Seller does hereby further agree to execute and deliver to the Purchaser all
documents and amendments presented to the Seller by the Purchaser in order to
effectuate the assignment by the Purchaser in furtherance of this Section 9.3
consistent with the terms and provisions of this Agreement. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until its
termination; provided, that the rights and remedies with respect to any breach
of any representation and warranty made by the Seller pursuant to Article IV and
the indemnification and payment provisions of Article VIII shall be continuing
and shall survive any termination of this Agreement.
Section 9.4. Costs, Expenses and Taxes. (a) In addition to the rights of
indemnification under Article VIII, the Seller agrees to pay upon demand, all
reasonable costs and expenses in connection with this Agreement and the other
documents to be delivered hereunder, including, without limitation: (i) the
periodic auditing of the Seller and the modification or amendment of this
Agreement; (ii) the reasonable fees and out-of-pocket expenses of counsel for
the Purchaser with respect to (A) advising the Purchaser as to its rights and
remedies under this Agreement or (B) the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement or the other
documents to be delivered hereunder; (iii) any and all accrued Program Fee and
amounts related thereto not yet paid to the Purchaser; and (iv) any and all
stamp, sales, excise and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing or recording of this
Agreement or the other agreements and documents to be delivered hereunder, and
agrees to indemnify and save each Indemnified Party from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
(b) If the Seller or the Subservicer fails to pay any Lockbox Account fees
or other charges or debits related to such accounts, or to pay or perform any
agreement or obligation contained under this Agreement, the Purchaser may pay or
perform, or cause payment or performance of, such agreement or obligation, and
the expenses of the Purchaser incurred in connection therewith shall be payable
by the party which has failed to so perform.
Section 9.5. Amendments; Waivers; Consents. No modification, amendment or
waiver of, or with respect to, any provision of this Agreement or the Related
Documents, shall be effective unless it shall be in writing and signed by each
of the parties hereto. This Agreement, the Related Documents and the documents
referred to therein embody the entire agreement among the Seller, the
Subservicer and the Purchaser, and supersede all prior agreements and
understandings relating to the subject hereof, whether written or oral.
Section 9.6. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF OHIO,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF THE
PURCHASER IN THE PURCHASED RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER, IN
RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE
OF OHIO.
(b) THE SELLER AND THE SUBSERVICER HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF OHIO AND THE UNITED STATES DISTRICT
COURT LOCATED IN THE SOUTHERN DISTRICT OF OHIO, AND EACH WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH ON THE
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SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE
DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE
PREPAID. THE SELLER AND THE SUBSERVICER EACH HEREBY WAIVES ANY OBJECTION BASED
ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT
OF THE PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE PURCHASER TO BRING ANY ACTION OR PROCEEDING AGAINST THE
SELLER OR ITS PROPERTY, OR THE SUBSERVICER OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION. THE SELLER AND THE SUBSERVICER EACH HEREBY AGREE THAT THE
EXCLUSIVE AND APPROPRIATE FORUMS FOR ANY DISPUTE HEREUNDER ARE THE COURTS OF THE
STATE OF OHIO AND THE UNITED STATES DISTRICT COURT LOCATED IN THE SOUTHERN
DISTRICT OF OHIO AND AGREE NOT TO INSTITUTE ANY ACTION IN ANY OTHER FORUM.
(c) THE SELLER, AND THE SUBSERVICER EACH HEREBY WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
Section 9.7. Execution in Counterparts; Severability. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
Section 9.8. Confidentiality. The Purchaser and Seller understand and agree
to keep confidential, and shall cause its respective directors, officers,
shareholders, employees, agents, and attorneys to keep confidential the terms
and conditions of this Agreement, all documents referenced herein and the
respective terms thereof, and any communication between the parties regarding
this Agreement or the services to be provided hereunder hereby, except to the
extent that (a) any party makes any disclosure to his or its auditors, attorneys
or other professional advisors, (b) any disclosure is otherwise required by law
or pursuant to any rule or regulation of any federal, state or other
governmental authority or regulatory agency, provided that Purchaser or Seller,
as the case may be, provides prior written notice thereof to the other or (c)
the Seller is in receipt of the prior written consent of Purchaser with respect
to any compromise by Seller of the confidentiality contemplated hereunder.
Purchaser and Seller further understand and agree that the violation by the
Seller or its agents of the foregoing shall entitle the other, at its option, to
obtain injunctive relief without a showing of irreparable harm or injury and
without bond.
ARTICLE X - ARBITRATION
Section 10.1 Mediation and Arbitration of Disputes. In their course of
dealing under this agreement, the parties shall bring problems or potential
problems to the attention of each other as soon as possible and discuss them.
The parties shall attempt to resolve any dispute arising out of or relating to
this Agreement promptly by good faith negotiations between the appropriate
officers of the parties.
The disputing party shall initiate negotiations by giving the other party
written notice of the dispute. Within thirty (30) days after receipt of the
notice, the receiving party shall submit to the other party a written response.
Both the notice and the response shall include (a) a statement of the party's
position and a summary of the evidence and argument supporting that position,
and (b) the name of the officer of the party. The officers shall
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confer within thirty (30) days of receipt of the disputing party's notice, in
person at a mutually acceptable time and place, if reasonable or by telephone
service, at least once and thereafter as often as they reasonably deem
necessary, to exchange relevant information and to attempt in good faith to
resolve the dispute.
If the dispute is not resolved within thirty (30) days of their first
meeting, the officers shall refer the dispute to designated representatives (who
may be legal counsel) who do not have direct responsibility for administration
of this Agreement. The officers shall also prepare and exchange summaries of
their negotiations and send the summaries and all other documents to the
designated representatives. The designated representatives shall confer within
sixty (60) days of receipt of the disputing party's notice, in person at a
mutually acceptable time and place if reasonable or by telephone otherwise, at
least once, and thereafter as often as they reasonably deem necessary, to
exchange any further relevant information and to attempt in good faith to
resolve the dispute.
If the dispute is not resolved within thirty (30) days of the first meeting
of the designated representatives, either party may initiate mediation of the
dispute under the auspices and procedures of the American Arbitration
Association. Also, if either party fails to participate in the mediation, the
other party may initiate the arbitration. The arbitration shall be conducted by
a single arbitrator at the offices of the American Arbitration Association,
Columbus, Ohio, or in the vicinity thereof. The arbitrator shall be governed by
this Agreement and may not change it. The arbitrator may not award punitive
damages. The award of the arbitrator shall finally resolve the dispute, and
judgment upon the award may be entered by any Court with jurisdiction to do so.
The parties shall share the fees and expenses of the mediator or arbitrator
equally. Otherwise, each party shall pay its own negotiation, mediation or
arbitration expense. All time limitations specified here may be extended by
mutual written agreement. The procedures specified herein shall be the sole and
exclusive methods for the resolution of disputes between the parties arising out
of or relating to this Agreement, any conflicting provisions notwithstanding.
However, a party may seek a temporary restraining order, a preliminary
injunction or other preliminary judicial relief if in its reasonable judgment,
such action is necessary to avoid irreparable damage. Despite such action, the
parties shall continue to participate in good faith in the procedures specified
herein. All applicable statutes of limitation shall be tolled while the
procedures specified herein are pending. The parties will take any action
required to effectuate such tolling.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ARI NETWORK SERVICES, INC., as Seller and Subservicer
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and Chief Executive Officer
Address at which the chief executive office is
located:
Address: 000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Phone number: 414/283-4300
Telecopier number: 414/283-4375
Additional locations at which the Seller does
business and maintains Records:
000 X. Xxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
0000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
000 XxXxxx Xxxxxx, Xxxxx X
Xxxxxxxxxxxx, XX 00000
Additional names under which Seller does business:
AgriData Resources, Inc.
RFC CAPITAL CORPORATION
By:
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Phone number: (000) 000-0000
Telecopier number: (000) 000-0000
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SCHEDULE 1
SELLER'S LICENSE NUMBERS
Name of Seller License Numbers
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---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
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---------------------------- ----------------------------
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SCHEDULE 2
LIST OF NAMES UNDER WHICH SELLER IS DOING BUSINESS
AND ADDRESSES AT WHICH SELLER IS DOING BUSINESS
Names Under Which Seller Addresses At Which Seller
Is Doing Business and Payee Names Is Doing Business
ARI Network Services, Inc. 000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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AgriData Resources, Inc.
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EXHIBIT A
DEFINITIONS
"ADVERSE CLAIM" means any claim of ownership, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement having the effect of a lien or security interest.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person within the meaning of control under Section 15 of the Securities Act
of 1933.
"BASE RATE" means, as of any Purchase Date, a percentage equal to the
prime lending rate of First Chicago, NA, plus 2.00% per annum.
"BILLED AMOUNT" means, with respect to any Receivable the amount billed
or to be billed to the related Payor with respect thereto prior to the
application of any Gross Liquidation Rate.
"BILLING AND COLLECTION AGENT" means the party performing billing and
collection services for and on behalf of the Seller pursuant to the terms of a
Billing and Collection Agreement.
"BILLING AND COLLECTION AGREEMENT" means, to the extent applicable, any
written agreement whereby a party is obligated to provide end-user billing and
collection services with respect to the Seller's accounts.
"BILLING DATE" means the date on which the invoice with respect to a
Receivable was submitted to the related Payor which shall be not more than 45
days from the date on which services were provided to the end user of such
services.
"BUSINESS DAY" means any day of the year other than a Saturday, Sunday
or any day on which banks are required, or authorized, by law to close in the
State of Ohio or Wisconsin.
"CASH COLLECTIONS" means all Collections in the Lockbox Account from
the immediately preceding one month period.
"CLOSING DATE" means September 28, 1999.
"COLLECTION ACCOUNT" means the account titled "Collection Account"
established pursuant to Section 2.4(b).
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable.
"CONTRACT" means an agreement (or agreements) pursuant to, or under
which a Payor shall be obligated to pay for services rendered by the Seller from
time to time.
"CREDIT DEFICIENCY" has the meaning specified in Section 5.2(c).
"CUSTOMER BASE" means all of the Seller's past, present and future
customer contracts, agreements, or other arrangements, any customer list
relating thereto and any information regarding prospective customers and
contracts, agreements, or other arrangements and all of the goodwill and other
intangible assets associated with any of the foregoing; provided, such
definition of "Customer Base" shall specifically exclude the Seller's customers
not located in the United States or not organized under the
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laws of any jurisdiction in the United States and having its principal office at
a location other than the United States.
"DEFAULTED RECEIVABLE" means a Purchased Receivable as to which, on any
Determination Date (a) any part of the Net Value thereof remains unpaid for more
than 90 days, or, such other period of time as the Purchaser may agree in
writing,, from the Billing Date for such Receivable; or (b) the Payor thereof
has taken any action, or suffered any event to occur, of the type described in
Section 7.1(f) or (g); or (c) the Purchaser otherwise reasonably deems any part
of the Net Value thereof to be uncollectible for reasons other than a breach of
a representation or warranty under Article IV hereof.
"DEFAULTED RECEIVABLE AMOUNT" has the meaning specified in Section
5.2(c).
"DETERMINATION DATE" means the Business Day preceding the Purchase
Date, to be not less than one day per week.
"ELIGIBLE PAYOR" means a Payor which is (a) (i) a corporation, limited
liability company, partnership or any statutory organization organized under the
laws of any jurisdiction in the United States and having its principal office in
the United States, (ii) an individual or sole proprietorship which is a resident
of any jurisdiction in the United States, or (iii) a Billing and Collection
Agent; (b) not an Affiliate of any of the parties hereto other than Textron
Financial Corporation or any Affiliate thereof; (c) has executed and delivered
to the Seller a copy of any related Contract or Billing and Collection
Agreement; and (d) not subject to bankruptcy or insolvency proceedings at the
time of sale of the Receivables to be purchased.
"ELIGIBLE RECEIVABLE" means, at any time, a Receivable as to which the
representations and warranties of Section 4.2 are true and correct in all
respects at the time of Purchase.
"ELIGIBLE RECEIVABLE AMOUNT" means, with respect to any Eligible
Receivable, an amount equal to its Billed Amount after giving effect to the
Gross Liquidation Rate associated with the Payor Class with respect to such
Eligible Receivable.
"EVENT OF SELLER DEFAULT" has the meaning specified in Section 7.1.
"EXCESS COLLECTION AMOUNT" has the meaning specified in Section 5.2(d).
"GOVERNMENTAL AUTHORITY" means the United States of America, any state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"GROSS LIQUIDATION RATE" means a factor, conclusively determined by the
Purchaser from time to time, with respect to a designated Payor Class based on
(i) the Seller's historical experience with respect to Collections for such
Payor Class, and (ii) the terms and provisions of any related Contract, Billing
and Collection Agreement, or other agreement, determined on the basis of actual
Collections which are expected to be received on a Receivable within 90 days,
or, to the extent applicable, 120 Days of its Billing Date; provided, that any
adjustment in such Gross Liquidation Rate by the Purchaser shall not be applied
to any Purchased Receivable purchased prior to such adjustment. For purposes of
the initial purchase of Receivables hereunder, the "Gross Liquidation Rate"
shall be 75.0% for with respect to Receivables which have been billed to the
respective Payor thereof and 55.0% for Unbilled Receivables.
"INSOLVENCY EVENT" means the occurrence of an event whereby the Seller
makes a general assignment for the benefit of creditors; or where any proceeding
is instituted by or against the Seller seeking to adjudicate it a bankrupt or
insolvent, or which seeks the liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of the Seller or any
of its debts
A-2
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under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, custodian or other similar official for it or for any
substantial part of its property.
"LOCKBOX ACCOUNT" means the account established pursuant to Section
2.4(a).
"NET VALUE" of any Receivable at any time means an amount (not less
than zero) equal to (a)(i) the Eligible Receivable Amount multiplied by (ii)
.90; minus (b) all Collections received with respect thereto; provided, that if
the Purchaser makes a determination that all payments by the Payor with respect
to such Receivable have been made, the Net Value shall be zero.
"PAID RECEIVABLES AMOUNT" has the meaning specified in Section 5.2(b).
"PAYOR" means, the Person obligated to make payments in respect of any
Receivables.
"PAYOR CLASS" means, with respect to any Payor, one of the following:
(a) statutory organization, (b) individuals and sole proprietorships, or (c)
Billing and Collection Agent.
"PERSON" means an individual, partnership, limited liability company,
corporation (including a business trust), joint stock company, trust, voluntary
association, joint venture, a government or any agency or political subdivision
thereof, or any other entity of whatever nature.
"PROGRAM FEE" means as of each Purchase Date, the greater of (a)
$3000.00 per month, or (b) an amount equal to (i) 7/360, of the annualized Base
Rate, multiplied by (ii) the sum of (a) the aggregate Initial Payments with
respect to Unbilled Receivables which have been purchased and (b) the Net Value
of all Purchased Receivables which are not Unbilled Receivables including (A)
Rejected Receivables and (B) those Receivables to be purchased on such Purchase
Date; provided, however, that in the event there is more than one Purchase Date
per week, the Program Fee as of each subsequent Purchase Date during such week
shall mean an amount equal to 7/360, of the annualized Base Rate, multiplied by
the sum of (x) the aggregate Initial Payments with respect to additional
Unbilled Receivables and (y) the Net Value of all Purchased Receivables which
are not Unbilled Receivables, to be purchased on such Purchase Date consistent
with the terms and conditions of this Agreement.
"PURCHASE" means a purchase by the Purchaser of Eligible Receivables
from the Seller pursuant to Section 2.2.
"PURCHASE ACCOUNT" means the account titled "Purchase Account"
established pursuant to Section 2.4(b).
"PURCHASE COMMITMENT" means an amount not to exceed $3,000,000;
provided, however, that with respect to the initial Purchase Date, such amount
shall not exceed $2,000,000 and other than with respect to the initial Purchase
Date, the aggregate Net Value of Purchased Receivables on the first Purchase
Date of any month may not be greater than $500,000, or such other amount as the
Purchaser and Seller may otherwise agree in writing, over the highest aggregate
Net Value of Purchased Receivables at any time during the immediately preceding
month. Subject to the prior written approval by the Purchaser and payment by the
Seller of all applicable fees as agreed by and between the Seller and Purchaser,
the Purchase Commitment may be increased to $10,000,000 provided, however, that
no single incremental increase in such Purchase Commitment may be for an amount
less than $1,000,000.
"PURCHASE DATE" means the date on which the Purchaser initially
purchases Receivables from the Seller and thereafter, such other day of each
week, as the case may be, that the Seller and Purchaser mutually agree;
provided, that unless otherwise agreed otherwise such day shall be Wednesday of
each
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such week and in any event there shall occur a "Purchase Date" for purposes
of this Agreement not less than once per week.
"PURCHASE PRICE" has the meaning specified in Section 2.3.
"PURCHASED RECEIVABLE" means any Receivable which has been purchased by
the Purchaser hereunder including a Rejected Receivable to the extent such
Rejected Receivable has not been repurchased by Seller.
"PURCHASER" means RFC Capital Corporation, a Delaware corporation,
together with its successors and assigns.
"RECEIVABLE" means (a) an account receivable arising from the provision
or sale of electronic commerce products, goods and/or services (and any services
or sales ancillary thereto) by the Seller including the right to payment of any
interest or finance charges and other obligations of the Payor with respect
thereto; (b) all security interests or liens and property subject thereto from
time to time purporting to secure payment by the Payor; (c) all rights,
remedies, guarantees, indemnities and warranties and proceeds thereof, proceeds
of insurance policies, UCC financing statements and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such account receivable and (d) all Collections, Records and proceeds
with respect to any of the foregoing; provided, however, that "Receivable" shall
not include the foregoing as it pertains to (x) license, renewal, maintenance
and/or subscription payments due from customers of the Seller payable by or
through a credit card program, and (y) receivables payable by any obligor/payor
not located in the United States or not organized under the laws of any
jurisdiction in the United States and having its principal office at a location
other than the United States.
"RECORDS" means all Contracts and other documents, books, records and
other information (including, without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
prepared and maintained by the Seller or the Subservicer with respect to
Receivables (including Purchased Receivables) and the related Payors. In the
instance of a Receivable with respect to which the Payor is a Billing and
Collection Agent pursuant to a Billing and Collection Agreement, the amount owed
to the Seller by the Billing and Collection Agent is the "Receivable" which is
eligible for Purchase by the Purchaser and not the amount owing to, or collected
by, the Billing and Collection Agent from the end user of the services provided
by the Seller.
"REJECTED RECEIVABLE AMOUNT" has the meaning specified in Section
5.2(a).
"REJECTED RECEIVABLE" has the meaning specified in Section 4.4.
"RELATED DOCUMENTS" means all documents required to be delivered under
this Agreement.
"REQUIRED INFORMATION" means, with respect to a Receivable, (a) the
identity of the Payor, (b) the Eligible Receivable Amount, (c) the Billing Date,
(d) the Payor telephone number and (e) the Payor account number, if applicable.
"SELLER" means ARI Network Services, Inc., a Wisconsin corporation,
together with its successors and assigns.
"SELLER CREDIT RESERVE ACCOUNT" means the account titled "Seller Credit
Reserve Account" established pursuant to Section 2.4(b).
"SERVICING RECORDS" means all documents, books, records and other
information (including, without limitation, computer programs, tapes, disks,
punch cards, data processing software and related
A-4
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property and rights) prepared and maintained by the Subservicer or the Purchaser
with respect to the Purchased Receivables and the related Payors.
"SPECIFIED CREDIT RESERVE BALANCE" means, as of any Purchase Date, an
amount equal to 5.00% of the sum of (i) the aggregate Initial Payments with
respect to Unbilled Receivables which have been purchased and (ii) the Net Value
of Purchased Receivables which are not Unbilled Receivables including (a)
Rejected Receivables to the extent not repurchased and (b) those Receivables to
be purchased on such Purchase Date.
"SUBSERVICER" means the Seller, or any Person designated as Subservicer
hereunder.
"TERMINATION DATE" means the earlier of (a) September 28, 2002; (b) a
Termination Event; (c) the occurrence of an Event of Seller Default as set forth
in Section 7.1 of this Agreement; or (d) ninety days following the Seller's
delivery of a written notice to the Purchaser setting forth Seller's desire to
terminate this Agreement and the payment of the Termination Fee with respect
thereto.
"TERMINATION EVENT" means the occurrence of an event under any loan
agreement, indenture or governing document following which the funding of the
Purchaser to be utilized in purchasing Receivables hereunder may be terminated.
"TERMINATION FEE" means, other than as a result of the occurrence of a
Termination Event, an amount to be paid by the Seller to the Purchaser equal to
(A) 4.0% of the Purchase Commitment in the event of an occurrence of an Event of
Seller Default resulting in the termination of this Agreement; or (B) in the
event the Seller desires to terminate this Agreement, such termination shall be
effective only in the event that the Seller has (i) provided the Purchaser
ninety days prior written notice thereof and (ii) paid to Purchaser and
Purchaser has received from Seller an amount equal to (a) 3.0% of the Purchase
Commitment if such notice of termination is provided to the Purchaser during the
one year period commencing on the Closing Date and ending on the one year
anniversary of the Closing Date, (b) 2.0% in the event such notice of
termination is provided to the Purchaser during the period commencing the day
after the one year anniversary of the Closing Date and ending on the second
anniversary of the Closing Date, or (c) 1.0% in the event such notice of
termination is provided to the Purchaser during the period commending the day
after the second anniversary of the Closing Date through the Termination Date.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the state of the location of the Seller's chief executive office.
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EXHIBIT B
[SELLER LETTERHEAD]
FORM OF NOTICE TO PAYORS - [INDIVIDUAL PAYORS]
[NAME AND ADDRESS OF PAYOR]
Dear :
--------------
Because of our continued growth and in an effort to better serve our
valued customers, we have entered into a receivables sale arrangement with RFC
Capital Corporation ("RFC") whereby certain receivables of ARI Network Services,
Inc. will be sold from time to time to RFC. One result of this relationship is
that your payments will be received and posted in a more timely manner. Payments
should [for resellers with existing lockboxes] continue to be forwarded to the
same address which is as follows or [for resellers establishing new lockboxes]
be forwarded to the following new address:
[bank name]-Lockbox Account (ARI NETWORK SERVICES, INC.) # .
-----------
[BANK NAME]
[BANK ADDRESS]
[BANK ABA #]
Your payments will continue to be serviced by, and all inquiries
regarding your service, billing invoices and payments should continue to be
directed to ARI Network Services, Inc.'s Customer Service Department at [phone
number]. This change is effective immediately and may not be further amended or
modified without the written consent of RFC.
Thank you for your cooperation and we look forward to continuing to
satisfy your business needs.
Sincerely,
ARI NETWORK SERVICES, INC.
-------------------------------
By: Xxxxx X. Xxxxxxx
Its: Chairman and Chief
Executive Officer
B-6
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EXHIBIT C
FORM OF CORPORATE CERTIFICATE FOR THE SELLER
I hereby certify that I am a duly elected [Officer] of ARI NETWORK
SERVICES, INC. (in its capacity as Seller, the "Seller") with all requisite
knowledge of the matters set forth below, and further certify as follows:
1. Except as otherwise previously disclosed by the Seller to
the Purchaser in writing, there has been no change of the Seller's
legal name, identity or corporate structure within the six month period
preceding the execution date hereof.
2. No proceedings looking toward merger (where the Seller will
not be the surviving entity without the Purchaser's written consent),
liquidation, dissolution or bankruptcy of the Seller are pending or
contemplated.
3. There is no litigation pending, or to my knowledge,
threatened, which, if determined adversely to the Seller, would
adversely affect the execution, delivery or enforceability of the
Receivables Sale Agreement (the "Sale Agreement"), dated as September
28, 1999 by and among the Seller and RFC Capital Corporation ("RFC") as
Purchaser (the "Purchaser"), or the sale or servicing of the
Receivables as provided therein.
4. With respect to the Sale Agreement, the Seller has complied
with all the agreements by which it is bound and has satisfied all the
conditions on its part to be performed or satisfied prior to the
Closing Date.
5. No Event of Seller Default or other event of default in the
performance of any of the Seller's covenants or agreements under the
Sale Agreement has occurred and is continuing, nor has an event
occurred which with the passage of time or notice or both would become
such an Event of Seller Default.
6. The Seller is not a party to, or governed by, any contract,
indenture, mortgage, loan agreement, note, lease, deed of trust or
other instrument which restricts the Seller's ability to sell or
service Receivables or consummate any of the transactions contemplated
by the Sale Agreement.
7. For tax and reporting purposes, the Seller will treat the
transfer to the Purchaser of the Seller's interests in the Receivables
as a sale.
8. The transfer to the Purchaser of the Seller's interests in
the Receivables will be made (a) in good faith and without intent to
hinder, delay, or defraud present or future creditors, and (b) in
exchange for reasonably equivalent value and fair consideration.
9. On the date hereof, the Seller (a) was paying its Debts, if
any, as they matured; (b) neither intended to incur, nor believed that
it would incur, Debts beyond its ability to pay as they mature; and (c)
after giving effect to the purchase of certain Receivables by the
Purchaser the Seller will have an adequate amount of capital to conduct
its business and anticipates no difficulty in continuing to do so for
the foreseeable future.
10. The Seller has and maintains all material permits,
licenses (including any applicable and necessary license, permit or
certification from the Federal Communication Commission),
authorizations, registrations, approvals and consents of Governmental
Authorities
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26
necessary for (a) the activities and business of the Seller and each of
its Subsidiaries as currently conducted, (b) the ownership, use,
operation and-maintenance by each of them of its respective properties,
facilities and assets, and (c) the performance by the Seller of the
Agreement.
11. Without limiting the generality of the foregoing
paragraph: (a) each Contract of the Seller and each Subsidiary relating
to Receivables is in full force and effect and has not been amended or
otherwise modified, rescinded or revoked or assigned, and (b) no
condition exists or event has occurred which, in itself or with the
giving of notice or lapse of time or both, would result in the
suspension, revocation, impairment, forfeiture, and non-renewal
thereof.
12. Other than those UCC financing statements to be filed by
the Purchaser, no UCC financing statements, federal or state tax liens
or judgments with respect to the Purchased Receivables and all other
Receivables generated by the Seller have been filed nor shall be filed
from and after the date and time of the UCC search results provided by
the Seller in accordance with the conditions precedent set forth in the
Sale Agreement.
13. As of the date hereof, the undersigned hold the respective
office set forth opposite their name, and the signature set forth
opposite their name is their genuine signature:
NAME OFFICE SIGNATURE
______________________________
______________________________
______________________________
______________________________
14. The Seller is a corporation duly organized and validly
existing under the laws of the State of [state incorporated] validly
acting by and through its Board of Directors. Other than the Articles
of Incorporation filed on [date articles filed] and annexed to the
Certificate of the Secretary of State of the State of, a true, correct
and complete copy of which is attached hereto as Exhibit A and which
are in effect on the date hereof, there has been no amendment or other
document filed with said Secretary of State with respect to the Seller
and no such amendment or other document has been authorized.
15. The Seller is in good standing (including the payment of
all franchise taxes and the filing of required reports) under the laws
of the State of ____________ and is duly qualified to do business in
the State(s) of [states qualified]. A certificate of good standing
issued by the Secretary of State of [states qualified] is attached
hereto as Exhibit B.
16. Attached hereto as Exhibit C is a true, correct and
complete copy of the Bylaws of the Seller, which Bylaws have not
subsequently been amended, modified or rescinded; no such amendment,
modification or rescission is contemplated and said Bylaws continue in
force on the date hereof.
X-0
00
00. Attached hereto as Exhibit D is a true, correct and
complete copy of resolutions (the "Resolutions") duly authorized and
adopted by the Board of Directors of the Seller pertaining to the RFC
Receivables Program; said Resolutions were duly adopted by the
unanimous written consent of the Board of Directors without a meeting
in accordance with the Articles of Incorporation and Bylaws of the
Seller and have not been amended, modified, annulled or revoked and are
in full force and effect; and the instruments referred to in said
Resolutions to which the Seller is a party were executed pursuant
thereto and in compliance therewith by the duly authorized officer of
the Seller.
All capitalized terms used herein that are not otherwise defined shall
have the respective meanings ascribed thereto in the Sale Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of the Seller this _______ day of _______ , 199__.
By
__________________________________
Name:
Title:
C-3
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EXHIBIT D
TO CORPORATE CERTIFICATE
CERTIFIED COPY OF RESOLUTION
WHEREAS, at a meeting of the Board of Directors of , a corporation
organized and existing under the laws of the State of ____________, duly and
regularly called and held at the office of the corporation on the day of
<>, at which meeting a quorum of said Board was present,
the following resolution was duly adopted by the unanimous vote of all Directors
present, and the same has not been rescinded or modified:
RESOLVED, that the <> of this corporation be
and they are hereby authorized on behalf of and in the name of this corporation
to enter into and perform that certain "Receivables Sale Agreement" or
modifications, amendments, or supplements thereof or thereto with RFC Capital
Corporation (the "Purchaser"), a corporation organized and existing under the
laws of the State of Delaware, relating to the sale, assignment, transfer,
conveyance and/or the creation of a security interest in 's Receivables, Seller
Credit Reserve Account and Collection Account as defined in said "Receivables
Sale Agreement", and to execute and deliver said "Receivables Sale Agreement"
and any other documents to be executed and delivered in relation to, or pursuant
to said "Receivables Sale Agreement"; and said officers are hereby further
authorized at any time to sell, assign, transfer, convey and/or create a
security interest in such Receivables and related Seller Credit Reserve Account
and Collection Account on such terms and conditions and in such form as may be
acceptable to the Purchaser; and said officers are authorized to execute and
deliver all such instruments and documents and to do all such things as may be
required to complete any such transactions; and all acts and things of the
nature herein referred to, heretofore and hereafter done by the said officers or
any of them, are hereby approved, ratified, and confirmed.
RESOLVED FURTHER, that the authority conferred upon said officers by
this resolution shall remain in full force until written notice of revocation
thereof shall have been received by the Purchaser and a copy of this resolution
certified by , Chairman, and , Secretary, with the seal of this corporation
affixed, is delivered to the Purchaser.
We, and , hereby certify that we are the Chairman and Secretary,
respectively, of ; and that the foregoing resolution was duly and regularly
passed, as above stated, by the said Board of Directors at a meeting of said
Board of Directors, duly and regularly called and held at the office of said
corporation at the time and place hereinbefore stated.
IN WITNESS WHEREOF, we have hereunto signed our names as , Chairman,
and , Secretary, and affixed the seal of said corporation as of
<>.
CHAIRMAN SECRETARY
----------------------------------------- ------------------------------
X-0
00
XXXXXXX X
FORM OF OPINION OF COUNSEL FOR THE SELLER
[DATE OF INITIAL PURCHASE OF RECEIVABLES]
RFC Capital Corporation
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
RE: RFC CAPITAL CORPORATION - RECEIVABLES SALE AGREEMENT
Gentlemen and Ladies:
We have acted as legal counsel to____________________________ (the
"Seller") in connection with the transactions contemplated by that certain
Receivables Sale Agreement (the "Sale Agreement"), dated as of___________, 199_,
by and among the Seller, a(n)__________________ corporation, and RFC Capital
Corporation, a Delaware corporation, as Purchaser ("Purchaser"). All references
herein to the Seller shall refer to the Seller in its capacity as both Seller
and Subservicer under the Sale Agreement. This opinion is being delivered at the
Seller's request.
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed thereto in the Sale Agreement.
In this connection, we have examined the following:
i) An executed copy of the Sale Agreement and all exhibits and
attachments thereto;
ii) Copies of the UCC-1 financing statements executed by the
Seller as assignor/debtor and naming the Purchaser as
assignee/secured party relating to the Purchased Receivables
and all other Receivables generated by the Seller (the
"Financing Statements"), copies of which are attached hereto
as Annex 1;
iii) The results of the searches (the "Searches") conducted by the
Secretary of State of ([AND THE COUNTY RECORDER,__________
COUNTY,_________ , AS OF_____________,]) certified by such
filing offices on Form UCC- 11, as to financing statements on
Form UCC- I on file with such offices and naming the Seller as
a "debtor" as of such date, copies of which are attached
hereto as Annex 2A;
iv) [ADD IF APPLICABLE] [EXECUTED COPIES OF APPROPRIATE RELEASES
OF ALL OUTSTANDING FINANCING STATEMENTS RELATING TO SECURITY
INTERESTS IN ACCOUNTS OF THE SELLER IN FAVOR OF THIRD PARTIES
WHICH ARE REFLECTED ON THE SEARCHES AND WHICH SHALL BE
RELEASED AT CLOSING] (the "Releases") copies of which are
attached hereto as Annex 213; and
v) Such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
------------------
(1) All references to "State of _________" in this form of opinion mean
state of the present location of the Seller.
(2) UCC searches certified on form UCC-11 by the appropriate government
officials should be dated within ten (10) days of the closing of the
transaction.
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30
As to various questions of fact material to our opinions set forth
below we have relied upon certificates of officers of the Seller, copies of
which are attached hereto as Annex 3. Nothing has come to our attention in the
course of our representation of the Seller which leads us to believe that the
representations set forth in any of the foregoing certificates are inaccurate or
incomplete in any material respect.
In connection with the opinions set forth below we have assumed, with
your agreement, that each party to the Sale Agreement other than the Seller has
executed and delivered such Sale Agreement and has the corporate power and
authority to enter into and perform its obligations thereunder, and that the
execution, delivery and performance of the Sale Agreement by each party thereto
other than the Seller will not breach, contravene, conflict with, or constitute
a violation of any provision of the articles of incorporation or bylaws or other
organizational documents of such party, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which such party is bound or
to which any of its property or assets is subject, or constitute a violation of
any law, statute, rule, regulation, order, writ, judgment, award, injunction or
decree of any Governmental Authority as to any such party.
In connection with the opinions set forth below which deal with the
perfection and priority of security interests, we have assumed that no financing
statements relating to Seller, the Receivables or the Purchased Receivables have
been misindexed or misfiled in the appropriate filing offices covered by the
Searches.
We have also assumed that all documents submitted to us as originals
are complete and authentic, that all copies of documents submitted to us conform
in all respects to the originals thereof, including all amendments or
modifications thereto; and that all signatures of parties, other than those of
the Seller and its authorized officers, to the respective documents are genuine.
We have also assumed that all documents or copies thereof examined by us have
been or will be duly, validly and properly authorized, executed, acknowledged
and delivered by all parties thereto other than the Seller.
As you have agreed, for purposes solely of ascertaining the existence
of security interests perfected by the filing of UCC financing statements, we
have limited our investigation to an examination of the Searches, which indicate
that there are no filed financing statements naming the Seller as debtor and
relating to the Seller's Receivables [,OTHER THAN THOSE WHICH WILL BE TERMINATED
BY THE FILING OF THE RELEASES].
For purposes of the opinion expressed in the first sentence of
Paragraph 4 below, we have assumed, with your consent, that the description of
"Purchased Receivables" set forth in the Sale Agreement accurately and
completely describes all of the Seller's Purchased Receivables being transferred
to the Purchaser pursuant to the Sale Agreement and the description of
"Receivable" set forth in the Sale Agreement accurately and completely describes
all of the Seller's Receivables generated by the Seller historically and from
time to time.
For purposes of the opinions expressed in Paragraphs 5 and 6 below,
with your agreement we have assumed that all transfers of Purchased Receivables
will have occurred in accordance with the terms and conditions set forth in the
Sale Agreement.
In addition to the foregoing, in rendering the opinions set forth
herein we have acted only as attorneys licensed to practice in the State of
_________________ and do not hold ourselves out as being knowledgeable as to the
laws of any other jurisdiction. We therefore express no opinions as to the
effect of any laws other than federal laws of the United States of America and
the laws of the State of ___________________. In this regard, we note that [- if
the Seller is located in a state other than Ohio -] the Sale Agreement is
governed by the laws of the State of Ohio. We have assumed, for purposes of
issuing this letter, that insofar as the laws of any such other jurisdiction are
applicable to the matters set forth below,
D-2
31
such laws (including applicable conflict of laws provisions) are identical to
and will be interpreted in-all respects in the same manner as the laws of the
State of _________.
On the basis of the foregoing and subject to the limitations,
qualifications and exceptions set forth above, we are of the opinion as of the
date hereof that:
1. The Seller is a corporation duly organized and validly existing
under the laws of the State of___________,
is in good standing under the laws of the State of [STATE OF ORGANIZATION] and
is duly qualified to do business, and is in good standing in each jurisdiction
in which it maintains an office and has the corporate power and authority to
own, lease and operate its properties and to conduct its business as now
conducted. The Seller has made all filings with, and has obtained all necessary
or appropriate licenses and approvals from federal and State of ___________
Governmental Authorities, which such licenses and approvals are in full force
and effect as of the date hereof, that are necessary to permit the Seller to
own, lease and operate its properties, to lawfully generate receivables and to
lawfully conduct its business as presently conducted, and to consummate the
transactions contemplated by the Sale Agreement.
2. The Seller has the corporate power and authority to execute,
deliver and perform the Sale Agreement. The execution, delivery and performance
of the Sale Agreement has been duly authorized by all necessary corporate action
of the Seller and such Sale Agreement constitutes a legal, valid and binding
obligation of Seller enforceable against the Seller in accordance with its
terms.
3. The execution and delivery of, and the performance of the
Purchaser's obligations under, the Sale Agreement does not and will not (a)
violate any provision of the Seller's articles of incorporation or bylaws, (b)
violate any statute, law, ordinance, rule or regulation of the United States of
America or the State of ____________ binding on the Seller, (c) violate any
orders, judgments, writs or decrees known to us to which the Seller is subject
in any respect, or (d) violate or create a breach or default under any loan
agreement, indenture, note, evidence of indebtedness, mortgage, financing
agreement, bond, debenture or similar agreement or instrument relating to
obligations of the Seller for borrowed money or for the deferred purchase price
of property or services payable more than one year from the date of incurrence
thereof or on demand or relating to obligations of the Seller under capital
leases which is presently in effect and known to us and to which the Seller is a
party of its property is subject.
4. The Purchased Receivables and Receivables constitute "accounts" and
"general intangibles" within the meaning of the UCC. The Seller is "located" in
the State of __________ for purposes of Section 9-103(3)(b) of the UCC such that
the laws (including the conflict of law rules) of the State of _____________
govern the perfection of security interests in accounts and general intangibles
of the Seller and the sale of accounts by the Seller. The grant of a first
priority security interest in the Receivables, other than Purchased Receivables,
is perfected by the filing of appropriate UCC financing statements in the
appropriate UCC filing offices identified in paragraph 5(i) below. The transfers
of the Purchased Receivables are "true sales" of the Purchased Receivables to
the Purchaser. In the event, however, that a court of competent jurisdiction
were to hold that such transaction constitutes a loan and not a purchase and
sale, then the Sale Agreement creates a first priority perfected valid security
interest in the Receivables and Purchased Receivables in favor of the Purchaser.
5. If transfers of the Purchased Receivables from the Seller to the
Purchaser pursuant to the Sale Agreement constitute a "true sale" of the
Purchased Receivables to the Purchaser, the execution and delivery of the Sale
Agreement and
(i) upon the proper filing of the Financing Statements in the UCC
filing offices of the Secretary of State of _____________,
[and in the UCC filing offices of the County Recorder of
__________County,] and
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(ii) the delivery to the Payors of such Purchased Receivables of
the notices in the form of the notices on Exhibit B to the
Sale Agreement (assuming no such prior notice has been
delivered to any such Payor by any person claiming an
interest in the Purchased Receivables, and we hereby advise
you that we have no knowledge that the Seller has previously
made any such assignment thereof or granted any such lien or
encumbrance thereupon);
are effective under the laws of the [STATE OR LOCATION OF SELLER] to vest title
thereto in the Purchaser, and all necessary steps have been taken under the laws
of the State of [LOCATION OF SELLER] to protect the Purchaser's ownership
interest in the Purchased Receivables now existing, and hereafter created,
against creditors of, or subsequent Purchasers from, the Seller, provided that
(x) if the transfers of the Purchased Receivables are deemed to
be subject to Article 9 of the UCC, or previously filed
financing statements, priority may be subject to financing
statements effective as a result of Section 9-401(2) of the
UCC, or
(y) if the Purchased Receivables are deemed to be interests or
claims "in or under any policy of insurance" under
ss.9-104(g) of the UCC, priority may be subject to [IN
ENGLISH RULE STATES: PRIOR NOTICES TO PAYORS OF SUCH
POLICIES] [IN AMERICAN RULE STATES: PRIOR SALES OF SUCH
PURCHASED RECEIVABLES].(3)
The filing of the Financing Statements in the filing offices identified in
paragraph 5(i) above are the only filings required to be made in the State of
____________ to evidence, provide notice to third parties with respect to, or
otherwise perfect the Purchaser's ownership interest in the Purchased
Receivables and the Purchaser's security interest in all Receivables other than
Purchased Receivables under any applicable law of the State of _______________.
No other filings, either in the filing offices identified in paragraph 5(i) or
in any other filing offices in the State of ______________, are required or are
advisable to be made to evidence, provide notice to third parties with respect
to, or otherwise perfect such interests, or to establish the priority of the
Purchaser's interest with respect to such Purchased Receivables.
6. If the transfers of the Purchased Receivables from the Seller to the
Purchaser pursuant to the Sale Agreement does not constitute a "true sale" of
the Purchased Receivables to the Purchaser, the Sale Agreement creates a valid
security interest in favor of the Purchaser in the Purchased Receivables from
time to time transferred to the Purchaser pursuant to the Sale Agreement, which
security interest will constitute
(i) upon the proper filing of the Financing Statements in
the UCC filing offices of the Secretary of State of
___________________, [and in the UCC filing offices
of the County Recorder of _______________, County,]
and
(ii) upon the delivery to the Payors of such Purchased
Receivables of the notices in the form of the notices
on Exhibit B to the Sale Agreement (assuming that no
such prior notice has been delivered to any such
Payor by any person claiming an
---------------
(3) As to assignments of accounts and intangibles, if the UCC is not
applicable because of Sections 9-104, most jurisdictions follow either the
so-called "American rule" (which in general provides that the transfer of an
interest made effective by a written assignment, with priority being granted to
the assignment which is first in time) or the so-called "English rule" (which in
general provides that the transfer of an interest therein is only effective if
notice is given to the payor). Counsel should choose one approach or the other
in completing paragraph 5(y) or, if the law in the jurisdiction is unsettled,
counsel may include both as exceptions (i.e., by indicating in paragraph 5(y)
"prior notices to payors of such policies or prior sales of such Purchased
Receivables").
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interest in the Purchased Receivables and we hereby
advise you that we have no knowledge that the Seller
has previously delivered any prior notice);
a security interest (perfected under the UCC and under other appropriate law to
the extent applicable) in the Seller's right, title and interest in and to the
Purchased Receivables and the proceeds thereof now existing, and hereafter
created, prior and senior to all other liens, provided that:
(x) if the granting of a security interest in the
Purchased Receivables is deemed to be subject to
Article 9 of the UCC or previously filed financing
statements, priority may be subject to financing
statements effective as a result of Section 9-401(2)
of the UCC, or
(y) if the Purchased Receivables are deemed to be
interests or claims "in or under any policy of
insurance" under ss.9-104(g) of the UCC, priority may
be subject to [IN ENGLISH RULE STATES: PRIOR NOTICES
TO PAYORS OF SUCH POLICIES] [IN AMERICAN RULE STATES:
PRIOR SALES OF SUCH PURCHASED RECEIVABLES].
The filing of the Financing Statements in the filing offices identified in
paragraph 6(i) above are the only filings required to be made in the State of
__________ to evidence, provide notice to third parties with respect to, or
otherwise perfect the Purchaser's security interest in the Purchased Receivables
under any applicable law of the State of__________. No other filings, either in
the filing offices identified in paragraph 6(i) or in any other filing offices
in the State of__________, are required or are advisable to be made to evidence,
provide notice to third parties with respect to, or otherwise perfect such
interests, or to establish the priority of the Purchaser's interest with respect
to such Purchased Receivables.
7. A State of __________ court and a federal court sitting in the
State of __________ would give effect to the choice of law provisions of the
Sale Agreement, except that such court may apply State of _________ law to (a)
certain remedial and procedural rights, (b) matters of public policy, (c)
matters pertaining to the perfection and priority of security interests, and (d)
matters as to which Ohio law cannot be proven to such court to be sufficiently
authoritative or certain for such court to rely on it.
8. No consent of, or other action by, and no notice to or filing with,
or licensing by any federal or State of ____________ Governmental Authority or
any other party (except for those consents required under Section _________of
the Sale Agreement which have been provided by the Seller to the Purchaser) is
required for the due execution, delivery and performance by the Seller of the
Sale Agreement or any other agreement, document or instrument to be delivered
thereunder or for the perfection of or the exercise by the Seller or the
Purchaser of any of their rights or remedies thereunder. The transactions
contemplated by the Sale Agreement will not cause the Purchaser to be subjected
to any obligation to pay any transfer tax to any Governmental Authority in the
State of _________, including without limitation any transfer, sales, use, added
value, documentary stamp or other similar transfer tax other than [DESCRIBE ANY
SUCH TAXES WHICH ARE APPLICABLE].
9. To the best of our knowledge, there are no actions or proceedings
against or affecting the Seller or any of its assets, pending or threatened,
before any Governmental Authority (including, without limitation, any federal or
state court of competent jurisdiction) (i) which seek to affect the
enforceability of the Sale Agreement or the transactions contemplated thereby,
or (ii) which, if determined adversely, would materially and adversely affect
the ability of the Seller to perform its obligations under the Sale Agreement.
Our opinions set forth herein are subject to the following
qualifications and exceptions:
(a) The effect of certain laws governing bankruptcy,
reorganization, fraudulent conveyance, moratorium and
insolvency and relating to or affecting the enforcement of
creditors'
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rights generally, including, but not limited to, the right to
take or retain personal property encumbered by the Sale
Agreement and the Financing Statements;
(b) The application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law);
(c) Standards of commercial reasonableness and good faith;
(d) In the case of proceeds, perfection of security interests is
limited to the extent set forth in Section 9-306 of the UCC;
(e) Continuation of perfection in any proceeds which are subject
to a security interest or in any after acquired property may,
if such proceeds or after acquired property consist of
property of a type in which a perfected security interest
cannot be obtained by filing a financing statement, require
additional compliance with applicable provisions of the UCC
and we express no opinion as to the perfection, priority an
effectiveness of any security interest in any proceeds of the
Purchased Receivables initially subject to the security
interest or after acquired property to the extent that
perfection, priority or effectiveness depends upon additional
compliance with the UCC. Any change (from one state to another
state) in the location of the Seller's place of business or
chief executive offices to a location outside of the State of
__________, or any change in the name, identity or corporate
structure of the Seller that would make a filed financing
statement seriously misleading, may result in the lapse of
perfection of the security interest to the extent that
perfection is dependent on filing unless new and appropriate
financing statements are filed in a timely manner; and
(f) In the case of collateral (as such term is defined in Article
9 of the UCC) in which a debtor (as such term is defined in
Article 9 of the UCC) has no present rights, a security
interest will be created therein only when the debtor acquires
rights to such collateral.
Our opinions expressed herein are limited to those matters expressly
set forth herein, and no opinion may be implied or inferred beyond the matters
expressly stated herein. Further, the opinions expressed herein are being
rendered solely in connection with the consummation of the transactions
contemplated by the Sale Agreement to which Seller is a party, and may not be
relied upon for any other purpose.
Our opinions are rendered only as of the date hereof and we assume no
obligation to update or supplement this opinion to reflect any facts or
circumstances that may hereafter occur or to reflect the applicability of any
laws that may affect the transactions contemplated by the Sale Agreement after
the date hereof.
In addition to the foregoing, this letter may not be distributed to,
furnished to or relied upon by any person without the express written consent of
this firm, provided, however, that any assignee of the Purchaser pursuant to the
Sale Agreement may likewise rely upon this opinion as if named as an addressee
herein.
Very truly yours,
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