SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 11, 2021
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
7681 E. Gray Rd.
Scottsdale, Arizona 85260
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|[ ]||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|[ ]||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|[ ]||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|[ ]||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading Symbol(s)||Name of each exchange on which registered|
|Common Stock, $0.001 par value||POWW||The Nasdaq Stock Market LLC (Nasdaq Capital Market)|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 8.01 Other Events.
On March 11, 2021, Ammo, Inc. (the “Company”) issued a press release announcing a proposed underwritten public offering of its common stock. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
As previously disclosed in the notes to the Company’s financial statements filed with the Securities and Exchange Commission (the “Commission”), the Company is a party to a First Amended and Restated Factoring and Security Agreement (as amended, the “Factoring Agreement”), with Factors Southwest, LLC (“FSW”). FSW may purchase from time to time the Company’s accounts receivables with recourse on an account by account basis. The Factoring Agreement contains a maximum advance amount of $5,000,000 on 85% of eligible accounts and has an annualized interest rate of the Prime Rate published from time to time by the Wall Street Journal plus 4.5%. The Factoring Agreement contains a fee of 3% ($150,000) of the maximum facility assessed to the Company. Our obligations under this agreement are secured by present and future accounts receivables and related assets, inventory, and equipment. The Company has the right to terminate the Factoring Agreement, with 30 days written notice, upon obtaining a non-factoring credit facility. This agreement provides the Company with the ability to convert our accounts receivables into cash. The Factoring Agreement has a maturity date of June 17, 2022. The foregoing description of the Factoring Agreement is not complete and is qualified in its entirety by reference to the full text of the Factoring Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
As previously disclosed in the notes to the Company’s financial statements filed with the Commission, the Company is a party to a Revolving Inventory Loan and Security Agreement (as amended, the “Revolving Loan Agreement”), with FSW. FSW has established a revolving credit line and makes loans from time to time to the Company for the purpose of providing capital. The Revolving Loan Agreement has a maturity date of June 17, 2022, is secured by our inventory, among other assets, contains a maximum loan amount of $2,250,000 on eligible inventory and has an annualized interest rate of the greater of the three-month LIBOR rate plus 3.09% or 8%. The agreement contains a fee of 2% of the maximum loan amount ($45,000) assessed to the Company. The foregoing description of the Revolving Loan Agreement is not complete and is qualified in its entirety by reference to the full text of the Revolving Loan Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference
Item 9.01 Financial Statements and Exhibits.
|10.1||First Amended and Restated Factoring and Security Agreement, as amended, by and between Ammo, Inc. and Factors Southwest, LLC|
|10.2||Revolving Inventory Loan and Security Agreement, as amended, by and between Ammo, Inc. and Factors Southwest, LLC|
|99.1||Press Release dated March 11, 2021|
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Dated: March 11, 2021||By:||/s/ Robert D. Wiley|
|Robert D. Wiley|
|Chief Financial Officer|
FIRST AMENDED AND RESTATED FACTORING AND SECURITY AGREEMENT
|DATE:||June ___, 2020|
|SELLER AMMO:||Ammo, Inc.||FSW:||FACTORS SOUTHWEST, L.L.C.,|
|a Delaware corporation||an Arizona Limited Liability Company|
|7681 East Gray Road|
Scottsdale, AZ 85260
|SELLER ENLIGHT:||Enlight Group II, LLC|
|a Delaware limited liability company|
A. WHEREAS, FSW and Seller Ammo are parties to that certain Factoring and Security Agreement dated July 16, 2019 (“Factoring Agreement”) as guaranteed by that certain Cross-Guaranty Addendum to Factoring and Security Agreement dated July 16, 2019 among Seller Enlight and Cross-Guaranty Parties as set forth therein;
B. WHEREAS, Seller Enlight has sold certain Accounts to FSW and factored invoices to FSW under the Seller Ammo Factoring Agreement; and Seller Enlight desires to enter into this Agreement to offer FSW for sale, purchase and assignment all of Seller Enlight’s Accounts and appoint FSW as its sole and exclusive factor and receive financial accommodations from FSW pursuant to the terms and conditions of this Agreement;
C. WHEREAS, FSW and Seller Ammo and Seller Enlight (collectively hereinafter “Seller” and individually “Seller Ammo” or “Seller Enlight”) desire to enter into that certain Revolving Inventory Loan and Security Agreement dated even herewith regarding Seller’s request for a lending facility for revolving inventory loans to be secured by all assets of Seller, including, but not limited to, Inventory and Proceeds thereof;
D. WHEREAS, each Seller Ammo, Seller Enlight and FSW desire to enter into this First Amended and Restated Factoring and Security Agreement (“this Agreement”) pursuant to the terms and conditions hereof.
1. Purpose of Agreement.
The purpose of this First Amended and Restated Factoring and Security Agreement and each Addendum (collectively the “Agreement”) attached hereto is to set forth the terms and conditions of the sale by each Seller and the purchase by FSW, as their sole factor, from time to time, of Seller’s Accounts now existing or hereafter arising from the sale and delivery of goods or the rendering of services in the ordinary course of each Seller’s business. Each Seller Ammo and Seller Enlight will have its own factoring facility with FSW under the terms of this Agreement and each Seller Ammo and Seller Enlight have agreed the Obligations owed hereunder shall be joint and several. If a Company Guaranty is executed in connection with this Agreement, additional purposes of this Agreement are to guaranty, cross-collateralize and cross-default the obligations of Seller with those of the other Guaranty Parties, among other purposes noted in such Company Guaranty. Capitalized terms not defined in the context shall have the meanings given those terms in the Addendum A to this Agreement, which definitions are incorporated herein by reference. Seller Ammo and Seller Enlight shall be referred to individually and collectively as “Seller”. Seller and FSW shall be referred to herein individually as “Party” and collectively as the “Parties”.
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2. Sale; Purchase Price; Billing.
2.1 Assignment and Sale.
2.1.1 Seller agrees to offer for sale to FSW all of its Accounts and FSW may purchase, at FSW’s offices in Phoenix, Arizona, those Accounts as are acceptable to FSW, in its sole and absolute discretion. FSW shall have no obligation to purchase any Account from Seller which it does not approve and accept. FSW reserves the right to reject an Account regardless of whether FSW may have purchased the Accounts of a particular Customer in the past.
2.1.2 Accounts shall be offered by Seller to FSW through the Online Reporting Service or upon forms as may be provided by FSW, accompanied by original or copies of invoices therefor (as FSW may request), together with satisfactory evidence of shipping or proof of delivery or performance of services, and other documents as FSW may from time to time require. FSW may elect not to deem an Account an Eligible Account until Seller furnishes all requested supporting documentation for such Account.
2.1.3 Upon acceptance in writing of the purchase and assignment of an Account by a duly authorized agent of FSW, which acceptance may be indicated through the Online Reporting Service, said assignment shall vest full, absolute and irrevocable title and ownership to said Account in FSW, as the sole and absolute owner thereof, together with the Proceeds thereof and Seller’s title to the goods represented thereby. As the full and sole owner of the Account, FSW shall be entitled to all of the ownership, title, rights, or guarantees which Seller possessed with respect thereto and with respect to the goods represented thereby, including without limitation, the right to stoppage in transit, reclamation or replevin of the goods, the right to the goods which may be rejected, returned, or reconsigned and in and to any new Account created through the resale or exchange of those goods, the right to file in the name of Seller or FSW materialmen’s liens and claims under any payment bond, and the right to contact Customers at any time for the purpose of verifying any information relating to any Account in the name of Seller or FSW, without notice to or further consent of Seller. Seller shall have no right or power to modify, change or alter the terms, price or other conditions of any Account, without first obtaining the prior written approval of FSW.
2.1.4 Notwithstanding the foregoing, FSW may elect to only purchase Accounts of either Seller, so long as, before and after that purchase, the unpaid balance of the Accounts does not exceed, before and after that purchase, the Maximum Amount; notwithstanding the foregoing, nothing contained herein shall be deemed to constitute a commitment by FSW to purchase any amount of Accounts from Seller. FSW shall have a first priority security interest in all Accounts not purchased by FSW and such Accounts shall be paid directly to FSW pursuant to Section 2.1.6.
2.1.5 It is specifically understood and agreed that notwithstanding the foregoing, FSW shall not as a result of purchasing those Accounts, either expressly or impliedly, be deemed to have assumed any liability or obligation which Seller may now or at any time hereafter have to its Customers, and each Seller shall indemnify, defend and hold FSW harmless from any and all liability with respect thereto.
2.1.6 Each Customer of an Account may be notified in writing that its Account has been sold and assigned to FSW and that all payments on said Account shall be made only to FSW. Such Notification shall be done in a manner as FSW shall reasonably prescribe from time to time.
2.1.7 The Parties intend that the sale of the Accounts hereunder be deemed to be a true sale and not a financing arrangement and that the Accounts will not be the property of Seller’s bankruptcy estate, in the event of Seller’s bankruptcy.
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2.2 Advances; Purchase Price; Available Funds.
2.2.1 FSW, subject to the terms and conditions hereof, may make Advances via ACH or wire transfer in such amounts as Seller may request and FSW may approve in FSW’s sole and absolute discretion, up to the collective Advance Percentage of the Net Face Amount of the Eligible Accounts, provided that at no time shall FSW be obligated to have outstanding Advances exceeding the Maximum Eligible Advances. Seller may at any time submit a Borrowing Base Certificate requesting that FSW pay and advance to Seller an Advance not to exceed the Maximum Eligible Advances, and FSW may, in its sole discretion, make such Advances, subject to the conditions and limitations herein, by wire transfer to Seller’s account designated to FSW. Advances may be made within two (2) Business Days for all Eligible Accounts. In the event of an Overadvance (i) Seller agrees to immediately pay such Overadvance directly to FSW; and (ii) FSW shall have the right to charge the Overadvance Fee in its sole discretion. All terms and conditions of this Agreement shall apply to such Overadvance.
2.2.2 The purchase price for the Accounts will be the Net Face Amount thereof less any amounts owed to FSW, subject to the terms and conditions of this Agreement. At the time that the Account is purchased, which shall be in FSW’s sole discretion, FSW may make funds available for each Account in an amount equal to the Advance Percentage set forth in this Agreement.
2.2.3 At such time as there are Available Funds, FSW may release such Available Funds to Seller upon submission of a Borrowing Base Certificate at the sole discretion of FSW. An Account may be deemed to be paid after the expiration of three (3) Business Days after the remittance is received by FSW, or a longer period as is necessary to allow for clearance of the remittance by FSW’s bank.
2.2.4 Each Seller shall pay the Collateral Monitoring Fee, which may be deducted by FSW from Advances or Available Funds.
2.2.5 All Advances and Available Funds remitted by FSW shall be by ACH or wire transfer, and which may be reduced by any amounts due to FSW from Seller pursuant to this Agreement. Failure to reduce outstanding amounts owed to FSW shall not relieve Seller from its liability to pay FSW for fees associated with such outstanding balance or the Accounts.
2.2.6 Advances and Available Funds may be held by FSW and may be applied to any Obligations of each Seller to FSW at the sole discretion of FSW, including but not limited to FSW’s Costs, the Collateral Monitor Fee, the Net Face Amount of any Eligible Account to be charged back by Seller, adjustments, short payments, or discounts made or allowed on any Eligible Account, or sums or Obligations owing from Seller to FSW, whether arising out of this Agreement or otherwise. FSW, in its sole discretion, may take any reasonable action with respect to this subsection 2.2.6 as applicable to any Seller hereunder.
2.2.7 Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence of an Event of Default, FSW shall have no obligation to disburse any Advances or Available Funds to Seller until the time as all Obligations of Seller to FSW, arising out of this Agreement or otherwise, have been fully paid and satisfied and Seller has otherwise cured any Events of Default or Incipient Defaults.
2.2.8 The Daily Balance Fee will be calculated daily and will be charged to Seller’s account on the last day of each calendar month. Any publicly announced decrease or increase in the Base Rate will result in an adjustment on the next Business Day, provided, however, that in the event the Base Rate is lower than the Minimum Base Rate, the Minimum Base Rate shall be assessed. After the occurrence of an Event of Default and for so long as the Event of Default continues, all the Obligations will, at FSW’s option, with or without the notice to Seller, be assessed a rate per annum equal to the Daily Balance Default Rate.
2.2.9 In no event will the total amount of any fees or other charges to be paid by Seller to FSW that could be characterized as interest exceed the amount of interest or other charges permitted by applicable Law and in the event excess interest or charges are determined by a court of competent jurisdiction to have been paid by Seller to FSW, the excess amount will be applied as a credit against the outstanding Obligations and Seller will not have any action against FSW or any damages arising out of the payment or collection of those excess interest or charges if so applied or the excess amounts are refunded to Seller.
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3. Recourse of Eligible Accounts.
3.1 Each Seller acknowledges and agrees that all Accounts purchased by FSW, including but not limited to Eligible Accounts, will be with full recourse to Seller. FSW may require Seller to pay to FSW the then unpaid Net Face Amount, together with any unpaid fees relating thereto, for an Eligible Account in the event such Account is no longer deemed an Eligible Account in the sole discretion of FSW, including but not limited to Accounts that are or that become:
3.1.1 subject to a Customer Dispute. FSW is under no obligation to determine whether a Customer Dispute is bona fide. Seller acknowledges and agrees that any returned goods shall be and remain the property of FSW until such time as FSW has been paid in full on such Account. FSW shall have the right, in its discretion, to dispose of any returned or rejected goods at a price and upon commercially reasonable terms available to FSW under the circumstances, in the sole opinion of FSW and as required by applicable Law and the full value of such sale and disposition proceeds will be credited to the Obligations;
3.1.2 do not conform to the warranties and representations set forth in this Agreement;
3.1.3 owed by a Customer who, in FSW’s commercially reasonable credit judgment, has become insolvent or has defaulted on its obligations to Seller or any of its other creditors; or
3.1.4 unpaid beyond the Late Payment Date.
3.2 The payment to FSW for an Account that is no longer deemed to be an Eligible Account as set forth in the foregoing Section 3.1 may be accomplished in any one of the following manner or combination thereof, at FSW’s option:
3.2.1 deducting the Net Face Amount of the Eligible Account from Advances and/or Available Funds;
3.2.2 deducting the Net Face Amount of the Eligible Account from any other funds which come into the possession of FSW and which would otherwise be paid to Seller;
3.2.3 debiting the Net Face Amount of the Eligible Account against any deposit account of Seller, pursuant to Section 13.1; or
3.2.4 payment from Seller, which shall be paid within one (1) Business Day following demand by FSW.
3.3 If an Account that is no longer an Eligible Account, or any payment is charged back to Seller after the collection date, Seller will pay FSW the Daily Balance Default Rate from the date of the chargeback of such or payment until Seller has paid FSW in full for the Obligations related to that Account.
3.4 Subject to the terms of this agreement, each Seller agrees that FSW, in its sole discretion, may use or employ any of the foregoing acts, options or remedies set forth in Section 3.1, Section 3.2 or Section 3.3 in connection with any Account purchased under this factoring facility from either Seller in order to satisfy the Obligations owed by either Seller to FSW.
4. Security Interest in Collateral.
4.1 In order to secure the obligations of Seller hereunder, each Seller hereby grants FSW a security interest in all Collateral, now owned or hereafter acquired by Seller, as an additional inducement to FSW to enter into this Agreement. FSW shall have a first priority security interest in all Collateral, provided, however, that FSW agrees that it will accept a second junior lien position in all right, title, claim, legal or equitable interest in or arising out of equipment and machinery owned, leased or used by Seller in the ordinary course and operation of its business and FSW will promptly execute any and all documents necessary for recordation for such subordinated position, which shall be in the sole discretion of FSW.
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4.2 Seller authorizes FSW at any time and from time to time to file any financing statements and amendments thereto that it deems appropriate to perfect its security interest in the Collateral Such financing statement may, at the sole discretion of FSW, (a) describe the Collateral as “all assets of Seller, excluding certain Accounts owed by government agencies” or words of similar effect; (b) include a statement that Seller has agreed not to assign its Accounts to any other party; and/or (c) include a statement that any grant of a subsequent security interest may constitute a tortious interference with FSW’s rights under this Agreement.
4.3 In the event any principal of either Seller including, but not limited to equity owners, managers, officers or directors, and their respective employees and agents (collectively with Seller, the “Seller Parties”) during the term of this Agreement or while Seller remains liable to FSW for any Obligations, directly or indirectly, including acting by, through or in conjunction with any other person, cause to be formed a new entity or otherwise become associated with any new or existing entity, whether corporate, partnership, limited liability company or otherwise in a business similar to or competitive with that of Seller (a “New Entity”), such New Entity shall be deemed to have jointly and severally with Seller expressly assumed the Obligations due FSW under this Agreement. Seller and New Entity shall notify FSW of the formation of the New Entity within one (1) Business Day of formation. With respect to any such New Entity, Seller shall be deemed to have been granted FSW an irrevocable power of attorney with authority to file an initial UCC-1 financing statement with the New Entity as Debtor and to have the UCC-1 financing statement filed with any and all appropriate secretaries of state or other UCC filing offices. FSW shall be held harmless by Seller and the Seller Parties and be relieved of any liability as a result of FSW’s authentication and filing of any such financing statement or the resulting perfection of its ownership or security interests in such New Entity’s assets. The Seller Parties shall, and shall cause the New Entity, to execute and deliver to FSW agreements substantially identical to this Agreement and all other agreements between Seller and FSW or its affiliates, within five (5) Business Days following FSW’s request to do so. FSW shall have the right to notify the Customers of the New Entity of FSW’s rights, including without limitation, FSW’s right to collect all Accounts, and to notify any creditor of the New Entity that FSW has such rights in the New Entity’s assets. Nothing in this Section shall authorize or excuse the formation by any of the foregoing of a New Entity or to otherwise divert or attempt to divert accounts, assets, income or business away from Seller or FSW. Notwithstanding the above, the terms and conditions set forth in this Section 4.3 remain subject to any covenants contained in Section 8 below, including, but not limited to, any requirements that Seller receive FSW’s consent and approval prior to any merger, sale or other similar transaction as specified in Section 8.9 of the Seller’s business or assets.
5. Collection of Accounts.
5.1 All remittances, including cash, checks and other Proceeds arising from the Accounts shall be the sole and exclusive property of FSW. Each Seller acknowledges and agrees that it shall not have any right to, or interest in, or power or authority to deposit or in any way deal with the Proceeds of any Account. Upon receiving any inquiry from a Customer relating to payment of an Account, Seller shall inform the Customer to make payment directly to FSW.
5.2 If for any reason any Seller should receive any payment or other Proceeds with respect to an Account, Seller agrees to hold that payment or Proceeds in trust for FSW separate and apart from any property of Seller and shall deliver the same to FSW on the same or next Business Day, in the form received without negotiation, together with any voucher or memoranda. If any payment received by Seller with respect to an Account is cashed, deposited or negotiated by Seller, it is understood by Seller that the action shall constitute an Event of Default hereunder and may subject Seller to civil liability. Notwithstanding that the action constitutes an Event of Default under this Agreement, Seller shall immediately be obligated to pay said sum to FSW, plus an amount equal to 10% of said sum, not as a penalty, but as liquidated damages to compensate FSW for additional administrative and collection expenses resulting from that action. In addition to all other remedies, FSW shall have the right to debit those amounts against any deposit account of Seller, pursuant to Section 13.1.
5.3 Any remittance made by a Customer, including remittances representing C.O.D. sales, may be applied by FSW in its sole discretion, unless specifically designated as being in payment of a particular Account purchased by FSW.
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5.4 To facilitate the collection of the Accounts, each Seller does hereby make, constitute and appoint FSW, any agents designated by FSW, as its attorney-in-fact with full power to receive, take, accept, endorse, and deposit in the name of FSW or Seller any check, note, draft, money order or other evidence of payment which may come into the possession of FSW pertaining to any Account; receive and open all mail addressed to Seller pertaining to the Accounts, with copies of said mail promptly provided to Seller upon receipt; demand, collect, receive, receipt for, give releases for, or compromise or settle the payment of or prosecute, or defend any action or proceeding pertaining to the Accounts in its own name or in the name of Seller; sign Seller’s name on any notice of assignment, materialman’s lien or waiver thereof, or on any other instrument or document with respect to those Accounts; prepare and sign Seller’s name and file a proof of claim in bankruptcy or similar document with respect to any Customer and do all acts and things necessary to facilitate the collection of those Accounts. The authority granted FSW shall be coupled with an interest and remain in full force and effect until all Accounts are paid in full or all Obligations of Seller to FSW have been fully paid and satisfied. In this regard, however, FSW shall have no obligation to engage in any collection or other action with respect to the collection of any Account, nor shall it have any direct or indirect liability to Seller for its actions undertaken or not undertaken in connection herewith. All fees and expenses of any attorney or collection agency employed by FSW or on its behalf to collect any Account with respect to which FSW has or which is otherwise subject to a notice of a dispute, claim, offset, defense or counterclaim by the Customer shall be charged to Seller and shall be paid by Seller, as part of its Obligations.
5.5 Each Seller agrees to cooperate, at Seller’s expense, with FSW in making a good faith, commercially reasonable effort to assist FSW in collecting the Accounts.
5.6 Each Seller authorizes FSW to accept, endorse and deposit on behalf of Seller, any check tendered by customer “in full payment” of its obligation to Seller. Seller releases FSW from any claim which Seller may now or hereafter have arising out of FSW’s endorsement and deposit of any check issued by a Customer stating that the check is in full payment of an Account, but issued for less than the full amount which may have been owed and FSW agrees that any amounts actually received by FSW for such Account will be credited to the Obligations owed on such Account. Seller shall not assert against FSW any claim arising therefrom, irrespective of whether that action by FSW is an accord and satisfaction of Seller’s claim under the Uniform Commercial Code or otherwise.
5.7 Each Seller shall notify FSW immediately in the event of a Customer Dispute and in the event that the goods represented by any Account are returned to Seller for any reason, Seller shall, subject to FSW’s prior approval, promptly adjust and settle the same at its expense and advise FSW of any such adjustment. Seller shall, on demand, pay over to FSW the amount of any such adjustment on said Account; in the alternative, FSW may offset against any such sums as may be due to Seller the amount of that adjustment or the full unpaid balance thereon. Seller shall pay any and all expenses and attorneys’ fees and disbursements that FSW may incur in connection with a Customer Dispute. Until said Account is paid in full by Seller, it is understood and agreed that all returned or rejected goods shall be and remain the property of FSW. FSW shall have the right to dispose of any returned or rejected goods at a price and upon terms reasonably available to FSW under the circumstances, in the sole opinion of FSW, and in accordance with applicable Law and FSW agrees that any amounts actually received by FSW for such Account will be credited to the Obligations owed on such Account.
6. Conditions to all Purchases.
6.1 Any purchase of Accounts by FSW, including the initial purchase, is subject to the following conditions:
6.1.1 No event shall have occurred and be continuing, which would with the giving of notice or passage of time, or both, constitute an Event of Default; and
6.1.2 The Seller shall have delivered to FSW on or prior to each date of purchase, in form and substance satisfactory to FSW, complete information with respect to each Account together with additional information as may reasonably be requested by FSW; and
6.1.3 There shall be no material adverse change in the financial position or business prospects of the Seller or Customers, as compared to that existing on the date hereof.
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7. Warranties, Representations and Covenants.
As an inducement for FSW to enter into this Agreement and to Purchase Accounts from Seller, and with full knowledge that the truth and accuracy of these warranties, representations and covenants are being relied upon by FSW, regardless of any credit investigation, diligence or knowledge of FSW, each Seller warrants, represents and covenants as follows, which warranties, representations and covenants shall be deemed to be made at the time each Account is purchased by FSW:
7.1 If Seller is a corporation or a limited liability company, it is duly organized under the laws of the state set forth in this Agreement, and is and at all times hereinafter will be in good standing under the laws of that state and is duly qualified and in good standing in every other state in which it is required to be registered or licensed.
7.2 The Seller has full power and authority to own or lease its properties and to conduct its business as presently conducted and to execute, deliver and perform this Agreement, any assignment and any other documents related thereto to which it is a party and to consummate the transactions contemplated hereby and thereby;
7.3 The execution and delivery of this Agreement by the Seller and the consummation of the transactions contemplated hereby will not result in a breach of any of the terms and provisions of, or constitute a default under, or conflict with, any contract, the organization documents of the Seller, any judgment, decree, order or award of any court, governmental body or arbitrator or Law applicable to the Seller.
7.4 This Agreement, each assignment and all other instruments and documentation being delivered hereunder has been duly and validly authorized, executed and delivered by the Seller and constitutes a valid and legally binding obligation of the Seller, enforceable against the Seller in accordance with its terms;
7.5 Seller is presently doing business only under the company and Trade Names set forth in this Agreement.
7.6 The place of business of Seller, or if Seller has more than one place of business, the location of its chief executive office, is at the location set forth in this Agreement and will not be moved therefrom, without at least thirty (30) days’ prior written notice to FSW.
7.7 All records of Seller pertaining to the Accounts are maintained electronically and shall be made accessible at Seller’s address set forth in this Agreement and said access availability will not be materially modified without at least thirty (30) days’ prior written notice to FSW.
7.8 Seller is solvent and able to pay its debts as they mature.
7.9 Seller is the true and lawful owner of the Accounts and the Collateral.
7.10 All financial statements, applications and information delivered to FSW or financial records or Seller’s Books which may be shown to FSW at any time shall be true and correct in all material respects and kept in accordance with generally accepted accounting principles consistently applied, and there has been no adverse change in the condition, financial or otherwise, of the business since the date thereof.
7.11 There are no actions, suits, proceedings or investigations pending or, to the knowledge of the Seller, threatened or contemplated, before any court, administrative agency, arbitrator, governmental body or other tribunal, except as may be specifically disclosed in writing to FSW, relating to: (i) the Accounts; (ii) Seller; or (iii) to Seller’s knowledge, the Customers, which could have a material adverse effect on the transactions contemplated by this Agreement, the ability of the Seller to perform hereunder or FSW’s ability to collect the Accounts or realize upon the Collateral. If any of the foregoing arises, Seller shall immediately notify FSW in writing with respect thereto. Without limitation thereof, Seller has not, within the past 180 days, contemplated or approved a bankruptcy filing with Seller as debtor, or a filing under comparable state law proceedings, including but not limited to an assignment for the benefit of creditors or a composition among creditors, nor has the Seller been threatened with any such action by its creditors on an involuntary basis. During that period, Seller has not consulted with bankruptcy or insolvency counsel with respect thereto. Seller has paid all federal, state and local taxes and assessments required of it by applicable Law (including timely payment or deposit of all OASDI, Medicare Tax, retirement plan, withholding tax payments and other mandatory withholdings) and no tax lien has been filed against Seller.
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7.12 All of the Accounts and all Collateral are owned by Seller only and are free and clear of any and all liens, claims or security interests of any party and no financing statement covering the Accounts, the Collateral or the proceeds therefrom is or shall be on file at any public office, except as provided in Section 4.2 above.
7.13 Each Eligible Account:
7.13.1 is owned by Seller and has not been sold, transferred, or assigned to any other party, nor does any party have a security interest in any Account;
7.13.2 is genuine and in all respects what it purports to be and represents a bona fide sale in the ordinary course of Seller’s business of the kind, quantity and quality of the goods or services described therein, and that the goods or services described therein have been completely delivered, installed or performed in accordance with any warranty, guaranty or service standards offered by Seller and in a commercially reasonable manner, and at the time of delivery or installation have been accepted by the Customer without condition;
7.13.3 is not owed by a Customer in which Seller or any manager, director, officer or equity owner of Seller has any legal or financial interest or represents services furnished or provided to or on behalf of any subsidiary, parent, person, associate or other entity affiliated with the Seller;
7.13.4 is not owed by a Customer who has commenced or has had a petition under the Bankruptcy Code commenced against it, and none of those proceedings are threatened;
7.13.5 is due and payable in thirty days or less or on other terms as are acceptable to FSW, in its sole discretion, which are expressly set forth on Schedule 7.13.5;
7.13.6 is not subject to any credit, deduction, discount, allowance, or dispute, and the goods represented by said Account have not been sold on consignment or with any return privilege whatsoever (excepting defective merchandise);
7.13.7 is not subject to any defense or setoff, counterclaim, recoupment, defense, abatement, suspension, deferment, deductible, reduction, dispute or termination which could be asserted by way of defense or counterclaim against Seller or FSW by the Customer, nor does any condition exist which would give rise thereto;
7.13.8 arose in a commercial transaction and is not for personal, family, household or agricultural purposes or in connection with the sale of residential real estate;
7.13.9 has been originated and the products sold and/or services rendered that underlie that Account were undertaken in full compliance with all legal duties of Seller and its agents.
7.14 Seller has not settled, compromised, released or adjusted any Account and will not bring any suit or attempt to collect thereon, without FSW’s prior consent.
7.15 Seller has notified FSW and will continue to notify FSW of the occurrence of any of the following: (i) a tax lien or warrant is issued/filed against Seller (or, if Seller is an entity, any of its principals) or its assets; (ii) Seller (or, if Seller is an entity, any of its principals) fails to pay any tax when due; or (iii) Seller (or, if Seller is an entity, any of its principals) receives any notice of tax assessment, deficiency or levy.
7.16 Seller has no subsidiaries or other affiliates other than those disclosed in writing to FSW prior to the date of this Agreement, and no additional subsidiaries or other affiliates have been or will be created on or after the date of this Agreement without FSW’s prior written consent, which consent may be withheld in FSW’s absolute discretion or conditioned upon any such subsidiary or other affiliate entering into an agreement similar to this Agreement with FSW.
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7.17 Seller has not and will not, without first satisfying in full all of Seller’s Obligations to FSW or otherwise upon receipt of FSW written consent, (1) merge or consolidate with or into another legal entity; (2) sell, lease, or otherwise substantially dispose of all or substantially all of its assets to another person or legal entity; or (3) purchase all or substantially all the stock or other equity interests in or assets of another person or legal entity.
7.18 Seller has and will continue to provide to FSW all such information about Seller’s ownership, officers, directors and corporate structure as may be required by FSW.
7.19 Seller operates its business in material compliance with all Laws.
7.20 The Seller has submitted all necessary documentation and supplied all necessary information for payment of each Account to the Customer and has fulfilled all of its other obligations in respect thereof, including verification of the eligibility of the Account for payment by such Customer.
7.21 Neither the Account nor the related contract has been satisfied, subordinated or rescinded or, except as disclosed in writing to FSW, amended in any manner.
7.22 True and correct copies of all claims, invoices, agreements and other documents relating to the creation of each Account have been or will prior to an Advance by Seller be delivered to FSW.
7.23 No action other than the execution and delivery of this Agreement and any assignment, the filing of financing statements on Form UCC-1 or such successor form as may from time to time be necessary or desirable, in the state in which the Seller has been formed or otherwise incorporated and the provision of consideration by FSW is required to perfect the interest of FSW, as the owner, assignee and transferee of the Accounts with a first priority security interest therein, and to perfect FSW as secured party with a first priority lien and security interest in the other Collateral pledged to FSW, and all such actions have been or will be accomplished no later than the date of purchase of the Accounts therefore.
7.24 The Seller has the right to sell, assign and transfer ownership of each Account.
7.25 The Seller has and shall treat the sale and assignment of Accounts as a true sale for all purposes, including, without limitation, tax and accounting, it being understood that it is the intention of both Parties that the assignment of Accounts pursuant to this Agreement and any assignment be treated as a sale for all purposes. The Seller shall mark its books and records to show the Accounts as sold to FSW.
7.26 The Seller has sold and will sell the Accounts to FSW without markup over the actual sales price and terms offered to the Customer, and that Seller sold the goods or services underlying the Accounts in good faith, for fair and reasonably equivalent value, and without intent to hinder, delay or defraud the Seller’s present or future creditors.
7.27 The Seller has no knowledge of any fact which should have led it to expect at the time of sale of such Account to FSW that such Account would not be paid in full, when due, in the normal course.
7.28 The proceeds of the sale of the Accounts will be used exclusively for the business and commercial purposes of the Seller.
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8. Additional Covenants of Seller.
8.1 Each Seller shall keep proper and accurate books, correspondence, records and papers pertaining to all Accounts and the Collateral and make proper entries in its books reflecting the sale of the Accounts hereunder to FSW. From time to time as reasonably requested by FSW, at the sole expense of Seller, FSW or its designee shall have access, during reasonable business hours, if prior to an Event of Default, and at any time on or after an Event of Default, to all premises where Collateral is located for the purposes of inspecting (and removing, if after the occurrence of an Event of Default) any of the Collateral, including copies of Seller’s Books, and Seller shall permit FSW or its designee to make copies or extracts therefrom as FSW may request. Without expense to FSW, FSW may use any of Seller’s personnel, equipment, including computer equipment, programs, printed output and computer readable media, supplies and premises for the collection of Accounts and realization on other Collateral as FSW, in its sole discretion, deems appropriate. Seller hereby irrevocably authorizes all accountants and third parties to disclose and deliver to FSW at Seller’s expense all financial information, books and records, work papers, management reports and other information in their possession relating to Seller.
8.2 Seller shall furnish to FSW within five (5) Business Days of a request by FSW for information relating to the Accounts, the Collateral, Seller and its financial condition, or any other matter related to the transactions contemplated by this Agreement as FSW may request from time to time in a commercially reasonable manner. Seller shall also deliver to FSW within ninety (90) days after the close of Seller’s fiscal year a financial statement certified either by an independent CPA or, at FSW’s option, an authorized representative of Seller, and any other financial reports or statements prepared by or for Seller, within twenty (20) days after preparation or receipt, as applicable.
8.3 Seller shall conduct its business in a lawful matter and in compliance with all applicable laws, and shall pay when due all lawfully imposed taxes, liens and assessments upon its property, business and income.
8.4 Seller agrees, during the term of this Agreement, not to sell, assign or grant a security interest in any of the Accounts to any other party and will not grant a security interest in any of the Collateral to any other party, excepting purchase money security interests in equipment, which Seller shall discharge in full before the due date of those obligations. Seller shall not create, permit or suffer to exist any lien, claim or right in, to or on the Accounts other than the interest of FSW. Seller shall take actions as are necessary to remove, and will defend the right, title and interest of FSW in and to the Accounts against the claims and demands of all persons whomsoever, other than those created hereby.
8.5 Seller agrees to make timely payments or deposits of all taxes (including OASDI, Medicare Tax, withholding tax payments and other mandatory withholdings) prior to delinquency and furnish to FSW on demand evidence of that payment or deposit.
8.6 Seller agrees not in any manner whatsoever to take any action or to refrain from taking any action, which in either case may interfere with or hinder the collection of the Accounts or interfere with any of FSW’s rights under this Agreement.
8.7 Seller shall, at all times, and for periods of time as FSW may require, at Seller’s expense, insure all of the insurable Collateral, and all of Seller’s books and records, by financially sound and reputable insurers acceptable to FSW, in the form of extended coverage policies against loss or damage by theft, embezzlement, fire, explosion, flood, sprinkler, or any other insurable event or risk that FSW may require, to the fullest extent of the insurable value thereof. All insurance policies shall name FSW as the exclusive loss payee, shall provide that proceeds payable thereunder shall be payable directly to FSW unless written authority to the contrary is obtained from FSW, and shall also provide that no act or default of Seller or any other person shall affect the right of FSW to recover thereunder. Upon receipt of the proceeds of insurance, FSW shall apply the proceeds in reduction of the Obligations, whether or not then due, in the order and manner as FSW shall determine, in its sole discretion. Seller shall provide FSW with the original or a certificate of each policy of insurance which shall contain a provision requiring the insurer to give not less than thirty (30) days’ advance written notice to FSW in the event of cancellation or termination of the policy for any reason whatsoever. If Seller fails to provide or pay for any insurance required pursuant to this Section 8.7, FSW is authorized (but not obligated) to procure the same at Seller’s expense. Seller agrees to deliver to FSW, promptly as rendered, true and correct copies of all reports made to all insurance companies.
8.8 Seller will, when requested by FSW, execute any document or instrument or do any other thing necessary to effectuate more fully the purposes and provisions of this Agreement.
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8.9 Notwithstanding any provision contained herein, including, but not limited to, Section 4.3 above, Seller shall not hereafter, without FSW’s prior written consent: merge, consolidate, dissolve, acquire any other corporation; enter into any transaction not in the usual course of business; make any investment in any securities other than securities of the United States of America; guarantee or otherwise become in any way liable with respect to the obligations of another party or entity; pay or declare any dividends upon Seller’s stock; redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Seller’s stock; make any change to Seller’s name, identity, corporate or capital structure; alter any of Seller’s business objectives, purposes, or operations or financial structure in a manner as to adversely affect the ability of Seller to pay or perform any of the Obligations; lend or distribute any of Seller’s property or assets; incur any debts, outside of the ordinary course of Seller’s business, except extensions of existing debts and interest thereon; sell, lease, transfer, assign or otherwise dispose of any of the Collateral; or make any capital expenditures or leasehold improvements at a cost in the aggregate in any twelve-month period of more than $1,000,000.00.
8.10 . Seller shall immediately give notice to FSW (and in no event later than one (1) Business Day following actual knowledge thereof), in reasonable detail, (i) of any security interest, lien, set-off, recoupment, defense, claim or dispute asserted or made against any of the Accounts, the Seller or the Collateral, (ii) any litigation or administrative claim commenced or threatened against Seller, the Collateral or the Accounts; (iii) of the occurrence of any breach by the Seller of any of its’ representations, warranties and covenants contained herein; (iv) the occurrence of any Event of Default by Seller hereunder, and (v) of the occurrence of any other event which could in either case, with the giving of notice or the passage of time, or both, have an adverse effect on the aggregate value or collectability of the Accounts.
8.11 Seller shall not submit a Borrowing Base Certificate requesting an Advance or the release Available Funds while there is pending an uncured Event of Default by Seller hereunder unless otherwise agreed to by FSW.
8.12 Upon request of FSW, the chief financial officer of the Seller shall deliver a certificate to FSW stating as of such date, (i) that all representations and warranties herein are true and correct; (ii) that the conditions set forth herein have been fulfilled; (iii) that no Event of Default exists and is continuing; and (iv) such other statements and information as has been reasonably requested by FSW.
8.13 Seller will not, without the prior written consent of FSW, (a) grant any extension of time for payment of any of the Accounts; (b) compromise or settle any of the Accounts for less than the full value thereof; (c) release in whole or in part any Customer under an Account, or (d) grant any credits, discounts, allowances, deductions, return authorizations or the like with respect to any of the Accounts. Notwithstanding the foregoing, so long as no Event of Default exists, Seller may grant credits, discounts, allowances, deductions, return authorizations or the like with respect to any of the Accounts in the ordinary course of business, provided that any discount offered by Seller, as agent of FSW, shall not exceed three percent (3%) of the Eligible Account and that Seller shall bear the economic impact of any such action.
9.1 Each Seller does hereby indemnify, defend and agree to hold FSW and its affiliates, and their respective shareholders, members, managers, directors, officers, representatives, employees, agents, successors and assigns (collectively, the “FSW Parties”) harmless from any and all claims, demands, liabilities, loss, damage or expenses, including reasonable attorneys’ fees which any of the FSW Parties may at any time sustain, suffer or incur by reason of any action which may be brought against any FSW Party by Seller, any of Seller’s Customers or any third party,. This indemnity is in addition to all other indemnities set forth in this Agreement and any other agreement between each Seller and any FSW Party. All the indemnities shall survive the termination of this Agreement and shall not be deemed to be released by the general release referred to in Section 13.10 of this Agreement.
9.2 FSW shall have no liability for any indirect, special, incidental or consequential loss or damage whether caused by tort (including negligence), breach of contract or otherwise, which may arise in respect of this Agreement, FSW’s obligations hereunder, or the Online Reporting Service, including equipment or property used in connection with the Online Reporting Service, or for loss of profit, business, revenue, goodwill or anticipated savings.
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10.1 Any one or more of the following shall be an “Event of Default” hereunder:
10.1.1 Any warranty or representation made herein proves to be false in any respect.
10.1.2 Seller breaches any covenant, term or provision contained in this Agreement or under any other agreement or contract between Seller and FSW, including, in particular, depositing or negotiating any check, or other form of payment made on any Account.
10.1.3 Seller becomes insolvent, a tax lien is filed against Seller, or Seller shall voluntarily file for bankruptcy.
10.1.4 Any involuntary petition in bankruptcy shall be filed against Seller and not dismissed within sixty (60) days.
10.1.5 Any levy of attachment, execution, tax lien or similar process shall be issued against Seller as concerns the Accounts or the Collateral and shall not be released within five (5) days thereof.
10.1.6 Seller ceases or suspends ordinary business operations.
10.1.7 A material portion of the Collateral is damaged or destroyed or cannot be located within five (5) days after FSW makes demand upon Seller to inspect the same.
10.1.8 Failure on the part of the Seller to promptly remit any sums payable by it hereunder when due;
10.1.9 Failure on the part of the Seller to deliver any information and/or notices required pursuant to this Agreement within a commercially reasonable and timely manner;
10.1.10 Seller changes its name or principal place of business (or residence of Seller if Seller is an individual), without the prior written consent of, and thirty (30) days’ notice to, FSW.
10.1.11 The occurrence of an event of default under any Company Guaranty or other agreement between Seller and any FSW Party.
10.1.12 There is a material change in the control of the Seller, without the prior written consent of FSW.
10.2 Upon an Event of Default, and without limiting any other rights FSW has pursuant to this Agreement, FSW may, at its election, take any or all of the following actions, to be exercised concurrently or successively:
10.2.1 Cease purchasing Accounts from Seller or making any remittances to Seller from Available Funds until all Obligations of Seller to FSW have been fully paid and satisfied.
10.2.2 Require Seller to pay to FSW all Obligations of Seller.
10.2.3 Setoff any and all Obligations of Seller to FSW against any and all funds that may come into the possession of FSW which would otherwise be paid to Seller. Notwithstanding anything in this Agreement to the contrary, Seller may not setoff, deduct or otherwise reduce its obligations owed to FSW by any amounts owed (or claimed to be owed) by FSW to Seller.
10.2.4 FSW shall have the right to open and dispose of all mail in a manner as FSW may deem appropriate, retaining all mail pertaining to the Eligible Accounts, provide copies of all such mail and related items are promptly provided by FSW to Seller.
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10.2.5 Notify all customers relating to the Accounts of the security interest of FSW and proceed to collect those Accounts, having all rights as are granted to FSW pursuant to Section 5 of this Agreement with respect to the Accounts and Section 9-607 of the Uniform Commercial Code.
10.2.6 Take or bring, in the name of FSW or Seller, all steps, actions, suits proceedings deemed by FSW necessary or desirable to effect collection of or other realization upon the Accounts and other Collateral.
10.2.7 Enter, with process of Law and without the necessity of posting a bond, upon any premises where the Collateral is or is believed to be located and take possession of said premises, the Collateral and a copy of Seller’s Books.
10.2.8 Require Seller to assemble a copy of the Collateral and Seller’s Books and make them available to FSW at a place designated by FSW, at Seller’s expense, or, at FSW’s election, deliver the same to FSW at a place which is reasonably convenient to the Parties.
10.2.9 Pay any sums necessary to discharge any lien or encumbrance which is senior to FSW’s security interest in the Collateral, which sums shall be part of FSW’s Costs.
10.2.10 Sell the Collateral in its then condition, or after further manufacturing, processing or preparing the same, at either public or private sale or both for cash or on terms, in a manner and at a place (including Seller’s premises) as is commercially reasonable in the opinion of FSW, after at least five (5) days’ notice is given to Seller prior to said public sale or the time when a private sale will take place. FSW shall have the right to credit bid or purchase all or any portion of the Collateral at any public sale. All proceeds from said sale after payment of all costs and expenses incurred therein shall be applied to any and all Obligations of Seller to FSW returning any excess to Seller who shall remain liable to FSW for any deficiency.
10.2.11 Exercise any and all rights of a secured party under the Uniform Commercial Code and/or any other applicable Law.
10.2.12 No exercise by FSW of any right or remedy shall be deemed an election thereof, except to the extent required by applicable Law.
10.2.13 Any amounts owed by Seller to FSW that are not paid to FSW when due shall bear interest at the lesser of the Daily Balance Default Rate or the highest rate permitted by Law, until the amount is paid in full. The assessment of interest shall not relieve Seller from its obligations to pay the amounts owed or to excuse or waive Seller’s default.
10.3 Seller agrees that if it shall (i) file or be the subject of any petition under the Bankruptcy Code, (ii) file or be the subject of any petition seeking any reorganization, arrangement, composition, or similar relief under any present or future federal or state act law relating to bankruptcy, insolvency, assignment for benefit of creditors, or other relief, or (iii) seek, consent to, or acquiesce in the appointment of any trustee, or receiver, FSW shall thereupon be entitled to immediate relief from any automatic stay imposed by the Bankruptcy Code, or from any other stay or suspension of remedies imposed in any other manner with respect to the exercise of the rights and remedies otherwise available to FSW under this Agreement, any related agreement or under applicable Law relating to the Accounts purchased by FSW from Seller. Seller hereby acknowledges and stipulates that relief from the automatic stay (or any other provision of Law having a similar effect) with respect to Accounts purchased by FSW is in Seller’s best interest. Seller further stipulates, acknowledges, and reaffirms that said Accounts do not constitute property of “debtor’s estate” as that term is defined under the Bankruptcy Code, and do not constitute property of Seller for purposes of any other Law relating to bankruptcy, insolvency, assignment for the benefit of, or relief from, creditors, and that, subject to terms and provisions of this Agreement, Seller has no right, title, or interest in said Accounts. Seller further stipulates, acknowledges and agrees that should FSW request the relief specified herein, Seller shall not object to or oppose FSW from having immediate relief, subject to court approval (if necessary), from the automatic stay under Section 362 of the Bankruptcy Code (or any other provision of Law having a similar effect), that relief being limited to modification of the stay (or other provision of law) (i) to permit FSW to collect all Eligible Accounts purchased by FSW from Seller and apply the proceeds to the Obligations of Seller to FSW, and (ii) to obtain Seller’s cooperation and assistance in collection and recovery of all amounts due on said Accounts. Seller agrees to pay all expenses including reasonable attorneys’ fees and legal expenses, incurred by FSW in any proceedings involving Seller, this Agreement, the Accounts or the Collateral, including expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral or relating to any plan of reorganization.
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10.4. Seller acknowledges that this Agreement is in the nature of a financial accommodation to or for the benefit of Seller within the meaning of Section 365(c)(2) of the Bankruptcy Code, and as such may not be assumed or assigned. FSW shall be under no obligation to purchase Accounts under this Agreement from and after the filing of any voluntary or involuntary petition against Seller as provided above. FSW may at its sole discretion, agree to provide post-petition financing to the Debtor and/or Debtor-in-possession after the filing of a voluntary or involuntary bankruptcy by or against Seller; however, any such agreement to provide post-petition financing shall not be effective until the time as the Bankruptcy Court approves that financing arrangement.
11. Online User Standards.
11.1 FSW may post all of Seller’s account activity on FSW’s website, which shall constitute each Seller’s Online Statement of Account. Seller acknowledges and agrees that FSW will not provide hard copies of any activities which constitute Seller’s Online Statement of Account. Provided that there is no Event of Default, FSW shall provide Seller with reasonably continuous access to view the Online Statement of Account, subject to periodic or occasional maintenance or outages or due to communication or other situations beyond Seller’s control. Seller shall be solely responsible for checking its Online Statement of Account. If Seller disputes any entry on the Online Statement of Account it shall, within thirty (30) days after the first posting of the event, send to FSW a written exception to that event. Unless FSW receives a timely written exception to the activity posted to the Online Statement of Account, within thirty (30) days after it is first posted, the Online Statement of Account shall become an account stated and be deemed accepted by Seller and shall be conclusive and binding upon the Seller.
11.2 Online Conducting of Business. FSW and Seller intend to conduct business contemplated by this Agreement through the internet and through FSW’s Online Reporting Service. FSW is the sole and exclusive owner of the Online Reporting Service. Seller hereby accepts a non-exclusive, non-transferable, terminable right to access the Online Reporting Service, upon the terms and subject to the conditions contained herein.
11.3 Standards Regarding Conducting Business Online. Each Seller and FSW agree as follows:
11.3.1 FSW shall have the right to terminate or limit any Seller’s access to the Online Reporting Service upon the occurrence of an Event of Default or at any other time within FSW’s discretion.
11.3.2 Seller shall not: (i) copy the Online Reporting Service nor otherwise reproduce the same other than for normal system operation backup; (ii) translate, adapt, vary, or modify the Online Reporting Service; or (iii) disassemble, decompile or reverse engineer the Online Reporting Service.
11.3.3 FSW shall not be liable to Seller for any loss or damage whatsoever or howsoever caused, whether caused by tort (including negligence), breach of contract, or otherwise arising directly or indirectly in connection with the use of the Online Reporting Service, including for any inability of Seller to obtain access to the on-line system or for unauthorized access to that system by others. Seller hereby waives any legal rights it has with respect to data privacy to the fullest extent permitted by Law.
11.3.4 Seller acknowledges that any and all of the copyright, trademarks, trade names, patents and other intellectual property rights subsisting in or used in connection with the Online Reporting Service, including all documentation and manuals relating thereto, are, and shall remain, the sole property of the FSW. Seller shall not, during or at any time after the expiry or termination of its use of the Online Reporting Service, in any way question or dispute the ownership by FSW thereof. In consideration of this Agreement and until all Obligations have been paid in full to FSW, Seller hereby grants to FSW a royalty-free, nontransferable, worldwide, non-exclusive license to use the intellectual property, including but not limited to names and tradenames of Seller, as FSW deems reasonably necessary in its sole discretion to collect the Accounts, protect and enforce FSW’s rights in the Collateral and to obtain payment in full of the Obligations.”
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11.3.5 To the extent permitted by applicable Law, FSW excludes all warranties with respect to the Online Reporting Service, either express or implied, including, but not limited to, any implied warranties of merchantability, satisfactory quality or fitness for any particular purpose.
11.3.6 Seller is solely responsible for virus scanning the Online Reporting Service, and FSW makes no representations or warranties regarding any virus associated with the Online Reporting Services.
11.3.7 All information, data, drawings, specifications, documentation, software listings, source or object code which FSW may have imparted and may from time to time impart to the Seller relating to the Online Reporting Service is proprietary and confidential. Seller hereby agrees that it shall use the same solely in accordance with the provisions of this Agreement and that it shall not, at any time during or after expiry or termination of this Agreement, disclose the same, whether directly or indirectly, to any third party or use it in connection with any purpose other than the Transactions.
11.3.8 The Parties shall be responsible for restricting access to passwords and systems relating to the Online Reporting Service and shall only provide passwords and access to the Online Reporting System to those individuals on an as needed basis. Upon learning of any breach of security or suspected breach of security to the Online Reporting System, each Party shall report the incident immediately to the other Party. Seller agrees to implement and follow authentication procedures and protocols requested by FSW. The Parties shall be solely responsible for safeguarding the confidentiality of its authentication codes and passwords, and each Party assumes all responsibility for any transactions undertaken in that Party’s name through the use of those authentication codes, passwords or using that Party’s electronic signature. Neither Party shall have a duty to verify or authenticate that the person(s) using the other Party’s systems are authorized to act on behalf of that other Party.
11.4 Online Access. Subject to subsection 11.3.1, upon an Event of Default, all of Seller’s rights and access to any online internet services that FSW makes available to Seller shall be provisional pending Seller’s curing of all such Events of Default and FSW may elect to terminate Seller’s online access as provided for herein. During that period of time, FSW may limit or terminate Seller’s access to online services. Seller acknowledges that the information FSW makes available to Seller through online internet access, both before and after an Event of Default, constitutes and satisfies any duty to respond to a request for accounting or request regarding a statement of account that is referenced in the UCC.
12. Term of this Agreement, Minimum Monthly Fees. This Agreement shall be in effect for the Original Term and shall automatically renew for consecutive like periods (each a “Renewal Term”) unless terminated by either Party giving the other written notice not less than thirty (30) days prior to the end of the Original Term or any Renewal Term, which written notice shall clearly state its intention to terminate at the end of the current term. Notwithstanding the foregoing, in the event Seller obtains a non-factoring credit facility, Seller shall have the right to terminate this Agreement with thirty (30) days written notice to FSW, and Seller shall not be liable for any termination fees for such banking facility termination. FSW may terminate this Agreement at any time after an Event of Default. As consideration for FSW making the necessary financial accommodations, Seller agrees to pay FSW each calendar month during the Original Term and for each Renewal Term an amount equal to the Minimum Monthly Fee. In the event of a Minimum Monthly Shortfall, Seller agrees to pay the Minimum Monthly Shortfall within 15 days immediately following the last day of the month in which the Minimum Monthly Shortfall occurred. If the aggregate amount of the Collateral Monitoring Fee and the Daily Balance Fee paid by Seller to FSW in any calendar month is greater than the Minimum Monthly Fee, then no Minimum Monthly Shortfall Fee will be owed by Seller to FSW for such calendar month. If Seller terminates this Agreement at any time prior to the expiration of the Original Term, or any subsequent Renewal Term, or if the FSW terminates this Agreement at any time upon the occurrence of an Event of Default, Seller shall remain obligated to pay the total of the Minimum Monthly Fee for the time remaining for the Original Term or Renewal Term, as the case may be, in additional to all other fees that are due and owing.
No termination of this Agreement shall affect the liabilities and obligations of Seller or the rights, powers and remedies of FSW under this Agreement, or the security interest granted to FSW hereunder until all Obligations have been fully paid and satisfied.
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13.1 Bank Lockbox. Unless alternate arrangements are made acceptable to FSW, in its sole discretion, Seller shall cause all remittances by Client and any obligors on the Eligible Accounts to be remitted to a bank lockbox established by FSW, subject to terms and conditions as are deemed appropriate by FSW and the financial institution, which shall remain in effect so long as any Obligations remain unpaid to FSW. FSW is also hereby authorized by Seller to initiate electronic debit or credit entries through the ACH system to any deposit account maintained by Seller wherever located. Seller shall execute all forms, agreements or authorizations required in connection with these authorizations, which agreement and authorizations are coupled with an interest and are irrevocable.
13.2 Disposal of Papers. Seller authorizes FSW, in its sole discretion, to dispose of any documents, schedules, invoices or other papers delivered to FSW at any time after six months after they are delivered to FSW, unless Seller requests, in writing, the return of the same, which shall be made at Seller’s expense.
13.3 Waiver. No failure to exercise and no delay in exercising any right, power, or remedy hereunder shall impair any right, power, or remedy which ether Party may have, nor shall any such delay be construed to be a waiver of any of its rights, powers, or remedies, or any acquiescence in any breach or default hereunder; nor shall any waiver by either Party of any breach or default by the other Party hereunder be deemed a waiver of any default or breach subsequently occurring. No Party shall be deemed to have waived any of its rights or remedies hereunder unless that waiver is in writing and signed by the Party to be charged with waiver. Failure or delay by either Party in exercising or enforcing any right, power, privilege, lien, option or remedy hereunder shall not operate as a waiver thereof and a waiver by that Party of any default under this Agreement shall not be construed of any subsequent or other default or effect or impair any right or power resulting therefrom.
13.4 Governing Law. This Agreement shall be deemed to have been made, executed and is to be performed in the County of Maricopa, State of Arizona and all rights and obligations of the parties shall be governed, construed and enforced according to the Laws and decisions of the State of Arizona. Seller does hereby agree to submit to the jurisdiction of the courts of the State of Arizona with respect to any actions or proceedings arising out of or related to this Agreement and does hereby agree that service of process may be made upon Seller by certified mail at the address set forth in this Agreement. In recognition of the higher cost and delay which may result from a jury trial, the parties hereto do hereby waive any right to a jury trial of any action arising hereunder, or in any way connected with or incidental to the dealings of the parties. Any Party hereto may file an original counterpart or a copy of this section with any court as written evidence of the consent of the parties hereto to the waiver of their right to a jury trial. The parties agree that service of process may be made upon a Party by United States Mail, certified mail, return receipt requested, postage prepaid, sent to the Party at its last known address of record.
13.5 Notices. All written notices which are to be given under this Agreement by either Party shall be delivered, sent electronically or mailed postage prepaid to the address stated herein or to any other address as may be designated in writing. All notices required to be given to Seller shall be deemed given upon the first to occur of (i) upon deposit thereof in a receptacle under the control of the United States Postal Service, (ii) transmittal by electronic means to a receiver under the control of Seller; (iii) the following day after delivery to a reputable courier, or (iv) actual receipt by Seller or an employee or agent of Seller. All notices to FSW hereunder shall be deemed given upon actual receipt by a responsible officer of FSW.
13.6 Entire Agreement; Amendment. This Agreement constitutes the full and complete Agreement of the parties hereto and shall supersede in its entirety any prior agreement or understanding between the parties, whether written or oral. This Agreement shall not be modified or amended in any respect, except by an agreement in writing signed by both of the parties.
13.7 Enforceability. If any provision of this Agreement is determined to be legally invalid or unenforceable, the validity or enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby.
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13.8 Attorneys’ Fees. Seller does hereby agree to reimburse FSW for its attorney’s fees and disbursements incurred in preparing this agreement or any modifications thereto, in administering this Agreement or the Transactions, obtaining or enforcing any right or remedy arising out of this Agreement, realizing upon any of the Collateral or incurred in any litigation, dispute, suit or proceeding, whether commenced by FSW or by way of defense or intervention in any such action or proceeding, which attorneys’ fees and all court costs shall be deemed to constitute a part of FSW’s Costs.
13.9 Effectiveness. This Agreement shall become effective only when and if it is executed by an authorized officer of FSW and Seller.
13.10 General Release. In recognition of the FSW’s right to have its attorneys’ fees and other expenses incurred in connection with this Agreement secured by Collateral, notwithstanding payment in full of all Obligations by Seller, FSW shall not be required to record any terminations or satisfactions of any of FSW’s liens on the Collateral unless and until Seller has executed and delivered to FSW a general release in a form suitable to FSW, for no additional consideration. Seller understands that this provision constitutes a waiver of its rights under § 9-513 of the Uniform Commercial Code.
13.11 True Sale. It is the expressed intention of the Parties that the transactions contemplated by this Agreement with respect to the Eligible Accounts involve a true purchase of Accounts with transfer of title thereto, and shall not be deemed to be a loan. Notwithstanding this express intention, should a court of competent jurisdiction determine that the transactions contemplated herein shall be construed to be a loan by FSW to Seller and that all deductions, rebate charges, FSW’s costs and any other charges hereunder are to be treated as interest on funds advanced, then Seller shall be deemed to have agreed to pay that rate of interest as is determined resulting from all charges paid or to be paid by Seller arising out of this Agreement.
13.12 Binding Agreement. This Agreement shall inure to and be binding upon the parties hereto, their personal representatives, successors and assigns; provided, however, that Seller shall not have the right to assign this Agreement or any rights hereunder without FSW’s prior written consent and any assignment made without that consent shall be void and of no effect whatsoever. FSW shall have the right at any time to assign or grant a security interest or participation interest in this Agreement to any party upon the provision of ten (10) days advanced written notice provided to Seller, but without obtaining the consent of Seller.
13.13 Interpretation. No portion of this Agreement shall be interpreted against the Party that drafted it as each Party has been represented by or had the opportunity to be represented by counsel. Unless otherwise given a defined meaning in this Agreement, terms defined in the Uniform Commercial Code shall have the meanings given those terms in that code in the applicable jurisdiction. The term “including” shall mean “including without limitation,” regardless of whether so stated. The use of the singular shall include the plural and vice versa, and the use of any gender shall apply to any other gender, as the context shall require.
13.14 Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.
13.15 Electronic Signatures. The Parties intend to conduct business contemplated by this Agreement by electronic means. Each document, which is the subject of this Agreement, that a Party has affixed a typed or electronic signature or other authentication and then transmitted electronically to the other shall be intended as and constitute an original and deemed to contain a valid signature of the Party for all purposes. In furtherance of the above, the Parties hereby authorize each other to regard their respective printed names, electronic approval or other confirmation process authorized and agreed to by the Parties to be by or on behalf of each Party for any document, agreement, assignment schedule or invoice as the equivalent of a manual signature by one of the Parties’ authorized officers or agents. The Parties agree that in any legal proceedings between them respecting or in any way relating to this Agreement or any transactions hereunder, each waives the right to raise any defense based on its execution hereof in counterparts or the delivery of executed counterparts by electronic signature and delivery. The Parties waive, to the fullest extent permitted by Law, any provisions of applicable Law to the contrary.
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13.16 Seller’s failure to promptly deliver to FSW any schedule, report, statement or other information required by this Agreement or any document related thereto shall not affect, diminish, modify or otherwise limit FSW’s security interests in the Collateral or rights and remedies under this Agreement. FSW may rely upon, and assume the authenticity of, any approval and material applicable to that approval as the duly confirmed, authorized and approved signature of Seller by the person approving the same which constitute an Authenticated Record for all purposes including under the UCC and shall satisfy the requirements of any applicable statute of frauds.
13.17 Seller authorizes FSW to obtain credit reports for Seller, any other Seller Party and all guarantors at any time, in FSW’s sole discretion.
13.18 Joint and Several Liability. Each Seller, for itself and its successors and assigns, and any guarantor(s) hereunder, acknowledges and agrees (a) the liability for the Obligations owed to FSW, now existing or hereafter arising shall be joint and several; (b) all representations, warranties, and covenants made by any Seller shall be deemed representations warranties, and covenants of each other Seller hereunder; (c) any breach, default or Event of Default by any Seller shall be deemed a breach, default or Event of Default of each other Seller hereunder; (d) the compromise of any claim with, or the release of, any Seller shall not constitute a compromise with, or a release of, any other Seller or guarantor; and (e) the liability for the Obligations of a Seller shall not be impaired by FSW’s agreement to (i) modify the reserve account of any Seller in FSW’s sole discretion pursuant to this Agreement; (ii) modify, adjust, reschedule, or refinance any Obligation owed when due by any Seller; or (iii) release, in whole or in part, FSW’s security interest and lien in and to any Collateral of Seller encumbered by this Agreement or any other agreement or instrument between or among the Parties.
13.19 Arbitration. Except for “Core Proceedings” under the United States Bankruptcy Code, or as noted below in the next paragraph of this Section 13.19, the Parties agree to submit to binding arbitration all claims, disputes and controversies between or among them, whether in tort, contract or otherwise (and their respective employees, officers, directors, attorneys, and other agents) arising out of or relating to in any way (i) this Agreement or any other agreement, instrument, certificate or document entered into between the Parties, or any dispute, claim or controversy between them related to any of the transactions contemplated by this Agreement. Any arbitration proceeding will (i) proceed in Maricopa, County, Arizona; (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code); and (iii) be conducted in accordance with the Commercial Arbitration rules of the American Arbitration Association (“AAA”), as modified by these provisions.
Notwithstanding the foregoing, however, the arbitration requirement does not limit the right of FSW to (i) foreclose against any Collateral; (ii) exercise self-help remedies relating to Collateral or proceeds of Collateral permitted to FSW, such as setoff or repossession; or (iii) obtain provisional ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before, during or after the pendency or any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of either Party to submit any dispute to arbitration, including those arising from the exercise of the actions detailed in this paragraph.
Any arbitration proceeding will be before a single arbitrator selected according to the Commercial Arbitration Rules of the AAA. The arbitrator will be a neutral attorney who has practiced in the area of commercial law for a minimum of ten (10) years. The arbitrator will determine whether an issue is arbitrable and will give effect to the statutes of limitation in determining any claim. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.
In any arbitration proceeding, the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.
In any arbitration proceeding discovery will be permitted at the arbitrator’s discretion and will be governed by the Arizona Rules of Civil Procedure unless otherwise ordered by the arbitrator. The arbitrator shall award costs and expenses of the arbitration proceeding in accordance with the provisions of this Agreement.
13.20 Seller, by executing this Agreement, warrants and represents that it has fully read this Agreement, has had the opportunity to be represented by counsel and to ask and receive answers to any questions it may have concerning this Agreement, and that it fully understands all of the terms and provisions hereof, and that said Agreement, although drafted by FSW, shall not be interpreted or construed against FSW.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year stated above.
|SELLER AMMO:||SELLER ENLIGHT:|
|AMMO, INC.||ENLIGHT GROUP II, LLC|
|Name:||Fred Wagenhals||Name:||Fred Wagenhals|
|Title:||Chief Executive Officer||Title:||Manager|
STATE OF ARIZONA)
County of Maricopa) ss.
On this, the ______ day of June, 2020, before me personally appeared Fred Wagenhals, known to me to be the person[s] whose name is [names are] subscribed to the within instrument and acknowledged that the person[s] executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
My Commission Expires:
|FSW:||FACTORS SOUTHWEST, L.L.C.|
Date of Acceptance: _________ (the “Effective Date”)
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ADdendum to FIRST AMENDED AND RESTATED factoRING AND SECURITY AGREEMENT
THIS ADDENDUM (“Addendum”) shall constitute an addendum to the First Amended and Restated Factoring and Security Agreement entered into among Factors Southwest, L.L.C., Ammo, Inc. and Enlight Group II, LLC dated June [__], 2020 (the “Agreement”). The effective date of this Addendum (the “Addendum Effective Date”) shall be: June [__], 2020.
The terms used in the Agreement, including any Addendums attached thereto, shall have the following meaning and all capitalized terms not herein defined shall have the meaning set forth in the Uniform Commercial Code (the “UCC”) in effect in Arizona:
1. “Accounts” shall mean and include all presently existing or hereafter created rights to payment for goods sold or leased and delivered, or services rendered, arising in the ordinary course of Seller’s business, whether or not evidenced by an instrument or chattel paper, together with all guarantees thereof and other security therefor, and all goods returned to or reclaimed by Seller which pertain thereto, and all substitutions, replacements and additions to the foregoing, all proceeds related to the foregoing, and a copy of all of Seller’s Books related to the foregoing.
2. “Advance” shall mean the advance to Seller by FSW of the purchase price for Eligible Accounts.
3. “Advance Percentage” shall mean Eighty Five percent (85%)
4. “Agreement” shall mean the Factoring and Security Agreement entered into between the Parties, this Addendum and any subsequent addendum or rider thereto, and all amendments or modification which may be executed between the Parties from time to time.
5. “Available Funds” shall mean Proceeds of Accounts that have been collected in good funds minus (i) the Advance; (ii) all returns, credits, allowances and discounts, (iii) the amount of any Chargeback Accounts; (iv) any and all expenses arising in connection with the Agreement; (v) any and all fees; (vi) all FSW Costs; and (vii) FSW’s right to use such Available Funds to secure any Obligation.
6. “Base Rate” shall mean the highest prime rate publicly announced from time to time by The Wall Street Journal as the prime rate or base rate or equivalent rate, or if The Wall Street Journal ceases to publish the prime rate, another published prime rate as chosen by FSW, in its sole discretion, all as calculated on the basis of a 360-day year for the actual number of days elapsed.
7. “Borrowing Base Certificate” shall mean the form of borrowing base certificate attached hereto as Exhibit A.
8. “Business Day” shall mean any day that is not a Saturday, Sunday, or other day on which commercial banks in Phoenix, Arizona are authorized or required by law to close.
9. “Collateral” shall mean and includes all assets of Seller, including but not limited to accounts, contract rights, inventory (including raw materials, work in process and finished goods and all packing and shipping materials related thereto), instruments, documents, chattel paper, equipment now owned or hereafter created or acquired, all proceeds thereof, including proceeds of insurance covering the foregoing and all of Seller’s Books relating to the foregoing, excluding the Excluded Collateral. The inclusion of Accounts in the foregoing definition shall not be construed to detract from the nature of the sale of the Accounts by Seller as a true sale with recourse and not a financing transaction, but those accounts are included as a precautionary matter as noted in the Agreement.
10. “Collateral Monitoring Fee” shall mean a fee paid each calendar month in arrears calculated as the average Daily Balance for such calendar month multiplied by Two Hundred Eight Thousandths percent (0.208%).
11. “Company Guaranty” shall mean that guaranty of Obligations owed by Seller under either the Agreement or Loan Agreement by Guaranty Parties including, but not limited to guaranty, cross-collateralization and cross-default by each Guaranty Party with that of the Seller in accordance with the terms and conditions of the Company Guaranty.
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12. “Guaranty Party” shall mean the party or parties named in that certain Company Guaranty as the Guaranty Party with respect to this Agreement, and its or their respective affiliates, successors and assigns. Nothing in this definition shall constitute permission for a Guaranty Party to assign any of its rights or obligations pursuant to the Agreement, the Company Guaranty, this Addendum or any other agreements among any of the parties thereto.
13. “Customer” shall mean the Account Debtor of Seller who is obligated on an Account.
14. “Customer Dispute” shall mean an asserted claim, defense, dispute or offset by the Customer of any kind whatsoever, either arising out of an Account or against Seller, whether valid or invalid, arising either before and/or after the Account has been purchased by FSW, or if Customer refuses payment for any reason.
15. “Daily Balance” shall mean the outstanding balance each day of all monies remitted, paid or otherwise advanced by FSW to Seller for Seller’s account in accordance with the Agreement (less all amounts credited to Seller’s account), plus all FSW Costs charged to Seller’s account in accordance with the Agreement.
16. “Daily Balance Default Rate” shall mean the Base Rate plus 30%.
17. “Daily Balance Rate” shall mean four and on half percent (4.50%).
18. “Daily Balance Fee” shall mean a fee charged on the Daily Balance at a rate per annum equal to the Daily Balance Rate plus the Base Rate.
19. “Effective Date” shall mean the date FSW shall accept the Agreement as indicated on the signature page of the Agreement, unless a different effective date is specified in writing by the parties to that Agreement.
20. “Eligible Account” shall mean all Accounts of Seller that are eligible for purchase by FSW in its sole discretion, but may specifically exclude the following: (a) an Account due from a Customer with unpaid Account balances aged more than ninety (90) days from the original invoice date; (b) Accounts due from any party outside the United States; (c) any Accounts due from any branch or agency of the Federal Government for which the proper Assignment of Claims form and Notice of Assignment form have not been fully executed or due from any other government agency which, by contract from agency, precludes and/or prohibits the assignment of those Accounts to a third party; (d) any Accounts which, at the reasonable discretion of FSW, are deemed doubtful for collection for any reason to include, but not be limited to, disputes, returns, and legal proceedings, whether in process or pending; (e) any Accounts payable by a Customer which has suspended business, requested a general extension of time within which to pay debts, made an assignment for the benefit of creditors, filed a petition for bankruptcy, or suffered a general business failure; (f) any Accounts subject to a Customer Dispute; (g) any Accounts to the extent subject to offset by an Account Debtor of Seller, in the sole reasonable discretion of FSW; or (h) any Accounts payable to a Seller for whom Purchaser has not yet filed a UCC financing statement.
21. “Event of Default” shall have the meaning as set forth in Section 10.1 of the Agreement.
22. “Excluded Collateral” shall have the meaning of any collateral that is not defined in section 9
23. “Facility Fee” shall mean a fee paid in the amount of three percent (3.00%) of the Maximum Amount due at the time of the Effective Date and each subsequent Renewal Term.
24. “FSW” shall mean Factors Southwest, L.L.C. and any successor or assign.
25. “Funding Request” shall mean that certain request for Advances and/or Available Funds by Seller to FSW in the form attached hereto as Exhibit B.
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26. “FSW Costs” shall mean and includes all costs, expenses and fees incurred by FSW in the administration or performance of this Agreement by FSW, or in preserving the Collateral or FSW’s ownership and security interest therein, including but not limited to the following: applicable bank charges, filing, recording, publication and search fees which are paid or incurred by FSW; all costs and expenses incurred by FSW in enforcing its rights and remedies under this Agreement or defending this Agreement or its interest in the Accounts or its security interest in the Collateral; photocopying and long distance telephone charges, facsimile and delivery charges, expenses of field examinations of Seller’s Books; costs and expenses incurred in gaining possession of, maintaining, handling, preserving, storing, repairing, shipping, selling, preparing for sale and advertising to sell the Collateral whether or not a sale is consummated; expenses involved or incurred in collecting the Accounts; all sums advanced by FSW to reasonably protect and preserve its interest in the Accounts and the Collateral; and all attorneys’ fees and expenses of FSW incurred in connection with the foregoing; which sums so advanced shall become due and payable from Seller to FSW on written demand and shall bear interest at 24% per annum if not paid within ten days after demand.
27. “Inventory Loan Agreement” shall mean that certain Revolving Inventory Loan and Security Agreement among Seller Ammo, Seller Enlight and FSW dated even herewith, as amended, restated or otherwise modified.
28. “Late Payment Date” shall mean the date which is the earlier of (a) ninety days from the invoice date of an Account, (b) the date that the customer or Seller ceases to be doing business in the ordinary course, or (c) the customer or Seller makes an assignment for the benefit of creditors, becomes bankruptcy or takes similar action, whether voluntary or involuntary.
29. “Law” shall mean any federal, state, foreign, local, municipal or other law, statute, constitution, principle of common law, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any governmental entity or agency.
30. “Maximum Amount” shall mean Five Million Dollars ($5,000,000).
31. “Maximum Eligible Advances” shall mean the amount of Five Million dollars ($5,000,000).
32. “Minimum Base Rate” shall mean Five and One Half percent (5.50%).
33. “Minimum Monthly Fee” shall mean Fifteen Thousand Six Hundred Fifteen Dollars ($15,615).
34. “Minimum Monthly Shortfall” shall mean, in the event the aggregate amount of the Collateral Monitoring Fee plus the Daily Balance Fee paid by Seller to FSW in any calendar month is less than the Minimum Monthly Fee, such difference between the Minimum Monthly Fee and such Collateral Monitoring Fee actually paid by Seller to FSW during such applicable calendar month.
35. “Net Face Amount” shall mean the gross amount of an Account, less any returns, allowance or discount allowed in the ordinary course of business.
36. “New Entity” shall have the meaning as set forth in Section 4.3 of the Agreement.
37. “Obligations” shall mean all present and future indebtedness, liabilities and obligations owing by Seller to FSW whether or not for the payment of money, whether or not evidenced by any note or other instrument, whether direct or indirect, absolute or contingent, due or to become due, joint or several, primary or secondary, liquidated or unliquidated, secured or unsecured, original or renewed or extended, whether arising out of this Agreement or otherwise and whether arising before, during or after the commencement of any bankruptcy proceedings commenced by or against Seller, all FSW Costs and all other amounts which Seller is required to pay or reimburse FSW for, pursuant to this Agreement, or by law. “Obligations” shall include all present and future indebtedness, liabilities and obligations owing by Seller to FSW under any agreement, including but not limited to this Agreement.
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38. “Online Reporting Service” shall mean the system set up on FSW’s website where Seller provides FSW with the pertinent data necessary for FSW to purchase Accounts under the Agreement and otherwise administer the Agreement.
39. “Online Statement of Account” shall have the meaning as described in Section 11.1 of the Agreement.
40. “Original Term” shall mean the term of the Agreement commencing on the Effective Date and concluding on the Termination Date.
41. “Overadvance” shall mean the amount by which Advances outstanding to Seller exceed the Maximum Eligible Advances.
42. “Overadvance Fee” shall mean a daily fee calculated as the Overadvance multiplied by zero percent (0.00%).
43. “Renewal Term” shall have the meaning as set forth in Section 12 of the Agreement.
44. “Seller” shall mean individually Seller Ammo and Seller Enlight Group and collectively Seller as set forth in the Agreement.
45. “Seller’s Books” shall mean and includes a copy of all of Seller’s books and records including ledgers and records, computer programs, computer disks or tape files, computer printouts, and other computer prepared information pertaining to the Accounts, the Collateral or Seller’s business.
46. “Termination Date” is: June [___], 2022
47. “Termination Fee” is: Monthly Minimum Fee multiplied by the number of months left in the Original Term or subsequent Renewal Term thereof
48. “Trade Name(s)” is: AMMO, Inc., AMMO Incorporated and Jagemann Munitions Components______________________________.
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IN WITNESS WHEREOF, the Parties have executed this Addendum as of the day and year stated above.
|SELLER AMMO: AMMO, INC.|
|SELLER ENLIGHT: ENLIGHT GROUP II, LLC|
|FSW: FACTORS SOUTHWEST, L.L.C.|
Date of Acceptance: ______________ (“Effective Date”)
|Page 5 of 7|
FORM OF BORROWING BASE CERTIFICATE
|Page 6 of 7|
FORM OF FUNDING REQUEST
|Page 7 of 7|
REVOLVING INVENTORY LOAN AND SECURITY AGREEMENT
This Revolving Inventory Loan and Security Agreement (this “Agreement”) is made as of June __, 2020 (the “Effective Date”), by and between Factors Southwest, L.L.C. d/b/a FSW Funding, an Arizona limited liability (“FSW”) and each of AMMO, Inc., a Delaware corporation and Enlight Group II, LLC, a Delaware limited liability company (collectively and individually, the “Borrower”).
WHEREAS, the Parties entered into that certain Factoring and Security Agreement and Addendum to Factoring and Security Agreement, each dated as of July 16, 2019, between the Company and FSW (the “Factoring Agreement”) pursuant to which FSW, as purchaser, purchases certain Accounts of Borrower, as Seller, as the same may be amended, supplemented or restated from time to time.
WHEREAS, the obligations under the Factoring Agreement are secured by that certain Affiliate Guaranty.
WHEREAS, the Borrower has requested, and FSW has agreed, subject to the terms and conditions contained herein, to extend to the Borrower a facility for revolving inventory to be secured by all assets of Borrower, including but not limited to Inventory and Proceeds thereof.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained in this Agreement, and of the loans and extensions of credit now or after the date of this Agreement made to or for the benefit of the Borrower by FSW, and intending to be legally bound hereby, the Parties agree as follows:
SECTION I. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the capitalized terms shall have the following meanings:
“Administrative Costs” shall mean wire fees, search fees, and any other expenses incurred by FSW in the administration of the Inventory Loan.
“Affiliate Guaranty” shall mean that Amended and Restated Company Guaranty dated as of even date herewith by and among FSW, the Borrower, Enlight Group, Ammo Munitions, Ammo Technologies and SNI
“Agreement” shall mean this Revolving Inventory Loan and Security Agreement dated as of the Effective Date.
“Advance” shall mean the amount of funds advanced by FSW under the Factoring Agreement.
“Ammo Munitions” shall mean Ammo Munitions, Inc., a Delaware corporation and wholly owned Subsidiary of the Company.
“Ammo Technologies” shall mean Ammo Technologies, Inc., an Arizona corporation and wholly owned Subsidiary of the Company.
“Avoidance Claims” shall mean any claim that any payment received by FSW from or for the account of Borrower or on account of any Collateral is avoidable under the United States Bankruptcy Code or any other state or federal debtor relief statute.
“Borrowing Base” shall mean an amount that is (a) the lesser of (i) fifty percent (50%) of the Inventory Cost, or (ii) the Maximum Inventory Loan Amount, minus (b) the Reserve. FSW has bargained for and Borrower agrees and acknowledges that the value of Inventory not included in the Borrowing Base is included as Collateral.
“Borrowing Base Certificate” shall mean a certificate prepared by Borrower in substantially the form attached hereto as Exhibit “A” and incorporated herein by this reference.
“Business Day” shall mean any day other than a Saturday, Sunday, public holiday under the laws of the State of Arizona or other day on which FSW is not open for business in Phoenix, Arizona.
“Collateral” shall mean all of the Borrower’s existing and later acquired assets, including but not limited to the following: (a) all Inventory, wherever located, all goods, merchandise or other personal property held for sale or lease and all related rights, title and interest, now owned or hereafter acquired or created, all proceeds and products of the foregoing and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering any of the foregoing, all property received wholly or partially in trade or exchange for any of the foregoing, all leases of any of the foregoing, and all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of any of the foregoing or any interest therein; (b) all contract rights related to Inventory; (c) Accounts; (d) General Intangibles; (e) all Instruments, Documents, Letter of Credit Rights and Supporting Obligations related to the Inventory; and (f) all Proceeds of each of the foregoing, including but not limited to, all insurance proceeds, all claims against third parties for loss or destruction of or damage to any of the foregoing, and all income from the lease or rental of any of the foregoing.
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
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“Collateral Monitoring Fee” shall be waived.
“Default Interest Rate” shall mean ten percent (10.00%) per annum above the Interest Rate, but not exceeding twenty percent (20%) per annum. Should such rate of interest as calculated thereunder exceed that allowed by law, the applicable rate of interest will be the maximum rate of interest allowed by applicable law.
“Default Waiver Fee” shall mean a fee in the amount of One Thousand Dollars ($1,000).
“Effective Date” shall have the meaning set forth in the Preamble.
“Eligible Inventory” shall mean Inventory which is owned by the Borrower and held for sale, including (i) raw material used or consumed by Borrower in the ordinary course of business in the manufacture or production of other Inventory, (ii) work in process and (iii) finished goods, which is (a) subject to FSW’s first priority, perfected security interest; (b) in Borrower’s possession and control and situated at a location identified in Schedule 4.9; (c) valued at the lower of cost or market, and which may exclude the Inventory determined by FSW in its commercially reasonable discretion or the Borrower to be not in good condition, slow-moving, obsolete or not currently usable or salable in the ordinary course of the Borrower’s business, Inventory consisting of finished goods which do not meet the specifications of the purchase order for which such Inventory was produced or held pursuant to a consignment arrangement or Inventory which sales are subject to contra-account liability with the purchaser of such Inventory.
“Event of Default” shall have the meaning ascribed to such term in Section 7.1 hereof.
“Factoring Agreement” shall have the meaning set forth in the Recitals.
“Financing Documents” shall mean, singularly or collectively as the context may require, (i) this Agreement; (ii) the Factoring Agreement; (iii) the Affiliate Guaranty; (iv) any UCC-1 financing statements filed naming Borrower as Debtor and FSW as Secured Party; and (v) any and all other documents, instruments, certificates and agreements executed and delivered in connection with any of the foregoing, as any of them may be amended, modified, extended or supplemented from time to time.
“GAAP” shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and pronouncements of the Financial Accounting Standards Board (or any successor authority) that are applicable as of the date of determination shall mean generally accepted accounting principles applied on a consistent basis.
“Intercreditor Agreement” shall mean that certain agreement entered into by and between FSW and Jagemann Stamping Company dated June __, 2020 attached hereto as Exhibit __.
“Interest Payment Date” shall mean the last calendar day of each month, in arrears.
“Interest Rate” shall mean a per annum rate equal to the greater of (i) the three-month LIBOR rate plus 3.09% or (ii) 8%. In the event such rate of interest as calculated thereunder exceed that allowed by law, the applicable rate of interest will be the maximum rate of interest allowed by applicable law.
“Inventory” shall have the meaning ascribed to such term in the UCC, including, without limitation, all Inventory held for sale, all accessions, additions, substitutions and replacements thereto and therefore.
“Inventory Cost” shall mean, as determined by Lender, the lesser of (a) cost of Eligible Inventory, as applicable, computed on a first-in-first-out basis in accordance with GAAP, or (b) market value, as determined by Lender in a commercially reasonable manner, of Eligible Inventory.
“Inventory Loan” or “Inventory Loans” shall mean the loans made by FSW to the Borrower under this Agreement.
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“Inventory Loan Amendment Fee” shall mean a fee computed as the product of the Inventory Loan Fee Percent multiplied by the amount of the increase in the Maximum Inventory Loan Amount on the date the Loan Amendment Fee is assessed.
“Inventory Loan Fee” shall mean a fee computed as the product of the Inventory Loan Fee Percent multiplied by the Maximum Inventory Loan Amount on the date the Inventory Loan Fee is assessed.
“Inventory Loan Fee Percent” – shall mean two percent (2%) annually charged on each anniversary of the Effective Date.
“JSC Loan” shall mean that secured loan entered into by and between the Borrowers and Jagemann Stamping Company (“JSC”), all loan documents related thereto and collateral in which JSC maintain a senior priority lien position.
“Late Fee” shall mean five percent (5%) of the amount of any payment of principal, fees, Interest or any other amount due hereunder.
“LIBOR” shall mean, at any time, an interest rate per annum equal to the interest rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) as published in the “Money Rates” section of The Wall Street Journal (or another national publication selected by FSW) as the three-month London Interbank Offered Rate for United States dollar deposits (or, if such page shall cease to be publicly available or, if the information/description contained on such page, in FSW’s sole judgment, shall cease to accurately reflect such London Interbank Offered Rate, then such rate as reported by any publicly available recognized source of similar market data selected by FSW that, in FSW’s reasonable judgment, accurately reflects such London Interbank Offered Rate). LIBOR may not be the lowest or best rate at which FSW calculates interest or extends credit. LIBOR for each calendar month shall be adjusted (if necessary) on the first day of such calendar month and shall be equal to LIBOR in effect as of the close of business on the last Business Day of the immediately preceding calendar month. Notwithstanding anything to the contrary herein, if at any time FSW determines (which determination shall be conclusive absent demonstrable error) that LIBOR is no longer available from such source(s) as FSW may designate from time to time for purposes of determining LIBOR and such circumstances are unlikely to be temporary, or the supervisor for the administrator of such rate or any governmental authority having jurisdiction over FSW has made a public statement identifying a specific date after which LIBOR shall no longer be used for determining interest rates for loans, then FSW and Borrower shall endeavor in good faith to establish an alternate benchmark rate of interest to LIBOR that gives due consideration to the then prevailing market convention, if any, for determining a rate of interest for asset-based loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest, the timing of the effectiveness of the use of such alternate rate and such other related changes to this Agreement as may be applicable; provided that, if such alternate rate of interest shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“Lien” shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature, including, but not limited to, any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security.
“Maturity Date” shall mean the Termination Date of the Factoring Agreement, unless sooner demanded by FSW after the occurrence of an Event of Default hereunder.
“Maturity Default Fee” shall mean three percent (3%) of the amount of outstanding Obligations which remain unpaid and outstanding after the Maturity Date.
“Maximum Inventory Loan Amount” shall mean the amount of One Million Seven Hundred and Fifty Thousand Dollars.
“Notice of Borrowing” shall have the meaning as set forth in Section 2.2 of this Agreement.
“Obligations” shall mean (i) all indebtedness, principal, Interest and fees of the Borrower to FSW now or after the date of this Agreement evidenced by any agreements, including but not limited to this Agreement and the other Financing Documents; (ii) all other debts, liabilities, duties and obligations of the Borrower to FSW now existing and contracted or incurred after the date of this Agreement, whether arising under or in connection with this Agreement or under any other agreement, instrument or undertaking made by or for the benefit of the Borrower to or for the benefit of FSW and whether direct or contingent, including, without limitation, all reimbursement and other obligations arising under or with respect to the Factoring Agreement, (iii) all costs and expenses incurred by FSW in the collection of any of the indebtedness described in this paragraph or in connection with the enforcement of any of the duties and obligations of the Borrower to FSW described in this paragraph, including reasonable attorneys’ fees and legal expenses, (iv) Administrative Costs; (v) Avoidance Claims; and (vi) all future advances made by FSW for the maintenance, protection, preservation or enforcement of, or realization upon, the Collateral or any portion thereof, including advances for storage, transportation charges, taxes, insurance, repairs and the like.
“Parties” shall mean FSW and Borrower; each may be referred to herein as a “Party”.
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“Permitted Liens” shall mean any such permitted encumbrances existing as of the date hereof as agreed to in writing by FSW.
“Potential Default” shall mean any event or condition which with notice or the passage of time would constitute an Event of Default.
“Prime Rate” shall mean the prime rate of interest announced from time to time by Wells Fargo Bank, N.A. or any successor thereof, as its prime rate, base rate, or reference rate. Any adjustment in the Prime Rate, whether downward or upward, will become effective on the first day of the month following the month in which the Prime Rate is reduced or increased.
“Prepayment Fee” shall mean an amount equal to two percent (2%) of the Maximum Inventory Loan Amount as of the date the Prepayment Fee is due during the initial twelve months of the loan.
“Reserve” shall mean as of any date of determination, such amounts as FSW may from time to time establish and revise establishing the amount of Inventory Loans which would otherwise be available to Borrower hereunder: (i) to reflect events, conditions, contingencies or risks which, as determined by FSW, which may affect either (a) the Collateral or any other property which is security for the Obligations or its value, (b) the assets, business or prospects of Borrower, or (c) the security interest and other rights of FSW in the Collateral (including the enforceability, perfection and priority thereof); (ii) the amount of any third-party claim, until such time as FSW has determined in good faith that the third-party claim is unlikely to be asserted; (iii) to reflect any collateral report or financial information furnished by or on behalf of Borrower to FSW which FSW determines is or may have been incomplete, inaccurate or misleading in any material respect; or (iv) in respect of any state of facts that FSW determined constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
“Service Fee” shall mean a monthly service fee calculated as the product one half of one percent (.5%) multiplied by the average outstanding Inventory Loans.
“SNI” shall mean SNI, LLC, an Arizona limited liability company and wholly owned Subsidiary of the Company.
“UCC” shall mean the Uniform Commercial Code as adopted by the State of Arizona, as the same may be amended from time to time during the term of this Agreement.
All capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such term in the Factoring Agreement. Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, words of the singular number shall be construed to include correlative words of the plural number and vice versa, and “including” (and with the correlative meaning “include”) means including without limiting the generality of any description preceding such term. This Agreement and all terms and provisions hereof shall be liberally construed to effect the purposes set forth herein and to sustain the validity
SECTION 2. INVENTORY LOAN
2.1 Revolving Inventory Loan. Subject to the terms and conditions contained herein, FSW will establish for Borrower a revolving line of credit against which FSW will make Inventory Loans from time to time for the purpose of providing working capital to Borrower. Subject to the terms hereof, Borrower shall have the right to obtain Inventory Loans, repay Inventory Loans and obtain additional Inventory Loans; provided, however, all of the Inventory Loans hereunder shall be viewed as a single Inventory Loan. At no time shall the unpaid principal balance of the Inventory Loans exceed the Maximum Inventory Loan Amount and all accrued Interest and any fees and costs provided for herein. All Inventory Loans shall be made on or before the Maturity Date. Within the limits of time and amount set forth herein and subject to the provisions of this Agreement, including, without limitation, FSW’s right to demand repayment of the Inventory Loan upon the occurrence of an Event of Default, the Borrower may borrow, repay and reborrow under this Section 2. The Borrower shall use the proceeds of the Inventory Loan for general working capital and general corporate purposes. The Borrower shall be jointly and severally liable for all Obligations hereunder, including but not limited to the Inventory Loan and Interest.
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2.2 Inventory Loan Funding. Subject to the terms and conditions hereof, Inventory Loans will be made in amounts not to exceed the amount calculated in accordance with the Borrowing Base as set forth in the Borrowing Base Certificate. In calculating the Borrowing Base, only Eligible Inventory shall be used. The eligibility of Inventory shall be determined by FSW in its reasonable commercial discretion. On any Business Day when the Borrower desires that FSW make an Inventory Loan, Borrower shall provide to FSW a notice for the requested Inventory Loan (a “Notice of Borrowing”). Each Notice of Borrowing required pursuant to this section shall be given in writing and shall be given no later than 11a.m. PST, on the day such Inventory Loan is to be made, and shall be signed by an officer of the Borrower or any employee who has been designated by an authorized person having the authority to deliver a Notice of Borrowing, and, in any event, shall include: (i) the date (which shall be a Business Day) on which the Inventory Loan is to be made; (ii) the principal amount of the Inventory Loan; and (iii) the documentation set forth in Section 6.5(a). Subject to the terms and conditions of this Agreement, upon FSW’s review, approval and processing of the required Notice of Borrowing and any other information requested by FSW, FSW shall make the proceeds of the Inventory Loan available to the Borrower on the date specified in the Notice of Borrowing, in funds immediately available. Notwithstanding the foregoing, any Inventory Loan may be made by FSW in good faith reliance upon a telephonic or electronic mail request under this Agreement, provided, however, that FSW shall have the right to request that the Borrower confirm such telephonic or electronic mail request for an Inventory Loan in writing. Such Inventory Loans may be borrowed, re-paid and re-borrowed, provided, however, the aggregate outstanding principal amount of all Inventory Loans shall not exceed Maximum Inventory Loan Amount. On or after the Effective Date until the Maturity Date, or until the occurrence of an event which with the giving of notice or the passage of time, or both, shall constitute an Event of Default, Borrower shall be entitled to borrow, repay or prepay and reborrow, by delivering to FSW a request for Inventory Loans in accordance herewith.
2.3 Interest. Each Inventory Loan shall bear interest from the date such Inventory Loan is made on the aggregate unpaid principal amount thereof until such principal amount is paid or shall become due and payable (whether at the stated maturity or by acceleration) at the Interest Rate (the “Interest”). After the principal amount of any part of the Inventory Loans shall have become due, whether at the Maturity Date, by acceleration after the occurrence of an Event of Default or otherwise, as compensation to FSW for the increased cost of administering the Inventory Loan, the Inventory Loan will bear interest at the Default Interest Rate, such interest rate to change automatically from time to time effective as of the effective date of each change in the Interest Rate which is in effect.
2.4. Payments. On the Interest Payment Date, Borrower shall make each of the monthly payments of (i) Interest; (ii) the Service Fee; and (iii) the Collateral Monitoring Fee. The outstanding principal amount, all accrued and unpaid Interest and any other Obligations due and owing under this Agreement shall be due and payable in full on the Maturity Date, if not declared due and payable on an earlier date in accordance with the terms hereof. If payment hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and Interest shall be payable thereon at the rate specified during such extension. All payments and other sums received hereunder shall be taken and applied by FSW, at FSW’s option, (i) first, to the payment of any costs and expenses of FSW payable hereunder (other than principal, Interest and the Collateral Monitoring Fee); (ii) second, to Interest due hereunder; (iii) third, to Service Fee due hereinunder; (iv) forth, to the Collateral Monitoring Fee due hereunder; (v) fifth, to the outstanding principal amount; and (vi) sixth, to any outstanding amounts due under any of the Financing Documents.
2.5 Maximum Inventory Loan Amount Paydown; Prepayments. If for any reason the aggregate principal amount of the Inventory Loan outstanding at any time shall exceed the Maximum Inventory Loan Amount, Borrower, without notice or demand, shall immediately make a principal payment to FSW in an amount equal to such excess plus accrued and unpaid Interest hereon. Borrower may from time to time, prepay all or part of the outstanding principal balance of the Inventory Loan, provided, however, that in the event of a payoff of the Inventory Loan or the termination of this Agreement for any reason at any time prior to the Maturity Date, Borrower shall pay the Prepayment Fee as required hereunder. The Prepayment Fee shall be waived in the event Borrower obtains a conventional loan facility from a FDIC insured bank, which loan facility is not a factoring facility or an asset based lending facility. The Prepayment Fee shall be in addition to any other fees due to FSW hereunder.
2.6 Usury. In the event the Interest Rate or the Default Interest Rate are finally determined to exceed the maximum rate of interest permitted by applicable usury or similar laws, its application will be suspended and there will be charged instead the maximum rate of interest permitted by such laws. Any interest which has been collected by FSW in excess of the maximum rate of interest permitted by applicable usury or similar laws prior to the suspension of such interest rates shall be applied to the principal balance of the Inventory Loan.
2.7 Inventory Loan Amounts. FSW shall make appropriate debits and credits to the loan account of Borrower corresponding to each Inventory Loan to reflect prepayments, payments by and other disbursements for the account of Borrower, the Interest and any fees and costs provided for herein. Each such entry shall be prima facie evidence of the principal amount of the Inventory Loans hereunder at any time outstanding and the Interest due and owing.
2.8 Inventory Loan Fee. Borrower shall pay the Inventory Loan Fee at the time of the first Inventory Loan hereunder, and thereafter on an annual basis on each anniversary of the Effective Date. Borrower shall pay the Inventory Loan Amendment Fee upon any amendment to this Agreement that increases the Maximum Inventory Loan Amount, which shall be due on the day such amendment is signed by the Borrower. The Inventory Loan Fee and Inventory Loan Amendment Fee shall be fully earned on the due date and shall be nonrefundable.
2.9 Late Fee. Borrower shall pay to FSW the Late Fee for each payment of principal, fees or Interest or any other amount due hereunder which is not paid within ten (10) business days of its due date, or for any payment made which is not good funds, provided that collection of said Late Fee shall not be deemed a waiver by FSW of any of its rights under this Agreement or any other instrument given to secure the Obligations. The Borrower and FSW hereby agree that said fee is a fair and reasonable charge for the late payment and shall not be deemed a penalty. Additionally, FSW may exercise any and all other rights and remedies FSW has pursuant to this Agreement. The Late Fee shall be in addition to all other fees due to FSW.
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2.10 Maturity Default Fee. Borrower shall pay to FSW the Maturity Default Fee on the first day of each month in which any Obligations remain outstanding after the Termination Date, provided that collection of said Maturity Default Fee shall not be deemed a waiver by FSW of any of its other rights under this Agreement or any other instrument given to secure the Obligations. Borrower and FSW hereby agree that said fee is a fair and reasonable charge for the failure to repay the Obligations on the Termination Date and shall not be deemed a penalty. FSW may exercise any and all other rights and remedies FSW has pursuant to this Agreement. The Maturity Default Fee shall be in addition to all other fees due to FSW.
2.11 Factoring Agreement Advances. Borrower hereby authorizes FSW to pay any amount due and owing hereunder from any amounts that would otherwise be payable to Borrower under the Factoring Agreement.
SECTION 3. GRANT OF SECURITY INTEREST
From the date hereof as security for the payment and the performance of the Obligations due hereunder, including but not limited to the Inventory Loan, Borrower extends, sells, assigns, conveys, mortgages, pledges, transfers, grants, and re-grants to FSW a continuing, first priority security interest in and to all of the its respective rights, title and interest in, to and under all the Collateral. Borrower irrevocably authorizes FSW to file in any UCC jurisdiction financing statements and amendments thereto describing and relating solely to the Collateral that: (i) indicate the Collateral as all assets of Borrower or words of similar effect, regardless of whether any particular asset comprised in the Collateral as defined herein falls within the scope of Article 9 of the UCC, or as being of an equal or lesser scope or with greater detail; (ii) contain a notification that the Borrower has granted a negative pledge to the FSW, and that any subsequent lien holder may be tortuously interfering with FSW’s rights; and/or (iii) advises third parties that any notification of Borrower’s Account Debtors will interfere with FSW’s collection rights. FSW may add any supplemental language to any such financing statement as FSW may determine to be necessary or helpful in acquiring or preserving rights against third parties solely as concerns the Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to FSW as follows:
4.1 Organization, Standing, Corporate Powers
(a) Duly Organized. Borrower (i) is an entity duly organized, validly existing and in good standing under the laws of the state of its formation; (ii) has all requisite power and authority, corporate or otherwise, to conduct its business as now being conducted and to own its properties and assets; and (iii) is duly qualified to do business in every jurisdiction wherein the failure to so qualify would have a material adverse effect.
(b) Powers. Borrower has all requisite power and authority, corporate or otherwise, to execute, deliver, and to perform all of its obligations under this Agreement and under other documents or agreements relating to the transactions contemplated herein to which it is a party.
(c) Binding Obligation. This Agreement, the Financing Documents and all guarantees, assignments, security agreements and all documents executed in connection therewith are legal, valid and binding obligations of Borrower and enforceable in accordance with their respective terms, subject to the enforcement of remedies to bankruptcy, insolvency and other laws affecting creditors’ rights generally and to moratorium laws, from time to time in effect, and to general equitable principles which may limit the right to obtain the remedy of specific performance.
4.2 Authorization of Borrowing. The execution, delivery and performance of this Agreement and the borrowings hereunder: (a) have been duly authorized by all requisite corporate action; (b) will not violate any provision of applicable law, any governmental rule or regulation, any order of any court or other agency of government to which Borrower is subject or the organic documents of Borrower; or (c) do not violate any provision of any indenture, agreement or other instrument to which Borrower is a party or by which Borrower or its properties or assets are bound and which is material to the conduct or operation of Borrower’s business and financial affairs, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any provision of such indenture, agreement or other instruments, or result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever upon the property or assets of Borrower, other than as provided herein.
4.3 Financial Statements. Borrower has heretofore furnished to FSW financial statements which fairly present the financial condition and the results of operations of Borrower as of the date and for the period indicated, show all known material liabilities, direct or contingent, as of the respective dates thereof, and were prepared in accordance with GAAP.
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4.4 Adverse Change, etc. There has been no material adverse change in the business, properties or condition (financial or otherwise) of Borrower since the date of the most recent of the financial statements delivered to FSW.
4.5 Litigation. Other than identified on Schedule 4.5, there are no actions, suits or proceedings pending or threatened against or affecting Borrower, at law or in equity, or before or by any Federal, state, municipal or other governmental court, tribunal, department, commission, board, bureau, agency or instrumentality, domestic or foreign, which involve any of the transactions herein contemplated or the possibility of any judgment or liability which would result in any material adverse change in the business, operations, properties or assets or in the financial condition of Borrower, or materially and adversely affect the ability of any of them to perform hereunder. Borrower is not in default with respect to (a) any judgment, order, writ, injunction or decree; or (b) any rule or regulation of any court or Federal, state, municipal or other governmental court, tribunal, department, commission, board, bureau, agency or instrumentality, domestic or foreign which would have a material adverse effect on its business, properties or condition (financial or otherwise).
4.6 Payments of Taxes. Borrower has filed or caused to be filed all Federal, state and local tax returns that are required to be filed and has paid or caused to be paid all taxes as shown on such returns or on any assessment received by it, to the extent that such taxes have become due, except taxes the validity of which is being contested in good faith by appropriate proceedings and for which, in the exercise of reasonable business judgment, there have been set aside adequate reserves with respect to any such tax or assessment so contested the tax or assessment so contested shall not materially affect its ability to perform hereunder.
4.7 Priority of Security Interest. Subject (a) to filing and recordation of the appropriate instruments in the appropriate offices of the proper jurisdiction or possession by FSW or its agent where perfection is based upon possession; (b) to the enforcement of remedies to bankruptcy, insolvency, and other laws affecting creditors’ rights generally and to moratorium laws, from time to time in effect; and (c) to general equitable principles which may limit the right to obtain the remedy of specific performance, each of the security interests granted to FSW as identified under Section 3 of this Agreement constitutes a valid first priority security interest or lien in and to the Collateral, granting all rights and remedies to a secured party under the UCC, except as otherwise permitted hereunder.
4.8 Eligible Inventory. All Eligible Inventory included in the Borrowing Base meets the criteria for Eligible Inventory.
4.9 Location of Collateral. All of the Collateral is used or held for use by Borrower at the locations as listed on Schedule 4.9 attached hereto.
4.10. Activities of Borrower. Borrower has not been designated, and is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224. Borrower hereby acknowledges that FSW seeks to comply with all applicable laws concerning money laundering and related activities. In furtherance of those efforts, Borrower hereby represents, warrants and agrees that: (i) none of the cash or property that Borrower will pay or will contribute to FSW has been or shall be derived from, or related to, any activity that is deemed criminal under United States law; and (ii) no contribution or payment by Borrower to FSW, to the extent that they are within Borrower’s control shall cause FSW to be in violation of the United States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. Borrower shall promptly notify FSW if any of these representations ceases to be true and accurate. Borrower shall provide FSW any additional information regarding Borrower that FSW deem necessary or convenient to ensure compliance with all applicable laws concerning money laundering and similar activities. Borrower understands and agrees that if at any time it is discovered that any of the foregoing representations are incorrect, or if otherwise required by applicable law or regulation related to money laundering similar activities, FSW may undertake appropriate actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of FSW’ investment in Borrower. Borrower further understands that FSW may release confidential information about Borrower and, if applicable, any underlying beneficial owners, to proper authorities if FSW, in its sole discretion, determines that it is in the best interests of FSW in light of relevant rules and regulations under the laws set forth in subsection (ii) above.
SECTION 5. CONDITIONS OF INVENTORY LOANS
The extension of credit by FSW hereunder is subject to the following conditions:
5.1 Representations and Warranties; Covenants. At the date of each Inventory Loan, the representations and warranties set forth in Section 4 hereof and otherwise contained herein and the Borrower Covenants set forth in Section 6 hereof shall be true and correct on and as of such date, with the same effect as though such representations and warranties and covenants had been made on and as of such date, except to the extent that such representations and warranties or covenants relate solely to an earlier date.
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5.2 Certificates. On or before the date hereof, FSW shall have received from Borrower (a) a copy of its certificate of company status and articles of formation with all amendments, certified by the Secretary of State of the state of Borrower’s formation; (b) the certificate of its secretary or assistant secretary, dated the date hereof and certifying that attached thereto is a true and complete copy of its charter documents prior to the adoption of the resolutions by its Board of Directors authorizing the execution, delivery and performance of this Agreement; and certification that its articles of formation have not been amended since the date of the last amendment thereof, if any, indicated on the certificate of the Secretary of State; and (c) such other documents as FSW may reasonably request.
5.3 No Default. At the date of each Inventory Loan, no Event of Default, or event which with the giving of notice or of the passage of time, or both, would constitute an Event of Default, shall have occurred and be continuing. Each request for an Inventory Loan shall constitute the confirmation by Borrower that at the date thereof the conditions contained in this Section 5.3 shall have been satisfied.
SECTION 6. BORROWER COVENANTS
From the date hereof and so long as the Inventory Loan shall remain outstanding, Borrower shall undertake and covenants as follows:
6.1 Existence and Properties. To the extent that the same are necessary for the proper and advantageous conduct of its business, Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its entity existence, rights, licenses and permits and comply with all laws and regulations applicable to it and conduct and operate its business in substantially the manner in which it is presently conducted and operated.
6.2 Insurance. Borrower shall have and maintain with financially sound and reputable insurers, insurance satisfactory in all respects to FSW of the types and amounts customarily carried in Borrower’s line of business, including, without limitation, fire, public liability, theft, product liability, property damage and workers’ compensation and such other risks as FSW may reasonably require, such insurance to be carried with companies and in amounts satisfactory to FSW, in its reasonable discretion, and Borrower shall deliver to FSW from time to time as FSW may request, schedules setting forth all insurance then in effect and copies of the policies covering the Collateral, including standard extended coverage in an amount at least equal to the value of the Collateral. Policies evidencing any such property insurance shall contain a standard loss payee provision providing for payment of any loss to FSW and shall provide for a minimum of thirty (30) days prior written notice to FSW of any cancellation. At any time after the occurrence of an Event of Default or the occurrence of an event which with the giving of notice or the passage of time, or both, shall constitute an Event of Default, FSW may act as attorney-in-fact for Borrower in obtaining, adjusting, settling, and canceling such insurance and endorsing any drafts representing payments of claims under such policies. Borrower hereby assigns to FSW all rights to receive proceeds of such insurance and directs any insurer to pay all proceeds directly to FSW, for application in FSW’s sole discretion to the payment of the outstanding Obligations hereunder or to the restoration or repair of the Collateral. If Borrower at any time fails to maintain the insurance required hereunder, FSW may purchase the same and charge Borrower for such amount, which amount shall be payable upon demand, and if unpaid, shall constitute a secured Obligation hereunder. Borrower shall furnish FSW with certificates or other evidence of compliance with these insurance provisions.
6.3 Obligations, Taxes and Laws. Borrower shall pay or cause to be paid all indebtedness and Obligations promptly and in accordance with their respective terms, including, without limitation, sales, use and personal property taxes as the same may be imposed upon Borrower from time to time, and pay and discharge or cause to be paid and discharged promptly all taxes, assessments, and governmental charges or levies imposed upon it or in respect of its property before the same shall become in default, as well as all lawful claims for labor, materials, and supplies or otherwise which, if unpaid, might become a Lien or charge upon such property or any part thereof, and timely comply with all applicable laws and governmental rules and regulations; provided, however, that Borrower shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge, Lien or claim, or timely comply with the laws and governmental rules so long as the validity thereof shall be properly reserved for in accordance with GAAP and contested by appropriate legal proceedings timely initiated and conducted in good faith.
6.4 Audits and Appraisals. (a) Borrower shall at all times keep accurate and complete books, records and accounts of all of Borrower’s business activities, prepared in accordance with GAAP, and Borrower shall permit FSW, or any persons designated by FSW, at any reasonable time, to inspect, audit and examine such books, records and accounts and to make copies or extracts thereof at the sole expense of Borrower, which expense shall be an Obligation hereunder. In addition, FSW shall conduct an examination and verification of Borrower’s Collateral by an employee of FSW or a professional selected by FSW to verify the accuracy of such records (an “Audit”) in each twelve (12) month period during the term of this Agreement. In addition, FSW shall have the right to conduct an Audit upon i) an Event of Default; ii) a breach of the Factoring Agreement by Borrower thereunder; iii) in order to protect FSW’s security interest hereunder; or iv) a request by Borrower to modify any terms or conditions of this Agreement. FSW shall be permitted to conduct an Audit upon 24 hours advance notice to Borrower. Borrower shall be responsible for all Audit costs and expenses, which shall be an Obligation hereunder.
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(b) Borrower shall at all times keep accurate perpetual Inventory reporting reflecting accurate stock counts and Cost Values, and Borrower shall permit FSW, or any persons designated by FSW, at any reasonable time, to inspect, count, appraise for value and examine such books, records and accounts and to make copies or extracts thereof at the sole expense of Borrower, which expense shall be an Obligation hereunder. In addition, FSW shall conduct a valuation Borrower’s Inventory by an employee of FSW or a professional selected by FSW to assess the value of the Inventory (an “Appraisal”) in each twelve (12) month period during the term of this Agreement, with the first Appraisal to be completed and delivered to FSW prior to the Effective Date. In addition, FSW shall have the right to conduct an Appraisal upon i) an Event of Default; ii) a breach of the Factoring Agreement by Borrower thereunder; iii) in order to protect FSW’s security interest hereunder; or iv) a request by Borrower to modify any terms or conditions of this Agreement. FSW shall be permitted to conduct an Appraisal upon 24 hours advance notice to Borrower. Borrower shall be responsible for all Appraisal costs and expenses, which shall be an Obligation hereunder.
|6.5||Statements and Reports. Borrower shall furnish to FSW:|
(a) on the last Business Day of each week and at the time of each Notice of Borrowing, a Borrowing Base Certificate in the form attached hereto as Exhibit A;
(b) on the last Business Day of each calendar month: (i) a sales journal for period since last monthly submission; (ii) a collection/adjustment report for period since last monthly submission; and (iii) an inventory report of the complete and detailed description of all Inventory for period since last monthly submission, which shall include movement of Inventory or an analysis of the Inventory stock;
(c) on a monthly basis, which documentation shall be received by the tenth (10th) working day of the following month: (i) invoice level accounts receivable aging; (ii) invoice level accounts payable aging; (iii) work-in-progress reports; (iv) obsolete inventory report; and (v) financial statements for such month, including but not limited to income statements, balance sheets and cash flow statements, certified by an officer of Borrower.
(d) within the thirty (30) days after the end of each fiscal quarter and fiscal year end of Borrower, financial statements of Borrower, which shall include a balance sheet, an income statement showing the results of operations for such a fiscal period and a change in financial position statement for such fiscal period, together, in each case, with the comparable figures for the immediately preceding fiscal period, all in reasonable detail and prepared in accordance with GAAP;
(e) promptly, from time to time, such other information concerning the financial condition, business and affairs of Borrower as requested by FSW in its sole discretion.
6.6 Notices. Borrower shall promptly notify FSW in writing of the occurrence of any Event of Default under any of the Financing Documents or any act or event which, with the giving of notice or the passage of time, or both, would be such an Event of Default and of any legal action, proceeding or investigation threatened or instituted against Borrower that might have a material adverse effect upon the operations, financial condition or business of Borrower or Borrower’s ability to repay the Inventory Loan, or FSW’s security interest in the Collateral, and from time to time, at FSW’s request, Borrower will furnish to FSW a summary of the status of all such actions, proceedings or investigation.
6.7 Maintain Business. Borrower shall maintain in full force and effect all licenses, permits, authorizations, bonds, franchises and other rights necessary or desirable to the profitable conduct of its business, shall continue in, and limit its operations to, the same general lines of business as are presently conducted and shall comply with all applicable laws, orders, regulations and ordinances of all governmental authorities, and, if a corporation or partnership, shall maintain its corporate or partnership existence.
6.8 Mergers, Sale of Assets. Borrower will not, without FSW’s prior written consent: (a) sell, lease, transfer or dispose of substantially all of its assets to another entity; or (b) consolidate with or merge into another entity, permit any other entity to merge into it or consolidate with it, or (c) permit any transfer of the majority ownership of, or power to control, Borrower.
6.9 Dividends and Other Distributions. Borrower will not, without FSW’s prior written consent, which consent shall not be unreasonably withheld, declare, order, pay or make, directly or indirectly: (i) any dividend or other distribution on or on account of any equity interest in Borrower; (ii) any management fee; (iii) any loans to equity holders of Borrower; or (iv) any redemption, retirement, purchase or other acquisition of any equity interest of Borrower now or hereafter outstanding.
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 9 of 16|
6.10 Indebtedness. Borrower will not, without FSW’s prior written consent, (i) incur, create, assume or permit to exist any obligation or indebtedness, except (A) existing indebtedness disclosed on financial statements previously delivered to FSW, (B) the Inventory Loan, (C) the indebtedness under the Factoring Agreement; (D) other indebtedness and trade obligations and normal accruals in the ordinary course of business not yet due and payable; or (ii) become liable, directly, or indirectly, as guarantor or otherwise, for any obligation of any other person or entity.
6.11 Inventory Records and Schedules. Borrower shall maintain complete and accurate books and records regarding the Inventory, including records describing the dates of acquisition, acquisition costs, and serial or other identification numbers of the Inventory. Upon FSW’s request, Borrower shall provide FSW with complete and accurate schedules containing (a) a description of each item of Inventory; (b) the serial number or other identification number, if any, of each item Inventory, and (c) such other information regarding the Inventory as FSW may reasonably require. Borrower shall notify FSW in writing within five (5) business days of any Inventory which Borrower acquires which is the subject of a Consignment Sale.
6.12 Inventory Location. Prior to causing or permitting any of the Inventory to be located on any premises in which any third party has an interest (whether as owner, mortgagee, beneficiary under a deed of trust, lien holder, or otherwise), Borrower shall cause such third party to execute and deliver to FSW such consents, waivers and subordinations as may be reasonably necessary or appropriate, in FSW’s discretion, to insure FSW that its security interest and rights in and to the Inventory are and shall at all times continue to be prior and superior to the rights of any such third party. No Inventory shall be stored with any warehouse operator or other third person without FSW’s prior written consent and provided that the warehouse operator or other third person executes an agreement acceptable to FSW in its sole discretion which acknowledges FSW’s security interest in the subject Inventory, provides that the Inventory will not be released or relocated without FSW’s written consent and provides for other proper assurances that FSW may require under the circumstances. Borrower shall not cause or permit any event to occur which would result in an early termination of any real property lease for any premises on which all or part of the Inventory now is or hereafter may be located.
6.13 Possession and Use of Inventory. Borrower shall not sell, lease, transfer or otherwise dispose of any or all of the Inventory, except for the sale or lease of finished Inventory in the ordinary course of business. Borrower shall not enter into any consignment sale unless Borrower (i) notifies FSW in writing; (ii) the consignment sale purchaser executes an agreement acceptable to FSW in its sole discretion; and (iii) Borrower properly perfects its security interest in the Inventory subject to the consignment sale.
6.14 No Liability by FSW for Inventory. FSW shall not be directly or indirectly liable or responsible in any way or under any circumstances to Borrower or any other party (a) for the safe keeping of the Inventory; (b) any loss or damage to the Inventory occurring or arising in any manner from any cause; (c) any decrease in the value of the Inventory; or (d) any act or omission by any carrier, warehouse operator, bailee, forwarding agent, or other party dealing with all or part of the Inventory. Borrower shall bear the entire risk of loss for all damage to and destruction of the Inventory.
6.15 Accounts. Borrower acknowledges and agrees that all Accounts of Borrower shall be subject to the terms and conditions of the Factoring Agreement.
6.16 Further Assurances. Borrower shall take all actions which may be reasonably necessary or appropriate to maintain, preserve, protect, and defend the Collateral and FSW’s security interest therein, including all such actions as may be reasonably requested by FSW. Upon FSW’s request, Borrower shall execute and deliver to FSW such further documents and agreements, in form and substance satisfactory to FSW, as FSW may reasonably require to effectuate this Agreement or to evidence, perfect, maintain, preserve or protect FSW’s security interest in the Collateral, including financing statements, continuation financing statements, financing statement amendments, security agreements, and assignments.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of one or more of the following events shall constitute an Event of Default under this Agreement:
|(a)||There shall occur an Event of Default under the Factoring Agreement;|
|(b)||The Factoring Agreement is terminated for any reason, or FSW is no longer making Advances to Borrower as set forth therein;|
|(c)||Borrower fails to observe or perform any of the covenants, conditions and agreements on the part of Borrower contained herein or in any of the other Financing Documents;|
|(d)||If any representation or warranty made by Borrower to FSW contained herein or in any of the other Financing Documents proves to be untrue in any material respect;|
|(e)||Borrower shall be in default in the payment or performance of any material obligation under any indenture, contract, mortgage, deed of trust or other agreement or instrument to which Borrower is a party or by which it is bound, including but not limited to the JSC Loan;|
|(f)||FSW reasonably and in good faith deems itself to be insecure because of any or all of the following: (i) Borrower of any obligor hereunder fails to perform any of its obligations under the terms of any document that is part of, or is held by FSW as, Collateral; or (ii) the validity or priority of FSW’s security interest in the Collateral is impaired for any reason; or (iii) there is a Potential Default;|
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 10 of 16|
|(g)||Any deterioration or impairment of the Collateral or any decline or depreciation in the value of the Collateral which, in FSW’s reasonable discretion, causes the character or value of the Collateral to become unsatisfactory to FSW acting reasonably;|
|(h)||There shall occur a breach of the Intercreditor Agreement by JSC; or|
|(h)||FSW reasonably and in good faith believes that the Collateral is in danger of misuse, dissipation, commingling, loss, theft, damage or destruction, or is otherwise impaired.|
7.2. Remedies of FSW Upon Default. At all times, FSW shall have all of the rights and remedies of a secured party under the UCC and under all other applicable laws. In the event FSW agrees to waive an Event of Default at the request of Borrower, which waiver shall be in the sole discretion of FSW, Borrower shall pay a Default Waiver Fee for each such waiver in addition to other fees due hereunder. At any time after any Event of Default has occurred, FSW may, without presentment, demand, protest or further notice of any kind (all of which are hereby expressly waived) and, notwithstanding the provisions contained in any other document or instrument executed or to be executed by Borrower to FSW hereunder or contained in any other agreement, take any one or more of the following actions:
7.2.1 Acceleration. FSW may declare any or all of the Obligations to be immediately due and payable.
7.2.2 Extensions of Credit. FSW may discontinue Inventory Loans or otherwise extending credit to or for the benefit of Borrower in connection with this Agreement or under the Financing Documents.
7.2.3 Assembly of Collateral. FSW may require Borrower to assemble the Collateral and make it available to FSW at a place designated by FSW.
7.2.4 Possession of Collateral. FSW, without a breach of the peace, may enter any of the premises of Borrower and search for, take possession of, remove, keep or store any or all of the Collateral. If FSW seeks to take possession of any or all of the Collateral by court process, Borrower irrevocably and unconditionally agrees that a receiver may be appointed by a court for such purpose without regard to the adequacy of the security for the Obligations. FSW shall have the right to remain on Borrower’s premises or cause a custodian to remain thereon in exclusive control of such premises without charge for as long as FSW deems necessary in order to complete the enforcement of its rights under this Agreement. If FSW seeks possession of any or all of the Collateral by court process, Borrower irrevocably waives (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident or condition to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession; and (iii) any requirement that FSW retain possession of and not dispose of such Collateral until after trial or final judgment.
7.2.5 Preparation of Collateral. FSW may complete processing, manufacturing or repair all or any part of the Collateral prior to a disposition and, for such purpose and for the purpose of removal, FSW shall have the right to use Borrower’s premises, vehicles, equipment and all other property without charge. FSW may sell, ship, reclaim, lease or otherwise dispose of all or any part of the Collateral in its condition at the time FSW obtains possession of such Collateral or after further manufacturing, processing, or repair.
7.2.6 Foreclose on Collateral. FSW may sell or dispose of the Collateral at public or private sale, in one or more sales, as a unit or in parcels, at wholesale or retail, and at such time and place and on such terms as FSW may determine. FSW may be the purchaser of any or all of the Collateral at any public sale and, if permitted under applicable law, any private sale. Any public sale of any or all of the Collateral may be postponed from time to time by public announcement at the time and place last scheduled for the sale.
7.2.7 Transfer of Rights in Collateral. FSW’s sale or disposition of any or all of the Collateral shall transfer to the purchaser all of the Borrower’s rights in such Collateral and discharge all security interests and Liens subordinate to FSW’s security interest in the Collateral, and the purchaser shall acquire such Collateral free of all such subordinate interests and Liens.
7.2.8 Time of Sale. Without limiting the generality of this Section 7, FSW shall conclusively be deemed to have made a commercially reasonable disposition of any or all of the Collateral if (a) FSW holds a public or private sale of such Collateral at least ten (10) days after notice is given to Borrower of the date fixed for any public sale or the date on or after which any private sale or other disposition of the Collateral is to be made by FSW; (b) with respect to any public sale, the sale is held at least ten (10) days after notice is published in a newspaper of general circulation in the county in which such Collateral is located; and (c) respect to any public disposition, the sale is held any time between the hours of 8 a.m. and 5 p.m. in the county in which such Collateral is located at any place designated by FSW.
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 11 of 16|
7.2.9 Information. Without limiting the generality of this Section 7, it shall conclusively be deemed to be commercially reasonable for FSW to direct any prospective purchaser of any or all of the Collateral to Borrower to ascertain all information concerning the status of the Collateral.
7.2.10 Disposition. FSW’s disposition of any or all of the Collateral in any manner which differs from the procedures specified in this Section 7 shall not be deemed to be commercially unreasonable. It shall conclusively be deemed commercially reasonable if FSW sells any of the Collateral in a Consignment Sale.
7.2.11 Judicial Foreclosure. FSW may reduce its claims for breach of any of the Obligations to judgment and foreclose or otherwise enforce its security interest in any or all of the Collateral by any available judicial procedure. If FSW has reduced its claims for breach of any of the obligations to judgment, the Lien of any levy which may be made on any or all of the Collateral by virtue of any execution based upon such judgment shall relate back to the date of FSW’s perfection of its security interest in such Collateral. A judicial sale pursuant to such execution shall constitute a foreclosure of FSW’s security interest by judicial procedure, and FSW may purchase at such sale and thereafter hold the Collateral free of all rights of Borrower therein.
7.2.12 Discharge Claims. FSW may discharge claims, demands, Liens, security interests, encumbrances and taxes affecting any or all of the Collateral and take such other actions as FSW determines to be necessary or appropriate to protect the Collateral and FSW’s security interest therein. FSW, without releasing Borrower or any other party from any of the Obligations, may perform any of the Obligations in such manner and to such extent as FSW determines to be necessary or appropriate to protect the Collateral and FSW’s security interest therein.
7.2.13 Credit or Consignment Sales. In the event that, as a result of the disposition of any of the Collateral, FSW directly or indirectly enters into a credit transaction with any third party, FSW shall have the option, exercisable at any time, in its sole discretion, of either reducing Borrower’s obligation the principal amount of such credit transaction or deferring the reduction thereof until receipt by FSW of cash therefore from the third party. If FSW sells any of the Collateral in a Consignment Sale, FSW shall not reduce Borrower’s obligation until it’s receipt of cash or good funds from the third party.
7.2.14 Proceeds of Sale. The proceeds of any sale or disposition of the Collateral by FSW shall be applied in the sole discretion of FSW, including but not limited to the following order of priority.
(i) First, to all liabilities, Obligations, costs, and expenses, including reasonable attorneys’ fees and costs, incurred by FSW in exercising any of its rights or remedies under this Agreement, including the costs and expenses of retaking, holding, and selling any or all of the Collateral and the costs and expenses of enforcing and collecting upon any or all of the Accounts;
(b) Second, to the payment of the Obligations in such order and amounts as FSW may determine in its discretion;
(c) Third, to (i) the satisfaction of indebtedness secured by any subordinate security interest in the Collateral if written demand therefore is received by FSW before distribution of any such proceeds; and (ii) to the satisfaction of any subordinate attachment lien or execution lien pursuant applicable law if notice of the levy of attachment or execution is received by FSW before distribution of any such proceeds. If requested by FSW, the holder of a subordinate security interest in the Collateral shall furnish FSW with proof of its interest in the Collateral acceptable to FSW, and unless such holder does so, FSW shall have no obligation to comply with such holder’s demand; and
(d) Fourth, the surplus, if any, shall be paid pursuant to the UCC.
7.2.15 Liability for Deficiency. Borrower shall at all times remain liable for any deficiency remaining on the Obligations for which Borrower is liable after any disposition of any or all of the Collateral and after FSW’s application of any proceeds to the Obligations.
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 12 of 16|
7.2.16 Power of Attorney. Borrower irrevocably appoints FSW, with full power of substitution, as Borrower’s attorney-in-fact, coupled with an interest, with full power, in FSW’s own name or in the name of Borrower, at any time after the occurrence of any Event of Default, to do any or all of the following: (i) endorse any checks, drafts, money orders, notes, and other instruments or documents representing or evidencing the Collateral, or proceeds of the Collateral; (ii) pay or discharge claims, demands, Liens, security interests, encumbrances, or taxes affecting or threatened against any or all of the Collateral; (iii) commence, prosecute or defend any suit, action or proceeding relating to any or all of the Collateral; (iv) receive and open all mail addressed to Borrower and, in the exercise of such right, FSW shall have the right, in Borrower’s name, to notify the Post Office authorities to change the address for the delivery of mail addressed to Borrower to such other address as FSW may designate, including FSW’s own address. FSW shall promptly turn over to Borrower all of such mail not relating to the Collateral; (v) direct any financial institution which is a participant with FSW in extensions of credit to or for the benefit of Borrower, or which is an institution with which any deposit account is maintained, to pay to FSW all monies on deposit by Borrower with said financial institution which are payable by said financial institution to Borrower, regardless of any loss of interest, charge or penalty as a result of payment before maturity; (vi) settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral, obtain payment of claim, and make all determinations and decisions with respect to any such policy of insurance, and endorse Borrower’s name on any check, draft, instrument or other item of payment or the proceeds of such policies of insurance; (vii) instruct any accountant or other third person having custody or control of any books or records belonging or relating to the Collateral to give FSW full rights of access with respect thereto; (viii) execute on behalf of Borrower any document exercising, transferring or assigning any option to purchase, sell or otherwise dispose of or to lease, as lessor or lessee, any real or personal property; (viii) sell, transfer, pledge, make any agreement with respect to, or otherwise deal with any or all of the Collateral as though FSW were the owner thereof for all purposes; and (ix) execute on behalf of Borrower any and all documents and instruments (including notices of assignment) necessary or desirable by FSW, including any financing statement, continuation financing statement, financing statement amendment, security agreement, assignment, notice, and all other documents which FSW, in its discretion, determines to be necessary or appropriate in order to (a) perfect or maintain FSW’s security interest in the Collateral; (b) exercise any or all of FSW’s rights under this Agreement; or (c) to consummate or effectuate any of the transactions contemplated by this Agreement.
7.3 Waivers. Borrower hereby waives presentment, demand for payment, protest, notice of demand, dishonor, protest and nonpayment, and all other notices and demands in connection with the delivery, acceptance, performance, default under, and enforcement of the Obligations. Borrower waives the right to assert any statute of limitations as a defense to the enforcement of any of the Obligations to the fullest extent permitted by law.
7.4 Cumulative Remedies. FSW’s rights and remedies under this Agreement are cumulative with and in addition to all other rights and remedies which FSW may have in connection with the Loan. FSW may exercise any one or more of its rights and remedies under this Agreement at FSW’s option and in such order as FSW may determine in its discretion. FSW may exercise its rights under this Agreement from time to time and at such times as FSW may determine.
7.5 Actions. FSW shall have the right, but not the obligation, to commence, appear in, or defend any action or proceeding which affects or which FSW determines may affect (a) the Collateral; (b) Borrower’s or FSW’s rights or Obligations under the Financing Documents; (c) Borrower’s or FSW’s rights under this Agreement; or (d) the Loan. Whether or not Borrower is in default under the Financing Documents, FSW shall at all times have the right to take any and all actions which FSW in its good faith business judgment determines to be necessary or appropriate to protect FSW’s interest in connection with the Loan.
SECTION 8. GENERAL PROVISIONS
8.1 Parties. This Agreement is made solely between Borrower and FSW, no other person shall have any right of action hereunder. The parties expressly agree that no person shall be a third-party beneficiary to this Agreement.
8.2 Indemnity. Borrower agrees to and shall indemnify, hold harmless and defend FSW from any liability, claims or losses (“Claims”) related to or arising under this Agreement, including but not limited to Claims resulting from the disbursement of the proceeds of the Inventory Loan, from the condition of the Inventory whether arising during or after the term of the Loan or Avoidance Claims. This provision shall survive repayment of the Loan and shall continue in full force and effect so long as the possibility of such Claims exists.
8.3 Entire Agreement. This Agreement, together with all other Financing Documents and the Recitals, Exhibits and Schedules referenced herein, constitutes the entire agreement of the Parties hereto and thereto, and relating to the subject matter hereof and is the final and complete expression of their intent and no prior agreement or understanding with respect to the Inventory Loans, whether written or oral, shall be of any further force or effect, all such other prior agreements and commitments having been superseded in their entirety by the Financing Documents. No prior or contemporaneous negotiations, promises, agreements, covenants, or representations of any kind or nature, whether made orally or in writing, have been made by the Parties, or any of them, in negotiations leading to this Agreement or relating to the subject matter hereof, which are not expressly contained herein, or which have not become merged and finally integrated into this Inventory Loan Agreement; it being the intention of the Parties hereto that in the event of any subsequent litigation, controversy or dispute concerning the terms and provisions of this Agreement, no Party shall be permitted to offer or introduce oral or extrinsic evidence concerning the terms and conditions hereof that are not included or referred to herein and not reflected in writing. No conditions exist to the legal effectiveness of this Agreement unless expressly set forth herein.
8.4 Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective executors, administrators, heirs, successors and assigns; provided, however, that neither this Agreement nor any rights or obligations hereunder shall be assignable by Borrower without the prior express written consent of FSW, and any purported assignment made in contravention hereof shall be void. FSW may assign any part of or all of the Agreement and its rights and obligations hereunder at any time in its sole discretion. FSW may participate all or any portion of the Inventory Loan to such other party or parties as FSW shall select.
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 13 of 16|
|8.5||Governing Law; Waiver of Jury Trial; Jurisdiction; Arbitration.|
8.5.1 Governing Law. This Agreement shall be deemed to have been made, executed and is to be performed in the County of Maricopa, State of Arizona and all rights and obligations of the parties shall be governed, construed and enforced according to the laws and decisions of the State of Arizona. Borrower does hereby agree that service of process may be made upon Seller by certified mail at the address set forth in this Agreement.
8.5.2 JURY WAIVER. In recognition of the higher cost and delay which may result from a jury trial, the Parties hereto do hereby waive any right to a jury trial of any action arising hereunder, or in any way connected with or incidental to the dealings of the Parties. Any party hereto may file an original counterpart or a copy of this section with any court as written evidence of the consent of the parties hereto to the waiver of their right to a jury trial.
8.5.3 Jurisdiction. Subject to the arbitration requirements set forth herein, as part of the consideration for this Agreement and regardless of any present or future domicile or principal place of business of Borrower, Borrower hereby consents to the exclusive jurisdiction of any state or federal court sitting in the United States District Court for the District of Arizona or any court of the State of Arizona located in Maricopa County (the “Chosen Forum”) in any action or proceeding the subject matter of which arises out of or relates, directly or indirectly, to this Agreement and each of Borrower and FSW agree that all claims in respect to any action or proceeding shall be heard and determined exclusively in the Chosen Forum to the extent such claims, if any, are not subject to the arbitration requirements. Notwithstanding the foregoing, FSW shall have the right to bring a proceeding in any jurisdiction as chosen by FSW to protect FSW’s right and remedies in the Collateral, which shall be in the sole discretion of FSW. Borrower further waives any objection or right it may have to seek a change of venue based on lack of personal jurisdiction, improper venue, forum non conveniens or otherwise and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court any right it may have to seek a change of venue based on inconvenience of the Chosen Forum or otherwise. The Parties agree that service of process may be made upon a party by United States Mail, certified mail, return receipt requested, postage prepaid, sent to the Party at its last known address of record. Nothing in this Agreement shall be deemed or operate to affect the right of FSW to serve legal process in any other manner permitted by law, or to preclude the enforcement of any judgment or order obtained in such forum or the taking of any action under this Agreement to enforce same in any other appropriate forum or jurisdiction.
8.5.4 Arbitration. Except for “Core Proceedings” under the United States Bankruptcy Code, or as noted below in the next paragraph of this section, the Parties agree to submit to binding arbitration all claims, disputes and controversies between or among them, whether in tort, contract or otherwise (and their respective employees, officers, directors, attorneys, and other agents) arising out of or relating to in any way (i) this Agreement or any other agreement, instrument, certificate or document entered into between the parties, or any dispute, claim or controversy between them related to any of the transactions contemplated by this Agreement. Any arbitration proceeding will (i) proceed in Maricopa County, Arizona; (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code); and (iii) be conducted in accordance with the Commercial Arbitration rules of the America Arbitration Association (“AAA”), as modified by these provisions.
Notwithstanding the foregoing, however, the arbitration requirement does not limit the right of FSW to (i) foreclose against any Collateral; (ii) exercise self-help remedies relating to Collateral or proceeds of Collateral permitted to FSW, such as setoff or repossession; or (iii) obtain provisional ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before, during or after the pendency or any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of either party to submit any dispute to arbitration, including those arising from the exercise of the actions detailed in this paragraph.
Any arbitration proceeding will be before a single arbitrator selected according to the Commercial Arbitration Rules of the AAA. The arbitrator will be a neutral attorney who has practiced in the area of commercial law for a minimum of ten (10) years. The arbitrator will determine whether or not an issue is arbitrable and will give effect to the statutes of limitation in determining any claim. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. In any arbitration proceeding, the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. In any arbitration proceeding discovery will be permitted at the arbitrator’s discretion and will be governed by the Arizona Rules of Civil Procedure unless otherwise ordered by the arbitrator. The arbitrator shall award costs and expenses of the arbitration proceeding in accordance with the provisions of this Agreement.
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 14 of 16|
8.6 Attorney’s Fees. Borrower shall reimburse FSW for all reasonable attorney’s fees, court costs and other expenses incurred by FSW arising under or related to this Agreement and the Financing Documents, whether incurred by FSW before or after the commencement of any action or proceeding, including but not limited to: (a) the preparation and negotiation of this Agreement; (b) the exercise of any or all of FSW’s rights and remedies relating to or arising under an Event of Default, whether or not any legal proceedings are instituted by FSW; (c) the protection, preservation, management, operation, or maintenance of any or all of the Collateral; (d) the sale or disposition of any or all of the Collateral; (e) the commencement and prosecution of any suit, action, or proceeding with respect to any or all of the foregoing matters, including an action for relief from the automatic stay arising under the Bankruptcy Code § 362(a), 11 U.S.C. § 362(a) or in connection with any insolvency event of Borrower; and/or (f) the defense of any suit, action or proceeding by Borrower or any other party relating to any or all of the Collateral. Borrower’s obligation to reimburse FSW under this Section shall include payment of interest on all amounts expended by FSW from the date of expenditure at the rate of interest specified in this Agreement. As used in this Agreement, attorneys’ fees will be deemed to be the full and actual cost of any legal services actually performed in connection with the matters involved, including those related to any appeal or the enforcement of any judgment calculated on the basis of the usual fee charged by attorneys performing such services. Notwithstanding the existence of any law, statute or rule, in any jurisdiction that may provide Borrower with a right to attorney’s fees or costs, Borrower hereby waives any and all rights to hereafter seek attorney’s fees or costs thereunder and Borrower agrees that FSW exclusively shall be entitled to indemnification and recovery of any and all attorney’s fees or costs in respect to any litigation based hereon, arising out of, or related hereto, whether under, or in connection with, this and/or any agreement executed in conjunction herewith, or any course of conduct, course of dealing, oral or written statements or actions of either Party.
8.7 Survival. The representations and warranties and Borrower’s covenants hereunder shall survive the (a) closing of the Agreement; and (b) termination of this Agreement and FSW may enforce such representations and warranties and covenants at any time. The indemnities of Borrower shall survive repayment of the Inventory Loan and the termination of this Agreement.
8.7 Severability. If any term or provision of this Agreement, or the application thereof to any circumstance, shall be invalid, illegal or unenforceable to any extent, such term or provision shall not invalidate or render unenforceable any other term or provision of this Agreement, or the application of such term or provision to any other circumstance. To the extent permitted by law, the parties hereto hereby waive any provision of law that renders any term or provision hereof invalid or unenforceable in any respect.
8.8 Amendments. No amendment, modification or waiver, oral or otherwise, with respect to any provision will in any event be effective unless the same is in writing and signed by an officer of Borrower and FSW. Such amendment or modification or waiver must have an original signature of an officer of FSW, and no email correspondence shall be considered a writing for purposes of an amendment, modification or waiver.
8.9 Waiver. No failure or delay on FSW’s part in exercising any right, power or remedy granted to FSW hereunder will constitute or operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right set forth herein.
8.10 Relationship of Parties. Borrower acknowledges that the relationship under this Agreement is principally that of creditor and debtor and that there is not now, and Borrower will at no time seek or attempt to establish, any fiduciary or confidential relationship of FSW to Borrower. Borrower waives any right to assert, now or in the future, the existence or creation of any fiduciary or confidential relationship of FSW to Borrower in any action or proceeding, whether by way of claim, counterclaim, cross claim or otherwise.
8.11 Notices. Any notice or other communication by either Party to the other in connection with an Event of Default, breach of this Agreement, termination of this Agreement or any written notice as provided for herein shall be in writing and shall be sent to the address set forth in the Schedule 8.11 and shall be given and be deemed to have been duly given, (i) three Business Days following deposit in the United States mail, with proper postage prepaid; (ii) upon delivery if delivered by hand to the Party to be notified; or (iii) the following day if sent by a nationally recognized overnight delivery service. The address for notices may be changed by written notice delivered as set forth herein. No email correspondence shall be considered a written notice for purposes of this Section 8.11.
8.12 Additional Instruments. Each of the Parties shall from time to time, at the request of others, execute, acknowledge and deliver to the other Party any and all further instruments that may be reasonably required to give full effect and force to the provisions of this Agreement.
8.13 Originals. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed an original and constitute one and the same agreement. Delivery of a manually executed copy of a signature page of this Agreement or any document ancillary thereto or executed pursuant to the transactions contemplated by this Agreement by facsimile or by electronic transmission of a portable document format file or equivalent (also known as a “PDF file”) shall be effective as delivery of a manually executed original counterpart of this Agreement. An electronic signature of this Agreement or any document ancillary thereto or executed pursuant to the transactions contemplated by this Agreement shall be effective as delivery of a manually executed original counterpart of this Agreement, which electronic signature shall be defined as an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by Borrower or any Person with the intent to sign the record.
8.14 Interpretation. In the event an ambiguity or question of intent or interpretation arises, the Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
8.15 Construction. The Parties have read this Agreement, understand its contents, and represent that each has full and complete authority to sign this Agreement and that the execution, delivery and performance hereunder has been duly authorized by each Party. Each of the Parties hereto has had an opportunity to consult with its respective legal counsel prior to executing this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE TO FOLLOW]
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 15 of 16|
In Witness Whereof, the Parties hereto have caused this Revolving Inventory Loan and Security Agreement to be duly executed by their respective authorized officers as of the Effective Date.
|Enlight Group II, LLC,||AMMO, Inc.,|
|a Delaware limited liability company||a Delaware corporation|
|Factors Southwest, L.L.C.|
|d/b/a FSW Funding, an Arizona limited liability|
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|FSW Initials _____|
|Page 16 of 16|
EXHIBIT A TO THE REVOLVING INVENTORY LOAN AND SECURITY AGREEMENT
Borrowing Base Certificate form
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|Exhibit A – Borrowing Base Certificate||FSW Initials ____|
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|Schedule 2 – Litigation||FSW Initials ____|
Location of Collateral
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|Schedule 2 – Litigation||FSW Initials ____|
Address for Notices
|Revolving Inventory Loan and Security Agreement||Borrower Initials _____|
|Schedule 3 – Notices||FSW Initials ____|
AMMO, INC. announces proposed public offering of common stock
SCOTTSDALE, Ariz., March 11, 2021 — AMMO, Inc. (Nasdaq: POWW) (“AMMO” or the “Company”), a premier American ammunition and munition components manufacturer and technology leader, today announced that it intends to offer and sell newly issued shares of its common stock in an underwritten public offering. AMMO is expected to grant the underwriters a 30-day option to purchase up to an additional 15% of the number of shares of common stock sold by AMMO in connection with the offering.
AMMO intends to use the net proceeds from this offering for general corporate purposes and working capital purposes, including debt reduction and capital expenditures. In addition, AMMO may use a portion of the proceeds for potential acquisitions.
Roth Capital Partners and Alexander Capital are acting as joint book-running managers for the offering. The offering is subject to market and other conditions. There can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering.
The shares of common stock are being offered pursuant to an effective shelf registration statement (333-253192) that AMMO previously filed with the Securities and Exchange Commission (SEC), which became effective on February 24, 2021. The offering will be made only by means of the written prospectus supplement and the accompanying prospectus that form a part of the registration statement. An electronic preliminary prospectus supplement and the accompanying prospectus relating to the offering will be filed with the SEC and when filed, will be available on the SEC’s website at www.sec.gov. Copies of the preliminary prospectus supplement and the accompanying prospectus relating to the offering, when available, may be obtained from Roth Capital Partners, LLC, 888 San Clemente Drive, Newport Beach, California 92660, Attn: Equity Capital Markets, via telephone at (800) 678-9147 or via e-mail at email@example.com or from Alexander Capital, L.P., 17 State Street, New York, New York 10014, 212-687-5650, firstname.lastname@example.org.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities of AMMO being offered, and shall not constitute an offer, solicitation or sale of any security in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
About AMMO, Inc.
With its corporate offices headquartered in Scottsdale, Arizona. AMMO designs and manufactures products for a variety of aptitudes, including law enforcement, military, sport shooting and self-defense. The Company was founded in 2016 with a vision to change, innovate and invigorate the complacent munitions industry. AMMO promotes branded munitions as well as its patented STREAK VISUAL AMMUNITION™ and armor piercing rounds for military use. For more information, please visit: www.ammo-inc.com.
Forward Looking Statements
This press release contains certain “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, goals and objectives of management for future operations; any statements concerning proposed new products and services or developments thereof; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.
Forward looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words, or the negative thereof. These forward-looking statements present our estimates and assumptions only as of the date of the statements. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Such forward-looking statements are based on our current beliefs and expectations, which we believe are reasonable. However, forward-looking statements are subject to significant known and unknown risks and uncertainties that may cause actual results, performance or achievements in future periods to differ materially from those assumed, projected or contemplated in the forward-looking statements. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures and risk factors we include in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports filed on Form 8-K.
Rob Wiley, CFO
Phone: (480) 947-0001