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(Accounts Receivable Financing)
1. Grant of Security interest in Receivables. [Name], with offices at [address] (Borrower), hereby grants to [name], with offices at [address] (Lender), a security interest in all accounts, drafts, acceptances, and other forms of receivables (including chattel paper), and all rights of Borrower earned under contracts to sell goods or render services, all of which are, or may be, identified by the terms of Paragraph 6 of this Agreement. All of these items now belong or will belong to Borrower for goods sold by Borrower or for services rendered by Borrower. Included in this grant are all guaranties and securities for the receivables, all right, title, and interest of Borrower in the merchandise that gave rise to any receivable, including the right of stoppage in transitu, and the proceeds of all of the receivables. The receivables and the rights included in the grant of the receivables are the Collateral.
2. Security for Payment of Borrower's Obligations. The security interest granted by this Agreement is to secure payment and performance of all of Borrower's liabilities and obligations to Lender whether now due or to become due, presently existing or arising after the date of this Agreement, direct or indirect, or absolute or contingent. All of the foregoing are the Obligations.
3. Definitions. As used in this Agreement, the following terms have the definitions set out in this Paragraph.
a. Qualified Account. A right of Borrower to payment for goods sold or leased by Borrower or for services rendered by Borrower that conforms to the warranties set out in Paragraph 4(c) and that is due and payable according to terms acceptable to Lender.
b. Slow Account. Any Qualified Account with respect to which any of the following has occurred or is applicable:
(i) all or a substantial part of the property giving rise to the Qualified Account is returned, rejected, repossessed, lost, or damaged;
(ii) a dispute with the account debtor arises;
(iii) the Qualified Account becomes past due for a period of [number] days;
(iv) the death, dissolution, termination of existence, insolvency, or business failure of the account debtor; the appointment of a receiver for any part of the property of or assignment for the benefit of creditors by the account debtor; or the filing of a petition in bankruptcy or the commencement of any proceeding under any bankruptcy or insolvency laws by or against the account debtor; (v) the account debtor does not meet credit standards acceptable to Lender.
Lender has the sole discretion as to whether a Qualified Account is or has become a Slow Account.
c. Borrowing Base. An amount equal to ...... percent (......%) of the outstanding amount of Qualified Accounts exclusive of Slow Accounts.
4. Borrower's Warranties. Borrower represents and warrants as follows:
a. Corporation in Good Standing. Borrower is a corporation organized and existing under the laws of [state] and is duly qualified and in good standing in every state in which it does business.
b. Execution of Security Agreement Within Borrower's Corporate Powers and Properly Authorized. The execution, delivery, and performance of this Agreement are within Borrower's corporate powers, have been properly authorized, do not contravene any law or the terms of Borrower's charter, bylaws, or other incorporation papers, or of any indenture, agreement, or undertaking to which Borrower is a party or by which it is bound.
c. Qualified Accounts Will Be Bona Fide and Undisputed. Any Qualified Account reported by Borrower to Lender will be a good and valid account representing an undisputed bona fide indebtedness of the account debtor to Borrower for merchandise shipped or delivered pursuant to or in connection with a contract of sale, or for services performed by Borrower to or for the account debtor. There are and will be no setoffs or counterclaims of any nature against any Qualified Account. No agreement under which any deduction or discount may be claimed has been or will be made with the account debtor on any of the Qualified Accounts except as reflected in the identification of the Collateral as set forth in Paragraph 6. Borrower will have good right to pledge, sell, assign, and transfer the Qualified Accounts and grant a security interest in them. None of the Collateral has been or will be pledged, sold, assigned, or transferred to any other person than Lender or in any way encumbered except to Lender. Borrower will warrant and defend all the Collateral against the claims and demands of all persons, firms, corporations, and associations. No account reported by Borrower to Lender shall represent payment due under a consignment or under a sale or return agreement.
d. Borrower's Place of Business. Borrower's places of business are only at the following locations: [addresses]. Borrower will promptly notify Lender of the opening of new locations or the closing of existing locations.
e. Location of Borrower's Business Records. The office where Borrower keeps records concerning accounts, contracts, rights, and chattel paper is [location]. Borrower will promptly notify Lender of any change in the location of these records.
f. All Information Correct. Subject to any expressly stated limitations, all information furnished to Lender concerning the Collateral and the proceeds of the Collateral for the purpose of obtaining credit or an extension of credit is or will be at the time it is furnished, accurate and correct in all material respects and complete insofar as completeness may be necessary to give Lender true and accurate knowledge of the subject matter.
5. Limit on Loan Amounts. Borrower understands that Lender will use the Borrowing Base as a limitation on loans. Borrower agrees that the outstanding principal balance of loans under this Agreement, together with interest due and unpaid on the loan balances, will at no time exceed the Borrowing Base. Borrower shall make payments in cash, on demand, in reduction of interest and principal, and in an amount necessary to eliminate any excess. The loans will be evidenced by Borrower's promissory note, payable on such terms as Lender may accept.
6. Identification of Collateral. The Collateral shall be identified to Lender as prescribed by Lender and by Borrower's delivery to Lender of all original documents described as the Collateral in Paragraph 1 and either (a) original and duplicate invoices representing sales and delivery of goods or services, together with any evidence of delivery that Lender may request, all invoices to bear an assignment stamp in favor of Lender in terms acceptable to Lender, or (b) at the time of each borrowing, a completed and executed Borrower's Certificate of Accounts Receivable or Accounts Receivable Schedule, or both, satisfactory in form to Lender.
In addition to the documents described above, Borrower shall deliver to Lender monthly a completed and aged Schedule of Collateral satisfactory in form to Lender.
7. Failure to Identify Collateral. Lender's failure to demand delivery of the writings described in Paragraph 6 or Borrower's failure or refusal to deliver them shall in no way diminish Lender's security interest in the Collateral described in Paragraph 1, it being the intention of the parties that Lender shall have a security interest in all items of the Collateral described in Paragraph 1, whether presently owned by Borrower or acquired hereafter, whether or not specifically identified or listed.
8. Inspection of Borrower's Records. Borrower will at all reasonable times allow Lender or any of Lender's representatives, attorneys, or accountants, to examine and inspect and make extracts from Borrower's books and other records and to arrange for verification of the Collateral, under reasonable procedures, directly with account debtors or by other methods. Borrower will furnish to Lender upon request additional statements of any Collateral, together with all notes or other papers evidencing the Collateral and any guaranties, securities, or other documents and information relating to it, and generally at all times will furnish to Lender the statements and information Lender may reasonably request.
9. Insurance. When requested by Lender, Borrower will provide, at no expense to Lender, insurance satisfactory to Lender on all chattels that may be listed on any chattel paper subject to this Agreement. Lender will have affixed to the policies loss payable clauses satisfactory to Lender and will provide proper evidence of such insurance to Lender.
10. Additional Documents, Assurances, Etc., Required of Borrower. Borrower will do any further acts and sign and deliver to Lender any additional assurances and instruments that Lender may require to more completely vest in and assure to Lender Lender's rights under this Agreement and to the Collateral and the proceeds of the Collateral. If any of these instruments must be or should be filed, Borrower will pay all filing fees.
11. Disposition of Collections. Borrower shall make collections on the Collateral, hold the proceeds received from collection in trust for Lender, and turn over the proceeds to Lender daily in the exact form in which they are received together with a collection report in form satisfactory to Lender. Cash proceeds, including checks, shall be deposited by Lender in an account designated as Cash Collateral Account--[name] (Borrower). The account will be under Lender's sole control. Lender, in Lender's discretion, may apply all or any part of the cash proceeds to Borrower's Obligations or may release all or any part of the cash proceeds to Borrower.
12. Notification of Assignment to Account Debtors. Lender may at any time notify account debtors on any Collateral that the Collateral has been assigned to Lender and that proceeds shall be paid to Lender. Upon Lender's request, Borrower will notify the account debtors and will indicate on all billings to the account debtors that the accounts are payable to Lender. Any proceeds of accounts thereafter received by Borrower shall be turned over to Lender daily in the exact form in which they are received.
13. Lender Can Deal With Collateral in Own Name. Lender has full power to cancel, compromise, indorse, sell, or otherwise deal with the Collateral or its proceeds in its own name or that of Borrower.
14. Financing Statements. At Lender's request, Borrower will join with Lender in executing one or more financing statements pursuant to Article 9 of the Uniform Commercial Code (UCC) of [state] in form satisfactory to Lender. Without Lender's written consent, Borrower will not allow any financing statement covering any Collateral, the proceeds of any Collateral, or the proceeds of any of Borrower's assets to be on file in any public office.
15. Events of Default; Acceleration. At Lender's option and despite the maturity date of or any grace period provided in any instrument evidencing a liability, any or all Obligations shall become immediately due and payable without notice or demand upon the occurrence of any of the following events of default:
a. Performance of Agreement. Borrower's default in the payment or performance of any obligation, covenant, or liability contained or referred to in this Agreement or in any note secured by this Agreement;
b. False Warranty, Etc. The falseness in any material respect when made or furnished of any warranty, representation, or statement made or furnished to Lender by or on behalf of Borrower;
c. Acceleration of Borrower's Indebtedness to Others. Any event that results in the acceleration of the maturity of Borrower's indebtedness to others under any indenture, agreement, or undertaking;
d. Loss or Damage of Collateral. The loss, theft, or damage to, or the destruction, sale, or encumbrance of any of the Collateral, or the making of any levy, seizure, or attachment of the Collateral; or
e. Borrower's Dissolution or Insolvency. Borrower's dissolution, termination, or insolvency or the appointment of a receiver for any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower or any guarantor or surety for Borrower, or the entry of any judgment against them, or the failure of any guarantor or surety of Borrower to provide Lender with financial information promptly when requested.
16. Rights and Remedies of Lender on Borrower's Default. Upon the occurrence of any event of default, and any time thereafter, Lender shall have the rights and remedies of a secured party under the UCC of [state], in addition to the rights and remedies provided in this Agreement or in any other writing executed by Borrower.
17. Waiver of Rights. Lender shall not be deemed to have waived any of Lender's rights under this Agreement or under any other agreement, or under any writings signed by Borrower unless the waiver is in writing and signed by Lender. No delay or omission on Lender's part in exercising any right shall operate as a waiver of that right or any other right. A waiver on any occasion shall not be construed as a bar to or waiver or any right or remedy on any future occasion. All Lender's rights and remedies, whether evidenced by this Agreement or by any other writing, shall be cumulative and may be exercised separately or concurrently.
18. Notices to Borrower. Any demand upon or notice to Borrower that Lender may elect to give shall be effective when deposited in the mail or delivered to a telegraph company addressed to Borrower at the address shown in Paragraph 1, as modified by any notice given pursuant to Paragraph 4(d). Demands or notices addressed to Borrower's address at which Lender customarily communicates with Borrower shall also be effective.
19. Lender May Transfer Borrower's Obligations and Collateral. If, at any time by assignment or otherwise, Lender transfers any Obligations and Collateral or other security given for the Obligations to a third party, the transfer shall carry with it Lender's powers and rights under this Agreement with respect to the Obligations and Collateral or other security transferred, and the transferee shall become vested with these powers and rights, whether or not they are specifically referred to in the transfer. If and to the extent that Lender retains any other Obligation or Collateral or other security, Lender will continue to have the rights and powers set out in this Agreement with respect to the Obligations, Collateral, or other security.
20. Borrower to Pay Costs of Collecting Collateral. Borrower shall pay to Lender on demand, together with interest at the highest rate allowed by law, any and all expenses, including legal expenses and reasonable attorney fees, reasonably incurred or expended by Lender in the collection or attempted collection of the Collateral and in protecting and enforcing the Obligations and other rights of Lender under this Agreement.
21. Termination of Agreement by Borrower. Whenever there is no outstanding Obligation and no commitment on the part of Lender under any agreement that might give rise to an Obligation, Borrower may terminate this Agreement upon written notice to Lender. Prior to such termination, this shall be a continuing Agreement in every respect.
22. Applicable Law. This Agreement and all its rights and obligations under it, including matters of construction, validity, and performance, shall be governed by the law of [state].
23. When Agreement Takes Effect. This Agreement will take effect when signed by Borrower and delivered to Lender.
24. Illegality of Part of Agreement. If any portion of this Agreement is held to be illegal, then only that portion is void and not the entire Agreement.
25. Date of Signing and Delivery. This Agreement was signed by Borrower and delivered to Lender on [date].
[name of corporation]
*** If Required By State Law ***
This Section for Notary:
State of _________
County of ________ [County]
On [Date] before me, [Name of Notary], notary, personally appeared [Name of Person(s) Involved], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
My commission expires: _____