Item 1.01 Entry into a Material Definitive Agreement.
On
There are included in the Agreement certain provisions protecting GCF in the event that the Company discourages the use of electronic check processing, changes its arrangements with the electronic check processor in a way not acceptable to GCF, changes its electronic check processor without the consent of GCF, interrupts or disposes of its business without the consent of GCF and, in the event of a transfer, an agreement that the successor will assume the obligations of the Agreement, or induces its customers to pay for goods and services by any means other than the electronic check processor. These protections include the requirement that the Company immediately pay the unpaid value of the Purchased Receivables, together with any fees (including legal fees), in full; the right by GCF to execute in the name of the Company a confession of judgment in favor of GCF for the unpaid value of the Purchased Receivables and to have the confession of judgment entered as a judgment; the right by GCF to enforce the Security Agreement described below; the requirement that the Company immediately refund the value of the Purchase Amount; the right by GCF to file a legal action against the Company; the right by GCF, upon a breach of the Agreement, to be an assignee of the Company's lease for its business premises and to exercise its rights under such assignment; and the right to debit the Company's deposit accounts.
By executing the Agreement, the Company made certain representations, warranties
and covenants and agreed to certain provisions setting forth events of default
that are standard for agreements of this type. In case any event of default
occurs and is not waived, GCF may proceed to protect and enforce its rights or
remedies by suit in equity or by action at law or both. Simultaneous with the
execution of the Agreement, the Company executed a confession of judgment. In
addition to the other remedies available to GCF upon an event of default, GCF
may file the confession of judgment in
On the Effective Date, the Company and GCF also signed a Security Agreement. Pursuant to the Security Agreement the Company granted to GCF a security interest in and lien upon all accounts, chattel paper, documents, equipment, general intangibles, instruments, and inventory now or hereafter owned or acquired by the Company; all proceeds, as that term is defined in Article 9 of the UCC; all funds at any time in the Deposit Account, regardless of the source of such funds; present and future electronic check transactions; and any amount which may be due to GCF under the Agreement, including but not limited to all rights to receive any payments or credits under the Agreement. To secure the Company's obligations under the Agreement, the Company also agreed to provide other security to GCF upon request. The Company further agreed that, if at any time there are insufficient funds in the Deposit Account to cover the GCF entitlements under the Agreement, GCF is granted a further security interest in all of the Company's assets of any kind. GCF may exercise its rights under the Security Agreement without notice or demand of any kind by making an immediate withdrawal or freezing the secured assets.
The descriptions of the Agreement, the Security Agreement and the Payoff Letter
are summaries only, are not intended to be complete, and are qualified in their
entirety by reference to the full text of the Agreement, the Security Agreement
and the Payoff Letter, which are expected to be filed with the Company's
Quarterly Report on Form 10-Q for the quarter ending
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K, to the extent required by this Item 2.03, is incorporated herein by reference.
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