Accounts Receivable Security Agreement by mbf17044

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									                                       Accounts receivable security agreement.

   This agreement, made [date], between Bank (called the "bank"), [address], and (called "borrower"), [address];

    Because it is contemplated that Borrower may from time to time request loans or advances from the bank and that
the bank may, at its election, comply with any such request, in whole or in part;

    Now, for consideration of any loan or advance (including any loan or advance by renewal or extension) to be made
to borrower by the bank, or any release to be made by the bank of any balance in the assignee deposit account (to be
defined), and for other good and valuable consideration, the parties to this agreement agree as follows:

       1. Definitions. When used in this agreement, the following terms shall have the following meanings:

          "Note" shall mean any promissory note of borrower evidencing any loan or advance made by the bank to
       borrower.

           "Liabilities" shall mean all obligations of borrower under any note, all obligations of borrower under this
       agreement, and all other obligations of borrower to the bank, its successors and assigns, however created, arising
       or evidenced, whether direct or indirect, absolute or contingent, or now or in the future existing, or due or to
       become due.

          "Account receivable" shall mean any right of borrower to payment for goods sold or leased or for services
       rendered.

           "Contract right" shall mean any right of borrower to payment under a contract for the sale or lease of goods
       or the rendering of services, which right is at the time not yet earned by performance.

          "Account debtor" shall mean the party who is obligated on or under any account receivable or contract right.

           "Eligible account receivable" shall mean an account receivable which meets each of the following
       requirements: (a) if it arises from the sale or lease of goods, the goods have been shipped or delivered to the
       account debtor under the account receivable; (b) it is a valid, legally enforceable obligation of the account
       debtor under the account receivable, and is not subject to any offset, counterclaim or other defense on the part of
       the account debtor or to any claim on the part of the account debtor denying liability in whole or in part; (c) it is
       not subject to any lien or security interest other than the security interest under this agreement; (d) it is evidenced
       by an invoice (dated not later than the date of shipment or performance and having payment terms acceptable to
       the bank) rendered to the account debtor and is not evidenced by any instrument or chattel paper; (e) it is not
       owing by any account debtor whose obligations the bank, acting in its discretion, shall have notified the
       borrower in writing are not deemed to constitute eligible accounts receivable; and (f) it is not owing by an
       account debtor who shall have failed to pay in full any invoice evidencing any account receivable within
       days after the due date of the invoice. An account receivable which is at any time an eligible account receivable,
       but which subsequently fails to meet any of these requirements, shall cease to be an eligible account receivable.

          "Collateral" shall mean all property or rights in which a security interest is granted under this agreement.

          "Obligor" shall mean borrower and each other party primarily or secondarily liable on any note or any of the
       other liabilities.

         "Default" shall mean the occurrence of any of the following events: (a) nonpayment, when due, of any
       amount payable on any of the liabilities or failure to perform any agreement of borrower contained in this



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   agreement; (b) any warranty of borrower in this agreement is untrue in any material respect; (c) any obligor
   becomes insolvent or unable to pay debts as they mature or makes an assignment for the benefit of creditors, or
   any proceeding is instituted by or against any obligor alleging that the obligor is insolvent or unable to pay debts
   as they mature; (d) entry of any judgment against any obligor; (e) death of any obligor who is a natural person,
   or of any partner of any obligor which is a partnership; (f) dissolution, merger or consolidation, or transfer of a
   substantial part of the property of any obligor which is a corporation or a partnership; or (g) the bank feels
   insecure for any other reason.

    2. Grant of security interest. As security for the payment of all liabilities, borrower assigns to the bank, and
grants to the bank a continuing security interest in the following, whether now or in the future existing or acquired:
all accounts receivable (whether or not eligible accounts receivable) and contract rights of borrower; all chattel
paper and instruments evidencing any obligation to borrower for payment for goods sold or leased or services
rendered; all interest of borrower in any goods the sale or lease of which shall have given or shall give rise to, and
in all guaranties and other property securing the payment of or performance under, any accounts receivable,
contract rights or any chattel paper or instruments; and all proceeds of any of the above.

   3. Warranties. Borrower warrants that: no financing statement (other than any which may have been filed on
behalf of the bank) covering any of the collateral is on file in any public office; borrower is and will be the lawful
owner of all collateral, free of all liens and claims, other than the security interest under this agreement, with full
power and authority to execute this agreement and perform borrower's obligations under this agreement, and to
subject the collateral to the security interest under this agreement; and all information with respect to collateral and
account debtors set forth in any schedule, certificate or other writing at any time previously or in the future furnished
by borrower to the bank, and all other written information previously or in the future furnished by borrower to the
bank, is and will be true and correct as of the date furnished.

    4. Collections, etc. Until the bank notifies borrower of the revocation of such power and authority, borrower (a)
will, at its own expense, endeavor to collect, as and when due, all amounts due under the collateral, including the
taking of any action with respect to the collection as the bank may reasonably request or, in the absence of such
request, as borrower may deem advisable, and (b) may grant, in the ordinary course of business, to any party
obligated on any of the collateral, any rebate, refund or allowance to which the party may be lawfully entitled, and
may accept the return of goods, the sale or lease of which shall have given rise to the collateral. The bank, however,
may, at any time, whether before or after any revocation of such power and authority or the maturity of any of the
liabilities, notify any parties obligated on any of the collateral to make payment to the bank of any amounts due or
to become due and enforce collection of any of the collateral by suit or otherwise and surrender, release or exchange
all or any part of the collateral, or compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness under the collateral or evidenced by the collateral. Upon request of the bank,
borrower will, at its own expense, notify any parties obligated on any of the collateral to make payment to the bank
of any amounts due or to become due.

    Borrower will (except as the bank may otherwise consent in writing) immediately, on receipt, transmit and
deliver to the bank, in the form received, all cash, checks, drafts and other instruments or writings for the payment
of money (properly indorsed, where required, so that the items may be collected by the bank) which may be
received by borrower at any time in full or partial payment or otherwise as proceeds of any of the collateral. Except
as the bank may otherwise consent in writing, any of the items which may be received by borrower will not be
commingled with any other of its funds or property, but will be held separate and apart from its own funds or
property and on express trust for the bank until delivery is made to the bank. Borrower will comply with the terms
and conditions of any consent given by the bank pursuant to the provisions of this paragraph.

   5. Adjustments and returned and repossessed goods. In the event borrower obtains possession (by return,
repossession or otherwise) of any goods, the sale or lease of which shall have given rise to any eligible account


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receivable, borrower will, not later than        days thereafter, pay to the bank the greater of the unpaid purchase
price or lease rental of the goods or the amount of any rebate, refund or allowance granted by borrower in
connection with obtaining possession of the goods. In the event borrower grants to any account debtor under any
eligible account receivable any other rebate, refund or allowance (except a cash discount not exceeding          % of
the face amount of the applicable invoice, and except any allowance which has been deducted in computing the net
amount of the invoice as shown in the original schedule furnished to the bank identifying the eligible account
receivable), borrower will, not later than        days thereafter, pay to the bank the amount of the rebate, refund or
allowance granted.

    6. Certificates, schedules and reports. Borrower will from time to time, as the bank may request, deliver to the
bank a schedule identifying each eligible account receivable (not previously identified) subject to the security
interest under this agreement, and the additional schedules and the certificates and reports respecting all or any of
the collateral at the time subject to the security interest under this agreement, the items or amounts received by
borrower in full or partial payment of any of the collateral, and any goods (the sale or lease of which shall have
given rise to any of the collateral) possession of which has been obtained by borrower, all to the extent the bank may
request. Any schedule, certificate or report shall be executed by a duly authorized officer of borrower and shall be
in the form and detail the bank may specify. Any schedule identifying any eligible account receivable subject to the
security interest under this agreement shall be accompanied (if the bank requests) by a true and correct copy of the
invoice evidencing the eligible account receivable and by evidence of shipment or performance.

    7. Agreements of borrower. Borrower (a) will, on request of the bank, execute financing statements and other
documents (and pay the cost of filing or recording them in all public offices deemed necessary by the bank) and do
any other acts and things, all as the bank may from time to time request to establish and maintain a valid security
interest in the collateral (free of all other liens, claims and rights of third parties) to secure the payment of the
liabilities; (b) will keep, at its address shown above, its records concerning the collateral, which records will be of
such character as will enable the bank or its designees to determine at any time the status of the collateral, and
borrower will not, unless the bank shall otherwise consent in writing, duplicate any records at any other address; (c)
will furnish the bank with any information concerning borrower, the collateral and the account debtors as the bank
may from time to time reasonably request; (d) will permit the bank and its designees, from time to time, to inspect,
audit and make copies of and extracts from all records and all other papers in the possession of borrower pertaining
to the collateral and the account debtors, and will, on request of the bank, deliver to the bank all the records and
papers; (e) will, on request of the bank, stamp on its records concerning the collateral a notation, in a form
satisfactory to the bank, of the security interest of the bank under this agreement; (f) will immediately deliver to the
bank, appropriately indorsed to the order of the bank, any note, trade acceptance, chattel paper or other instrument
or writing which shall be received by borrower and which may at any time evidence any obligation to borrower and
which may at any time evidence any obligation to borrower for payment for goods sold or leased or services
rendered; (g) will not sell, assign or create or permit to exist any lien on or security interest in any inventory of
borrower; and (h) will reimburse the bank for all expenses, including reasonable attorneys' fees and legal expenses,
incurred by the bank in seeking to collect or enforce any rights under the collateral and, in case of default, incurred
by the bank in seeking to collect each note and all other liabilities and to enforce rights under this agreement.

    8. Default. Whenever a default shall exist, each note and all other liabilities may (notwithstanding any
provisions of the note or other liabilities), at the option of the bank, and without demand or notice of any kind, be
declared, and shall immediately become, due and payable, and the bank may exercise from time to time any rights
and remedies available to it under applicable law. Any notification of intended disposition of any of the collateral
required by law shall be deemed reasonably and properly given if given at least         days before disposition. Any
proceeds of any disposition by the bank of any of the collateral may be applied by the bank to the payment of
expenses in connection with the collateral, including reasonable attorneys' fees and legal expenses, and any balance
of the proceeds may be applied by the bank toward the payment of any of the liabilities, and in the order of
application, the bank may from time to time elect.


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       9. General. The bank shall be deemed to have exercised reasonable care in the custody and preservation of any
   of the collateral in its possession if it takes such action for that purpose as borrower requests in writing, but failure
   of the bank to comply with any request shall not of itself be deemed a failure to exercise reasonable care. No failure
   of the bank to preserve or protect any rights with respect to the collateral against prior parties, or to do any act with
   respect to the preservation of the collateral not so requested by borrower, shall be deemed a failure to exercise
   reasonable care in the custody or preservation of the collateral.

       Any notice from the bank to borrower, if mailed, shall be deemed given when mailed, postage prepaid,
   addressed to borrower either at borrower's address shown above, or at any other address of borrower appearing on
   the records of the bank.

       No delay on the part of the bank in the exercise of any right or remedy shall operate as a waiver of the right or
   remedy, and no single or partial exercise by the bank of any right or remedy shall preclude other or further exercise
   of the right or remedy or the exercise of any other right or remedy.

       Either the bank or borrower may terminate this agreement at any time on written notice to the other of the
   termination; provided, however, that the termination shall in no way affect, and this agreement shall remain fully
   operative as to, any transactions entered into or rights granted or liabilities incurred prior to the receipt of the notice
   by the party to whom given. Prior to termination, this agreement shall be a continuing agreement in every respect.

       This agreement has been delivered at [city and state], and shall be governed by the laws of the State of          .
   Wherever possible each provision of this agreement shall be interpreted in such manner as to be effective and valid
   under applicable law, but if any provision of this agreement shall be prohibited by, or invalid under, applicable law,
   the provision shall be ineffective to the extent of the prohibition or invalidity without invalidating the remainder of
   the provision or the remaining provisions of this agreement.

          The rights and privileges of the bank under this agreement shall inure to the benefit of its successors and assigns.

          10. Special provisions. [If none, insert "None."].

                                                                                                                        [Borrower]
Attest:         , Secretary                                                                                By            , President

                                                                                                                        Bank
                                                                                                  By         , Vice-President




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