SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 2000
CORFACTS, INC.
(Exact name of Registrant as Specified in its Charter)
New Jersey 0-17394 22-2478379
(State of Incorporation) (Commission File) (IRS Employer
Identification No.)
3499 Highway 9 North, Suite 3B, Freehold, NJ 07728
(Address of principal executive offices)
(800) 696-7788
Registrant's Telephone Number
Item 5. Repurchase of Shares; Resignation of President
On October 17, 2000 Corfacts entered into a Change of Affiliation Agreement
with Lawrence Finkelstein. Mr. Finkelstein was a founder of Corfacts, and
had served as its Chairman. Pursuant to the Change of Affiliation Agreement,
Mr. Finkelstein has resigned from the Board of Directors and from his
position as Chairman. He has signed an Employment Agreement to serve as Vice
President of Marketing for Corfacts through October 31, 2001. Ariel Freud
has assumed the position of President and sole Director of Corfacts.
The Change of Affiliation Agreement provides for the sale of the 3,864,088
shares of Corfacts common stock owned by Mr. Finkelstein. Corfacts has
repurchased those shares for $1,000,000. Payment of $419,000 has been made
in cash. The remainder of the purchase price is represented by a Five Year
7% Subordinated Secured Note in the principal amount of $581,000. The Note
is secured by the assets of the Corporation, subordinate to bank debt, if
any.
Mr. Finkelstein has also surrendered the options for 400,000 Corfacts shares
which he held.
EXHIBITS
1. Change of Affiliation Agreement with Lawrence Finkelstein dated October
17, 2000.
2. Employment Agreement with Lawrence Finkelstein dated October 17, 2000.
3. Five Year 7% Subordinated Secured Note issued to Lawrence Finkelstein
dated October 17, 2000.
4. Security Agreement with Lawrence Finkelstein dated October 17, 2000.
SIGNATURES
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.
CORFACTS, INC.
Dated: October 23, 2000 By:/s/ Ariel Freud
Ariel Freud
Chief Executive Officer
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CHANGE OF AFFILIATION AGREEMENT EXHIBIT 1.
AGREEMENT made as of the 17th day of October, 2000 by and between CORFACTS,
INC., a New Jersey corporation with offices at 3499 Highway 9 North, Suite
3B, Freehold, NJ 07728 (the "Corporation"), and LAWRENCE FINKELSTEIN,
residing at 14 Washington Ave., Morganville, NJ, 07751 ("Finkelstein")
October 15, 2000.
WHEREAS, Finkelstein has been a principal shareholder, director, and executive
officer of the Corporation since it was founded; and
WHEREAS, the parties wish to change the relationship of Finkelstein to the
Corporation, on the terms and conditions set forth herein.
NOW, THEREFORE, it is agreed:
1. Officership and Directorship.
a. Finkelstein hereby resigns from his position as a member of the Board of
Directors and as an officer of the Corporation, effective immediately.
b. The Corporation shall on this date elect Finkelstein to serve as Vice
President of Marketing, and Finkelstein shall assume that office.
2. Employment Agreements.
a. The Employment Agreement between the Corporation and Finkelstein shall be
terminated, effective on November 1, 2000. Neither party shall, after
that date, have any executory rights or obligations thereunder. This
termination shall not, however, void any claims or liabilities that have
arisen thereunder or shall arise prior to November 1, 2000.
b. Upon the execution of this Agreement, the Corporation shall pay to
Finkelstein the sum of Eighty-One Thousand Dollars ($81,000). The
parties agree that the payment under this section shall satisfy all
accrued liabilities of the Corporation to Finkelstein, except for salary
due at the next regular pay date.
c. Simultaneous with the execution of this Agreement, the parties shall
execute the Employment Agreement in the form annexed hereto, which shall
become effective on November 1, 2000. Pursuant to the new Employment
Agreement, Finkelstein shall serve as Vice President of Marketing.
3. Sale of Shares.
a. Immediate upon the execution hereof, Finkelstein shall sell to the
Corporation three million, eight hundred sixty four thousand eighty eight
(3,864,088) shares of the Corporation's common stock. Promptly hereafter,
Finkelstein shall deliver to the Corporation certificates for the shares
or lost certificate affidavits. Finkelstein warrants that the shares are
being transferred to the Corporation free of liens, claims and
encumbrances.
b. The purchase price for the shares shall be One Million Dollars
($1,000,000) payable as follows:
i. Four Hundred Nineteen Thousand Dollars ($419,000) shall be paid within
one day after this date by wire transfer pursuant to instructions given
to the Corporation by Finkelstein.
ii. Five Hundred Eighty-One Thousand Dollars (581,000) shall be paid by
execution and delivery to Finkelstein of the Five Year 7% Subordinated
Secured Note and related Security Agreement in the form annexed
hereto.
4. Surrender of Options. Finkelstein hereby surrenders all options or
warrants for shares of the Corporation's capital stock which he now holds.
5. Further Assurances. Each party agrees that he or it will execute such
instruments and deliver such documents as the other party may reasonably
request in order to effectuate the intent of this Agreement.
6. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORFACTS, INC.
By: Ariel Freud, President
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EMPLOYMENT AGREEMENT EXHIBIT 2.
AGREEMENT made as of the 17th day of October, 2000 by and between CORFACTS,
INC., a New Jersey corporation with offices at 3499 Highway 9 North, Suite
3B, Freehold, NJ 07728 (the "Corporation"), and LAWRENCE FINKELSTEIN,
residing at 14 Washington Ave., Morganville, NJ 07751 ("Finkelstein")
October 15, 2000
WHEREAS, the Corporation has employed Finkelstein for many years in a number
of capacities, and the parties wish to modify the arrangements between them
such that Finkelstein will hereafter serve as Vice President of Marketing.
NOW, THEREFORE, it is agreed:
1. Title; Capacity.
(a) The Corporation hereby employs Finkelstein as Vice President of Marketing.
In such capacity, Finkelstein shall be responsible for supervising the
sales efforts of the Corporation's sales personnel, and those other
aspects of management of the Corporation's business as are assigned to
him by the Corporation's Board of Directors or President. Manager
shall carry out his responsibilities consistent with the Corporation's
policies as propounded from time-to-time by the Board of Directors of
the Corporation.
(b) Manager shall be subject to the supervision of the Corporation's Board
of Directors and the President of the Corporation. Manager shall report
to the President of the Corporation unless or until the Board of Directors
designates a different reporting relationship.
(c) Finkelstein agrees to devote all his business time, labor, skill,
attention and best ability to the performance of his duties under this
Agreement in a manner which will advance the business and interests of
the Corporation. Finkelstein agrees to abide by such reasonable rules,
regulations, personnel practices and policies of the Corporation, and
any changes therein, which may be reasonably adopted from time to time
by the Corporation and delivered in writing to Finkelstein.
2. Compensation.
(a) Salary. The Corporation shall pay Finkelstein a salary at the rate of
Eighty-Five Thousand Dollars ($85,000) per year, payable on such days
when the salaries of other Corporation employees are paid.
(b) Expense Allowance. The Corporation shall pay Finkelstein a non-accountable
expense allowance at the rate of Fifteen Thousand Dollars ($15,000) per
year. The expense allowance shall be paid in equal installments on such
days when the salaries of other Corporation employees are paid.
(c) Benefits. Finkelstein shall be entitled to receive such health, medical,
disability and life insurance benefits as are made available to managerial
employees of the Corporation.
3. Term.
(a) The "Term" of this Agreement and of Finkelstein's employment hereunder
shall commence on November 1, 2000 and shall terminate on October 31,
2001, unless earlier terminated pursuant to Sec. 3(b) hereunder.
(b) Prior to October 31, 2001, Finkelstein's employment hereunder may be
terminated as follows:
(i) by Finkelstein, at will;
(ii) by the Corporation for Cause;
(iii) by the Corporation, upon the death or disability of Finkelstein.
"Disability" shall mean Finkelstein's inability to perform
Finkelstein's normal Employment functions due to any medically
determinable physical or mental disability, which can last or has
lasted 12 months or is expected to result in death.
(c) As used herein, the term "Cause" shall mean only the following:
(i) conviction after the date hereof of a crime involving moral turpitude,
(ii) material, willful or gross misconduct by Finkelstein in the performance
of his duties hereunder; or (iii) the failure by Finkelstein to
perform or observe any substantial lawful obligation of such employment
that is not remedied within fifteen (15) days after the receipt of
written notice thereof from the Board of Directors (provided such
neglect or failure is unrelated to disability).
(d) Termination of Finkelstein's employment, when permitted hereunder, may be
effectuated by delivery of written notice to Finkelstein, stating the
grounds for termination. Such notice shall be effective upon receipt.
4. Covenant of Non-Competition. In consideration of the undertakings by the
Corporation herein, Finkelstein covenants for the benefit of the
Corporation and the shareholders thereof as follows:
(a) The "Restricted Period" for purposes of this Covenant shall commence on
the date hereof and shall continue for a period ending on the date which
is two years after the date on which Finkelstein ceases to be employed
by the Corporation.
(b) During the Restricted Period Finkelstein shall not, directly or indirectly,
as an employee, consultant or principal, through equity ownership or
otherwise, for himself or for any other person, engage in, or assist any
other person to engage in, any Competitive Activities. For purposes
hereof, "Competitive Activities" shall mean all telemarketing activities
as commonly carried on by the telemarketing industry.
5. Assignment. The Corporation and Finkelstein acknowledge that the relation-
ship established hereby is unique and personal and that neither the
Corporation nor Finkelstein may assign or delegate any of their respective
rights and/or obligations hereunder without the prior written consent of
the other party except as follows:
In the event of a future disposition of (or including) the properties and
business of the Corporation, substantially as an entirety, by merger,
consolidation, sale of assets, or otherwise, then the Corporation shall
be obligated to assign this Agreement and all of its rights and obligations
hereunder to the acquiring or surviving corporation, and such acquiring or
surviving corporation shall assume in writing all of the obligations of the
Corporation hereunder; provided, however, that the Corporation (in the
event and so long as it remains in business as an independent going enter-
prise) shall remain liable for the performance of its obligations hereunder
in the event of an unjustified failure of the acquiring corporation to
perform its obligations under this Agreement.
6. Indemnification. The Corporation shall indemnify Finkelstein to the
fullest extent authorized by the General Corporation Law of the State of
New Jersey against claims or liability arising from his service on behalf
of the Corporation, whether pursuant to this Agreement or pursuant to
previous arrangements between the Corporation and Finkelstein.
7. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision.
8. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORFACTS, INC.
By: Ariel Freud, President
Lawrence Finkelstein
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CORFACTS, INC. EXHIBIT 3.
FIVE YEAR 7% SUBORDINATED SECURED NOTE
Date of Issuance: October 17, 2000
$581,000
CORFACTS, INC., a New Jersey corporation, (hereinafter called the "Company"),
for value received, promises to pay to Lawrence Finkelstein or registered
assigns (the "Registered Holder" hereof) at the offices of the Company, the
principal amount of $581,000 in lawful money of the United States of America,
and to pay interest (computed on the basis of a 30-day month, 360-day year)
on the unpaid principal amount at said offices in like lawful money from the
date of the issuance hereof at a rate of 7% per annum, compounded monthly,
until the principal hereof is paid.
This Note is further subject to the following provisions.
1. Payment Dates. Payment shall be made in 60 monthly installments, each due
and payable on the seventeenth day of each month, commencing on November
17, 2000 (the "Payment Dates"). On the first twelve Payment Dates,
payment of interest only shall be due. The Company shall pay on each of
those dates the sum of $3,389.17. On each of the thirteenth Payment Date
through the sixtieth Payment Date, payment of principal and interest shall
be due. The Company shall pay on each of those dates the sum of
$13,912.77.
2. Prepayment. The Company may prepay this Note at any time without penalty
by paying to the Registered Holder all or part of the principal amount
hereof then outstanding. However, all payments shall be first be credited
against interest accrued to the date of payment and then credited against
principal.
3. Transfer; Exchange. The Registered Holder may transfer this Note upon
surrender of this Note at the principal office of the Company, and, in
such event, the Company shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denominations, of a like aggregate principal amount.
At the option of the Registered Holder, the Note(s) may be exchanged for other
Notes of any authorized denominations, of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at the principal office of the
Company. Whenever any Notes are so surrendered for exchange, the Company
shall execute and deliver the Notes which the Registered Holder is entitled
to receive.
All Notes issued upon any registration of transfer or exchange of Notes shall
be valid obligations of the Company, evidencing the same debt, and entitled
to the same benefits as the Notes surrendered upon such registration of
transfer or exchange.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company, duly executed by the Registered Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
any registration of transfer or exchange of Notes.
Prior to due presentment of a Note for registration of transfer, the Company,
the Note Registrar and any agent of the Company may treat the Person in whose
name such Note is registered as the owner of such Note for the purpose of
receiving payment of principal of (and premium, if any) and interest on such
Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Company nor any agent of the Company shall be
affected by notice to the contrary.
4. Security. Payment of all obligations of the Company under this note will
be secured by a pledge of collateral pursuant to a Security Agreement made on
this date.
5. Subordination of Notes.
5.1 Noted Subordinate to Senior Indebtedness. The Company covenants and
agrees, and the Registered Holder, by his acceptance hereof, likewise
covenants and agrees, that the payment of the principal of and interest
on the Note is hereby expressly made subordinate and junior, to the extent
and in the manner hereinafter set forth, in right of payment to the prior
payment in full of all principal of (and premium, if any) and interest on
all Senior Indebtedness whether now outstanding or hereafter incurred,
created or assumed.
"Senior Indebtedness" means the principal (and premium, if any) and
interest on, or substantially similar payments to be made by the Company
in respect of the following, whether outstanding at the date of execution
of this Note or thereafter incurred: (i) indebtedness of the Company for
money borrowed from banks or other similar financial institutions, and
(ii) obligations of the Company as lessee under any lease of property
which is reflected on the Company's balance sheet as a capitalized lease
in accordance with generally accepted accounting principles, but excluding
(1) any such indebtedness, obligation or liability referred to in clause
(i) or (ii) above as to which, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that
such indebtedness, obligation or liability is not superior in right of
payment to the Note, or ranks pari passu with the Note, and (2) any such
indebtedness, obligation or liability which is subordinated to indebtedness
of the Company to substantially the same extent as or to a greater extent
than the Note is subordinated.
5.2 Payment of Proceeds Upon Dissolution, etc., of the Company. In the event
of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings in connection
therewith, relative to the Company or to its creditors, as such, or to
its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, then the holders of Senior Indebtedness shall be
entitled to receive payment in full of all principal (and premium, if any)
and interest on all Senior Indebtedness before the Registered Holder of the
Note is entitled to receive any payment on account of principal (and
premium, if any) or interest upon the Note, and to that end (but subject to
the power of a court of competent jurisdiction to make other equitable
provision reflecting the rights conferred by the provisions of this Section
upon the Senior Indebtedness and the holders thereof with respect to the
Note and the Registered Holder thereof by a lawful plan of reorganization
under applicable bankruptcy law) the holders of Senior Indebtedness shall
be entitled to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash or property or
securities which may be payable or deliverable in any such proceedings in
respect of the Note.
In the event that, notwithstanding the foregoing, the Registered Holder of
the Note shall have received any payment or distribution of assets or
securities of the Company of any kind of character, whether in cash or in
property or securities (other than as aforesaid) before all Senior
Indebtedness is paid in full or payment thereof provided for, and if such
fact shall then have been made known to such Holder, then and in such event
such payment or distribution of assets or securities of the Company shall be
paid over or delivered forthwith to the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making payment or distribution of
assets or securities of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent payment
or distribution to or for the holders of Senior Indebtedness.
5.3 Subrogation to Rights of Holders of Senior Indebtedness. Subject to
the payment in full of all principal (and premium, if any) and interest
on all Senior Indebtedness, the Registered Holder of the Note shall be
subrogated (equally and ratably with the holders of all indebtedness of
the Company which, by its express terms, is not superior in right of
payment to the Note or is subordinated to indebtedness of the Company to
substantially the same extent as or to a greater extent than the Note is
subordinated and is entitled to like rights of subrogation) to the rights
of the holders of such Senior Indebtedness to receive payments or
distributions of assets or securities of the Company applicable to the
Senior Indebtedness until the Note shall be paid in full. For the purposes
of such subrogation, no payments or distributions in respect of the Senior
Indebtedness of assets or securities which otherwise would have been
payable or distributable to Holder of the Note shall, as between the
Company, its creditors other than the holders of Senior Indebtedness, and
the Registered Holder of the Note, be deemed to be a payment by the Company
to or on account of the Senior Indebtedness, and no payments or distri-
butions to the Registered Holder of the Note of assets or securities which
are applied to the satisfaction of Senior Indebtedness, by virtue of the
subordination herein provided for shall, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the Registered
Holder of Note, be deemed to be a payment by the Company to or on account
of the Note.
5.4 Reliance on Certificate of Liquidating Agent. Upon any payment or
distribution of assets of the Company referred to in this Section, the
Registered Holder of the Note shall be entitled to rely upon any order or
decree of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending and
upon a certificate of the trustee in bankruptcy, receiver, assignee for
the benefit of creditors or other person making such payment or
distribution, delivered to the Registered Holder of Note, for the purpose
of ascertaining the persons entitled to participate in such distribution,
the holders of Senior Indebtedness and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this
Section.
5.5 No Payment When Senior Indebtedness in Default. In the event and during
the continuation of any default in the payment of principal of (or
premium, if any) or interest on any Senior Indebtedness of the Company
beyond any applicable period of grace, or in the event that any event of
default with respect to any Senior Indebtedness shall have occurred and
be continuing permitting the holders of such Senior Indebtedness (or a
trustee on behalf of the holders thereof) to accelerate the maturity
thereof, unless and until such default or event of default shall have
been cured or waived or shall have ceased to exist, or (b) in the event
any judicial proceedings shall be pending with respect to any such default
or event of default, then no payment of principal (or premium, if any) or
interest shall be made by the Company on the Note.
5.6 Payment Permitted if No Default. Nothing contained in this Section or
elsewhere in this Note shall prevent (a) the Company, at any time except
during the pendency of any insolvency or bankruptcy proceeding or any
receivership, liquidation, reorganization or other similar proceedings,
or any dissolution or other winding up referred to in Section 5.2 or
under the other conditions described in Section 5.2 or the conditions
described in Section 5.5, from making payments at any time of principal
of (and premium, if any) or interest on the Note.
6. Remedies.
6.1 Events of Default. "Event of Default", wherever used in this Note, means
any one of the following events:
(a) default in the payment of the principal or interest of the Note(s) when
due; or
(b) default in the performance, or breach, of any covenant or warranty of the
Company in this Note (other than a covenant or warranty, a default in
whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for
a period of 60 days after there has been given to the Company by the
Registered Holder a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(c) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company (including obligations
under leases required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles but not including
any indebtedness or obligation for which recourse is limited to property
purchased) in an aggregate principal amount in excess of $100,000 or under
any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (including such leases but not including such
indebtedness or obligation for which recourse is limited to property
purchased) in an aggregate principal amount in excess of $100,000 by the
Company, whether such indebtedness now exists or shall hereafter be
created, which default shall have resulted in such indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise
have become due and payable or such obligations being accelerated, without
such acceleration having been rescinded or annulled within a period of 30
days after there shall have been given to the Company by the Registered
Holder a written notice specifying such default and requiring the Company
to cause such acceleration to be rescinded or annulled and stating that
such notice is a "Notice of Default" hereunder; or
(d) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company, under Federal bankruptcy
law, as now or hereafter constituted, or any other applicable Federal or
State bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, trustee, or other similar official of the Company or
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(e) the commencement by the Company of a voluntary case under Federal
bankruptcy law, as now or hereafter constituted, or any other applicable
Federal or State bankruptcy, insolvency, or other similar law, or the
consent by it to the institution or bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under Federal bankruptcy law or any other
applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Company or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
6.2 Acceleration of Maturity; Rescission and Annulment. If an Event of
Default occurs and is continuing, then and in every such case the
Registered Holder may declare the principal of the Note to be due and
payable immediately, by notice in writing to the Company and upon any
such declaration such principal shall become immediately due and payable.
6.3 Delay or Omission Not Waiver. No delay or omission of the Registered
Holder to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or any acquiescence therein. Every right and remedy given
by this Section or by law to the Registered Holder may be exercised from
time to time, and as often as may be deemed expedient.
7. Miscellaneous.
7.1 Notice to the Company. For purposes of this Note, notice of the events
contemplated herein to be given by the Registered Holder shall be deemed
given if sent in writing by a nationally-recognized overnight courier to
the Company at its principal office, unless otherwise designated by the
Company:
7.2 Notice to Registered Holder. When this Note provides for notice to the
Registered Holder of any event, such notice shall be sufficiently given
if in writing and mailed, first-class postage prepaid, to the Holder, at
such Holder's address as it appears in the Note Register, not later than
the latest date, and not earlier than the earliest date, prescribed for
the giving of such notice. In any case where notice to Holders is given
by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency
of such notice with respect to other Holders.
7.3 Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
under its seal.
CORFACTS, INC.
By:_______________
Ariel Freud
President
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SECURITY AGREEMENT EXHIBIT 4.
SECURITY AGREEMENT dated as of October 17, 2000, by and between CORFACTS,
INC., a New Jersey corporation (the "Company"), and LAWRENCE FINKELSTEIN
("Finkelstein").
- W I T N E S S E T H -
WHEREAS, the Company has given to Finkelstein a Five Year 7% Subordinated
Secured Note dated this date in the principal sum of $581,000 (the "Note"),
and has agreed to provide certain Collateral for such Note to Finkelstein and
any successors thereto (the "Note Holder"); and
WHEREAS, Finkelstein, intending to bind himself and any successors, has
agreed to accept such Collateral, all under the terms and conditions herein
set forth subject to amendment of such terms and conditions from time to time
as further herein provided to secure the due and punctual payment of (i) all
sums payable to Note Holder by the Company under the Note, (ii) all costs and
expenses incurred by Note Holder in connection with realization of such
security, (iii) all costs and expenses of any proceedings to which this
Security Agreement may give rise (collectively the "Obligations"), all under
the terms and conditions herein set forth subject to amendment of such terms
and conditions from time to time as further herein provided.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
SECTION 1. Definitions. The following terms shall have the meanings as set
forth in this Section except as otherwise indicated:
(a) "Account(s)" means all of the Company's existing and future-created or
future-acquired accounts, receivables, rights of any kind to receive
payment for property sold or leased or for services rendered, contract
rights, documents, bills, leases, rents, chattel paper, licenses, rights
to refunds or indemnification, notes, acceptances and other forms of
obligations, tax refunds, insurance proceeds and all proceeds of the
above including the right of stoppage in transit and all books, records,
computer programs, tapes, discs, software and guaranties with respect to
any of the above.
(b) "Equipment" means all of the Company's existing, future-created and
future-acquired equipment, machinery, trade fixtures, fixtures, tools,
appliances, office equipment, server equipment and peripherals, computer
software, furniture, motor vehicles and all proceeds and products of the
above as well as all related warranties, documents and insurance policies.
(c) "Equipment Leases(s)" means all existing leases of any Equipment or other
personal property presently or in the future entered into or acquired by
the Company together with all renewal or purchase options.
(d) "Event of Default" means any event of default listed in Section 6.
(e) "General Intangible(s)" means all of the Company's existing, future-
acquired and future-created trade secrets, proprietary information, know-
how, inventions, good-will, patents, applications for patents, renewals
and continuation of patents, reissues, trademarks, service marks, customer
lists, distribution records and distributor lists, sales materials and
records, purchasing materials and records, personnel records, sales order
files, copyrights, manufacturing processes, rights of payments from, or
performance of, obligations by any third party, software and computer
programs and source code data relating thereto (including all current and
historical data bases) all intangible property of any kind, all "general
intangibles" of any kind as defined in the New Jersey Uniform Commercial
Code, and all rights, agreements, records and documents relating to any of
the property described in this provision.
(f) "Instrument" means all of the Company's existing, future-created and
future-acquired "instruments" as that term is defined in the New Jersey
Uniform Commercial Code.
(g) "Inventory" means all of the Company's existing, future-created and
future-acquired goods of every nature, kind and description, wherever
located including all livestock, raw materials, goods, work in process,
finished goods, materials and supplies of any kind used, or to be used
in the business of the Company, including all proceeds and products of
the above.
(h) "Permitted Encumbrance" means (i) a purchase money security interest
granted by the Company to the Seller of a piece of Equipment or Inventory
purchased after the date hereof; provided however, that such security
interest shall apply only to the particular piece or pieces of Equipment
or Inventory so purchased, and not to any other assets of the Company.
(i) "Pledged Collateral" means the collateral as so defined in Section 2.
(j) "Real Property" means all of the Company's interest (whether by fee or
leasehold) in existing and future-acquired real estate and buildings, in
leases thereon, and in leasehold improvements.
(k) "Farm Products" means all of the Company's existing, future-produced or
future acquired "farm products" as that term is defined in the New Jersey
Uniform Commercial Code.
SECTION 2. Pledge. As collateral security for the Obligations, the Company
hereby grants to the Note Holder a security interest in, and does hereby
assign to the Note Holder all right, title and interest of Company in and to
all of the following described property, whether now owned or hereafter
acquired:
(i) Accounts, Inventory, General Intangibles, Chattel Paper, Documents,
Instruments, Equipment, Fixtures and Farm Products;
(ii) Equipment Leases;
(iii) Real Property and Real Property leases;
(iv) proceeds and products of, and substitutions for, the foregoing;
(v) insurance policies and proceeds relating to the foregoing
(collectively the "Pledged Collateral").
All property comprising part of the Pledged Collateral shall be accompanied
by proper instruments of assignment duly executed by the Company and by such
other instruments or documents as the Note Holder or its counsel may from
time to time reasonably request.
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights, titles,
interests, powers, privileges and preferences pertaining or incidental thereto,
unto the Note Holder and to its assigns, forever; subject, however, to the
terms, covenants and conditions hereinafter set forth.
SECTION 3. Obligations Secured. This Security Agreement is made, and the
security interest created hereby is granted to the Note Holder, to secure the
Obligations.
SECTION 4. Representations and Warranties. The Company hereby represents and
warrants that, except for the security interest granted hereunder to the Note
Holder, the Company is the legal and equitable owner of the Pledged Collateral,
holds good and marketable title to all Accounts, Inventory, Equipment,
Equipment Leases, Real Property and Real Property Leases, Instruments,
General Intangibles, Chattel Paper, Documents, Furniture, Fixtures, Money and
Farm Products now owned by the Company, and the same are free and clear of all
liens, charges, encumbrances and security interests of every kind and nature
and (except for Permitted Encumbrances); that the Company has good right and
legal authority to pledge the Pledged Collateral in the manner hereby done or
contemplated and will defend its title thereto against the claims of all
persons whomsoever and that the consents or approvals of any governmental
body, regulatory authority or securities exchange which were or are necessary
for the validity of such pledge have been obtained; that the pledge of the
Pledged Collateral is effective to vest in Note Holder the rights of the
Company in the Pledged Collateral as set forth herein; that the Company is a
duly organized and validly existing corporation that is in good standing under
the laws of the State of New Jersey; that the execution, delivery and
performance of this Agreement have been duly authorized and approved by the
Board of Directors of the Company and no other corporate proceedings on the
part of the Company are necessary to authorize and approve this Agreement;
and that this Agreement constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or the principles governing the availability of equitable remedies.
SECTION 5. Remedies upon Default. If an Event of Default shall have occurred
and be continuing, Note Holder may take any one or more of the following
actions, no one of which shall be deemed the Note Holder's exclusive remedy:
(a) Acceleration. declare any Obligations, immediately due and payable, on
notice to the Company;
(b) Repossession. proceed with judicial process, or with the Company's
consent, to take possession of all or any part of the Pledged Collateral
and the Company agrees immediately upon receipt of notice from Note
Holder to do everything requested by such persons to assemble, assign,
transfer or deliver all Pledged Collateral to Note Holder and to provide
Note Holder immediate access to the Company's principal place of business
and to every other place where any Pledged Collateral or any records of
the Company may be stored or where the Company may conduct any business;
(c) Sell Collateral. sell, assign, lease, transfer and deliver all, or any
part, of any Pledged Collateral at a private sale or public auction for
cash, upon credit or otherwise at such prices and upon such terms as Note
Holder may deem advisable and any requirement of reasonable notice to the
Company shall be met if notice is mailed, postage prepaid, to the Company
at the address set forth in Section 13 hereof at least five (5) days prior
to the sale or other disposition and Note Holder may be the purchaser at
any public sale of any Pledged Collateral free of any right of redemption,
which right the Company hereby waives, and the Company further waives any
claim that any sale made in compliance with the notice provisions of this
Sec. 5(c) as commercially unreasonable;
(d) Collateral Proceeds. apply the proceeds of any sale, collection or other
disposition of any Pledged Collateral first to all costs and expenses of
sale or collection, including but not limited to any attorneys' fees and
disbursements at trial or on any appeal and, then, to payment of any
other Obligation in whatever order the Note Holder may, in his discretion,
elect;
(e) Direct Recourse. institute suit directly against the Company to collect
any Obligations without first foreclosing on or liquidating any Pledged
Collateral;
(f) Deficiency. hold the Company liable for any deficiency that may remain
after the sale of any Pledged Collateral;
(g) Appointment of Receiver. without regard to: (i) the adequacy of the
security for the obligations by virtue of this Security Agreement or
(ii) the solvency of the Company, seek the appointment of a receiver or
recivers to take possession of any or all of the Pledged Collateral, with
the power to preserve, protect, and operate the Pledged Collateral
preceding foreclosure or sale and apply the proceeds, over and above the
cost of the receivership, against the Obligations. The receiver or
receivers may serve without bond if permitted by law;
(h) Other Creditor Remedies. exercise any right or remedy available to a
secured party under the Uniform Commercial Code or under any other
applicable law of any jurisdiction.
For purposes hereof, a written agreement to purchase all or any part of the
Pledged Collateral shall be treated as a sale pursuant to such agreement, and
the Company shall not be entitled to the return of any Pledged Collateral
subject thereto, notwithstanding the fact that after the Note Holder shall
have entered into such an agreement all Events of Default may have been
remedied or the Obligations may have been paid or performed in full. Any
sale pursuant to this Section 5 shall conform to commercially reasonable
standards as provided in Section 9-504(3) of the Uniform Commercial Code as
in effect in the State of New Jersey.
SECTION 6. Events of Default. For purposes of this Security Agreement, an
"Event of Default" shall exist hereunder upon the happening of any of the
following events:
(a) an "Event of Default" as defined in Section 6 of the Note;
(b) all or any part of the Pledged Collateral shall be attached or levied
upon or seized in any legal proceedings or held by virtue of any lien or
distress;
(c) the Company shall fail to pay promptly all taxes and assessments upon any
of the Pledged Collateral; or
(d) the Company shall fail to comply with any other provision of this
Security Agreement.
It is understood and agreed that the occurrence of an event set forth in this
Section 6 shall constitute an Event of Default only if the Company fails to
cure such default within ten (10) days after notice of such default (the
"Default Notice) which may be given at any time after the occurrence of such
default (provided, however, that such 10-day waiting period shall be
shortened to three (3) days after there shall have occurred two defaults,
cumulatively under this Security Agreement, which are in each instance cured
in a manner acceptable to the Note Holder.) A default as described in
subsections (b) and (c) shall be deemed cured upon the posting by the Company
of a bond in the full amount of the claim.
SECTION 7. Reimbursement. The Company agrees (a) to indemnify and hold
harmless Note Holder (to the full extent permitted by law) from and against
any and all claims, demands, losses, judgments and liabilities (including
liabilities for penalties) of whatsoever nature growing out of or resulting
from the Pledged Collateral, and (b) to reimburse Note Holder for all costs
and expenses, including, but not limited to, reasonable legal fees and
disbursements at trial and on any appeal growing out of or resulting from any
Pledged Collateral, this Security Agreement or the administration and
enforcement or exercise of any right or remedy granted to Note Holder
hereunder.
If the Company shall fail to do any act or thing which it has covenanted to
do hereunder or any representation or warranty of the Company shall be
breached, in either case following any applicable notice required hereunder,
Note Holder may (but shall not be obligated to) do the same or cause it to
be done or remedy any such breach and there shall be added to the Obligations
of the Company hereunder the cost or expense incurred by Note Holder in so
doing, and any and all amounts expended by Note Holder in taking any such
action shall be repayable to it upon its demand therefor to the Company and
shall bear interest at the highest applicable legal rate from the date
advanced to the date of repayment.
All indemnities contained in this Section 7 shall survive the termination of
this Security Agreement.
SECTION 8. Return of Excess Proceeds of Sale and Cash. Any amounts remaining
from proceeds of sale of Collateral after application of proceeds to
Obligations under Section 5(d) shall be promptly remitted to the Company,
its successors and assigns, or as otherwise provided by law. Application of
any proceeds in accordance with the above provisions shall be deemed to have
been made at such time as cash is received.
SECTION 9. Duty To Preserve the Pledged Collateral. The Company shall use
reasonable care in the custody and preservation of the Pledged Collateral in
its possession or control including maintaining the Pledged Collateral in good
condition and repair and preserving it against loss, damage, contamination,
pollution, depreciation and spoilage in value, other than by normal wear and
tear, and defending against all claims and demands of any person claiming
title to, a lien against or security interest or other interest adverse to
Note Holder in any Pledged Collateral.
SECTION 10. Further Assurances. The Company agrees to join with Note Holder
in executing, and to file or record, such notices, financing statements or
other documents as may be necessary to the perfection of the security interests
of Note Holder hereunder, and as Note Holder or its counsel may reasonably
request, such instruments to be in form and substance satisfactory to Note
Holder and their counsel. The Company agrees to do such further acts and
things and to execute and deliver to Note Holder such additional conveyances,
assignments, agreements and instruments as Note Holder may at any time
reasonably request in connection with the administration and enforcement of
this Security Agreement or relative to the Pledged Collateral or any part
thereof or in order to assure and confirm unto Note Holder the rights, powers
and remedies hereunder.
SECTION 11. No Waiver. No failure on the part of Note Holder to exercise,
and no delay on its part in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof or of the exercise of any other right,
power or remedy. All remedies hereunder are cumulative and are not exclusive
of any other remedies provided by law.
SECTION 12. Governing Law. This Security Agreement has been executed and
delivered in the State of New Jersey and shall in all respects be construed
in accordance with and governed by the laws of such State, without giving
effect to its conflict of laws rules.
SECTION 13. Notices All notices or other communications required or
permitted hereunder shall be given in writing and shall be delivered by hand
or by overnight delivery or courier service from which a bona fide delivery
receipt can be obtained, as follows: (a) if to Note Holder, to the last
address for same on the records of the Company, (b) if to the Company, to the
address of its principal executive offices, or such other address as shall be
furnished in writing by such party, and any such notice or communication
shall be effective and be deemed to have been given as of the date so
delivered or three days after having been mailed; provided, however, that
any notice or communication changing any of the addresses set forth above
shall be effective and deemed given only upon its receipt.
SECTION 14. Binding Agreement; Assignment. This Security Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to
the benefit of Note Holder and its successors and assigns, and to the Company
and its successors and assigns. No notice to or demand on the Company shall
entitle the Company to any other or further notice or demand in the same,
similar or other circumstances. The parties hereto agree that the Note
Holder may, at any time, assign its interest in this Security Agreement, and
the terms, conditions and covenants thereof, to any other person, firm or
corporation to whom, simultaneously therewith, it assigns its interest in the
Note, without notice to or consent of Company, and such Note Holder shall
thereafter be relieved and discharged from any liability hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be executed as of the day and year first above written.
CORFACTS, INC.
By: By:
Ariel Freud, President Lawrence Finkelstein
