ACCOUNT TRANSFER AND PURCHASE AGREEMENT
This Account Transfer Agreement (this "Agreement") is dated this 22nd day of
September, 1997, and is between KBK Financial, Inc., a Delaware corporation
authorized to do business in Texas and doing business as HER/KBK Acceptance
Corporation ("KBK"), H.E.R.C. PRODUCTS INCORPORATED, a Delaware corporation, and
H.E.R.C. CONSUMER PRODUCTS, INC., an Arizona corporation (collectively referred
to herein as "Seller"). This Agreement shall become effective as of the day it
is accepted in the State of Texas by KBK as indicated at the end hereof by the
date and signature on behalf of KBK.
WHEREAS, KBK is in the business of purchasing accounts receivable
("accounts"); and
WHEREAS, Seller desires, from time to time during the term of this
Agreement, to sell accounts to KBK; and
WHEREAS, the parties hereto desire to enter into this Agreement to
govern the purchase and sale of accounts;
NOW THEREFORE, in consideration of the premises, the mutual agreements
herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
agree as follows:
1. Offer of Accounts. At its election from time to time during the term of
this Agreement, Seller agrees to offer for sale to KBK certain of its
accounts arising out of sales of goods, or services rendered, by
Seller, and to sell to KBK on the terms set forth in this Agreement
such of the offered accounts as KBK may accept for purchase in the
State of Texas. KBK shall have the absolute right in its sole
discretion to reject any or all offered accounts, whether or not KBK
has previously purchased accounts of any particular account debtor
hereunder. The parties agree that, without the prior consent of KBK,
the maximum Gross Amount (as defined below) of accounts that KBK may
purchase hereunder at any time, together with the Gross Amount of
accounts previously purchased by KBK from Seller hereunder which then
remain outstanding, will not exceed Six Hundred Thousand and No/100
Dollars ($600,000.00) (the "Facility Amount"). KBK's consent to
purchase accounts in excess of such amount may be evidenced by KBK's
acceptance for purchase of such offered accounts.
2. Purchase and Sale of Accounts. Each account purchase by KBK hereunder
shall be purchased by KBK without recourse against Seller. All losses
incurred by KBK from the financial inability of the applicable account
debtor to pay such account over and above any and all Residual Payments
(as hereinafter defined) and Reserve (as hereinafter defined) amounts
offset shall be borne solely by KBK; provided, however, that nothing in
this Agreement shall be construed to relieve Seller from liability for
any breach by Seller of any representation, warranty, or agreement of
Seller contained herein. Notwithstanding any provision in this
Agreement to the contrary, it is contemplated by and the intention of
the parties hereto that accounts of Seller may be considered and
purchased as one account (herein a "batch") and the terms "account" and
"accounts" as used herein may also refer to and mean a "batch" or
"batches," as the case may be.
In connection with each offer of accounts to KBK, Seller agrees to
deliver to KBK a written assignment of such accounts, together with a
copy of all invoices relating to such accounts, and evidence of
delivery of the related goods or performance of the related services
(and, if requested, the original purchase orders from the applicable
customers), all in a form reasonably satisfactory to KBK. In order for
an account to be eligible for purchase by KBK, the related invoice must
set forth, as the sole address for payment, the following post office
box: X.X. Xxx 00000, Xxxxxxx, Xxxxxxx 00000-0000 ("Authorized
Remittance Address") (or, upon notice from KBK, another post office box
of KBK) and, in the case of payments to be effected by wire transfer or
other electronic means, the related invoice must set forth, as the sole
bank account for such payment, a bank account of KBK (or a third party
designated by KBK) designated by KBK from time to time (except in each
case as otherwise agreed in writing by KBK). KBK's acceptance for
purchase of offered accounts shall be evidenced by KBK's tendering of
the Initial Payment (as hereinafter defined) to Seller or otherwise
delivering to Seller a schedule of accounts accepted for purchase by
KBK. Seller's transference of offered accounts shall not be effective
as to any accounts not accepted for purchase by KBK.
Seller hereby sells, transfers, assigns and otherwise conveys to KBK
(as a sale by Seller and a purchase by KBK, and not as security for any
indebtedness or other obligation of Seller to KBK) all right, title and
interest of Seller in and to all accounts accepted by KBK for purchase
hereunder, together with all related rights (but not obligations) of
Seller with respect thereto, including all contract rights, guarantees,
letters of credit, liens in favor of Seller, insurance and other
agreements and arrangements of whatever character from time to time
supporting or securing payment of such accounts and all right, title
and interest of Seller in any related goods, including Seller's rights
and remedies under Article 2, Part 7 of the applicable Uniform
Commercial Code ("UCC"). The foregoing sale, transfer, assignment and
conveyance does not constitute and is not intended to result in an
assumption by KBK of any obligation of Seller or any other person in
connection with the accounts or related rights or under any agreement
or instrument relating thereto. Seller agrees to execute and deliver
such bills of sale, assignments, letters of credit, notices of
assignment, financing statements (including continuation statements)
under the applicable UCC and other documents, and make such entries and
markings in its books and records, and to take all such other actions
(including the negotiation, assignment or transfer of negotiable
documents, letters of credit or other instruments) as KBK may request
to further evidence or protect the sales and assignments of accounts
and related rights to KBK hereunder, as well as KBK's interest in any
returned goods referred to in Section 7 hereof.
3. Terms of Accounts. Except as otherwise may be agreed to in writing by
KBK from time to time, the terms of sale offered by Seller to its
account debtors with respect to all accounts offered to KBK for
purchase hereunder shall be NET 30 DAYS. After an account has been
purchased by KBK, Seller shall not have the right to vary the terms of
sale set forth in the invoice relating to such account, or any other
aspect of the account, except in Seller's capacity as agent for KBK for
purposes of collection of accounts purchased by KBK as set forth in
Section 8 hereof, and then only with the prior written consent of KBK.
4. Purchase Price. The purchase price for each account purchased hereunder
shall consist of and be paid by the Initial Payment and the Residual
Payment. The Initial Payment shall be payable by KBK to Seller on the
business day that KBK accepts for purchase the related account, and the
Residual Payment shall be payable by KBK to Seller within five business
days after KBK receives and deposits the proceeds of collection for the
subject account in an amount equal to the Net Amount (as hereinafter
defined) of such account (subject to KBK's right to withhold payment of
Residual Payments hereunder, and subject to KBK's right to withhold,
offset, and charge each as described below).
"Initial Payment" means Eighty percent (80%) of the Gross Amount of an
account. "Gross Amount" of an
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account means the gross face Amount payable pursuant to the related
invoice. "Net Amount" of an account means the Gross Amount of such
account, less all discounts, deductions and allowances. "Residual
Payment" with respect to an account means the aggregate amount
collected with respect to such account, less the sum of (i) the Initial
Payment with respect to such account, (ii) the KBK Discounts (as
hereinafter defined), (iii) any and all attorneys' fees and other costs
of collection.
5. Fixed and Variable Discounts. "Fixed Discount" means a discount of One
percent (1.0%) of the Gross Amount of such account. "Variable Discount"
means a discount computed on the Initial Payment and accruing on the
basis of actual days elapsed from the date of Initial Payment until and
including five business days after KBK receives and deposits the
proceeds of collection of such account at a per annum rate equal to
KBK's Base Rate (as hereinafter defined) in effect on the date of
purchase of such account plus Two percent (2.0%) per annum; provided
however, in no event shall the Variable Discount with respect to any
account purchased hereunder be less than seven percent (7.0%) per
annum. "Base Rate" means that per annum variable rate (expressed as a
per annum percentage based on a year consisting of 360 days) determined
from time to time by KBK without notice to Seller as KBK's Base Rate
for purposes of calculating variable discounts under KBK's account
transfer agreements. The Fixed Discount and the Variable Discount shall
be collectively referred to herein as the "KBK Discounts." The KBK
Discounts may be subject to one or more adjustments during the term of
this Agreement if a Performance Based Pricing Addendum is attached
hereto. If a Performance Based Pricing Addendum is attached hereto, it
is then made a part hereof as though fully written herein.
6. Reserve. In the event that KBK believes Seller has breached any
material representation, warranty, covenant or agreement contained
herein (including, without limitation, in the event an account
purchased by KBK becomes a Disputed Account as hereinafter defined),
any account is not paid in full within 90 days from the date of
purchase of such account, or KBK deems itself insecure hereunder, KBK
may at its election, withhold and accumulate the payment of the
Residual Payments ("Reserve") with respect to any or all accounts
purchased hereunder to the extent necessary to maintain a Reserve in an
amount up to the sum of (a) the total Initial Payments made by KBK with
respect to accounts purchased by KBK hereunder which remain
uncollected, plus (b) the total of the KBK Discounts with respect to
such accounts and (c) such other amounts which may become due by Seller
to KBK hereunder or under any other agreement. Seller hereby authorizes
KBK to offset and charge any and all amounts for which Seller or the
Reserve may be obligated to pay to KBK pursuant to the terms of this
Agreement against the Reserve, and at KBK's election, against any funds
of Seller in the possession or control of KBK, from whatever source.
However, if, on any business day that KBK regularly makes a payment to
Seller for accounts purchased, none of the foregoing conditions exists
and no other breach of this Agreement by Seller exists, then KBK shall
distribute to Seller the Residual Payments then due and all funds it
then has on hand that it has collected from accounts that KBK has not
then purchased.
7. Certain Security. For the purpose of securing KBK (a) in the payment of
any and all sums of money that may become due and owing KBK from Seller
by reason of this Agreement, and (b) in the performance by Seller of
Seller's obligations hereunder, Seller hereby grants to KBK a security
interest in (i) all of Seller's present and future inventory, accounts,
account and contract rights, contracts, drafts, acceptances, documents,
instruments, chattel paper, deposit accounts, general intangibles and
all products and proceeds therefrom, including all returned or
repossessed goods, as well as all books and records pertaining to all
of the foregoing, (ii) all amounts due as Residual Payments or withheld
by KBK as the Reserve pursuant to Section 6 hereof and (iii) all money
and other funds of Seller now or hereafter in the possession, custody,
or control of KBK, from whatever source. Seller agrees to execute and
deliver such financing statements under the applicable UCC and other
documents, and make such entries and markings in its books and records
and to take all such other actions, as KBK may request to further
evidence, perfect, preserve or protect the security interest granted to
KBK hereunder. KBK shall have all rights and remedies in respect of the
lien and security interest herein granted to KBK hereunder. KBK shall
have all rights and remedies in respect of the lien and security
interest herein granted as are provided in this Agreement, the UCC and
other applicable law, including the right at any time, before or after
any default by Seller of any of its obligations hereunder, to notify
account debtors and obligors on instruments to make payment to KBK (or
its designee) and to take control of proceeds to which KBK is entitled,
and to apply proceeds to (in addition to other obligations of Seller to
KBK) the reasonable attorneys' fees and legal expenses incurred by KBK
in connection with the disposing of collateral or the other exercise of
rights and remedies by KBK.
In the event a security interest has heretofore been granted
and given to KBK by Seller in a prior agreement(s) or document(s) to
secure certain obligations, then, in such event, and notwithstanding
anything in this Agreement to the contrary, including Section 23
hereof, the lien and security interest herein granted and given to KBK
is in renewal and extension, and not in extinguishment of, all such
prior liens and security interests and are valid and subsisting liens
and security interests to secure all prior, existing, and new
obligations of Seller to KBK hereunder and under any such prior
agreements, which obligations are likewise herein renewed and extended,
in any manner, including any action required in connection with or by
virtue of the United States Bankruptcy Code (the "Bankruptcy Code").
8. Servicing. KBK hereby appoints Seller as servicing agent for KBK
("Servicer") for the purpose of expediting the payment of accounts
purchased by KBK hereunder which become past due. Servicer agrees to
maintain an active, on-going and regular dialogue with each Account
Debtor. Servicer further agrees to utilize all powers, influences and
rights and take every action within its control in accordance with its
customary practices and applicable law to expedite the collection of
the accounts purchased by KBK which become past due and direct such
payments in specie exclusively to the Authorized Remittance Address.
Seller will furnish to KBK, upon request, any and all papers,
documents, and records in its possession or control related to accounts
purchased by KBK hereunder, or related to Seller's business
relationship with the respective account debtors, and agrees to
cooperate fully with KBK in all matters related to collection of
accounts purchased by KBK hereunder. KBK reserves the right to
terminate such servicing relationship at any time with or without cause
and without notice to Servicer.
Seller authorizes KBK to forward directly to account debtors statements
or invoices on accounts purchased by KBK hereunder, and to request
payment at such address or to such bank account as may be designated by
KBK. Seller agrees that, if any payment is made to Seller on any
account purchased by KBK from Seller hereunder, Seller (i) will hold
such payment in trust for KBK, (ii) will not commingle such payment
with any funds of Seller, and (iii) will deliver such payment to KBK,
in the exact form received, by the close of business on the next
business day following receipt thereof by Seller. If any goods relating
to an account purchased by KBK hereunder shall be returned to or
repossessed by Seller, Seller shall give prompt notice thereof to KBK
and shall hold such goods in trust for KBK, separate and apart from
Seller's own property, and such goods shall be owned solely by KBK and
be subject to KBK's direction and control. Seller shall properly store
and protect such goods and agrees to cooperate fully with KBK in any
subsequent disposition thereof for the benefit of KBK.
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Seller authorizes to collect, xxx for and give releases for in the name
of Seller or KBK in KBK's sole discretion, all amounts due on accounts
sold to KBK hereunder. Seller specifically authorizes KBK to endorse,
in the name of Seller, all checks, drafts, trade acceptances or other
forms of payment tendered by account debtors in payment of accounts
sold to KBK hereunder and made payable to Seller. KBK shall have no
liability to Seller for any mistake in the application of any payment
received with respect to any account, IT BEING THE SPECIFIC INTENT OF
THE PARTIES HERETO THAT KBK SHALL HAVE NO LIABILITY HEREUNDER FOR ITS
OWN NEGLIGENCE except for its own gross negligence or willful
misconduct. Seller hereby waves notice of nonpayment of any account
sold to KBK hereunder, as well as any and all other notices with
respect to such accounts, demands or presentations for payment, and
agrees that KBK may extend or renew from time to time the payment of,
or vary or reduce the amount payable under or compromise any of the
terms of, any account purchased by KBK, in each case without notice to
or the consent of Seller. Seller further authorizes KBK (or its
designee) to open and remove the contents of any post office box of
Seller of KBK (or its designee) which KBK believes contains mail
relating to accounts, and in connection therewith or otherwise, to
receive, open and dispose of mail addressed to Seller which KBK
believes may relate to accounts, and in order to further assure receipt
by KBK (or its designee) of mail relating to such accounts, to notify
other parties including customers and postal authorities to change the
address for delivery of such mail addressed to Seller to such address
as KBK may designate. KBK agrees to use reasonable measures to preserve
the contents of any such mail which does not relate to accounts
purchased hereunder and to deliver same to Seller (or, at the election
of KBK, to notify Seller of the address where Seller may take
possession of such contents; provided, if Seller does not take
possession o f such contents within 30 days after notice from KBK to
take possession thereof, KBK may dispose of such contents without any
liability to Seller). Seller hereby irrevocably appoints KBK (and any
employee, agent or other person designated by KBK, any of whom may act
without joinder of the others) as Seller's attorneys-in-fact and
agents, in Seller's name, place and stead, to take all actions, execute
and deliver all notices, negotiate such instruments and other
documents, as may be necessary or advisable to permit KBK (or its
designee) to take any and all of the actions described in this
paragraph or to carry out the purpose and intent thereof, as fully and
for all intents and purposes as Seller could itself do, and hereby
ratifies and confirms all that said attorneys-in-fact and agents may
door cause to be done by virtue hereof. This power of attorney is
irrevocable and deemed coupled with an interest.
9. Representations and Warranties of Seller. Seller hereby represents
and warrants to KBK with respect to each account offered by Seller to
KBK hereunder that (i) Seller is the sole owner of such account, which
account is free and clear of any liens (other than the lien granted by
Seller to InterEquity Capital Partners, L.P. which is subordinate to
KBK's lien), claims, or encumbrances whatsoever, and upon each purchase
by KBK of such account, KBK will own such account free and clear of any
liens, claims, or encumbrances whatsoever and the consideration
received by Seller from KBK, for such account is fair and adequate,
(ii) Seller is the sole obligee under such account, and has full power
and is duly authorized to sell, assign, and transfer such account to
KBK hereunder, and the date of sale of such account is not more than 30
days after the date of the original invoice relating to such account,
(iii) Seller has no knowledge of any fact which would lead it to expect
that, at the date of sale of such account to KBK, such account will not
be paid in the full stated amount when due, (iv) such account arises
out of a bona fide sale of conforming goods or the bona fide rendition
of services by Seller, and all underlying goods have been delivered to
the account debtor, or all underlying services have been rendered by
Seller, in complete fulfillment of all of the terms and conditions of a
fully executed, delivered, and unexpired contract with the account
debtor, and the account debtor has accepted the goods or services to
which the account relates, (v) such account is denominated and payable
only in United Sates dollars and constitutes the legal, valid and
binding payment obligation of the account debtor, enforceable in
accordance with its terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting the enforcement of creditors' rights
generally), (vi) such account is current and not past due as of the
date of purchase by KBK, (vii) such account has not been paid by or on
behalf of the account debtor in whole or in part, and is not and will
not be subject to any dispute, decision, set-off, recoupment, defense
or claim by the account debtor, whether relating to price, quality,
quantity, workmanship, delay in delivery, set off, counterclaim or
otherwise, and the account debtor has not and will not claim any
defense of any kind or character (other than bankruptcy or insolvency
arising after the date of sale of such account to KBK hereunder)
against payment of such account, and (viii) as of the date of purchase
by KBK of such account, the account debtor with respect to such account
is located (within the meaning of Section 9-103 of the applicable UCC)
and has its principal executive offices within the United States.
Seller further represents and warrants to KBK that (a) the execution,
delivery and performance of this Agreement by Seller have been duly
authorized and this Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally), (b)
Seller is not a debtor in any bankruptcy proceedings, insolvent,
undergoing composition or adjustment of debts or unable to make payment
of its obligations when due and no petition in bankruptcy has been
filed by or against Seller, nor has Seller or any Affiliate filed any
petition seeking an adjustment of its debts or for any other relief
under the Bankruptcy Code, and no application for appointment of a
receiver or trustee for all or a substantial part of the property of
Seller is pending, nor has Seller made any assignment for the benefit
of creditors, (c) Seller is not in default of any debt or obligation to
KBK, any other lender or other creditor, and (d) Seller's principal
place of business, chief executive office, the location where all
records concerning its books of account and contract rights are kept,
and (except any additional locations listed on Schedule A attached
hereto) the sole location of any property subject to the security
interest granted herein is its "Address for Notices" set forth on the
signature page hereon. Seller agrees not to change the location of its
principal place of business or chief executive office, the location
where its records concerning its books of account or contract rights
are kept, or the location of any property subject to the security
interest granted herein, without giving at least 15 days advance
written notice thereof to KBK pursuant to Section 20 herein. Seller
does business under no trade or assumed names except as may be listed
on Schedule A attached hereto.
Each representation and warranty of Seller contained in this Agreement
shall be deemed to be made at and as of the date hereof and at and as
of the date of each sale of accounts to KBK hereunder.
Seller agrees to indemnify and hold all Indemnified Persons (as
hereinafter defined) harmless against any breach by Seller of any
representation, warranty, or agreement of Seller contained in this
Agreement, and against any claims or damages arising out of the
manufacture, sale, possession or use of, or otherwise relating to,
goods, or the performance of services, associated with or relating to
accounts or related rights purchased (or with respect to which a
security interest is granted) hereunder. The term "Indemnified Persons"
shall mean KBK and its officers, directors, shareholders, employees,
attorneys, representatives, agents, Affiliates, successors and assigns.
Seller agrees to notify KBK immediately of any breach by Seller of any
representation, warranty or agreement of Seller contained herein or
should any representation, warranty or agreement made herein become
untrue or false at any time. Seller further agrees to notify KBK
immediately of the assertion by any account debtor of any dispute or
other claim (including any defense or offset asserted by any account
debtor) with respect to any
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account sold to KBK hereunder, or with respect to any related goods or
services ("Disputed Accounts"). Upon KBK's request, Seller agrees to
settle, at its own expense and for the benefit of KBK, all such
Disputed Accounts; provided that any such settlement shall be made only
with the prior written consent of KBK. Unless KBK is advised in writing
by Seller to the contrary, any account that has not been approved by
the account debtor within seventy-five (75) days from the date of the
invoice upon which the account is based, shall be deemed to be a
Disputed Account. As to any Disputed Account, KBK shall have the right,
in its sole discretion, (i) to settle at the expense of Seller
(including all attorneys' fees and expenses of KBK) and for the benefit
of KBK any such dispute or claim upon such terms as KBK may in its sole
discretion deem advisable of (ii) to assign the related account to
Seller, without recourse to KBK, and charge any unpaid balance with
respect thereto (up to the amount of the Initial Payment with respect
thereto and KBK's Discounts through the date of such charge with
respect thereto) against the Reserve or deduct such unpaid balance from
any Initial Payments or against any money or other funds of Seller in
the possession, custody or control of KBK, from whatever source. Seller
agrees that, in lieu of KBK charging any such unpaid balance against
the Reserve, Initial Payments or against such other funds, KBK may
require Seller to pay (and Seller hereby agrees to pay) to KBK on
demand any such unpaid balance. An account with respect to which the
account debtor has asserted an Insolvency Claim is not a Disputed
Account. As used herein, "Insolvency Claim" means any defense or other
claim by an account debtor with respect to an account sold to KBK
hereunder arising solely out of the bankruptcy or insolvency of the
account debtor or the financial inability of the account debtor to pay,
if Seller has not breached its representation contained in clause (vi)
of the first paragraph of this Section. Notwithstanding anything herein
to the contrary, KBK shall have the right to charge all accounts not
paid because of an Insolvency Claim against the Reserve and such charge
shall have priority over ad be paid before any Disputed Account charge.
Seller agrees to maintain the additional covenants set forth in the
Addendum attached hereto.
10. Financial Statements. Seller represents and warrants that all financial
and other information provided by Seller to KBK in connection with or
in Seller's application to KBK or to induce KBK to enter into this
Agreement is true, complete and correct in all material respects.
Seller agrees to furnish to KBK (i) within 90 days after the last day
of each fiscal year of Seller, a consolidated statement of income and a
consolidated statement of cash flows of Seller for such fiscal year,
and a consolidated balance sheet of Seller as of the last KBK, together
with a copy of any report to management delivered to Seller by such
accountants in connection therewith, and (ii) within 45 days after the
last day of each fiscal quarter of Seller, an unaudited consolidated
statement of income and statement of cash flows of Seller for such
fiscal quarter, and an unaudited consolidated balance sheet of Seller
as of the last day of such fiscal quarter. Seller, represents and
warrants that each such statement of income and statement of cash flows
will fairly present, in all material respects, the results of
operations and cash flows of Seller for the period set forth therein,
and that each such balance sheet will fairly present, in all material
respects, the financial condition of Seller as of the date set forth
therein, all in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise noted in
the accompanying auditors' report (or, with respect to unaudited
financial statements, in the notes thereto). Seller also agrees to
furnish to KBK, upon request, such additional financial and business
information concerning Seller and its business as KBK may reasonably
request, including copies of its Form 941 returns filed with the
Internal Revenue Service and evidence of payment of related taxes. KBK
and its agents, representatives and accountants shall have the right,
at all times during normal business hours and without prior notice to
Seller, to conduct an audit or other examination of the financial and
business records of Seller and to examine and make copies of all books
and records of Seller for the purpose of assuring or verifying
compliance by Seller with the terms of this Agreement, and Seller
agrees to cooperate fully with KBK and its agents, representatives, and
accountants in connection therewith and to timely pay all costs
associated with such audits at a rate equal to $650.00 per day, per
person, plus out-of-pocket expenses. Seller agrees to properly reflect
the effect of this Agreement, and all sales related thereto, in all
financial reports and disclosures, written or otherwise, provided to
Seller's creditors and other interested parties. Seller specifically
agrees that all accounts purchased by KBK will be excluded from
Seller's reported accounts receivable balances. Seller also
specifically agrees to immediately notify KBK of any material adverse
change in Seller's financial condition or business.
11. Taxes. All taxes and governmental charges of any kind imposed with
respect to the sale of goods or the rendering of services relating to
accounts purchased by KBK hereunder shall be for the account of, and
paid by, Seller.
12. Fees. Seller hereby agrees to pay KBK on the execution hereof a
one-time origination fee (the "Origination Fee") of Six Thousand and
no/100 dollars ($6,000.00). Seller and KBK acknowledge and agree that
the Origination Fee is intended as reasonable compensation to KBK for
making this facility available under the terms of this Agreement and
for no other purpose.
Seller hereby agrees to pay to KBK a termination fee equal to Two
percent (2.0%) of the Facility Amount (the "Termination Fee") and the
payment shall be an obligation of Seller secured under Section 7
hereof. This Termination Fee is payable upon termination of this
Agreement by Seller for any reason or upon termination by KBK at its
election for the reasons set forth in the second sentence of Section 13
below. However, if this Agreement is so terminated after the expiration
of one (1) year from the date of KBK's execution hereof, but before the
expiration of two (2) years from such date, one-half of the Termination
Fee shall be waived. If the Agreement is terminated more than two (2)
years after the date of KBK's execution hereof, all of the Termination
Fee shall be waived.
13. Termination. This Agreement may be terminated by either party hereto by
delivery of written notice of termination of this Agreement to the
other party specifying the date of termination, which date shall be at
least 30 days after the date such notice is given. KBK may, at its
election, terminate this Agreement immediately and without the
requirement of notice to Seller if (i) Seller shall fail to perform any
of its obligations hereunder or shall breach any of its representations
and warranties hereunder, (ii) Seller shall become insolvent or suspend
all or a substantial part of its or their business, (iii) a petition
under the Bankruptcy Code or any other insolvency or debtor statute
shall be filed by or against Seller or any receivership proceedings
with respect thereto shall commence, (iv) any guarantee of any of
Seller's obligations hereunder shall be terminated or become impaired,
(v) an event of default occurs under any other agreement now or
hereafter executed between Seller and KBK, or (vi) KBK otherwise
determines that it is insecure hereunder.
Termination of this Agreement shall not affect the rights and
obligations of the parties hereunder with respect to transactions
occurring on or prior to the date of such termination, and this
Agreement shall continue to govern the rights and obligations of the
parties hereto with respect to accounts purchased by KBK from Seller on
or prior to the date of such termination. All security interests
granted or contemplated by this Agreement shall survive the termination
of this Agreement until all amounts payable to KBK with respect to
transactions
4
occurring on or prior to the date of termination have been paid to KBK,
and Seller has performed all its obligations to KBK with respect to
such transactions and all obligations under this Agreement including
but not limited to payment of any fees owning hereunder.
14. Notice of Proposed Refinancing. Seller hereby agrees that in the event
(a) Seller receives a written proposal from any third party to provide
financing or factoring ("Proposed Refinancing"), (b) the terms of the
Proposed Refinancing are acceptable to Seller, and (c) Seller is
considering accepting the Proposed Refinancing from the Offeror
("Offeror"), Seller will immediately advise KBK in writing of the
identity of the Offeror, the complete terms and conditions of the
Proposed Refinancing and provide KBK a full and complete copy of all
written correspondence between Seller and Offeror describing the
Proposed Refinancing. Seller agrees not to accept the Proposed
Refinancing from the Offeror until at least 10 business days after
delivery of the foregoing items to KBK.
15. Attorney's Fees, Litigation Expense. Seller agrees to reimburse KBK
upon demand for KBK's attorneys' fees, court costs and other fees and
expenses incurred in collecting any sums due or to become due to KBK
hereunder, enforcing any of KBK's rights under this Agreement and all
actions taken by KBK that it deems necessary or desirable under the
Bankruptcy Code or should any provisions of Bankruptcy Code be
applicable to any rights or obligations of any party to this Agreement,
as well as all appearances, motions, and actions to which KBK may be or
become a party in any bankruptcy case.
16. Governing Law; Venue; Submission to Jurisdiction. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION
OR NONPERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS. SELLER AND KBK EACH AGREE
THAT TARRANT COUNTY, TEXAS SHALL BE THE EXCLUSIVE VENUE FOR LITIGATION
OF ANY DISPUTE OR CLAIM ARISING UNDER OR RELATING TO THIS AGREEMENT,
AND THAT SUCH PARISH IS A CONVENIENT FORUM IN WHICH TO DECIDE ANY SUCH
DISPUTE OR CLAIM. SELLER AND KBK EACH CONSENT TO THE PERSONAL
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN TARRANT COUNTY,
TEXAS FOR THE LITIGATION OF ANY SUCH DISPUTE OR CLAIM. SELLER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
17. Waiver of Jury Trial. SELLER AND KBK EACH HEREBY IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO ATRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH.
18. Amendments; Waivers. This Agreement may be amended only in writing
signed by the parties hereto. No failure on the part of KBK to
exercise, and no delay by KBK in exercising, and no course of dealing
by KBK with respect to, any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder by KBK
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies of KBK hereunder are
cumulative and not exclusive of any remedies provided by law.
19. Notices. All notices and other communications provided for herein shall
be given or made in writing and telecopied or delivered by courier or
mail to the intended recipient at the "Address for Notices" specified
opposite its name on the signature page hereto, or at such other
address or telecopy number as shall be designated by a party to the
other party in the manner specified in this Section. All such notices
and other communications shall be deemed to have been duly given when
transmitted by telecopier (with receipt thereof confirmed by
telecopier) or personally delivered or, in the case of a mailed notice,
upon deposit in the United States Postal System postage prepaid and
properly addressed, in each case given or addressed as aforesaid.
20. Indemnification. Seller agrees to indemnify, defend, and hold the
Indemnified Persons harmless from and against any and all loss,
liability, obligation, damage, penalty, judgment, claim, deficiency and
expense (including interest, penalties, attorneys' fees and amounts
paid in settlement) owing to any third party to which any Indemnified
Person may become subject arising out of or based upon this Agreement
as well as any prior relationship of Seller with any Indemnified
Person, WHETHER BY ALLEGED OR ACTUAL NEGLIGENCE OF ANY INDEMNIFIED
PERSON, except and to the extent caused by the gross negligence or
willful misconduct of any Indemnified Person.
21. Waiver and Release. Seller, by its execution of this Agreement, does
hereby covenant, warrant and represent that (i) the benefit received
and to be received by Seller as a result of this Agreement shall and
does constitute sufficient and valuable consideration to Seller for
entering into and performing its obligations under this Agreement, (ii)
the execution, delivery, and performance by Seller of this Agreement
and the consummation of the transaction contemplated thereby are (a)
not prohibited by any indenture, contract or agreement, law or
corporate or partnership documents, including, but not limited to the
Bylaws and Articles of Incorporation or Certificate of Incorporation,
as the case may be, if Seller is a corporation, or Seller's partnership
agreement, if Seller is a partnership, (b) duly authorized by
appropriate action of Seller, and (c) legally valid and binding
obligations of Seller and will continue to be such and enforceable
against the Seller according to their terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally), (iii) that this Agreement
will be executed and delivered by properly authorized officer of
Seller, (iv) KBK has no obligation to enter into this Agreement except
for the considerations herein expressed, and (v) the representations
and warranties set forth herein will survive the execution and delivery
of this Agreement.
22. Captions; Final Agreement; Counterparts; Successors and Assigns.
Captions and headings appearing herein are included solely for
convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement. This Agreement
represents the final agreement between the parties hereto with respect
to the subject matter hereof, and supersedes all prior proposals,
negotiations, agreements and understandings, oral or written, related
to such subject matter. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument. This
5
Agreement may not be assigned by Seller without the prior written
consent of KBK. This Agreement may be assigned by KBK, and any accounts
purchased by KBK hereunder, together with all rights and interests
related thereto granted to KBK hereunder, may be assigned by KBK, all
without notice to or the consent of Seller. This Agreement shall be
binding upon the parties hereto and their respective successors and
permitted assigns.
23. Effectiveness of Agreement. This Agreement shall become effective only
upon acceptance by KBK at its offices in Fort Worth, Tarrant County,
Texas as evidenced by KBK's signature hereon.
24. True Sales. Seller and KBK acknowledge and agree that the sale of
accounts contemplated and covered hereby are fully intended by the
parties hereto as true sales governed by the provisions of Article
5069-1H.103 of the Texas Revised Civil Statutes and Section 9.102 of
the Texas Business and Commerce Code, as each may be amended from time
to time, and, accordingly, legal and equitable title in all of Seller's
accounts sold to and purchase by KBK from time to time hereunder will
pass to KBK.
IN WITNESS WHEREOF, the parties hereto, heretofore duly authorized, have
executed this Agreement as of the date first set forth above.
Address for Notices SELLER:
0000 X. XXXX XXXXXX XXXXX H.E.R.C. PRODUCTS INCORPORATED
XXXXX 00
XXXXXXX, XXXXXXX 00000
Telecopy No: (000) 000-0000 By: /s/ S. Xxxxxx Xxxx
-------------------------------------
Name: S. Xxxxxx Xxxx
Title: C.E.O.
0000 X. XXXX XXXXXX XXXXX H.E.R.C. CONSUMER PRODUCTS, INC.
XXXXX 00
XXXXXXX, XXXXXXX 00000
Telecopy No: (000) 000-0000 By: /s/ S. Xxxxxx Xxxx
-------------------------------------
Name: S. Xxxxxx Xxxx
Title: C.E.O.
Address for Notices: KBK FINANCIAL, INC.:
000 XXXXXXXX XXXXXX
0000 XXXX CENTER By: /s/ Xxxx Xxxxxxx
XXXX XXXXX, XXXXX 00000 -------------------------------------
Telecopy No: (000) 000-0000 Name: Xxxx Xxxxxxx
Title: Vice President & General Counsel
Date: October 17, 1997
-----------------------------------
6
SCHEDULE A
TO
ACCOUNT TRANSFER AND PURCHASE AGREEMENT
Dated September 22, 1997
By and Between
KBK FINANCIAL, INC.
H.E.R.C. PRODUCTS INCORPORATED
and
H.E.R.C. CONSUMER PRODUCTS, INC.
The addresses of any other locations of Collateral referenced in Section 9:
CCT Corporation Innerspace Storage Corporation
0000 Xxxxxxx Xxxxxxx #X 0000 X.X-000 Xxxxxxx
Xxxxxxxx, XX 00000 Sugar Creek, Mo.
Nutrient Technologies Xxxxxx-Xxxxx
0000 X. Xxxx Xxxxxx 3 Miles Xxxx XX 0000
Xxxxxx, Xx. 00000 Xxxxxxxx, Xx. 00000
Helena Chemical Company Helena Chemical Company
0000 X. 00xx Xxxxxx Xxxxx 5 Box 000 Xxxxxxx 000
Xxxxx, Xx. 00000 Freemont, Ne. 68025
Helena Chemical Company Helena Chemical Company
0000 Xxxxxxx 00 Xxxx 100 Santa Xxxxxxx
Xxxxxx, Xx. 00000 Xxxxxxxx, XX 00000
Any trade or assumed names referenced in Section 9:
CCT Corporation
7
ADDENDUM
to Account Transfer and Purchase Agreement between KBK FINANCIAL, INC., a
Delaware corporation ("KBK"), H.E.R.C. PRODUCTS INCORPORATED, a Delaware
corporation, and H.E.R.C. CONSUMER PRODUCTS, INC., an Arizona corporation
(collectively herein referred to as "Seller') dated September 22, 1997 (the
"Agreement").
This Addendum modifies and supplements the Agreement as follows:
1. Financial Covenants. Seller agrees to maintain the following financial
covenant while this Agreement remains in effect:
(a) Tangible Net Worth. At the end of each fiscal quarter, its
Tangible Net Worth on a pro forma basis (i.e. add back
purchased accounts and factored balance) of not less than
$750,000.00.
As used herein, the term "Tangible Net Worth" shall mean, as of any
date, the amount by which Seller's total assets exceeds its total
liabilities, plus Subordinated Debt, less any intangible assets (as
defined by generally accepted accounting principles, including, without
limitation, trademarks, patents, copyrights, goodwill, covenants not to
compete and customer lists), less deferred charges. The term
"Subordinated Debt" shall mean indebtedness owing by Seller to a
creditor other than KBK which has been subordinated and subject in
right of payment to the prior payment of all indebtedness and
obligations now or hereafter owing by Seller to KBK, such subordination
to be evidenced by a written agreement between Seller and the
subordinated creditor which is in form and substance satisfactory to
KBK.
H.E.R.C. PRODUCTS INCORPORATED
By: /s/ S. Xxxxxx Xxxx
-------------------------------------
Name: S. Xxxxxx Xxxx
Title: C.E.O.
H.E.R.C. CONSUMER PRODUCTS INC.
By: /s/ S. Xxxxxx Xxxx
-------------------------------------
Name: S. Xxxxxx Xxxx
Title: C.E.O.
KBK FINANCIAL, INC.
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President & General Counsel
8
