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Exhibit 10.38
PAYPRO RESOURCES, INC.
CLIENT SERVICE AGREEMENT
This SERVICE AGREEMENT (this Agreement) is made effective on the 2 DAY OF APRIL
1999 by and between PAYPRO RESOURCES, INC. (PRI), acting by and through its
duly authorized officer, and XXXX XXXXXX DIRECT, a California Corporation
acting by and through its duly authorized representative.
WITNESSETH:
WHEREAS, PRI will provide to Company the employees (the Employees) shown on the
Payroll Check Register to work at Company's place of business and perform
services for Company and Company desires to obtain from PRI the Employees to
further the business of Company, subject to the terms and conditions of this
Agreement; and
TERM OF AGREEMENT. The term of this Agreement shall be for a period of 2 years,
commencing on 4-20, 1999 and continuing for one calendar year (the Initial
Term). Either party may terminate this Agreement, with or without cause, and
without payment of any penalty or premium charge, by giving to the other party
written notice thirty (30) days prior to the end of the Initial Term or any
extension thereof. If no written notice is given, then this Agreement will
automatically continue in full force and effect for one year periods at the
same rates and terms specified herein, unless the parties hereto agree in
writing to different rates and terms.
2. WORKERS' COMPENSATION INSURANCE
a) PRI shall furnish and keep in effect at all times during the term of
this Agreement a policy of workers' compensation insurance covering all of the
Employees provided to Company who have completed all new hire employment
documents. Company shall be responsible for providing the correct job
classifications to PRI and any audit adjustment due to incorrect classification
shall be reflected in the Service Fee referenced in paragraph 5. Company agrees
to post workplace notices required under State law in connection with PRI's
workers' compensation status. Company agrees to notify PRI of any injury to an
Employee within twenty-four (24) hours after Company's discovery of said injury.
b) Company shall deposit with PRI an amount equal to percent (0)% of
the projected workers' compensation insurance premium cost.
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3. SAFETY
a) Company agrees that it will, at its own expense, comply with all
applicable health and safety laws, regulation, ordinances, directives, and rules
governing any workplace owned or leased or under management by Company where
Employees work.
b) Company agrees to comply promptly with all written recommendations from
PRI or any agent of PRI or any governmental agency having jurisdiction over the
workplace concerning any health or safety hazard. If PRI issues a safety
recommendation or directive with which Company does not desire to comply, either
PRI or Company may terminate this Agreement on the later to occur of; (i) five
(5) working days after delivery of written notice, or (ii) the end of the next
pay period. In any such event, neither party shall have any further duties or
obligations hereunder, except to the extent of Company's duty to pay PRI fees
due PRI through the date of termination, and PRI's duties to pay existing
claims, and to perform its obligations through the date of termination of this
Agreement.
c) Company shall implement the Safety Plan as set forth in the Employee's
Handbook or other acceptable safety plan. Company shall provide and ensure use
of all personal protective equipment, as required by federal, state or local
law, regulation, ordinance, directive, or rule.
d) PRI shall have the right (but not the obligation) to make periodic
safety surveys wherever the Employees are working, at PRI's sole cost. To the
extent possible, such surveys shall be scheduled at times convenient to both PRI
and Company.
e) Company shall abide by the Drug and Alcohol Policy as set forth in the
Employee's Handbook or other drug and alcohol policy accepted in writing by PRI.
4. PERSONNEL AND PAYROLL ADMINISTRATION
a) Company agrees to designate a supervisor (the Supervisor) from the
Employees assigned to fill Job Function Positions for Company. The Supervisor
shall direct operational and administrative matters relating to services
provided to the Employees under this Agreement. The Supervisor shall determine
procedures to be followed by the Employees regarding time and performance of
their work duties.
b) PRI and Company each represents and confirms to the other and generally
that PRI shall have certain duties and obligations with respect to the Employees
as follows:
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(i) The right to hire, fire, discipline, evaluate, and direct the
work and conduct of the Employees (by and through the designated
Supervisor);
(ii) The responsibility for maintaining and paying premiums related
to employee benefit plans and complying with applicable employee
benefits regulations, COBRA, minimum two year maintenance of
employment and payroll records, and handling of all unemployment
claims, protests and appeal hearings;
(iii) The responsibility for payment of wages and the making of
payments for income tax, social security tax, medicare tax and
unemployment tax to the proper governmental agency or authority
required under State or Federal laws to be made by PRI, and comply
with all Federal, State, and local tax regulations, and promptly
account for same to Company;
(iv) The right of direction and control over safety policies related
to the Employees and the management of any occupational injury claims,
filing or any related procedures;
(v) The responsibility to provide written guidelines as further
described in the Employee's Handbook, a separate attachment hereto, to
facilitate compliance by all parties with the following: Title VII of
the Civil Rights Act of 1964 as amended (Title VII), the Age
Discrimination in Employment Act as amended (ADEA), the Americans with
Disabilities ACT (ADA), Family and Medical Leave Act of 1993, the Fair
Labor Standards Act (FLSA), and EEOC Regulations. Company agrees to
comply with all applicable Federal, State and Local laws and
regulations including, but not limited to the above listed Acts.
Company acknowledges that it shall be responsible for any costs
related to implementation, adherence to and violations of any
applicable laws or regulations.
c) PRI agrees to reimburse Company for direct out-of-pocket expenses,
including any penalties, damages and/or attorney's fees of Company which may
result from PRI's failure to withhold and pay taxes. However, PRI shall not be
liable in any event for Company's loss of profits, business goodwill, or any
other consequential, special, or incidental damages.
5. SERVICES FEES
a) Company shall pay PRI service fees due and payable 48 hours before
paychecks are delivered by PRI to Employees, as set forth below:
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One time Set-up Fee of $7,500 DUE ON JUNE 1, 1999 PURSUANT TO ADDENDUM.
Administrative Rate of 3.0% OF GROSS PAYROLL, per week. ($100.00
payroll minimum)
Workers' Compensation Fees equal to the percentages of gross wages for
the job classifications shown:
CODES RATES
8810 Clerical 0.55%
8742 Outside Sales 0.65%
3574 Golf Club Mfg. 3.00%
California Unemployment Tax Fee equal to 3.5% of gross wages.
Risk Management Fee 1.0%
California Employee Training Tax and Federal Unemployment, Social Security and
Medicare Taxes at current Federal rates in effect.
Service fees to include the payment and filing of all social security taxes,
Medicare taxes, federal and state unemployment taxes, workers' compensation
premiums and down payments, direct deposit or delivery of paychecks, employee
handbooks and new hire documents, risk management services, claims and employee
benefit administration including a 401(K) plan.
b) If Company believes that any invoice or other communication between
the parties is in error, Company shall use diligence to notify PRI immediately
of such error.
c) Within twenty-four (24) hours after receipt of the invoice, Company
shall deliver to PRI or deposit in PRI's designated bank account payment in full
for such invoice via: (i) bank cashiers or certified check, or (ii) such other
method designated in writing by PRI. Should payment of any sums owed PRI under
this Agreement not be made when due, Company shall pay a late charge of five
percent (5%) on the unpaid balance, but in no event shall the amount of such
service charge exceed the lawful rate of interest which may be charged on such
debt. Checks written on accounts with insufficient funds will be charged all
fees incurred by PRI.
6. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company warrants and represents
to PRI, that:
a) All wages and compensation owed by Company to the Employees have
been paid by Company and any governmental ordered wage settlements will be paid
by Company.
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b) No separate agreement or arrangement exists with respect to any
Employee that would obligate PRI to any person or entity, except as set forth
in this Agreement.
c) All of Company's pension and profit sharing and employee welfare
benefit plans in existence, if any, are funded and reported current, and are in
compliance with applicable law, and this Agreement shall not be deemed a breach
under the terms of any of those plans.
d) Company will be responsible for paying all costs including wages,
taxes, insurance premiums and accident claims associated with Company's usage
of workers as independent contractors or contract laborers and Company will
file the proper state and federal notices related to same.
7. INDEMNIFICATIONS
a) Upon a showing by Company that Company has complied with the
requirements of Paragraphs 2 and 3. PRI shall indemnify, defend and hold
harmless Company from all suits, actions, demands, damages, losses, or claims
brought or made for or on account of an on-the-job injury suffered by an
Employee.
b) Notwithstanding any other provision of this Agreement, Company agrees
to indemnify, defend and hold harmless PRI, its agents, employees and
representatives, from and against any and all liability, expense and claims for
damages which PRI may incur or become liable for as a result of the acts,
errors or omissions of (i) Company, or (ii) Employees, except as provided by
Paragraph 7(a), even if Employees are deemed negligent in whole or in part.
8. LIABILITY INSURANCE AND FIDELITY BOND
Company shall maintain a general liability insurance policy covering Company's
premises and business operations and automobile liability insurance covering
owned, hired and non-owned automobiles during the term of this Agreement in the
amount of at least $1,000,000 per occurrence. Company shall instruct its
insurer to name PRI as an additional insured and provide PRI with 30 days'
written notice of cancellation.
9. BUSINESS AND SALES TAX
It is agreed by PRI and Company that PRI is not providing any taxable services
to Company and that PRI shall not be responsible for paying any sales or
business tax on employees or services provided to Company.
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10. CONFIDENTIALITY
During the term of this Agreement, Company will allow PRI (or its designated
representative) to review Company's payroll files or records related to the
Employees, and PRI shall allow Company the same privilege. Neither party shall
disclose to any third party any of the aforesaid business information, either
directly or indirectly, during the term of this Agreement, or at any time
thereafter, except as required during the course and within the limited scope of
this Agreement, or as required by a duly issued subpoena or other legal process;
any such unauthorized disclosure, actual or threatened, shall give rise to all
of the remedies available therefore provided herein.
11. DEFAULT
a) Each of the following, without limitation, shall constitute a breach of
this Agreement by Company or PRI: (1) failure of either party to pay any sums
due within (2) two days after delivery of notice of default; (2) failure of
either party to comply with any other covenant or agreement as set forth
herein, after delivery of written notice and the expiration of (2) two days
opportunity to cure, or, if the same is curable, but not within such time, the
expiration of such time as is reasonable to cure the same through diligent
continuous effort, including, without limitation, the failure to comply with
any recommendation regarding health and safety made by PRI under this Agreement;
or (3) failure to maintain or supply proofs of insurance required under this
Agreement or to timely provide copies thereof; (4) failure to notify either
party of any occurrence known by either party involving an Employee that could
give rise to a claim by the Employee of discrimination, violation of law, or
occupational injury.
b) Upon a default hereunder, the non-defaulting party shall, in addition to
the rights and remedies set forth herein, be entitled to recover its attorney's
fees, and may pursue all rights and remedies available at law or in equity.
12. MISCELLANEOUS
a) This Agreement constitutes the entire agreement between the parties with
regard to this subject matter, and no other agreement, statement, promise or
practice between the parties relating to the subject matter shall be binding on
the parties.
b) THIS AGREEMENT MAY BE CHANGED ONLY BY WRITTEN AMENDMENT SIGNED BY BOTH
PARTIES.
c) Failure or delay by either party to demand performance by the other
party, or to claim a breach of any provision of this Agreement, will not be
construed as waiver of any subsequent breach nor otherwise affect this
Agreement, or any part hereof, or prejudice either party in any subsequent
action.
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d) Any notice or demand to be given hereunder by either party to the other
shall be effected by personal delivery in writing or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated forty-eight (48) hours after so mailing. Mailed notices shall be
addressed to the party's principal place of business, or as set forth in this
Agreement, but each party may change its address by written notice in accordance
with this paragraph.
e) If any provision of this Agreement, or the application thereof to
any person or circumstance, shall be invalid or unenforceable to any extent,
such provision shall be deleted or modified to the minimum extent necessary to
make its application valid and enforceable, and the remainder of this
Agreement, and the application of such provision to other persons or
circumstances, shall not be affected thereby, and shall be enforced to the
greatest extent permitted by law.
f) No consent or waiver, express or implied, by any party hereto, of or
to any breach or default of or by any other party in performance of his or its
obligation hereunder, shall be deemed to be a consent to, or a waiver of, any
subsequent or other breach or default of such party of the same or any other
obligation of such party hereunder. Failure by one party to complain of any act
or failure of another party to act, or failure to declare the other party in
default, irrespective of how long such failure continues, shall not constitute
waiver by such party of any rights hereunder.
g) The paragraph headings of this Agreement are for references only, and
shall not be considered in interpretation of this Agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, this AGREEMENT has been executed this 20th day of April,
1999.
PAYPRO RESOURCES, INC. XXXX XXXXXX DIRECT
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
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Address: Address:
0000 Xxxx Xxxxxxx, Xxxxx 0000 0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000 Xxxxx Xxxxx, XX 00000
Federal Tax I.D.: ----------------
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BROKER RECORD AUTHORIZATION
TO WHOM IT MAY CONCERN:
This confirms that as of , we have appointed XXXXXXX XXXXX
INSURANCE SERVICES (OB53998), as our exclusive insurance broker with respect to
our entire insurance program. The appointment of XXXXXXX XXXXX INSURANCE
SERVICES (OB53998) rescinds all previous appointments and the authority
contained herein shall remain in force until canceled in writing.
XXXXXXX XXXXX INSURANCE SERVICES (OB53998) is hereby authorized to negotiate
directly with any interested company as respects changes in existing insurance
policies and in closing, changing, increasing or canceling insurance carried
under temporary binders or cover notes. We understand, however, that they will
not share responsibility for any deficiencies in the insurance program to which
this letter applies until they have had a reasonable opportunity to make a
review and we have accepted their recommendations.
This letter also constitutes your authority to furnish the representatives of
XXXXXXX XXXXX INSURANCE SERVICES (OB53998) with all information they may
request as it pertains to our insurance policies, rates, rating schedules,
surveys, reserves, retentions and all other financial data they may wish to
obtain for their study of our present and future requirements in connection
with the insurance program to which this letter applies. WE REQUEST THAT YOU
WAIVE THE USUAL AND CUSTOMARY WAITING PERIOD IN ORDER TO FACILITATE THE TIMELY
SERVICING OF OUR CURRENT INSURANCE POLICIES.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxxxx, Xx. PRESIDENT
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4-20-99
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DATE
POLICIES TO WHICH THIS AUTHORIZATION APPLIES
Re: XXXX XXXXXX DIRECT
INSURANCE COMPANY POLICY NUMBER POLICY TERM
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BROKER OF RECORD
DATE: _____________________________________
CARRIER: _____________________________________
POLICY #: _____________________________________
Our firm has retained the services of Xxxxxxx X. Xxxxxx of PAYPRO RESOURCES,
INC., California State License #0B01293, a licensed insurance agency, to assist
us in our benefit planning. We hereby appoint Xxxxxxx X. Xxxxxx as consultant
and Agent of Record for our firm. This letter replaces and rescinds any
previous broker/agent appointments.
We understand that their compensation will come from the insurance carrier in
the form of commissions.
We ask your cooperation in dealing with Xxxxxxx X. Xxxxxx as our Insurance
Agent. Please provide him with timely information he will need to advise us
with regard to our insurance needs.
Sincerely,
/s/ Xxxxxxx X. Xxxxxxxxx, Xx.
President
Client
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ADDENDUM
PROMISSORY NOTE
AND SECURITY AGREEMENT
Amount: $79,269.46 April 20, 1999
FOR VALUE RECEIVED, this Note and Security Agreement ("Note") is executed
by the undersigned, Xxxx Xxxxxx Direct, a Delaware corporation ("Maker"). Maker
promises to pay to the order of X. Xxxxxxxx Insurance Services, Inc., a
California corporation, d/b/a/ PayPro Resources ("Lender"), the principal sum
of Seventy Nine Thousand, Two Hundred and Sixty Nine Dollars and Forty Six
Cents ($79,269.46) (the "Amount Advanced") on the terms set forth hereinbelow.
1. Interest: Finance Charge. The promissory note (the "Note")
shall bear simple interest at the rate of ten percent (10%)
per annum from the inception of the payroll problems. The
Note principal now includes this charge.
2. Term. Maker shall pay Lender the sum of $79,269.46 on or
before June 1, 1999.
3. Security Interest. Maker assigns to Lender, as security, all
of Maker's existing and future right, title and interest in
the property listed in Section 4.1 of this Note. The
security interest is granted to Maker to secure: (a) the
payment of the indebtedness evidenced by the Note, including
all renewals, extensions, and modification thereto; (b) the
payment, performance and observance of all warranties,
obligations, covenants and agreements to be paid, performed
or observed by this Note; and (c) the payment of all other
sums, with interest thereon, advanced or otherwise due or
payable under the terms of this Note. Subject to
modification as set forth.
3.1 Property. The property subject to the security
interest (the "Collateral"), to be evidenced by
the filing of a financing statement pursuant to
the Uniform Commercial Code (See Exhibit "A") with
the California Secretary of State, is as follows:
3.1.1 Equipment. All equipment of Maker.
3.1.2 Accounts Receivable. All account
receivable accounts, chattel paper,
contract rights, commissions,
warehouse receipts, bills of lading,
delivery orders, drafts, acceptances,
notes, securities, and other
instruments, documents, all other
forms of receivables, and all
guaranties and securities of Maker.
3.1.3 Inventory and Other Tangible Personal
Property. All inventory of Maker,
including all goods, merchandise,
materials, raw materials, work in
progress, finished goods, now owned
or hereafter acquired and held for
sale or lease or furnished or to be
furnished under contracts or service
agreements or to be used or consumed
in Maker's business and all other
tangible personal property of Maker.
3.1.4 General Intangibles. All general
intangibles now owned by Maker or
hereafter acquired by Maker.
3.1.5 After-Acquired Property. All property
of the types described in Sections
4.1.1-4.1.4, or similar thereto,
that at any time hereafter may be
acquired by Maker, including but not
limited to all accessions, parts,
additions, and replacements.
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4. Representations and Warranties of Maker.
4.1 No Senior Security Interest. Maker represents and warrants that
as of the date hereof, there are currently no security interests
against the Collateral, either evidenced by a UCC-1 filing with
the California Secretary of State, or in any agreement, whether
verbal or written, granting a third party a security interest in
the Collateral. Notwithstanding the above, it is understood that
this loan is subordinated to an anticipated $1,000,000 senior
secured loan.
5. Representations and Warranties of Lender.
5.1 Release of Security Interest. Upon receipt of all outstanding
principal and accrued interest on the Note, Lender agrees to
terminate its security interest by executing a UCC-3 termination
statement and filing same with the California Secretary of State.
6. Designated Places of Payment. Payments are due and payable by the close of
business prior to the close of business each Friday during the term of the
Note at the Company's headquarters located at 0000 Xxxx Xxxxxxx Xxx., Xxxxx
0000, Xxxxxxx, XX 00000.
7. Waivers. Except as set forth elsewhere herein, Maker, for itself and its
legal representatives, successors, and assigns, expressly waives
presentment, protest, demand, notice of dishonor, notice of nonpayment,
notice of maturity, notice of protest, notice of intent to accelerate,
notice of acceleration, presentment for the purpose of accelerating
maturity, and diligence in collection.
8. Default. Maker shall be deemed in default if any of the following events
occur: (a) Maker fails to make any payments hereunder when due and fails to
make such payment within twenty (20) days of such due date; (b) the entry of
a decree or order by a court having appropriate jurisdiction adjudging Maker
a bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization or liquidation of Maker under the Federal Bankruptcy Act or
any other applicable federal or state law, or appointing a receiver,
liquidator, assignee or trustee over any substantial portion of Maker's
property, or ordering the winding up or liquidation of Maker's affairs, and
the continuance of any such decree or order unstayed and in effect for a
period of sixty (60) consecutive days; (c) the institution by Maker of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it
to the institution of bankruptcy or insolvency proceedings against it, or
the filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Act or any other applicable federal
or state law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee or trustee of Maker; (d)
default in the obligation of Maker for borrowed money, other than this Note,
or any event that results in acceleration of the maturity of any
indebtedness of Maker under any note, indenture, contract, or agreement; (e)
Maker fails to comply with any material term, obligation, covenant, or
condition contained herein, within twenty (20) days after receipt of written
notice from Lender demanding such compliance; (f) any representation or
statement made or furnished to Lender by Maker or on Maker's behalf is false
or misleading in any material respect; (g) any levy, seizure, attachment,
lien, or encumbrance of or on Maker's property, other than those existing as
of the date hereof, which is not discharged by Maker within twenty (20)
days; and (h) any sale, transfer, or disposition of a material amount of
Maker's property, other than in the ordinary course of business, without the
written consent of the Lender.
8.1 Cure. Maker shall be provided a cure period of twenty (20) days
from the date of an event of default, as defined in Section 6
hereinabove. In the event Maker fails to cure any default within
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such time period, including the payment of all costs and expenses
provided for in this Note, Lender may immediately enforce any and
all rights provided to it under the Note.
9. Late Payment Fees. It would be impracticable to fix the amount of
Lender's extra expense involved in handling a delinquent payment if any
payment is not made when due. Accordingly, Maker agrees to pay to
Lender a late payment charge equal to five percent (5%) of the amount
due on any payment required under this Note which is received by Lender
more than four business (4) days after the due date. Maker agrees that
this charge is a reasonable estimate of extra expenses the Lender will
incur, and is not a penalty.
10. Acceleration: Attorneys' Fees. At the option of Lender, and without
demand or notice, all principal and any unpaid interest shall become
immediately due and payable upon an event of default as set forth in
Section 8 hereinabove. Any reasonable attorneys' fees and bankruptcy
filing relating to the Maker, or any of the other events described in
Section 8 hereinabove, shall be deemed additional indebtedness of the
Maker and added to the principal amount of the Note, irrespective of
whether Lender files suit against Maker.
11. Section Headings. Headings and numbers have been set forth for
convenience only. Unless the contrary is compelled by the context, the
language set forth in each paragraph applies equally to the entire
Note.
12. Amendments in Writing. This Note may only be changed, modified or
amended in writing signed by the Parties.
13. Choice of Law. The Note and all transactions hereunder and evidenced
hereby shall be governed by, construed under, and enforced in
accordance with the laws of the State of California.
14. Waiver of Trial by Jury. For separate and legal consideration received,
Maker hereby waives, to the extent permitted under applicable law, any
right to trial by jury in any action or proceeding relating to the
Note.
Made and Executed at Santa Maria, CA
XXXX XXXXXX DIRECT
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
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President
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PERSONALLY GUARANTEED
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
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